NAB
Web3 boosters say they’re building the digital utopia we’ve
long been promised — but looking past the rhetoric makes that impossible to
believe.
article here
For Business Insider, tech writer Paris Marx argues
that Web3 is a plan to further commercialize the internet and build a new set
of monopolies.
While the price of bitcoin soared to its peak of nearly
$70,000 in November 2021, it subsequently fell more than $67,000 a coin to just
over $35,000 on January 22, prompting critics to become even more outspoken
about their concerns with NFTs, DAOs, and the Web3 space as a whole.
One of the most trenchant is Marx (Paris, not Karl, though
there are similarities in attacking Big Capital), who aims to prick the bubble.
“Crypto evangelists promise this new internet will be more
democratic and free of corporate control, where every user will have
unprecedented opportunity to make a living online and own their virtual goods,”
he writes.
Instead Web3 is just another incarnation of control,
monopolies, greed and another revolutionary technological advancement that
failed to live up to its promise.
Web3, its backers argue, will finally fulfill the
cyberlibertarian promises of earlier iterations of the internet. That is,
you’ll get all the benefits of big platforms — ease of use, access to
community, and creative potential — and none of the drawbacks: no one selling
your personal data, no big companies taking high fees for themselves or
government regulations stifling what you do.
The intent is that we can all own pieces of internet
services through ownership of tokens (NFTs), and that those tokens give users
property rights. Instead of users owning nothing, Web3 is supposed to allow us
to buy and sell every little part of the internet.
But as Marx points out, commercial pressures have a habit of
getting in the way of emancipatory claims.
He deconstructs the Web3 model. Take mining transactions on
the blockchain, for example:
This process is highly concentrated. In order to complete a
transaction, or add a new block to the chain, a computer must solve complex
math problems. In the case of bitcoin, only about 50 miners (0.1% of the total
number) control half of the mining capacity, according to a 2021 study by the
National Bureau of Economic Research. For Ethereum, just two mining pools
controlled more than half the computational power as recently as 2020,
according to a report that year.
That’s important, Marx contends, because once a coordinated
group of miners controls more than 50% of the power, they can interfere with
the process of adding new blocks, stop other miners from completing them, and
effectively do whatever they want with transactions on that chain.
On top of that the space is quickly consolidating around
dominant companies in various niches, such as the crypto exchange Binance, the
NFT marketplace OpenSea, or services like Infura or Alchemy — in the same way
that e-commerce, social media, and content platforms also consolidated into a
few major players as their sectors matured.
“There’s good reason to believe that consolidation will
continue,” he argues. “Since most people won’t be able to (or don’t want to)
figure out the technical details of a system, there is an incentive for
companies to offer new users simpler access to the same tools in exchange for
doing it on their service — which is exactly the goal of the venture
capitalists getting involved in the space.”
The mounting incentives for centralization mean that Web3
will likely end up looking much like our current internet, just with a
different set of corporate megaplayers.
That brings Marx to one of the biggest problems with the
Web3 ecosystem: It’s deeply reliant on cryptocurrencies, which are less
currencies and more speculative financial assets.
Other critics have observed that the crypto house of cards
resembles Ponzi or pyramid schemes.
“The entire space is plagued with practices like wash
trading to artificially boost the values of NFTs and pump-and-dump schemes that
inflate coin or NFT values before the creator cashes out with everyone else’s
money.”
As Microsoft co-founder Bill Gates observed, crypto does not
produce value; it just redistributes the money that enters into the system like
a casino.
“In that way, it’s a negative-sum investment,” Marx says.
“There are a bunch of players, like the exchanges, front-running customers’
trades and taking cuts for themselves along the way. So unless you buy early or
have a lot of money to begin with, you will lose every time.”
Here’s the crunch: “Web3 advocates want the rest of us to
believe that this is the real emancipatory version of the internet. But it
can’t be because there’s a fundamental conflict between the lofty goals of
freedom and decentralization, and the interests of venture capitalists swarming
to Web3 to build companies that can monopolize their segment of the industry.”
Marx, not alone in calling out these trends, wants anyone
thinking of jumping into crypto to look critically at what is being built —
from the “rampant financialization” and the “creation of artificial scarcity”
by extending property rights, to digital goods and the “enormous energy
requirements causing blackouts in many countries” — and ask whether the future
Web3 companies are building really aligns with their rhetoric. And when we see
that it doesn’t, we can start imagining what should be built instead.
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