"In the beginning — which is to say,
the 1990s — there was Web1: the first iteration of the internet as we knew it,
a vast virtual expanse sparsely populated with static websites that, for the
most part, were good only for reading. Then came Web2: a far more interactive
internet, networked by tech giants like Facebook and Google and Twitter and
YouTube, that made content creators out of nearly everyone with a smartphone.
Now, supposedly, we stand on the
precipice of Web3: a decentralized internet powered by blockchain, the
technology that underpins cryptocurrency and NFTs, or nonfungible tokens, the
techno-innovation sweeping the art world.
It’s a still-nascent, fuzzy idea,
but if you squint, you can see it intruding more and more upon mainstream
culture. Matt Damon is filming ads for Crypto.com.
Gwyneth Paltrow is giving out $500,000 worth
of Bitcoin to her social media followers. And Paris Hilton and Jimmy
Fallon can be seen talking awkwardly on “The
Tonight Show” about limited-edition digital cartoon apes they paid
hundreds of thousands of dollars for.
Where, exactly, is this all going?
Could Web3 really democratize the internet by eliminating its middlemen — the
Big Tech companies and the banks and the regulators — as its boosters say, or
is it a speculative bubble that’s about to burst? Here’s what people are
saying.
Wait,
what is blockchain again?
Blockchain is a cryptographic
technology that allows for distributed record keeping, like a digital
spreadsheet, that is virtually impossible to corrupt. Unlike conventional
records kept by centralized institutions, the blockchain ledger uses networks
of powerful computers racing to verify transactions that remain visible to, and
trusted by, everyone.
Blockchain was introduced initially
as the technology behind cryptocurrency, starting with Bitcoin in 2009. “With decentralized financial exchange based on the
blockchain design, like what Bitcoin uses, you don’t have to trust an authority
with your money,” The Times’s Nathaniel Popper explains. “Two people are
automatically matched up through software, and they make the exchange directly
with one another.”
NFTs are a newer use of blockchain
that enables the buying and selling of digital assets, like images, GIFs, songs
and videos. Because these files are typically
too large to store in a blockchain token, most NFT purchases buy not the actual
asset, but rather a receipt proving ownership. In effect, this creates a new
kind of scarcity among digital goods where there was none.
“Many NFTs can be downloaded,
duplicated, ‘screenshotted’ or simply found elsewhere on the internet,” Sophie
Haigney explained in The Times last year.
“Buying an NFT, then, is not so much about buying something as it is buying the
concept of owning a thing — which feels like the logical endpoint of a society
obsessed with property rights, and finding new ways to buy and sell almost
anything.”
Why
is Web3 taking off now?
Today, the value of all
cryptocurrencies is some $2.3 trillion. Some of the
biggest drivers of the crypto boom are venture capitalists, who invested more
than $27 billion globally in crypto-related projects last year, more than in the previous 10 years combined.
“Every type of financial service is
now being replicated in these decentralized environments,” Stephen McKeon, a
cryptocurrency expert at the University of Oregon, told The Times. “This is what’s
driving all the investment.”
As crypto values have soared, the
rush of interest in NFTs among celebrities with extra cash to spend makes a
certain kind of sense, the
journalist Max Read argues. “More than anything else,” he writes, “the value
of a given NFT is a function of its perceived exclusivity, coolness, and
prominence, and so a halfway decent celebrity should be able to generate
capital gains on their NFT holdings simply by going on a popular nightly talk
show and discussing their NFT portfolio with the host.”
But what explains the interest in
Web3 among the less wealthy?
One theory, from Tressie McMillan
Cottom, a Times Opinion writer and sociologist, is that blockchain offers the
promise of unimpeachable ownership rights, an idea that might especially appeal
to the historically dispossessed.
Economic anxiety inflected by FOMO —
fear of missing out — fuels the fever too. “Cryptocurrency is, at the very
least, now seen as a good place to park some cash,” The Times’s Erin Griffith writes. “Everyone has read the
stories of teenage crypto millionaires — or the pizza bought with Bitcoin that
would now be worth millions. To not get involved is, in crypto-speak, to
‘have fun staying poor.’”
The
promise of Web3
Although blockchain technology has
been around for over a decade now, it hasn’t lent itself to many real-world
uses for people who aren’t crypto investors or criminals. Recently, though, The
Times’s Kevin Roose found a crypto project that has what he terms “normie
utility”: Helium, a decentralized, long-range wireless network that uses
cryptocurrency to reward people for sharing bandwidth on their Wi-Fi-compatible
devices, like air-quality sensors and smart kitchen appliances.
Still, much of Web3’s promise remains
theoretical. When it comes to NFTs, some
proponents argue that it will transform not only the way art is bought and
sold, but also what art and artists we value and how artists are paid. “NFTs
create opportunities for new business models that didn’t exist before,” James
Bowden and Edward Thomas Jones write in The
Conversation. “Artists can attach stipulations to an NFT that ensures they get
some of the proceeds every time it gets resold, meaning they benefit if their
work increases in value.”
At the loftiest heights of Web3
discourse, the prospect of a decentralized internet is cast as a bulwark
against authoritarianism. “Conceptually, Web3 is innately more beneficial to
Western liberal democracies, which value democracy and personal privacy,”
Anthony Vinci and Nadia Schadlow argue in The
Washington Post. “China and Russia have already set up mechanisms to spy on and
control the existing Web2 infrastructure through firewalls, censorship and
coercion of technology platforms. Web3 would make such authoritarian controls
much more difficult.”
How
much of Web3 is hype — or a scam?
If there’s anything the social-media
iteration of the internet made clear, Recode’s Peter Kafka believes it’s that
even the most exciting technology can bring unintended consequences. “At first
blush, Twitter seemed like a fun way to tell people what you had for lunch, and
then for a moment like a tool that could help liberate oppressed
populations,” he writes, adding,
“This time around, we ought to be much more thoughtful about possible
downsides.”
One downside is that cryptocurrency
is a useless, even dangerous speculative investment, The Times’s Binyamin Appelbaum argues. Unstable, cumbersome and
expensive to use, cryptocurrency doesn’t work as a replacement for
government-backed currencies. What it does do, however, is incentivize market
frenzies and use huge amounts of electricity — more than the nation of Finland.
Some commentators, like Moxie Marlinspike, the creator of Signal,
have also pointed out that Web3, for all its heady promises of democratization,
isn’t actually very decentralized: It still depends on centralized organizations
to maintain servers, cryptocurrency wallets and websites where NFTs are stored.
For Anil Dash, who helped invent
NFTs in 2014, this reliance on Web2 infrastructure frustrates much of their
revolutionary potential to put power back in the hands of artists. When people
buy an NFT, “they’re buying a link that, in many cases, lives on the website of
a new start-up that’s likely to fail within a few years,” he writes. “Our dream
of empowering artists hasn’t yet come true, but it has yielded a lot of
commercially exploitable hype.”
And the commercially exploitable
hype that celebrities are creating around NFTs is “gross,” The Atlantic’s Amanda Mull believes.
“Watching two millionaires promote a mechanism of passive wealth accumulation
while they unconvincingly pretend to be interested in ‘art’ or ‘community’ is
viscerally revolting,” she writes. “If Hilton and Fallon and their celebrity
friends are going to go out there and pump-and-dump their way to additional
wealth, they could at least do the rest of us the courtesy of being a little
more discreet about it. Instead, they sound like they think this is stupid, and
like they think the rest of us might be stupid enough to buy in.”
In the years to come, both Web3’s
boosters and its skeptics may be proven a little bit right, Charlie Warzel argues in The
Atlantic. “The Web3 crowd’s ambitions must be taken seriously: It has the money
and the influence and sheer marketing power to make the dream a reality,” he
writes. But, he adds: “To accept the FOMO bullies’ narrative — and ignore the
doubters — is to cede control of the future to a small subset of loud and
powerful people. That’s just what Web3 is supposed to prevent.”