Thread
I tried writing hot takes in response to @jack ‘s web3 and VC criticisms, but twice gave up after the drafts turned into rambling incoherent essays. Spent some more time to be able to write less. Here are my thoughts: /1
2/ first, no, web3 today isn’t really web3. It’s far too centralized in many regards and it’s ‘buggy’ in every way from actual code bugs to UX and operational and game theory ‘bugs.’ That’s how new stuff gets built. Was bitcoin really “bitcoin” in 2011?
3/ as for the VC hate - as many others pointed out, it’s not like VCs just decided to own big stakes in web3. They bought the positions. Why were they able to buy so much? Two main reasons:
4/ A. Regulators. As many pointed out, teams are legally required to fundraise from AML/KYC’ed investors, and it’s far far safer and cheaper to fundraise from only accredited investors.
5/ while there are ways around this, those ways are either expensive and inefficient, or legally risky. The other reason is…gonna be unpopular, but here it goes -
6/ VCs allocated capital reasonably well. In a meritocracy (aka free markets), the best allocators will eventually own everything (absent taxes and other redistribution mechanisms.)
7/ why does Paradigm own so much UNI? Because they were smart enough to be large early supporters of a project that @jack and most others were completely dismissive off. Jack calls these “alt” projects worthless then complains when other people own them because they invested.
8/ there’s plenty of brilliant non-VC investors. But on average, the VCs own so much of Web3 because they bet fairly accurately. Retail owns doge and SHIB and a ton of outright scams and garbage (as well as the good stuff.) The VCs make plenty of bad bets, but overall…
9/ lastly, a common debate in crypto in 2017 was bitcoiners asking, “why does this thing need a token?” The answer was obvious then, but now we have real world proof. All of crypto is based on incentives. Shockingly…most people won’t work hard for free.
10/ so, the valuable stuff Jack is complaining about VCs owning got built where there were investable tokens. Bitcoin as sovereign money? If you want to trade or lend it trustlessly, you’ll need to use a project with a token like Rootstock or Blockstack.
11/ a few years ago, Jack and many bitcoiners said all this web3 stuff was just scams. Now that it works and generated hundreds of billions of $$ of value, he complains that VCs own it.
12/ let me turn to a positive note - I share Jack’s desire for maximum decentralization in web3 and crypto broadly. We need to reform US regulation to let retail compete on more even footing with VCs.
13/ an unexplored critical question in this whole discussion is: how important is ownership to control? That’s a very complex topic that varies based on the consensus mechanism, social contract, stakeholder incentives etc. if we can fork malicious miners off a PoW network,
14/ the same can be done with a malicious whale in a PoS network. It’s similar questions to evaluating equity - could the founders just restart the company under a different name with a new cap table? Depends on a long list of factors.
15/ TLDR: web3 today is comparable to bitcoin in 2011 - fairly centralized and buggy, but an amazing proof of concept. And we don’t want VCs to own the world…but whining about it doesn’t help. Gotta facilitate broader ownership.
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Geoffrey Miller @primalpoly
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Dec 24, 2021
Good thread Many valid points.