Future Tense

Is It Possible to Have a Scam-Free Crypto Platform?

The founders of Cent shut down their company’s NFT sales because of “rampant fraud.” They’re still believers.

A cracked computer monitor with Bitcoins and NFTs coming out of it.
Photo illustration by Slate. Photos by klyaksun/iStock/Getty Images Plus, Overearth/Getty Images Plus, and michal-rojek/iStock/Getty Images Plus.

Just a year ago, the blockchain-based network Cent was at the forefront of the growing craze for nonfungible tokens and cryptocurrency-based social platforms. In late March, crypto evangelist and then–Twitter CEO Jack Dorsey sold his first-ever tweet as an NFT for nearly $3 million exclusively on a Cent-based trading platform called Valuables; the winning bidder then spent another million to buy an NFT of a tweet from Elon Musk. These were among the first-ever million-dollar NFT sales, making Cent a notable name in the booming crypto space: It earned investments from the founders of Quibi and LinkedIn, as well as artists like will.i.am. Last summer, co-founder and CEO Cameron Hejazi said that his company was raising $3 million to support creators who wished to mint NFTs across Cent, including JPEGs and tweets, while continuing to support coin trading and wallet storage on the platform.

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That all changed earlier this month. On Feb. 6, Hejazi halted “most transactions” on Cent, including “buying and selling” NFTs of everything except tweets on Valuables. As he told Reuters, there were “rampant” problems with “people selling unauthorised copies of other NFTs” and “making NFTs of content which does not belong to them,” and he couldn’t stop these fraudulent transactions and bad actors at a fast enough rate to stem their spread. Even though he’s still running Cent and plans to continue operating in the crypto space, Hejazi has stated that this kind of forgery is “a pretty fundamental problem with Web3,” referring to the vision of a “decentralized” internet proselytized by  many crypto fans. After all, the popular NFT-trading platform OpenSea has admitted that 80 percent of the NFTs that its users created there were “plagiarized works, fake collections and spam.” And as my colleague Aaron Mak and I have reported, a recent startup tried to monetize musicians’ works as NFTs without permission, leading to artist blowback and the subsequent shutdown of the platform in question. So rife is the space with scams and sketchiness that a project called Web3 Is Going Just Great finds itself posting numerous updates a day. Despite all this, Hejazi remains bullish on the prospects of a crypto future, telling Vice that “We can come together, and we can fix the problems inherent to the systems that we’ve created.”

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Recently, I spoke with Hejazi and his co-founder, Kate Geminder—previously a prominent executive at social networks like Facebook and Myspace—about the problems they’ve faced with Cent so far, why they remain upbeat about crypto and Web3, and what next steps they’re planning. Our conversation has been edited and condensed for clarity.

Nitish Pahwa: Cent was officially launched in 2017. Was it always used as a wallet for cryptocurrencies?

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Cameron Hejazi: No, it started as a social network. The initial component that we had on the network was called “bountying,” the ability to attach a financial reward to any number of replies—incentivizing engagement around a piece of content. Over the years, we proceeded to add in new mechanisms, like subscribing to creators. The whole premise of this network was to return value to the people that are making the value on the network, and by doing that, creating a more sustainable, fair social ecosystem.

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Cameron, you’ve talked about what was going on in Cent—the fraudulent transactions—as a systemwide problem across Web3. But you clearly believe in Web3 and are looking for solutions to go forward from this. What do you think is the best way to address these problems of fraud and plagiarism in these spaces?

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Hejazi: It’s interesting because we’ve created a new problem space. Innovation unlocks new possibilities, good and bad, and so we can say for creators, the good possibility is that they’re no longer locked into a single platform. They can do something creative, and they can carry it from platform to platform and reap the benefits of the one that most maximally suits them. With that also comes this great danger where someone could maybe copy something on a platform, get banned on that platform, but then go to another platform and continue to use the features and functionality, even though they were identified as malicious on the previous platform.

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If now we’re in Web3 and things can go between platforms and we’re “open,” there needs to be a Web3-native way to address this issue, and to date, no real thing exists for that. And so, that’s really the impetus, or the call here, to help co-develop a system of cooperation between all the different platforms around something like information sharing or tagging. It’s very early.

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Crypto has been around since 2008, and NFTs have also been around since 2014. How come there hasn’t been some sort of solution for the problems you’ve named yet?

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Hejazi: There actually has been, to some extent. For cryptocurrency, there are firms like Chainalysis, which do blockchain forensics. The problem is that they’re effectively surveillance platforms; they’re black boxes. You don’t have any transparency as a consumer, as another company, unless you pay Chainalysis for whatever these insights are. And a lot of what Chainalysis is focused on is around drug transactions, money laundering, very serious enforceable actions in the real world with really grave consequences. But at the same time, we know we can do better by creators by having an open ecosystem, as opposed to this closed, value-capture surveillance network [like the current major social networks]. We want to iterate from that private model into a more public model, because that just feels more aligned with Web3 values.

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Katie Geminder: Also, I don’t think that Web3 is defined yet. Anyone who says, “Oh, I know what Web3 is, here’s what it is,” is full of shit, because we’re all figuring it out. When you say you’re decentralized and you abandon the structures that happened in Web 2.0 that allow for dealing with fraud and returns and all of these issues, then you’re basically in the Wild West. So when we say Web3, there are ideals that I love about it like collaboration, openness, but some of the other things I love about it are contributing to the problem, like no centralized entity that is dealing with fraud. Because we care about the ecosystem and the community we’re building, we have a desire to make sure that if our mission is anyone can make a creative income, then that means that you shouldn’t have your work copied and taken advantage of.

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There’s a lot of self-regulation in these spaces. Is there any sort of way that laws and rules get enforced? Is enforcement the wrong word?

Geminder: I think that when you’re at the very top of the wave, about to drop in, there’s a need where people that are participating in that thing, they work together for the good of the ecosystem, not for just self-interested purposes. That’s part of what motivates us: We aren’t going to ever do anything in this space alone. Other companies are going to come in. Some are going to deal with scaling, some people are going to deal with infrastructure, other companies are going to deal with payment processing or fraud. I think that’s part of why talking about it, and talking to you, is about asking for help. How do we like-minded people try to do the best that we can for the ecosystem overall? Because if the ecosystem doesn’t work, then we don’t work.

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Hejazi: It’s like, in the absence of formal regulation, how can we best self-regulate? For us right now, it feels very Web 2.0, where it’s like, “Kick them out, ban.” But Web3 feels fundamentally different because ownership is a first principle. We can kick you out, but you still own everything that you’ve created, everything that you’ve amassed, in this idealized world. It is a call for more collaboration than what we’ve seen right now. We can’t just expect to kick people off our platform or kick them out of a Discord server and call it a day, our hands are clean. No, it’s not going to work like that. And so, that’s what we see today, but that’s not the end state or the solution.

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Cameron, you’ve tweeted before about how Cent has closed its Discord on occasion. Why do you think that Discord has become the fixture for so many Web3 communities? And if Discord is not the ideal app to use, what other communication platforms or spaces should be utilized?

Hejazi: I think it showcases people’s craving to have a dedicated space for themselves. With Discord, you have your own server. It sounds sectioned off, though in practice, everything is just spilling over everywhere. I would say that was one of the big things that they got right: Being able to get people at the cross-section of certain interests and bringing them into a room—albeit a very large and overly packed room—and getting the conversation going. I would think the second thing is that Discord lets you do things like token-gate a channel. So, you had to be a member of this [decentralized autonomous organization], and membership meant ownership of one of the digital assets of the DAO in order to actually access some exclusive community. That’s like a Web 2.0 version of a Web3 product.

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Geminder: It’s about community, and what Discord created is that sense of community that people want to participate in. It originates as a gaming community. Great, so now we can self-identify that we play the same game together and we’re on this Discord and we’re a part of a community, and we socialize, whether it’s IRL or whether it’s online. We saw that Discord actually became the place that young people would go and communicate with their friends. And then there is the tough side of that, which is that when kids go and congregate someplace and hang out and socialize—

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Hejazi: There’s bullies.

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Geminder: And that happens no matter where they’re congregating. Community can be unwieldy if there are no values embedded in the community, no constraints or bylaws. I think that’s what happened with Discord, but it’s not Discord’s fault. When you open it up to everyone and everything, which is what growth or viral desires will tell you to do, it becomes unruly.

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A lot of Web3 communities like the ones you’re trying to build aim to be very “open,” but at the same time, what you’re saying is unfettered growth also can be ruinous to these platforms. How do you balance that line between being open, but then not being open to everything?

Hejazi: I think there’s no silver bullet, and it depends on how you approach the social coordination game. Are people coming together around interests? Are you trying to build a friend graph or an audience graph? Reddit is fundamentally different from something like Twitter because Reddit is an interest-based, community-based system, and we’ve seen that scale quite well. Reddit is one of the largest sites in the United States, and it is decentralized in a very Web 2.0 way, in the sense that these communities live and thrive and do their thing and this isn’t breaking society in any fundamental way. On the other hand, social media and the exposure to information across the entire world by anyone within milliseconds has clearly shown that there are reasons to be cautious about just being insanely open to anyone. So when we think about scale and growth, we like to think about the more Reddit-y version, which is the interest graph, which is about bringing people together around things that unite them as opposed to things that divide them, things they’re interested in as opposed to things they want to rage on and argue about. In terms of quantifying it, I couldn’t give you a number, like Dunbar’s number. But from what we’ve seen, authentic organic communities happen best when there are intrinsic value propositions, when there’s connection to a particular person or topic, as opposed to a lot of the financialization that we’ve seen.

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There was a big alt-right surge on Reddit around 2015. Trolls took over the front page, and there were a lot of racist, sexist, nasty things said about the CEO at the time. Reddit has often just kicked out a lot of the communities that drove such harassment. If there is a Web3 platform that takes its cue from some of what Reddit is doing, how would you plan to avoid some of those uglier strains?

Hejazi: Well, I think it’s important to recognize our position and other companies’ positions as stewards into this future. We’re really trying to get people in; people aren’t really in yet. That does place a great responsibility on us to cultivate a place that people want to be in, and to that extent, I do think it is our responsibility to, as best as we can, self-moderate what goes on our network and what role we have in facilitating access to that network. Concretely, we could boot a community off our platform, but because it’s on the blockchain, technically it can still take its members and migrate to some other service. Then we can make a statement as a company saying that this has no place here on our network because it goes against our values, and that’s really the essence of it. We might not agree with everyone, but at the end of the day, we want to reflect the values of ourselves and our community. That’s another thing we’re also thinking about, how we incorporate more of a community role into the moderation process period. I think DAOs and tokens offer a little bit of promise of that, but we’re very early in the exploration.

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You’ve said Web3 is not yet defined. Do you have a definition in your mind for Web 2.0?

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Hejazi: Walled gardens.

Geminder: I would totally agree with that, given that I’ve helped build a lot of walled gardens.

I saw that on Cent’s website, there’s a mention of a “Web2.5.” What does that mean?

Hejazi: It means a combination of things, depending on which sort of value you’re trying to provide. Web 2.0 identity is email, Web3 identity is an ETH address. Web 2.0 mode of interaction is clicking like or upvote; Web3’s mode of interaction is clicking buy and purchasing something. When we say Web2.5, we’re trying to straddle both worlds. We’re not in whatever Web3 is going to fully manifest as yet: We’re still firmly in Web 2.0, we still check our email every day, we still use the internet mostly on a free basis, we’re not paying everywhere we go for things.

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Geminder: Having been a part of Web 1.0 and Web 2.0, I also think that when an innovation happens, people are automatically … not defensive, but skeptical, and a lot of people can become entrenched in that older space, user experience, or design. When new things come about, it’s hard to take the leap of faith and jump from the place you’re at right now to this new place, which is why the numbers aren’t tremendous in terms of who owns Bitcoin and who’s buying NFTs. It’s my desire to actually bring people along, because there’s a lot of misinformation and they think Web3’s not for them, they don’t feel like they’re invited to the party, and the reality is the opposite. It will be for everyone.

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Hejazi: A lot of our product strategy is really in around how do we minimize the hurdles, and even, to some extent, the importance of an NFT. We’re not going to be an agency here promoting your NFT saying that it’s the next greatest thing, because philosophically, like Katie’s saying, we believe it’s for everyone, and it’s not about just the most valuable, most expensive artifacts. It’s really a new way of bringing data ownership to people that previously never made sense, and now is starting to make a little sense.

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From the early days of the web, there’s always been this utopian vision: “A Declaration of the Independence of Cyberspace,” belief in the democracy of social platforms. I think a lot of people feel burned by that nowadays, and yet you still hear a lot of starry-eyed visions of what Web3 can be. How would you explain to others why you have faith in this system?

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Hejazi: The spirit of this movement that we’re in puts the person foremost ahead of any company or entity. Ultimately, what we’re enabling are the users of the platform to capture more value for themselves, which historically has a not been the case, especially with Web 2.0, where it’s clear that there was this advertising-driven value extraction that happened at scale. If we are putting digital ownership in the hands of everyone who uses this web, then [ad-driven value extraction] is just fundamentally not the business model anymore.

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Geminder: I think we’re building on top of what Web 2.0 was about, even though anyone who says that they knew what Web 2.0 was going to be about before it happened is full of shit. We have these ideals or this forward-looking analysis of what should be different, but we don’t yet know what it is, and so I think it’s really evolution and it’s innovation. I think that’s what’s most exciting is that we’re building on top of everything that’s come before and making some things better. Some people may say you’re making it worse, but whatever. I think that we’re evolving.

Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.

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