Don't show Me the Money
The blockchain will disappear. But first, it will uncover a whole new world.
🎧 I chatted with Brandon Beylo on the Value Hive Podcast about my experience in (and views on) China, the future of work, Ponzi schemes, the Metaverse, and one-man media companies. Check it out here.
📚 I just finished teaching the first cohort of Hype-Free Crypto, with an amazing group of 130 participants from across the world. In January, I will be teaching two cohorts — Hype-Free Crypto and Future-Proof Real Estate. See you there!
This is my last newsletter of 2021. Thank you for reading and sharing my work. It means the world to be able to make a living from writing and speaking about the stuff that interests me.
The most-read pieces from the past year are:
Other highlights include my New York Times articles about the future of offices and the broader consequences of remote work; and my wide-ranging conversation with Professor Scott Galloway.
The blockchain will disappear. But first, it will uncover a whole new world.
The French Revolution brought down the monarchy in the name of Liberty, Equality, and Fraternity. It also created a vacuum that gave rise to an Emperor who was more ambitious and more powerful than any king.
Did the revolution fail?
Nearly 200 years later, Chinese Premier Zhou Enlai was asked what he thought of the revolution. "It's too soon to tell," said Zhou. The media relished his response, seeing it as evidence of the long-term view taken by Chinese leaders — who think in centuries and millennia.
But the whole thing was a misunderstanding. Speaking in 1972, Zhou thought his translator was referring to the student protests that took place in Paris a few years earlier. Zhou was not thinking in centuries — he simply didn't understand the question.
Doesn't matter. The quote was too good to waste. It has since been quoted in hundreds of books and magazine articles. When the internet came along — and China was on the rise — the quote reached even more people, compounding the original error.
But the internet also put an end to the fifty-year glorification of Zhou's answer. Today, anyone who Googles the quote can learn about the original error.
They Promised Us
I thought of Zhou and the French Revolution when I saw this tweet last week:
It was another example of how complex processes can begin with one set of intentions and end somewhere completely different. It highlighted how it could take decades or centuries for these consequences to become clear. And it also reminded me of how elegant, chaotic, and powerful Twitter can be and how fun tweets like the one above are an unintended consequence of the internet itself.
The author of the tweet was complaining about a global network that failed to get his coffee machine to work — but he was doing so on the same global network that enabled him to share his petty grievance with an audience of millions (and get more than 22,000 likes in return). And yes, it's a bummer that "smart" devices don't always work, but it's a miracle that we can tweet our way into anyone's heart and mind.
And it's not just a miracle; it's also important. Twitter is often held up as a trivial, disappointing product of a technological revolution that promised so much more. As Peter Thiel notably lamented: "We wanted flying cars. Instead, we got 140 characters."
But 140-character tweets had a much bigger impact on society than flying cars would ever have. And, in many ways, Twitter made flying cars redundant. A tweet is a flying car. If I can reach millions of people from my basement office, move them, sell them stuff, infect their minds with ideas — I don't need to drive anywhere. Or fly.
Twitter is the internet we never knew we wanted. It is a world-changing idea that nobody saw coming. And even when it's here, it's so easy to dismiss. Twitteracy is the new literacy, but those who don't get it don't even know there's anything to get.
But I'm not here to rave about Twitter. I only bring it up because Twitter's evolution offers an essential lesson about the future of the internet, blockchains, Web3, and consumer technology in general.
The founders of Twitter envisioned it as a "status tool" that allows people to let their friends know what they're currently listening to or where they are. An early product sketch by Jack Dorsey shows "in bed" and "going to park" as the kind of stuff he expected people to tweet. Dorsey named the project "Stat.us" when he first conceived it in 2000.
Since the app store was not yet invented, the easiest way to tweet from the phone was by sending an SMS. As a result, tweets were originally constrained to 160 characters — the maximum text message length allowed by mobile operators.
Twitter's founding team expected the tool to be used mostly to keep in touch with friends. After all, who would want to receive mobile notifications with tweets from people they don't know?
For mostly technical reasons, Twitter forced users to refer to each other by their usernames (e.g., @drorpoleg) rather than their full or real names. This was an engineering decision that made it easier to handle and direct messages. And since users mostly communicated with people they knew, it was easy for them to remember each person's "handle."
The technical constraints that shaped Twitter's early product are no longer relevant. People can send long messages from their phones (and even broadcast HD videos). Apps are a thing so there's no need to rely on SMS anyway. And the distinction between backend hands and front-end display names is not so important since apps can now easily convert one into the other.
In 2021, Twitter's product is incredibly similar to what its founders had in mind. Its main (and almost only) function is still to share short updates. The length of these updates is still strictly constrained. And it still forces people to refer to each other in @handles.
But the way people actually use Twitter is completely different. Tweets are not used to update friends about one's "status"; instead, they've become a whole new communication genre used to share insights (and invitations). And strangers — not friends — use @handles to enter complex ad-hoc conversations about anything from NBA highlights and HBO shows to investment or medical advice.
Twitter's original constraints created a whole set of online behaviors that continue long after the constraints are gone. These constraints exposed new human preferences and taught us something we did not know — or expect — about how the internet can be used, and how it can impact our society, political system, and economy.
Something similar is happening in crypto right now.
What if I told you, in 1995, that the internet will fail to fulfill all its promises: Not increase democracy, not be resilient to nuclear attacks (or petty crooks), not make people less lonely, not make people more intelligent or informed, not turn the world into a global village where people understand and respect each other. What if I told you that most internet bandwidth would be used to binge-watch silly shows or, worse, pornography. Or that social media platforms will be used for implicit or, worse, explicit censorship. That these platforms would enrich fewer people, and turn scores of others into cogs who run around governed by algorithms.
What if I told you all this? Would you have chosen to continue to use, and support, and invest in this internet thing? And now, after you've seen it all happen, do you think the internet was a mistake?
The crypto ecosystem (or web3, or blockchain-based, or whatever you want to call it) is offering a new set of promises of how wonderful it will all be.
Most of these promises will not be fulfilled, at least not fully or in the way we expect. But in trying to fulfill them, we will learn new things about what people can do online, and what types of businesses can be built that have not yet been built.
In the last 24 months, we learned a few interesting things:
- People are willing to pay a lot of money for digital goods, and owning something online can be a powerful status symbol even if it does not correspond to anything offline.
- Some people are willing to pay much more for things they like and people they admire/enjoy. So, instead of just buying an album from your favorite singer, you can now fully invest in their career, finance their next album, or just pay for more digital products or fragments of things they created.
- Some artists and platforms are willing to share more of their revenue if you make it easy for them. For their part, those who are selling and producing content are happy to share more of their revenue with their community and with different contributors.
- Shared governance is attractive, even if it has no teeth. DAOs and token-based crowdfunding campaigns showed that people are much more likely to contribute if there is a built-in mechanism to vote on how their money is spent and how their favorite companies are run.
- Separating "login" from "data" is powerful and attractive. Currently, we need to create an account with every app and website we use. And we need to let these apps store our data on their own servers. On the blockchain-powered web, people use a single private key (and wallet) to log in to many different apps, and their data and history belong to them. They can share it in order to use a specific service, and then they revoke access to it when they're done. Apps can still abuse people's trust and collect data, but now they don't have to.
- Liquidity and the ability to sell anything immediately are attractive. In a traditional crowdfunding campaign, you put in the money and wait. In token-based campaigns, you put in the capital, and you can immediately sell your position to someone else. This leaves room for new Ponzi schemes, but it also makes it easier to finance new projects and ventures.
- Paying people to use a product or a game can make economic sensein some situations.
- Making obligations enforceable across different apps and web site is powerful. People can use the same private key to access multiple apps and take their digital money, data, and history with them on the blockchain. As a result, it is possible to create contracts and rules that work across different apps. For example, you can take a "sword" that you bought inside one video game and sell it on another site — and the new owner will immediately be able to use it on the video game. You can also take your sword to another site and "pawn" it in exchange for cash. If you don't repay your loan, you will automatically lose access to the sword. This is a gaming example, but it's easy to imagine other scenarios that involve the same logic.
If you prefer video, I also summarized these examples for my students during our live session earlier today:
These are just a few examples. And some of you may have a lot of questions after reading this. The point, for now, is that all these behaviors and business models emerged in the crypto ecosystem, but many of them can be implemented without relying on blockchains or crypto protocols.
It's quite possible that web3, the internet of the future, will end up running on completely different technologies and protocols. Or that blockchain protocols will be abstracted away by powerful middlemen that will save users the trouble of knowing anything about the underlying technologies and protocols (see Shopify's latest NFT solution for an example).
But if you want to understand what people will be doing on the internet in 5-10 years, and if you want to identify new business models before anyone else — you must pay attention to what's happening in crypto. My course offers a healthy and impartial gateway for anyone looking to do so (And for anyone looking to expand their knowledge and network).
The crypto ecosystem is not about money or speculation, or radical politics, even though it has plenty of people who are into that kind of stuff. Crypto is ultimately far less and far more radical. Its legacy might be a bunch of gaming, social, and financial business models and consumer behaviors. But understanding these business models and behaviors holds the key to the future.
I'll stop here. If you enjoyed this piece, subscribe to my newsletter. Here's to a healthy and happy 2022!