Is Web3 Bullsh*t?
News flash: The crypto and blockchain crowd have rebranded to web3. They probably thought it sounded better and didn’t want all the baggage that hundreds of scam ICOs, STOs and skirted securities laws brought with the term blockchain.
In a way, it was a bit like Facebook changing its name to Meta. Crypto’s biggest players wanted a way to shift public (and regulator) perception to something more reputable and visionary than the next pump and dump scheme…
Which to be fair, after the 2018 ICO gold rush, makes sense. Especially as essentially every project that went on to raise millions (some even billions), basically never shipped a product, let alone something meaningful.
Unfortunately, like many a craze, charlatans came in, grabbed the money and ran.
But regardless of its questionable grifter past, web3 is THE hot topic today as more and more founders, venture firms and larger institutions look to enter the web3 world and build “the decentralized internet of the future.”
At least, that’s what they say.
How many times have you heard: “This is going to change the world… fix all the problems with the modern internet… give back power to the people…”
Etc, etc, etc…
So, why is it that most of web3’s web3’s biggest proponents (and beneficiaries) are the same rich, powerful players that made hundreds of billions building and investing in the modern internet? It’s like they “want” to remake the internet for everyone, yet also own it as well…
Is it just me, or does something seem off about that?
As if that wasn’t enough, why are these “insiders” receiving preferential presale terms before the general public can participate — thus allowing the early investors and proponents to flip dirt cheap tokens and advisors shares almost immediately after the public sale?
To be fair, it’s a pretty good gig — guaranteed mark ups, no risk or progress necessary…
If it sounds a bit like insider trading, that’s because it is — if not from a legal sense, at least from a practical one. And this becomes unavoidably obvious when you hear the way people talk about blockchain/web3 launches and releasing tokens.
The terms “fast money,” “quick flips,” and “guaranteed markups/returns” come up almost every time.
But from an incentives perspective, it is hard to blame them. How can you blame someone for playing by the rules to win the game? Is it their fault, or that of regulators who’ve failed to set a level playing field?
In a sense, it’s no different than oil companies polluting their way to profit, Instagram depressing you into buying that new dress or pharma pushing you a pill you don’t need.
Unfortunately, all of that is fair game, at least until we change the playbook — because people (and corporations) change for one of two reasons: pain or love. And let’s be honest, who doesn’t love making money?
Belief built upon financial gain
Upton Sinclair once said:
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
Is there any better analogy for Bitcoin, blockchain or web3?
The truth is, most of blockchain and web3’s largest proponents are not cynical capitalists interested in a quick buck, but true believers. They believe blockchain’s inherent transparency and permissionless trust allow for humanity to evolve beyond our reptilian ways and, through correctly aligned incentives, build a “better world” built around decentralization and democratization.
They point out the problems with the modern internet and centralization around monopoly players like Google, Facebook and Apple… “Decentralization will fix all that…”
“If we could just give power back to the people and get governments/corporations/individuals out of the way through trustless DAOs (decentralized autonomous organizations) and proper tokenomics, we’d fix everything…”
Problems with the supply chain and child labor in China… “There’s a blockchain for that.”
Reducing emissions to reach the Paris climate goals… “Let’s launch a tradeable carbon token.”
Fixing hate speech and polarization online… “A web3 replacement for Twitter and Facebook.”
Web3 must just be the answer for everything… your “perfect” silver bullet.
The thing is, NOTHING is one-size-fits-all. Everything has advantages and disadvantages, and blockchain is no different.
What is different however is blockchain’s inherently viral, ponzi-esque nature — which has a very MLM (mid level marketing) feel to it. Not only do you love listening to Taylor Swift, but if you bought her NFT, the value of your “investment” is now suddenly tied to her popularity.
Probably incentivizes you to pimp TSwift even more. Blast the music for all to hear!
If that’s not blatant enough, here’s a better example:
Imagine if Jehovah’s Witnesses (or evangelical preachers…) got paid for every single person they converted to their cause.
It quickly becomes a self-fulfilling prophecy — of course their belief in “god” grows right along with their bank account.
Which is a recipe for fundamental extremism — think ultra Orthodox Jews or, for a more related example: Bitcoin maximalists…
Because that is what Bitcoin and blockchain are — a cause, a “religion.” It is a movement and ideal with money attached.
The problem is, we’re very good at convincing ourselves of things we want to believe — hence why filter bubbles are such a problem.
I ignore everything else that doesn’t jive with my worldview and seek out even more likeminded individuals — which is only further amplified by algorithms.
Which begs the question:
Is web3 just another scam?
The short answer: No, not at all!
There are tons of incredibly important uses for blockchain technology.
Like sending money home/abroad without paying obscene bank fees;
Like fleeing a war torn country and converting your savings to unstealable Bitcoin;
Like preventing dissidents from being silenced on centralized social media platforms like Twitter (and just as a side note, no, Republicans aren’t being unfairly silenced, they’re just whining the loudest about being punished for breaking the rules…).
In fact, the prospect of truly permissionless, trustless databases holds great potential for society and for humanity. But as with everything in life, there are also many limitations.
Like what happens if you lose your password?
Like what happens if you get cheated out of money?
Like what happens if Trump/Putin/”insert your favorite dictator” incites an insurrection to overthrow democracy…?
There are so many what ifs to consider. And because of the open nature of decentralization, you get the good along with the bad.
No gatekeepers, but also no firefighters to save your home.
Frictionless payments, but also frictionless fundraising for ISIS.
Community run/owned apps, but also awful interfaces and customer service.
It’s all about trade-offs.
So what are the trade-offs of web3?
Which trade-offs are you willing to make? Decentralization has many strengths, but also many gaping weaknesses. Like Bitcoin’s incredibly wasteful proof of work system or Ethereum’s more political/wealth-based proof of stake.
In order to ensure the survival and veracity of the network/blockchain and to safeguard its various nodes, extreme measures have been designed/put into place to prevent various forms of hostile takeover — all of which would be logically aimed altering the blockchain, i.e., adding money to your own wallet (account) etc…
But these protective measures require significant resources and come with their own wave of challenges. Like reduced speed and throughput (number of transactions per second), high gas fees (the cost to submit/write a transaction to the blockchain) and delayed development times — not to mention forked blockchain chains… oops, I mean web3 projects 🙂
For some things like protecting dissidents or guarding against rogue regimes, this makes sense. You need security, anonymity and peace of mind.
But what about in everyday 1st world life?
What if you assumed EVERY SINGLE person you saw every day was out to rob you/attack you etc… You’d never go anywhere, never trust anyone, never accomplish much and never live life to its fullest. The economy would also come to a grinding halt.
It’s a bit like an ant colony where 50% of ants do nothing but wait in the anthill they’re attacked.
Talk about a waste of resources and labor.
Heck, the US government alone spends (wastes?) 11% of its annual budget on the military. Imagine how much good we could do with the $766B+ each year we spend on “what if” money…
Is so much hypothetical “security” and “protection” really necessary?
The same could be said of blockchain and web3.
Does your app or service really need fully permissionless decentralization? Does it really need such a robust proof of stake system and 1000s of nodes to ensure your scooter sharing company never gets hacked by faceless Russian crime syndicates? Why?
What’s the worst that could happen? It’s not life or death here, not really, not unless you stretch the what ifs beyond any reasonable limit. Yet many web3 proponents do just that, finding the most improbable scenarios to justify decentralization and tokenization.
For instance, do I really need a token to prove I own the painting on my wall? Unless I’m a master thief with Ocean 11 esque museum burgling skills, I probably bought it.
…even if I lost the receipt.
But I actually love web3
That’s enough web3 bashing for one day. You get the point. Sure, decentralization isn’t everything it’s hyped up to be, but it still holds enormous potential — when applied to the right problems.
And the many of the right problems, at least as I see them, are in disrupting big tech’s ruthless monopolies. In fact, several years ago I wrote an article on exactly this topic: how tokenized blockchain’s could be used to break big tech’s stranglehold on platforms, marketplaces and social media, all of which still applies today.
Crypto, Decentralization and the Big Four: Blockchain vs. Google, Amazon, Facebook, and Apple …
Blockchain's been a bust but has the ability to disrupt big tech, creating new platforms and network effects to free us…
It turns out those pesky, ponzi-esque tokenomics schemes we talked about earlier can also be used for good — and they are really powerful! Here’s how.
Back at the start of 2018 I made a series of predictions (pre ICO boom days when I was a bit more starry-eyed about blockchain’s future) on what the future held for blockchain/crypto. Much of it still holds true today.
Why Crypto is WIDELY Overrated and Still Underrated - Matt Ward
"We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run." "We…
To get a better idea of where I stood then and some of the things I see web3 rising to, I’ll share those here:
In the not so distant future, humans will probably wear rings or bracelets containing their crypto cash (probably personal identification as well).
- Some governments around the world will begin to embrace crypto while others will crackdown.
- Blockchain will radically change voting and governance, creating a more transparent voting system.
- Freedom of money will create a more geographically free world, where citizens can more easily pick up and leave in situations of strife.
- Blockchain will greatly simplify recording keeping, reducing the need for a large percentage of government employees whose sole job is paperwork.
- Smart contracts are overrated.
6. Tokens will replace stocks to denote ownership of a company.
7. Blockchain will dramatically increase the liquidity, value and volatility of real estate.
8. The impact on healthcare may be largest of all.
9. Crypto could lead to Minority Report and make privacy a thing of the past.
10. Many new network effects companies will overthrow incumbents.
11. In the not so distant future, humans will probably wear rings or bracelets containing their crypto cash (probably personal identification as well).
As you can see, some of these have already come to pass while others are still just a possible future.
Will they come to pass… only time will tell.
And to leave you with just one last thing:
You are probably wondering what web3 will become?
I think the best way to answer that question with another question: who’ll be holding the reins?
I hope you have enjoyed this deep dive into web3. And while there is so much more to be written on the subject, that’s a topic for another day.
As they say: we’re literally writing the history books as we go.
Tech regulation, consolidation, massive mergers, Bitcoin surges… How will history view our era?
And how will it view web3 and blockchain?
Is this the moment that sparks “the revolution” or just another tulip craze?
I’m sure you have your opinions (which I’d love to hear in the comments), but keep in mind, actions speak louder than words.
So, the ball is in your court.
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About the author
In addition to being the General Partner and Syndicate Lead of 4WARD.VC’s early stage venture fund and angel network, Matt Ward is a Venture Partner with Climentum Capital, the host of The Startup Tank, a serial founder with multiple modest exits and a strategic startup advisor to high-growth, world-changing companies.