The world is bursting with talks of new, exciting technologies. Blockchain, Cryptocurrencies, NFTs, DAOs, DeFi, Metaverse… all manners of concepts have seemingly sprouted from our collective digital imagination. Alone, they are naught but fun diversions. Together, they make up the key components of Web3.
Despite forceful push-back from many corners of the internet, this latest web iteration is gathering steam. Not least because of the billions being poured into it by large corporations. It is also vindicated by millions of rabid devotees eager to destroy the current world order. Opening any news site, who could blame them? The promise of a decentralized model wherein anonymity, fairness and freedom are the operating words does sound appealing in 2022. And that is what Web3 promises.
There is however a lot to ask before blindly accepting a new system as a better system. Web2.0, with its penchant for apps and user-generated content, has created as many social, economic, and political issues as it has solved. Who could have foreseen in 2006 that Facebook would weaponize elections? In 2010, that Instagram would be a key contributing factor to teenage suicide? That the creation of Uber would bring about a new era of serfdom? Two decades ago, we were just learning to set up profile pictures. CEOs and technologists preyed on the public naivety by shrouding their inventions in complex technical gibberish. Impaired by lack of knowledge, we were fooled, and went along, with the results we know and see today.
History may not repeat itself, but it does rhyme. Web3 technologies are more complex than what we are used to today, but the people pushing it are the same. As are their intentions. To create a better digital world, and avoid traps past, all must take part in the discourse this time. We have a duty to ourselves, to our peers and to our children to understand the new systems proposed and shape them without blindly accepting them.
Technology is neither inevitable, nor inexorable. Much like Web2.0, Web3 is being born out of social and financial pain. The circumstance of their birth matters more to shape technologies than the intent behind their creations. Logically, then, we must first know where we’re coming from to understand where we’re going.
The 2007-2008 Financial Crisis
The world economy functionally collapsed in 2008. This has made a lot of people very angry and has been widely regarded as a bad move. The crash is simple to understand. Banks issue loans. Groups of loans are worth a lot as financial instruments called bonds. Banks issued loans even when they shouldn’t have because a bad loan as part of a bond was worth more to them than a good loan that wasn’t part of a bond. People couldn’t repay loans as they came due after a short grace period created to promote sales. Bonds on which the economy was based became worthless overnight. The whole system came crashing down.
As with technocrats, financiers like to hide behind fake technical complexity.
At the end of the day, it came down to this : people were out of work because insiders got greedy. Most never got punished. But an entire generation is yet to recover from the financial scars of the subprime crisis. This created an anti-elite sentiment which is yet to subside. The fact that many mocked the Occupy Wall Street movement should haunt us as we consider that, had we heeded them, we might not be trying to monetize the concept of color today. But we’re getting ahead of ourselves.
The five-percenters in Silicon Valley saw this revolt as a way to finally stick it to the one-percenters who had never respected them. Airbnb was born a few days after The Housing and Economic Recovery Act of 2008 was enacted (oh the irony). Uber was created a year after the crash. Others had already been around for a few years, but saw their revenues grow exponentially as the unemployed tried to make ends meet by putting their cars, houses and bodies on the market for richer people to use. Ad novum ducem, eadem cum veteri duce; meet the new boss, same as the old boss. Web2 was around before 2008 but became inevitable after the financial crisis.
What few realize is that Web3 was also born at the same time. Bitcoin was invented in 2009, for the same reason as the gig economy : “the elites cannot be trusted, and we want to be our own leaders”. See it as a fork in the system : while Silicon valley proposed decentralization-as-a-platform, the creator of Bitcoin proposed complete decentralization. For its creators, this was the only way to avoid an unhealthy aggregation of power.
The world was not yet ready for Web3, but the seeds were sown. It would have to get worse for them to sprout. Much worse.
The Election of Donald Trump
Donald Trump took office in 2017. This has made a lot of people very angry and has been widely regarded as a bad move. 2017 was a year of political upheaval, intensified by technological platforms. Facebook was being used to influence politics, from the United States to Myanmar. Britain had triggered article 50 following a farcical misinformation campaign. France barely avoided a far-right government. #MeToo went viral on Twitter. Fake news entered our collective lexicon. Terror in Las Vegas. In Manchester. In Charlottesville. On the London Bridge. In Barcelona. All with their share of misinformation and virality.
It is no surprise, then, that a technology promising a new, better deal would come to the forefront. Young people needed hope. They found cryptocurrencies. In December 2017, Bitcoin skyrockets for the first time. Prices went from 1,000$ to 20,000$ per token in a matter of weeks. A few months later, “cryptocurrency,” “blockchain” and “initial coin offerings” were added to Merriam-Webster’s dictionary.
It looked like gambling. But what else was there to do? We can’t afford homes. The world is burning. We live on platforms that literally thrive on anger and discontent. Corporations post memes on Twitter as they enslave children abroad. We wish upon shooting stars that are actually billionaires going to space for fun. We laugh at cows wearing VR headsets, while letting Netflix automatically play the next episode. There is nothing to do except gamble.
Bitcoin was most people’s first introduction to Web3. The physical world was, at the time, steadily being digested by digital. Then came the pandemic.
The COVID-19 Pandemic
In 2020, COVID-19 closed the world. This has made a lot of people very angry and has been widely regarded as a bad move. We’ve had to be fired, work jobs that felt unsafe, or commit to what feels like a lifetime of Zoom. We’ve had to ask everyone how they’re doing, all the time. We’ve had to home-school our children and check on our parents. We’ve had to keep up with the news, because what else was there to do. We’ve lived, laughed, loved, and we’ve died, cried, mourned. And all the while, we continued to be both audience and entertainer in the highly performative show that social media has given us a platform to create.
This hit young people hard. Especially young men, who weren’t doing so well before the pandemic to start with. Many retreated online, to Reddit and Discord, where anonymity is both a great equalizer and a great dehumanizer. Indeed, it’s easy to hurt someone you don’t see or know. They retreated to Joe Rogan, where they could be told the problem wasn’t them, but others. Many have since become overly confident that they know better, and believe they can function fine without the system / the establishment holding them back. It’s particularly disheartening to see crypto/DeFi take off in popularity during a global pandemic, when the message “we’re all in this together” could not be more plain. Crypto is, to some degrees, an outright refusal of that. The social contracts that link us seem to have become more tenuous, we’re all seeing it.
In 2020, digital ate the world. The economy leaped forward 7 years in terms of digitization, compared to expected trends. And that’s only in relation to commerce. Millions of people discovered digital dates, digital school, mobile banking, online workshops, remote voting. And it was… fine. We were finally ready to accept the idea of digital finances, digital organizations, and even a whole digital universe. We were ready for Web3.
The Gamestop Short Squeeze
In January 2021, GameStop shares soared 1,700 percent as millions of small investors employed a classic Wall Street tactic to put the squeeze — on Wall Street. This has made a lot of people very angry and has been widely regarded as a bad move. A short squeeze is easy to grasp. A trader borrows a share of a company. That share is worth 10$. The trader sells that share. The trader hopes the company will do badly. If that does happen, he buys the share again, for 7$ this time. He then gives back the share to its original owner. Mathematically, he’s made 3$. If, instead of going down, prices go up, the trader needs to buy the share at a higher price to give back. If nobody wants to sell because a bunch of Redditors banded together, he will need to make higher and higher offers. This can very quickly become ruinous.
The 2021 short squeeze happened for a few reasons. Greed, obviously. But also boredom, and access to disposable income (or government stimulus checks) that had not been spent in 2020 because of the pandemic. The last two ingredients came straight out of 2008 : determination to teach Wall Street a lesson, and an endless flow of get-rich-quick hype and ideas delivered via social media.
Investments in “meme stocks” was a gamble. A stupid one, too, for a majority of the people involved. If you made a Venn Diagram of the people who bought Bitcoin in 2017 and GameStop stocks on RobinHood in 2021, you’d most likely just make a circle. But this turn of events went further than the Bitcoin 2017 hype, exposing the elements that would go on to feed the NFT boom one year later.
There were talks of community. Of belonging. Of meaning. Of revolution. All things many young people had been seeking for a year at least, and all their lives at most. Loneliness created in part by social media coalesced into streams of consciousness on other social medias such as Reddit or Discord. A language was created, as a way to show loyalty to an in-group versus an out-group. On r/WSB, you say “gm” when you wake up. You “hodl” with your “diamond hands” to make it “to the moon”. “WAGMI”, unless you “FUD”. If that’s the case, “HFSP”, you’re “NGMI”.
Some of those small-time investors did make money… And some on Wall Street fared poorly… When the smoke cleared, though, the popular image of tables being turned on America’s financiers wasn’t entirely accurate. Individual investors who bought GameStop this time a year ago and never sold are sitting on hefty losses.
Buyers of so-called meme stocks like GameStop and AMC viewed their investments as an opportunity to fight against a financial system rigged in favor of the wealthy. For a large number of individual investors, the stock market has become the battleground on which they join forces to right perceived wrongs and fight the powerful.
This is when Web3 went from obscurity to obnoxious ubiquity.
You Are Here
In 2021, NFTs became the new big thing following THAT Beeple sale. This didn’t make anyone angry. We were too tired. The fact that the sale was at least a little bit fraudulent seems to have bothered no one at the time. Or since. Millions were asking for a movement. Silicon Valley rushed to provide it. Angry at the bankers? Have some Cryptocurrency and DeFi. Tired of giving your data to big tech? Have some blockchain. Sick of Art being the realm of insiders? Have some NFTs. Mad at the government? Form a DAO and buy a copy of the Constitution. Exhausted by the real world? Have some Metaverse.
The people pushing these technologies and their fans don’t just want them to be the change they’re envisioning. They need it to be real. Why else, then, would they have spent millions in technologies that never should have left the proof-of-concept stage? What was the point of it all? We’re in too deep to go back now.
When large groups of people can join forces and channel their money towards goals they care about, the old distinction between market participation and market manipulation is no longer valid. And once enough people partake in market manipulation, all other market participants must respond in kind.
But always remember that none of these technologies happen without the Goldilocks zone created by the march of history. Over time, seemingly unplanned, unrelated, chaotic actions give rise to something that seems like it has been designed. We needed a financial crisis to create the app-led world that isolated us and primed us for anger at elites. We needed a world in crisis to envy a new system. We needed COVID to digitalize the world. Without these events, the technologies being presented to us today would be radically different.
Now… we know where it’s coming from. Where is it going?
This article was written with the help of Stéphane Distinguin, Fabernovel's founder & CEO, amongst many, many other things. I thank him warmly for his notes and comments.
