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The world of finance and investments has always been seen as the domain of elites — a place where the wealthy play by different rules than everyone else. But a new wave of decentralized technologies is changing that, giving rise to a more inclusive economy where everyone can participate.
The best-performing funds, for example, require a minimum investment typically in the hundreds of thousands — or even millions — of dollars. This has made it difficult for ordinary investors to get a piece of the action.
To understand one of the biggest promises of Web3, we must first understand how the economics of the internet has changed and how democratic investing has become one of the frameworks that have made DeFi such a viable investment opportunity for the everyday person.
Pre-Web3: The economics of Mr. Market
Mr. Market — the allegorical figure that represents the collective mood swings of the stock market — has been around for centuries. This is an idea made popular by legendary investor and mentor to Warren Buffett, Benjamin Graham.
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In his original form, Mr. Market was a man who would show up at your door every day, offering to buy or sell your shares for a price that represented his current mood. If he was feeling optimistic, he might offer you $100 for a share that you bought for $80 the day before. If he was feeling pessimistic, he might offer you $80 for that same share.
The key point is that his offer price had nothing to do with the underlying value of the company — it was entirely based on his own emotion …