These are questions for wise men with skinny arms

Lighting strikes twice but you can’t choose to repeat history

I started reading Chris Dixon’s book and had a strong immediate reaction. I’m thoroughly unconvicted by its arguments even though I agree with the premise. The very concept of web3 delivering on the early promises of web2 is based on finding and improving on what made the early Internet powerful. Cargo cult technology and business choices might find something by accident, but the current Internet is in every way more powerful than the Internet of the past. The loss of not treating these privately owned platforms as public infrastructure is based on the flawed assumption that a decentralized system would even be effective or efficient computationally or competitively. Centralized systems are the natural consequence of consolidation that would otherwise lead to chaos. The egalitarian nature of protocols like email is almost exactly why centralized services to prevent spam and track delivery have become so successful. The lack of central authority during periods of high growth is more efficient in exploring the possibility space. The fallacy of assuming that web3 is some new frontier is the lack of fundamentally different modality. The idea that you can have digital contacts be more efficient from Web2 was the shift from physical to digital, framing a shift from centralized to federated as equivalent is misleading at best. The history of the Internet isn’t some magical tale of freedom winning out over oppression, it’s a pattern of any technology growth from trusted early adopters to masses of scammers. Trying to reboot the Internet will be as successful as trying to reboot cars into hydrogen powered machines (same model different fuel), you actually have to provide a better experience if your sequel is going to beat out the original.

The problem block chain has as a maturing technology is that it’s old enough that it’s being pushed by those that already have staked out the valuable land. The best gold rushes are the ones no one sees coming until it’s too late! Compare the adoption of BEVs and 3D TVs compared to their expectations. One was heavily bet against until it was clear that it was inevitable, while the other was forecasted to to be ’the future’ by those that had already laid a trap to extract maximum rent for the gold seekers. It’s almost a death knell to have a technology celebrated long before it’s actually ready or demanded by users. I think people often forget the popular sentiment prelaunch for the iPhone vs BlackBerry and iPad vs netbooks. Block chain has set up quite the hurdle for itself to clear and start ‘beating market expectations’ vs trying to live up to hype that in many cases wasn’t even done in good faith. The book mentions this later, as success came because it was ignored, and I wouldn’t call block chain ignored, even if it’s wildly misunderstood.

There are going to be three options for adoption: customer demand, regulations, and supplier choice. Customer demand is minimal right now, as the promises of block chain products haven’t convinced the average consumer and the ethical/privacy situation hasn’t been a driving factor even for the most interested. The killer dApp hasn’t yet been built. The kinds of guarantees that block chain offers haven’t been translated into a compelling experience. Regulation would enforce adoption as block chain offers automated enforcement of federation, areas where digital monopolies have flexed their data control would be well served by requiring a flexible popular public API implementation. Supplier choice requires the block chain to be the best solution to a problem such that dApps have a fundamental advantage over apps. Today this is the weakest argument, having real businesses compete on block chain is like forcing boxers to fight bare knuckled! Forcing data to be public removes any competitive moat that’s attractive for long term investments. The kinds of success that centralized businesses have accomplished is related to the ability to lock out or disenfranchise competitors, leading to their outsized valuations and investment gains. To change their mind the fundamental block chain technology has to be brought much closer to their core business, reducing the cost of adoption and increasing the benefits of competition to outweigh the defensive losses.

The book has ‘own’ in the title when referring to what the users could control, but for the business it’s the reverse relationship as they are now effectively renting access to customers via the chosen chain. This customer data centric view looks desirable from first principles, but the continued growth of users willing to pay less in exchange for vendor lock in continues to prove this wrong. Kindle books are cheaper than sites that sell epub versions! Adding an additional party to every transaction with an untrusted customer is trying to build some strange bridge where the data is ‘publicly’ owned but the relationships are private businesses. Governments have done this in other areas like tax and some labor disputes, but attempting to provide a similar level of trust without the government’s explicit support is going to expose the downfalls of coop-petition. By this definition, basically all government owned IT networks should be block chain based if it’s a superior technology to just having a trusted 3rd party. Other industries tend to form foundations (Linux, USB, MPEG) to prevent the kinds of rent seeking tendencies that current social networks exploit. The odds of new or existing businesses voluntarily adopting block chain technology on first principles is low, even with the ethical and social benefits.

The places where something like block chain will succeed is in places where the government should have regulated but either now has no interest or ability. Finding markets where all participants agree to fight while being intermediated by a judge with effectively no ability to arbitrate is going to be difficult. There are plenty of monopoly markets other than social networks like online ticket sales or real estate listings. While existing market players would obviously avoid giving away direct private access to their data, there may be enough interest in a consortium that could upset the incumbent. The use of a trust less counterparty is obviously intriguing in many financial markets, but the depth of the connections with traditional money movers will be hard to disrupt with providing an equivalently deep and broad value chain. The government has attempted to regulate the financial sector heavily and relatively successfully, but the deep distrust of the industry and the regulators might provide enough cover to develop an independent alternative. The cultural divide between government regulation and block chain is deep, so even if this is the easiest path for technology success it’s going to be difficult to persuade both sides.

Chris’s successful arguments for the primacy of Bitcoin and Eth and the lack of extensibility of the former were insightful after the laser eye meme was overdone. Admitting there’s no killer app yet and acknowledging the long technical road ahead to build something that could unseat the powers of today is realistic in the bear markets of today. He’s providing a vision based on his lived experience of a pathway to success for an untrusted and still nascent technology(specifically zk, not block chain). His tokenizing approach is probably the only realistic one to bootstrap the kinds of ecosystems he’s expecting. The other faulty comparisons I outlined above weren’t enough to sink the conclusion for me and might be convincing enough for others to invest or at least learn more. To that end I enjoyed reading the book because it was relatable and direct, it didn’t require any information on existing systems (in fact it assumed ignorance and explained them at a high level) and didn’t include much sneaky subtext pushing political or cultural values.