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Why Are Social Tech Giants So Afraid of the Blockchain?

With Facebook, Google, and Mailchimp exacting bans on blockchain businesses, an analysis of the fraught relationship between Web3 and the legacy internet.

Photo via Ross Findon

by Jemayel Khawaja

It started with Facebook. Right around the time the platform became mired in scandal for doing what most knew what it was doing anyway — selling users’ intimate data to the highest bidder — it was announced that Facebook had banned all promotion of posts relating in any way to cryptocurrency or digital currency. “This policy is intentionally broad while we work to better detect deceptive and misleading advertising practices,” noted Facebook’s statement.

Exacted under the banner of inhibiting scam ICOs from luring vulnerable Facebookers into parting with their hard-earned BTC or ETH in fraudulent token launches, the draconian move has in effect stymied the communication capacities of thousands of genuine and worthwhile startups by inhibiting the promotion of content that features any phrase even vaguely related to blockchain and decentralization in its headline.

Next came Google Ads. Then Twitter. And then Mailchimp! What’s resulted is an effective blockchain marketing blackout on platforms that make up much of the internet experience for most of the Western world. A blanket ban on all promotion of blockchain-related pages, regardless of whether they represent an ICO at all, functions less as a safety measure and more as an unprecedented act of censorship against a whole technology that should cause alarm to anyone watching how fast this late period of Web 2.0 is unraveling.

The situation has elicited a spectrum of reactions from around the blockchain world. Many have come out against the move. Some take the high road, claiming either that the industry needs to be exorcised of its scammier demons or that we don’t need those aging 2.0 platforms anyway. Almost universal, though, is a sense of surprise at the sheer breadth and severity, particularly when companies like Facebook and Google are purportedly looking into blockchain technology themselves, and an understanding that this is just another sign that there is still lots of building to be done to make the world in the image of decentralization.

“Centralized platforms give themselves this right because of how they are architected,” says Ariella Steinhorn of Blockstack. “We voluntarily hand over data that should be our own, and agree to their terms because there are no other options. But instead of seeing this as an obstacle, Steinhorn says “Blockstack is focused on funding decentralized projects and promoting usage of decentralized apps that including private messaging platforms, word processors, social media networks, and wallets.” Inspiring as this vision of a blockchain world is, it comes with an implication that the building will be done in spite of or in opposition to the legacy internet rather than with it.

Blockstack’s growing suite of decentralized apps aims to create updated versions of social tech stalwarts.

How did we get here? The situation is a goopy melange of monopoly, censorship, and enterprise gamesmanship. Facebook has long since manipulated its algorithms to require professional pages — be they DJs, politicians, blockchain startups — to spend more and more to reach audiences. In fact, achieving reach within Facebook’s audience analytics widget by pumping dollars into the right demographic (dare we say ‘psychographic’?) is now the major tenet of the whole digital marketing profession. Ads drove over $40 billion in profit for Facebook in 2017, and the platform has become the de facto information source for many of its 2.1 billion users.

Facebook’s monopolistic hegemony over information led Rolling Stone’s Matt Taibbi to state last week: “We need to break up Facebook, the same way we broke up Standard Oil, AT&T and countless other less-terrifying overgrown corporate tyrants of the past. The moral if not legal reason is obvious: A functioning free press just can’t coexist with an unaccountable private regulator.”

Facebook’s reach algorithms and censorship policies are conducted in secret, with minimal accountability transparency despite its role as the informational regulator of the western world for people aged 18–45. This means that the company’s blind spots, missteps, and oversights result in very real problems offline. Case in point: If Facebook went after Russian hackers with half the vigor with which it has gone after crypto, we likely would not have found ourselves in the dire political situation we’re in today. It is, in fact, easier to advertise illegal opioids, sketchy diet pills, and hate speech on Facebook than it is to market a blockchain app. Something is very wrong here.

All of this isn’t even to mention the red herring of scam ICOs in the first place. Yes, phishing, scamming, and a general lack of accountability and ethics are legitimate problems in the blockchain space. But for some total newbie to get scammed by an ill-intentioned ICO advertising on Facebook — the problem that Facebook’s ham-handed blanket ban alleges to solve — that newbie would have to create an account at Coinbase, link their bank, buy ETH, wait a week, create a wallet, learn at least the basics of transacting on the blockchain, and then participate in a live token sale for the scam to even kick in.

Photo via Rodon Kutsaev

Although platforms like Facebook and Twitter garnered most of the headlines in banning advertisement of blockchain projects, email automation giant Mailchimp took things one step further by banning blockchain-based clients entirely. The story first broke when it came out that Week in Ethereum, a long-running stalwart of sober and informative blockchain development news, was to be booted from the platform.

“We recognize that blockchain technology is in its infancy and has tremendous potential,” Mailchimp PR rep Lauren Lloyd communicated via an official statement. “Nonetheless, the promotion and exchange of cryptocurrencies is too frequently associated with scams, fraud, phishing, and potentially misleading business practices at this time… It’s important to note that this update to our policy does not prevent the discussion of related topics in messages sent through our platform. For example, journalists and publications may send cryptocurrency-related information as long as they’re not involved in the production, sale, exchange, storage, or marketing of cryptocurrencies.”

The last line in particular, which was not included in their initial statement, suggests there may be some wiggle room in what Mailchimp deems appropriate. Unfortunately, that was not the case for Week in Ethereum. Evan Van Ness, who has run Week in Ethereum for two years, was magnanimous despite the obstacle: “I’m sympathetic to the fact that they want to remove scammy clients. That can affect their core business,” he explained. “As for Week in Ethereum, I’ve been with them for almost two years. The fact that they were too lazy to do any sort of filtering for an account with a 66% open rate and 0% reporting spam is what I find ridiculous. They’re, theoretically, a tech company after all. To be honest, I wanted to quit Mailchimp anyway. They’re expensive for the services they provide, and this is an opportunity to find a better partner.”

And those better partners are popping up. Creative-focused upstart email automator ConvertKit is offering a discount code for blockchain businesses thinking of switching over. “I was really surprised to see so many tech giants exact such wide ranging measures on a technology that’s clearly becoming a key part of how things get built in the world,” says Barrett Brooks, COO of ConvertKit. “We want to be a viable alternative, an email provider for the future, not the past. A huge part of the future of commerce and creativity is going to be built on blockchain technology. We understand that. By no means do we think that we need to outlaw anything to do with blockchain to make sure our platform remains secure. We’re gonna be here for the creators using blockchain productively to create value in the world, and we’re making sure we shut down accounts that are takers and fraudulently taking people’s money.”

Photo via Rami al-Zayat

Now, does this mean there is some terrible and evil deep tech conspiracy to block out blockchain tech before it has a chance to flourish? Probably not. At least explicitly. More likely, tech, social media, and community platforms like Facebook, Twitter, and Mailchimp suffer from a general distrust of the blockchain movement. With the outlook of tech giants suddenly blotted by the struggles of their solutions growing so big that they have become part of a whole new problem, this new wave of technology undoubtedly presents a scary proposition. There may be no conspiracy, but there will be no quarter given either — at least until they figure out how they can profit from it.

So the question still has to be asked: What are social tech giants so afraid of? Web 2.0 tech giants have built their world-beating business models from creating an attention economy, commodifying users, surveilling their usage, and owning the data. Web3 platforms, from BAT to uPort to SingularDTV to Civil, chip away at this business model. Each blockchain project that decentralizes a little bit of agency or value or control back into the hands of the users is a threat to the status quo. If 2018 has shown us anything, it is a clear public desire for control over digital identity, footprint, and the creation and transaction of value online. Web 2.0 platforms exist to maintain control over such things.

The decentralized evolution is happening. Whether or not Facebook or Twitter try to control its course, when blockchain platforms begin to come good on their potential, Web 2.0 will already be a thing of the past. That’s just how it goes. Remember AOL? And the blockchain world is fighting back. Already, blockchain coalitions ranging from Russia to China and South Korea have banded together to file lawsuits in the US against four social media giants, and more are on the way. Meanwhile, according to The Economist, the European Commission and countries like France and Germany are readying legislation to limit Facebook, and Attorneys General from a handful of states including Missouri, have opened up inquiries into Google’s monopoly on information.

In truth, oversight of the circus-like atmosphere around speculative and shady ICOs is a good thing. Regulatory bodies are catching on — some faster than others — to the fact that blockchain and digital currency should be sensibly developed rather than marginalized. As more blockchain applications provide real world benefits and more people grow wise to ICO scammers, legacy social media platforms won’t be scrambling to inhibit the promotion of blockchain tech on their platforms; they’ll be scrambling to integrate the tech itself.

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