It’s not as straightforward as Jack Dorsey’s image of Web3 as a VC coup against the established tech elite, and things may not be as clear-cut as he thinks.
Israeli serial entrepreneur Ariel Shapira analyses developing technologies in the crypto, decentralized finance, and blockchain space, as well as their responsibilities in creating the economy of the twenty-first century, in his monthly crypto tech column.
Ex-Twitter CEO and Bitcoin (BTC) enthusiast Jack Dorsey isn’t a fan of Web3 or at least what its grand vision is turning up to be. He repeatedly emphasizes that users will not own the next generation of the internet. Instead, the reins will be held by venture capital funds investing millions in blockchain and Web3 initiatives. Will they, however, succeed?
As is customary, the truth is not as skewed as either side would have you believe. In a nutshell, Web3 is the dream of an internet devoid of centralized platforms like, well, Twitter. Other features mentioned by different critics include an end to ubiquitous surveillance, more decentralization, data that is intelligible by both humans and machines, and AR/VR functionality. But, at its core, the Web3 movement appears to be about bringing down the big fish.
After all, the internet, in its current state and structure, is fairly centralized in many aspects. Only four businesses control about 70% of the world’s cloud infrastructure, which hosts millions of online pages and applications. All of the recognizable faces are invading the critical infrastructure that makes up the web’s backbone. And, as evidenced by Facebook’s feud with Australian news outlets, platforms like Twitter and Facebook have largely centralized the way we consume material, serving as a window into the larger web for many.
According to Jack, the whole Web 3.0 kerfuffle is akin to a coup. A group of outcasts band together to plot the fall of the monarchy, but they are simply acting in their own self-interest. They don’t have any sympathy for the common man. And, if they win, the kingdom will remain largely unchanged, with the exception of the banners hanging over the capital.
We put our faith in code.
Is there anything in Web3 for the centralized kingdom’s laypeople? The truth is difficult, as it always is.
Web3 is certainly a popular issue in the venture capital sector. This vision isn’t solely the work of a16z. Iconium, a private investment firm focused on digital assets and decentralized initiatives, has invested in networks such as Secret and Terra, as well as dozens of other major and small funds. In total, venture capitalists invested $33 billion in blockchain businesses in 2021, a sum that speaks for itself — but not always with the implication of power.
You harvest what you sow in the digital world. Blockchain aficionados like to argue that code is the law, and while the crypto community hasn’t always followed this philosophy, it is a rallying cry for some of its most ardent supporters. The argument is that code is a more fair judge than any centralized entity could ever be, and that we should put our trust in code.
While the sentiment may be a little simplistic, this focus on the code deserves to be discussed more. Users today are subjected to widespread surveillance as a result of the programming that powers the platforms they utilize. Facebook and Twitter services are coded in such a way that they pull in your data. This design, on the other hand, is based on a specific Web2 business model: Your privacy is the price you pay for the free service.
An program without hard-coded consumer surveillance, on the other hand, is inherently incapable of spying on its users. It’s also incapable of exerting any kind of control over whatever it wasn’t designed to do in the first place. And, as long as it’s on a public blockchain with open source code, people will be able to examine its limitations for themselves. Those who don’t speak Solidity will still be able to hear from those who do, as the open-source community is always buzzing with interesting conversations and ideas.
The ebb and flow of investment
Don’t be fooled: VCs aren’t looking to help the poor; they’re looking for a good return on their investment. Where do these returns come from, though, is the question. Things fluctuate from project to project in this regard, but in the most broad economic terms, blockchain initiatives are all about tokens. It’s not always a good thing, as victims of any of the recent rug pulls will attest, but for VCs, it’s essentially how they make money. They put money into the initiative by purchasing tokens and profiting when it goes off. It’s usually that straightforward.
Dorsey’s thesis is supported by a VC who invests in an invasive app that takes aim at the established giants. Yes, a decentralized application (DApp) can theoretically be as intrusive as a centralized one. A venture capitalist who invests in a privacy-first open-source initiative in the expectation of profiting from its coin does not succeed. Neither can amass any form of disproportionate influence in the imagined decentralized internet of the future unless the projects they invest in explicitly provide it to them something the community can monitor.
In addition, the face of investing is shifting. Decentralization has resulted in the formation of decentralized autonomous organizations, or DAOs, which often coalesce around a shared vision or investment. In a similar spirit, projects like dHEDGE, a social asset management protocol, allow regular investors to pool their funds and put them to work under the supervision of a competent manager or algorithm. Both techniques will eventually lead to more democratized and mindful investing, which is the opposite of what Dorsey advocates.
Overall, the story of Web3 is now more about marketing excitement and speculation than true technological genius and a push for a better web for all, as is frequently the case with large objectives and big words. It takes a certain amount of skepticism to analyze something like this without falling into any of its numerous qualifiers, but it’s just as necessary to hunt for the diamonds in the rough. Exactly this is what investors are doing. There may never be a single tectonic change in the Web3 foundations, but as more decentralized projects emerge that provide users with true value beyond merely financial terms, Big Tech’s grip on the Internet may indeed give way to a new paradigm, one that doesn’t provide us more of the same.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.