Web3 for Social Good?! Building Real World Impact with Decentralized Finance

Web3 was built to disrupt traditional systems, but it hasn’t been without its own challenges—think FTX, rug pulls, hacks, and financially driven projects that put profit over purpose. This all raises a key question: if at all, how can we ensure the power of Web3 is used for good? Can it truly drive social impact through DeFi, crypto and worldwide projects? And what about the $$$? Can profit and purpose co-exist? The answer is yes — but it’s complicated. Read on for some answers.

Web3-based technologies and assets, with their inclusive ánd disruptive nature, are increasingly being recognized as tools that can create meaningful, societal impact. Think about it. Decentralized finance (DeFi). Transparent supply chains. Raising funds for (good) causes via meme coins… Just a few examples and they all hold great promise. But as with any innovation, profound and philosophical questions do arise as well. How can we ensure that Web3's power is leveraged for "the" greater good? And how do we balance aspirational and ethical considerations with the financial motives and realities driving many projects?

In this honest piece, we tap into the potential of Web3 for social impact.

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^{A recent live session, hosted by Thrilld Labs’ CEO Alexandra Overgaag, brought together innovators, technologists, and thought leaders, including Frank Oonk (CEO and founder of Masternode.one), Jesse Wachtel (founder of Decentralised Ventures and the CTO of Thrilld Labs), Henrik Beyer (author and creator of the Crypto Beyer newsletter and the “Proof of Good” framework). The panelists met to discuss the importance of using Web3, crypto and blockchain technologies as a force for good and how projects can ensure they are delivering real-world social, environmental, and economic impact. They engaged in various debates, covering topics such as the need for transparency and decentralization in fundraising, the role of other emerging technologies like AI and IoT in enabling positive social impact, and the challenges of making Web3 accessible and inclusive for all. Loosely inspired by the insights shared during this panel, we dive a little deeper into the intersection of Web3 and social impact in our article below.

Please note that the opinions and perspectives shared in the article may not necessarily represent the views of all panelists.}

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The Intersection of Tech, Ethics, and Impact in Web3

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Web3 has arrived with the promise of decentralization, transparency, and innovation. Why? To make legacy systems better. Why? To make societies and individuals' lives better. Indeed, Web3 has opened new doors. From blockchain to NFTs (non-fungible tokens), DAOs (decentralized autonomous organizations), and DeFi, the technology's decentralized nature allows for increased autonomy, transparency, and a direct connection between creators and communities.

Yet, as a technology aimed to challenge traditional systems but also having coped with various adverse industry (black swan) events itself such as FTX, rug pulls, hacks, or simply financially driven projects, and whatnot, we may immediately raise one key question: How do we ensure that the power of Web3 is used for good? And how do we navigate the ethical and financial complexities that come with the industry's growth? Let's dive into the impact of Web3 on social good and explore how we can shape a future where technology drives positive change.

Simply put, we may argue that Web3's potential for social good relies on a careful balance of ethics, purpose, and profit. At the forefront of this exploration is the growing movement within Web3 to align the power of decentralized technologies with positive social outcomes. From environmental sustainability via ReFi (regenerative finance) solar panels connected to the blockchain to social justice via open access, self-custodial ledgers and financial inclusion via airdrops and open markets, Web3 is reshaping most industries, if not the world.

However, this trajectory is far from straightforward. With ethical dilemmas, regulatory concerns, and the rise of financial incentives, the path to Web3-driven good requires industry stakeholders and those using the tech to consider questions of impact, accountability, and trust. (Check out how the media industry is changing, or less so… at: Web3 & Media: Impacts, Intersections, and Interests).
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Starting with Builders and Funders

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When we think about Web3’s potential for social good, it’s easy to imagine the latest booming 10x coin and early-stage investments as tools for financial gain. However, many advocates (Thrilld Labs' team included) for Web3 believe that these tools can—and should—be leveraged to address some of the world’s most pressing challenges.

Indeed, Web3 has a sociological nature to it. Through decentralized networks, individuals have more control over their data, and projects can be built with the intent of creating social value rather than maximizing profit. For example, impact-driven initiatives are increasingly funding projects that prioritize “impact” over financial returns via DAOs and community-backed funds, while blockchain-based companies engage in sustainable business practices via the ethical distribution of parts of their profits to charities.

While the potential and execution by some are clear, a fundamental question remains lingering at the surface: how to ensure that “Web3 for good” isn’t strategically leveraged as a mere buzzword or something that simply sounds good in one’s marketing, but is actually helping people in the reality of daily life? The solution lies in the way we build and govern the tech.. As Frank Oonk, founder of Masternode.one stated: “[...] we built this trading engine that makes money from the market, and then it's our turn to give money back [by donating] 10% of our profits to good causes [...].

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Just as with traditional systems, we reckon that the success of decentralized tools will thus depend on the principles that guide them and on their very makers and users.
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Decentralization Challenges + Checks & Balances
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But let's be honest—significant challenges flow from decentralized technologies, let alone from using them "for real" for good.. First, the decentralized nature of Web3 means that systems of checks and balances are often missing, and, secondly, the introduction of financial incentives can lead to unintended consequences or even aggregate the former.

Let’s make this more clear. The promise of autonomy and transparency can, at times, be undermined by a lack of oversight and accountability. Think about early-stage projects, raising capital for a wonderful (social) cause via a token raise. A stunning deck, impressive website and beautiful promises may translate into hundreds of thousands of dollars raised in no time, especially in a bull market. But then - the builders are no longer visible. Telegram groups fall silent despite community members’ calls for updates.

And suddenly, it’s game over.
Founders gone.
Cash gone.

So, while some Web3 projects tout their transparency, others may use decentralized platforms to sidestep regulation and accountability. Similarly, financial motives tied to the Web3 space—whether through speculation, “pump-and-dump” schemes, or other FOMO-induced practices—can erode trust and undermine the integrity of projects designed to benefit the greater good.
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So, what we mean to say with this is that transparency, while essential, does not automatically equate to ethical behavior. Nor is initial transparency a given. It can die like a canary in a coal mine. We’d therefore argue that Web3 initiatives must prioritize ethical governance, informed decision-making, and user protection to ensure that social good remains at the forefront.

One open-access tool to help projects do this (or help investors analyze how ‘good’ a project is) is through the Proof of Good Framework. Created by author and founder of Cryptobeyer, Henrik Beyer, the Proof of Good Framework is a set of principles that founders and project creators can use to assess what the impact of their project is on the Web3 space and more broadly in society. This tool provides a potential solution for understanding if a project’s good intentions align with its real impact – whether realized or not – by posing eleven critical questions every Web3 project could ask itself. Builders may consider these questions, for example: Who benefits from our success? Are we transparent and inclusive in governance? What’s the project’s environmental impact?
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For further consideration on aligning your Web3 project or assessing it, find the complete set of questions here: Proof of Good.
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What about the $$$, the Financial Incentives in Web3 and Crypto?

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As with any new technology, the financial incentives that drive Web3 projects often complicate the ethical landscape. With billions in fiat and cryptocurrency pouring into the space every year (State of Crypto Fundraising: Q2 2024, Messari), there is no question that financial motivation is a key driver of innovation in the space—just as it has been in traditional industries. However, when profit maximization becomes the sole purpose, the very integrity of the system can come into question.
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Web3 projects centered around social good must navigate this financial tension carefully. While profit-driven approaches can fund innovation (indeed, who said “good” projects cannot make money, too?), it’s crucial that they don’t overshadow the core mission of creating positive impact. A balance must be struck between sustainability and the values that make Web3 for good possible in the first place.

This is where financial transparency becomes paramount. For Web3 projects that aim for social impact, clarity around fundraising mechanisms, tokenomics, and revenue models will be vital in maintaining trust. Selecting the right investors is also absolutely key - you don’t want to onboard an eager venture capital firm that dumps all the tokens at the first possible moment, leaving the community empty-handed and liquidity entirely drained.

If centralized investors are not necessarily a preferred route, projects may also seek community-based fundraising, for instance, via small investment tickets only. Or they can revert to other platforms such as Fundingchain.io, where projects and good causes can raise (crypto) funds in a decentralized, tamper-proof, and secure manner. After all, founder of Funding Chain Jesse Wachtel explains, "something that Funding Chain does with our crowdfunding process is we keep everything on-chain. And I think that that is a really important part of being able to scrutinize the projects [...]; making sure that there's a clear trail of what's actually happening with the money in the crowdfunding space [...]". By embracing - no, literally incorporating it from the very fundraising start - financial transparency and aligning monetary incentives with the greater good and for the longer term, Web3 projects can prove that profitability and purpose coexist.

That opens the door to immense long-term impact.

All Rise: a Collaborative Take on Positive Change
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As we look toward the future of Web3 for good, it’s worthwhile to remember that this isn’t really about technology; it’s about the people. The people who build. Who invests. Who uses the tech and the tools. We believe that success of Web3-driven social impact will depend on collaboration across people: from technologists and entrepreneurs to regulators, non-profits, and end "users" (altough we don't love that term).
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An ultimate test of Web3 for good will be in its ability to scale. As more projects emerge, so too will the need for collaboration, ethical frameworks, and perhaps, regulation and more competition. If done correctly, crypto projects, blockchain infra, and Web3 ideals can spearhead entire industries and provide more narrow business and societal outcomes with real-world impact, partially spurred by big words like decentralization, transparency, inclusivity, and accountability.

Web3 for good is not an easy fix, and it won't happen tomorrow. It will take thoughtful, intentional checks and balances from all stakeholders involved and those joining tomorrow – be it due to the latest meme coin craze, or thanks to a new solution focused on providing payments infrastructure to the unbanked. Together we can and will build social good on the massive waves the crypto space is already making, be it "to the moon" or closer to home where change still matters just as much.
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