Some people may wonder what is the need for crypto tokens for Web 3.0 decentralized blockchain services. This might be because they are used to Web 2.0 services operated by centralized tech giants such as Facebook, Twitter, Google, etc. Often they misunderstand the need for crypto and think that these are simply used for price speculation. That is not really their primary use.

They need to remember that these Web 2.0 giants have been funded by venture capitalists and eventually became public companies, with their shares traded in the stock market. Hence the cost of buying and operating the servers, paying the salaries of the people who design and maintain these, and pay for the design and engineering, are funded by investors.

With decentralized blockchain Web 3.0 services, there are no centralized companies. Instead these new services are run by token holders who do not know each other. Often they are organized in a new type of business organization called a Decentralized Autonomous Organization (DAO). 

So if in Web 2.0 the servers for example are paid by the tech company, who pays for Web 3.0 decentralized network costs? Decentralized networks are owned by independent server owners who need to get paid for their costs and make a profit. Since disinterested third party transaction verification servers that keep decentralized copies of the transaction also involve a cost, there needs to be a way for the owner of that server to earn to pay for costs involved in acquiring (capital), maintaining, and powering the server for a 24 x 7 online basis. The server operator is basically an independent contractor who gets paid via the transaction fee that is paid for ensuring that the server does its validation job properly.

The means by which these transactions are paid for is via the use of crypto tokens. These tokens can be bought peer to peer (P2P), via a decentralized exchange (DEX), or via a centralized crypto exchange.

Thus in terms of behavioral economics, these validators (called miners in Proof of Work systems) earn the transaction fees when they validate the transaction. Hence this incentivizes them to make sure the system runs properly with no fraud, as they can lose their crypto (as opposed to cash) flow stream if they do something improper.

The alternative is to setup your own centralized servers, maintain these 24×7 to run the blockchain. But that defeats the purpose of putting your transactions on the blockchain. You’d have to pay for all of those in the context of a traditional company, instead of having independent third party contractors run those servers funded by tokens.

This is the reason why you need the token. To give independent network server validators a chance to recoup their costs.


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