Will the Real Web3 Please Stand Up?
By Keith Teare • Issue #292 • View online
Moxie Marlinspike ruffled feathers this week by suggesting that Web3 is, well, Web2 with marketing. Vitalik Buterin. did all but apologize and complain of lack of resources.Web3 is controversial and becoming more so.
- Will the Real Web3 Please Stand Up
- The Changing Face of Venture Capital
- Startup of the Week
- Tweet of the Week
Many of you will find this editorial a little…what? Obscure. it is about an intense debate raging in tech and venture lands about the nature of Web3, whether it is real and whether it is different from Web2.
You will be excused for not caring. But it is important to the future of the globe, so, sadly, it must be discussed.
The emergence of Web3 forces us to focus a lot on the conversations triggered by Moxie Marlinspike’s reflections on what Web3 is.
Moxie (real name??) was the CEO of Signal and, a week ago, decided to move on from his job after what must have been an invigorating few days.
His essay is in the curated list of articles below. And there are responses from Vitalik Buterin, John Battelle, Jeff Jarvis, Om Malik, and others.
So what is the big deal?
Moxie basically poured cold water on the idea that Web3 is truly decentralized or particularly able to be trusted. For an infrastructure founded on the promise of decentralized technology, with trustlessness at the core, this was perhaps a devastating attack. It was almost as if Moxie was going to war alongside Marc Andreessen with their common foe Jack Dorsey. But that would be a superficial reading.
A better version, especially now he has left his role at Signal, might be that Moxie was writing a sort of pre-manifesto. Summing up the current state of Web3 as a starting point for determining what to work on. His ending suggested that:
We should accept the premise that people will not run their own servers by designing systems that can distribute trust without having to distribute infrastructure. This means architecture that anticipates and accepts the inevitable outcome of relatively centralized client/server relationships, but uses cryptography (rather than infrastructure) to distribute trust. One of the surprising things to me about web3, despite being built on “crypto,” is how little cryptography seems to be involved!
And is followed by:
We should try to reduce the burden of building software. At this point, software projects require an enormous amount of human effort. Even relatively simple apps require a group of people to sit in front of a computer for eight hours a day, every day, forever. This wasn’t always the case, and there was a time when 50 people working on a software project wasn’t considered a “small team.” As long as software requires such concerted energy and so much highly specialized human focus, I think it will have the tendency to serve the interests of the people sitting in that room every day rather than what we may consider our broader goals. I think changing our relationship to technology will probably require making software easier to create, but in my lifetime I’ve seen the opposite come to pass. Unfortunately, I think distributed systems have a tendency to exacerbate this trend by making things more complicated and more difficult, not less complicated and less difficult.
These are fairly general points and they align with his earlier point that
A protocol moves much more slowly than a platform. After 30+ years, email is still unencrypted; meanwhile WhatsApp went from unencrypted to full e2ee in a year. People are still trying to standardize sharing a video reliably over IRC; meanwhile, Slack lets you create custom reaction emoji based on your face.
In general Moxie is — from the point of view of an architect — pointing out how hard it is to build open, distributed protocols that become standards for others to build on, and how much easier it is for people to build wholly owned applications and services where they can iterate faster.
That is both true and irrelevant. It is true that applications and services can be built faster, and better, by teams that work together and own all the pieces. But Web3 is not an application or a service. It is also true that protocols move slowly, but that is the point. A Web3 application or service has to sit on top of unchanging and predictable infrastructure. Just as Web1 sat on top of the http:// protocol and the HTML markup language and Web2 sat on top of JSON and SQL and NoSQL.
Those who build infrastructure are usually rewarded with recognition and not riches. Ask Vint Cerf and Bob Khan (TCP/IP) or Tim Berners Lee (URLs, HTTP and HTML). The application and service builders made off with those riches or at least lots of them.
In Web1 it was Yahoo, Google, Excite, Infoseek, AltaVista, and others. In Web2 it was WordPress, Salesforce, Yahoo, and others. Now in Web3 we see OpenSea raise capital at a valuation of over $13 billion and Coinbase and Binance grow to be very large by providing centralized services. But we also see Ethereum, Bitcoin, Filecoin, Solana, MetaMask, MyEtherWallet, LUNA, Celsius and BlockFi and hundreds of others that derive value from running distributed infrastructure.
Both Jack Dorsey and Moxie are right to point out how “old” much of Web3, in its current form, is. But Marc Andreessen is also right to point out how “new” it is. The future of Web3 is not knowable. But it is knowable that the raw materials of Web3 — Blockchains, Tokens, Tokenization of Assets, Trustless transactions with no middlemen, DAOs, Smart Contracts and others — are the basis for a new relationship between people. And that is the real promise.
For us all to be related through open and transparent software opens up not just the end of the financial middlemen. But the end of all middlemen. Think about rideshare but with no Uber. Or voting with no machines. Or savings with no banks. Software as an intermediary, replacing companies, is a truly possible vision.
So despite the limits of the current stage the platform is already set for a very disruptive future, especially if you are a middleman of any kind. Developers everywhere are focused on making this and many other transformations happen. Moxie is wrong, and it will be shown, irrelevant. Why? Because cynicism cannot stop progress.
More in this week’s video.
Will the Real Web3 Please Stand Up
Moxie Marlinspike >> Blog >> My first impressions of web3
Despite considering myself a cryptographer, I have not found myself particularly drawn to “crypto.” I don’t think I’ve ever actually said the words “get off my lawn,” but I’m much more likely to click on Pepperidge Farm Remembers flavored memes about how “crypto” used to mean “cryptography” than I am the latest NFT drop.
Also — cards on the table here — I don’t share the same generational excitement for moving all aspects of life into an instrumented economy.
Even strictly on the technological level, though, I haven’t yet managed to become a believer. So given all of the recent attention into what is now being called web3, I decided to explore some of what has been happening in that space more thoroughly to see what I may be missing.
“My first impressions of web3”
Just some guy
The word “server” imo is not very useful in the blockchain context; it combines together a bundle of concepts that are best treated separately. Particularly, think of the following ways that a user could connect to the blockchain:
- Use a Binance account.
- Run a piece of code that asks the Infura API endpoint what the blockchain state is, trust the answer. However, keys are still kept locally; the code signs transactions locally and sends them to the Infura API endpoint to be re-broadcasted.
- Same as (2), but the code also runs a light client to verify the signatures on the block headers and uses Merkle proofs to verify individual account and storage data.
- Same as (3), but the code talks to N different API endpoints run by N different companies, so only 1 of them need to be providing honest answers for the connection to be reliable.
- Same as (4), but instead of pre-specifying N API endpoints the code connects directly to a p2p network
- Same as (5), but the code also does data availability sampling and accepts fraud proofs, so it can detect and refuse to accept blocks that are invalid.
- Run a fully verifying node.
- Run a fully verifying node that also participates in mining/staking.
Currently, only (1), (2), (7) and (8) are feasible, and (7) and (8) are too expensive for most users. Indeed, the whole reason why blockchains are the future of decentralization and self-hosting is not is that running a server that stays online 24/7 is even harder than (8) [if your staking node is only online 95% of the time, you’re fine; if your website is only online 95% of the time, that presents a serious annoyance for your users!].
Can we ever become Post-Social? — On my Om
With all the conversation of breaking free from big social platforms, owning your own digital identity, and being independent, I have been asking myself: how can all of us who have slowly become on…
The crypto-communists behind the Web3 revolution
An end to the nation-state, the upending of modern finance and a new world order. What could go wrong?
As cryptocurrency swells in value, both financial and cultural, it’s easy to read the phenomenon as hypercapitalist: Bitcoin’s price swings get airtime on CNBC alongside the Dow and Nasdaq. But a recent dispute among some of the industry’s top figures have served as a reminder of digital currency’s libertarian-anarchist roots.
Alongside the hedge-fund cowboys arbitraging and leveraging their way to fresh fortunes, there’s a culture war being waged, with big implications for anyone thinking that the blockchain is just a cool way to lower the cost of cross-border remittances. Hidden in the army of moneymen is a fifth column of revolutionaries. Meet the new crypto-communists.
We’re stealing the term from Winston Churchill, who used it as a Cold War epithet. If you don’t dwell on the historic echoes, though, it’s a useful shorthand for the more extreme, sometimes radical views that undergird some crypto supporters’ enthusiasm for the idea of detaching the world’s financial architecture from its current moorings.
The ’90s internet had its share of utopian dreamers, as did Web 2.0. Web3, as some call the crypto revolution, is another exercise in grappling with what the future will look like and who will lead it. And as in past upheavals, there are heated debates over who’s the genuine crypto revolutionary — and who’s just faking it.
OpenSea, Web3, and Aggregation Theory
OpenSea is positioned as another Aggregator, which is evidence that Web 3 is a layer on top of the Internet, not a replacement.
In fact, what gives Aggregators their power is not their control of supply: they are not the only way to find websites, or to post your opinions online; rather, it is their control of demand. People are used to Google, or it is the default, so sites and advertisers don’t want to spend their time and money on alternatives; people want other people to see what they have to say, so they don’t want to risk writing a blog that no one reads, or spending time on a social network that because it lacks the network has no sense of social.
This is why regulations focused on undoing the control of supply are ineffective: the marginal cost nature of computing and the zero distribution cost of the Internet made it viable for the first time — and far more profitable — to control demand, not by forcing people to act against their will, but by making it easy for them to accomplish whatever it is they wished to do, whether that be find a website, buy a good, talk to their friends, or give their opinion. And now, to buy or sell NFTs.
This, then, is the reason that OpenSea received its $13 billion valuation: it is by far the dominant market for NFTs; should the market exist in the long run, the most likely entryway for end users will be OpenSea. This is a very profitable position to be in, even if alternatives are only a click away. It’s not like that reduces the profitability of a Google or a Facebook.
Web .0000012 — BuzzMachine
I’ve been thinking about Matt Mullenweg’s response to Brian Armstrong’s response to Moxie Marlinspike’s excellent post about Web 3. I have some responses…
John Battelle’s Search Blog On Building A Better Web: The Marlinspike Threads
If you want to follow the debate about crypto’s impact on society, which I believe is one of the most important topics in tech today, you better sharpen your Twitter skills — most of the interesting thinking is happening across Twitter’s decidedly chaotic platform. I’ve been using the service for nearly 15 years, and I…
Jack Dorsey wants to help bitcoin developers fight legal battles
Block CEO Jack Dorsey is spearheading the creation of a group that would help defend bitcoin developers against lawsuits and other legal challenges.
The Bitcoin Legal Defense Fund, a nonprofit organization, “aims to minimize legal headaches that discourage software developers from actively developing bitcoin,” Dorsey said in an open letter to bitcoin developers.
It was also signed by Chaincode Labs co-founder Alex Morcos and Martin White, whose professional affiliation was not detailed. White has been identified in reports as a University of Sussex academic who has done some research into blockchain technology, but a Martin White is also the head of litigation at Block. Protocol could not immediately confirm that.
“The main purpose of this Fund is to defend developers from lawsuits regarding their activities in the bitcoin ecosystem, including finding and retaining defense counsel, developing litigation strategy, and paying legal bills,” Dorsey, Morcos and White said in the letter.
The fund, which will offer its services for free, will form a “corps of volunteer and part-time lawyers,” the letter said.
The defense fund appears to be in its earliest stages. No filings appear in the California Secretary of State’s business database or Guidestar’s index of nonprofits. The bitcoindefensefund.org domain mentioned in the email is currently parked. Dorsey, who details donations made through his Start Small vehicle in a Google Sheet posted online, has not detailed any contribution to an entity related to the proposed fund.
Among the first cases it will focus on the so-called Tulip Trading lawsuit in which a group of developers have been sued in connection with bitcoin losses related to the defunct Mt. Gox exchange.
Crypto executives and lobbyists have expressed concern about recent changes to U.S. tax laws that would create financial reporting requirements for blockchain software developers, though no known cases have emerged from those laws and the Treasury Department has said the IRS would not target software creators.
The Changing Face of Venture Capital
YC’s $500,000 Standard Deal
We’re excited to announce our new standard deal at Y Combinator. When a company is accepted into YC, we now invest a total of $500,000.
Y Combinator’s New Deal Sparks Fear in Seed Investors — The Information
Y Combinator’s change to the deal terms it grants startup founders has given the famed startup accelerator more firepower than ever. And that’s causing an outcry among the seed investors who comb through its graduating classes to find the next Stripe and Airbnb. On Monday, Y Combinator said that …
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What Insiders Think About YC’s New Deal Terms
Y Combinator’s decision to invest $500,000 could elbow out angel investors
The news that Y Combinator has decided to change its deal terms is about as earth-shattering as Sequoia Capital restructuring its investing apparatus — and we’ve now seen both happen within a few months of each other.
It’s a sure sign that even the most secure investors — we’re talking Silicon Valley royalty — realize that they have to keep changing with the times.
If you missed the news this morning, Y Combinator is going to start investing $500,000 in startups in its accelerator — up from $125,000.
YC is still going to take 7% of a company when it joins the YC batch — but now YC is also going to take another chunk of the company when the startup raises its next fundraising round.
Tiger Global Lost 7% Last Year, First Annual Drop Since 2016
By Hema Parmar
January 10, 2022, 9:55 AM PSTUpdated onJanuary 10, 2022, 11:55 AM PST
Tiger Global Management’s hedge fund tumbled 7% last year, its first annual loss since 2016, according to people familiar with the matter.
The fund struggled in the final two months, dropping 8% and 10.7% in November and December, respectively, the people said. That erased a 13% gain that it had built through the first 10 months of the year.
Sequoia Capital Changes Regulatory Status to Broaden Investment Scope — WSJ
In a bid to expand the types of deals it does, Sequoia Capital, one of the U.S.’s largest venture-capital firms, has become a registered investment adviser with the Securities and Exchange Commission, according to a notice on the agency’s website.
The change in its regulatory status reflects the expansion of the Menlo Park, Calif.-based firm’s investment strategy from its original focus on backing early-stage Silicon Valley technology startups.
“[T]he Adviser’s scope has expanded as technology has revolutionized industries,” read a description of the firm’s activities in a filing that Sequoia Capital Operations LLC made with the SEC dated Nov. 30.
In the SEC filing, Sequoia described its current strategy of investing primarily in seed, early and growth stages in companies in sectors such as business and consumer technology, financial services and energy. It also said it makes deals that aren’t traditional for venture firms, such as buying public stock and crypto assets, as well as the possibility of sponsoring a special-purpose acquisition company, or SPAC.
Sequoia’s new status was approved by the SEC and became effective on Jan. 3. The change applies only to Sequoia’s U.S. and European business. Registered investment advisers must comply with various SEC requirements. Venture firms are typically exempt from registration, which lowers their compliance burdens.
SoftBank banks on AI for fund management with $146 million investment in Qraft — Protocol — The people, power and politics of tech
The multinational investment giant will look into using AI to manage its own assets.
Kate Kaye January 10, 2022
Can AI do investing better than highly-paid fund managers? SoftBank wants to find out.
The multinational investment giant is pumping $146 million into an AI-based fintech company called Qraft to see how to use AI to manage its own assets.
“We wanted to test how we could utilize AI, and we thought Qraft was the best way to do that,” Kentaro Matsui, managing partner of SoftBank’s investment advisory arm SB Investment Advisers, told the Wall Street Journal, which first reported the investment.
According to WSJ, the investment is about access to the brains behind Qraft’s deep-learning algorithms as well as the tech itself.
Founded in 2016, Qraft uses deep-learning models fed with market data to generate Exchange Traded Funds, build portfolios, manage data and execute trades. The company’s name is an amalgam of the terms “quant” and “craft.” The Wall Street Journal reported that the company manages $1.7 billion for Asian banks and insurance companies including through its U.S.-listed ETFs.
$9B to Build the Future
I am excited to announce that Andreessen Horowitz just raised a fresh $9B to invest via our Venture, Growth, and Bio Funds. We are grateful to our Limited Partners who have believed in us and stuck with us over the …
The post $9B to Build the Future appeared first on Andreessen Horowitz.
Venture capital firm Kleiner Perkins raises $1.8 bln via two new funds | Reuters
Venture capital firm Kleiner Perkins said on Tuesday it had raised $1.8 billion through two new funds, as it aims to expand into sectors such as fintech and consumer after a record year for venture funding deals.
What’s new with NextView? The story behind our NextView.vc website refresh
As someone relatively new to the VC space, I was particularly struck by the partners’ collective reflections regarding what has changed and what has remained the same. Here are some of the industry-wide mega shifts I’ve overheard as central points of water cooler discussion: the ever-increasing check size for seed rounds, the ever-changing “hottest” vertical […]
The post What’s new with NextView? The story behind our NextView.vc website refresh appeared first on NextView Ventures.
Startup of the Week: TPG
Inside private equity’s race to go public
Most of the private equity industry has been enriched during the pandemic — but a select group has had a particularly good time. Eleven listed private equity firms collectively gained nearly $240bn in market value in 2021. Against that backdrop, a growing number of privately held buyout groups are rushing to join them on the public markets. London-based Bridgepoint, New York-based Blue Owl and Paris-based Antin Infrastructure Partners all listed last year. One of the largest privately held buyout firms in the US, TPG, is expected to float this month at a valuation exceeding $9bn. European firms CVC Capital Partners and Ardian and US-based L Catterton have all had conversations with advisers about potential initial public offerings, people with knowledge of the talks said. The largest listed players have used the past decade to become diversified asset managers that control multiple pools of capital worth hundreds of billions of dollars. They now dwarf their smaller, unlisted rivals, many of which are fearful of missing out.
We are a leading global alternative asset manager with approximately $109.1 billion in AUM as of September 30, 2021. We have built our firm through a 30-year history of successful innovation and organic growth, and we believe that we have delivered attractive risk-adjusted returns to our clients and established a premier investment business focused on the fastest-growing segments of both the alternative asset management industry and the global economy. We believe that we have a distinctive business approach as compared to other alternative asset managers and a diversified, innovative array of investment platforms that position us well to continue generating sustainable growth across our business.