How will Web3 change the future of humanity?

Web3 has been a very popular term this year, especially among alternative finance cartoon characters and logical tweet thread writers in the technology world.

In 2021, if you want to raise your first round of funding and avoid the critical thinking of investors, there are two "cheat codes" you can use, one is "Web3" and the other is "Metaverse". If you learn these buzzwords, then congratulations, you now have $1 billion at your disposal and a good starting point. Good luck and have fun.

Despite the numerous featureless thought pieces published by today’s leaders, there is still no consensus on “what exactly Web3 is.” The definition of “Web 3” depends on which faction you belong to. Web3 is a scam, Web3 is the future, Web3 is tokenizing the world, Web3 is an excuse for VCs to withdraw funds, Web3 is another name for cryptocurrency, and all kinds of voices fill our ears. Even the crypto community cannot be sure whether Bitcoin is web3.

If there is no single definition of what "Web3 is", and the term has only really become a buzzword in the past six months, I think it's fair to conclude that Web3 doesn't really exist yet. However, it's clear that there are a lot of ideas and experiments that continue to emerge under the umbrella of the topic, which has inspired and inspired creativity, or completely disappointed onlookers.

What is the significance of Web3?

I will not elaborate on the views on the uselessness of Web3 here. I will think about the possible definition of Web3 from the perspective of its use. Do we need to abandon Web2? What problems does Web3 solve?

I think there are two important themes:

◼Decentralization of power

People are increasingly distrusting centralized authority. Whether it’s governments, central banks, or global tech giants, they have become more powerful than the state. Decentralization, empowerment, and censorship resistance have led to a new interest in building trustless and censorship-resistant platforms that can empower ordinary people and fragment existing power structures.

◼Value Ownership

With the advent of Web2, the web went from “read” to “read and write”, becoming more social and participatory; the era of user-generated content began. Modern tech companies host content from users and then quietly monetize it. Taking advantage of our desire for social interaction and reprocessing it through addictive product models, inserting ads, and managing to distribute all the user-generated value to shareholders. By the time you are able to become a shareholder in these companies, their valuations have reached billions of dollars and insiders have become rich.

An open and fair network

I understand the excitement among supporters.

An idealized future web might be able to solve these social problems in a positive way, but also empower founders with powerful growth and retention tools to compete with incumbents.

We can build a network where users can share in the value they create and drive adoption, without technology managers deciding what we talk about or how many ads we have to see every day.

Perhaps Web3 can empower ordinary people who have worked thousands of hours as cogs in large companies, only to have their efforts harvested as profits for private shareholders.

Maybe the web could become more collaborative, rather than just extractive.

Everything can be Ponzi-ized

Perhaps more importantly, I understand the critics’ fears.

A pessimistic idea is that the future network may be full of tokenized microtransactions, rent-seeking on all user behavior, and requiring users to own native tokens to properly operate their toasters.

It could be a network that was built on selling worthless ERC20 tokens to retail investors and then failed, extracting value in a more direct way than selling ads that took years to develop.

It could also be a network where there are not enough tools to deal with objectionable content such as harassment or child abuse, making cybercrime more difficult to prevent.

Perhaps full financialization will only benefit hedge funds that are good at complex algorithms and giant VCs that enter the market early and become the majority owners of these tokens in private seed rounds.

Which way to go?

If you can imagine a happy future and a dystopian future, I don’t blame you for expecting the worst future to be the most likely reality. Modern businesses are clearly often making the web more annoying: cookie permissions, data permission requests, banner ads, paywalls, loot boxes, and pay-to-play or pay-to-win games — these are all changes that are either second-best or anti-user.

If we look at cryptocurrencies from outside the community, we can’t blame outsiders for seeing something that looks eerily like a scam. The wealth effect has fueled the heated rhetoric and arrogance of crypto market participants, and the self-ironic nature of cryptocurrency culture has alienated outsiders.

I get it. It was bad in the past, it is bad now, so you strongly reject ideas that you can find theoretical holes in. You don’t have to think too hard to imagine ways that decentralized systems can be exploited, and you don’t have to look too far to find examples of token projects that take advantage of ordinary people.

But at the same time, you don’t have to look far to see the power of ownership and self-determination in existing owner-operated systems.

Without the intervention of a central authority, Bitcoin has transformed from "dark web drug money" to an institutionally recognized store of value asset in just ten years.

Ethereum has evolved from a "geek Ponzi scheme" to a massive owner-operated network with billions of transactions per day.

Businesses, users, and third parties contribute to the creation of incremental value for both networks, and they can share in the rewards. Anyone can participate and get value back, not just to founders or investors.

Even a purely interesting social consensus project like ConstitutionDAO could become an example of shared user-generated value creation among all. Despite failing to capture the Constitution, the DAO became more valuable, and that value accrued back to the participants.

Perhaps this shared ownership could become a forcing function to disrupt existing conventions of how tech companies can or should operate.

Inequality

Inequality is becoming more and more apparent. During the pandemic, asset prices have skyrocketed, and the rich have become even richer. Meanwhile, small businesses have struggled, and the working class has quickly spent their stimulus cash. More than 50% of Americans have less than three months of emergency savings.

Wage growth has barely budged, but housing costs have risen more than 400% over the past 40 years. People are starting to feel trapped in a system that doesn’t serve them, and the future they want is slipping away fast.

So it makes sense that the number of RobinHood retail options traders and Dogecoin buyers has increased. For those who cannot see the hope of achieving their financial goals through savings and investments, lottery-style investing has become a viable option.

Perhaps a more socialist model of equity or token ownership could serve as capitalism’s answer to universal basic income. Rather than having the state print a little cash for families and tax future generations to pay for this generation, perhaps people sharing the wealth produced could create a more equitable world.

If users vote with their wallets, choosing companies where they have participated in value creation and are rewarded, these companies will find huge network effect tools, grow rapidly and displace existing businesses. People who truly participate can choose to own some of the value they co-create, rather than giving it all to founders and investors.

If other conditions are the same, between two identical services, users are more willing to use the service that can bring them value in return.

Perfect concept

When Bitcoin was created, it was another flawless concept. Satoshi Nakamoto was probably one of the most important creators in history in terms of ensuring a fair position for all. No share of the tokens was taken away privately, nor given to any private investor. All users mined their own Bitcoins on equal terms. Although they mined millions of Bitcoins by participating early, they had no other advantages beyond that.

When Ethereum was created, they pre-mined some tokens and held a free-for-all public ICO. Anyone could participate, and a total of 60,000,000 ETH was sold at a price of about $0.3 per ETH. The founders of Ethereum did reserve some tokens for themselves and the Ethereum Foundation, with founder Vitalik having the largest share, but his share is less than 1% of the total ETH supply. Compared to traditional stocks, this ownership share is quite small.

While Ethereum’s founding appears slightly less “fair” than Bitcoin’s, it still has a relatively fair and open model for participation. The ICO model became popular in 2017, but has since degraded as issues such as pre-sales and private sales to insiders emerged.

In 2018-2019, fair terms for participants to compete freely became a thing of the past. The SEC began to regulate ICO projects to protect the interests of retail investors. Due to regulatory pressure and lack of clarity, cryptocurrency builders can only raise funds from venture capital firms instead of the general public. It is no longer possible for non-insiders to buy tokens at early cheap terms, while venture capital institutions can.

You see the trend from no founder reward, free competition, fair launch to large founder holdings, VC investment, privatization proceeds and feel very pessimistic about it. It seems that the purity and beauty of Satoshi's creation has been corrupted by greed.

But the fact is that cryptocurrencies are popular now. When Bitcoin first came out, it was not obvious to many people that cryptocurrencies were valuable. However, Bitcoin proved that it was valuable, and Ethereum exacerbated this belief. Bitcoin has been on an upward trend for 10 years since its birth, which has attracted a lot of venture capital institutions.

When Satoshi launched Bitcoin, the mining difficulty was so low that a computer could mine a block reward of 50 BTC. Undiscovered Bitcoin became a fair launch for amateurs, not a playground for hedge funds. If a project tried to launch the same way today, the already wealthy would easily hold all the hashes, accumulate all the tokens, and pay the electricity bills for a share of the new project. In such an environment, the founders might as well just sell to them and secure long-term funding.

I would prefer to open sales to everyone under the same conditions, but I also understand that founders don’t want to take unnecessary regulatory risks, so dealing with professional investors is easier and has lower overhead, not to mention the abuse of vehicles and the fact that most ICOs in 2017 went to zero.

Is it necessary to get rich while building the future?

No one would argue that Vitalik does not deserve 0.7% of the ETH supply because of his huge contribution to Ethereum. Similarly, no one would argue that Satoshi Nakamoto mined 1 million Bitcoins in an unfair way.

However, it is impossible to ignore that the biggest backers of Web3 are already successful venture capitalists. Somewhat ironically, but not surprisingly, these entities are attempting to become super investors in this utopian, shared, and community-governed economy by purchasing majority stakes at low prices in seed rounds.

It is also important not to overlook the cash-grabbing founders and investors who take advantage of existing market dynamics to create behemoth bull run projects to fill their own wallets.

So, I think four things are true:

? There is a consensus that it is both well-deserved and expected for founders to get rich when they create tremendous value in the world.

There is a rough consensus that early-stage funding from venture capital firms or angel investors is also a service, and they should be rewarded when the projects they fund create significant value for the world.

Many believe these funding opportunities should be open and fair, rejecting existing investor compliance rules as overly paternalistic or counterintuitive (yay, now we can pay top dollar from venture firms!).

?Everyone hates it when founders or VCs gain wealth without contributing any value.

Admittedly, the last point has now become common in the crypto world. Many CEOs of half-developed products have become billionaires overnight simply by issuing tokens and promising to make NFT-driven video games, or building a "Web3" platform with only double-digit active users.

Summarize

Web3 does not exist yet. There are a lot of Ponzi schemes in the bull market, and it may not be accurate to assess its value, but it is also not objective to ignore the dynamic changes in the market.

I think the social problems of the real world and Web2 exist and are worth solving, and there is a lot to look forward to in the vision of Web3.

I think open, transparent and permissionless systems replacing centralized institutions would be good for the world, rebalancing and decentralizing power.

I hope that the financial boom in the crypto market will attract smart minds away from selling ads to people and instead build a more fair and collaborative future.

But if crypto project founders get rich and no longer care about their projects, and new networks are built by the greedy legions of late-stage capitalism, then I wouldn’t be surprised if these greedy companies let you buy a sharded micropayment NFT on Cardano to operate your electric toothbrush.

Afterword

I know I’ve been lured into a fruitless debate with billionaires who all got rich online in the Facebook era. To be honest, the outcome of their debate doesn’t matter because they are no longer risk takers and builders of the future. Maybe they are financiers, but their power law curve models have shown that they are more wrong than right.

Author: Cobie | Translator: Morisen | Editor: Rich Second Generation

Link: cobie.substack.com/p/wtf-is-web3