The tech bros have declared a new era of the Internet; they call it Web 3.0, or just web3. They claim this new era is about decentralization, but their claims are suspiciously linked to non-web-specific ideas like blockchain, crypto currency and NFTs. I object to all of it.
I consider myself a child of Web 1.0 — I cut my teeth on primitive web development just as it was entering the mainstream. But I consider myself a parent of Web 2.0. Not that I was never in the running to be a dot com millionaire, but my career has largely been based on the development and employment of technologies related to the read/write web, and many of my own personal projects, such as this website, are an exploration of that era of the Internet. Web 2.0 is the cyberspace I am at-home in. So one might accuse me of becoming a stodgy old man, refusing to don my VR headset and embrace a new world of DeFi and Crypto — and time will tell, maybe I am…
But its my personal opinion that web3 is on the fast track to the Trough of Disillusionment, and that when the crypto bubble bursts, there will be much less actual change remaining in the rubble than the dot-com bubble burst left us with.
Before I dive in, let’s clear up some terms. “Crypto” has always been short for cryptography. Only recently has the moniker been re-purposed as a short form for cryptographic currency. Crypto being equated with currency is a bit of a slight to a technology space that has a wide-variety of applications. But fine, language evolves, so let’s talk about crypto using its current meaning. Crypto includes BitCoin, Dogecoin, Litecoin, Ethereum and all the other memetic attempts at re-inventing currency. Most of these are garbage, backed by nothing except hype. People who are excited by them are probably the same people holding them, desperate to drive up their value. There’s literally no “fundamentals” to look to in crypto — its all speculative. But that doesn’t mean they don’t have value; the market is famously irrational, and things are worth what people think they’re worth. Bitcoin, the original crypto-currency, has fluctuating, but real value, because virtual though it may be, it has increasing scarcity built-in.
I’ve owned Bitcoin twice — and sold it twice. The first time was fairly early on, when I mined it myself on a Mac I rescued. What I mined was eventually worth about $800: enough to buy myself a newer and more powerful computer.
My next Bitcoin experiment was last year, where I bought a dip and sold it when it went high. I made about $300. I made more money buying and selling meme stocks with real companies behind them, so I have no plans to continue my Bitcoin experiments in the near future.
As a nerd who’s profited (lightly) off it, you’d think I’d be more of a proponent of digital currency, but the reality is that none of its purported benefits are actually real — and all of its unique dangers actually are. I won’t cite the whole article, but I need to do more than link to this excellent missive I found on the topic, because its much better written than I could manage, so here’s a relevant excerpt — go read the rest:
Bitcoin is touted as both a secure and non-inflationary asset, which brushes aside the fact that those things have never simultaneously been true. As we’ve seen, Bitcoin’s mining network, and therefore its security, is heavily subsidized by the issuance of new bitcoin, i.e. inflation. It’s true that bitcoin will eventually be non-inflationary (beginning in 2140), but whether it will remain secure in that state is an open question…
The security of bitcoin matters for two reasons. First, because bitcoin’s legitimacy as the crypto store of value stems from it. Out of a sea of coins, the two things that bitcoin indisputably ranks first in are its security and age. In combination, these make bitcoin a natural Schelling point for stored value. If halvings cause bitcoin’s security to fall behind another coin, its claim to the store of value throne becomes a more fragile one of age and inertia alone.
The second reason is the tail risk of an actual attack. I consider this a remote possibility over the timeframe of a decade, but with every halving it gets more imaginable. The more financialized bitcoin becomes, the more people who could benefit from a predictable and sharp price move, and an attack on the chain (and ensuing panic) would be one way for an unscrupulous investor to create one.Paul Butler – Betting Against Bitcoin
I think a few crypto-currencies will survive, and that blockchain as a technology may find a few persistent use-cases. But I’m also convinced that the current gold rush will eventually be seen as just that. Crypto isn’t that much better than our current banking system: its not faster, it doesn’t offer any real privacy, it isn’t truly decentralized, and blockchain itself is grossly inefficient. But that doesn’t mean people won’t try find uses for it. Just look at NFTs!
NFTs, or Non Fungible Tokens, employ blockchain technology to assert ownership of digital assets that are, by their very nature, fungible. You could, right now, take a screen shot of this website and share it with everyone. You could claim it was your website, and I couldn’t stop you. The website itself would continue to be mine, and DNS records for the domain will be under my ownership as long as I pay the annual renewal. But that screen shot you took can belong to anyone and everyone. This fact has caused no end of grief for media companies, who have been trying, almost since the dawn of the web, to control the distribution of digital media. No wonder NFTs are taking the world by storm right now, both the tech and investment community (who desperately need a reason to justify their blockchain investments) and the media conglomerates, want it to be the answer. Its not — but that reality won’t impact the hype cycle.
A NFT is an immutable record of ownership of a digital asset. The asset may be freely distributed, but the record of ownership remains, preserved in a blockchain that can be added to — but not removed from. Its like a receipt, showing that you bought a JPG or GIF… except that this receipt imparts no rights. I can still freely copy that JPG, host it, post it, email it and share it. The purchase record only serves as evidence that someone stupidly spent money (sometimes incredible amounts of money) for it. Everyone else just gets to benefit from the asset as before. If the stock market indicates the perceived value of holding a share of a company, the NFT market indicates that some people are willing to assign value to holding only the perception itself. Its ludicrous.
You can start to understand why some are calling web3 a giant ponzi scheme. People who bought into ephemeral perceptions of value need to increase the perceived value of their non-existent holdings, so they hype them up and try to get others to buy in, to raise that perceived value — until at some point, the bubble bursts, and not only does all the perception disappear — but the basis of those perceptions mostly go away too. Unlike the dot com bubble, which left behind useful ideas to be gainfully employed in less foolish ways, the web3 bubble has created nothing of real value, and little useful technological innovation will remain.
All that said, I do despair for the state of Web 2.0 — it has been almost completely commercialized, and the individual freedom of expressions the “eternal September” has wrought clearly indicated that our Civilization of the Mind needed some better guardrails. I also believe in some of the concepts of decentralization that are being espoused for the next web. But I’d argue that hyped up ideas of virtual ownership, meta realities, and the mistaken assumption of privacy that comes with cryptographic currency, are not the changes we need. The barrier to entry for the freedom of exchange shouldn’t be based on how much money you’re willing to gamble on dubious claims of hyped-up technologies…
I’m not sure I know what would be a fair and equitable way to approach Web 3.0. Web 1.0’s barriers were around a user’s ability to understand technology — a bar that ensured that most of its participants were relatively intelligent. Web 2.0’s democratization lowered that bar, enabling more diverse conversation and viewpoints (both good and bad), but also enabled a level of exploitation that even the original denizens of the web were unable to stop. The next web can’t be allowed to be more exploitative — and its participants shouldn’t be more easily misled. We need to learn from our mistakes and make something better.
Maybe I’m too old, or too disconnected from the metaverse and tech bro culture to influence much. But I observe that there are still wonderful communities on the web. They’re a little harder to find (sometimes deliberately so), but there are still (relatively small) groups of people who can converse civilly on a topic of shared interest. Since leaving Facebook, I’ve created and joined a few, and it gives me hope that technology can still be enabler for real communication and community. For some people, wearing a funny headset might be a part of that, and that’s OK. For others, it may mean speculating on stocks or new forms of stored value, and if they’re doing that responsibly, maybe that’s OK too. But if Silicon Valley decides that web3 requires crypto currency, NFTs and the metaverse, I think I’m going to skip that update… forever.