Part 1: Is Web3 Good for the World?

Just last week I was talking with a friend who also works in Web3 about what exactly it is we’re doing here in this crazy, new and unpredictable space…

I had the noble and naïve idea that we are only lending our creative talent and expertise to projects making a real, positive difference in the world and that there was no way we’d work with a Web3 startup that wasn’t actively bettering the human condition.

My friend’s response was to politely laugh and then ask me, “Well how do you know which one of these startups is going to ‘CHANGE THE WORLD’? We know they all have the potential for a big impact, but the fact remains that creating something of real value, affecting many people’s day-to-day lives is hard and the deck is stacked against those making this attempt.”

Woof, she was right. And my subsequent spiral from this revelation didn’t stop with questioning my role in this exciting and occasionally frustrating new technology space. Oh no, I took it to the extreme and decided it was a good time to re-evaluate if this entire industry is, like, even necessary and whether Web3 is a good thing for our world…

Part 1: Descent Into Madness

Web3 to me is an entire ecosystem encompassing cryptocurrency, smart contracts, blockchain based apps and projects, metaverses, digital identities, self-controlled data and the people and communities who are building or using this stuff. This piece and Part 2 (coming next week) are about my journey down the rabbit hole of answering “Is Web3 net positive for humanity?”. The first part is the downward spiral where we find rock bottom and part two attempts to climb back up and bring it full circle to a final opinioned conclusion. So far it's been a fun, if tiring, exercise but I feel more confident in my view on Web3 so that’s nice.

• Part 1 (UR REED’N IT)
• Part 2 (will make this a hyperlink once it’s published)

Too Many Scams

My first stopping point on the initial descent was a very obvious and troubling facet of the Web3 ecosystem - Scammers. Due to the finality of transferring digital currency or assets, if someone gets their hands on your Bored Ape or 32 of your Ethereum (valued at $82k, nearly 40% more than an average American makes in a year…) it’s basically unrecoverable. Thanks to the immutable properties blockchain tech gives to data, a new digital equivalent to pick-pocketing has become possible and boy are these people getting good.

Fake websites of popular services, fake support staff, innocent looking invites to free giveaways, social engineering of cell phone carrier employees, sneaky requests to approve access to your Web3 wallet are but a few of the ways a new (or veteran) person in the space can lose their shirt.

Then you have the rug pulls where a seemingly top tier Web3 project makes an oopsy! and gets exploited to zero (Terra “LUNA” comes to mind) or even worse, the founders of a project (usually anonymous but sometimes not) purposefully decide to take the funds given to them by the community and ride off into the sunset, either by possibly faking their own death or just completely ceasing all communication.

To find the biggest negative impact though I think it’s best to look at what scams affect people outside the Web3 environment (the whole “eating your own babies vs. other people’s babies” comparison) and by far the most damage is caused by ransomware.

Already estimated to have caused billions of dollars in damage to entities like the city of Atlanta, GA and the Colonial Pipeline, ransomware is only becoming more prevalent and relies on the fact that cryptocurrency can be used to pay the “ransom”.

Because crypto is used to pay off the hackers it allows them a reasonable chance at staying anonymous while earning a lucrative payday. With the “average” case seen by the ransomware specialists at Unit 42 approaching $1M, most experts agree that attackers are getting more sophisticated. With our digital world only growing bigger and offering more attack surfaces for this type of crime I have to wonder - if cryptocurrency didn’t exist, would ransomware also not exist?

Too much greed

Why is there so much volatility in cryptocurrency markets? How far away does the price have to move and liquidate me if I have 69x leverage on a Bitmex Bitcoin put? What is the ratio for withdrawing people-to-new deposit people that makes Bitconnect go insolvent? What if I hide my money in cryptocurrency after I cheat on my wife so she can’t get shit in the divorce? What happens when 3AC doesn’t follow basic risk management that any “tradfi” intern knows is rote? Should SBF have gotten more jail time?

These are the questions that keep me up at night when thinking about Web3 and the impact of greediness.

Usually I end up trying to decide if the people of Web3 seem greedy because the world at large has a lot of greed and it’s spilling over…or if the unregulated free-for-all crypto casino has people acting on their most basic lizard instinct and just snatching as much as they can as fast as they can.

Either way this characteristic is not helping the reputation of the space, but the allure and rush of suddenly making a large sum of money (and often quickly losing it) is something only Vegas rivals.

And finally - Too much Zealotry

Bottoming out of the free-falling spin lets watch in awe as a random cryptocurrency/Web3 community increases their body count, throwing yet another competing project, critic or even just a regular ole’ noob asking noobie questions under the bus (the comments on this link are golden).

Maybe if people weren’t re-mortgaging their houses to buy Hex, Pulsechain and the next scheme from Richard Heart (see Too Much Greed) or getting scammed out of their retirement portfolio (see Too Many Scams) I wonder if they would be so quick to attack everyone not blindly and faithfully supporting a thing that might make them rich.

While tribalism is nothing new for humans, the Web3 version just seems so…toxic. These communities are global and made of people from incredibly varied backgrounds. This means there is a wide range of personal financial situations which almost guarantees at any given moment someone is desperately hoping the price doesn’t fall (and willing to call you an asshole if you dare introduce a shred of doubt about their investment).

Having been raised in a conservative religious bubble I absolutely notice similarities like an expectation of “blind faith” and having a “don’t question that” attitude between tightly controlled religious organizations and Web3 communities for speculative cryptocurrency projects. No Thanks.

Rock Bottom

Damn, that’s a pretty good list. I hope I made @CasPiancey proud but probably not, he’s a tough cookie when it comes to Web3 (his content and Molly White’s @molly0xFFF were great resources for writing Part 1).

So where have we ended up on this journey down the mine shaft? While I don’t think we’ve covered all the negative impacts Web3 is having on our world, I’m hoping we got the big ones.

My measuring stick is basically, “If my grandma read this would she advise me to immediately leave my job working in Web3?” and by that standard I think we’ve done alright.

Stay tuned for Part 2 though as we attempt to climb out of our hole and reach some sort of conclusion balancing the good with the bad (most likely just ending up ugly).

Cheers!

~ MattM from the Denver Crypto Group