Web3 is a key element in the debate on decentralization in technology. There are disagreements, even between Silicon Valley’s top executives. Not so long ago, Mark Andressen, head of Andreessen Horowitz, blocked Jack Dorsey from Twitter.
Scott Galloway, a marketing professor and billionaire, explained the ambiguity in this concept and why web3 is not just web2.
I had no idea how much Dorsey would be appreciated. Class traitors are the key to progress: Generals warn of the dangers and product managers talk about dishonesty management; Silicon Valley technology leaders who break the “boy code” — don’t criticize one another or your missions to save this world.
Jack Dorsey: You don’t own the web3. Venture capitalists and limited partners own it. They will never let their ambitions get in the way of their success. It’s ultimately a central enterprise with a different name. Be aware of what you are getting into.
Jack Dorsey took out a sword, pointed it at his colleagues who were trying to centralize control and reap the benefits of decentralization. Particularly web3.
What is web3?
It is a term that refers to cryptocurrency internet, as well as a lot of other clever nonsense. The promoters of his project say something similar.
Web3 is an open-source version of the Internet that allows users to create and own platforms and apps. Web3 will be a decentralized version of the internet, unlike web2 (the existing internet), which is controlled by large platforms like Google, Apple and Facebook. It will use blockchain, cryptocurrency, and NFT to give power back to the online community.
It sounds great. We all believe in the “down with Facebook” and Google narratives. We all benefit if we remove the middleman, especially for those smaller. There are many opportunities to provide basic services online, such as doctors, banks and theaters online, and smart speakers and smartphones that make it easier.
Smart contracts, among other benefits, can reduce agency costs and eliminate biases. This is the promise that decentralization holds. Is that not too optimistic?
Reality is hard to believe
It was the decentralization of power that led to the much-hyped decentralization. The market value of NFT on Ethereum blockchain is $ 41 billion and the top 9% owns 80%. The practice of “white list” allows you to keep most of the NFT profits within a small circle of insiders.
Bitcoin is even central. The 2% with the largest accounts have 95% of $ 800 billion worth of bitcoin reserves. Half of all bitcoin mining is done by 0.1% of the miners. Bitcoin would be the most ineligible state in the world if it were a nation.
This isn’t a temporary gestalt for a startup. It is set up to become the Big Bang of centralization. As the market develops, it becomes more centralized and tokens are held by insiders. Insiders held 15% of Ethereum’s initial launch seven years ago.
Recent web3 projects started with an insider participation of 30-40%, while others are approaching the 80/20 ratio between the public and insiders. This distribution is common for technology companies that go public. What other asset class is worth more than $ 1. trillion? Can wild fluctuations in values be caused by a Saturday Night Live sketch?
The “new guard” also looks older and more like the “old guard” than the former. Particularly because of the men from Harvard and Stanford, who mistake talent for luck and dedicate themselves to the illusionary salvation of humanity, earning billions of dollars.
Every Forbes 2021 crypto billionaire is a male. One third of them went to Harvard and Stanford. Only one of the 12 on the list isn’t white. The web3 narrative reminds me of a TED talk before a large audience of survivalists.
Venture capital funds are increasingly investing in centralization and monopoly as a way to fund web3. OpenSea is the largest NFT marketplace in the world and it’s very similar to other exchange platforms. Because the company makes transactions simpler and moderately safer, it receives 2.5% from each one.
Coinbase, the largest cryptocurrency company, works exactly in this way. It has high industry commissions as well as a CEO who has provided himself with two-class shares with voting privileges 20 times greater than ordinary shares. Two-class stock ownership is synonymous with corporate centralization and mass serfdom.
The existence of intermediaries is the foundation of web3 infrastructure. Many popular “decentralized” apps rely on The Infura, which offers “ETH nodes as a services.” Other similar services include Alchemy (“supporting Blockchain developers all over the globe”) and Moralis (“creating and hosting decentralized applications”.
People don’t want their own servers or to write code each time they buy bread. So “centralized” services will eventually appear so that web3 can be used even by the average person.
Wild West, Wild West
Detractors are drawn into the trap of bad faith by the use of the term “decentralized”. It defines terms before any discussion even begins, just like the Prolife movement. Who wants centralization of power? It sounds corrupt, bureaucratic, and suffocating.
The Wild West was decentralized. We soon realized that cities need sheriffs and central protocols (i.e. laws). Web3 is a hotbed of theft. The theft and fraud of cryptocurrencies was $ 14 Billion in 2021.
Although decentralization was supposed to replace the bank’s middleman with blockchain technology, Coachella for fraud was born. Here, anonymity, enthusiastic nonsense and entanglement help fraudsters avoid oversight or liability.
TAO Winnie the Pooh
Web3 acolytes claim DAOs (decentralized autonomous organisations) are superior to traditional corporations. However, many of the early attempts at this were unsuccessful. It is not certain that these businesses are truly decentralized.
ConstitutionDAO was a hit after it lost the original copy the US Constitution for $43 million in an auction. The founders didn’t have the time or the resources to develop a management plan before the company closed. They also failed to figure out how to stop the control being taken over by large shareholders, “whales”, or other wealthy investors.
Index Coop is the DAO that creates index funds. It decided to appoint senior members. These are the “wise owls”, which are the Boomers who used to call them directors/advisers before Web3.
DAO advocates for more democratic corporate governance. The DAO allows all investors to vote on the organization’s decisions. There’s a reason that all organizations, from shoe companies to school districts, choose to adopt a representative model over trying to embrace pure democracy.
Leadership, experience and accountability improve results. But the same cannot be said for superficial decisions on long-term issues that are prone to bias. Nobel laureate Daniel Kahneman describes them as System of Thought 1.
What is described as a bug, error, or “friction” in centralization is actually a feature. It makes it difficult to present evidence and arguments to other trustees and polish them to find better solutions. It is frustrating, expensive, and, most importantly, doesn’t work as well as other systems of its kind.
A public company is a representative democracy that exists in corporate space. Token-based companies operate in an unregulated space, where tokens (i.e. securities) are instantly liquid and ostensibly exempt from disclosure requirements.
It is likely that the U.S. Securities and Exchange Commission and the courts will soon give cryptocurrency the same “boomer” regulation that has created some of the most stable exchanges and platforms in the history.
These markets are unique because they offer investors confidence through the rule and law. This is a great thing. Cryptocurrencies have attracted communities that weren’t previously interested in investing. What happens to these communities when scams and hacks hit? They will never be able to return to the marketplace.
Centralization was the key to many of our greatest achievements.
Technology has been revolutionized by centralized systems. NASA launched the James Webb Space Telescope last week. This remarkable feat of human achievement required cooperation and centralization from many private companies and space agencies. They didn’t use coins to make decisions.
Private enterprise is no different. Visionaries need visionaries, leaders are needed in teams. A centralized organization can create an environment where leaders are able to get the best out of their teams, and is responsible for the results. Software can’t replicate this environment.
None of this is the fault of technology. Probably, blockchain technology, tokens and smart contracts have huge potential, and most of these innovations will last a very long time. DAOs offer the potential to modernize organizational and corporate governance. NFTs open up opportunities for creators to receive higher compensation for their work.
They will, however, be, as with most “revolutionary”, technologies, eventually prove to have evolutionary benefits and can change lives in meaningful ways, though probably less than expected. Technology is often more boring than we think.
These innovations have increasing externalities and will continue to increase at the same pace. If we allow innovators’ idolatry to win over slow-thinking authorities, they will pose the same risk.
Technology is not able to preach liberation and isolate in closed communities. Although the “personal” computer was meant to liberate us from IBM’s grip on mainframes, it fell under greater Microsoft control.
Apple claims to be a revolutionary fighting Big Brother but has also created the largest anti-creativity camera (the App Shop). The slogan “Information wants freedom” was used by the leaders of early web companies in an attempt to persuade simpletons and fanatics to share their content for pennies.
The wheel is turning again and the loudest voice can be heard is from Andreessen Horowitz Venture Capital, which has created a crypto fund worth $2.2 billion and sends its general partners around the internet as missionaries.
One partner advocates decentralization to its almost 800,000 Twitter followers. Marc Andreessen, founder, blocks anyone who criticizes web3.
Andreessen Horowitz’s real money is invested in companies that create centralized, paid platforms. OpenSea and Coinbase are portfolio companies of Andreessen Horowitz. These companies have the intermediaries required to solve any problems with trust and user experience that may arise in a decentralized system. It’s your old boss.
If you don’t know where to look, illusions will only work. People are more aware of the person behind the curtain (even Elon).
The pressure on regulators will rise as more information is released. They will have to take preventive steps so that 27 million Americans don’t go hungry. Gary Gensler, Chairman of the U.S. Securities Commission, is open to this problem but his Commission provides no solution.
This space has tremendous potential, but it needs to be managed carefully and regulated.
Web3 may have hair of a different colour, but its DNA is identical to previous web paradigms. Web3 decentralized services on a unprecedented scale to build wealth and influence at the same time.
Two companies influence ninety-three per cent of intentions and two thirds of decisions. This is a good thing. Pro tip: Ask any teenage daughter. Web3 is currently web2.