Are Web3 and Crypto Just a “Grift Pouring Lighter Fluid on Our Already-Smoldering Planet”? ❧ Current Affairs

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Molly White i​​s a software engineer described in a recent Washington Post profile as “the crypto currency world’s biggest critic.” The Post says of White: 

On her website, Web3 is Going Just Great, White documents case after case of crypto malfeasance: investments that turn out to be scams, poorly-run projects that collapse under mismanagement and hacks that drain supporters’ money. As much of the financial and tech elite has rallied around crypto, White has led a small but scrappy group of skeptics pushing the other way whose warnings have seemed vindicated by the cratering in recent weeks of cryptocurrency prices.

White recently joined Current Affairs editor-in-chief Nathan J. Robinson to discuss whether, as her site suggests, Web3 is “an enormous grift that’s pouring lighter fluid on our already smoldering planet.”

NATHAN J. ROBINSON: 

I want to start here with this notion of “Web3.” You actually started the Wikipedia entry for “Web3.” Here’s a quote from VICE:

“It can feel at times as if the entire world is pivoting into Web3, and the question is why. There are, suddenly, Web3 media companies, Web3 advertising firms, Web3 studios, Web3 marketing tactics, and Web3 publishing networks. LimeWire and MoviePass have risen from the dead, newly “powered”—as one of their CEOs put it—“by Web3 technology.” Web3 apparently is not only “transforming gaming” and “re-engineering real estate,” but also the future of the internet, and maybe the entire global economy as well. Never mind that very few people can agree on exactly what Web3 is (and isn’t). What matters to investors is that Web3 is the hot new thing and the entrepreneurs are piling in.

So let me ask you, Molly White: what is “Web3”?

MOLLY WHITE: 

“Web3” is, more than anything, a marketing term. I think it is sort of the new shiny word for blockchains and anything that uses them. There is this sort of belief among some people that Web3 is the future of the web, and that all web technology will eventually be built on these blockchain technologies. But more than anything today, Web3 companies are largely using traditional web technologies, and are mostly in my opinion leaning on the Web3 term to attract venture capital interest.

ROBINSON: 

But do you think there is some kind of coherent shared vision for the future of the internet captured by this term? Is it just a buzzword? Or is there something we can think of as “what an internet shaped by the visionaries who embrace this notion would be like”? 

WHITE:

I don’t think there is a coherent vision. And the definition changes very much depending on who you’re talking to, even when you’re talking to people who are themselves supposedly running these Web3 companies. And there are a lot of sort of similar buzzwords that are used around decentralization and the removal of power from being concentrated in these large tech companies. But it’s also very self-contradictory in a lot of ways. It’s the same large tech companies, and the same large venture capitalists, who are funding Web3 that were funding Web2 and that had a lot of power in Web2. So I don’t think there is a coherent vision there.

ROBINSON:

What was Web2?

WHITE: 

Web2 was sort of a retroactive name that was applied to the shift in the web from sort of a read-only state where most people who are interacting with the internet were just reading and consuming content. Web2 was the shift to the form of the web where people were also creating content, interacting with social networks, posting things online. And so people have started to refer to Web2 as though it is sort of the old way, and that Web3 is the new way that everyone is going to be using or even is using today. But in reality, that’s not true. You know, I think Web2 could just be what we consider the internet to be today. 

ROBINSON: 

So, Web2 is the internet where people are creating content, Web3 is the internet where people are constantly being ripped off by Ponzi schemes.

WHITE:

That’s my impression. Yeah.

ROBINSON: 

Regarding your website “Web3 Is Going Just Great”: why is it going great? I interpret this as sarcasm. What sorts of things are you pulling together to document the state of Web3, what are you trying to capture? 

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WHITE:

It’s really intended to just show that despite the broad utopian descriptions of Web3, Web3 is really not going very well. We’re constantly seeing these scams, these enormous hacks of various crypto companies. Just outright fraud, disaster after disaster, I would say. 

ROBINSON:

Maybe you could give a couple of examples of the kinds of disasters that you’re talking about.

WHITE: 

Sure. So recently we saw the failure of some enormous portions of the crypto ecosystem. Terra was a stablecoin and a cryptocurrency that collapsed in early May, and has been causing ripple effects ever since throughout the crypto ecosystem. We’ve also seen Celsius having trouble in recent weeks. Those are some of the really big collapses in the ecosystem. But I also cover things like NFT rug pulls, which is where someone creates an NFT project and then basically runs off with the money without following through on their promises. Or just the day-to-day issues that people run into trying to interact with the technological nightmare that is often crypto. People lose their keys and suddenly they can’t access hundreds of thousands of dollars sometimes. 

ROBINSON:

Because even though the argument you have made is that there’s not really a coherent vision for Web3, there are definitely some common fraudulent tendencies. One of them is that the promise of decentralization actually in practice ends up meaning that it’s very easy to take people’s money and run away with it without there being any mechanism for them to get it back. 

WHITE:

Yes, that happens practically daily.

ROBINSON:

Your site is very funny. It invites us to laugh at the absurdity of many of these projects that, to anyone who scrutinized them for half a second, would have appeared obviously fraudulent or scammy. That said, there seems to be a more serious underlying purpose to what you’re doing. You seem to have a real concern with the fact that there are perfectly ordinary people being tricked into putting their retirement savings into these things and they’re getting all their money stolen. They’re not always horrible, unsympathetic libertarian tech bros. 

WHITE:

Absolutely. I try to keep a fairly empathetic mind when it comes to describing this stuff. Because it can seem really obvious that something’s a scam after the fact, or even during the operation of it, to people who have a decent level of financial literacy or who are fairly technologically informed. But for a lot of people, crypto projects don’t necessarily come off as obviously scammy. I get a lot of people messaging me saying “How can I choose the right crypto project? How can I find the one that isn’t the scam?” Because people really want to believe that there are crypto projects out there where they can make these returns that they’ve been hearing about, where they can put $50 in and become a millionaire overnight. And there’s this prevailing belief that if they just choose the right crypto project and avoid the scams, that’s a possibility for them. 

And I have a lot of empathy for them, because there are a lot of things pressuring them to believe that, news media, advertising, celebrity endorsements, influencer endorsements. Everyone is saying crypto can be the way to financial freedom. You can stop working two jobs. Just pick the right project. And people are getting totally screwed over in a lot of cases. 

ROBINSON:

Of course, some of it comes from greed, but some of it comes from desperation. I mean, the American economy is infamously a pretty tough place for working people to survive. And so when someone comes along and says “I have a safe way for you to guarantee yourself financial security,” there are a lot of desperate people who can be preyed upon.

WHITE:

Right. I think a lot of people don’t realize that crypto at this stage is sort of the Wild West. In the aftermath of a lot of these crypto projects collapsing, I’ve been seeing a lot of people who were under the impression that their funds might be protected, in similar ways as they would be in a savings account at a traditional financial institution where you are insured by the FDIC up to a certain amount. Or there were people who believed that the crypto project itself might hold insurance and so their losses might be covered. But after these things collapse, they start to do that research they didn’t do before and they realize that there’s nothing there for them. They just have to hope that somehow this crypto project is not only able to recoup a lot of their funds, but then is willing to pay off the retail investors, when in reality they’re probably prioritizing their debts to larger firms that have more legal power behind them.

ROBINSON:

Now, there’s a lot of propaganda, isn’t there? It’s rather incredible how aggressive some of the proponents of crypto are. They basically make it a full-time job to convince people that skeptics such as yourself just don’t understand it. This this is real effort to discredit critics and to hype this thing, to make it seem like every intelligent person understands this and everyone who doesn’t understand this must therefore not be intelligent.

WHITE:

Yes, absolutely. The whole crypto ecosystem is propped up on the fact that if you believe it has value, it does have value. [It’s the “Tinkerbell effect.”] If you just believe in it hard enough, it will be true. The incentive to make more people believe that crypto is worth something and will go up in price is very much based in that. So at any point people will be telling you to buy crypto. It doesn’t matter if the markets are booming and it’s higher than it’s ever been—people will still say
“Buy now! Buy now!” because it’s only going to continue to go up. Or you see days like today where crypto is not doing so well. It’s lower than it has been in years. And people are saying “Buy now!”

ROBINSON: 

Perfect time to buy!

WHITE:

Yeah, you’ll never get it at a lower price. It’s remarkable. People will always say “buy” and it’s very rare to see someone say, “maybe don’t right now. Maybe wait a little bit and see how things go.” 

ROBINSON:

One of the more important realizations that I had when reading about this stuff was that, if we’re trying to decide whether or not it’s a Ponzi scheme scheme, if it is one, the person pushing it has a very strong incentive to mislead you. And so you have to approach this stuff with extreme skepticism because anyone who is themselves trying to make money in crypto has a very, very strong incentive to try and convince everyone else that it’s a good idea, and they should hop on board as well.

WHITE:

Right. And that incentive doesn’t really exist for the critics. Although people will sometimes claim that critics have some nefarious incentive to undermine crypto. It’s often somewhat unclear what that is. 

So there’s this very unbalanced ecosystem where there are a lot of people who spend a lot of time boosting crypto, because it’s enormously financially beneficial to them. And then there’s sort of a handful of skeptics who are mostly doing it in their free time, or for a very small amount of money for those who do accept payment for it. And so you end up with this imbalance in the media, which is exacerbated somewhat by a lot of journalists’ tendencies to try to buy into the hype, and see both sides and all that kind of thing.

ROBINSON

Well, I for one wish that I tried to make money on crypto skepticism by betting against it, because over a year ago, I wrote an article called “Why Cryptocurrency Is A Giant Fraud.” And I wish I had placed money on that. And in fact, when in May we spoke to Nicholas Weaver at Berkeley, he said that the Celsius thing was a Ponzi scheme. And then it went into a hole. 

On what you said about this desire of journalists to try to be neutral and explain both sides, perhaps you could elaborate on that. You were recently critical of the way the New York Times handled crypto in a way you felt was too soft. 

WHITE:

I think overall most coverage of crypto in media has been enormously positive toward it. I think we’ve been seeing a little bit more of the critical side recently, when things have been going poorly, but it felt like, especially during the last winter when crypto was on a bit of a bull run, everything you were seeing was about how much money this person made, or this new project that was going to change the future of the web. There was very little skeptical coverage of it around, “wait, how does this even make money?” You know, what is the value of this token? What are the protections if things go poorly? What are the fundamentals of this company that is claiming that it will be worth billions? And I think that’s disappointing, because the media is where people learn about new technologies, new ideas like cryptocurrency. It felt like for a long time there, including today,that  the media has been very much credulous of a lot of the claims that we’re seeing from venture capitalists and Web3 companies and others that are in the crypto space.

ROBINSON: 

Well, I believe that you pointed out that if someone had read one of the New York Times articles on crypto a while back and actually went, “Oh, this seems worthwhile,” they would have lost a giant pile of money. People trust journalists—maybe a lot less these days. But I think the role of journalists is to try and cast a skeptical eye on power, and sort through propaganda and educate people on the truth. So when they repeat this hype, as you emphasize a lot, people really do get hurt when the skepticism isn’t applied.

WHITE:

Yeah, I think so. I mean, people are being told to “do their own research” before they invest in crypto projects. That’s sort of the common refrain. And it’s hard to do your own research when the materials that are available to you are coming from the crypto projects themselves. And when there’s very little outside research happening, questioning those claims, and double-checking what these people are saying. It’s being done in a very ad hoc way, because there’s no regulation being applied, and the regulations that should be applied are not being enforced.

ROBINSON: 

You mentioned regulation. You recently signed an open letter to Congress, along with some other prominent skeptics of the crypto and Web3. Perhaps you could explain what you were saying there and what you believe needs to be done legislatively.

WHITE:

So that open letter was largely a plea to Congress that they take the claims that are being made—especially the technological claims that are being made about crypto and blockchain—and they treat them a little bit more skeptically. There’s an enormous amount of lobbying happening from the crypto industry these days. And they’re really just pouring money into lobbying politicians. And we’re seeing a lot of politicians beginning to embrace crypto and repeat a lot of the same talking points that you see from some of these large crypto boosters. And increasingly, politicians themselves are actually getting into crypto. There’s nothing stopping politicians from putting money into Bitcoin or whatever it might be. And then basically continuing to legislate about Bitcoin. Which, like we mentioned before, has this very strong incentive to boost and be positive about. So the open letter was really just saying: take a step back, please. Ask technologists who are knowledgeable about what these people are actually talking about whether or not these claims hold any water. 

ROBINSON: 

It’s been remarkable actually to watch politicians on this. Even Democratic politicians—Eric Adams of New York said he wanted to turn New York into crypto city or something. And Senator Kirsten Gillibrand was on television suggesting that it’d be a good idea if people could invest their retirement savings in crypto. The mayor of Miami is into it. Every time you assume someone would be a little reasonable, you go “Oh God, not you, too.” Gillibrand, it turned out, had a fundraiser for her put on by a crypto lobbyist. It’s just open corruption in a way that might have shocked us in the pre-Trump era. I guess standards have declined. 

WHITE:

If you look at the bill that was recently introduced by Senators Lummis and Gillibrand, it is enormously friendly to the crypto industry. They might as well have written the bill and just had Lummis and Gillibrand sign off on it.

ROBINSON: 

You say that your letter was a call to treat claims skeptically. But are there particular things that in creating a regulatory structure for this space you think are essential. 

WHITE:

Well, I think there’s this belief—and a lot of crypto people are pushing this—that if you regulate crypto to any degree, you will squash innovation. So you need to keep your hands off and allow people to innovate and to build. That’s the refrain that we’re hearing. But a lot of what we’re seeing is people’s innovations are just financial fraud. They’re taking advantage of the fact that there’s not strong regulation in the crypto space. And they are operating classic Ponzi schemes and various other schemes that are really designed to separate people from their money, not to innovate in finance. So I think the legislators need to realize that they can’t rely on the crypto industry just operating out of the goodness of its own heart. Because clearly that’s not working well, and it should not be expected to work well. They should actually apply some strong regulation to this space and then enforce it appropriately.

ROBINSON: 

You can innovate new scams. That’s innovation, technically, if that’s what we believe in.

WHITE:

There’s been some fabulous innovation in the scam world in the past couple of years.

ROBINSON: 

Pretty impressive. Very creative. People can read your Web3 Is Going Great, they’ll be amazed what people come up with.

I want to mention the kind of bizarre culture that has developed around Web3 and cryptocurrency. One of the more popular pieces of commentary you produced was when you dissected an extremely odd video promotion for a “crypto island” called Cryptoland. And when you watch it, if you’re a normal person who is not in this “space,” it feels deranged. Perhaps you could talk about the bizarre mental universe inhabited by these people. 

WHITE:

Yeah. Well, crypto has developed this very strong culture, and it’s very online. So there are these memes. And there’s jargon. And there’s just this underlying sort of cult mentality around it to some extent that you really have to decipher before you can even begin to understand what people are saying in some cases. So the Cryptoland video is a very good example of that, where it is so packed full of different references and memes and callbacks to events in crypto history, that it’s almost indecipherable to somebody who’s not familiar with the space. 

ROBINSON: 

Well, maybe you could just give us one example.

WHITE:

The main character lands at Crypto Island and is met with an humanoid coin named Connie. And they have this moment of greeting where the coin says, “I haven’t seen you since Consensus,” which is referring back to a blockchain conference. And then there’s people in the background who are saying “honey badger don’t care,” which is like a meme from five or 10 years ago, I think, that was very popular on the internet. Even people today are like, “What? That’s so old.” 

ROBINSON: 

I think I vaguely remember the honey badger.

WHITE:

Yeah, it was the first time I had heard it in years. But throughout, there’s references to historical crypto scams. They’ve built on this island, a memorial to Bitconnect. There’s a pyramid, which is supposed to be a memorial to something but also sort of a reference to the fact that a lot of crypto projects are pyramid schemes. The whole thing is just full of these references.

ROBINSON: 

Now, I have to clarify, were they actually planning to build a physical crypto utopia on an island?

WHITE:

I put a lot of time into trying to figure out if this was just an elaborate parody or not. But I believe they were in fact trying to build a real crypto island. They had planning documents that had actually gone through an architectural firm and some engineering firms. Some of them showed, like, how they would handle the waste or electricity generation on the island. Which seems a little more devotion to a bit than would be reasonable. So I do think they actually were intending to create a real crypto island, although the likelihood of that panning out seems pretty slim at this point. 

ROBINSON: 

Seems like it would probably end like Jonestown.

WHITE:

Yes. Well, and especially because I’ve looked at some of the planning documents that they had come up with. The island that they had picked is in Fiji, which is notoriously prone to hurricanes, and they did not have much in the way of emergency services or fallback electricity or ways to handle the fact that most of their, you know, food and waste and all those things were being handled off the island. And so if a hurricane were to sweep through, they’d be sort of stranded to some extent. So I think it’s probably better for everyone involved that the island doesn’t come together.

ROBINSON: 

Some hybrid between Jonestown, the Fyre Festival, and Bernie Madoff. 

WHITE:

Just an incredible combination of things there.

ROBINSON: 

Is this all men? Is this a men problem? 

WHITE:

Yeah, that’s a great question. I did notice actually in the Cryptoland video there were very few women around. Which is very representative of crypto in general. It is very, very male-dominated. It’s not entirely men, there are women and non-binary people who are involved with crypto. But they are definitely the minority, I would say. And they actually face a lot of the same misogyny and other sorts of unpleasantness from the crypto space, to the extent that some of them prefer not to reveal that they’re women at all—which is treated by some people as the great equalizer. You know, the true equality will be that everyone can just hide who they are.

ROBINSON: 

I have noticed, for example, that when Terra collapsed there was a guy going “Oh, if my wife knew how much of our family savings I’d put into Terra… thank God she doesn’t know.” 

WHITE:

Yeah. Yeah, there’s a lot of that sentiment when these crypto projects fail, like, “my wife is going to leave me. She didn’t know that I was investing all this money into these schemes.”

ROBINSON: 

Or she said it was a horrible idea. 

WHITE:

Yeah, it’s like where are these women who are apparently the voice of reason? We need more of them!

ROBINSON: 

It does feel as if certain aspects of this, I don’t know quite how to articulate it, but are the product of or made worse by aspects of masculinity that make the world worse more broadly. 

WHITE:

Yeah. It’s extremely online, that culture, and so it is very bro-y. You hear references to “crypto bros” a lot, and like I said, they’re not the only people in crypto, but they sure are the majority. And they are very loud.

ROBINSON: 

Yeah, they’re pretty obnoxious. I’ve found that whenever I say anything about cryptocurrency, the replies are just a deluge. It’s like a swarm of hornets coming. I’m sure you encounter this whenever you say anything.

WHITE:

I think that is largely a way to silence critics. If they make it incredibly unpleasant to criticize crypto, then people stop doing it. And I do know people who have stopped criticizing crypto because the reaction to it is so hostile and so disgusting. And they just decide it’s not worth it. I can’t blame them, honestly. 

ROBINSON: 

I want to talk to you about the alternative to this financialized, scammy internet that seems to be envisioned by the Web3 people. Now, you are a famous Wikipedia editor, you have had a long history as a Wikipedia editor. I love Wikipedia. I think it’s a beautiful kind of utopian project in a way that embodies the right spirit of the internet. And you had one article where you wrote that some of the questions that the people who are proponents of crypto and Web3 are asking are valuable questions. You just don’t see crypto as the answer. And some of them that you cite are: 

  • How can we create a more equitable financial system? 
  • How can we reduce the power that a small few currently hold over the web? 
  • How can we improve data privacy? 
  • How can we make information more widely available?

And so you point out that some of this is driven by sincere idealism, and we can think about alternative paths to the things that people say these projects are trying to get us. 

WHITE:

Yeah, I very much don’t hold the belief that every person who is working on a crypto project or especially a Web3 project is a scammer, or is just trying to get rich and has no other motive. I think there are people who are working on these Web3 projects who are working towards very noble goals. In a lot of cases, they’re goals that I share around decentralizing the web, returning power to the users, making it easier for people to create things on the internet, forming these communities of people based around common goals. I love a lot of the things that people  working in Web3 are trying to achieve, I just don’t see crypto as the avenue to those goals.

ROBINSON: 

So what is the Molly White vision for the future of the internet? 

WHITE:

A lot of what crypto is trying to solve is basically around financialization of a lot of interactions online. So people refer to things like the “Web3 Wikipedia,” where you would be paid to contribute to Wikipedia. And I sort of see what they’re trying to do there. Because there is an enormous issue with projects like Wikipedia, where people contribute for free, in that the only people who are able to do that are people who happen to have enough financial stability that they’re not working three jobs and have no spare time. It’s only people who aren’t so busy with other obligations, whether it be their career, or childcare, or taking care of elderly family members, that they have the luxury to contribute. And so that in a lot of ways biases the types of contributors that we have. And it really does limit who can participate. So I see why people are trying to solve those problems around who can actually participate in the web through financialization. 

But I also see a lot of downsides of financializing projects like that. If people were paid to edit Wikipedia, that would actually be enormously detrimental to the project, because as soon as you’re paid to edit, the incentives for the types of edits that you’re making change dramatically in a lot of very negative ways. So I see solutions more along the lines of things like universal basic income, or stronger financial protections for people. Higher wages, social safety nets, those types of things, rather than making every single thing that you do, whether it’s a hobby or a video game, or any online interaction into basically another job.

ROBINSON: 

What you’re saying here is that you can’t have a technical fix to broader socioeconomic problems, right? If you pay people a small pittance every time they edit a Wikipedia page, that’s not going to eliminate the crises that face working-class people in America.

WHITE:

Exactly. And I think a lot of my criticisms of crypto come down to that, which is that a lot of these projects are seeking to find technological solutions to what are truly social and political problems. And it’s a band-aid fix which in a lot of ways will truly make the problems worse.

ROBINSON: 

So, socialism. And then you can have Wikipedia as it is.

WHITE:

Yes, that will be my empire.

ROBINSON: 

Oh, yes, you have a communist empire, don’t you? 

WHITE:

Yes, someone recently told me that my “communist empire was crumbling.” I didn’t know that I had a communist empire but I do enjoy it when people try to insult me and sort of inadvertently make me sound way more powerful than I actually am. 

ROBINSON: 

Conservatives in particular have a way of describing those of us on the other side in ways that make us sound fucking awesome. I saw recently someone say “we seem to be replacing DARE programs with drag queens,” and I thought “That sounds ideal. Let’s do it.” 

Well, Molly White, thank you for joining us. The website is Web3 Is Going Great. The incredible thing is you really have pretty much new ways in which it’s going great every single day.

WHITE:

Like I said, innovation in scams and fraud is actually going very well.

ROBINSON: 

I started combing through it, and it took me a long time to get back more than a couple of weeks in the feed.

WHITE:

Every day there’s usually a couple of things to add.

ROBINSON: 

But just to emphasize what you said earlier. As people read it, it’s really funny. The apes are hideous. People launching a crypto island are fun to laugh at. But what we really have here is a sector of the economy causing a great deal of harm through lies. 

Well, thanks for joining us on Current Affairs, Molly White. 

WHITE:

Thanks for having me.

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