Boom Times: Panic! At The Dawn of Web3

in The Brick House Cooperative
on December 7, 2021

I note with the usual mixture of pfft! and alarm that a boatload of journalists and bloggers have suddenly become half-aware, or more like 10% aware, of the mysterious and emerging phenomenon known as “Web3.”

What is Web3?? The usage of this term is not consistent.

For me—and I’ve been working on Web3 projects since 2017, which even back then were known as Web3—it refers to a means of publishing, connecting and archiving information online that replaces secretive, top-down platforms, like Facebook and Google, with transparent, shared-ownership networks powered by blockchain.

This is easier to understand when you consider the difference between Web3 and the dominant earlier methods of achieving the same ends.

Here’s how I understand it:

  • Web1 (~1996-2004): publish your own posts on your own website (millions did and are doing this)
  • Web2 (~2004-2017): publish your posts on corporate platforms like MySpace, FB (billions did and are doing this)
  • Web3 (~2017-now): publish to shared—not owned—networks, using blockchain (maybe hundreds of thousands, at a guess, have done this so far)

The deficiencies of Web2 gave rise to Web3. The secrecy and monopolistic tendencies of Facebook, Amazon and Google can and should be replaced with better, more secure systems. Consider, for example, the advantages of Wikipedia over Google as a source of information. Anyone can see where the information on Wikipedia came from; transparent rules govern citations, challenges and editing. It’s not a profit-making enterprise, so there is no incentive to game the results. Consider, too, the advantages of Discord over Facebook; operators can customize their servers for users in ways that you just can’t on Facebook, which maintains tight control over every interaction between its users. Discord servers enable all kinds of unique, unmediated connections by incorporating podcasts, messaging, video or text chats, etc., which you can design off your own bat, all without advertising or interference.

But Discord and Wikipedia operate on servers that they control. The quality of these services, of their software and archiving, is beyond the reach of users; if their internal governance and management should for some reason fail, so will the whole enterprise.

Web3 replaces that reliance on institutions with reliance on software held in common on networks of thousands of computers all over the world.

Just expand these notions of openness and flexibility and shared ownership, and then include commerce as well as communications, publishing and archiving, and you can begin to get an idea of the possibilities of Web3. This is why digital artists and musicians have gotten so excited about it; they can handle their own business rather than relying on the earlier dominant (and very greedy) middlemen who stood between them and their audiences, skimming every possible penny. Maybe you don’t care for Bored Apes, and I sympathize, but the artists who are forever getting fleeced by studios and galleries and publishers and record labels have very good reason to welcome the new Web3 marketplaces.

But in the heated dialogue around these new developments, both critics and cheerleaders of Web3 are making the same mistake: confusing a protocol that could be used for anything, by anybody, with a single purpose or system. Confusing the paper with what’s being written on it. The thing to remember is that there’s a fundamental, rock-solid difference between an open protocol that you don’t need permission to use (internet, HTML, crypto), and a private platform (Facebook, Discord, Substack).

More and more blockchains have launched since Bitcoin in 2009, specialized for particular ends. Ethereum allowed for computation itself to be recorded on its blockchain; Decentraland created virtual territory; settlement tokens like Ripple enable more efficient monetary transactions. It’s not just Bitcoin anymore, and every single day sees the same kind of explosion in inventiveness and creativity that we saw in the early aughts—some of it beautiful and inspiring, and some of it exploitative, some of it plain fraud. It’s real life! This is how things are, for now.

Note that the owners of Web2 have a vested interest in preventing the establishment of Web3. This is why it’s been so surprising to me to see many self-avowed anticorporatists on the left expressing violent, even shrill opposition to anything bearing the name. When they learn the facts (economic as well as environmental) I can’t help thinking that these people, many of whom I admire and respect, will change their minds.

The corpocracy is fighting back… and likely in ways we can’t easily see. They may prevail for a time, just like they did with Web2. A friend told me recently that what made the internet special is that it didn’t occur to anyone until it was too late that it could be used to make money. It took a long time before anyone sought to monopolize or own it. Wealth was the main subject of contention from the dawn of Web3. It’s a long, long fight we’re in.

I know this because, as I’ve said before, I’ve been involved in this for a long time; Civil, the project I helped launch in 2017-2019, was a Web3 project. What can this mean, exactly, when Civil—which folded in 2019—wasn’t selling a single ape or Beeple?

Civil developed software and a token intended to harness the Ethereum blockchain to promote a stronger, better business model—a whole self-contained economy, really—for journalism. The network would have enabled users to fund and participate directly in our work, while providing a freely customizable environment for publishing. This project failed, but had it succeeded, we journalists would be able to promote ad-free, subscriber-based services to our readers on our own terms, and together, as a large network and interest group with shared goals. (There were many other efforts seeking similar results, back then; Ujo had much the same ambition for the music business, Foam for location services, etc.) I could not wait to join Civil in the fall of 2017, having long hoped, as an early student of blockchain, for these ideas to take root. Nothing has happened in the years since to change my mind about what this technology has to offer for press freedom and speech rights.

But regulatory difficulties prevented many worthy blockchain projects, including Civil, from launching. At Nieman Lab, for example, John Keefe described the 44-step process required for buying Civil tokens back in September of 2018—he had to open accounts at Token Foundry, MetaMask and Coinbase, pass a quiz, upload his passport and driver’s license, buy some ETH and put it in a wallet, and so on. Civil basically buckled under the weight of compliance in an impossibly mercurial regulatory atmosphere.

It’s unfortunate that U.S. agencies have done such an abysmal job on this over the last ten years (just one more way in which Senator Warren has proved a really terrible disappointment). If you care about this sort of thing, regulatory complications cost the U.S. an enormous early mover advantage in establishing a foothold in the nascent crypto economy, and untold billions when innovative new businesses weren’t allowed off the ground. By contrast, countries like Germany put the U.S. to shame, by producing clear and cogent regulations designed to allow people to try new things safely and in an atmosphere of legal certainty. They defined new asset classes, they set up an authority at BaFin to license crypto businesses, they amended their KWG, the German Banking Act, to permit custody of cryptocurrency; they defined crypto as “units of account,” separate from legal tender. There are rules for wallet custody and the securing of private keys, and limits on the amount of crypto assets that funds can own. All this means that Germany has been able to race ahead, and create exchanges and trading platforms for green energy and artworks and energy storage, and digital marketplaces for art and real estate, and a lot more besides, and all this development can occur without fear that FinCEN or the SEC will jump out from behind the sofa and yell, “Surprise!” and come crashing down on them, like what kept happening to us at Civil.

In any case, I keep seeing people who are extremely uninformed about what Web3 is or what it’s likely to achieve getting their knickers in twist every day. A lot of them are software engineers who believe their technical Web2 expertise is far more meaningful than it is in these revolutionary times. To them I say, sure, fine, if you don’t like it, if you think it is bound to fail, nobody is making you buy a Beeple. Let it fail, if you’re so sure!! Maybe you’ll turn out to have been right and that will be a lot of fun, for you.

I’m also going to keep repeating this until it’s understood: saying that Web3 is bad because there are many charlatans and fools involved in it demonstrates an absolute ignorance of our existing economic situation. For every charlatan involved in Web3 there are a thousand grifters for dollars, from Joel Osteen to Wells Fargo; for every fool getting ripped off in Web3, there are a thousand fools being ripped off in dollars, on everything from student loans to Teslas. The charlatanism is coming from inside the building. In my industry, Web2 brought us video ad fraud from Facebook, and ad brokerage abuse on a monstrous scale by Facebook and Google, and that is why journalism needs Web3.

This is human nature; wherever there is something to steal, someone will try, and that will continue until we are finally able to share our resources fairly with each other in a just world.

What I’m working on is an improved ecosystem for journalism where people can support writers and publishers directly, and where we can use that direct support to bring everyone the information they need, without having to rely on the largesse of Alden Capital, Substack, Google, Facebook, ad networks, or any other institution in order to do so. Maybe you think that is charlatanism; if so, well, that just breaks my heart.

Boom Times is a blog about gambling, luck, money, greed, investing, blockchain technology and cryptocurrency.

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