Web3: “You Don’t Own It, The VC’s Do!”

January 14, 2022 6:35 pm

Strange battle lines are being formed on the so-called “Web3” battlefront.

I love how @alexgausman put it:

“If it wasn’t for web3 most of us probly wouldn’t even know there was a web2”

Well said Alex!

And perhaps that’s the whole point…

Perhaps “Web3” is much more marketing spin than a true descriptor of anything actually happening.

But nevertheless, battle lines are forming around “Web3” with some interesting alliances.

On the one hand appear to be Elon Musk and former Twitter CEO Jack Dorsey, both claiming that “Web3” is a sham marketing ploy masquerading as decentralization when in fact it is really more centralized by big money than any part of the Internet ever before.

Interesting.

On the other hand is, I suppose, the “sham marketing ploy” claiming that Web3 will finally democratize and decentralize Al Gore’s Internet.

Here’s Coinbase trying to make the pitch for the latter:

Not everyone is buying this pitch, especially not in the XRP community.

The Digital Asset Investor posted this video recently explaining how “Web3” is nothing more than a coordinated “free pass” designed to give the Ethereum Foundation and it’s big money backers an unfair multi-year head start:

@Jack seems to be in agreement with the Digital Asset Investor.

He Tweeted this a few weeks ago:

In response, a man who is synonymous with “VC’s and their LPs” (Marc Andreesen) responded by BLOCKING @Jack on Twitter:

Nothing confirms the other person is right quite like blocking them because you can’t win the argument.

Bad look Marc, bad look….

And now I want to advance the story even further with a new article written by Nick Saponaro, CEO of Divi Labs.

Saponaro penned the guest post on NASDAQ.com, and here is a portion of his thoughts on the topic:

Just before Christmas, the Twittersphere was ablaze as Jack Dorsey, the co-founder and one-time CEO of Twitter (TWTR) launched a salvo at Web3.

Rather than the promised decentralized utopia that puts individual privacy front and center, Dorsey suggested the next iteration of the World Wide Web had already been co-opted by institutional investors who sought to subvert its ideological aims and twist them to their own ends.

“You don’t own Web3,” Dorsey said. “The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label. Know what you’re getting into.”

While his statements are quite broad and feel like they were aimed mostly at the senior execs at VC firm Andreessen Horowitz, a major investor in blockchain technologies, there is some truth in what he’s saying.

There has been and will continue to be large scale investment into Web3 companies. This comes as no surprise when you consider the fortunes that have already been made from blockchain-based businesses and the staggering financial upsides that are forecast to come.

Certainly, these institutions will have their own agendas and will want to impose their will in order to generate the highest possible returns. Adherence to selective incentives and a Milton Friedman driven business philosophy may see the same institutions diverging from the original ideological aims of Web3’s developers. After all, for capitalists, ideology is all well and good until it gets in the way of making money.

However, in my view, what happens next isn’t in the hands of the money men and women. Ultimately, whether Web3 can live up to the decentralized dream of its proponents or as Dorsey suggests, be controlled by institutional vested interest, will depend on us, Web3’s creators and consumers. Here’s why.

Reality or fantasy?

When considering whether Web3 can deliver on its decentralized vision, the first question is, is true decentralization a fantasy or is it something we can make a reality? As with most things, the answer lies somewhere in between.

Let’s first look at the way decentralized projects are now being funded. Unfortunately, the end of the ICO era and the regulatory crackdown that followed forced the hands of founders to fund their companies via traditional means.

This outcome is a result of accredited investor rules, which prohibit anyone with less than $1MM liquid (among other criteria) to invest in securities or early-stage equity. This rule is painted as “consumer protection” but it’s really just a way to ensure the serfs remain in serfdom. Hence, many projects are raising their startup capital with VC funding.

I will concede that some projects are grossly overfunded and completely controlled by VCs. Then there are the grassroots projects that grew organically and later raised VC, e.g. Uniswap. Further still, there are genuine DAOs operating within a more fundamentalist construct.

Regardless of the funding mechanisms used, the technologies behind Web3 inherently enable users to take control of their content, data, privacy and funds. And while Twitter has made billions of dollars off the backs of creators and thought leaders who never saw any benefit other than targeted advertising and some internet points via a blue check mark, Web3 has enabled creators to make millions of dollars without paying a dime to someone in a high-rise office wearing a pin-striped suit.

Web3 is helping game developers fund their games without becoming beholden to shareholders who don’t have any interest in what they’re building, aside from what it delivers to the bottom line. It is enabling savvy users to become their own hedge fund, lender or market maker. People are becoming millionaires in a matter of months thanks to this technology, which is more than Web2 has ever done for most.

But, while decentralization is ingrained in the DNA of this technology, it is not without one major caveat. The true underlying tech (cloud infrastructure run on AWS, Google, etc.) is not, in any way, decentralized. Even IPFS (Interplanetary File System), while distributed, is usually run in a single instance by the owner of the content, e.g. NFT projects.

This fact will change over time as more decentralized cloud infrastructure comes into the fold and IPFS becomes easier to access and incentives to host content drive distribution across a larger array of machines.

What we’ve also got to remember is we are still very early in the development cycle, and even earlier in the adoption cycle. At one point, the web seemed useless. An unnecessary reimagining of things that were already “good enough” (see: eCommerce, email, etc.) in the physical realm.

Web3 is in its nascency. It needs time to grow, for the infrastructure to truly democratize, and for the protocols built on top of the infrastructure to mature to a state that they are just as, if not more secure and useful than their predecessors.

It may indeed be idealistic but then so was the idea of a decentralized, borderless currency, and it’s now a market worth $2 trillion.

We get what we deserve

People have a big role to play too. Referring originally to the Government and our leaders, the adage that we get what we deserve posits that we are all complicit in and culpable for the quality of the people we put in power. Either through action, where we actually vote them in or through inaction, where we leave the responsibility to others because we don’t care enough to bother contributing.

The same is also true of the technology we consume and the people who supply it to us. Think about the Titans of Web2, Google, Facebook, Twitter and Amazon. As users, we empowered them by rushing to their sites, giving little thought to the hefty price we were paying for accessing their “free” services.

Even today as their influence on us both individually and as a society is laid bare, few give a thought to the loss of privacy that the wholesale farming and selling of our data has wrought. Not to mention the way in which the data is used to manipulate our thinking and behavior.

The same is also true of the people at the helm of these companies, many of whom have ceded increasing control to institutional investors in their drive for growth and unicorn status. As Dorsey himself says, “Twitter started as a corporation. It’s had corporate incentives from day 1.”

Saponaro’s article is receiving widespread praise online:

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