Think Bitcoin™ Issue #39
Escaping the Thunderdome of Hyperfinancialization: Bitcoin vs. Web 3
Hey friends, welcome back to Think Bitcoin™ for issue #39. Special welcome to the new subscribers. I’m glad you’re here. As always, if you have any questions or comments, feel free to reach out. You can also find me on Twitter (@TheWhyOfFI) and connect with me on LinkedIn.
In this issue:
Long Reads: Escaping the Thunderdome of Hyperfinancialization: Bitcoin vs. Web 3
Content Round-Up: 2 articles, 1 podcast
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Long Reads
Escaping the Thunderdome of Hyperfinancialization: Bitcoin vs. Web 3
If you’ve spent any time in the Bitcoin space, you are surely aware of that seemingly liturgical rite that is the savage condemnation of anything purporting to be or related to “Web 3.” Such merciless denunciation is a way of genuflecting before our beloved Bitcoin. While I largely agree that there is much in the amorphously defined Web 3 space that warrants extreme skepticism and/or vigorous disapproval, I think too often the criticism from Bitcoiners resorts somewhat shallowly (and certainly reflexively) to simply calling everything a scam or a Ponzi scheme, when there are, in my opinion, much deeper criticisms of Web 3 to be lodged.
And that’s what I want to do here. I want to dive in to why I think Web 3, as currently conceptualized by many of its most vocal and deep-pocketed advocates is, despite a veneer of egalitarianism, directionally aimed at a future that is, in real human terms, pernicious and extractive.
I recently listened to a podcast in which the guest, representing an entity heavily invested in the development and growth of Web 3, spoke in hopeful, optimistic tones about why we’re going to see the “securitization of everything” and why that will be great. He then guided listeners through a hypothetical example: a world in which movie tickets exist on-chain and allow for air-drops of various tokens, NFTs, etc., which could then of course be traded in a liquid market for such things. The future he envisions is one in which pretty much everything exists and is tradable on-chain, and this future was gushed about as an exciting and important leap forward for markets and their participants.
I’ve spent a lot of time thinking about the implications of this securitize-everything vision of Web 3. While it’s common for Bitcoiners to summarily and categorically dismiss everything that’s not Bitcoin as an outright scam, I think, as I said in the opening, that there are much more useful questions to be asked about Web 3 that lead us to more salient and persuasive criticisms.
That being said, there is a panoply of overt, brazen scams in the wider world of crypto. The wider crypto space is practically teeming with scams, charlatans, dilettantes, and dissemblers. And there are certainly a glut of projects with no real practical use case.
But I would take it one step farther and deeper and argue that a future in which Web 3 achieves what its proponents ebulliently profess it will achieve, a world in which everything is on-chain, securitized, and tradable, is not, in fact, a desirable future, for reasons that get in to what makes us human and how we pursue meaning in this world. It will cost more than we know, and this cost will be extracted from, among other areas, our collective capacity to ascribe non-financial meaning to experience, our ability to coordinate and cooperate for non-financial reasons to achieve non-financial ends, our creative ability to transfigure our suffering, and our ontological drive to reach beyond ourselves for something enduring and beyond the pale of markets.
Which is why I want to focus on the teleological differences between Bitcoin and Web 3. And I want to start with the thesis that Bitcoin is about definancialization, while Web 3 is about hyperfinancialization.
The most common case for Web 3 that I hear is that it’s a great wave of democratization technology that, by virtue of its existence and growth, disempowers monopolistic big tech companies while simultaneously giving that power back to users and creators. One is invited to imagine a world in which we, not Instagram, own all our content; a world in which artists can liberate themselves from the oppressive grip of Spotify by incorporating NFTs into their creation of music, or using NFTs to share ownership in their music. Ditto for visual artists and their ability to reap royalties from secondary transactions. The promise of DAOs, the argument goes, is flattened, decentralized organization that allows for truly powerful, democratic coordination, the profits of which can be distributed without any intermediaries taking outsized cuts.
It all sounds pretty radical and subversive and can certainly be pretty competently pitched as revolutionary. But I think we can and should ask some pointed questions that reveal the speciousness of some of these claims without resorting to simply howling about scams like the witch-hunters in Monty Python and the Holy Grail.
First, with respect to claims of democratization. I would argue that yes, Web 3 is effectuating a kind of democratization, but not the kind its advocates are referring to. Without any constraints on the supply of money, both in fiat and in a parallel system of crypto (as opposed to Bitcoin), the underlying monetary dynamics that lead to ever-increasing cost-of-living remain unaltered. In fact, I think there are arguments to be made that, at a certain point, such a parallel system, to the extent it leaches productivity from necessary, real-world industries, will actually exacerbate problems like inflation.
What Web 3 does do is democratize the ability to essentially monetize everything. It unlocks the ability to, potentially, monetize pretty much everything about yourself. It dissolves any remaining barriers between markets and one’s lived experience.
Web 3 is not “software eats the world” or “crypto eats the world,” nor is it “code eats the world” or any other pithy pitch-deckism. It’s “markets eat the world.” Markets will seep into the very marrow of our lives. Every activity one does, every interest one has, every minute of one’s day will be, in some way, financialized or financialize-able.
Sure, this is a democratization of sorts, in the sense that in a world where everything seems to be getting more expensive and more unstable we will have a seemingly infinite amount of ways to keep up, monetarily. But it doesn’t fix the underlying problem. It just opens up new ways to attempt to live with the underlying problem, which isn’t particularly revolutionary at all.
Moreover, I’m not sure making everything tradable in a liquid market leads to increased human fulfillment, belonging, or sense of meaning. And I’m not sure the ability to turn one’s life into a brokerage dashboard is any deep or lasting consolation to the person still trying to keep up with an out-of-control monetary reality.
We already spend so much time thinking about money, about how to get more of it, how to pay for increasingly unaffordable housing, how to afford childcare, how to send our children to college, how to pay off student loans, how to save for retirement, all of which is severely and undeniably intensified and made worse by the structural dynamics of fiat currency.
The overwhelming majority of people feel as though they’re on a treadmill, the speed of which is regularly and unrelentingly turned up. This feeling of being pressed all the time is, inarguably I think, deleterious to human flourishing. Energy that could be channeled into relationships, family, occupational expertise, serious scientific endeavor, artistic creation, etc. must, by necessity, be directed toward not falling off the proverbial treadmill.
This is why, as I’ve written before, it’s worth fixing the concept of savings (as opposed to investing), because when everyone is forced to be a full-time investor or speculator, as an unofficial second job, just to preserve the value of their money into the future, we are forcing a misallocation of energy and life-force. But this is what a fiat monetary system does.
Web 3 does absolutely nothing to fix this fundamental problem. What it does is turn the treadmill knob up another notch while offering a plethora of new ways to monetize every part of your existence to cope with said adjustment. In other words, it hyperfinancializes the world.
Now, some more nuance. Do I think the economic reality for artists and creators under the current system is untenable and abysmal? Yes. Do I think big tech monopolies wield way too much power? Yes. Do I think the future of work is going to be different in significant ways from the present? Yes. Do I think Web 3 clearly offers a solution to these problems that doesn’t come with a litany of equally, if not more negative, downstream effects? No, I don’t. Am I willing to change my mind if presented with strong, compelling evidence to the contrary? Yes.
So while Web 3 seeks to hyperfinancialize the world, Bitcoin seeks to do the exact opposite. Bitcoin forces definancialization. To extend our treadmill metaphor, Bitcoin seeks to slow it down. The promise of Bitcoin is a world in which one can provide value and be compensated with money that doesn’t lose its value, meaning one can, but is not required to, invest or speculate. This means less time obsessing over money.
Another question worth asking is do we genuinely believe that any so-called democratization can be essentially invested into existence by firms that exist to return profits to their LPs? Nothing against these firms, but this type of top-down dynamic is not the typical provenance of revolutions.
I would invite readers to recall the similarly altruistic-sounding mission of a company like Meta (formerly Facebook), who sought to “connect” the world. A decade or so down the road, do we think Facebook has, in the grand scheme of things, connected us or unified us in any meaningful way? Would we argue that Facebook has, in the aggregate, improved the state of the world and the state of personal and national relations in the world?
I’m not trying to sound like a Luddite or a prig, but does anyone honestly believe that any great democratization and Robin Hood-style redistribution of power from big tech to the masses of users is going to be birthed, catalyzed, and brought to fruition, top-down, by much of the same cohort that brought us social media? Is democratization the mission of Andreessen Horowitz?
Maybe I’m wrong.
And I’m not suggesting that Web 3 is evil or that investors in Web 3 technology are categorically, consciously malicious. Not at all. I’m also not foreclosing the possibility that other practical uses for blockchain technology outside of and unrelated to Bitcoin will emerge. I’m just looking big picture, thinking about what kind of world I want to live in, and wondering whether we’re moving the ball forward for aggregate human happiness. While “Web 3” purports to be doing precisely that, I think this is, though initially seductive, a mostly delusional way of thinking.
I want to live in a world where more than a few areas of human experience remain un-monetizeable and unreachable by markets. More importantly, I want to live in a world in which one is not compelled by the existing monetary system to attempt to monetize every corner of one’s existence.
I think Bitcoin is a way of protecting the parts of us that shouldn’t be rendered a marketplace and creating more space for us to pursue higher aims. It slows us down, whereas I think Web 3 speeds us up.
Lastly, if we allow more and more of our lives and interactions to become marketplaces, what downstream effects will this have on our ability to relate to one another? How will it alter the depth of our connections? How will it change what we value and what we care about? Will it ultimately make us feel more or less free?
I posit that when everything is mediated by a monetary impulse we lose something really precious. Little by little.
I’ll admit, there are some Web 3 applications that seem pretty slick and pretty cool but, again, something like Facebook seemed pretty slick and pretty cool at one point, too. It’s pretty cool, for example, to be able to keep in touch with your family or share pictures of your child with your friends. But is doing so on a centralized platform worth the damage Facebook has wrought upon public discourse and the way we relate to each other?
If we couldn’t predict the grave downstream effects of something like Facebook, which initially presented as fairly innocuous, what externalities might we be failing to appreciate with Web 3?
As philosopher Michael Sandel said, well before Web 3 was a gleam in anyone’s eye, “we drifted from having a market economy to being a market society. The difference is this: A market economy is a tool—a valuable and effective tool—for organizing productive activity. A market society is a way of life in which market values seep into every aspect of human endeavour.”
And we may just be getting started.
Or we can advance Bitcoin.
Content Round-Up
1. “Finding Signal in a Noisy World,” a tour-de-force article by Jeff Booth.
2. “Acting on Climate Change Now,” an absolutely must-listen episode of the Progressive Bitcoiner podcast with Daniel Batten. If you’re interested in learning more about the uniquely effective ways in which Bitcoin mining helps fight climate change, you will find this episode fascinating and informative.
3. “A Look At the Lightning Network,” an article by the always outstanding Lyn Alden. This is a deep, thorough examination of Bitcoin’s Layer 2 scaling technology, the Lightning Network.
Miscellaneous
You can check out my most recent podcast appearance here:
As always, thanks for reading! If you enjoyed it or found it useful, share this newsletter widely and freely!
“Civilization is in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.” -H.G. Wells
See you in two weeks,
Logan
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DISCLAIMER: I am not investment advisor and this is not investment advice. This is not, nor is it intended to be, a recommendation to buy or sell any security or digital asset. Nothing in this newsletter should be interpreted as a solicitation, a recommendation, or advice to buy or sell any security or digital asset. Nothing in this newsletter should be considered legal advice of any kind. This newsletter exists for educational and informational purposes only. Do your own research before making any investment decisions.
© Copyright Logan Bolinger, Think Bitcoin LLC