SNEAK PEEK:
- The Office of Science & Technology asked Polygon Labs for an explanation on digital assets.
- Polygon Labs is focused on the benefits of Web3 to both the US and global economy along with matters related to privacy and operational resiliency of DeFi.
- Responsible advancement in digital assets can bring major advantages for the American people.
In its response to the Office of Science and Technology, Polygon Labs has come up with a detailed insight. The firm has shared that a blockchain-powered internet has the potential to enhance crucial elements of society. Among the recent advancements in the blockchain is the arrival of Web3 social, i.e., social media, as well as networking protocols.
In the present Web2 space, users can engage with a website by giving up their rights. However, blockchain-supported apps return control over such crucial rights to users to enhance their freedom over their digital presence and footprint.
Big Tech monitors the data of users via their browsing history, emails, and location. This is followed by technology firms using and selling this particular data for the purpose of marketing, advertising, or personalizing the browsing experience. At times, this data leads to certain perks for users, though the perks are nothing beyond being a byproduct of technology firms that want to increase their revenues.
Other than tracking personal information, Big Tech exercises the same level of control over UGC, or user’s generated content. A number of people contribute through reviews and other kinds of UGC to different websites. A database of content can be created with a UGC, alongside accumulating audiences and creating both online visibility and reputation.
All this is of great help to big tech firms in terms of creating a user base via network effects along with the maintenance of control over the user base. This way, big tech organizations use the UGC of every user at the same time, leveraging the user in the form of a personal, profit-making tool without compensation.
As far as users’ IP is concerned, there are two types of online intellectual property- formal and informal. Talking about the former, several types of IP need various legal frameworks, while the informal system is related to UGC and there’s no existence of legal frameworks or recognized rights.
In blockchain-backed networking or social internet apps, users get control over their internet experience and need not give up their personal details. Instead, they can connect their self-hosted, personal wallet to an app when they want to be involved with the internet. Since such self-hosted wallets are pseudonymous, they don’t contain personal information unless a user willingly includes a kind of digital asset with such details or that shows such details.
NFTs enable creators to monetize their contributions. Users own their content in the Web3 world and also enable others to collect it or engage with it. Rather than just consuming content, consumers can serve as participants as far as the careers of creators are concerned.
Blockchain enables users to own their IP via NFTs or other means. Rather than depending on documents and paperwork, a person can have digital possession or representations of ownership associated with their identity online. This system works in formal as well as informal contexts. If a person tends to leave a social media platform in Web2, the firm needs to innovate and provide them incentives to stay. This makes way for the reallocation of power from big tech to users.
Besides the benefits presented by blockchains, certain risks are also associated with evolving technologies. Regulators are focused on financial stability risks since there’s growth in the DeFi system and it interconnects with the ongoing known systems. Concerns related to the volatility in the price of digital assets owned by users and the use of digital assets in the DeFi system are acknowledged.
There’s an ongoing debate in the U.S. over whether or not digital assets are commodities as defined by the Commodities Exchange Act. This has led to the interruption of the potential for establishing a regulatory regime on digital assets in the United States. Hence, the OSTP must research classifications of digital assets worldwide to inform the U.S. approach.
Many other jurisdictions have tackled many classifications of digital assets that identify technologies’ realities as well as the nuances of various kinds of assets.
MiCA, the UK Consultation, and the FINMA classifications recognize that there are many forms of digital assets and that not each one of them can be categorized as financial instruments. Also, specific digital assets are possible to have traits of both a financial instrument and something that’s not financial at all.
For a strong and tailored regulatory regime in terms of digital assets, it is important to understand the ways and extent of digital assets’ functioning. This will make sure that the U.S. can establish regulation that aims at safeguarding users and offering market stability other than promoting innovation.
A financial system based on DeFi and its ecosystem has many benefits. Risks in the DeFi are a possibility, though. Talking about blockchain, it increases efficiency and transparency to improve present systems in areas like healthcare, supply chains, and government. According to PwC’s estimates, blockchain can increase worldwide gross domestic product by $1.76 trillion by 2030, along with the addition of 40 million jobs.
The U.S. is likely to earn $407 billion of that added value. Last but not least, blockchains are open and transparent and are on their way to offering affordable and faster remittance payments. Moreover, DeFi will enhance the financial system’s operational resiliency.
