With the explosion of technological innovation, it isn’t a stretch to say that Web3 (crypto, blockchains, DLTs) has been one of the most controversial classes of technology. While we all share a slight indifference to the latest consumer gadgets and maybe even discomfort with military technological advancement, the same cannot be said for Web3. Some see the technology as keys to a more equitable web, whereas others view it as nothing more than a dangerous fad with negative societal value.
This division over Web3 highlights the fact that many aspects of the technology either resonates or clashes with our world view. Remember that although technology is always neutral, the context in which it is implemented will always confer various advantages/ disadvantages. A prime example of this is the coopting of the internet by various governments in order to control media narratives.
At a technical level, the internet enables open and instantaneous communication which should undoubtedly be a net positive for the world. Nonetheless, many countries are following in China’s footstep in an effort to police the media and even spy on its own citizens. Consequently, your access to the web (and freedom of expression) depends completely on the arbitrary conditions of your birth.
The fact that nation states have gone to such great lengths to actively curtail technological access highlights an inconvenient truth that all technology is inherently political. Even something as mundane as your smartphone is not immune as evidenced by America’s Huawei ban:
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It is of little wonder why a technology that promises to fundamentally shift the power dynamics away from institutions has garnered so much attention. While Web3’s individual empowerment narrative has been front and centre in this heated debate, proponents of the technology tend to glance over the assumption that such empowerment is even desired in the first place.
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Fans of a particular red-and-blue spandex wearing web-shooter will know where the above is going. Nonetheless, it is too simplistic to stereotype all Web3 detractors as being too lazy to take responsibility over their own life. The user experience gap between the current web and Web3 is progressively shrinking but that in itself is insufficient to convince mass adoption of Web3.
Web3’s association with liberalism is no coincidence and as such, this provides us with a crucial clue as to why such a boring ledger technology results in such a wide range of opinions. Whether we view this transformation in a positive or negative light boils down to our perspective on how society should function. Opinions on this are therefore extremely complex as our ideology is informed by our experiences in relation to the individuals and institutions surrounding us, i.e. our social context.
The purpose of this article is not to wax philosophical about the subjectivity of human experience and that Web3 detractors are just unenlightened. Rather, framing novel technologies within this context enables us to objectively observe the corresponding shift in power dynamics that accompanies innovation. The incentives brought about from Web3, or any other technology for that matter, is indifferent to our individual biases. Practical implementation of the technology drives the incentive structures and societal change is driven by incentives, not popular opinion.
Rise of Institutions: Violence & Self-preservation
Viewing history through the lens of violence and self-preservation sheds significant light on how societies came to be. Prior to the digital age, all human activities took place in the physical world which necessarily meant that there was always a return to be had through physical violence. In other words, it didn’t matter how educated or rich you were if your assets and even your life could be seized through violence. As such, individuals were forced to coordinate based on self-preservation and the safekeeping of assets.
The Sovereign Individual
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Davidson & Rees-Mogg’s 1997 provocative piece, The Sovereign Individual, views mass social upheavals through this lens. Their predictions based on a focus of social incentives, proves exceptionally prescient 25 years later. This includes forecasting the adoption of a non-governmental digital currency as well as populism driven by growing resentment of increasingly extractive nation states. While I disagree with how the book justifies social inequalities based on merit alone, its framing of technological innovation and power is particularly illuminating:
- Agricultural innovation resulted in more productive use of land through farming instead of foraging and hunting. A society of hunter-gatherers gave way to farmers as individuals weighed the risk of starvation. As crops took time to grow, the seedlings for private property and assets were sowed.
- Military advancements in armoury and horseback warfare ensured that those in possession of the above could easily dominate those without the means to properly defend themselves. Feudalism was a consequence of this as individuals grew to rely on the security offered by a Lord which was paid through labor or taxes.
- Although the advent of artillery greatly reduced the fighting capabilities between knights and farmers, the economies of scale required to produce them as well as its distribution placed large centralised institutions at a distinct advantage. This not only greatly expanded the scale of fighting but also that of enterprise.
- The printing press was one such outcome of enterprise which paved the way for the Industrial Revolution. The speed of the printing press subverted handwritten manuscripts that were economically sustained by religious institutions. This democratisation of knowledge led to experimentation with more secular and efficient forms of organisation as resource distribution was no longer limited along symbolistic lines.
- Coordination at scale was required in order to fuel the military machinery. Given the economy was largely limited by geography, nation states started to form as they established a monopoly of violence within their borders. In exchange for citizenship, individuals were expected to commit themselves to their nation whose government would ensure the security of their family and assets.
- Significant public resources were diverted to warfare research which eventually led to the nuclear arms race. Citizens could no longer be assured of their own safety due to the likelihood of mutual assured destruction. This brought elected officials to the negotiating table which opened new avenues for coordination between nations.
Throughout history, individuals have traded their independence for the security provided by institutions. Technology has consistently played a key role in determining the dynamics of this relationship as its creation and distribution greatly favoured coordination at scale. Viewed through this lens, governments can be seen as the modern institutional equivalent that sells protection to its citizens.
Self-preservation in the Internet Age
With the invention of the web, the logic of violence changed significantly as there now exists a virtual space where power is not determined by physical violence alone. Nevertheless, this is not to ignore the fact that the internet depends heavily on public funding of fibre optic cables through which data packets could flow.
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As hinted in the introduction, it is not for lack of trying that governments are unable to control open access to the internet. Just in 2020, Kashmir underwent a 7 month internet blackout following the Indian government’s decision that this was in the interest of public safety. India is not alone as even as recent as 2021, there were a total of 21 countries which implemented internet black outs, costing the global economy an estimated $5 billion.
Taking a glance at the list of countries, it is fair to assume that such blackouts were possible as citizens had little recourse by way of holding their governments accountable. In other words, the social contract between government and citizens greatly favoured the former. Based on the fact that many developed nations are following in China’s footsteps, our open access to the internet is not due to the generosity of governments but rather that the penalty for governments breaking the social contract might be too costly.
In more advanced economies, the cost of stonewalling open and instantaneous global communications would far outweigh any potential benefits as trust in the government disintegrates. Skilled labor and private capital would find means to migrate borders while high value companies will seek stability in other jurisdictions. Consequently, tax revenues will fall resulting in the overall weakening of the government.
Blurred Lines: National Borders & Private Property
This weakening of the nation state is largely due to web technologies breaking down the geographical monopoly which governments were uniquely suited to address. While nation states were finely tuned for resource distribution within and between their borders, the web did away with the fundamental concept of borders. This dissonance consistently comes to the fore whenever governments attempt to overlay their national rules on a sovereign web infrastructure.
As governments scramble to position themselves in this new reality, users all around the world have already gotten a taste of this newfound power. In the age of unfettered data and capital, the definition of self-preservation for many started extending into the virtual space as more of their resources (time, money, social data) were increasingly web-based. As governments were still playing catch-up during this phase, users had to start negotiating with the new virtual safekeepers.
Private companies arising out of the internet boom were purpose built around fulfilling this newfound avenues of empowerment:
- Search providers enabled access to a virtually unlimited source of knowledge (Google, Bing, Baidu)
- Email providers enabled coordination independent of the physical distance between parties (Outlook, Gmail, Yahoo)
- Social media platforms enabled the sharing of stories with friends and strangers all around the world (Facebook, Youtube, Linkedin)
- Web messaging apps enabled encrypted and practically free forms of communication (WhatsApp, Telegram, Messenger)
- Payment platforms enabled trusted value flows between strangers on the internet (Paypal, Visa, Mastercard)
- Trading platforms enabled direct access to marketplaces and orderbooks (Amazon, Fidelity, eBay)
Due to technological limitations around the hosting and management of data, users had to forgo ownership of their personal data in exchange for access to these service. This was for practical reasons as the hosting of data was a resource intensive task where economies of scale still gave a distinct advantage. As companies started to realise the value of owning such data, their business models also shifted accordingly to extract as much value as socially allowed from the data they were holding (Cambridge Analytica, Google’s Pentagon Contract, Apple Tax Evasion are examples of such social contracts). Companies based on this model have colloquially come to be known as Web2.
Web3: Red Pill or Blue Pill?
This brings us to today whereby Web3 technologies have already proven its viability as an alternative ecosystem for likeminded people to coordinate without any intermediaries. Simply put, users are able to achieve the same Web2 functionalities without having to give up ownership of their own data or assets. The technicalities of how this is achieved is not within the scope of this article but the incentives it creates deserves further analysis.
For users coming from Web2, the main advantage of Web3 revolves around the downstream implications of ownership:
- Portability: Data is leased to service providers instead of transferred. As such, data follows the user instead of the service platform. Access to personal data can be revoked when services are no longer required.
- Security: Data cannot be accessed without the consent of the user. Web3 native data and assets can not be forcefully seized due to the defensive nature of cryptographic maths as well as its relatively free distribution.
- Privacy: Data is encrypted and stored on personal devices (wallets, etc.) instead of a company’s servers. Cryptography enables selective disclosure of data on a need to know basis.
With such a tantalising proposition, it begs the question as to why society has yet to adopt Web3 technology en masse. Putting the growing pains of user experience aside (i.e. self-custody management overhead), mass adoption of Web3 hinges on a user’s willingness to regain control of their own digital data. This embracing of individual empowerment cannot be assumed as it will be heavily dependent on the user’s social context as well as experience with the technology.
What is guaranteed is that individuals will always protect their own interests. A prime example of this is the ongoing lawsuit against Terra’s Co-Founder Do Kwon.
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Users were drawn in by the prospect of financial autonomy from the traditional finance system only to call for regulation by the same powers when things went south. This is not to absolve Terra from any wrongdoings but to highlight the fact that individuals are always navigating the shifting power dynamics.
The Politics of Web3
Web3 is such a divisive technology precisely because of how it reconfigures power in favour of users. Whether this leads to anarchy or a more equitable society depends on the self-preservation tradeoff which is constantly being renegotiated between individuals and institutions. Prior to Web3, institutions always had the upper hand in negotiations as the existing technology favoured coordination at scale. Web3 is a step in the other direction as individuals are able to achieve similar levels of security without requiring tradeoffs with another party.
Critically, in the Web3 paradigm, the potential returns from violence is greatly reduced as personal data is hidden behind a virtual password. While it is possible to extract the password through physical means (i.e. the $5 wrench attack), without the cooperation of the owner, the data is essentially lost. Moreover, given that such data is stateless, governments and institutions have limited means to affect its movement without the consent or knowledge of the owner. In other words, digital data is safely secured and can only be accessed with the user’s consent.
It is important to place the security guarantees of Web3 within the context of an increasingly virtualised modern life. Physical limitations still apply as some form of digital infrastructure is required, from the fibre optic cables to the devices required for access. Moreover, many of the resources required for survival can never be fully digitalised and are therefore more efficient to provide at scale (e.g. electricity, water, food). Nevertheless, all the above can be procured with sufficient money which, by nature, is perfectly suited to be virtualised. Those that identify themselves globally will thrive as governments around the world compete for increasingly liquid private capital.
Ultimately, Web3 is a defence based technology which enables individual choice that is less affected by the coercive forces of scale. Put simply for the average person:
- DeFi: I can safely secure and transfer my net worth without fear of it being seized. This decision will be heavily influenced by trust in governments, institutions, and decentralised code.
- Decentralised Identity: My personal network follows me instead of the platform. I am able to determine the levels of privacy disclosure and control access to my social graphs.
Web3 forces us to think outside the current framework of nation states and private institutions as it is the first time that digital data/assets can truly be owned and secured at an individual level. The legal structures which modern societies have grown to rely on are incompatible with this new borderless reality.
In an increasingly globalised world, an individual’s moral compass will be informed by decentralised social networks which better reflect relationships in reality. This in turn will determine the future of politics as individuals weigh the cost of giving up their autonomy. In other words, the Web3 paradigm is one where power is given, not taken.