Web3 Smart Contracts Have Created The Ultimate Free Market
The Web3 ecosystem has created many new experiences for society, exploring the idea of borderless commerce, digital currencies, and immutable data. Over the past five years especially, the industry has exploded with creative ideas and innovation, many of which were considered impossible prior to blockchain’s rise.
One of the interesting effects of this explosion is that, even with all this innovation, we are nowhere close to running out of ideas. Web3 has not yet reached mass adoption, and even though the industry is massive and growing, it is still young. We are still exploring, and sometimes stumbling upon new use cases. After all, blockchain is a fascinating technology that has incredibly unique attributes. Data on chain is immutable, which can develop endless use cases for data verification, chain of custody, and other immutable situations. Data ownership is secured, meaning that the many use cases for NFTs as receipts, proof of ownership, and collectible assets are possible. Data flow can be trustless, so decentralized groups of people can work together for the common good without worrying about betrayal or poor participation. And with the resurgence of multi-party computing, the trustless working environment can be performed with sensitive information without risking its exposure.
Once you examine these amazing attributes, it’s no wonder that we are still discovering new use cases and will be for some time. Aside from technology-focused use cases, we can also see even political and social science phenomena play out thanks to blockchain. One of the most interesting cases is how smart contracts and other permissionless systems can create a new level of open market for people to share. Let’s examine an emerging free market system that has the potential to massively scale thanks to its ties with Bitcoin, and see just how incredible Web3 technology applied well can be. The Bitcoin Validated Services (BVS) model, developed by SatLayer, is a prime example of Web3’s free market at work.
Free Market via BVS
The Bitcoin Validated Services model, or BVS, creates the foundation for interested parties to work together. This type of working market isn’t completely unique, where a middleperson can facilitate different parties to contribute and provide services for each other. What is certainly unique is that the BVS may be the first case of this model being completely automated. Its architecture provides the incentives balanced enough to ensure that each party behaves well.
Here’s how it works. Developers are building all types of dApps that create economic value. These dApps are by design decentralized, which requires some type of validator to help secure the network and ensure it operates correctly as designed. To make this happen, the developers must set up rules that reward the validators with the revenue generated by the dApp. The problem lies when a dApp is first developed, and it doesn’t have the full list of validators and the liquidity backing these reward structures. This is a dangerous gauntlet that new dApps have to endure, putting them at risk of attack, or even just not providing quality services and dying before they get a chance to shine.
The developers need a way to have instant backing of funds in order to quickly ramp up validation and run their service as it is intended. With the BVS model, they are able to tap into the Bitcoin backing immediately and launch their dApp at full strength. This is a huge benefit that can help to build a massive ecosystem quickly and safely. But how does a developer find this type of service, and who provides it?
The BVS connects developers with the two players that need to back it. Financially, Bitcoin restakers provide the currency needed to secure the network. However, to build up and back those dApps that will perform correctly, another role is needed. Operators handle this challenge and are responsible for deploying and running the BVS by working the key features needed for the network to operate smoothly: ensuring a stable connection, a safe and secure environment for executing the code and making sure the hardware used for this can handle what is required. By doing all of these critical tasks, operators take a portion of the rewards as their fee.
Each of these roles (Developer, Restaker, and Operator) perform their tasks and create a well-functioning ecosystem. But the challenge is ensuring that everyone works together. More so, there are a thousand different decisions that have to be made for this to work. What will the rewards be? What are the conditions of someone not doing their job? What happens when things go wrong? This is the magic of Web3, of smart contracts, and of the free market at work.
In the BVS model (and in other models that might follow this type of operation), the various parties get to select all of these parameters. Developers build up the smart contract and use the forces of the free market to decide the rewards and conditions that will attract the Restakers and Operators they need to run the system. It’s this free market that decides the rates, the rules, and ultimately, the players. This market motivates developers to build up dApps that are successful and can provide the revenue needed to pay the Operators and Restakers, which builds up the overall quality of the ecosystem. By centering this entire system around one of Web3’s most powerful attributes—the smart contract—the entire process can be performed by countless participants located across the globe. It is one of the purest forms of the free market in action, with all the barriers removed by a combination of technology and intelligent incentives.
What Comes Next?
SatLayer’s BVS model is an important example of what Web3 was always meant to be. Looking ahead, its success will hopefully lead to many similar models that can fully explore the value of Web3 in our evolved world. With this type of innovation in a world that is becoming more and more connected, creating trustless free markets is an incredible way to push toward mass adoption around the globe.