The fever dream that was the bull run of 2021 clearly ended in 2022. As we are now back in the depths of a bear, it’s worth revisiting some of the narratives we accepted as truth and questioning if these are really the phrases we want to carry forward into the next cycle.
One of these mantras that has continually been a point of discomfort for me was the framing of Web3 put forward by investors Packy McCormick and Chris Dixon:
Ownership is definitely a part of Web3 — but is it really its defining quality? If the primary value proposition of Web3 was ownership, surely we could all just go buy shares of Amazon, Google or JPMorgan? We can easily own pieces of the Web2 internet or financial infrastructure today, so this cannot be the defining quality that makes this space unique.
Ownership is the wrong frame for Web3 and incorrectly centers the discussion. By focusing on ownership, it implicitly introduces a notion of value or monetization, rather than a more nuanced focus on control and a user’s rights within a system. The two are only indirectly related. You can have something valuable over which you have no control (such as owning a share of a megacorp). You can also have control over something that has no value (for example, POAPs — which are digital badges commemorating your attendance at an event). Implicitly, the argument Web3 makes is that by better enshrining user rights at a technical level, we create the substrate for higher-order value creation that is returned more equitably to the participants of the system.
By starting the discussion around ownership, the shape of external discourse has become misaligned (see: news outlets conflating the failures of centralized institutions with blockchains), limiting the frame of what falls under the Web3 discussion and what these technologies can potentially enable.
The past year has been a painful reset in many ways, but hopefully the year ahead will be an opportunity to recenter the discussion about what we’re doing and why.
What does ownership miss?
First, “ownership” has a different meaning in this space. If we’re talking about an L1, sure, there is ownership of a token, but what that token represents is fundamentally tied to those who participate in governance (e.g., EIP processes), those who implement, and those who ultimately run the code on their nodes. The unique aspect of Web3 is the ability to know that your rights — as enshrined by the system itself — can’t be easily infringed upon, participation in these systems is open, and you retain the ability to vote with your feet if your values diverge.
Second, ownership is a limiting frame for blockchains and the value they bring. Balaji’s ledger of record doesn’t hinge on any individual’s ability to own a source of truth, but that this ledger can be transparently inspected and verified. It’s the transparency of these systems that allow on-chain sleuths like ZachXBT to trace hacks and frauds, and the crowdsourced risk-modeling in times of systemic stress.
Third, the focus on ownership limits the scope of what falls under Web3. There are plenty of tools that are or are increasingly becoming critical parts of Web3, such as zero-knowledge proofs and InterPlanetary File System (IPFS) that imply nothing about ownership. Both, however, enshrine further rights at a technical layer — such as a right to privacy and the ability to exit — for broader swaths of the interactions we might have on the web.
If not ownership, then what?
Verifiability is the clear throughline in all of these contexts. Without the ability to verify, you as a user are unable to voice your opinion.
With blockchains, we have verifiability of state via consensus and the ability to run our own nodes. It’s this verifiability of state that allows anyone to check the same shared ledger, and arrive at a shared agreement about what the current version of the world is. When we add in cryptography with user-owned keys, we implicitly get ownership, as we can verify on our shared ledger who controls which assets.
This implied version of ownership is much more limited — the ledger could be forked, and someone else may mint a non-fungible token with identical metadata — but powerful. The substrate of ownership sits upon a foundation that is substantially more resilient. This resilience comes from the checks and balances inherent to the operation of these public ledgers and ultimately from the fact that users can always fork. (Note: This doesn’t mean voting with your feet will always be acknowledged by others, but your right to do so is retained — see: Ethereum proof of work).
This theme of verifiability extends to a broader set of non-blockchain technologies as well. With IPFS, you can verify (via CAR files) that the data we request is verifiably the same as the data we receive — meaning, we don’t have to rely on a trusted server to ensure the right bytes are being passed around. This uncouples data from specific servers, allowing users to port storing data between individual service providers, their own computers, or even across incentivized storage networks. This adds resilience from the union of these technologies rather than any individual stack. With zero-knowledge proofs, we can verify that the output of some private computation was indeed correctly done — the basis for enabling privacy (e.g. ZCash) as well as for enabling off-chain scaling (e.g., ZK rollups).
With all of the above, none of them require a notion of ownership. They all rely on verifiability.
Why verifiability will be critical for the future
For those of us who believe deeply in this space, it can feel more obvious why verifiability matters.
When you have this permissionless, open, substrate for building, it can lead to greater composability, which can snowball into a system greater than the sum of its parts. Take decentralized finance (DeFi) sharing interoperable protocols that allow for more powerful interactions. The transparency of these systems can result in better risk management, as we’ve seen during every volatile period over the last few years, the on-chain solvency of positions and liquidations can be both observed and acted against. Contrast this with FTX, where user assets were not held 1:1 and users only discovered the harm after it was too late.
But increasingly it becomes obvious that these value propositions are not going to be essential just for the systems we build for ourselves but for the internet at large.
With Dall-E and ChatGPT, we see that high-quality and convincing artificial intelligence will be here within our lifetimes. With the act of creation becoming commoditized, verifiability will become a critical tool for enabling authenticity. With Dall-E, anyone can create a likeness of a creator’s work with a few words, but with an NFT, we can at least verify if it was generated by the original artist. With ChatGPT, anyone can create a plausible scam to convince a user to give away money, but with cryptographic tools, we can at least rely on a source of truth to determine whether a counterparty on the web is truly a member of the organization that they claim to be.
Finally, as faith in institutions continues to degrade, verifiability will become an essential factor in rebuilding trust in our systems. For instance, the recent change in leadership at Twitter has highlighted a fact that has been true since its inception: Having a central actor with the power to boost, deboost, platform or deplatform content gives that actor significant control over public discourse.
While one can hope that the central actor in charge is benevolent, there is no guarantee, and users have no explicit way to express their disagreement. In contrast, having a technical foundation that enshrines basic rights (irrespective of the central actor in charge) in a verifiable way, and building layers of subjective decision-making on top of that foundation, feels more aligned with a social contract based on user consent. Web3 natively has these properties built into it. Systems like Bluesky, Farcaster and Lens allow for credible alternatives to current centralized versions, and they embody user rights as a default and allow for a market of subjective values to be opted into on top.
Ownership is just one property of Web3, and while interesting, it is not the most interesting nor the most valuable aspect of these technologies. Web3 enables a technical enforcement of a social contract, and that’s only possible because of verifiability. While we’re still in the depths of a bear market, we have the space to reassess our values. Personally, I’d like to see a vision of Web3 that’s less about fiefdoms and more about freedom.