Lighting up the Shadows of Web 3

Examining the values of Web 3.0 and their dark sides

“The brightest flame casts the darkest shadow.”― George R.R. Martin

“One does not become enlightened by imagining figures of light, but by making the darkness conscious.” ― C.G. Jung

For every ideal we hold and practice, we must distance ourselves from its contradictions. Creation by creating negative space. This is true in the formation of personalities, societies, and religions.

Because we are humans, these contradictory thoughts don’t just go away. Often they are suppressed because they are complicated to deal with.

In Jungian psychology, the only way to grow the consciousness is to acknowledge and deal with our shadows, so that we have control of it. The more we build walls to try keep them out or try to eliminate them altogether, the more they rule our lives, subconsciously, holding us back.

What does this have to do with Web 3?

It’s impossible to argue that this wave of innovation has brought many important tech primitives to the forefront - encryption, blockchains, tokens, protocols, smart contracts, zero-knowledge proofs, side chains, and the list goes on. These tech primitives also create new constraints, and together they form a new creative space — a new canvas upon which technologists can paint a new internet society.

Just like previous waves of internet innovation, Web 3 isn’t just about technology. Critics have noted all along how many of these things could have been built on existing tech and make little to no difference to the end user.

The technology is the canvas. Societies are about people.

It’s about the beliefs, ideals, memes, motivations, emotions, and behaviors that manifest on top of the technology. We’ve already watched these human stories take over the narrative in Bitcoin, Ethereum, ICOs, DeFi, NFTs, so on, and it is also why a massive movement led by these technical (and formerly boring) tech primitives has spread so quickly through our culture.

The web 3 movement is so compelling because not only is it a new canvas, it is the wave of empowered artists who have fully committed to producing their life’s work on it. And now they have more capital than they could have ever imagined.

The very core of every human society and movement are shared values.

From the Trump campaign to #BlackLivesMatter. They provide a collective sense of purpose and direction. Beyond other types of incentives (like money or validation) that align our bodies or our minds, values align our spirits. That is why they are the best indicators and drivers of collective human behavior.

The Web 3 movement inherited a bunch of values from its parents — open source and cryptography. The earliest builders and leaders in Web 3 were idealists themselves, attracting more idealists. The movement was hyper undercapitalized and therefore mostly values-driven from 2008-2017. It also meant that the community had a long time to draw in fellow value-aligned people and reiterate and reaffirm what became a very strong set of values.

Without these values, Web 3 wouldn’t exist:

1. Privacy

2. Ownership

3. Decentralization

4. Openness

5. Community

6. Fairness

These values have each served an important purpose in perpetuating the movement and event accelerated it at specific times (more later). However, as the movement grows, they have casted unavoidable shadows in our collective consciousness. These inherent contractions are impossible to eliminate, but they deserve deep examination in order for these values, thus the movement, to be sustained.

1. Privacy / Crime

Privacy was one of the key ideals in the Satoshi white paper; it even has its own section. This ideal put the movement into existence. It allowed for censorship resistance and propelled hackers and cyberpunks to work tirelessly to create a new financial system without needing permission from the state, which they would have never gotten. On the flip side, the shadow it casts enabled some pretty bad things. The negative stigma from the criminal activity in the early days still lingers over the whole movement for some, no matter how many times we rebrand.

However, there is a good example here of how when examined, the shadow, even a powerful one can be controlled, and must be controlled for the entire movement to grow. This wasn’t done by governments alone — the decision to hard fork Ethereum after the DAO hack, and white hat hackers coming to the rescue are examples of community-driven efforts to stamp out criminal behavior. As we cracked down on illegitimate crypto activity and built more credible rails into our existing systems, more builders and legitimate users felt safe enough to enter the space. If left unchecked, the whole movement might have been thrown out with the bathwater.

2. Ownership / Greed

Many have called Web 3 the ownership web. It reshapes the relationship between capital and labor such that anyone who is a part of a community can be a part owner. This is clearly a powerful motivator, especially as we emerge out of a paradigm of technological development where capital was scarce and had very special access to the rewards from innovation. This all while the laborers became a cost variable in the profit equation to be minimized as much as possible.

Ownership was the first promise of the ICO era, and the narrative was so powerful that it motivated some of the biggest crowd fundraises in history. On top of that, the wealth creation from the token appreciation afterwards will help to capitalize the industry for years to come. Crypto whales are the perfect audience to try out some of the riskiest web 3 prototypes before they’re ready for the masses.

A flood of talent entered each time prices went up, builders and speculators alike. However, individually they were not even able to clearly delineate why they are motivated. Sadly we have all witnessed teams with even the purest intentions of building something great fall prey to raising far more capital than they needed and getting so personally wealthy from the price appreciation, that they completely lost the incentive to build.

This was the second and another very obvious shadow cast by the Web 3 movement. The market has somewhat acknowledged and corrected for some of this in the newest iterations of team incentive design with more aligned vesting periods and airdrops.

However, this doesn’t fully solve for many projects being over-capitalized and lacking in urgency. I imagine we will see stricter measures in company capitalization and capital deployment leading to more successful outcomes going forward.

3. Decentralization / Centralization

Many of the builders and investors in the early part of the Web 3 movement had just healed from their personal wounds inflicted by Amazon, Google, Facebook, etc. Despite pouring themselves into their work, the data moats that these giants brought to battle were too great to overcome. It was only a few years ago that the rhetoric said GAFA had won the web, which was a death knell for the entrepreneurial spirit.

Web 3 was the shining beacon of light. Decentralization was as a result built into the fabric of Web 3. It promised builders that at least for as long as they can prevent it, this unfair advantage can never accrue to one person again, because it will written into the rules of the game. This gave them the permission to build again because it was a dimension GAFA could never compete on.

While it may be inevitable that recentralization happens again when Web 3 reaches maturity along some dimension we don’t yet understand (maybe governance? which if designed correctly could be potentially good for people), we aren’t there yet.

However, this doesn’t mean that centralizing forces aren’t already rearing their ugly heads, along the temporary dimension of usability since some basic infrastructures are still missing. Many have noted NFT platforms are highly centralized, and that all dapps pull from the same two centralized services to interact with the blockchains.

While I think the forces are in motion to decentralize these layers over time as they become natural prizes for builders, it is important to be aware of some of these centralizing dynamics and whenever possible, optimize for decentralization. Or else we will never get there.

4. Openness / Surveillance

Tied to the idea of decentralization, openness helps to level the playing field to make sure the internet’s most valued native asset — data — is never again hoarded. It is also a mindset that allows builders to focus on building individual lego blocks, sharing the results, and building on top of each other’s work. This value gave web 3 the advantage of composability - the option to rapidly experiment at a relatively low risk. It was also helped by a collaborative monetization model — tokens. Building with interoperability in mind also makes Web 3 a positive-sum game, where all protocols can benefit from end-user adoption and no resources are wasted in competition. It fosters a growth mindset.

It was a mere matter of months between the first DeFi protocol emerging to complex yield-seeking stable coins built on multiple strategies being used in games. I expect we will see the pace of innovation accelerate even further as more lego pieces are built in the rest of the Web 3 realm.

However, openness casts its ugly shadow — surveillance— at every corner as we make design decisions about who can see what when all of the rails connect. This will become more pertinent the more data we create on Web 3 dapps. China’s efforts around the BSN serves as an example of what can happen in the worst case scenario if we get these tradeoffs wrong.

5. Community / Toxicity

Just as social media continues its raid on our ability to actually be social, we also just now spent two years quarantining in our homes. Web 3 communities helped many to feel a basic sense of belonging; this was the biggest drivers of adoption for NFTs more recently. From discord to private concerts, these communities can now share experiences on top of values, and participants love to signal to outsiders using Twitter profile pics or handles. Unlike many online communities, Web 3 communities have traditionally prided itself in being low judgement, collaborative, and hyper inclusive. Projects recognize this, which is why the community management functions of Web 3 projects are some of the most advanced and well-funded.

The flip side of this, is again creation by creating negative space. High emotional commitment to a crypto community can result in emotionally-loaded rivalries between communities that perceive themselves to be in competition. So far even though it isn’t very clear that there is strong competition between any cryptocurrency, a fair amount of negative maximalism energy has already created pretty toxic dynamics for some of those new to the space. All newcomers observe is the fighting without understanding distinction between the warring factions. I expect this will get worse before it gets better.

6. Fairness / Exclusionary

Web 3 has always been a movement that prided itself on being inclusive, in that anyone can start participating in any network at any time without needing permission.

The big caveat here is that it is inclusive for anyone who can overcome the technical hurdles of signing transactions, custody, voting on-chain, etc. In the early days, that really didn’t matter since the playing field was pretty level across anyone that cared. It was by definition limited to a very specific developer community which all happened to be technical. Now that Web 3 has reached a more mainstream audience, in order to preserve this value, we will have to work harder to build fairer onramps.

For example, the gender ratio are some of the worst on the web.

Some advances have been made to encourage participation from more users by abstracting away parts of the experience, but not enough is being done in the building process.

Recruiting and empowering multi-disciplinary and diverse perspectives to help build this new internet society will be the next big hurdle and the only way that we get to mass adoption.

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In summary, each of these values (and perhaps there are more) were instrumental in the creation of the Web 3 movement. However, they all have dark sides that might take us back to exactly same place as before, if not worse, especially as technology takes a greater role in our lives.

This requires us to be fully self-aware, collectively. It also requires us to make a lot of decisions, daily, on where we are walking on this line.

It’s time for us to reexamine how we score in acting according our values. It’s the only way preserve the driver of momentum in the greatest technological movement we have ever had the honor of witnessing.

Web 3 is made up of its values. Without these values, Web 3 would be a misnomer.