The Web3 Movement?s Quest to Build a ?Can?t Be Evil? Internet

And rather than feeling exasperated or baffled, I seem to have caught the same thrill, however fleetingly, as everyone around me.I am among the estimated 10,000 people who arrived in Colorado a few days ago for this year’s ETHDenver conference, the biggest and oldest event in the world of Ethereum and Web3. In the media and on Twitter, Web3 has become a catchall for anything having to do with blockchains and cryptocurrency: People paying tens of thousands of dollars for digital collectibles known as non-fungible tokens, or NFTs, with neither practical nor aesthetic value, then flipping them for even ungodlier sums. The main vehicle for this is Ethereum, a blockchain that borrowed Bitcoin’s key features and added a major innovation: It was designed with its own programming language so developers could build apps, and eventually a whole new decentralized digital infrastructure, to run on it.If Bitcoin attracts anarcho-capitalists who want to dethrone the central bankers, the culture around Ethereum and Web3 has a more progressive bent. After I walked into the Denver Sports Castle, a massive former sporting goods store turned events space that served as ETHDenver’s main venue, the first panel I caught was about using blockchains to build “public goods.” Another was titled “Navigating the Web3 Workforce as a BIPOC, Queer, Marginalized Individual.” (The overall crowd skewed heavily white and male.) Aesthetically, ETHDenver embraced a spirit of collaborative, LARPish make-believe; there was quite a bit of talk about the Bufficorn, the cartoon buffalo-unicorn hybrid that was the event’s NFT mascot. (It fuses the magic of the unicorn with the strength of the buffalo.) People communicated with all manner of cheerful memes: gm, for “good morning,” was the universal greeting, regardless of the time of day; wagmi meant “we’re all gonna make it.”The Bufficorn, ETHDenver's mascot, and Vitalik Buterin, creator of Ethereum.During the opening ceremony, the conference organizers emphasized Web3’s idealism. Ethereum has a similar problem.One way to think about Web3 is right there in the name: It’s the successor to Web 2.0, the era that was supposed to democratize the internet but instead became dominated by a handful of huge platforms, like Google and Facebook. To Wood, Web3 is about building systems that don’t rely on trusting people, corporations, or governments to make moral choices, but that instead render evil choices impossible. Brewster Kahle, the creator of the Internet Archive and the Wayback Machine, has described this goal as “locking the web open.” Or, as Chris Dixon, a general partner at Andreessen Horowitz’s crypto fund and a leading Web3 booster, puts it, “Can’t be evil > don’t be evil.”A blockchain is a database that lives across a network of computers rather than on one server. In a Web3 world, the theory goes, your data would live on a blockchain, not a central server. And a platform couldn’t change the rules of the game by erecting walls around its data, because it would never have owned the data in the first place.Innumerable Web3 startups are trying to apply this theory by creating blockchain-based alternatives to just about any platform you can name: Spotify, Twitter, Instagram, Google Docs. A company called Sapien purports to be building an entire Web3 metaverse.Faith in blockchain infrastructure as a forcing mechanism for decentralization is Web3’s first tenet. Like the Sports Castle, it can’t handle the load of transactions going through its pipes.Ethereum, like Bitcoin, operates on a system known as “proof of work.” Computers in the network “mine” new tokens by being the first to solve complex math problems and get paid a fluctuating “gas fee” for verifying transactions on the blockchain. Then there are “Layer 2” blockchains that do most of the work on their own network before logging the results on Ethereum in big batches to lower the cost per transaction.Beyond the bandwidth problems, there was broad agreement among the ETHDenver crowd that the technology is far too difficult to use. In the early days of Web 1.0, some people thought “we’d all have our own web server with our own website, our own mail server for our own email,” he writes. Yes, your data lives indelibly somewhere on the blockchain, but in practice, any Web3 app you might use probably relies on these centralized services to access it. As an illustration, Marlinspike writes that when a satirical NFT he created got pulled from OpenSea, it also stopped appearing in his MetaMask wallet, even though it still existed on the blockchain.Marlinspike notes that Web3 defenders tend to reply to critiques by insisting, “It’s early days still.” It took exactly one day for Vitalik Buterin, the creator of Ethereum, to prove his point. “I would very strongly say, Web3 is not synonymous with blockchains,” says Jeromy Johnson, an engineer at Protocol Labs, a Web3 R&D organization. Johnson works on blockchain projects, but he also helped code the Inter­Planetary File System, a peer-to-peer alternative to the hypertext transfer protocol (that “http://” bit at the front of every web address). It’s a leading example of decentralized tech that isn’t blockchain.“There’s a lot of things that people try to use blockchain for that you don’t actually need a blockchain for,” Johnson says. But I came to Denver wondering whether the same could be said of decentralization itself, as Web3 people understood it. But government policy does not really figure into the Web3 blueprint.On the morning the toilets broke, I moderated a panel titled “Why Decentralization Matters.” At one point, one of the panelists, Nick Dodson, an engineer at Fuel Labs, observed that “traditional fintech”—personal finance apps that don’t use blockchains or crypto—is arguably more decentralized than Web3 “because, to be honest, there’s more companies doing things.”Did you know, I asked, that the fintech sector owes much of its existence to a piece of federal legislation? Wouldn’t a data portability law be easier than the whole Web3 thing?“Government moves way slower than software does,” she said, with an incredulous laugh. It’s mostly about blocking new regulations that might stop the gravy train, making sure the state stays out of crypto’s way.That gravy train has a name: DeFi. Short for “decentralized finance,” DeFi is essentially a crypto betting market, with financial products that allow investors to gamble on cryptocurrencies via options, derivatives, and other avenues. One analysis found that more than $10 billion was stolen from DeFi platforms in 2021 alone.On my first night in Denver, I headed to a happy hour sponsored by Uma, which bills itself as “a fast, flexible, and secure way to create decentralized financial products.” The event was crawling with DeFi people, each of whom assured me that their product promised super-high yields with minimal risk. It’s also where the Web3 movement breaks with the economic innocence of past waves of internet utopianism.In case the parallels to the eve of the 2008 financial crisis were too subtle, my next stop was a startup that offers mortgage-backed crypto tokens.Back in the early days of Web 2.0, the open source movement—that era’s generation of idealists—was guided by a perhaps naive belief in the willingness of people to volunteer their energies and talents for the greater good. The platforms born in this era played to that spirit, deploying lofty rhetoric about making the world a better, more open, more connected place—while, in the background, quietly setting up global surveillance operations to spy on their users for the benefit of advertisers.“A lot of open-web, open source people always thought that money was dirty,” says Julien Genestoux, a veteran of the open source movement who created Unlock Protocol, which seeks to put memberships and subscriptions on the blockchain. By making it explicit, a thing we’re all staring at, we’re making it harder for the people who want to take it from everybody else.”At the most basic level, Web3’s approach to financial incentives is an ingenious way of solving new technology’s adoption problem. Let’s say you make a new decentralized platform built on the blockchain, one that works so smoothly that people can use it without getting a PhD in cryptography. But it’s not a Ponzi scheme.Web3 apps promise not just to pay users but to give them a say in how the platforms are run. Owocki believes this can be harnessed to revolutionize how human beings interact through something he calls “regenerative cryptoeconomics.” Crypto­economics, he writes in GreenPilled, “is the use of blockchain-based incentives to design new kinds of systems, applications, or networks.” Regenerative cryptoeconomics means doing this in a way that makes the world a better place for everyone. (In this sense, the first DAO was arguably Bitcoin itself.) “Our weapon of choice is novel mechanism designs, based upon sound game theory, deployed to decentralized blockchain networks as transparent open source code,” he writes in GreenPilled. In a foreword to Owocki’s book, he writes, “I am deeply ambivalent about Web3.” He has positioned himself as a sort of insider critic of the movement, one who supports its broad goals of decentralization and digital public goods but questions its faith in the potential of blockchains and cryptocurrencies in their current state.Weyl walked me through the weaknesses of using quadratic voting in a DAO.