The Petty Pleasures of Watching Crypto Profiteers Flounder

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I cannot stop watching videos of Web3 boosters failing to explain the usefulness of the technology. I realize this is petty, but the videos are deeply cathartic.

I’m talking about two clips in particular, both of which were posted by Liron Shapira, a tech investor and writer, and a critic of crypto and Web3. The first is of Packy McCormick, a newsletter writer, investor, and advisor to A16z’s crypto venture-capital team. I urge you to watch this clip before reading any further (but I’ll also summarize parts of it below):

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McCormick is questioned by Zach Weinberg, a crypto skeptic who asks McCormick to reason through why a given problem might be better solved with a Web3 or blockchain-based project. McCormick offers up the example of a blockchain-based real-estate transaction, which he says hasn’t been done yet but is touted as one of Web3’s “promised” examples. Property buying outside of the blockchain is a long, onerous process, McCormick argues. He suggests that, “theoretically, you could make all these things NFTs … you could transact very quickly, borrow against them in the global market as opposed to going to Bank of America to take out your mortgage. You have a more open system that people are able to transact in more creative ways in.”

Weinberg stress-tests this particular scenario (putting your house on the blockchain) first by asking: What would happen in a decentralized mortgage market if a mortgage lender couldn’t get its money back? McCormick responds, essentially, that the lender could take legal action via the courts. They go back and forth a bit about smart contracts, and at every turn Weinberg pushes McCormick with some version of the same question: What makes this blockchain version better than the current system? McCormick has no answer. Here’s a transcript of the end of their exchange:

Weinberg: It doesn’t work. I am all for “The technology is cool.” But there’s no—as you work the idea through the minute, you put a real asset on chain, it’s like: The only reason I can borrow against these real assets is because there’s a document that the U.S. court system will enforce.

McCormick: There’s a document in this case, too. And there’s no reason the U.S. court system wouldn’t enforce it. It’s a smart contract as opposed to a ream of papers or an online document.

Weinberg: But then, what makes it smart? The whole point of a smart contract is that the computer can do everything, and here what you’re saying is, “I’ve got to now take this contract to the U.S. court system, I have to prove that I own it, I need the sheriff to then show up and get me out of…” You just recreated the entire mortgage infrastructure that already exists today…

McCormick: …on the blockchain.

Weinberg: But exactly. It’s like, I’m lost as to why the “on the blockchain” part matters. Besides basically, what everyone means is, “Oh, I want a public record of the transaction.” Okay; sure. That’s the thing you’re looking for, but ultimately every other step in the process is essentially the exact same thing you have to do in the real world.

McCormick: Yeah…I got wrecked on the mortgage example because I’ve never thought through that one before.

He’d never thought it through—and yet, he felt confident enough to offer mortgages as his example of Web3’s promise. Curious!

The second clip is of A16z co-founder and venture capitalist Marc Andreessen during a podcast taping with economist and blogger Tyler Cowen.

Cowen runs a similar playbook to Weinberg. He asks Andreessen to provide specific reasons why Web3 versions of a given project might be better than what we use right now. Andreessen does what many Web3 boosters do—he starts using vague terminology. “I’m hoping five years from now, there will be these thriving Web3 podcast environments that will be open,” he tells Cowen. “We’ll have this anarchic, uncontrolled kind of element that I think you and I both like.”

Cowen asks him to narrow the aperture on the vision and focus on specifics. In response, Andreessen starts to spin his wheels. He seems put out to have to articulate the specifics. He blusters a little about the early days of the technology, and about experimentation. When he brings up the idea that Web3 might unlock new monetization efforts, he hardly articulates what those would look like, instead offering that they “will monetize in completely different ways through the creation of unique digital property that gets sold and trades.”

Vague! Rather than re-post Andreessen’s circular responses, I think it’s instructive to share Cowen’s series of incisive questions:

  • What’s the concrete advantage of Web 3.0 for podcasts? Right now, you and I may not feel like it, but we are anarchic and uncontrolled, right? We can say something. Some external force isn’t going to censor us. Why is this a better podcast if it’s done through Web 3.0? Why can’t we just put it out there?
  • How does someone like Joe Rogan — it doesn’t have to be him, but a well-known podcast host — how does that person get paid in a better way through Web 3.0? Make that more concrete for us.
  • But is the key difference easier micropayments? Is the key difference being able to sell collectibles more readily, say, with the NFT model than with signed T-shirts? They don’t sound very big to me. They both sound like possible advantages, but as a percentage of GDP, they sound like really tiny advantages.
  • What prevents a lot of intermediaries from re-emerging in Web 3.0 and making it in some ways a lot like Web 2.0? Which could be okay, but actually recentralized. There are gatekeepers again. There are censorship issues again, and it’s not actually that different, but with marginal improvements. Why isn’t that the scenario?

With each question, Cowen latches onto the most nominally coherent part of Andreessen’s response and asks for more specificity. Or he asks some version of: Is this marginal difference between your technology and the current way we do things the major innovation here?

Again, I urge you to watch the clips, because it’s baffling how befuddled these men look when asked to articulate concrete, compelling use cases for their next big thing. At one point in McCormick’s interview (around the 3:02 mark), McCormick gives up outlining the future of blockchain mortgages by shaking his head and exasperatedly confessing, “I don’t know.” The look on McCormick’s face seems to suggest, Why are you asking me to give you definitive answers about something theoretical? But it was McCormick who chose the mortgage example in the first place.

What makes the videos so cathartic for a crypto skeptic is that the interviewers give McCormick and Andreessen no place for their arguments to hide. The interviewers are asking very simple, rational questions, and the interviewees are unable to answer them without abstract language. The subjects aren’t walking into an unfair ambush, either—Cowen clearly has respect for Andreessen and appears to be offering him numerous good-faith chances to explain his vision (which he cannot). The fact that these exchanges are captured on video is also important. Simply reading transcripts of the exchanges obscures how unprepared these two men sound while describing the benefits of a technology they’ve staked their money and reputations on. Numerous times while watching these clips, I found myself marveling at how they didn’t even have some stock, bullshit answers prepared. It was as if the pair never expected to have to answer these kinds of questions at all.

Shapira, who assembled both clips, said the videos demonstrate that the Web3 movement has “no logically coherent vision for a desirable end state.” Shapira has been a longtime critic of Web3 boosterism, though he doesn’t appear to have any ideological opposition to crypto as a culture. Shapira is by all accounts an avowed capitalist who at one point invested in Coinbase. He’s a founder who is fascinated by startups and innovation, and who sometimes cites Peter Thiel in his blog posts. He told me that he would be happy to change his mind and invest in the Web3 space, if only he could find some kind of transformative use case for the technology—one that differentiates it from the Web2 world.

I talked with Shapira about why he’d become such a public critic of the Web3 crowd, and especially of the venture-capital firm Andreessen Horowitz. He said that he sees the crypto world as emblematic of a fundamental problem in startups, where founders and venture capitalists become so enamored with a vague initial idea that they never stop to consider its utility. “They think they’re onto something visionary, but their product actually fails a basic logical test,” he told me. “There’s a starting bar at the beginning of the journey, and you’re supposed to step over it to go on the journey, and they never do. They trip at the beginning but go on to work on it for five years and deploy billions of dollars.” When it comes to Web3, he argued, “it’s not just the financial shenanigans; it’s the hollow abstraction of it all.”

Shapira said that he learned this lesson the hard way, by falling into the same trap himself as an entrepreneur. “I experienced this five times,” he said. “And finally I realized there’s a pattern here: I keep making things that people don’t want. Why am I building things people won’t use for free?” The problem, he gathered, was that he’d gotten caught up in reasoning abstractly about the use cases of his products, to the point where he couldn’t think concretely. He started blogging about this dilemma and talked to hundreds of entrepreneurs in Silicon Valley, many of whom seemed to fall into this same trap. They’d grown up wanting to build a company; they read Hacker News in college and dreamt about the entrepreneur lifestyle. The only thing missing was a vision. So Shapira started pressing people on their visions.

“They’d say things like, ‘It’s like Slack, but it’s an open community for people.’ And I’d say, ‘Okay, maybe there’s something there. But it’s too high-level of an idea. I can’t tell you if it’s good or bad because it’s too abstract.’ So then the next step is to reason through the idea. ‘Who is going to use it? What products are they using now instead?’”

This process of reasoning, Shapira said, is arguably the hardest part of creating a company. But it’s the step that is often skipped. “They think they’ve gotten past the idea stage,” Shapira said. “They move quickly and think, As a founder, I need engineers, I need to hire, I need to raise money, and I need to launch. They move through the steps, but the underlying mechanism that’s missing in their vision is: How does value get created?”

I’m inclined to agree with big parts of Shapira’s reasoning, though I’d argue there are many more scammy and cynical crypto projects. Shapira is not excusing Web3 boosters by suggesting that they got caught drinking their own visionary Kool-Aid. Just because they think they’re onto something big doesn’t mean they aren’t also full of shit when it comes to the way they’re hyping it on the rest of us. I think I’m more cynical than Shapira, though—surely there are well-intentioned founders drinking the visionary Kool-Aid, but many are rushing toward what they see as easy money by attaching crypto buzzwords to hastily considered ideas or pivoting failed projects toward the blockchain.

But I think Shapira’s focus on the “hollow abstraction” of Web3 is a big reason why his clips of McCormick and Andreessen have resonated and gone viral. The clips strip off all the hype and bluster and marketing and reveal an empty vision. Andreessen’s interview is striking, in part, because the former Netscape founder rarely does media appearances with places that aren’t friendly toward him, and therefore rarely has to answer the kinds of skeptical questions that he, as a venture capitalist, might pose to a potential founder in a pitch meeting. Because of Andreessen’s past as a foundational figure of the early commercial internet, and later as a successful investor, he can hide behind his reputation and only speak with people willing to paint him as a wise man who can see just around the corner and into the future.

McCormick does most of his evangelizing in newsletter form, where he writes about his ideas in sprawling, earnest, and often enthusiastic posts. Last week, in response to the viral interview with Weinberg, McCormick wrote a 6,100-word piece on “Web3 use cases, present and future.” To be fair, McCormick offers up a number of companies that are doing blockchain-based projects he finds useful. Like so much crypto blogging, the post is quite dense. After 2,600 words of preamble, he starts listing use cases, one of which is a company called Braintrust. Here’s how he explains it:

Braintrust is a user-owned talent marketplace that connects high-skilled, often technical people with jobs at companies like Nike, NASA, and Porsche. The average project on the network is worth $77,630 and lasts 217 days. The money and time at stake make talent networks an ideal first use case of the user-owned marketplace model because participants have so much skin in the game.

Currently, most of the activity on the network takes place in local currency, but participants in the Braintrust ecosystem, including Talent, Clients, Connectors, and Vetters, can earn BTRST tokens for doing things that are good for the network, like screening applicants or referring candidates, and can stake those tokens for advantages in the network. Talent might stake BTRST on a certain job opening to prove their seriousness and increase their chance of getting hired, which has real monetary value, and Clients might stake BTRST to increase the visibility of their job listings to attract more Talent. Because Braintrust can use tokens to get work done and attract new demand, it can keep the take rate it charges at an industry-low 10%, making it more attractive to potential Clients and Talent.

I’ve read what feels like hundreds of descriptions of crypto projects that sound very similar to this. Usually, I have to read them three or four times, and, even then, I come away with a very fuzzy understanding. I understand that Braintrust is using a token system to connect freelancers with potential employers, and that the token system allows Braintrust to (perhaps) charge a lower take rate than other companies that do this the old-fashioned way. But I also don’t see anything visionary in there. Here is a similar bit from Braintrust’s whitepaper:

Braintrust’s use of crypto is essential to its success in achieving decentralization at a significant scale. The blockchain is immutable: it provides a record that cannot be altered over time, making the user’s record of ownership and control over the network incorruptible. This form of blockchain is a permissionless system because it can be accessed by anyone around the world with an internet connection, no prior authorization is required. A critical innovation of the Braintrust network is the ability to programmatically distribute ownership and control of the network to those who contribute to its growth, in a fully permissionless way. The Braintrust talent network implements this primarily through its referral engine. Anyone in the world can create what is called a “Connector Account”, obtain a unique referral code, and share it with new talent or clients that could serve as supply or demand on the network. When those referred parties join the network and start transacting, the network automatically rewards the referring party with tokens.

I will acknowledge that the paragraph above is indeed composed of words and that they appear to form complete sentences. But the urgent tone of those words doesn’t really align for me with what is being said. It’s a lot of revolutionary language to say, There’s a public record of transactions, and we give people referral bonuses that they can use inside our product. There is nothing wrong with that! And I will agree that it is definitely a Web3 use case. I just don’t know that the blockchain necessarily makes this process better than doing it off-chain. I do know that the idea sounds a lot sexier to people with money if you say it that way.

When I read McCormick’s posts or many of the other pieces evangelizing for crypto-related projects, I tend to come away feeling kind of stupid — just as I did reading the Braintrust whitepaper. Now maybe I’m telling on myself here. Perhaps my small brain stopped accepting new ideas after the 10th version of the iPhone, and now I’m doomed to look foolish (I’ve written at length about this fear). But I also know I’m not at all alone when it comes to reading whitepapers and crypto Substacks and feeling like the breathless urgency or complexity doesn’t match with what’s really being described. Here, for example, is the first comment on McCormick’s post:

When you write with so many buzzwords rather thaen layperson explanations you hinder rather then help your case. Your writing on Braintrust is a great example. Again, you hawk out “user owned”’ as if everyone should nod their heads when you say it. I still can’t figure out the crypto angle.

By using and referring talent to the platform, users can earn tokens. It’s never clear, however, what these tokens gate or purchase. Users on the platform may price services in terms of the token, but they’d only do so if the token has purchasing power in real terms. You write that Braintrust may offer “hints at future benefits for token holders; these might be things like educational content, free software, or coaching.” If so, the token’s price reflects the value of these services. I find it excruciatingly difficult to believe these services are worth much, so, in turn, the token isn’t worth much.

You’re resting the web3 use case on a tradeable loyalty program?

What I love about this comment is that it speaks to the frustration of sifting through crypto-boosting media. I don’t doubt that there are might be some interesting blockchain applications down the line coming from people who aren’t just profiteering but who want to build a better web. But so far, I don’t see it. And so often when I read this stuff from investors I feel like I’m being DDoS’d by marketing language, needless complexity, and vague future-casting. I believe that much of it is in earnest, but I think that much of it  is also intended to obscure how little meat there is on the bone of these arguments. A lot of people simply won’t read a 15-page whitepaper, but they will be impressed by the flowcharts. By making the language of Web3 meandering and impenetrable and by building a culture that is very self-referential,  investors make criticism harder to come by. This very attempt at trying to describe just a small sliver of Web3 boosterism has itself morphed into a 3,000 word newsletter because this stuff is so dense to navigate.

It’s for these reasons that I can’t stop watching Shapira’s videos. While McCormick argues that his conversation with Weinberg is an example of him walking into “such a narrow debate space,” I would argue it’s exactly the opposite. By stripping out all the artifice and focusing on concrete use cases, McCormick and Andreessen weren’t put into a small box, but instead were lured out into the open where we could see their ideas for what they really are—hollow abstractions.

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