web3 thesis (version0) on the composability of value as enabled by crypto-networks.

Our existing world is built on composability. Composability is a system design principle that deals with the inter-relationships of components. Any type of system, whether its a single-institution, industry, etc., can be evaluated along degrees of composability. Highly composable systems allow the individual components to be selected and assembled in various combinations depending on specific requirements and/or use cases. 

For example, in capital markets, composability exists in the financing documents used to create the capital structures of any type of company across a variety of different industries. In order to finance a real estate asset, different financial instruments whether it be equity, preferred equity, mezzanine debt, senior secured debt, or other need to “fit” into a company’s capital structure, utilizing standard legal concepts and provisions as the same “rails” to allow for an orderly functioning system.

Composability unlocks innovation by enabling economies of scale across the product development process. There is no one size fits all solution for financing different types of companies therefore market participants have tailored financing documents to compose new types of financing structures, i.e., products or services, by combining elements of pre-existing products.

Composability requires a common language and/or a protocol. Unified infrastructure that establishes the rules of the road for participants to engage with one another and resolve disputes. For example, in capital markets there is a protocol used in US bankruptcy courts to resolve disputes when a company fails in their financing obligations e.g., going bankrupt.

Composability leads to unintended consequences that can be non-intuitive prospectively. Modularization enables unique combination of services and features that may be useful for new and applications.

web3 is a supercharged expression of composability because it combines embedded economic incentives with permissionless protocols that bring together digital cooperatives, enabling rapid iteration and experimentation across potential use-cases.

As coined by Chris Dixon, web3 provides trust guarantees. web3 enables digital owned community cooperatives that utilize crypto-networks as coordinating mechanisms by having a cryptographically secure agreement on state. Fully digital systems that are owned by vested stakeholders enable a new form of organization that potentially enables better alignment between the creation, provision, and consumption of value. Crypto-networks provide a quantification of value in the form of tokens that can be used to incentivize positive-sum actions and behaviors.

Tokens as units of value that are interoperable, programmable, and composable on open ledgers will enable the proliferation of embedded economies that both democratize access to capital markets and improve the efficiency of transferring value. The technology creates value by reducing frictions to create, own, and distribute value. Further, crypto-networks unlock novel ways to organize economic activity and incentivize human behavior using new programmatic systems

Permissionless access to open source software reduces the barriers to entry for creation and experimentation. Anyone with an internet connection that has access to the underlying protocol can leverage the work of others to experiment on new models and applications. Borderless innovation enables an open meritocracy of ideas that can better source ideas through the wisdom of crowds with reduced frictions.

The composability of digital value will unlock the greatest investment opportunities of our lifetime as the features of web3 are iterated on across different verticals including open finance, digital identity, fractionalized art, among others. Web3 is not theoretical and the experimentations are happening now and expected to accelerate in the coming decade unlocking significant economic value for builders, community-members, and investors.

web3 thesis (version0) on the composability of value as enabled by crypto-networks.

Our existing world is built on composability. Composability is a system design principle that deals with the inter-relationships of components. Any type of system, whether its a single-institution, industry, etc., can be evaluated along degrees of composability. Highly composable systems allow the individual components to be selected and assembled in various combinations depending on specific requirements and/or use cases. 

For example, in capital markets, composability exists in the financing documents used to create the capital structures of any type of company across a variety of different industries. In order to finance a real estate asset, different financial instruments whether it be equity, preferred equity, mezzanine debt, senior secured debt, or other need to “fit” into a company’s capital structure, utilizing standard legal concepts and provisions as the same “rails” to allow for an orderly functioning system.

Composability unlocks innovation by enabling economies of scale across the product development process. There is no one size fits all solution for financing different types of companies therefore market participants have tailored financing documents to compose new types of financing structures, i.e., products or services, by combining elements of pre-existing products.

Composability requires a common language and/or a protocol. Unified infrastructure that establishes the rules of the road for participants to engage with one another and resolve disputes. For example, in capital markets there is a protocol used in US bankruptcy courts to resolve disputes when a company fails in their financing obligations e.g., going bankrupt.

Composability leads to unintended consequences that can be non-intuitive prospectively. Modularization enables unique combination of services and features that may be useful for new and applications.

web3 is a supercharged expression of composability because it combines embedded economic incentives with permissionless protocols that bring together digital cooperatives, enabling rapid iteration and experimentation across potential use-cases.

As coined by Chris Dixon, web3 provides trust guarantees. web3 enables digital owned community cooperatives that utilize crypto-networks as coordinating mechanisms by having a cryptographically secure agreement on state. Fully digital systems that are owned by vested stakeholders enable a new form of organization that potentially enables better alignment between the creation, provision, and consumption of value. Crypto-networks provide a quantification of value in the form of tokens that can be used to incentivize positive-sum actions and behaviors.

Tokens as units of value that are interoperable, programmable, and composable on open ledgers will enable the proliferation of embedded economies that both democratize access to capital markets and improve the efficiency of transferring value. The technology creates value by reducing frictions to create, own, and distribute value. Further, crypto-networks unlock novel ways to organize economic activity and incentivize human behavior using new programmatic systems

Permissionless access to open source software reduces the barriers to entry for creation and experimentation. Anyone with an internet connection that has access to the underlying protocol can leverage the work of others to experiment on new models and applications. Borderless innovation enables an open meritocracy of ideas that can better source ideas through the wisdom of crowds with reduced frictions.

The composability of digital value will unlock the greatest investment opportunities of our lifetime as the features of web3 are iterated on across different verticals including open finance, digital identity, fractionalized art, among others. Web3 is not theoretical and the experimentations are happening now and expected to accelerate in the coming decade unlocking significant economic value for builders, community-members, and investors.