Jack Dorsey, CEO of Block (the payments company formally known as Square) and the former head of Twitter, made it very clear how he feels about Web3 on Monday.
Web3 is the latest Silicon Valley buzzword referring to a possible future version of the internet that’s run on blockchain networks, the record-keeping technology that underlies cryptocurrency. If you follow tech news at all these days, you’ve seen the term’s almost-instantaneous absorption of online discourse about the web. NFTs, DAOs, laser eyes, the metaverse—all of a sudden Twitter feels like a crypto-bro fever dream. But Dorsey’s broadside, and some pushback it inspired, underlined that crypto enthusiasts aren’t at all on the same page about the Web3 hype. Instead, they have some distinct factions.
In Web3 booster’s formulation, the internet originally began with the Web1 era, which was characterized by open protocols, decentralization, and static webpages that weren’t regularly updated and didn’t have a lot of interactive features. We’re currently in the Web2 era, in which major corporations like Facebook and Google control the biggest hubs of activity and services on the internet. Web2 also encouraged users to interact more with the internet and produce content on social media. Web3 is, then, is pitched as an attempt to recapture the decentralization of Web1 while maintaining the interactivity of Web2. Proponents of Web3 argue that the blockchain negates the need for central authorities like Google to act as gatekeepers for services on internet or to facilitate virtual transactions between users. It would also theoretically be individual users and not big companies who control pieces of the internet, partly by obtaining cryptocurrency tokens that entitle them to ownership over virtual objects or decision-making powers in certain communities. Viewed through rose-colored glasses, Web3 shifts the balance of power away from dominant institutions back to the users.
Dorsey is essentially arguing that Web3 is doomed to break its promise of a more egalitarian and individualistic internet. Deep-pocketed venture capitalists, tech companies, and hedge funds are collectively pouring tens of billions of dollars into developing Web3 services and infrastructure. Just this month, a crypto firm called Hashed raised $200 million, Kraken Ventures Fund raised $65 million, and venture accelerator Brinc raised $130 million, all for Web3 investments. Representatives from the venture capital firm Andreessen Horowitz, which has a $2.2 billion fund devoted to blockchain infrastructure, even visited Capitol Hill in November in an attempt to influence regulations around Web3. It’s hard to see why these actors would be making such moves and investments without the expectation of a pay off in the form of power and earning potential in a future Web3 ecosystem. Tech entrepreneurs aren’t going to use their money to pave the road for an internet in which they’re on equal footing with some rando user. In the replies to his original tweet, Dorsey sparred with Web3 boosters and pointed to his previous experience with venture capitalists in order to back up his prognosis. Many of his detractors, on the other hand, accused him of being a Web2 king who is afraid of losing power in a Web3 era.
He also tried to knock some crypto evangelists down a peg.
Concerns about centralization aren’t entirely conjecture. Indeed, we’ve already how certain actors can concentrate power on the blockchain with cryptocurrency. For instance, Tesla and SpaceX CEO Elon Musk demonstrated earlier this year just how much influence he has over multiple cryptocurrencies. In February, Tesla announced that it had bought more than $1 billion of Bitcoin and that it would start accepting the cryptocurrency as payment, which pushed Bitcoin prices up 14 percent to what was then an all-time high. A few months later, Musk reversed Tesla’s policy on accepting cryptocurrency due to environmental concerns, which caused Bitcoin prices to drop by 8 percent within three hours. Musk seems to have even more power over Dogecoin, a Shiba-Inu-inspired cryptocurrency that he’s helped to popularize; shortly a May appearance on Saturday Night Live in which he joked that cryptocurrency is a “hustle,” the price of Dogecoin plunged by 80 percent. (Musk and Dorsey had a somewhat cheeky exchange about Web3 and Andreessen Horowitz in the wake of the Block CEO’s tweets.) And Musk isn’t the only person with this sort of influence: crypto whales, or investors with humongous caches of a certain cryptocurrency, have been known to affect prices simply by moving their treasuries around. Companies have also already found ways to dominate certain crypto markets. OpenSea, a site for buying and selling NFTs, has a market share of 95 percent in the space. As a recent example of apparent insider trading demonstrates, even OpenSea’s decisions about which NFTs to feature on the front page hugely impacts the price the seller can demand.
Though Dorsey is by no means the first person to make a consolidated power critique of Web3, it is striking that he’s taking such a fatalistic stance on the matter, particularly given how much he’s worked to promote blockchain technologies. When he was still in charge of Twitter, Dorsey funded a small team to develop a decentralized standard for social media. He’s been a major booster for Bitcoin for years and has contributed resources toward developing a Lightning Network that would make it easier to use the cryptocurrency for day-to-day payments. In early December, he even changed the name of Square to “Block” partly to reflect its work with blockchain. Under his leadership, Block has also been looking into building a Bitcoin mining system, formed a nonprofit called Cryptocurrency Open Patent Alliance, and devoted a division known as Spiral to promoting cryptocurrency.
All of which is to say that Dorsey’s had crypto on the brain for a while. But now that he has one less job, he appears to be sharing what he really thinks.