Web3’s Relevance Challenge

Assume that not all Need-Solution Pairs [1] have been discovered and that the diffusion of new solutions is Bassian [2].

What is going on with Web3?

By Web3, I mean the set of technologies that includes decentralized applications (dApps), distributed ledger, protocols, Decentralized Autonomous Organizations (DAOs) and related cryptographic technologies. It’s a superset that doesn’t just include decentralized finance (DeFi) and regenerative finance (ReFi), decentralized science (DeSci), memecoins, shitcoins, Non-Fungible Tokens (NFTs) and cryptocurrencies, smart contracts and oracles, but all the things rooted on Peer to Peer, decentralized technology and the general concept of trustlessness.

Web3 suffers from the same accessibility problems that the World Wide Web suffered from in early 1990s. It was brutal to dial up and log on. It was hard to read information. It was even harder to create it. Both technologies, being new, attracted the same kinds of people that new technologies always attract. First come the believers and enthusiasts. Then come the grifters. Then comes the capital. Then comes the State. So it was with: Stone cutting, Writing, Printing, Telegraph, Phonograph, Radio, the World Wide Web and smartphones. So it is with Web3.

Human memory is short and over-confidence is long. The next technological disruption won’t be any different because lifespans are short and learning goes at the rate that it goes. It won’t be different next time. History doesn’t repeat, but it sure as hell rhymes.

Example: Writing

If you are sighted, you may remember how hard it was to read with your eyes. If you are not sighted, you may remember how hard it was to read with your fingers. It doesn’t come naturally. You had to work at it.

Symbolic communication is novel and revolutionary. But how relevant was reading to your typical hunter or farmer? To 99.99% of the population, the invention of symbols that represented reality, that could be recorded on some medium and eventually rendered portable and carried across long distances by courier, was not immediately, directly, relevant to their lives. Does writing grow wheat? Or kill lions? Will writing bear my children?

Writing likely attracted enthusiasts. Then grifters. Then it was used to scale centralized control, and for those who were scaling up their power, it was very relevant. For those who would be enslaved by the systems of control it enabled, it would become extremely relevant. Communities need coherence to cohere. Combine the skill of reading and writing with old stories and you get social cohesion at scale. There’s power in writing.

And power attracts competition and conflict. The fields of Eurasia have been repeatedly soaked in blood over which words are knowledge, and which ones are not. And in some places still are.

It wasn’t immediately evident to the inventors of writing what the relevance of writing was going to be.

Example: Web3

You may recall how hard it was to understand what a decentralized network is. Or what a protocol means. And what token economics refers to. And even if you didn’t try to understand, you may have heard of apes appearing to be bored.

Decentralized technology is novel and revolutionary. But how relevant it is to your typical on-to-go citizen who are just trying to survive and thrive on a hostile planet?

And therein lies a challenge.

We’ve seen a lot of extractive use cases. We’ve been through the pyramid schemes, the gambling, the creation of the idea of artificial scarcity, and the money laundering. People were selling tulips, without the tulips! But don’t worry though – “it’s algorithmic!” And people bought it. And people got hurt. It isn’t quite Banque Royale or the South Sea Bubble, but it was bad.

We haven’t seen a whole lot of the additive use cases. I’m not picking a fight with those words. It’s a statement.

A large portion of the OG Bitcoin community buys Bitcoin because it is the distillation of libertarianism, and since information possesses a massive amount of symbolic value (see: writing), if somebody thinks there’s value in something, and somebody else agrees, then they agree that value exists. It’s relevant to them, and that’s great. No shade.

Use cases that centre on the need for portability and interoperability have the potential for greater mass relevance. The ability, for instance, to take your data from one application to another, easily, fulfills the need for flexibility. It’s one of those needs that you don’t realize you have until you realize that you’ve been captured and locked in, facing spiralling rents and complexity, and significantly reduced flexibility. Protocols can certain enforce portability and interoperability if they are deliberately designed that way.

Use cases that centre on the need for privacy are in a similar vein. A lot of people believe they have nothing to hide until you call them on it and demand the password to their phone. Then suddenly it’s none of your business what’s in there. The need is only realized when stimulated by crisis.

Previously, I’ve written about use cases that centre on the need for fairness and opportunity. I won’t repeat them here. But again, there’s nothing inherently biological about those needs either, except the protest in your bones that somewhere, somehow in history, something has gone terribly wrong. Interoperability, portability, privacy, fairness and opportunity are, like writing, fairly abstract concepts.

The use cases that centre on the need for trust and truslessness are those that intrigue me the most. In the West, a tremendous amount of intelligence, capital, and blood went into establishing and reinforcing institutions that generate and persist trust. Consider contract law and the system that enforces it.

Without contract law, you’d have to rely on family ties to conduct any sort of trade, little though execute complex deals and reliable supply chains that enable specialization, resiliency and enable productivity growth. Family ties evolve at the speed of reproduction, which is slower than how most things on Earth do it. Our competitive advantage, as a species, is in our ability to learn faster than evolution. So, it follows, that if we want to advance together, quickly, we need enough security, enough trust, for contracts to be written and executed reliably.

There’s a lot of exploitation of weakness in Web3. It’s easy to make mistakes and lose all your assets. It’s easy to place your trust in a centralized exchange based out of a shell company in a jurisdiction with tenuous contract law. There’s a lot of hacking. It’s just, in general, easy to lose your assets.

Some might argue that that is incentive to pay attention. Do Your Own Research. Others argue that every failure incentivizes learning. And I’m pro-learning. Just not scalding the baby with the bathwater. Proportionality in consequences matter.

The intent of some, with this technology, is to substitute the institutions that underwrite trust by rendering transactions trustless. If all of us, through consensus, agree that something is the way that it is, then there is no need for a centralized authority to dictate to everyone that something is the way that it is. (It’s just a curious contradiction that the grifters argued for decentralization and proceeded to centralize.)

Scaling that through code was always going to be as painful as building contract law in the first place.

It would be great if the protocols were rigorous enough to withstand bad actors, so that there would be no need for centralization to prevent bad actors from acting badly. Wouldn’t that be great? Wouldn’t that be better?

It sounds hopeful because it is.

In some ways, it is reminiscent of how the INGSOC Party wanted to make thoughtcrime impossible by eliminating the words that enabled thoughtcrime. Make it impossible to be a bad actor, and bad acting ends. Of course, one perk of Inner Party membership is hunting Outer Party thought criminals for incrementally smaller forms of thought crime, like a line converging on an asymptote. Nature always invents a better a thought criminal.

And nature always invents a better asshole. It always creates a better bad actor. That is the engine of drama.

The main way of mitigating the damage, centralizing power, has always attracts bad actors. And, in many ways, the inability of institutions to clear out those bad actors is contributing a sense of decay that is driving the search for alternatives. So why could decentralization be any different? The root of the problem is the same that it’s always been all along: bad actors behaving badly.

It’ll likely always be a dramatic struggle in which everybody is the hero in the story they tell themselves.

On the one hand, people need enough security to be free, and, they also need enough freedom to be free. And that is, eventually, extremely relevant to everyone’s needs.

How will it diffuse?

Web3 isn’t stalled like VR or Metaverse, but it isn’t exactly taking off like Generative Pre-trained Transformers.

There remain serious barriers to adoption. Those barriers ought to be attracting entrepreneurs who want to discover ways of lower them. I am hopeful that the Tulip phase of Web3 will be soon over and we’re ready to get into some seriously additive use cases.

The rate of diffusion will be determined by how rapidly those barriers come down.

[1] Eric von Hippel, Georg von Krogh (2016) CROSSROADS—Identifying Viable “Need–Solution Pairs”: Problem Solving Without Problem Formulation. Organization Science 27(1):207-221

[2] Bass, F. M. (1963, December). A dynamic model of market share and sales behavior. In Winter Conference American Marketing Association (pp. 269-275).