I’m just old enough to remember when the internet was fucking awesome. It was open and lawless. Using it was an experiment. You could ask “asl” in an AOL chatroom. You could play pretend.
The invention of MP3 compression and file sharing apps was life-changing. As a middle school boy learning to play bass guitar, I suddenly had access to practically every song in the world. Incredibly, it was even cooler than that—using it was breaking the rules!
At one point, an ISP threatened my dad that they’d shut down our service because they had evidence of our IP address, as I saw it, just downloading files. This was around the same time there were stories of random people getting slammed with huge fines for downloading files (with at least one innocent grandma harassed in the process).
The moral justification for this was that it protected artists. There was an ill-fated effort around “digital rights management”. Pay $1 per song on iTunes and then you—and only you—own it. Price aside, there was a big issue: this tech is inherently circumventable. You can just record the output of your audio card.
Then we got Spotify. Artists get a share of a flat monthly fee that’s (I guess) the market rate for the convenience of the app over finding the files online. “There are a hundred pities in a penny.” Where did those guys go that said they cared about protecting artists?!
Anyway, sure, copy-pasting an MP3 file might have a couple similarities to putting a CD-ROM of Jay-Z’s Black Album in your backpack and running out of a Tower Records without paying for it. But in most ways, I’d argue, it’s not like that at all! Maybe our conception of intellectual property is based on a strained metaphor with physical property and we could stand to gain from reevaluating all of this.
In any case, we ended up with an internet where music piracy is technically trivial and humans are generally unable to make a living creating art. We moved on.
But there was more to the internet than just replacing radio. You could play games and you could make them. You could explore websites and you could make them. You could make a MySpace profile and customize your HTML. We got Facebook, Instagram, Snapchat, TikTok, and now the average person just uses the internet to connect to a small handful of apps and websites operated by massive corporations.
These apps are optimized to keep people hooked, generating ad revenue. They sell your data. They invented doomscrolling. This is the internet middle schoolers are growing up with today and it’s the only internet they’ve ever known. Now, they get to witness the internet transition towards an archive of AI-generated content, increasingly indistinguishable from human communications.
Enter blockchain technology. Internet-native money (which can be used to purchase decentralized computing power) becomes a major asset class as open and permissionless financial systems mature.
Before, we had little choice but to incentivize and, ultimately, trust middlemen like banks to hold and transfer money. They’re profit-seeking and operate privately. Now, there’s an alternative powered by free (as in ”free speech”) open source software. It’s an amazing development.
In just the few years since I got involved in the space, this tech has developed at an astonishing rate. (The Optimistic Virtual Machine feels like just yesterday.) Scaling solutions have enabled lower transaction fees; they’re now reliably below the ~3% (plus flat fee) common among traditional payment processors. Many small businesses operate on single-digit margins and already prefer cash to avoid this. The demand here is obvious, assuming we’re able to adopt socially-acceptable privacy solutions.
There are even signs that Wall Street and the American political establishment are aware of the inevitability here. Paul Ryan suggested pro-stablecoin legislation as a method to help the national debt. (Centralized stablecoin issuers are already a major buyer of treasuries.) Interestingly, he goes out of his way to clarify “it’s not crypto because it’s tethered to the US dollar.” This is a branding exercise, I suppose.
Onchain derivatives markets built with immutable smart contracts can integrate with oracle networks to generate decentralized stablecoins and then trade them into tokens that track the value of any asset—including those that have nothing to do with crypto at all. At this point, decentralized finance is safely past the proof of concept phase. The utility is undeniable.
The most reliable, fast, scalable, and inexpensive financial infrastructure will ultimately win, simply as a function of capitalism. A more interesting debate surrounds the value of decentralized computation in general. This is a political and cultural concern, less a financial or economic one.
A major appeal of music piracy in the ‘00s was meeting all the interesting characters in chatrooms and message boards along the way. This magic really crystallized in MMORPGs. The internet was social in a sense of the word that existed before social media.
I poured countless hours into Everquest—and even more into Dark Age of Camelot—because it was wildly fun building a character. In role-playing games, you not only accrued experience points and items to wear on raids through Darkness Falls, but you also built a reputation. There wasn’t really a difference between your character being unreliable and you being unreliable. If you say you’ll meet a group at Druim Ligen at 6PM GMT on Thursday to complete a quest, people would be disappointed if you didn’t show up.
These expectations weren’t set on NPCs. Of course they weren’t. Throughout Hibernia and into the frontier, it was always obvious which characters had humans behind them.
This is no longer the case. It’s clear that ‘proof of personhood’ tech will need to do better than CAPTCHA codes going forward. It’s no coincidence that the leader of the most successful AI project also founded a blockchain project that associates eyeballs with accounts.
Imagine growing up with an internet full of bots that essentially pass the Turing Test. Imagine competing in a high school Battle of the Bands and wondering if the winning song was inspired by an interesting life experience or just talented prompt engineering. It will be completely intuitive to new generations that the value isn’t really in the ones and zeros of “digital content”. That never made sense in the first place.
Serious value stems from authenticity, provenance, identity, and reputation. This echos steelman arguments for NFTs. They had a hype cycle driven by the emergence of markets for them that mirror those of luxury art. There’s an important lesson in this analogy: the value of a painting was never just about who can look at it. It’s about whose name sits on the placard next to it.
The non-fungibility of NFTs is just an implementation detail. The real breakthrough here is in the payment rails and the receipts for them. Now that digital micropayments without intermediaries are becoming a reality, I can throw a few bucks in a digital tip jar and get credit for it. For me, cheap and plenty NFTs are far more exciting than expensive ones. Patronage is how the rich have always supported the arts. Now everyone can play.
The democratization that comes with decentralized technologies is exactly what has inspired so much disdain for crypto. It lays capitalism bare by creating a level playing field—for the good parts and the bad. Still, morally, a more free and open system is a net positive. Under the current system, sports betting and state-issued lottery tickets are fine for everyone, but we need to leave venture capital investing to the ‘accredited’.
With everyone able to create, store, and exchange value as they wish, we’re primed for a major sociological shift. Distinct cultures are growing around different blockchains. More chains will be created and the aggregate demand for their decentralized computing power will expand. You can run everything else on local hardware and retain your privacy. You can rent processors from Amazon as a last resort.
Social progress is ultimately in the hands of kids. I’m optimistic that—without asking permission from adults—they’ll just revolt against today’s internet, which is pretty fucking awful.