Crypto & the Invention of Web3
The blockchain and Crypto craze that is alight across the globe today shares a remarkable, and illuminating, historical similarity to the original Internet: it has followed a path that began in military computer science labs and quickly found transformative applications in the commercial sector. The open question is whether or not it will it follow a similar path of boom and bust and then more boom.
The original Internet was first imagined by a Cold War-era computer scientist working for the U.S. Defense Advanced Research Projects Agency (DARPA) named J.C.R. Licklider. He described his original idea as an “Intergalactic Computer Network” in a 1963 memo to his colleagues at DARPA. Just a few years later, funding was secured and by the 1970s the seeds were sown for Web 1.0. The DARPA team members and then academics like Vint Serf (who connected the first two nodes of the original Internet and co-authored some of the original protocols like TCP/IP) began utilizing this remarkable new technology.
Most people don’t realize that underneath the Web2 apps they use every day lie a set of Web1 protocols that were worked out when the military and academics were setting up the original Internet. WhatsApp and other messaging apps, for example, utilize an early standard called SMS or Short Message Service. Outlook and other mail software use SMTP or Simple Mail Transport Protocol. And software services like Dropbox utilize FTP or File Transport Protocol. These and other core Internet protocols are decentralized (meaning that no single government or corporation controls them), fault tolerant (meaning that if one part of the network fails, the whole system still works) and open (meaning anyone is free to build on top of them).
As opposed to the open and decentralized Web1 protocols, the Web2 applications were built by profit-focused startups. And those little companies are now some of the largest and most powerful corporations in the world (Google, Facebook, Paypal, etc.).
For all the benefits brought by the content discovery, communication and value exchange from these Web2 companies, there has been a cost: the Web2 corporations dictate the rules of these applications and control the data of their users. Many argue that this dominance is not only violating privacy and generating monopoly rents but is also stifling freedom, civil discourse and innovation. These critics contend that the profit focus and extraordinary power of Big Tech betrays the free-spirited and decentralized principles that the original Web1 Internet was founded on (and that innovation thrives on).
In this context, it is worth remembering that what we are witnessing with the advent of Crypto currencies and the blockchain is a return to these original principles. And, ironically, the seeds of Web3 were also planted by the U.S. military. Although it took much longer to develop, Web3 actually got its intellectual start not long after the Internet itself (i.e. Web1) was invented. In response to the Arab oil embargo in 1973 the U.S. began focusing on ways to make everything from appliances to electric grids to airplanes more energy efficient.
The work to create more efficiency in airplanes is the one that is relevant to our story, This work required the planes to be flown with the intermediated control of computers. But the problem with computers was that they occasionally failed or had the wrong information, and this was particularly common in the adverse environment of high altitude, high speed flight. Even a few microseconds of incorrect state information and the plane’s wings will fall off so solving this problem was of utmost importance.
The way to make computers more reliable was to have a backup, and then a backup of the backup. But what happens if the various microprocessors on a plane disagree about the state of the plane or the action being directed by the various onboard computers? How do you get the various microprocessors on the jet to agree on the state of the aircraft and how do the control systems sort out potentially different commands from these different brains?
Over the 1970s and 1980s various computer scientists worked on this problem. Perhaps most famously was the computer scientist Leslie Lamport, who came up with the analogy of Byzantine generals laying siege to an ancient city. “Communicating only by messenger, the generals must agree upon a common battle plan,” he writes in his famous 1978 paper (which was funded by the Ballistic Missile Defense Systems Command and the Army Research Office). “However, one or more of them may be traitors who will try to confuse the others. The problem is to find an algorithm to ensure that the loyal generals will reach agreement.”
Using the Byzantine generals problem, these U.S. military-funded computer scientists developed the solution to the problem by creating a set of consensus protocols. The protocols allowed absolute certainty about the state of the aircraft and the authenticity of the commands flowing through system without having to rely on a single source of truth or central authority.
A whole branch of computer science sprang up that spent several decades working through all the permutations of ensuring that even if there was arbitrary data or adversarial data coursing through a communications network on a plane (or in in any other system), that a) there would always be a single truth about state and b) there was the ability to establish and perpetuate that truth without a central authority. Back then they were focused on CPUs or nodes in an aircraft when they were thinking about this problem. Today the authority from whom we no longer need to assure state or ownership include entities like governments, people, or corporations.
If this is starting to sound familiar, you probably in the 10% or so of Americans and Europeans who own bitcoin or NFTs, or are part of the 80% or so of people who have been following the excitement in these markets (percentages as of this writing). It will sound familiar because it was this very line of work that led to the creation of smart contracts, the Blockchain, cryptocurrencies, DAOs, DeFi, NFTs and the various other protocols and concepts that have burst onto the tech scene over the last few years.
The current craze around BitCoin, NFTs, and DAOs mirrors the 1999–2001 tech bubble in both the provenance of the technology as well as the enthusiasm driving an inflation of company valuations. If we are at a similar moment of over-excitement in the history of Web3 as we saw just before the dotcom crash, the question we have to ask ourselves is which will be the spectacular failures in the Web3 world and who will be the winners? Who is Webvan or Pets.com and which companies will be the Web3 version Google or Amazon?