web3: INEQUALITY REBRANDED

Image: Yusuf Akın Gülsayın

Lately it has become considerably challenging to avoid seeing buzzwords such as ‘NFT’, ‘blockchain’, or ‘rebuilding the internet’ during this latest craze of web3 madness. Perhaps in order to cope with the remorse of missing the Bitcoin train, many are in the race to become early adopters of the ‘revolution’ and benefit from this emerging trend before everybody else. They are all singing the song of an ‘equal future’ and of abolishing the ‘system’ through decentralisation and inviting every internet user to join their ranks. The last two statements might look contradictory, until we start to see that invitees are reserved to be seated at the bottom of a great pyramid.

For Diehl and many sceptics, web3 is nothing more than a great PR campaign to rebrand what blockchain technology represents and what it can promise — it is merely there to take the gaze away from the negative connotations of cryptocurrencies. When they first emerged, cryptocurrencies were seen as the ultimate tool for disrupting and democratising the financial systems. However, it seems like what it has become is the greatest Ponzi scheme of recent times. The use of the word Ponzi here is not to be mistaken as an accusation, for it is acknowledged and even whitewashed by the so-called crypto gurus themselves. It is of course hard to deny the success of this huge scheme, when weekly or even daily gains in considerably amounts could be achieved by the top dogs through the pump-and-dumping of hundreds of meme coins (such as Dogelon Mars named after Elon Musk and the iconic meme Doge, which also has its own cryptocurrency) emerging every new day. However, it is of great question how this technology is ‘revolutionising’ our current financial system, other than digitising the accumulation of wealth in the hands of the privileged minority all over again.

For a possible answer, we might take a closer look at the latest trend in the art-trading market; Non-Fungible Tokens, better known as NFTs. In the simplest terms, NFTs allow any artist to implement their digital artworks a set of data, such as the current and the past owners of the object, the designator for the original piece, and the mark of the original creator (Nadini et al., 2021). In principle, the area of use of NFTs are not limited within the virtual space, as any of these tokens could be assigned to any object. But there is a great issue with this system as can be seen via many memes online; there is nothing limiting any other person on the web to ‘right-click’ and download the virtual art pieces sold on NFT markets without any expense or sanction. This ‘loophole’ narrows down the segment of people that would throw considerable amounts of wealth for a mere link as a certificate for being the ‘rightful owner’ of an object, not to mention the immensely inflated values on hit NFT collections such as Bored Apes, of which the average price of a piece is standing at $261.000 as in today. It is not surprising that these limitations eventually led the NFT market to resemble the ‘real-life’ one, with 10% of the traders owning up to nearly 85% of the transactions happening (Nadini et al., 2021). Furthermore, the reign of ‘experts’ seems to live on among the NFT circles, for the pieces praised by them have been more successful (Franceschet, 2020). Moreover, a study done by Barabasi shows that the transactions within NFT circles are encapsulated in a centralised bubble, standing at the exact opposite of what was initially claimed by cryptocurrency circles.

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So, the question remains, will web3 bring about a new utopian world it has promised, or will inequality prevail once more, only time will tell.

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The seemingly inevitable centralization of this ‘decentralised’ transaction network carries many flaws behind the unseen parts of the technology. For one, in order to make the exchange complete, traders still need a financial mediator such as cryptocurrency exchange platforms, which are basically not so distinct from any bank of our age. However, there lies one crucial difference between them, for there is nothing preventing these exchange platforms from blocking the access of users to their own wallets, or not fulfilling the terms of depositing unlike a regulated bank, as Dillinger remarked. Even aside from the issue of a centralised mediator, losing the key for a personal account means an eternal banishment from one’s own savings. In a nutshell, only the privileged class of tech savvy individuals can survive in this competitive market, which again is far from democratising any financial systems.

Of course, there are many other aspects of web3 deepening the existing inequalities even more; such as the immense energy consumption related to mining or transaction of cryptocurrencies (Sedlmeir, 2020), the untraceable nature of blockchain technology enabling money laundering easier than ever, or alt-right figures making great profits through adopting the blockchain train early. So, the question remains, will web3 bring about a new utopian world it has promised, or will inequality prevail once more, only time will tell. However, until then it feels only right to remain sceptical of all the hype being created around it.

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Podcast of the Day

Don’t forget to check out this great episode of Tech Won’t Save Us on the issue of web3, guesting Stephen Diehl

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REFERENCES

Barabasi, A. (2021, May 10). Opinion | The Hidden World of NFTs, Visualized. The New York Times. https://www.nytimes.com/2021/05/07/opinion/nft-art-market.html

Bored Ape. (2021). Bored Ape Yacht Club. Bored Ape Yatch Club. https://boredapeyachtclub.com/#/

CoinDesk. (2021, December 11). CoinDesk on. Twitter. https://twitter.com/CoinDesk/status/1469677423423799302

Diehl, S. (2021). Web3 is Bullshit. Personal Blog of Stephen Diehl. https://www.stephendiehl.com/blog/web3-bullshit.html

Dillinger, R. (2020). [Cryptography] Bitcoin is a disaster. The Cryptography and Cryptography Policy Mailing List. https://www.metzdowd.com/pipermail/cryptography/2020-December/036510.html

Dogecoin. (2021). Dogecoin. https://dogecoin.com/

Franceschet, M. (2020). Art for space. Journal on Computing and Cultural Heritage (JOCCH), 13(3), 1-9.

Hayden, M. E., & Squire, M. (2021, December 9). How Cryptocurrency Revolutionized the White Supremacist Movement. Southern Poverty Law Center. https://www.splcenter.org/hatewatch/2021/12/09/how-cryptocurrency-revolutionized-white-supremacist-movement

Jacobson, R. (2020, April 6). Crypto Was Meant to Democratize Finance, And It’s Finally About To. Nasdaq. https://www.nasdaq.com/articles/crypto-was-meant-to-democratize-finance-and-its-finally-about-to-2020-04-06

Know Your Meme. (2021, December 7). Doge. https://knowyourmeme.com/memes/doge

Loizos, C. (2021, March 24). TechCrunch is part of the Yahoo family of brands. Tech Crunch. https://techcrunch.com/2021/03/24/nft_users/

Nadini, M., Alessandretti, L., Di Giacinto, F., Martino, M., Aiello, L. M., & Baronchelli, A. (2021). Mapping the NFT revolution: market trends, trade networks and visual features. arXiv preprint arXiv:2106.00647.

Poleg, D. (2021, December 5). In Praise of Ponzis. Dror Poleg. https://www.drorpoleg.com/in-praise-of-ponzis/

Rosen, P. (2021, November 1). A meme coin named after Elon Musk rode the wave of joke cryptocurrencies in October to soar 4,000%. Markets.Businessinsider.Com. https://markets.businessinsider.com/news/currencies/dogelon-mars-price-history-october-gains-meme-coins-cryptocurrency-2021-11

Sedlmeir, J., Buhl, H. U., Fridgen, G., & Keller, R. (2020). The energy consumption of blockchain technology: beyond myth. Business & Information Systems Engineering, 62(6), 599-608.