Orawan Limnalong is the founder of MUS Labs†
The much-celebrated World of Women (WoW) NFT project launched its second drop on March 26 this year. WoW is considered one of the most successful women-led projects† Ahead of the package, the bottom price was 7,248 ETH on March 8. This might give flippers about 104x if they had initially hit a genesis NFT when the project was first introduced.
Those who already owned a Genesis WoW could mint their WoWG for free. Come on the day of the reveal, some lucky individuals found out that they had beaten a 1/1 NFT Champion WoWG. The odds for that were 8 out of 22,222. After five days, such an NFT was sold for up to 80 ETH.
These lucky ones just happened to be in the right place with the right resources at the right time – or had certainly done something right in their previous crypto lives.
This scenario highlights the ongoing problems of opportunity and access. It got me thinking: is Web3 just going down the same path as Web 2.0, where the rich just keep getting richer?
Drivers and impact of wealth inequality
In her book Plutocrats, journalist and author Chrystia Freeland argues that globalization and technology are feeding rather than closing the global income gap. Despite all the innovation and value created by globalization and technology, it has also fueled the rise of the super-rich.
The gap between the haves and have-nots has real and serious implications for our society. In his TED talk Richard Wilkinson describes leading a team to create an index of indicators of life expectancy, math and literacy scores, infant mortality, homicides, jail terms, teen births, confidence, obesity, and mental health. They found that this index is highly correlated with wealth inequality. In essence, societies with larger wealth gaps are worse off.
Traditional Remedies for Wealth Inequality
The general consensus is that policy is the most direct way to correct the wealth gap. Surveys conducted by Pew Research and the PIIE unveiled recommendations on education, taxation, job creation, conditional money transfers, community wealth and credit availability.
A policy that is too strict reduces the incentives to develop technological breakthroughs. The OECD warns that a balance must be struck between reducing wealth inequality and promoting wealth-generating innovation. Carefully considered policy, social constructions and operational management are necessary.
Web3 and the political compass
At the outset, Web3 was envisioned as a place of incorporation where blockchain technology would address regulator antitrust issues. Unfortunately, a study conducted by researchers at the University of Limerick reveals that cryptocurrency has not changed the story. In terms of wealth inequality, crypto follows real economies.
If I had to put it on the political compass, I’d say Web3, the DAOs, and the communities it represents fall under the left-wing libertarian quadrant. In a sense, Web3 has evolved into a space collectively averse to regulation. as the PIIE sum it up, this is where the tension lies: “Technology and trade are factors, but policy determines the results.” What can be done in an environment where the solution could be policy, but regulation is disapproved at best and rejected at worst?
A happy medium
Can we create Web3 projects that mimic the effects of policies? Can and should projects impose these themselves? Maybe we can if we don’t think in absolutes.
Here are three solutions to consider when bridging the wealth gap in Web3.
1. A redistribution of wealth
Instead of taxes, what if you were charged higher gas costs if you had bigger profits? What if the higher gas rates were used to subsidize gas rates for lower flips? How can these fees be redirected to DeFi microloan projects?
Several projects have features equivalent to conditional money transfers.
For example, Not your brother has made her community treasury transparent with a link to this one OpenSea Collection† The team also allocated 10% of coin proceeds and 10% of coin royalties to vetted nonprofits.
HUG founder Debbie Soon says, “Despite being one of the fastest growing, welcoming and collaborative spaces, Web3 can still feel incredibly lonely and isolated being a creator launching a project.”
It can feel even more like an uphill battle when you’re part of a marginalized group. That’s why HUG has a soft spot for women, people who don’t speak English, BIPOC, people with disabilities, neurodivergent people and LGBTQIA+ people. In response to this, HUG has set up an artist-in-residence program where artists create 1/1 art for a prior grant. This frees marginalized artists to focus on their craft, and the HUG team then helps the artists turn their work into sustainable businesses.
2. Education and job creation
Subsidizing education and providing access to meaningful employment is paramount in a comprehensive inclusion policy. royals is an NFT project that is making great strides in such education.
Before Royals was launched, its founder Dr. Hans Boateng already involved in education, helping underrepresented groups build generational wealth through investment guidance firms targeting people of color in the United States.
3. DeFi Microloan
DeFi has opened doors for makers to access loans and capital that would otherwise not be available through traditional banking. Since credit scoring models are highly regulated, those without a bank account simply cannot meet the minimum requirements.
Because DeFi is highly unregulated, it gives fintechs the space to develop modern financial products that use alternative data sources for risk management. For example, instead of full credit history, wealth strategist Kedra Reeves identifies bills and rent payment behavior as excellent predictors of the probability of default.
Many flocked to NFT space when they first learned of the potential for alien reentry. “NFTs have changed my life,” some even say. However, it is important to remember that no one is an island. For Web3 to work, it has to work for everyone. If that means sacrificing short-term gains, maybe that’s what everyone needs to make it.