Last week, I wrote about how web3 is doomed to be a niche. The subtitle was “more like Usenet than YouTube” and right after publishing I realized I had left out an explanation of what Usenet is.
So lemme explain.
Usenet was the first open discussion board for the Internet. There were private dial-up discussion boards before, like CompuServe and AOL, but they were specific to each service. Usenet was the first that anyone could connect to from anywhere.
In the early days of the commercial Internet, when the web was read-only, Usenet was the only place you could actually post content. In that sense it was a precursor to blogs and social media.
However, it was still fundamentally a geek thing. You had to download and install a newsreader app and configure it to work with your ISP. This was a big enough barrier that most people didn’t use it, so it was always a small niche, mostly populated by people like this guy:
Eventually web-based discussion forums came along, followed by blogs with comment sections, and eventually web-optimized sites like Reddit and Twitter. Usenet was left in the dust.
Web3 is Usenet
I bring all this up because it highlights the problem with web3 and crypto more broadly. It’s a highly technical, rather weird user experience. The seed phrase alone is intimidating, and having real money at stake makes crypto a gigantic honey pot for scam artists.
Unless and until this Usenet-like experience is solved, web3 will never catch on with the masses. Period. End of story.
What about porn?
It’s often said that “if you can imagine it, there is porn about it.”
A corollary is that the best indicator of a technology’s potential is, does it support porn?
It’s funny because it’s true.
We don’t like to talk about it in polite company, but porn has been a part of of every consumer technology revolution. Some of the earliest Victorian-era photography was pornographic. Coin-operated peep shows started emerging in the 50s. VCRs really took off once video porn became available. Porn sites were the first to use high res images and video on the internet, including live video for camming. And of course, the leading tube sites perennially rank in the top 20 for web traffic.
Sex sells. Duh.
Given that, crypto seems tailor made for illicit commerce. It’s global, pseudonymous, near instantaneous and there are no pesky banks in the middle.
So perhaps crypto’s mass use case is being predicted by porn? Let’s check.
Here’s a list of the top five crypto sex products according to… a random site I found by Googling, because there is very little legitimate discourse about these products.
Have you heard of any of these? I haven’t. Most of them don’t even appear to be operational.
I am, however, drawn to Bitcci. Not because I would use it, or even understand it, but because they bought a cameo endorsement from David Hasselhoff.
(For you young-uns, Hasselfhoff was the star of the Knight Rider, a hit TV show in the 80s. The show sucked, but it sucked when there were only three networks and you could still get 40 million people to watch your crappy show every week. He still sucks, but I’m delighted to see how Cameo empowers him to suck in a whole new way.)
Make Wallets Useful
If you haven’t picked it up from the snark, I’m deeply pessimistic that any of the current trends will turn web3 into a breakout star.
But there is one killer app that I can think of. An app so useful that tens of millions of people would sign up overnight, and within a few years billions would use it.
What is it?
A Federal Reserve issued digital dollar.
Scads of companies would support it and compete to provide it. Facebook, Twitter, Google would seize on it as a way to more tightly integrate identity with their platforms. And while many of us nerds hate that, the fact is that large centralized companies are much better at security than individuals.
A lot of people hate this. A lot.
But.
Orders of magnitude more would appreciate it.
Right now, the process of using MetaMask or some other wallet to pay for something is ludicrous. It’s far slower than just using a credit card, and confusing as all heck.
Remember the opening words of the Bitcoin white paper?
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution
These days, the main uses of crypto are not even for payments! Instead they use it for things like “swapping” and “minting” and accessing “token-gated” resources so we can do “yield farming” and use “liquidity pools.”
And why is that? Because it’s really hard to understand the value of an asset that bounces around like lottery machine balls. So instead of using electronic cash for, like, buying stuff, we play games with our savings using weapons of mass financial destruction.
Why would the average person who just wants to split a bill or bet on a football game bother with all this nonsense?
Why not commercial stable coins like USDC?
Those are a good step forward, but they are still stuck in Usenet-land. You still have to do all the gyrations of installing a wallet and interacting with weird user interfaces. I envision something more pervasive with other benefits beyond just digital currency.
Matt Yglesias has floated a very intriguing proposal for the Fed to offer bank accounts to everyone, and use the Post Office as branches. There are multiple potential benefits to such a system — for example, the pandemic stimulus checks could all have been done electronically. Post Offices are an ideal location for basic banking services because there is literally one in or near every single zip code. This would ensure more people have access to digital wallets by providing them with local resources to help them get set up and resolve any technical issues.
Giving everyone access to electronic payments, and building in the KYC and AML parts from the get-go would be a major step function for society, on the order of universal public education. It would lead to a new generation of value add services from the private market and streamline government transfer payments.
Consider your own situation. What if you knew that everyone you interacted with could send or receive money as simply as sending a text message? No need to ask if they use PayPal or Venmo or Facebook payments, or worry about gas fees. Just give everyone a wallet address and watch the explosion in innovation.
There would still be a place for the Venmos of the world. The government wallet specification would be an open-source public good, so they could continue building apps that use it in novel ways.
What about privacy?
This is usually when the alt.libertarian, “taxation is theft” types speak up. So let me ask my free market loving friends this question:
Can you show me a single example of people actually giving a crap about privacy to the point that they refuse to buy the product?
Facebook broke their privacy pledges over and over and over and over and over again, and they did all that on the way to building the planet’s largest user base.
(I dislike Facebook as much as the next person, but in the game-theory centric world of crypto, why wouldn’t you expect something similar to happen?)
US House rep Matt Gaetz found out the hard way that all Venmo transactions are public(!) by default. How many other Venmo users knew that? I didn’t. It doesn’t matter. Venmo is still on the same rocket ship trajectory as always.
Let me repeat that last point to make it completely clear.
Venmo is a centralized service that invades your privacy by default.
“That’s why we need crypto,” I can hear some people say, “because we can’t trust Big Tech or the government.”
That might be why you need crypto, but here’s the thing: you are Comic Book Guy.
See you next week!