Friday, October 15, 2021

A Writer I Admire

Wouldn't it be great to write like Maciej Cegłowski? I've riffed off many of his riveting talks, including What Happens Next Will Amaze You, Haunted By Data, The Website Obesity Crisis and Anatomy of a Moral Panic. Now, in a must-read tweetstorm, Cegłowski takes on "Web3", the emerging name for the mania surrounding blockchains and cryptocurrencies. He starts from this tweet:
The replies it garnered are hilarious. Below the fold, some extracts from Cegłowski to persuade you to read his whole thread (Unroll here).

Cegłowski starts:
Then he lands this haymaker:
There are three non-fraud foundational problems with "web3":
  1. No way to reference anything in the real world (oracle problem)
  2. Immutable code makes any smart contract its own bug bounty.
  3. Everything breaks (more) unless expensive distributed systems are run in perpetuity.
He credits Trammell Hudson (@qrs) for #2, which brilliantly captures the type of problem which I discussed here:
The most amazing thing about the Compound fiasco is this:
There are a few proposals to fix the bug, but Compound’s governance model is such that any changes to the protocol require a multiday voting window, and Gupta said it takes another week for the successful proposal to be executed.
They were so confident in their programming skills that they never even considered that an exploit was possible. They built a system where, if an exploit was ever discovered, the bad guys would have ~10 days to work with before it could be fixed.

Engineering is all about asking "what could possibly go wrong?" but these cowboys are so dazzled by the $$$$$ that they never ask it.
He understands that "decentralization" is the Holy Grail that drives the technologists, despite (or perhaps because of) it's being unattainable in practice. He writes:
There's a poorly articulated sense of "decentralization = freedom" that drives this culture, as well as the familiar Year Zero mentality of silicon valley that enjoys reinventing human relationships from first principles and moving them into code. And there's oceans of real money
The "oceans of real money" are the root of the evil. For example:
Note that A16Z just raised a $2.2B fund dedicated to pouring money into similar schemes. This is enough to fund 650 Chia-sized ventures! (David Gerard aptly calls Andreesen Horowitz "the SoftBank of crypto")
The "oceans of real money" are chasing the real big bucks, which are from consumers (Consumer spending is currently 69% of US GDP). There are many companies trying to be the channel between consumers and cryptocurrencies:
The real villains to focus on right now are companies like Coinbase and Stripe that are trying to make this connection happen, with one leg in the regulated financial system and one leg in the cesspit of blockchain. They should be regulated into a fine pink mist.
Here's where I disagree with Cegłowski. He writes:
If there is value in the decade plus of experimentation with blockchains (and I'm bending over backwards here to try to see it) then it will find a way to break through without this Niagara of real money investment. We'll see at least one application that is not self-referential
The "Niagra of real money" is preventing any actual value emerging, for three reasons:
  • Almost the entire discourse about blockchains and their applications is corrupt. The extraordinary Gini coefficients of cryptocurrencies give the whales the means, motive and opportunity to hype their HODL-ings so that number go up "to the moon", and to practice social media "DDoS" against skeptics with armies of cultists.
  • Anyone wanting to develop a blockchain-based application needs to buy into the myths of "decentralization" and "immutability" and "security". They're already in the cult.
  • More fundamentally, the only defense permissionless blockchains have against Sybil attacks is to make participating in consensus be expensive, so that the cost of mounting an attack is much greater than the rewards it could obtain. Thus miners need to be reimbursed for their expensive participation. They can't be reimbursed by some central agency, that wouldn't be "decentralized"; they have to be reimbursed via the blockchain's cryptocurrency.
Thus you can't have "decentralized" without the corrupting cryptocurrency. Any possible blockchain application with actual value will be corrupted by the essential nature of the infrastructure upon which it is built.


Geoff said...

The inherent corruption of Bitcoin is even spawning fanfiction:

David. said...

Stephen Diehl weighs in with Web3 is Bullshit:

"At its core web3 is a vapid marketing campaign that attempts to reframe the public’s negative associations of crypto assets into a false narrative about disruption of legacy tech company hegemony. It is a distraction in the pursuit of selling more coins and continuing the gravy train of evading securities regulation. We see this manifest in the circularity in which the crypto and web3 movement talks about itself. It’s not about solving real consumer problems. The only problem to be solved by web3 is how to post-hoc rationalize its own existence."

The whole post is worth reading.

David. said...

Liam Proven's Web3: The next generation of the web is here… apparently attempts to explain what it means:

"What is this clearly controversial technology? Web 1 was simple HTML, later on with a bit of JavaScript for some interactivity. Web 2.0, as The Reg explained in 2008, turned websites into apps running in the browser. Web3 refers to the addition of the power of blockchain to the web, which, among other things, would enable smart contracts via distributed identities. The idea is that you enforce trust using cryptographically signed tokens, allowing world+dog to decentralise the web via federation."

Riiiight. Proven is appropriately skeptical, ending with:

"If you will forgive us for paraphrasing the great Douglas Adams, Web3 is "a myth, a fairy story. It's what parents tell their kids about at night if they want them to grow up to become economists."

Alas, in What Is Web3 and Why Should You Care?, David Nield has drunk deep of the Kool-Aid:

"Key to this decentralization is blockchain technology, which creates publicly visible and verifiable ledgers of record that can be accessed by anyone, anywhere. The blockchain already underpins Bitcoin and other cryptocurrencies, as well as a number of fledging technologies, and it’s tightly interwoven into the future vision of everything that Web3 promises. The idea is that everything you do, from shopping to social media, is handled through the same secure processes, with both more privacy and more transparency baked in.
In its current form, Web3 rewards users with tokens, which will eventually be used in a variety of ways, including currency or as votes to influence the future of technology. In this brave new world, the value generated by the web will be shared out between many more users and more companies and more services, with much-improved interoperability."

You checked that all these are already wonderful features of the cryptocurrency world, right?

David. said...

tante's The Third Web is a good explanation and debunking:

"The promise of the Internet of giving people access to information and potentially the power of publication is supposed to be replaced with an unregulated casino that literally burns our planet to the ground. I can hardly come up with anything this despicable.

Nobody is an island but the Web3 crowd wants to further individualize us, turn everything about our digital and ideally analog selves into objects for speculation with semi-automated trading of assets replacing politics. The full financialization and depoliticization of life with no regard for the ecological consequences.

This is not a utopian vision. This is a declaration of war against a lot of the political and social progress of the last decades. And I’m not willing to wave a white flag."

David. said...

Oh no! Dissension in the Web3 ranks! Richard Lawler reports that Jack Dorsey’s hot Web3 takes are apparently too much for Marc Andreessen to handle:

"The co-founder and (for the second time) former CEO of Twitter Jack Dorsey recently opened up about his issues with so-called “Web3” projects that aren’t decentralized to his liking and the venture capitalists that he says own the whole thing, creating “ultimately a centralized entity with a different label.”

Shockingly, his statements haven’t been received well by fellow tech thought leaders, billionaires, and venture capitalists, who’ve taken turns either trying to minimize his criticism of their blockchain efforts or going directly at him."

Dorsey's opinion is:

"In reality, Dorsey said, it’s big venture capital firms like Andreessen Horowitz, which has dedicated more than $3 billion to investments in the space (and has made investments in several dozen crypto companies, including OpenSea and CryptoKitties / NBA Top Shot creator Dapper Labs), that will control these new web systems."

Jack is right that Web3 is going to be centralized around a few large firms funded by A16Z, but he has no idea how to prevent this happening other than tweeting in vain.

David. said...

Moxie Marlinspike's My first impressions of web3 is hands-down the best takedown of the web3 hysteria yet. You absolutely have to go read it right now.