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web3

web3 is not a thing

web3 is not “the next version of the web.” It’s not even a clearly defined vision of the next version of the web. It’s a marketing term coined by blockchain enthusiasts to make it sound like their vision of the future is inevitable. It is not. web3 right now is not a thing, and it will never be the next version of the web, because the web doesn’t have versions.

Adopting the marketing language of an idea lends legitimacy to the idea and makes it sound real even when it’s not. It creates a feeling of inevitability, makes people think “oh, if this is going to be the future, I better get on it now!” while in reality it is nothing of the sort.

We need to find a better term for this thing blockchain enthusiasts call “web3” so people don’t confuse it with the web. “Blockchain All The Way Down” perhaps? Or “tokenomics?” Or more honestly “Blockchain-Based Utopianism?”

Before my web3 followers get all stressed by this, here’s the thing: For the “next version of the web” described (vaguely and without any meaningful detail) by the term “web3” to happen, the entire infrastructure of the web and the internet needs to be rewired and re-engineered. It’s not feasible, even if we all decided that this was the way to go. Which is not going to happen, because the infrastructure of the web and the internet is mission critical for everything from your friend’s hobby project to the power plant feeding your house electricity. Making the web dependent on the blockchain simply will not work. Ever. Under even utopian circumstances.

For the thing they call “web3” to work, the entire web needs to be centralized on the Ethereum blockchain. “What do you mean centralized on the blockchain! The blockchain is DEcentralized!” Sure. But: We would need to trade the current distributed DNS system with some form of blockchain-based ENS meaning every domain query would go to the blockchain. If there are multiple web3 blockchains serving their own versions of ENS, where a domain points will depend on what blockchain you’re querying. A single blockchain is required for stability.

Also, for this vision of the web to work, all current data on the web would need to be transferred to decentralized hosting. The size of the internet would need to increase at least 2x to ensure every piece of content exists at least in two locations. Again, unfeasible even in under utopian circumstances.

We have to stop echoing the claim that web3 will somehow solve the problems of web 2.0. The very premise here is wrong. Most of the critiques levelled against web 2.0 by web3 enthusiasts (centralization, data hoarding, corporate monetization, censorship) are actually critiques of Surveillance Capitalism, not web 2.0.

Web 2.0 doesn’t require Surveillance Capitalism. Surveillance Capitalism is a layer built on top of our web technologies that exploits the user patterns and data traffic on web 2.0 to build models of our behaviour. Having a public ledger where every transaction is public and can be used to build models is not solving for the problem. In a very real way, the proposed web3 is built for Surveillance Capitalism, as if it is an inevitability and should therefore become the standard: It not only makes modelling behaviour based on all transactions infinitely easier because all the data is public, it makes it possible to track everyone based on every single thing they do.

“Oh, but now each user can choose who they want to share their data with!” There are two problems with this argument: 1. It is horribly inequitable – rich people get to keep their data, while poor people must sell it to live. 2. It’s naiive. The data is public. It’ll be used. Why do you think the Surveillance Capitalists who became billionaires off web 2.0 are pouring billions into web3? I’ll give you a hint: It’s not because web3 will take power away from them and give it to “the people.”

“But pseudonymity!” Yeah. It’s PSEUDOnumous. If all our transactions are on the public ledger, it would be incredibly straight-forward for ML and AI to figure out exactly who owns every single wallet, and only the most crafty among us would be able to hide our identities.

This whole idea is built on naiive and utopian assumptions about how the internet works and how humans interact with it. It has nothing to do with the web and everything to do with money. Calling it “web3” lends the legitimacy of the web to an idea that will never be the web.

Also posted on LinkedIn.

Header photo: Matthieu Joannon on Unsplash

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web3

The Blockchain, Codified Meritocracy, and the Laissez-faire Ideals of Web3

“Who controls the past controls the future: who controls the present controls the past,” —George Orwell, 1984

In 2012 my wife and I almost bought a house. The contract was signed with one condition: Our home inspector needed to give it a pass. He did not. The house, built that same summer, already had a significant mold problem, and it was setting sharply to one side. “The builder did not provide a sound foundation,” the inspector explained. “The only way to fix this is to either lift the whole house up and redo the foundation, or tear it down and start over.”

We did not buy the house.

Watching the #web3 space evolve, I feel like bringing in that same inspector to take a look. And I fear he’ll come back to once again tell me “The builder did not provide a sound ideological foundation. The only way to fix this is to either build a whole new ideological foundation underneath, or tear it all down and start over.”

Who determines the truth of the blockchain?

Much has been written about the truth problem of the blockchain, most recently by Cory Doctorow in “The Inevitability of Trusted Third Parties.” Suffice it to say, while the blockchain promises “trustless” transactions and decentralized oversight, in reality truth is determined by 3rd party arbiters: the people with power to add things to the chain.

The #web3 community, in particular artists, women, minorities, and people belonging to historically excluded, oppressed, marginalized, and harmed groups, are being sold on the idea that the “next web,” powered by the blockchain, will allow them to “take power back” from big corporations and banks and “have a say” in what the future looks like. It’s a compelling story, and a world I think most of us would like to live in. It’s also the same story we told ourselves as we built what would become the surveillance capitalist nightmare later dubbed “Web 2.0.”

At the core of the promise of #web3 is power to the people, through decentralization enabled by the blockchain: Everyone can see what’s happening on the blockchain, there is no centralized authority operating as middleman, and as a result, everyone has an equal say.

It’s a wonderful idea. It’s also not what’s happening. In reality, control over the various blockchains are being centralized as we speak, because the blockchain is built on the principle of meritocracy: Decisions are made by those who show up. And those who show up are the people with the money and power to show up. The same people who control Web 2.0.

Web3 enthusiasts will counter this by saying the community is growing, diverse voices are entering the space, and that naysayers are just gatekeeping this new technology to take control or don’t understand what’s really happening.

So here’s what’s really happening:

Traditional blockchains like Bitcoin and Ethereum (until very recently) use a Proof-of-Work (PoW) model to determine what gets added to the blockchain. The entity spending the most energy to add a new block wins the bid to add the new block and adds the new block. That is exactly how insane as it sounds: Burn energy by having a computer do meaningless math to add something to a ledger. But it works, assuming everyone has equal access to mining. Which of course is not the case. Mining is therefore controlled by the people with the most money and the most power (literally). Decisions on the Proof-of-Work blockchain are made by the people who show up, and all power is held by the few who can win this energy arms race.

Enter Proof-of-Stake (PoS), an alternative consensus model where anyone who wants to add something to the blockchain must stake the value of what they are adding so if they lose the bid, they lose something of equal value. Sort of like if you want to buy something on credit you have to put up something of equal value as collateral until the credit is paid back. Again, it works, but it puts the power in the hands of those who can afford to win the arms race of staking, ie. the people who show up with the most (literal) money and the most power.

So while the promise of blockchain is decentralization of everything, the reality right now is that decentralization is limited to the distribution of the blockchain. Power is still centralized in a few hands, and those in power are reaping the majority of the financial reward from the system.

Meritocracy is a dystopia

“Meritocratic hubris: This is the tendency of winners to inhale too deeply of their success. To forget the luck and good fortune that helped them on their way. It’s the smug conviction that those on the top deserve their fate and that those on the bottom deserve theirs too.” –Michael Sandel

One of the most difficult challenges the open source community has yet to overcome is the realization that meritocratic rule is a dystopian model. The idea that hard work is an equitable path to power is absurd and divorced from reality. Handing power to those privileged enough and wealthy enough in time and money to contribute to anything is dangerous, because it hands power to the privileged.

I submit the core ethos of the blockchain ideology is that meritocratic rule is the only true form of rule. And thus, everything built on the technology of blockchain accepts this ideology as the truth.

You see it in how we talk about NFTs and DAOs: Get in early. Those who buy tokens now will have more power later. Build your merit and become a future leader.

This is what led to BDFLs and enormous inequities in open source, and what will lead to centralized power and enormous inequities in #web3. Unless we stop now and build a more sound foundation for the new web to stand on.

The core problem is simple: The blockchain is a computerized manifestation of absolute Laissez-faire economics – “an economic system in which transactions between private groups of people are free or almost free from any form of economic interventionism such as regulation and subsidies.” Bitcoin is a currency specifically designed to evade responsibility, regulation, and taxes. Thus anything built on this technology adopts the same Laissez-faire principles. The builders of these technologies did not provide a sound foundation for everyone but the privileged. So when the rest of us enter the space, we can’t be surprised when the privileged take control.

Building the next iteration of the web on this ideological foundation will result in a web that leans heavily to the right right from the start And no amount of spirited conversations in DAO Discord channels will change it.

If we want to build a decentralized web 3.0 where power is distributed equitably and we all have a role to play, we need to first scrutinize, then discard, and then build anew the ideological foundations of the technology stack we are building it on. Otherwise the promise of #web3 will be reduced to a finely distilled liquor of the most extreme libertarian techno utopian ideals of Web 2.0, wearing a cool crypto jacket.

Cross-posted to LinkedIn.

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web3

Web3: Panacea or Poisoned Chalice

Yesterday I transferred $50 CAD worth of the cryptocurrency Ethereum from one wallet to another. It cost me $18 CAD in “gas fees,” aka network expense, a 36% charge for a simple transaction.

Meanwhile, in the various social spheres I’m embedding myself as I research the #web3 phenomenon, everyone says cryptocurrencies are the future. It will replace traditional centralized banking and fiat money. It will replace Web 2.0. It will allow “us” to take power back from big banks and corporate interests.

This year I’m taking a deep dive into Web3 to make sense of what it is, how it works, what it promises, and whether those promises will come to fruition. So far I feel like I’m watching a thriller screaming “don’t open the door!” at my TV.

The Panacea

“Web3” (specifically with no space between the “web” and the “3”) has become an umbrella term for a future for the web in which everything from finance to storage is decentralized through the blockchain. This is notably different from “Web 3.0,” an umbrella term for the Spatial web, the Semantic web, the Metaverse, and the Decentralized web, with or without the blockchain. This means if someone says “web3,” there’s a high chance they’re talking about the blockchain, NFTs (Non-Fungible Tokens), DeFi (Decentralized Finance), and DAOs (Decentralized Autonomous Organizations) rather than the decentralized, semantic, and spatial web or the Metaverse (see “The Lawnmower Man,” “Ready, Player One,” and “A Beautifully Foolish Endeavor”).

Talk to the web3 crowd and they’ll tell you web3 is about “taking the web back” from centralized authorities like Facebook and Google, and “taking power away” from centralized financial authorities like banks and governments. As an example, artists are encouraged to mint NFTs (unique unreproducable tokens on the blockchain) for their work and sell those NFTs for cryptocurrency to fund their work rather than go through traditional channels where a middleman takes part of the profit. These NFTs are then traded on an open market and can over time generate enormous value, some of which can trickle back to the original creator (when minting an NFT you can configure it to send a percentage of every future trade back to the original creator).

Web3 is in a very real way presented as a panacea, an antidote and solution to all the harms and injustices brought upon us by existing financial, corporate, and social systems, in particular the banking system and the predatory surveillance capitalists of the Web 2.0 era.

This idea is a gravity well: Step close enough and the pull is nigh impossible to resist. The promise of independence, decentralization, autonomy, anonymity, and financial freedom is everything we’ve been promised from the modern world and all things the modern world has failed to deliver.

Where the cryptosphere used to be populated with finance bros and equally white and male techno utopians, the web3 conversation now has a significant cohort of women, environmentalists, and historically excluded and oppressed communities. These more diverse contributors have bought into the idea of the panacea and build upon it grand visions of a possible more equitable future for us all. In recent weeks I’ve observed conversations blooming on TikTok and Discord channels about how NFTs can be used to promote indigenous art, whether environmental NGOs can be run using DAOs, and whether online sex workers can decouple their income streams from expensive middlemen platforms and the moralistic qualms of traditional payment portals.

The mythos around Web3 is rapidly evolving from the techno utopian dream of untraceable and untaxable money to a promise of fairness, equity, and ownership in a post-centralized world.

These conversations, these dreams and visions of the future, are hopeful and important. From where I’m standing, and what I’ve seen of the current and near-future tech stack they are built on, they are also woefully premature.

The Poisoned Chalice

To me the blockchain has always seemed like a technological solution looking for a problem. I’m not the only one. I’ve linked to a series of critical articles at the bottom of this one for further reading. My introduction to the blockchain happened many many years ago when Bitcoin was first introduced. An acquaintance whose job consisted of managing giant servers in the deep core of a university had used the downtime on the servers as his own personal mining rig and was now complaining he had all this money that he couldn’t spend because nobody was honouring it. “In the future,” he said, “everyone will use Bitcoin. That way the government can’t get their greedy hands on our money.” The fact he was working for a state-funded university and relied on state-funded healthcare to get treatment for several chronic health conditions seemed irrelevant.

In the years that followed, conversations around first Bitcoin, then the Blockchain and how these technologies would solve everything from finances to shipping to healthcare to education flourished, yet I saw little in the ways of actual innovation or application. With the exception of more and more cryptocurrencies being minted, and more and more investors pouring their money into startups building businesses around these cryptocurrencies.

Flash forward to today, and I don’t see much change. This concerns me. Here are three of many reasons why:

Where are the proofs-of-concept?

The biggest red flag I see with web3 now is where web3 conversations are taking place: On Twitter, on Discord channels, on Telegram, on TikTok, on Medium and Substack. What do all these have in common? They are all good old centralized web2 platforms. And I see very little work being done to build web3 alternatives to these platforms.

One of the major marketing messages from the web3 community is that web3 will take power away from the centralized behemoths and place that power in our hands through decentralization. Yet the web3 community has yet to adopt a web3 solution to publishing articles and enabling community chats.

When I bring this up, the answer is usually “it’s still early days.” Here’s the thing: I was there in the early days of web 2.0. You know what those early days were like? The entire damn community was hard at work building the tools we wanted to use to change the world. That’s how Drupal and Joomla! and WordPress and a myriad of other CMSes were built: The community was walking the walk. And the community leaders were right at the front of the pack. Many of them still are.

From web3 community leaders I hear mainly three things: Buy tokens, get everyone else to buy tokens, and hold on to those tokens. By doing this, you are supporting the system and helping bring in the new era of decentralization. And where are they saying this? On centralized web 2.0 platforms.

Meanwhile venture capitalists and investment companies are pouring billions into the web3 space, mainly supporting so-called “DeFi” decentralized finance solutions. Many of these projects focus on building infrastructure around trading in cryptocurrencies and NFTs and are effectively machines for generating the most real-world money out of the crypto sphere as possible. The problem of course is cryptocurrencies are a negative-sum game. A crypto coin (or NFT, or DAO, or anything else on the blockchain) is only worth as much as what the next person buying it from you is willing to spend. They are not tied to anything tangible, and if everyone cashes out, there isn’t enough money in the world to actually pay everyone.

In short, while web3 says it’s all about taking power away from the centralized authorities and giving it back to the people, all the money being invested into web3 right now is going towards the same toxic capitalist tendencies that ruined web 2.0.

Big Money isn’t at web3’s gates. Big Money is on the inside, building the gates and selling tickets to watch the build process for profit.

Barriers to entry and real-world cost

I think part of the reason for this is the barrier to entry for Web3 and the blockchain is very high. These technologies add an enormous level of complexity to a system that is very simple. Building a basic smart contract involves a deep understanding of not only programming but also blockchain protocols and interface layers, and there are few tools available to simplify the process. Go search “web3” on TikTok and you’ll find a myriad of videos showing artists how to download a script from GitHub to mint 10,000 NFTs from a stack of 10 layers of art, and a myriad of videos talking about how smart contracts and DAOs will change how the world works. But dig deeper and you’ll discover very few examples of any of this actually being done. Because not only are these things difficult to build, difficult to use, and difficult to get other people to use, but they are expensive.

Yes, expensive. As I said in the opening to this article. Yesterday it cost me $18 to transfer $50 worth of ETH between wallets. To start selling NFTs on OpenSea, the system wanted to charge me $218 in network fees. That’s a lot of money to pay for two basic transactions. The reason it’s so expensive is the Ethereum network is “congested” meaning there are a lot of people making changes to the blockchain at the same time. And the more people use the blockchain, the more expensive things will get.

Now consider the millions of struggling artists out there being told all they have to do to earn money from their art is to mint NFTs. Some of them are now pouring significant money into the system, paying for gas fees at increasing rates. And while some of them will be lucky and make money from their NFTs, many more will never make a profit. Instead they’ll have spent significant time and hard cash burning energy on a graphics card somewhere to do a complex math operation to put an entry on a blockchain.

There are real financial, environmental, and human costs to the blockchain, and I have yet to see any meaningful proofs that web3 can resolve any of these problems.

For web3 to meet its own promise, the community must invest in building the future they want to live in, not by minting and buying NFTs and forming DAOs, but by actually building the tools they need to make web3 equitable and accessible.

Solving real-world problems with the Blockchain?

There used to be a food truck festival in Vancouver where I live. When you went to the festival, you bought Food Truck Bucks you could use at the festival. Only Food Truck Bucks were legal tender at the festival, and Food Truck Bucks were a one-way transaction. You couldn’t trade Food Truck Bucks back to regular money. Pretty much everyone who went to that festival still had some Food Truck Bucks left when they went home.

That’s what cryptocurrencies are: Food Truck Bucks. Except in some cases, if you’re lucky, you can trade them back for real money. And in some cases, if you’re lucky, a Food Truck Buck is worth more when you trade it back than it was when you first bought it.

Before the modern financial system, that’s how the world used to work. People, businesses, towns, and fiefdoms issued their own currencies or IOUs that could be traded for goods. It was a great way of keeping value contained within an area, and keeping power contained to the people who controlled the currency.

With the advent of cryptocurrencies, anyone can now once again mint their own legal tender and try to convince others that the new coin has value. And they’ll tell you this has absolutely nothing at all whatsoever cross my heart and hope to die pinkie swear anything to do with evading taxes. At all.

Sure.

Here’s the thing: Cryptocurrencies, in their current state, do not solve any problem we can’t solve without cryptocurrencies. And based on who holds the majority stake in the big cryptocurrencies today, it’s pretty clear any illusion of these new coins being “us” taking power back from Big Money is just that: An illusion. Big Money holds a majority stake in all coins.

So if not money, what real-world problems does the blockchain solve?

Decentralization of data? Not really. There are plenty of other models being worked on or already existing that solve decentralization without the blockchain. In fact, the internet is decentralized already. The reason the web is centralized is largely because of people wanting ever more streamlined web solutions that worked ever faster and capitalism being an endless collapse towards monopoly.

OK, how about artists making more money from their work without going through a middle-man? Again, that can be solved without the blockchain. In fact, the people making money off the current NFT craze in the art space are not the artists themselves but the investors who trade those NFTs among themselves. Big Money making more money of our work. The only real change is where it’s happening.

What about DAOs then? That’s something totally new, right? Sure, if the DAOs actually use smart contracts to do something meaningful, and we trust the programming to not have errors. In most current real-world examples though, DAOs are just shareholder companies wearing crypto jackets.

Oh, I know: How about combining DAOs and NFTs to streamline supply chain management? Sure, that’s possible. It would mean trusting computers to make decisions we currently have humans doing because those decisions often have to account for unforeseen issues like a giant boat getting stuck in a canal or a giant volcano exploding or a global pandemic causing everyone to stay home. Which would be extremely risky. But it is possible, at some point. It wouldn’t be done on the same blockchain that handles financial transactions and trading of art NFTs though.

I got it! The Decentralized Web! That’s where web3 gets its name anyway, right? Here’s the ting: The estimated size of the web right now is somewhere between 60 and 80 zetabytes. Thats 60-80 million million gigabytes. The blockchain can’t track that. Nothing can track that. And a single blockchain would never be able to manage even a fraction of that. So there would have to be a myriad of blockchains connected together in some sort of blockchain tree, with a central blockchain controlling all the other blockchains to make sure consensus was upheld across all the blockchains. And whomever had the power to control that central blockchain would effectively hold centralized control over the web.

So no, I have yet to see an example of how web3 solves a real-world problem. What I see instead are enterprising investors making big bank on the hopes and dreams of a generation badly burned by the web 2.0 shenanigans of those very same enterprising investors.

Hope is a catalyst

Does all this mean I think Web3 is bunk? That we should abandon the whole thing and keep building web 2.0 instead? No. Not at all. I think the ideas emerging from the diverse crowd now embracing the promise of web3 give us reason to hope. I think as soon as we stop pouring our money into the bottomless pits built by of VC capital and start actually building a web3 focused on sustainability, equity, inclusion, and decentralized power, we can build the next version of the web. To get there, we need to build the tools and the platforms and the communities necessary to get us into that future. That means less minting NFTs that will end up being traded between Elon and Jeff, more building decentralized alternatives to Discord and TikTok. Less focus on DeFi, more focus on how to handle the very real problem of online disinformation, hate speech, and violent and inhumane content when what goes on the blockchain can never be removed. Less focus on building energy-burning mining rigs, more focus on building cryptocurrencies whose value is tied to meaningful real-world impacts like carbon sequestration (read “The Ministry for the Future” for more on that).

I have hope web3 can be a panacea for the ails brought on us by web 2.0. And I have faith there are people in the community able to get us there, if we all stop drinking from the poisoned chalice of capitalist greed.

A Critical Reading List

Cross-posted to LinkedIn. Header photo by Adrian Infernus on Unsplash.