Chapter 6 provides a comprehensive overview of tokenomics, analyzing the economic models and incentive mechanisms underlying tokens and cryptocurrencies. It explores the classification, functions, supply and demand dynamics, and financial aspects of various token types, including utility, governance, platform, stablecoins, NFTs, and meme coins. The interplay between tokenomics and Decentralized Finance (DeFi) is examined, highlighting considerations such as staking rewards and yields. Innovations such as "play to earn" gaming are covered but also their risks such as sustainability and Ponzi schemes. The impact of community sentiment and conviction on valuation is analyzed through meme coins and viral hype. Overall, this chapter offers crucial insights into the foundational economics of the Web3 ecosystem, grounded in a nuanced understanding of the incentive structures and value drivers behind diverse crypto tokens and assets. Both the technological potential and limitations are critically appraised. The key takeaway is an ability to comprehensively evaluate tokenomics across dimensions such as utility, supply, demand, distribution, financials, sentiment, and regulation.

Chapter 3 provides a comprehensive overview of the foundational blockchain technology stack. It begins by examining the consensus layer, which enables a decentralized network to agree on the state of a shared ledger. The consensus layer is highlighted as the core foundation, with a deep dive into the breakthrough Nakamoto consensus protocol. Nakamoto consensus leverages proof of work for leader election and the longest-chain rule for transaction confirmation to achieve decentralized consensus in permissionless settings. The chapter then explores the computer layer, which defines the blockchain’s computational model, and the application layer where decentralized apps are built. It uses Bitcoin and Ethereum as examples to demonstrate how these layers work together in real-world systems. Bitcoin implements a simple UTXO model and scripting language, while Ethereum provides a Turing complete virtual machine. Finally, the chapter discusses elements such as wallets and RPC services involved in the user-facing experience. Overall, the chapter provides a comprehensive technical grounding across all layers of blockchain systems.

Chapter 9 offers a comprehensive exploration of decentralized autonomous organizations (DAOs) and their role in the formation of Web3 organizations. It begins by defining DAOs, tracing their history, and outlining the benefits they bring to the digital world. The chapter then delves into the various types of DAOs, including protocol DAOs such as MakerDAO and Lido, charity DAOs such as GitcoinDAO and Ukraine DAO, and investment DAOs, represented by The LAO and MetaCartel Ventures. The chapter also examines Art Collection, Social, Fans, Sports, Media, Tool, and multipurpose DAOs, with examples such as Aragon DAO and Coordinape DAO. However, it is not without noting the disadvantages of DAOs, such as slow decision-making, low active participation rates, legal and tax issues, centralization risk, and vulnerability to flash loan attacks. The future of DAOs is also a topic of discussion, with speculations on how they could be combined with artificial intelligence (AI), attract large institutional investments, or be endorsed by big brands. Furthermore, the chapter considers the possibility of DAOs functioning as virtual countries and their potential role in inclusive finance. The chapter provides a summary, followed by a series of thought-provoking questions for further reflection.

Chapter 4 examines the scaling of Web3 to support widespread adoption. It first discusses why scalability is crucial for Web3, enabling it to handle high transaction volumes and users such as centralized systems. Scalability refers to the ability to sustain performance amid growth. Key factors are number of users, response time, storage, transaction costs, and throughput. Scalability is challenging due to the blockchain trilemma of decentralization, security, and scalability. Solutions involve optimizations at the network layer (layer 0), blockchain layer (layer 1), and Off-chain layer (layer 2). Layer 0 focuses on data transfer, using protocols such as BloXroute. Layer 1 aims to improve the blockchain itself via methods like sharding or new consensus algorithms. Layer 2 leverages Off-chain processing via rollups, sidechains, and state channels. Each layer has trade-offs. Rollups bundle transactions Off-chain using zero-knowledge proofs or fraud proofs before validating On-chain. Sidechains process transactions externally to relieve the main chain’s load. State channels allow Off-chain transfers between participants. No single scaling approach fits all cases. A combination of solutions across layers tailored to the application offers the most potential.