Web3 and the Metaverse don’t need Blockchains
This article is a kind-of, sort-of follow-up to “Why I don’t believe in the Web3 narrative” and “Why I don’t believe in the Blockchain technology narrative.” It’s more of a provocation. If you want the rational articles, read the above links.
Because I work on and around the Metaverse, people repeatedly ask me about blockchains or Web3 and are quite surprised when I claim that both have nothing to do with the Metaverse.
The ensuing conversations go something like this.
Why are blockchains not part of Web3 and Metaverse? I read all the time that they are fundamental!
Blockchains are old by technology standards. David Chaum first proposed a blockchain-like protocol (Blind Signatures) in 1982. Satoshi Nakamoto conceptualized the “modern” blockchain in a post on Oct. 31, 2008: “Bitcoin: A Peer-to-Peer Electronic Cash System.”
Despite being around for 14 years, the technology didn’t fulfil any of the original aspirations. It’s not usable as currency, it’s not a hedge against the traditional financial system, and isn’t used much peer to peer.
It only has two real hits:
- Being used as unregulated, speculative financial asset
- Facilitating extortion via ransomware
Wait, what? Isn’t blockchain this innovative technology, enabling all these amazing use cases?
No. These two are the only scale use cases for blockchains that exist. And no, it’s not early. As I said, blockchains are old. Early has come and gone.
It’s important to understand that the whole speculative financial thing is a negative-sum game.
Blockchains themselves don’t do anything, they are detached from any real goods and services. Tokens like Bitcoin, Ethereum, and others are not backed by any economic activity or value. The only money in the system is what people put in, it cannot generate new money.
That means: For somebody to make a profit in crypto, somebody else needs to lose money. Zero sum. And the miners that handle the transaction scrape something off for themselves to pay for the operating costs of the system, making it negative-sum.
Don’t believe me? Here, I’ll let crypto genius Sam Bankman-Fried explain how the entire system is essentially a ponzi pyramid:
This system of course only works if new suckers constantly inject new money, and nobody looks too closely at the numbers. Hence the comparison to ponzi and pyramid schemes.
This is why we saw so much advertising for crypto coins and exchanges a while back: On buses, stadiums, sports teams, the superbowl, you name it, they bought ad space.
It’s people trying to convince YOU to put money in, so that NUMBER GOES UP and WAGMI! Are you in?! Everything to get fresh money into the system for exchanges and whales to siphon away from retail investors.
It’s really that simple.
Uh, ok. So, what about Web3?
Well, the reason you don’t see advertising for crypto anymore is because a lot of countries started to regulate them, like with advertising for financial products or gambling. In short: Some caught on that this was a ponzi pyramid. The casinos suddenly had a problem getting new money in, pushing the system to the verge of collapsing, causing the crypto crash in mid 2021. Bitcoin dropped from 60k to 30k in weeks.
Until somebody had a great idea.
“Why don’t we attach ourselves to other narratives? Prove that blockchains have other use cases than ponzi pyramids and extortion?”
They looked around and noticed a movement, based around criticizing the “Big Tech” centralization of online power into monopolies. Arguments ranged from “I think Big Tech has too much influence, hinders innovation and objectifies people” to “I don’t want to be arbitrarily delisted from a monopolistic platform with systemic importance, ruining my life whenever they please.” At that time, it was a fundamentally social discussion, with solutions like legal regulation or even breaking companies up.
The crypto crowd took this core concern about centralization and monopolization in the digital space and crafted a new narrative that blockchains with their decentralized properties would somehow be able to solve this issue. They combined the social criticisms around Big Tech with technology solutionism:
- Digital centralization bad
- Blockchains decentralized
- Thus, blockchains good against digital centralization
This new narrative is now called Web3.
It of course completely ignores the base problem: Why did digital centralization happen in the first place? And whether blockchains a) provide a valid alternative to the current system that b) prevents this from happening again.
TLDR: No to both. In fact, the only way this new proposed Web3 ecosystem can be used at scale is to imitate the system it’s replacing. Here is a long discussion about why that is.
But that doesn’t matter. It was never about creating a valid alternative to the current system; it was about a narrative that would get more money into the ponzi pyramid casino:
“Blockchains are not that bad, see? It helps with decentralization, protecting you from an unfair world in which Big Tech gets richer all the time and you don’t! Also, buy this Web3 token, because it will make you rich, too!”.
Or as Wikipedia puts it: “Particular interest in Web3 spiked toward the end of 2021, largely due to interest from cryptocurrency enthusiasts and investments from high-profile technologists and companies.” Guess why. Now buy their tokens.
Wait, so what about all those Web3 use cases?
They are mostly marketing to sell you tokens. Hallucinations. Vision LARPing. Sometimes traditional brands jump on the hype to get free earned media because the crypto enthusiasts will provide free multiplication: “See? Nike is Web3! Everybody buy tokens now!” while Nike gets free reach. Win-win.
The Web3 narrative took an important topic around reining in technology monopolies and turned it into “Blockchain awesome! To the moon! WAGMI!” Solving the actual issue of Big Tech would require education, discussion, consensus, regulation, and governance — not blockchains.
Wow. So, what about the Metaverse?
Same thing. The crypto crowd looked around and thought the Metaverse would make a good narrative to attach their newest narrative to. In the meantime, they had developed the crack-cocain equivalent of their stock-market ponzi pyramid tokens: Unregulated, speculative digital collectibles. In short: NFTs.
“See? It’s not about some abstract number! It’s about digital art! Collectibles. Totally not like a fraudulent stock market. Have an ape and get rich!”
And when that also peaked and was on the verge of collapsing, they needed another angle. Another narrative to attach NFTs to.
And the Metaverse provides that. Most would agree that at the core the Metaverse is about persistent, digital worlds that are connected to aspects of the physical world, enabling shared experiences across both the physical and digital worlds. But otherwise, it’s not really defined.
And so, they fabricated some hair-brained ideas about how NFTs would enable the Metaverse:
- Metaverse is virtual worlds
- NFT is virtual content
- Thus, NFTs powering Metaverse
“Interoperability! Play to earn! Ownership! Buy an NFT because Meta said the Metaverse is real and so NFTs also must be real!”
And no, none of that stuff works either. Looking at actual Metaverse solutions and platforms, they are all built without any trace of blockchains or NFTs.
Wait, what about The Sandbox? Decentraland? Axie Something?
What about them? Nobody plays those. They are not a game, nor Metaverse platform. They are an embodiment of how the ponzi pyramid people think of the narratives they subsume: A new front, a new skinned version of their crypto casino, trying to sell you tokens.
None of those have anything to do with enabling shared, persistent experiences across both the physical and digital worlds. Much like Web3 “solutions” don’t do anything to make social media less toxic or manipulative. They are just totems to point to and say: “See? Legitimate business! Innovation! Don’t worry if you don’t understand, just buy this token!”
And blockchains as technology?
There are some legitimate business use cases for blockchains, but they are extremely focused and niche. For example, settling roaming credits between telcos in near real-time. Tracking items across trust boundaries in supply-chains. But not paradigm changing since they usually run deep within industries, amongst a handful of companies, on private systems. And even then, they are usually bad.
Seriously? But Gartner and Forrester just published a study ...
Don’t believe me? Well, then show me a case study where blockchains worked at scale. Just one. What you will find are either absurd cases like using “600 virtual machines (VMs) to securely store and manage data points for only thousands of transactions per day” or a list of long dead proof of concepts. There is also the blockchain study that “finds 0.00% success rate and vendors don’t call back when asked for evidence.”
Most blockchain advocates just use buzzwords and vague ideas, while struggling to go into any depth — with hilarious results when they do. Like, really funny. My favorite was the argument that: “Sure, it doesn’t work NOW, but it could work if everybody would just rebuild the entire industry based on my first principles.”
There has been no real-world adoption in 14 years. It’s not early, it’s just bad. And the rest are ponzi pyramids.
Or people that got caught up in the mess, believing in the original narratives while thinking that blockchains would really solve anything in that space — if they just tried hard enough. But technology is not a hero’s journey.
So, Web3 and the Metaverse really don’t need blockchains, huh?
No.