The scourge of Silicon Valley: how Web3 solves the geographical silos of innovation

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Facebook, Google and Apple are the titans of the tech world today. They have achieved their success in part because of their location in the heart of Silicon Valley. But what if there was a way to decentralize the web so that anyone, anywhere could contribute to its growth and development?

Silicon Valley has become the most dominant force in the technology industry. But this domination comes at a cost. The Valley has become a victim of its own success, as the high cost of living and doing business has crippled many would-be entrepreneurs and innovators.

In this article, we’ll look at some notable Web 3.0 projects that have achieved Silicon Valley-like scale without having to conform to the valley’s geographic restrictions. We’ll also explore how Web3 could help solve some of the problems resulting from the concentration of power in Silicon Valley.

What Makes Silicon Valley Work?

Since the early days of the Internet, Silicon Valley has been the epicenter of technological innovation. There are a number of factors that have contributed to this. One is the concentration of wealth in the valley. This has created a large pool of capital that can be invested in new and innovative ideas.

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Another is the presence of major research institutions like Stanford University and the University of California at Berkeley. These schools have educated some of the most talented engineers and computer scientists in the world.

But perhaps the most important factor is the risk-taking culture that pervades Silicon Valley. This culture has given rise to some of the most iconic companies in history, from Apple to Google to Facebook.

However, as Silicon Valley has become more successful, it has also become less accessible to the outside world. It is increasingly difficult for startups and technology companies to gain a foothold.

How Web3 sets a precedent that makes the Silicon Valley model obsolete

To better understand how Web 3.0 solves the geographic silos of innovation, we need to look at all the factors that make a Web3 project work, and why those factors may not work in Silicon Valley.

Factor 1: A democratized funding pipeline

Web 3.0 startups are funded through crowdfunding instruments such as Initial Coin Offerings (ICOs), Initial Dex Offerings (IDOs), and Security Token Offerings (STOs), which are independent of traditional funding and can raise capital from all over the world. This gives them a distinct advantage over traditional startups, which rely heavily on venture capital (VC) funding. By contrast, one of the hallmarks of Silicon Valley is its hub of venture capital funds – but to capitalize on this, companies have often had a better chance by being located there.

Another reason Web 3.0 startups don’t need to be located near other businesses is that they can benefit from the network effect. It is the phenomenon by which a product or service becomes more valuable as more and more people use it.

Aren’t these benefits also available to traditional businesses? Yes, but to a much lesser extent. This is because traditional companies are more likely to be funded by VCs, which means they are less likely to benefit from the global network of investors that ICOs (and the company) can provide.

It can be argued that if CZ (Changpeng Zhao), the founder of Binance, had traveled to the San Francisco Bay Area to raise funds, the success of the exchange might not have been so great. . In effect, it would have been competing with much more established companies for a limited amount of venture capital funding.

Factor 2: A crypto-friendly regulatory environment

IFTX Founder Sam Bankman-Fried, one of the most successful people in the crypto space, has the makings of a successful Silicon Valley startup founder – he’s an extremely smart graduate from Massachusetts Institute of Technology (MIT) and a former quantitative trader at Jane Street Capital, a successful hedge fund in New York.

However, instead of going to the valley and setting up his business there, he chose to base his business in Hong Kong. The reason for this is quite simple: the regulatory environment in Hong Kong is much more crypto-friendly than in the United States. And this will become more and more the case over time.

The United States has been very slow to adapt to the rise of cryptocurrencies and blockchain technology. The U.S. Securities and Exchange Commission (SEC) only recently began to embrace the idea of ​​approving crypto-based exchange-traded products (ETFs) and only recently gave the green light to a Bitcoin ETFs.

Meanwhile, other countries like Canada and Switzerland have been much more welcoming to crypto innovation.

And it’s not just the SEC that’s been slow to adapt — the rest of the US regulatory environment isn’t particularly supportive of crypto firms, either. In contrast, Hong Kong has a much more business-friendly environment and its regulators are open to working with crypto companies.

This regulatory arbitrage is one of the main reasons so many crypto businesses choose to locate in Hong Kong, and it’s a trend that will only continue in the future.

Factor 3: A flatter hierarchy

Web 3.0 startups tend to have flatter hierarchies than traditional businesses. Indeed, they are often built around the idea of ​​decentralization, which means that there is no need for a centralized authority figure.

In a traditional company, the CEO is the one who makes all the decisions. But in a decentralized organization, power is distributed among all members. This leads to a flatter structure, often more conducive to innovation.

One of the best examples of a decentralized organization is the Ethereum Foundation. The non-profit organization is responsible for supporting Ethereum, but it does not have a centralized management team. Instead, it’s managed by a group of core developers who are responsible for making decisions about the direction of the project.

The advantage of this decentralized model is that it allows for a much more agile decision-making process. Indeed, there is no need to wait for a centralized authority to make a decision – the members of the organization can simply reach a consensus and move on.

So what does that have to do with not being in Silicon Valley? The answer is that if you’re not in Silicon Valley, you’re not competing with traditional power structures. This means you have a much better chance of succeeding because you don’t face the same level of competition.

Take for example, Austin, Texas. The city is not known for being a hub of technological innovation. However, it has been able to attract a number of Web 3.0 startups because it offers a much more favorable environment for innovation.

Unleash the location-independent nature of the Internet

The internet has made it possible for people to work from anywhere in the world. And it is a trend that will only accelerate. As more and more people can work remotely, the traditional idea of ​​a 9-to-5 job is becoming increasingly obsolete. This is especially true for Web 3.0 startups, which often don’t even have a physical office.

The Internet at its core is decentralized and location independent, but this has not been achieved because of the Silicon Valley model. Power structures were too centralized and funding was too limited.

The good news is that with Web 3.0, we are finally beginning to unlock the true potential of the Internet. By decentralizing power structures and opening up funding channels, we create more level playing fields for innovation. And it will benefit us all in the long run.

Next in this series: How important is Know Your Client (KYC) for Web 3.0 startups? Does it violate fundamental ideas of privacy and data sovereignty?

Daniel Saito is CEO and co-founder of Strong Node.

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