wtf is web3?
Is it Crypto? Or like. Is it just a good VC hashtag? idk probably
Web3 isn’t real yet but it’s useful to say it as shorthand for “you can own things by default” rather than just “rent them” on the internet
except like… renting NFTs and Crypto Assets is a totally a thing with $20B in loans currently outstanding across a few of the main protocols (loans are rentals of capital lol) so the metaphor kind of falls apart in just one sentence but let’s try this again.
Skill Level 1 Knowing
Timestamp Start 0811 EST
So the military has developed a graduated scale of tasks of increasing difficulty that a Soldier must become proficient at in order to be good at their job. Things like evaluating a casualty for medical treatment, reacting to contact with the enemy, and maintaining your weapon are all Skill Level 1 Tasks that are the absolute basics.
Side note: “Resolving an Ethical Problem” is considered a Skill Level 2 Task so that’s fun to think about with 18-year-olds with guns deployed all over the world.
Anyway, they aren’t always mapped appropriately for when one needs to know them in their job/career, but it’s a useful framing to think about the layers of understanding Crypto/Web3 ← Note that I’ll use Web3 moving forward in this essay, but in reality Crypto/Web3 instead of just Web3 is more helpful for people imo because there’s not a super clear mental connection for most yet.
So Skill Level 1 Knowledge for figuring out Web3 is probably knowing the following:
Bitcoin is a digital asset that some hardcore Libertarians use instead of Gold except its faster and you mine it like actual Gold I guess?
Ethereum is like computers except worldwide and everyone owns them so no one owns them and there’s money attached to it somehow?
There’s like computer art monkeys or something called NFTs and someone owns them but you can still right click + save them and this makes some people really mad and its definitely a scam right?
Your idiot friend from high school just bought a Lambo somehow because he traded some Crypto?!?!
Just kidding you probably know these takes and there’s definitely some truth in them, especially (lol) the last one. Most people stop thinking here, which is fine because more Lambo’s for me, but there’s a slightly more sophisticated explanation of these that you can rip right off this page for your next Omicron dinner party and you don’t even have to feel bad about taking it. So.
Bitcoin is a digital asset that exists in a shared ledger of data (think a public database that anyone can access) and executes transactions (like buy and sell) that are cryptographically validated (checked by computers) in blocks (sections) through a Consensus mechanism (arbitrarily hard math problems designed to make computers stay honest).
If you want to know more, please god just read the whitepaper - it’s only 8 pages with v wide margins and pictures. Skip the math, skip the code, idc but we gotta rip the “being exposed to technical stuff is scary” band aid off early if you want to keep up with the nerds. It’s better this way, I promise.
Ethereum is a virtual machine (like AWS or Microsoft Azure) that has a lot of computers distributed all over the world (although tbh a lot less than I thought before starting this essay and a lot in us-east-1 apparently) working together to keep track of the “state” for the entire system and anyone can ask the computer to perform a computation at any time. The various computations are stored in “Smart Contracts” (which is just a confusing way to say “computer programs”.) This “state machine” requires the expenditure of digital “gas” to pay these distributed computers to do computational work (because solving useful math problems costs electricity aka money) and this “gas” is paid in the form of “Ether” ← a digital token that for our purposes works basically the same as Bitcoin (except you spend it to solve useful math problems instead of arbitrarily hard math problems)
An NFT is a “non-fungible token” which is like the opposite of a Bitcoin (or a dollar or oil or gold or anything else that is truly interchangeable within a set). It’s basically a serial number that has metadata attached to it. Most of this metadata is for funsies right now like with this expensive monkey (look under the properties section to see how rare that Party Hat 1 is! 1%!), but with a little imagination we can think about how valuable a serial number with arbitrary data attached that everybody trusts might be. An NFT then becomes a verification tool for everything from driver’s license renewals to concert tickets to customer loyalty rewards to yacht parties. pretty cool stuff.
I mean, yea there’s clearly the problem that a lot of the image metadata (datas? datum? metadatums? dunno) point to centrally hosted URLs right now which means the expensive monkey can disappear if the hosting provider goes out of business or is hacked etc, but that’s being solved already with moving art fully on-chain (you can query Cryptopunks art data here which is neat) or using Interplanetary File System hosting (man crypto people use silly names that make it hard to understand wtf is happening huh).
NFT’s are…uh less technical than other parts of Web3, but here’s some docs if you’re interested in seeing how they work for real for real
Your idiot friend did buy a Lambo lol. Sucks to suck. No he’s not the genius he thinks he is, but yes he was right about some stuff but probably still wrong about most stuff. For better or for worse, we’re still early enough in the ecosystem to make stupid money through random chance. I mean, I accidentally made $30K by donating $500 because I thought it would be funny if a DAO bought the Constitution and nothing is real anymore I guess.
So let’s take a breath.
Feels a bit much for Skill Level 1, no?
Unfortunately, these are generally the table stakes required to have a thoughtful conversation about the shiny interesting new things. But! Once you understand the one paragraph “how”, it is MUCH more fun to talk about the “why”.
Skill Level 2 Thinking
We now get to think a bit about why the silly stuff that is making some nerds money might actually not be that dumb, but also might not actually be a brand new Internet. There’s a war rn over the Vision of Web3 and what it even means or if its possible or good and it’s happening on cryptotwitter and regular twitter and kind of in VC newsletters but definitely on Hacker News and other places that smart, opinionated, technical people hang out. Right now we have personas like Cobie and a fake dog with 700K followers picking fights with people like Jack Dorsey because…I mean I guess for the only reason people fight on the internet
Which is fun to watch, but less interesting than actually figuring out for yourself what to think about why this stuff could be useful and valuable.
So let’s try to do so in a lightning round.
Wouldn’t it be cool if Gold had a cryptographically verifiable finite upper limit (Boom! no more money printer go BRRR to inflate away your currency values), didn’t weigh anything (carrying gold around sucks), was really really fast to exchange for things (I can’t push bullion through my ethernet port), and no one (especially corrupt governments or inherently self-serving corporate entities) could freeze my accounts and stop me from making purchases)? Yea. Bitcoin basically unlocks this feature set.
But at the price of letting terrorists & people that still sneeze into their hands can use it too. damn.
Wouldn’t it be dope if I could write a program once, upload it to a network, let everyone on the entire planet with an internet connection interact with it, never have to worry about keeping my servers up, then other people could write their own programs that interact with my program, and then the new program is part theirs plus part mine and it’s just money and apps and idea lego bricks with a verifiable provenance so everyone gets paid for their work all the way up and down? Ethereum sounds so cool doesn’t it?
Except anyone can interact with my program without my permission? Even if they figure out how to steal money from me using my code? and I can’t update my code (in the traditional sense) after I publish it even I find a really really really bad bug? and I have to pay $100 in gas fees any time I want to buy a soda from the digital vending machine program I wrote? Definitely not as cool.
So I cheated a little bit with NFT’s above by saying some of the “why” earlier because the tech side of it isn’t as complex (for now) and JPEGs are just a strange thing to pay $100K for without a sense of “why”, but here we are. The deeper “why” though is that the ERC-721 NFT standard has established a reasonable system to enforce some “Artificial Scarcity” in digital goods. Which sounds stupid. But it’s not. Well it could be, but I don’t think it is. We all know it’s super easy to copy + paste memes across the internet. We all love and enjoy spicy memes. Yet. In our decades of consuming and sharing memes, the curators and creators of these foundational cultural units have basically received no reward for their labor (or embarrassment) other than some fake internet points. Attaching a serial # and a timestamp to memes could change all of that which incentivizes more memes. And its already changing how artists get paid for their art. And it’s changing how musicians get paid for their music. And it’s changing how writers get paid for their writing. So we might get more artists and musicians and creators than ever before because it’s more cost effective than ever to create.
Best not to think about the Lambo guy too much. It just hurts lol
So some real value here maybe? I can see why I’d want to have some Gold 2.0 and I can see why an omni-mega-universal computer could be fun to build with and I can even see why some of those loud twitter cartoon people like their cartoons. There’s obviously some bad stuff here. Like really bad. Like how do you stop the Taliban (not actually the Taliban at the link don’t worry) from issuing an NFT via a Smart Contract on Ethereum and receiving the proceeds in Bitcoin which they exchange for $$$ to buy guns and oppress people? We’re still working that out. Maybe you can’t!! Hmm.
With all of that acknowledged and thought through at least once, let’s start wondering about what all this could mean even deeper.
Skill Level 3 Wondering
Wondering is started best alone, but finished best together.
Since we’ve already done some basic wondering, let’s do some wondering with intellectual friends.
Chris Dixon from Andreessen Horowitz has been writing (and wondering) about Crypto for almost a decade which is a long time for people to think you’re completely insane. And he actually did look insane for most of that decade because Crypto seemed silly. To many people, he still looks insane (because it still kind of seems silly). and yet. and yet. He basically gets to be the King of Web3 now because he’s been thinking about this thing a lot longer than most people. And his thoughts are pretty good imo. Big things he talks about are “Why Web3 Matters”, “Why Decentralization Matters”, and “Big Things Start Out as Toys”. Feel free to read, but I’ll summarize in a second.
Packy McCormick (from Not Boring and runs his own vc fund) has been writing about Crypto for less time, but also has some fascinating thoughts about it plus also the budding nature of the new internet (its like hella changing rn). He’s taken the internet by storm this year and his writing on the “Web3 Value Chain” and “The Great Online Game” are pieces that make you need to sit down and go whoa. Again, will summarize.
Chris Burniske (former head of Crypto at Ark and now Partner at Placeholder VC) also writes good. He’s razor sharp and wrote one of my favorite pieces on how to philosophically approach designing an organization in Crypto. Protocols as Minimally Extractive Coordinators is a classic from 2019 (or I guess it will be when there are “classics” about Web3 thinking). Ok.
Suspend the terrorist problem in your brain for the rest of this essay (if this makes you mad don’t worry because I actually think we’ll figure out a good way to police the on and off ramps of Crypto eventually so boom roasted).
We just figured out we can credibly own digital things with NFTs and pay for it with digital money (Bitcoin) and then use those digital things we own to interact with computer programs that exist…everywhere? (Smart Contracts). That’s cool.
So how could the wondering together go from here?
Chris Dixon might say how this is a great example of why Web3 and decentralization matters because this new internet wide system let’s us get away from the highly concentrated landscape of Web 2.0 (like Facebook and Twitter and Instagram and Reddit and Snapchat and Tik Tok and are there even any other web applications that we spend meaningful time on?) and creates the chance for us to rebuild all of that in a composable way where you own your accounts, identity, and creations (tweets). No more breaking arbitrary terms of service and bad CEO’s deleting your only mouthpiece to your 600K followers. Hmmm.
Packy could follow up to comment with the notion that the reason why this change would happen is that the actual lifeblood powering the internet, content creators (aka YOU and ME and EVERYONE who tweets, posts, and comments everywhere), are only accruing a fraction of the value they’re creating for these massive, centralized aggregator platforms.
Chris Burniske probably chimes in that he agrees, but also that over time the value being redistributed from the aggregators to the new protocols connecting creators and consumers needs to be as small as possible because competition is now just a github fork away (everything is basically open source baby). Most of the value needs to go to the Creators and Consumers because commodity services that aren’t monopolies compete on price and brand lololol.
They would then likely nod quietly and look at each other knowingly and then Packy might remark that the Internet really is just a fun, free game with asymmetric upside and the new toys we’ve found are pretty dang fun. Chris Dixon might have a flashback to his pre-king days and shout that THE NEXT BIG THING WILL START AS A TOY and then they’d give him a hug and he’d calm down and everyone might look over to us to see if we had anything to contribute.
So I’d share.
I wonder if the new things that start out looking like toys and games today just stay that way forever, but soon have hundreds of billions of dollars flowing through them?
And I wonder if the things that stopped looking like toys to professionalize and scale and IPO actually just stay professional for only a little while and might all end up back as toys again?
And I also wonder if the things that aren’t toys or that we can’t imagine as toys or some people emphatically don’t want to be toys (like filing paperwork or writing a business plan or doing laundry or your some other part of your IRL chores, job, and life) also end up as toys as well?
Web3 let’s us own and gamify and earn and have fun in a way that maybe wasn’t imaginable or possible before. I wonder if that’s something to think about?
It’s probably nothing
I hope this added value to your day.
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