The Metaverse, Web 3, and NFTs are Bullshit
And probably most, if not all, of crypto is too
The ideals behind Web 3 and the concept of the metaverse are idyllic, noble, and alluring. Who doesn’t want an internet owned by the users? And who doesn’t want the option to hangout in an immersive digital space where it feels like anything is possible? A better way to collaborate and catch up with friends you no longer get to see.
Companies are a slave to the never ending pursuit of profits. Infinite growth and revenue are expected and if a company needs to make a trade off to protect users at the sacrifice of profits, there will come a point that even the CEO, board of directors, and any executives will lose to the system of incentives that (1) retain workers with stock and (2) make a company beholden to all of its shareholders. Which is why the only entity that can truly guarantee user protections is the government, but we all know how effective that is. This is nothing new, just something we struggle with in modern day capitalism with modern day tech platforms — and something a user-owned internet could maybe fix. Moxie, the founder of Signal, has a good articulation of some of these current Web 2 tech platform problems (but I forget the timestamp); thoughts on JRE aside, this episode is worth listening to (it’s about a bunch of other stuff too).
The champions of current Web 3 efforts are jumping the gun. There was so much explosive growth during Web 2 that the next wave of founders want to make an even bigger impact, while investors old and new want a chance to get a piece of the moonshot action. Worse, crypto zealots believe — and financially need — the reality of its success to be true, whether or not it is.
I’m skeptical that it will play out like current proponents suggest. Crypto has been the white-hot focus of SV’s best and brightest for a long time yet still struggles to proffer up any mainstream use case other than ‘buy, HODL, and believe’: a store of value for your financial dreams and wishes. And some form of the metaverse is very likely to come about, but will it be truly decentralized, exist largely in VR, or will Meta (formerly FB) play a huge role? I doubt it.
The metaverse in some sense already exists. Our digital lives are split across myriad apps, platforms, and games. I can already create a 3D house, invite my friends over, talk in Discord, and hang out in a completely artificial world. Millions of gamers do this every day, not just in Rust, Minecraft, Valheim or Animal Crossing, but across hundreds of other games. Discord’s voice chat and Slack-adjacent servers/channels are the current social anchor, but as this experience evolves, I’m sure that the interface, integrations, and data portability will improve. Soon you will be able to stream YouTube videos on the walls of the houses in the digital spaces you create. You’ll be able to draw, create art, play Jackbox, and walk through a door to play Apex Legends, Fortnite, or whatever game you want. And it won’t be limited to gaming. People will collaborate in real time with digital whiteboards and screen sharing. They’ll review code and run businesses. They’ll listen to and make music. They’ll watch movies, sports, stand up comedy, and live streams on Twitch together in digital living rooms. They’ll share tweets, laugh, learn, and talk shit.
I see the metaverse as being the evolution of the third place that is our pre-existing digital life when we are comfortably at home. The closest analog would be the evolution of Discord and the integration of disparate experiences like FB, Slack, YouTube, etc. into some kind of singular, 3D, customizable, hangout space.
I’m not convinced that this experience can somehow be massively decentralized and yet seamlessly orchestrated, managed and well run, or that VR — a luxury, cumbersome, and questionably relevant technology — is bound to be part of it. Sure, somewhere down the line, humans will reach a point where VR is not only pragmatic, but equitably attainable, and superior to real life in many aspects. A complete sensory experience like the Matrix or Sword Art Online where we are physically plugged into the Internet but in our minds we are jumping, flying, and performing feats of athleticism we never could in base reality; exploring worlds far more grand than our own (as grand as it is). But *that* VR is very different from what we have today.
One of my favorite podcasters of all time, Ben Thompson, released an episode of Exponent when Facebook announced its name change to Meta. While Ben was also skeptical about many claims of metaverse champions, he brought up a great analog for Oculus with respect to the personal computer. The PC was initially far too expensive for the average family to afford. It started out as a utility for businesses — an enterprise tool. But it became so powerful and so ubiquitous that it spilled over into our personal lives. The price point continued to drop and so much consumer software was written that it’s now hard to imagine life without a personal computer at home (or in our pockets). If Facebook proves product market fit with VR in the business world, through use cases such as remote work and collaboration, maybe VR will then become viable in our personal lives at home — or so the argument goes.
But life before a PC relegated us to Blockbuster, the Yellow Pages, calling cab companies to get to the airport, filing taxes by hand, using a landline telephone to arrange social events with friends, and a thousand other archaic aspects of daily life. It is hard for me to imagine what VR, in the form of headsets and hand controllers, stands to offer both professional and especially personal digital experiences that is an order of magnitude better than what we have today. Is turning your head to look around you markedly better than using your mouse to view a 3D landscape? Are the hand controls so precise that they make work, or gaming, x10 or x100 more enjoyable or efficient? Will the rise of VR obsolete scaled Web 2 practices and applications the same way Web 1 and Web 2 made many analog activities things of the past? Maybe, but I struggle to see how.
My prediction is that the metaverse will arrive slowly, initially on the screens we already use today, with increased interoperability with apps we already use today in addition to emergent ones. I doubt that it will be controlled by the users or by Facebook, a company that struggles to successfully innovate internally, as nearly every major tech company does. Large tech companies are absolutely terrible at hiring people with good product sense/intuition, and if they do, they rarely enable them to try bold new experiments.
These companies operate like business schools when they seek the outcomes of founders, with the additional burden of bureaucracy and pre-existing dependencies. What was the last massively popular consumer software product Apple, Google, Amazon, Facebook, or Twitter launched that wasn’t a clone or acquisition of some other company? If there are recent examples, there aren’t many.
Web 3 startups are putting the cart before the horse with investors and founders claiming victory — ‘Web 3 is here! Web 3 is the future!’ — before product market fit even exists. When Web 2 was coined, many successful and scaled Web 2 companies already existed. The term was created to explain broad shifts in extant user behavior, not to manifest a personal pipe dream into existence.
Perhaps one of these Web 3 startups will create some of the connective tissue to integrate all these experiences or even become one of the major new digital spaces themselves. Even that will likely be a shifting landscape with successful players using centralized power models, like Web 2 companies do today. Some Web 2 startups actually tried to integrate our disparate digital lives: Rockmelt (2010–2013) attempted to become a digital third space by being a personalized browser with lots of custom integrations to every application a user wanted; what if you could see your Facebook, Twitter, Discord, Netflix, YouTube, etc. all in one place. But it failed. And now Opera is trying something similar — who knows?
And it’s not crazy that Silicon Valley and tech Twitter writ large could be so wrong in such a big way, they have a long track record of jumping on stupid bandwagons that are going nowhere. Remember the 2000 dot com crash? Well most of us probably don’t but the massive allocation of capital into terrible ideas and businesses is well documented. And more recently fads like live video. It was the future of everything, until it turned out to just be a specialized vertical for a subset of gamers. Live audio will play out a similar reality as executives with no understanding of audio and no awareness as to what lasting new user behavior is versus pandemic-specific behavior, trick each other into making bigger and bigger bets on fool’s gold. Twitter attempting to acquire Clubhouse for a staggering $4B, Spotify buying Greenroom, Facebook pursuing live audio and nonsense like ‘Tiktok for audio’ and now Amazon launching a live audio platform. Whatever lasting use cases emerge from this live audio frenzy, it won’t be worth the time or energy that they are putting in. The blind are leading the blind. Rather than learning from past mistakes like Twitter buying Periscope for $100M pre-launch and pre-product market fit only to later shut it down entirely, they are making even bigger bets on unproven and uncompelling experiences.
On a similar topic, NFTs are bullshit too. Take Loot for example, a time-limited bag drop of “items” (text on the blockchain) for a game that didn’t exist, bought largely by rich techies too busy and successful to play video games, who are naive enough to think they are getting in early on something that will have a large payoff. What game studio is incentivized to make a game revolving around, or somehow incorporating, these items? And what users are incentivized to join? New users who don’t have Loot NFTs don’t give a shit; in fact no one besides anyone who already owns Loot gives a shit. Gamers want a chance to earn rare items based on their skill, merit, and effort. Even though a very small number of gamers can make a living off playing, the main appeal for the average game has never been to make real life money — that’s called a job.
And no game stays a hit forever, so how is such a goal even sustainable? Once popularity and usage begin to fall, any crypto or NFTs exclusive to that game will plummet. And if NFTs are supposed to have cross-game appeal — incentives that make no sense aside — if you take this to its limit, 30 years out any new game is going to have millions of pre-existing items it needs to build a game around before they even start. It doesn’t work.
And many games already have item economies based on *real* in-game scarcity, often for cosmetic items so as to not make the game pay-to-win which breaks scaled gaming incentives for the largest player bases. Counter-Strike, Rust, etc. are some examples — go check out the Steam Marketplace where real money is used to buy and sell these digital goods. Even unofficial cross game marketplaces have existed to buy and sell in-game items and currency since the 90s. They don’t need NFTs to keep doing this. Not to mention that making a popular game — a game that is truly enjoyable, entertaining, and durable — is already incredibly hard.
With NFTs, certain JPEGs on the internet went from being worthless to selling for hundreds of thousands of dollars and in one case $69 million. Why? Something something crypto, something something Web 3, something something early Internet collectibles. NFTs are just Beanie Babies in digital form (unlike NFTs, Beanie Babies started with the real demand as a popular children’s toy; regardless their fates will be the same). NFTs have no true value, purpose, or scarcity. They are the fever dream of crypto enthusiasts desperate for a tangible use case to not only validate their thesis, but to help increase their own personal wealth; they also appeal to SV insiders desperate not to miss the next big thing, having no idea what it will be. NFTs also sometimes fly under the guise of paying artists and creators who don’t get credit for their work, but that’s not what they are really about.
At best, NFTs are a benign, stupid scheme to make money intellectually on par with South Park’s underpants gnomes, but at worst it’s the realm of hucksterism and bad actors. Or people with money and large followings who, like everyone, don’t fully understand cryptocurrency but are motivated by greed and status and put stock in fools like Gary Vee who claim that CryptoPunks are the next Facebook (I’m not kidding, he actually said that). More of Gary’s airtight logic: ‘once Amazon’s stock dipped really low too so if the prices of NFTs dip, they’re really just on the same path as the most successful company in the history of humanity; buy the dip!’. Folks, NFTs aren’t businesses, much less art that belongs in a museum. They’re pure fucking nonsense.
And we all grew up with collectibles: I’ve spent a significant part of my life playing Magic: The Gathering (MTG) where some of the rarest cards, printed in the 90s, are now worth over $30,000. Imagine that you purchased ownership of a digital image of a Magic card, except there’s no overarching framework giving purpose to the card. The actual game doesn’t exist and there’s no community of players who care. It’s just a worthless contextless image on the internet that someone tricked you into buying a certificate for, but that anyone can still copy, paste, and use: that’s an NFT. For the younger folks, just replace MTG with Pokemon cards if this doesn’t make sense.
When people like Gary Vee grab a mix of 30 tech billionaires and YouTube influencers and strongarm them into buying snake oil like CryptoPunks, those people are invariably going to start talking about that crap to their large audiences on Twitch, YouTube, podcasts, Twitter, etc. That’s going to give regular people the bold idea that this stuff actually has value and is worth buying. ‘Hey, no one can really explain it, but these guys are super smart and/or rich so I’m gonna get in early like them.’ A similar concept applies to crypto. No solid, scaled, mainstream use case exists and no one knows where it’s headed, but since the global crypto financial bubble hasn’t burst, and many people have made insane fortunes, regular people are starting to put lots of real money into something that is highly speculative and could prove to be nothing at all because they want a piece of the action. Who doesn’t want free money? But it’s regular people who will be holding the bag when it all comes crashing down; rich techies and influencers will be fine.
As a simple thought experiment, imagine if every dollar that was put into Bitcoin purely as an investment was removed in an instant. What would happen? How far would Bitcoin fall? I’d guess well over 90% — maybe even 99% — and it would be the end of Bitcoin. But treating Bitcoin as an investment *is* the only scaled mainstream use case: it is faith that a better use case will emerge and that there is a payoff for being early. It’s like the world putting a trillion dollars into a company that has no business model or users and a CEO who just makes vague references to what a grand future may look like.
Perhaps a side effect of nearing your 40’s is that new tech and initiatives trigger a ‘get off my lawn’ sentiment, but I’ve always prided myself in having a good bullshit detector and it’s flying off the handle at this nonsense. I’ll end on an optimistic caveat though: if we can somehow manage to achieve a user owned internet that is functional, responsible, equitable, and ethical, well, I’m all for it.
I wanted to synthesize all my thoughts on this because I’ve been pissed off about this topic for a long time but only occasionally opined about it on Twitter. Just as I was about to publish a friend showed me a YouTube video from Dan Olson I hadn’t seen. He makes a *far* more knowledgeable, articulate, and compelling takedown of all things crypto. I highly recommend watching it: