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Web3 and Blockchain: The ‘access layer,’ decentralized exchanges, and geopolitical finance implications

Web3 is the new layer of applications which require access to a blockchain wallet in order to transact. Can it also be the end of financial coercion by government?

*I’m writing from the United States. If you have unique insights from other parts of the world, please leave a comment!

The buzz-term Web3 is trending quickly. The current reality of Web3 is this— most people have absolutely no idea what it means; large corporations and political institutions are playing Public Relations games with the term; and technical people are having a terrible time defining it.

We are in limbo somewhere between “wtf is Web3?” and “let’s make sure we both have the same definition of Web3…” I’ve been stumped by both the former and the latter. I’ve had a tough time understanding all the ideas around Web3 despite being very technical with a lot of hands-on crypto experience. I’ve built crypto apps, traded, arbitraged, my friends were early miners—some of whom moved on to write blockchains from scratch. The crypto space is moving so quickly that it’s very difficult for me to keep up.

There are large corporate, institutional, and political players trying to co-opt the term Web3. Management consulting firms like McKenzie and Deloitte need a new term that can be synonymous with the next wave of Internet innovation consulting services. Venture Capitalists and investors want to hear about that sweet ‘web3’ nectar oozing out from the software code of their potential funding recipients. Squares, corpo suits, and compromised global corporate politicians like Merkel, May, Warren, Trump, Sherman, Clinton, et al. seem to tangentially understand Web3's connection to decentralized finance (“de-fi”) and subconsciously perceive it as a real threat to their politico-financial oligarchies, frameworks of coercion, and associated dystopian orgies of lobbying influence and kickbacks. Politicians are quickly trying to develop the narrative for action that can curb the growth and adoption of the crypto markets, but it may just be a gesture in the wind of the decentralized storm that is developing.

On the surface, the ambiguity and lack of consensus around Web3 are all a bit silly. However, beneath the surface of the non-specific, insecure, and postural Web3 narratives lies a fascinating set of concepts and innovations that are 1) exposing a new ‘access layer’ of distributed Internet-based applications, and 2) growing into an absolutely dissonant threat to the dominant order of our existing monolithic financial and political institutions.

1) The Access Layer

Technically speaking, the term web3 started as part of the connection specification to an Ethereum node. The Web3 concept has grown into something much broader.The easiest way for me to think of Web3 is as an entirely new distributed access and application layer on top of the current Internet.

Web3 is a layer of applications which require access to a blockchain wallet connection in order to transact. This new layer is exploding apace with the second proliferation of cryptocurrency financial assets (i.e. entirely new blockchains themselves, in-app and on-chain tokens, and non-fungible tokens like trade-able NFT assets).

Very often with these new Web3 apps, a blockchain wallet profile takes the place of a traditional username/password login. The wallet connection app allows you to connect to any number of blockchain accounts via blockchain address. Inside of that blockchain address you may have things like traditional cryptocurrency, unique game/app tokens, or digital assets like NFTs. Two popular wallet connection apps are Metamask and Wallet Connect.

The first important concept to understand here is that the new Web3 access layer is both a secure authentication layer, and a blockchain/cryptocurrency transaction layer.

In order to access a wallet connection app, we need to set a highly secure anonymous authentication key (like a complicated passphrase). In order to access an entry in one of the many blockchains, we also need a highly specific ledger address combined with a highly secure and anonymous public/private key—which for the novice is happily abstracted by the wallet connection app. We can think of this like logging into a website or app directly using our ApplePay wallet (which is not currently possible).

In summary, in the Web3 layer we have a new class of apps that 1) require you to have access to a cryptocurrency wallet, and 2) use a blockchain to transact (either with valuable cryptocurrency or novelty tokens and digital assets).

The second important concept to understand is that blockchain currencies/tokens allow two things to happen, 1) semi-anonymous and governance-free transactions, and 2) unique in-app currencies/tokens/assets that can be immediately traded without regulation on blockchain marketplaces and decentralized trading exchanges (which are growing rapidly in number and popularity).

The proliferation of this new class of apps is causing an exponential growth of new tokens and digital units of arbitrary value. The decentralized exchanges are taking those thousands, soon to be millions of new tokens and creating a trading/speculation economy around each—provided that enough demand exists. These decentralized trading exchanges are pure peer-to-peer exchanges where we can speculate on, and/or trade, the representation of anything. We can think of these exchanges like trading stocks, futures contracts, ETFs, or options.

This move of transactions and trading outside of the traditional infrastructure has implications far beyond just a few whimsical NFT purchases, private car sales, and speculative trades.

2) A Genuine Threat To The Dominant Order

In 2018, I wrote Chaos vs. Order — The Cryptocurrency Dilemma. Our Web3 discussion here serves as a timely update to that article.

The decentralized and semi-anonymous nature of blockchain and cryptocurrency transactions directly threatens politicians and banking oligarchs. Blockchain is a supra-national phenomenon. The crypto space is moving infinitely faster than the speed of traditional industry knowledge or regulatory containment.

Let’s look at our current financial transaction system as it relates to anonymity, compliance, dominant political ideology, and governance. Whether we like to admit, the banking industry is fundamentally political and tied to social access. The banking industry often acts as the financial coercive force of government.

Simple Transactions & Banking

In the United States, it’s simple for us to open a bank account, provided we can prove our identity. If we want to move any meaningful amount of money through that account, we are immediately subject to compliance and governing transparency. If we want to send a wire for $1,000 to another bank account—generally not a problem. If we want to send a wire for $20,000 to another account—problem. If we are not ‘known’ by the banking system, that transfer will come under scrutiny. If the sender or recipient are to be considered unsavory by any government or regulatory body on either side of a wire transaction, consider that money delayed, or at worst confiscated without due process—think Civil Asset Forfeiture without any of the physical constraints. Moreover, this $20,000 wire transfer will have a transaction fee of $20–50, in addition to entry fee, reporting and compliance requirements. That same transaction on a crypto network might cost $0.10 to $3 — with only a public record that the transaction took place.

Beyond banks, we are encouraged to use credit cards (aka the first digital tokens) to make transactions easier. Medium-sized businesses cannot operate without accepting credit cards. Credit banks like Visa, PayPal, and American Express are, more than ever, politically affiliated organizations. Because banking fuels the businesses of many Web infrastructure providers, we also see a cascade of access restriction and other forms of coercion there as well. If the banking order (or their lobbying conduits—i.e. politicians) don’t like what a company represents (either morally or politically), it can come up with a reason to restrict a company’s ability to transact without due process. This affects both the customer and the business. The customer cannot patronize a business it has a peer-to-peer relationship with. The business cannot provide its service.

Here is a list of examples:

This list of examples is not meant to assign moral or political value to the parties involved. What this list explicitly illustrates is the power of the dominant order to stifle transactional participation. If a business does not conform, it can be excluded as a member of transactional society. I once noted to a friend when she recounted her conversation with a Libertarian who made some “actually, really good points”—“Unconstrained government power is only good if you agree with the government…”

Credit Card Disruption

Despite this clear union between policy and banking, what does it mean that credit card companies are exposing themselves more to the crypto markets? How can they move from a model of centralized control and influence to decentralized chaos? PayPal recently increased their fiat-to-crypto conversion limit to $100,000 per week. Visa is investing resources in crypto consulting.

Currently a credit card terminal (physical retail or virtual) charges between 3–5% per transaction. Just recently we saw Amazon pushing back hard on Visa’s fees, maybe more indication that the models are all outdated. Perhaps credit card companies aim to arbitrage between blockchain transaction fees and their existing physical and virtual terminal transaction fees.

A New Era For Speculative Trading

If we want to trade assets or contracts on the American exchanges like the NYSE or Nasdaq, we must first have an aforementioned bank account. We then need to pay a hefty fee to a connection broker like Etrade or Charles Schwab. The brokers are regulated by the government. The brokers pay taxes. The brokers have massive centralized software infrastructure. The regulatory and transparency compliance enacted on the connection brokers costs them large amounts of money. These brokers start deep in the negative, then charge the users/customers/traders to recover from infrastructure costs and top down pressure by regulators. This is not to say that regulation is bad, but much of it is forcefully applied to system participants.

Blockchain transactions are not subject to the traditional governing and compliance structures at all. Blockchains themselves enforce their own policies at the code and node level, with the assumption that two parties transaction out of mutual good will, nothing more. The financial oligarchs who built the transactional infrastructure of the world cannot sit happily knowing that two parties can exchange digital value without paying an access fee. An irresponsible, unaccountable, and debt-ridden government cannot sit happily knowing that two parties can exchange digital value without paying a tax.

With the first explosion of blockchain transactions and trading around cryptocurrencies like Bitcoin, Ethereum, Monero and Ripple, many of the world’s governments implemented reporting requirements on cryptocurrency exchanges and crypto-to-fiat transfers. A good example of this was the regulatory measures forced on exchanges like Coinbase that I wrote about in 2018, Coinbase cooperation with IRS will cause more peer-to-peer trading, darker crypto web. Also of note is China’s continued interference in its crypto markets and the relocation of large crypto exchanges to Singapore. The future the oligarchs feared in 2018 is here, and it terrifies them.

In blockchain and cryptocurrency we see a glorious illustration of the friction between the decentralized and divine individual, the collective political or cultural morality, the web of corporate interests, and the governing body. Blockchain is the digital theatre for an ancient epic story.

Decentralization Is The Problem

The current banking transaction economy is completely centralized underneath government regulatory entities and multinational financial cartels. Transactions in our traditional economy are approved by the banks and credit card companies, who together represent the authentication layer. We prove our human/corporate existence and worthiness first, then we are granted access to transactions in banking, ATM, credit card, merchant terminal, Apple Pay, and so on. Apart from cash transactions, every traditional digital transaction is facilitated entirely by regulated multinational companies who answer to (and sometimes participate with) the coercive force of government.

In stark contrast, blockchains are entirely decentralized. A blockchain is two things, 1) a ledger of balances, transfers, or digital assets—like an Excel spreadsheet with rows that represent things like balances of a coin/token, records of transfers between blockchain accounts, or digital assets like NFTs, and 2) a distributed web of servers (or nodes) that host the publicly accessible chain in order to approve transactions.

Each blockchain transaction requires an access interface to the chain (like through a Web3-enabled wallet which connects to the distributed web of nodes). There is no governing body that cares what the transaction contains, how much is transferred, or who the parties are. It is 100% peer-to-peer. I trust you. You trust me. We create a transaction based on that mutual peer-to-peer trust.

Each transaction on a blockchain requires computational resources. Blockchain transactions can represent monetary value, or be completely novel and valueless digital assets. Each transaction requires a certain number of distributed nodes to approve the transaction according to the history of the blockchain.

When we say distributed, we mean not housed within a centralized datacenter provider like Amazon, Google or Microsoft. Blockchain nodes are usually run by the participants of the network. A node can run on something as simple as a laptop in an apartment that has Internet access. Anyone can run a node of a blockchain according to the code/server requirements of the specific chain (like Bitcoin or Ethereum). 100,000 different people can run a node of a chain anywhere in the world.

Once released into the digital world, the only thing that can shut down transactions on a blockchain is the removal of the Internet itself—think something on the order of environmental or nuclear electro-apocalypse.

What we are seeing is 10,000 different blockchains competing to prove their value in a completely distributed environment with very little, if any, governance or constraints that are not expressed in code. Web3 is the layer of applications that transact using these many new blockchains.

Decentralized Exchanges

As mentioned earlier, the chasm-crossing mechanism that allows these tens of thousands of new blockchain coins, tokens and assets to explode into a purely unconstrained marketplace economy is the decentralized peer-to-peer trading exchange. It is hard to emphasize how much of a game-changer this is; or how much of a threat to the dominant order these decentralized exchanges represent.

While each blockchain does require a computing fee to approve a transaction (sometimes called “gas”), this cost can be orders of magnitude less than traditional fees, truly distributed, and governed by the algorithms and incentive structures unique to each blockchain or decentralized exchange. Blockchain computing fees are currently subject to wild volatility. To combat this volatility, decentralized exchanges are innovating using second layer trading pools and algorithmic pricing models that increase efficiency, simulate trade demand, and lower asset exchange costs.

Unlike with trading brokers like Etrade, Charles Schwab, or Interactive Brokers, on blockchain there is no intermediary entity to moderate peer-to-peer exchanges of value; there is no entity that can take a percentage for accessing the banking/trading infrastructure or for connecting to the exchanges like the NYSE, CBOE, or Nasdaq. Also, because decentralized exchanges most often use algorithmic pricing models, it removes the need for the order book and massive real-time streaming infrastructure needed to display the order book.

There are many popular decentralized and ‘swap’ exchanges like Vesper, SushiSwap, SundaeSwap, and PancakeSwap—and asset marketplaces like OpenSea and Rarible.

In terms of mechanics, a decentralized exchange functions much like the LSE, Nasdaq, NYSE, Deutsche Börse, or CBOE—except with no centralized connection arbiter/regulator.

The decentralized exchange provides the following functions:

  • Creates a marketplace to speculate on digital assets
  • Lists the last traded price of said assets
  • Executes contracts on peer-to-peer transactions for an underlying crypto asset
  • Transfers one asset (either value-based like cryptocurrency or novel, like NFT) from one location on a blockchain, to another location on a blockchain—usually on the same chain but not necessarily. *This can also be done in a simulated or ‘earmarked’ fashion in the case of a trading pool, but that is a bit complex for our conversation here.

As we explored earlier, corporate and government interests are not happy when confronted with an inability to collect fees or taxes—very not happy. Their current mechanism for regulatory compliance, fees, taxes, and penalties is the ability to regulate and force compliance on the clearing houses who exchange cryptocurrency for fiat currency, like converting Bitcoin to United States Dollars, then sending that deposit to your traditional bank account. This is common with Coinbase, Gemini, and others. The person requesting conversion from cryptocurrency to fiat currency will be subject to local taxes, fees, laws, penalties, restrictions, and so on.

As the Web3 app/access layer matures, it has the potential to disrupt everything. Once value is transferred into a crypto asset, that value can now be used to transact in thousands, maybe millions of new places in lieu of its transfer back into a fiat currency like the £ Pound, € Euro, ₩ Won, or USD. The longer a store of crypto value can remain on any given network of blockchains, marketplaces, and distributed exchanges, the farther away that crypto value moves from potential institutional and governmental fees, taxes, and coercion.

The decentralized exchanges and marketplaces allow each crypto asset to be transformed and exchanged between many other assets. These exchanges will allow for unregulated peer-to-peer speculation of every kind. Think of this like trading an ETF that is pegged to the price of the S&P500, gold, silver, or oil. So long as there is enough demand for a speculative bet on any asset or event, its representation will be traded on a decentralized exchange.

Imagine, trillions of new speculative trades that are not subject to inefficient approvals, vetting, fees, taxes, governing bodies, or compliance administrations. This is great for individuals, but a direct threat to the financial oligarchy. Just as Amazon, CostCo and Target are great for individuals and families, they play a large part in the disruption and destruction of small and mid-level retail.


In writing this article, I had to ask myself a very serious question, “by helping to elucidate the new realities of the decentralized Web3 inertia, will I be complicit in its potential future regulatory destruction?” I take this question very seriously. I am a lifelong non-conformist and pursuer of efficiency and truth—probably to a fault.

Across the globe we see that the disconnect between government narrative and truth is widening in almost ever place we look. At their best, global governments and multinational corporations steadfastly encourage the sustainable growth of the economy. At their worst, these entities have proven to be largely unaccountable self-interested actors — like overgrown and emotional teenage bullies who cannot be stopped. The global governments, politicians, and multinational corporations are all in bed together, enjoying a petulant elitist orgy of classism, exclusion, nepotism, and vigs. Because they control the financial access system in its entirety, their license to act inefficiently and coerce based on illegitimate influences and mandates cannot be constrained or revoked. Surely there are many righteous and responsible initiatives pursued by governments and corporations, but governments and multinational corporations are not fundamentally good—they are walking the line just like you and I. The truthful, efficient, and optimistic signal has become so faint, almost inaudible, while the cynical noise has become deafening and nonsensical.

At a minimum, we have to pursue cryptocurrency for its efficiency, transparency, and its obvious lack of inherent incentive to coerce.

I propose that the decentralized crypto space is so far ahead of governments, national or global, that it is hard to fathom. Governments cannot contain this beautifully efficient and innovative monster. Just as Open Source Software transcended the natural limits of centralized software platforms, so too are blockchain technologies transcending traditional finance. Its decentralized, community driven nature keeps blockchain unshackled, nimble, and efficient.

Governments, politicians and multinational corporations need to respect the power of cryptocurrency and not fight it. Any fight will be in vain and come at the cost of many innocent and decent actors. When governments dictate policy based on fear and nepotistic influence, the collateral damage is always tragic—and always worse in the margins where the elites don’t eat, sleep, drink, or live. It would be best if politicians remembered that government is not meant to be the slothful beast that cannot stop eating—government is funded by its people and has a contract to uphold their best interests through efficiency, trust, optimism, good will, and freedom. Governments must give more trust to the free and innovative individual to make society better. Governments must allow innovation to take its course, even at the expense of the existing, and often grossly inefficient, institutional power structures and norms.

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” — Upton Sinclair

Perhaps the world needs blockchain more than ever, and everything it represents, or perhaps, we need more and more government, to save us from ourselves…

Check out my new online class Web Fundamentals 101. Follow me on Twitter. Find me on LinkedIn.




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William Belk

William Belk


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