Decentralized public blockchain networks have existed for ~15 years with the associated cryptoassets currently going through their fourth major market cycle. Throughout these years, and especially since the launch of Ethereum in 2015, considerable time and resources have been spent theorizing about and developing applications on top of these networks. While progress has been impressive in the context of financial use cases, other types of applications have struggled, mainly due to the complexity of delivering scalable and seamless user experiences within the constraints imposed by decentralization, as well as fragmentation across different ecosystems and standards. However, recent technological advancements, both within and outside the blockchain industry, have made a broader range of applications not only more feasible, but also more necessary than ever.

“Better technology doesn’t always win” is an old adage in entrepreneurship with numerous well-studied examples from business history: standard vs. wider and more performant railway track gauges, combustion vs. electrical engines for inner city car transport, Qwerty vs. Dvorak as keyboard layouts, VHS vs. Betamax as videotape formats, etc. Similarly, while it is true that solving technical problems related to scalability, privacy, cost, and user experience is essential for driving the adoption of blockchain networks, the long-term success of individual networks is not only – and, in some cases, not even primarily – a function of their relative technical merits. It’s also a function of their relative institutionalization.

The road to progressive decentralization runs parallel to – and will eventually intersect with – the road to progressive compliance. The challenge is that, while “decentralization” in crypto has a broadly global definition, regulation is and will likely remain a national, or at least a regional, matter. Thus, there is no universal playbook towards compliance beyond what should be obvious to anyone. But the most important task at hand is to ensure that all of the above does not come at the cost of freedom to create and maintain open-source technologies, nor at the cost of what’s essential to the value proposition of blockchains: public verifiability of information, reduced reliance on the subjectivity of human administrators (automation), and tilting the power balance between institutions and individuals in favor of the latter (self-sovereignty).

To understand Web3, one needs to recognize not only how it aims to differ from the previous generation of web-based services, but also the functional equivalence between traditional and digital bureaucratization, or manual vs. automated bureaucracies. Both are based on formal rules of procedure (protocol) but whereas the former relies on human intermediaries (‘middlemen’) to perform administrative functions such as keeping information records and facilitating transactions in reference to these records, the latter pushes humans to the edges by replacing manual administration with computers and software. This results in more technological intermediation or, as I’ve come to call it, middlemachines.