Web3 idealists race to save crypto decentralization, NFT crash

Web3 idealists race to save crypto decentralization, NFT crash

In early 2021, French-Lebanese cryptologist Nadim Kobeisy tweeted a loose idea he had just had. “I am designing a decentralized social media solution where each user hosts their own microservices.” Kobeissi Books. These then connect to each other in a network, allowing posts to be followed and shared. It will be lightweight, easy to use and safe. Are you interested in financing its development? “

Within a day, Kobeissi had raised $100,000 through that brief and detailed tweet. A week later, he was CEO of a new company founded in Delaware called Capsule Social which had a paper valuation of $10 million. Another $2.5 million came via an introductory round that closed in April 2021. The startup is currently raising another $30 million round.

“[T]The level of interest was so exceptional that I felt I had to pause and re-evaluate the ideal approach… Venture capitalists were so gambling with me that I had no way of receiving their money,” says Kobeisy. “I had absolutely no plan. I just came up with an idea for my project.”

What triggered so many enterprising investors? Kobeisy’s speech contained the magic word that revives the less speculative and more idealistic aspect of the Web 3: “Decentralization”.

Decentralized systems, which do not depend on any underlying entity to function, is an old concept that has been severely undermined in the age of Web 2.0. Many technologists have been trying to revive decentralization for years.

But when Capsule Social finally launched its Blogchain writing platform in June, the sexual aspects of Web3 — cryptocurrency and NFTs — shattered, leaving idealists like Kobeissi scrambling to save their projects and the decentralized brand from Web3’s biggest bust.

Generations of decentralization

The Internet itself is a decentralized network of communication networks, with no central authority monitoring bits and bytes or preventing one part of the network from communicating with others. The technologies that initially sprang from that infrastructure — email, the early Web — inherently adopted the same decentralized nature.

This is how the details of life on the Internet have been designed, but then monolithic platforms like Google and Facebook have taken their place at the center of people’s interactions and activities. These Web 2.0 giants were easy to use and secure, but it soon became apparent that they were using their full visibility sites to characterize and target ads to their users—while censoring some search results and uploaded content.

The distrust of Silicon Valley inspired the first big wave of decentralization in the 2000s, as geeks and idealistic activists tried and failed to counter Big Tech with services like Diaspora and Mastodon — alternatives to Facebook and Twitter, respectively. These projects offered greater resistance to privacy and censorship than their competitors, but also offered more complex user experiences and, importantly, fewer users who were actually interacting happily on Silicon Valley platforms.

Then Bitcoin exploded, introducing the world to the concept of a blockchain, a decentralized ledger stored across multiple computers, and its contents effectively tamper-resistant due to that distributed architecture. Decentralization is back with a vengeance, as the term has been thrown up by seemingly every “Web3” proponent — a vague term that encapsulates the fields of interlocking cryptography, blockchain, and NFT.

Web3 audiences hope to counter Wall Street with decentralized finance (DeFi), where transactions take place via self-executing software called “smart contracts” that run on blockchains like Ethereum. New Web3 projects and communities are emerging in the form of decentralized autonomous organizations (DAOs) that also use blockchains as a kind of operating system.

People take pictures by an NFT billboard at the Boring Monkey Yachting Club in Times Square during NFT.NYC’s Fourth Annual Conference on June 23, 2022 in New York City.

Noam Galai – Getty Images

Andreessen Horowitz partner Chris Dixon declared in 2018 that “Decentralized networks can win the third age of the Internet.” When Coinbase CEO Brian Armstrong announced a new section of the crypto exchange blog last year to respond to crypto critics, he did so in a post about the “decentralization of truth.”

This is the context in which Kobeissi raised $100,000 in 24 hours. Kobeisy, who until recently was best known for creating the secure messaging service CryptoCat, the program that journalist Glenn Greenwald used to conduct confidential discussions with Edward Snowden, an NSA leaker in early 2013, said Kobeisy is still somewhat still only 31 years old.

But after the hype, came the crash.

encryption winter

Since November 2021, the market capitalization of cryptocurrencies has fallen from $3 trillion to a shade above $1 trillion, with both Bitcoin and Ethereum hitters down 66%. Sales of NFTs — tradable tokens that signify ownership of digital files, art in general — also collapsed, with an estimated 88% drop in the average NFT selling price between April and July.

The “crypto winter” was caused in part by a broader economic downturn — seen as a hedge against traditional stocks, cryptocurrencies turned out to be following the Nasdaq’s trajectory in particular — but the recession accelerated in May, when Terraform Labs was pegged to the dollar. Underground tanks collapsed. Perhaps most damagingly, countless cases of NFT, crypto theft and fraud have tarnished the reputation of the entire sector.

Kobeissi sees decentralization as having stopped collapsing. “I think NFTs helped sully the decentralized brand,” Kobeisy said.

Vitalik Buterin, co-founder of Ethereum, speaks during ETHDenver in Denver, Colorado, US, on February 18, 2022.

Chet String/Bloomberg via Getty Images

According to deal tracker Pitchbook, global Web3 and blockchain transaction activity fell from about $10 billion in the first quarter of this year to $7.7 billion in the second — although Pitchbook fintech analyst Robert Le says it “still reflects a good “drop” amount. What’s happening in the broader venture capital market.”

Andrei Brasovino, who has led venture capital firm Accel’s investments in companies such as Web3 development platform Tenderly and Axi Infinity SkyMavis Maker. “There’s a lot of cleanup going on right now.”

On the other hand, the crash makes a tougher market to start a service like Blogchain. Kobeisy says the platform has yet to establish detailed metrics, making it impossible to gauge readership numbers, but hardly any of the posts on Blogchain — some of which are well-researched articles of the kind one might see on Substack — contain more than a handful of comments. and posts.

“Had we launched earlier, we would have had a greater impact, simply because of the hype around Web3 and so on,” Kobeissi said. “Now we basically have to do a grassroots-style campaign. We have to justify the value of a product based on its merits – like any conventional logical business should do.”

But Kobeisy also sees the incident as proof of his controversial decision to stay away from the noisy elements of Web3.

Blogchain is at the core of Web3: its decentralized nature makes it difficult to fully censor posts, and it uses blockchain-based “smart contracts” to make content moderation decisions fully transparent — an answer to Big Tech’s opaque moderation practices.

But Kobeissi says that Blogchain is not based on cryptocurrencies or NFT, a trait that disappointed many venture capitalists who tried to pump money into Kobeisy in early 2021. The venture capital also was not impressed with its decision to use the carbon-neutral NEAR blockchain instead of the Ethereum blockchain. The higher-emissions one, which they said “has a better brand.”

“When we developed the platform, we made dozens of calls with potential investors, partners, and advisors, most of whom were pushing us to focus more on NFTs,” he recalls. “Many said that instead of focusing on the content, we should only promise people the tokens and the NFT. The advice given was in a very superior tone, and when I declined the advice, I was treated like someone who didn’t know what they were talking about.”

“Monkey NFTs don’t make sense, but when you use the same smart contract technology to provide accountability in content moderation, it actually makes sense,” Kobeissi said.

Decentralization name survey

Jürgen Gütter, a German computer scientist-turned-prominent tech critic who writes under the name “tante”, agrees that “the decentralized brand has been hurt a lot” by recent events, but in his opinion, trying to create decentralized systems has already been a losing cause because users have repeatedly shown Frequently, they prefer convenience over the ability to avoid the big tech companies.

Geoter cites email as an example. Email is decentralized in nature, but the wide adoption of Google’s feature-rich and well-secured Gmail has effectively centralized it to many people – just as Bitcoin is now controlled by a few mining pools, and the vast majority of NFT trading takes place on a single platform, OpenSea .

What’s more, says Geoter, the limited success of projects like Diaspora and Mastodon has already shown that decentralized services have significant problems in overcoming the effects of the Big Tech network and ease of use. “No one likes annoying technology, except maybe the techies,” he said.

All projects end with a degree of centralization, says Pitchbook’s Le – and that’s not a problem for most users. “As a consumer, I just want to use a product that makes my life easier,” he told me.

While Geoter scoffs at the way the Web3 landscape generates decentralization, he still thinks the concept remains “very important” – as long as people realize that decentralization is not an obscure agent of democratization, but rather as a tool for building things that really benefit from that kind. For architecture, such as transparent content moderation systems.

“In a way, decentralizing this crypto space, clarifying its name and making it the subject of research again, is a good thing for decentralizing,” Geuter said.

Accel VC Brasoveanu also believes that the concept remains “a compelling idea and a goal to pursue,” and noted the recent emergence of projects such as the NFT marketplace LooksRare, which offers a decentralized alternative to OpenSea. In June, OpenSea was still the leading market with two-thirds of NFT trading volumes, but LooksRare came in second with 20%.

Similarly, Lu cited a decentralized wireless network of devices connected to the Internet of Things, called Helium, as an example of an innovative token model. Helium participants earn cryptocurrency by operating the hotspots that make up the network, and companies can then purchase that cryptocurrency to use their infrastructure. Helium until very recently was touting Salesforce and Lime as examples of these clients, but after opposition from both, Helium admitted that it ran beta programs only with them.

Amir Halim, co-founder and CEO of Helium Inc. , speaks during the CoinDesk 2022 Compatibility Festival in Austin, Texas, on June 11, 2022.

Jordan Vonderhaar – Bloomberg via Getty Images

Helium was valued at $1.2 billion in March, when the likes of Andreessen Horowitz and Tiger Global Management participated in a $200 million Series D round.

“I think now, because of the way the project developers think about tokenomics, users will keep tokens because they believe in the project,” Lu said. “That’s less speculation, more” I understand this project. “

Kobeissi, who is preparing to add cryptocurrency functionality to Blogchain as a way to reward writers who prefer to remain anonymous, said Blogchain’s revenue comes from deducting 10% of the subscription fee charged by its premium writers.

“It’s the hype that gave us a boost in the beginning – whether we deserved or not – but now, because we’ve built on solid and well-justified foundations… I think we have an opportunity in the long run.”

Leave a Comment

Your email address will not be published.