Some of Silicon Valley’s biggest names have gotten into a dispute over the political and economic effects of competing cryptocurrencies and blockchains. Former Twitter CEO Jack Dorsey’s tweet Tuesday criticizing Web3 as being a tool of venture capital firms and their investors drew plenty of pushback from fans of the next-generation internet concept, including, well, venture capitalists.
Web3 is the idea of an internet in which all data and content are registered on blockchains, although the precise definition and mechanics of the concept remain somewhat unclear. Proponents say that such a system would allow power to be decentralized and democratized. That would stand in contrast to today’s internet—often referred to as Web2—in which a few giant tech companies wield disproportionate power due to their ownership of vast troves of data.
Dorsey tweeted that those who believed in this utopian, democratized political-economic vision of Web3 were deluded. “You don’t own ‘Web3,’” he wrote. “The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label. Know what you’re getting into…” (VCs are venture capital firms. LPs stands for limited partners—the institutions, endowments, and family offices that invest their money with venture capital firms.)
VC firms have recently poured hundreds of millions of dollars into startups that claim to be ushering in this era of Web3. Among the most prominent of these investors is Silicon Valley venture firm Andreessen Horowitz, also known by the shorthand moniker a16z, which has not only backed many Web3 companies, but has also spent heavily to market Web3 as a concept. Dorsey seemed to take aim specifically at Andreessen Horowitz when, after billionaire tech investor Elon Musk replied to Dorsey’s tweet saying he couldn’t even find Web3, the Twitter cofounder tweeted back that “it’s somewhere between a and z.”
That brought a retort from Balaji Srinivasan, a former Andreessen Horowitz partner, who replied that he respected the Twitter cofounder and “everything you’ve built” but that he was wrong about Web3. Srinivasan tweeted that corporate incentives had derailed Twitter’s free speech and libertarian roots and that “Web3 offers the possibility, not guarantee, of something better.”
The Twitter cofounder then took Srinivasan to task for mangling his facts. “All false,” he replied to the former venture capitalist. “Twitter started as a corporation. It’s had corporate incentives from day 1.” He then said Web3 backers were being disingenuous about where real power lay. “‘web3’ has the same corporate incentives, but hides it under ‘decentralization,’” Dorsey wrote.
Dorsey, who is currently the chief executive officer of payments company Block (formerly Square) is hardly an opponent of blockchain technology. In fact, he’s a major booster for the cryptocurrency Bitcoin, which runs on a blockchain, a kind of digital ledger that is powered by a cryptographic algorithm. But Dorsey isn’t a fan of the other cryptocurrencies that have followed in Bitcoin’s wake, including Ether and its Ethereum blockchain. Many Web3 digital assets are built using the Ethereum blockchain to register any transactions. Others use custom-built blockchains and cryptocurrencies that can sometimes be majority-controlled by the investors backing the startup.
Chris Dixon, an Andreessen Horowitz partner, replied to Dorsey that he was “a huge fan” and believed he would eventually come to see the value of Ether and Web3. “BTC is great as digital gold but there are other important applications that require other chains,” Dixon wrote, using the acronym for Bitcoin.
It isn’t clear any of the existing cryptocurrencies are doing much to combat wealth inequality. A study from the National Bureau of Economic Research, first reported by the Wall Street Journal, determined that 27% of Bitcoin was controlled by just 0.01% of those who hold the cryptocurrency. Another study from Nature found that 85% of non-fungible token (NFTs) transactions were made by just 10% of those investing in the digital assets. NFTs include non-currency digital items that are also logged on a blockchain.
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