Imagine That You Can Imagine A Better? World That Will Never Happen
The Utopian Tech Dream Shattered But Not Gone
Imagine a world where there is no single authority that takes responsibility for the data.
Imagine that there are no laws or regulations to define what a program or content can be published, and if there were, you couldn’t enforce them.
Imagine if no one is responsible for harassment and scam or seditious content online.
Imagine giving away your data assets for no reason because you store them in a glass box.
Imagine if there is no clear understanding of why you have to participate in a complicated online platform, but are told that it is the next big thing.
Imagine if the money in you bank account couldn’t buy a house or a car.
Imagine if the value of your money was so fragile, that you could wake up in the morning to find that you money is worth 40% less and you didn’t live in Venezuela, Lebanon or Turkey.
Imagine if each store took different money and you had to pay a fee to change your money into the kind of money that the store took. Imagine if some stores selling necessities didn’t take your money at all!
Imagine that as more and more people a spent different kind of money, the cost increased and the speed slowed down to process your transaction.
Imagine if your “credit card” could only process 20 transactions per second globally while the most popular one can process 24,400 transactions per second.
Imagine if your money was not tied to a debt instrument, a deposit reserve, a unit economics, a measure of sovereign fiscal and monetary policy but rather a synthetic, virtual thing whose value was controlled by a just a handful of synthesizers of that medium of exchange.
Imagine if you were given a gimmicky internet browser that was more idealistic, but slower, bulkier to use and there were huge tradeoffs between security and usability.
Imagine if your utopian economic dreams are over-leveraged on a perpetual over-the-horizon technological advancement or adoption that never comes, like the Millerism hope for a religious rapture or Second Coming that never materializes.
There are people that want you to not only want you to imagine this online world, but actually want you to live in it. Except, the necessary element for it to work properly and efficiently is coming tomorrow, … and tomorrow never comes. If you haven’t figured it out by now, I am talking about the illusory web3 and its crypto & blockchain underpinnings. Web3 in its simplest form, is a web browser tied to a crypto wallet and one or more blockchains. A blockchain is a transparent, append-only decentralized database that encodes each entry with the previous one.
Fifteen years ago, blockchain was at the apex of its hype cycle. It was a panacea for all of the world’s problems ranging from a broken economic system to a utopian dream of wresting control of one’s money, data and ironically, privacy, from the digital plutocrats. It gained dogmatic adherents (self included who is now an apostate) that now resemble religious zealots whose faith obscures the facts of observable reality and due inference of the local environment.
So why didn’t something that would solve many world problems never take off? There are other precedents in non-digital technology that had a world of promise, some major projects and incarnations, and ultimately failed to ignite. Take the hovercraft. It floated on a cushion of air. It could traverse any geographic substrate when it be water, ice, rocks, desert or land. It was more fuel efficient because it didn’t have the friction of its mass to content with moving on an air cushion. It was scaleable. There were several hovercraft ferries built to traverse the English Channel. They didn’t require docks, jetties, airstrips or any kind of terminal infrastructure. They just drove up on the beach. They had been around in various forms since the 1950’s and the last cross channel trip took place on October 1, 2000. From an observer point of view, they seemed like an ideal technology. Once you dove in with both feet (just like my experience with blockchain), the concept-killers became apparent.
Hovercraft were really noisy, expensive to maintain and not always easy to control. In high winds, they were almost impossible to control. They were not that comfortable for passengers. In spite of floating on a cushion of air, they were nicknamed a vomit comet. Their vehicle-carrying throughput capacity was limited. Quite simply, the advantages gained by technology could not offset the value proposition of the simpler, less-expensive boat ferries crossing the channel.
Actually there are a lot of similarities between the negative aspects of hovercrafts and blockchain/web3. The infrastructure is more complex. It most expensive to maintain. It has negative usability aspects for the users. It has scalability issues. The cheaper alternative (web2 — what you are using now) has all of the bugs ironed out and is faster and less expensive.
But let’s take the supposed benefits of decentralization. The utopian ideal is that no central authority can use our data, charge us usurious rates for financial help and transactions and dictate terms and conditions that are not in our best interests.
Many of us remember the decentralized days of internet and personal computing. In the beginning of personal computers, computing became decentralized so that anyone could build PC architecture with no one controlling it. The internet was the same way. I was an early adopter. There was no google. There was a guy name Bob who had a spider web crawler and he would post “Cool Sites of the Day’. You literally surfed by following links on static web pages. It sucked. I myself had a popular road-rage website called D.U.Ds — the Database of Unsafe Drivers. You could post the license plate numbers of idiots who were bad drivers. It was both listed on Cool Websites of the day, but it got its biggest boost when it was featured in Time Magazine (same issue of when Seinfeld quit his show and was on the cover — if you have a vintage collection of that magazine). Centralization was welcomed when Google created a search engine that was so brilliant and useful that it has since become the most crucial component of the web. And decentralized computing couldn’t last long as Microsoft figured out how to centralize the computing industry by building its proprietary software that came with a new computer giving new functionality and workload reduction to the masses.
Web3/blockchain decentralized is a Potemkin Village - a myth. Opensea, the largest NFT marketplace, or Metamask, a cryptocurrency wallet with more than 10 million monthly active users, rely on centralized infrastructure companies like Infura, a backend, and Infrastructure-as-a-service provider. Most web3 protocols slowly evolve and completely rely on centralized platforms to iterate on new functionality. When it comes to crypto wallets, Metamask is a point of centralization.
But there is a further point that the web3/blockchain idealists fail to grasp. As Jack Dorsey, the Twitter founder puts it: “You don’t own web3. The VCs and their LPs (limited partners) do. It will never escape their incentives. It’s ultimately a centralized entity with a different label. Know what you’re getting into.”
The erosion of decentralization is apparent to those who can get past the dogma of idealistic beliefs. We have seen the rapid consolidation of Bitcoin mining into very few hands. The technology is so complicated that for innovation, you need centralized control to develop sophisticated technology. And web3 services, if they follow the usual paradigm of new things, will have so many copies, incarnations, improvements, copycats and wannabes, that one will need a centralized index to sort it all out, rate it and make sense of it. Decentralization is a myth.
The other myth of web3 and lack of economics understanding, is that we, as users will take back the profits that the centralized entities are taking from us. The failure of foresight there, is to recognize the Law of Conservation of Attractive Profits. It’s not just some woo-woo economics theory. It states; “When modularity and commoditization cause attractive profits to disappear at one stage in the value chain, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage.” The profits from transferring money will migrate from the banks to the centralized entities that run the blockchains in the form of transaction fees. As a joke, I once sent 1 cent in crypto to a friend and it cost me close to $3 USD for the entire transaction on the blockchain. I can transfer money to my friends online from a bank account without any transaction fees if they bank at the same institution (there are only 5 major chartered banks in Canada).
There are other stated use cases for web3 and crypto blockchains that are touted as major value propositions. One of them is the tokenization or the virtualization of real assets with digital artifacts. For example there was a highly touted project that was to modernize and put land ownership in an African country on a blockchain with a digital token. It was a massive failure. You can’t just bolt on a blockchain and create digital tokens and expect it to function in the hidden and complex way that a cadaster system of land registry operates. There are interlocking anchors of trust between individual id (usually in the form of government id documents), certified survey professionals, the verification of those professional accreditations, the land tax departments, the utilities providers, the financiers and mortgage holders and the bylaws governing land use. The major problem is that web3 and blockchain projects are initiated by developers and idealists who are not subject matters in the field that they want to disrupt and their assumptions of disruptions are naive, uninformed and unfounded, but convincing to others with the same knowledge and information shortcomings. This is most obvious in the crypto proponents who do not understand economics and money and yet make pronouncements on how fiat money will die.
Now let’s come to public acceptance. When was the last time that you used a web3 application? Exactly! It sounds like a good idea to move banking into the hands of individuals, but they don’t want it. It increases their burden of responsibility in an already hectic world. Most people don’t have enough technology or just “banking” skills to do so. And they don’t care whether their money is handled in a centralized or decentralized fashion. They just want their money to be safe. Often if you are scammed out of money on your credit card, the institution will either limit your loss or reimburse you. That won’t happen on web3.
Of course, web3 is just a gleam in the eye of idealists. It is also the dream of anarchists. Down with big banks. Down with corporate hegemony. Down with governments. But anarchists are blind to the fact that anarchy never works at scale. Anarchies and communes above a certain size tend to collapse, turn into tyrannies, or turn into chaos. And then we are back to where we started.
So how did we get to venture capitalists investing millions upon millions of dollars into blockchain companies all to ultimately end up nowhere? There are two answers to this. First of all, venture capitalists do not invest in a single technology but in multiple technologies. There job is to foster the disruption and innovation ecosystem, knowing that over 90% of their investments will fail. They do not have a magic crystal ball that can pick winners. As Carl Sagan put it: “The prediction I can make with the highest confidence is that most amazing discoveries will be the ones we are not today wise enough to foresee.” The most dramatic example is the world-changing paradigm wrought by ChatGPT and generative AI in just the past 6 months. Nobody predicted it. If blockchain was a real value proposition, it would have done exactly the same thing — explode onto the scene. Facebook and even the internet followed roughly the same trajectory as ChatGPT in terms of public usage and acceptance.
The other answer to how web3 talk came about is hype. Gavin Wood, one of the many founders of Ethereum used the term “web3” prominently in a paper that became the “golden tablets” of the faith. He confidently predicted bolting on crypto onto the internet to create one computer for the entire planet. The disciples took up the cause and made it the talking point of the time years ago. Everyone disregarded the fact that the future is too complicated to predict, and they dipped their toes into it because the world was talking about it. It was promoted by many narcissists who believed that they could defy mankind’s inability to predict the future relying on the fact that the web3 dream is very familiar techno-utopianism for anyone who lived through Web 1.0. The web3 proponents, adherents and dogmatists are either trying to solve tomorrow’s problems today, or are trying to re-invent yesterday’s solutions for tomorrow. They are trying to reframe their dreams into a false narrative about disruption of legacy tech company hegemony. They fail to recognize the complexities of what they are trying to disrupt, including those of regulation that keeps markets orderly and safe. The tenets of web3 and crypto have devolved into casino capitalism that delivers no immediate benefits to the ordinary person.
The biggest problem with web3 initiatives is that they are trying to re-invent simpler, less complicated things that already work well. The hovercraft tried to re-invent the boat ferry. Web3 is trying to re-invent the credit card. Their biggest oversight is this:
The value of the change must surpass & greatly outweigh the burden of change.
I don’t decry idealistic and utopian ideas about how we can rebuild the internet to reflect our aspirations of a more humane and egalitarian society. It’s a noble, but unworkable idea. The idea of Utopia has been around since Plato (370 - 360 BC); Saint Augustine of Hippo wrote about it in 1501 AD, and Karl Marx had his own version of Utopia. Unfortunately if it hasn’t happened yet, it will never happen. Societal disparity among populations and demographics is increasing as we progress. The naked ape that is us, is too unpredictable and non-altruistic on a macro scale. And technology may the problem and not the solution.
Thanks for reading.