When the Web3 narrative received very talked-about in 2021, I used to be nonetheless in faculty and had solely not too long ago been launched to blockchain expertise, sensible contracts, and decentralized functions. Like many on the time, I imagined that Ethereum or one other extremely performant sensible contract blockchain would develop to turn into the bottom layer of the Web. The opposite end result in my thoughts was a “multi-chain” future the place the Web ran on a number of sensible contract L1s. And Bitcoin, being a boring chain devoid of Turing completeness, had no position in Web3.
Just a few information may have simply set the document straight if I have been solely conscious of them on the time. Fortunately, I used to be extra cautious with my cash than with my ideas, so I by no means misplaced something investing in Web3 ERC-20 tokens.
At the moment I’m actively betting towards the “read, write, own” Web touted by Web3 VCs whereas betting on a what I name a “read, write, work” Web which will probably be chosen and loved by customers. Each bets are expressed by proudly owning bitcoin. Moderately than a hopeless try and “own” knowledge, bitcoin is properly positioned to be the foreign money that powers the brand new net as a medium of alternate. The elemental idea behind this thesis is a subset of “fix the money, fix the world” – right here I’m solely saying “fix the money, fix the web.”
Web3 is a worthwhile matter to debate as a result of Bitcoiners want to start out reclaiming misplaced floor. I’ve written earlier than that Bitcoin should personal the title “Crypto” based mostly on precept and etymology; this essay is about how we should always severely reimagine Web3 with Bitcoin.
The place The Net Went Fallacious
The elemental situation with the Web immediately shouldn’t be privateness, or knowledge, or centralization, or censorship, or anything persons are so used to repeating. The elemental situation is that there isn’t a constant cash on the Web.
Once I use a social media platform, I pay for that have utilizing my knowledge. This knowledge is efficacious as a result of it may be monetized by promoting it to entities which need the information. When an influencer creates content material, they’re paid with consideration. This consideration is efficacious as a result of it may be monetized by redirecting it to entities which need the eye. See the parallels?
In both case the factor being paid, knowledge or consideration, shouldn’t be cash however as a substitute a factor that may be exchanged for cash. That strategy of exchanging this stuff for cash, which I known as “monetization” within the examples above, creates monumental market inefficiency. For instance, think about what’s being paid while you use social media to construct a following. On the one hand, you’re paying with knowledge however you’re getting paid with consideration. What’s the alternate fee for this stuff? To what extent does that fee change and beneath what situations will it change? You most likely don’t know; these aren’t even the difficult questions and we actually don’t know. Folks can’t make rational financial choices when there may be such ambiguity available in the market.
It is no earlier than this level that you could be start to note the core situation with immediately’s Web (or “Web2”) lies within the dismal state of immediately’s “Internet money.” Yes, fiat currency is pretty bad, but at least there’s a single unit of account for different things and there are somewhat known and stable prices. And even though there is a money printer, at least there is some judicious restraint shown some of the time. In contrast, using attention and data as Internet currency is like using pebbles and feathers to buy food and pay rent.
Where the web went wrong isn’t really an issue caused by big tech corporations or the surveillance state. Instead the issue is just that human beings haven’t discovered a money that works well for the web.
Bitcoin (Uniquely) Works Well For The Web
The reason attention and data is used as Internet money is that they act as a form of instantaneous microtransactions. Both are practically endless, so they are good enough for transmitting microscopic packets of value without disrupting user experience, even though neither is good money. (As an aside, the inevitable disruption of UX caused by a cumbersome blockchain-based Web3 Internet is exactly the reason why Web3 in the mainstream-narrative form will never take off.)
Although fiat has become digitized, it still lacks a lot of transnationality, speed, divisibility, and other things which Internet-native money needs. The advent of the stablecoin is perhaps the biggest improvement in this regard. For example, USDC on Ethereum can be split into tiny fractions of a penny (the indivisible unit of a USDC is worth far less than a satoshi), it is borderless, and it can be sent via Ethereum rollups to achieve very fast payment finality.
The stablecoin’s major failing is that it is not a bearer asset and therefore has counterparty risk. The stablecoin issuer is supposed to have real fiat for each stablecoin it issues. This may not always be the case. Even a CBDC implemented as a bearer asset is only a bearer asset to the extent that the user is using it for “approved” transactions. A permissioned CBDC community can simply freeze accounts with none justifiable motive. In an more and more politicized net, unhealthy currencies like consideration (they’ll simply lock your account) and knowledge (they’ll use your knowledge to confirm that what you’re doing is allowed) and CBDC’s are all vulnerable to censorship.
The opposite situation with stablecoins is that they’re often hosted on proof-of-stake networks. PoS can by no means be as trustless as proof-of-work as a result of it requires exterior checkpoints to assist with consensus. In distinction, Bitcoin is true “crypto” as a result of it depends on cryptography alone for safety.
There’s another excuse Bitcoin works uniquely properly for the net, which I discover to be somewhat underappreciated. Whereas each Bitcoin and Ethereum are scaling by way of layers, Bitcoin’s L2 strategy (predominantly the Lightning Community) favors state channels whereas Ethereum’s L2s are principally rollups. State channels are the superior manner of scaling for funds. They allow privateness by default and reject the necessity for international state consensus. Certainly that is like money: non-public by default, with out a identified international state. Rollups, then again, require a world state, which suggests having to deal with knowledge availability points and different complicated stuff. At the moment a lot of the outstanding Ethereum rollups are functionally like separate L1’s with their very own international state consensus guidelines. Property are additionally much less fungible as a result of the identical base layer asset bridged to totally different rollups aren’t handled as the identical asset.
Lastly, state channels allow high-speed microtransactions. They’ll all the time be sooner than rollups as a result of rollups should propagate knowledge to all nodes whereas state channels are simply between two people. Altogether, bitcoin is your best option for Web-native cash as a result of it’s the most safe bearer asset with probably the most acceptable fee infrastructure.
“Read Write Own” Or “Read Write Work”?
Web3 touts an Web powered by sensible contract blockchains which, via a token economic system, may implement possession of consumer knowledge and allow customers to earn income from this knowledge. This was famously labeled “read, write, own,” which juxtaposed Web2’s “read, write” framework and Web1’s “read” framework with itself.
The issue is nobody can “own” knowledge in any sensible sense. As soon as knowledge is revealed, you can’t pressure somebody to neglect it and you can’t pressure them to not use it. The one knowledge you possibly can “own” can be knowledge that nobody else has. However usually as quickly as you reveal you’ve gotten the information, you additionally reveal the information and relinquish your solely sensible possession declare. Solely uneven techniques let you reveal possession of data with out revealing data (suppose zero-knowledge proofs, or maybe extra familiarly, signatures by way of your seed phrase).
That is the primary motive “read, write, own” was NGMI from the beginning. Another excuse is what we’ve already talked about: specializing in knowledge is the mistaken concept completely. Knowledge and a spotlight are simply unhealthy monies which have to be changed by good cash. Attempting to “own” knowledge is silly. Folks make knowledge each second. What’s the purpose of proudly owning one thing like that?
Bitcoin is the cash that may exchange knowledge and a spotlight. Nobody could make extra bitcoin. Having a single, unfragmented, liquid medium of alternate will absolutely unlock a free marketplace for Web-native companies.
That is why I say the brand new Web – the approaching “Web3” that customers will really use – will probably be a “read, write, work” Web. If knowledge and a spotlight are now not legitimate currencies, then the one factor that continues to be is to make use of one’s creativity and speech – one’s works – to earn the true foreign money. There’s a cool philosophical parallel right here. Proof-of-stake, so favored by Web3 VCs, will predictably think about a rent-seeking “own” worth proposition to mission their preferences to the long run Web. Bitcoiners perceive that possession is significant solely when there may be true shortage and proof of labor.
My place is that bitcoin is probably the most promising Web3 token on the market. The rationale privateness and censorship are points in immediately’s net is as a result of unhealthy monies like knowledge and a spotlight are the present currencies of the net. As bitcoin turns into the popular Web cash, it’ll soak up the worth of those inferior currencies, very like what it is already doing with sure fiat currencies. Repair the cash, repair the net. That’s Web3 reimagined with Bitcoin.
This can be a visitor submit by Allard Peng. Opinions expressed are completely their very own and don’t essentially mirror these of BTC Inc or Bitcoin Journal.