Some Don’t Seem to Get Web3 — or There’s a Reason They Don’t Want to (Web3 Rebuttal to Letter in Support of Responsible FinTech Technology)
A few weeks ago, a group of 1,500 self-proclaimed (and primarily inconspicuous) “computer scientists, software engineers, and technologists” wrote a letter to leaders of Congress. The Letter in Support of Responsible Fintech Policy calls DeFi principles into question, suggesting that strict regulation will be necessary to protect the public.
Surprisingly brief for a group that is leaning on their professional qualifications to make quite inflammatory claims, the letter makes sure to touch on all of the fear-inducing tropes about crypto that are loudly promoted by those who have something to lose if Web3 continues to grow.
In short, they claim that it has no protections for individuals, that it is all fraudsters and schemes, and that…
“[Crypto will]… remain forever unsuitable as a foundation for large-scale economic activity.”
That’s quite an unscientific conclusion from a group that supposedly includes scientists.
This letter represents the sentiments of a small but vocal anti-Web3 group in the tech industry. Needless to say that they are wrong about most of the unsubstantiated claims made in the letter, but why would technologists be publicly speaking out against such a promising new technology? What’s the motive? It’s because, at the advent of anything new, there will always be those who promote fear and anxiety about how it could all go horribly, terribly, awry.
The tools, which are not inherently bad or good, become conflated with intentions and behavior. It doesn’t matter how well-educated or skilled people are, or even if they have a better-than-average understanding of the subject at hand. It has much more to do with who can see the forest for the trees, and who can’t.
Also, you always need to ask, what might these opponents stand to lose if Web3 is successful?
Even Technologists Often Don’t Understand Technology
Let’s tackle the first question about why technologists would be anti-technology. Clifford Stoll, a well-known author and technologist, wrote in 1995:
“Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.
Baloney. Do our computer pundits lack all common sense? The truth in (sic) no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”
— CLIFFORD STOLL
He was wrong about, well, just about all of that. To be fair to Mr. Stoll though, in that same article, he was spot on about the problem of unfiltered speech on the internet. He accurately described the precursors that led to our current “cacophony” of disinformation being easily spread on social media, compounded by a large portion of the public unable to separate fact from fiction.
While Stoll was able to analyze at least some of the potential impacts of technology accurately, he lacked vision for many of the concepts he describes. He can be forgiven for thinking the internet of 1995 wasn’t much fun for shopping, but he failed to realize that technology does not stand still. There were others around the same time who really thought there would be rather nefarious results of widespread adoption of the internet. A group of writers published a compendium of essays about these perils called Resisting the Virtual Life. Among some insightful essays, there were more insidious claims that the internet would be “the new machinery of domination” seeking to encroach on public spaces. Now history is repeating itself with technologists joining the chorus of naysayers, promising doom and gloom for those who engage in Web3.
Other Critics of Web3: They Aren’t Exactly Unbiased
The aforementioned letter to Congress includes signatories the average person wouldn’t recognize, but some high-profile tech types are making similarly incendiary claims about the technology. Last December, former Twitter CEO Jack Dorsey tweeted this:
In other words, Dorsey is saying that the enemy those working in Web3 think they are conquering is, in fact, Web3. He expressed his belief in decentralized systems in follow-up tweets but asserted that the current Web3, particularly Ethereum, is antithetical. Hypocritically, he has recently announced a plan to claim his own privately held piece of Web3 and has made no secret of his massive investments in Bitcoin, which is hard to square with his comments about Web3. Some may argue that Bitcoin isn’t Web3, which is a debate beyond the scope of this article, but I find Dorsey’s “Web5” concept to be a poorly rebranded part of Web3.
Besides his clear interest in seeing Ethereum — Bitcoin’s primary Web3 competitor — fail, let’s not forget that he has significant interests in Web2 companies and TradFi payment systems too.
There are many other prominent voices in technology and other fields who have been busy telling us all how and why Web3 will fail. Emmanuel Awosika’s piece “Who is Hating on Web3?” expertly categorizes many of them into the “hard-nosed journalists”, “contrarians”, “doomsday prophets”, and “luddites” who always emerge when a new technology appears to be gaining traction. These labels are a combination of their approach, and perhaps their expertise, but their motivations are also important. Are they honestly expressing concerns with the intention of warning us? Or do they have ulterior motives?
Dave Troy, one of the Congress letter’s signatories, is the co-founder and CEO of 410 Labs, which, according to Crunchbase, “produces a suite of socially-productive tools and applications that improve communication and access to information.” In summary, it produces Web2 apps. Alan Graham, another signatory, represents One Click License or OCL, which sells a proprietary technology that sounds a lot like what a smart contract does for free. There are also random signatories from Amazon, Google, and Microsoft — companies that have much to lose if the services or technology they provide is replaced by Web3 solutions.
Separating Technology from Behavior
Perhaps the primary issue with the letter sent to Congress is that it conflates blockchain technology with its potential malicious use cases. The writers state in the letter that “the underlying crypto-assets have been the vehicle for unsound and highly volatile speculative investment schemes that are being actively promoted to retail investors who may be unable to understand their nature and risk.” Is it not already the case that bad actors actively try to defraud people out of their savings through investments in worthless assets? Steal their credit card number? Wire money to seedy offshore accounts?
We haven’t responded by banning asset classes, credit cards, or wire transfers. Instead, we focus on preventing the malicious use of these tools.
Over-regulating or placing outright bans on blockchain technology and crypto to protect people is as ludicrous as outlawing computers to stop hackers from stealing personal information.
We absolutely should make sure Web3 is built to be secure and reliable. We should pass regulation that prevents its misuse and the exploitation of others. But we don’t throw the baby out with the bathwater.
Well, this piece of technology deserved it. (Source: ImgFlip)
They go on to point out several broad categories of criminal activity that happen to involve cryptocurrency like money laundering and ransomware, but don’t explain how Web3 technology makes any of these problems worse than they already are. Clearly, money laundering has been a problem since long before 2009 when Bitcoin was launched. Will unscrupulous actors stop locking down networks for a ransom if they couldn’t be paid in cryptocurrency? I don’t think so. Criminal investigators have been able to track fraud and illegal activity on blockchains for several years now, so that’s not really a problem anyway.
Finally, why would they be blaming our woefully inadequate cybersecurity infrastructure on Web3? Let’s digress for a moment to discuss real problems we have in cybersecurity like zero-day exploits. Zero-day exploits are holes or bugs in software not yet known to the public or the software developers that hackers can use to break into networks or databases. A famous one you may have heard of was Stuxnet. These security flaws are regularly discovered in software sold by Web2 companies. It’s also been reported that the U.S. government purchases “zero-day” code exploits on underground markets for use as cyberweapons instead of making them known to developers and the public. But, according to the authors of the letter, Web3 is the real problem that needs to be stopped in order to mitigate ransomware attacks. Not the zero-days in Web2 software?
They Got the Technology Part Wrong Too
The authors of the letter say “Blockchain technology cannot, and will not, have transaction reversal or data privacy mechanisms because they are antithetical to its base design.” This demonstrates a complete misunderstanding of the technology and how it’s been used. Yes, blockchain is an immutable ledger by design, but that doesn’t mean that known fraudulent activity can’t be ameliorated. On multiple occasions, network members have stepped in to replace stolen funds (such as with Jump Crypto and Solana) and then there is the famous hard fork of Ethereum in 2016 that was agreed upon by the community to repay users the ETH they lost in a major hack at the time.
Let’s also note here that transaction reversal in TradFi is not universal. If you were to be tricked into wiring money to a scammer in the Bahamas, there’s no “reversing” that transaction. Bernie Madoff’s investors could tell you that there was no transaction reversal available in their situation either. The point is, just because the blockchain itself is immutable, that doesn’t mean we can’t provide security and fraud mitigation in Web3 that is as good or better than in TradFi — through policy, regulation, and improved technologies.
The second part of their claim is that data privacy is impossible on a blockchain, which is just plain false. First of all, there is no personal data automatically tied to a wallet address. This is the nature of the trustless system; you don’t need any personal information to conduct a transaction with someone. Your wallet address could only be connected to your identity if you choose to make that connection public. There’s no personal data inherent in a smart contract either. In fact, blockchain technology can be used to enhance data privacy through the creation of a Decentralized Identity (DID) that allows a user to control who knows what about their personal information.
New Rule: Technology Only Has a Thirteen-Year Clock
Finally, there’s this: “Despite more than thirteen years of development, it has severe limitations and design flaws that preclude almost all applications that deal with public customer data and regulated financial transactions.” Here, they are essentially saying that blockchain technologies have had more than enough time to become perfect and have proven incapable of safe use by the public. It’s surprising that these technologists are forgetting that the internet was under development for at least 25 years before its broad public applications were even just beginning to be explored.
As for regulation of blockchain-based transactions, most centralized exchanges like Coinbase, Gemini, and Binance are adhering to Know-Your-Customer (KYC) standards. Regulation of transactions on a decentralized exchange is more difficult of course, but this is also happening. Stating that regulation of financial transactions in Web3 is not possible is to ignore much of what is already happening.
Technologists Who Do Understand Technology
Thankfully, there are a plethora of technologists who believe in Web3 and see it for the possibilities it brings, not as a scapegoat for societal challenges.
Marc Andreessen, the inventor of Netscape and prominent technologist has said, “We could actually imagine the entire global economy running on the blockchain like 30 or 50 years from now.” In the Bankless podcast where this quote originated, he muses about how all of the problems with Web3 are actually opportunities for innovation that the world’s best and brightest are jumping in to solve. Andreessen sees the opposite of what those in the letter wrote — a multitude of known uses and many that haven’t even been uncovered yet. He also doesn’t sound skeptical about our ability to overcome challenges with security and fraud, given that he sees the possibility of running the global economy on Web3.
Gavin Wood, computer scientist, Ethereum co-founder, and the man who coined the term “Web 3.0” in 2014, had this to say at the World Economic Forum in 2022:
“It’s no longer about Bitcoin, it’s no longer about crypto, it’s no longer [just] about smart contracts, it’s no longer about DeFi. It’s like we are starting to understand that this is a broad platform for building new kinds of services [that] Web2 just couldn’t.”
That is how you see the forest for the trees — understanding the massive potential Web3 brings to the world with new approaches that aren’t possible in a centralized global economy. The people who can only see the trees, like those who wrote the letter, lack vision and only see the problems. When the leaders of Web3 steer our economy through that forest toward new frontiers, there will be those who join them to see the new horizon, and those left behind trying to chop down old trees.
Zero Mass is a writer exploring the unique space of Web3, DAOs and their potential for the future of work.
BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.
Disclaimer: this isn’t investment advice. This article has been written for informational and educational purposes only and it reflects my personal experience and current views, which are subject to change.
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