BTC++, Consensus, and the Elusive Web3

On a recent Saturday evening in Austin, Texas, I left a talk between a human rights activist and an Afghan entrepreneur revolving around using Bitcoin to evade repressive regimes, and walked down towards Consensus to see the last few advertising vans circling the block, their electronic panels brightly promising untold riches from yet another token, even while the Consensus crowd had clearly moved on to the evening’s entertainment. The next morning, the markets would begin slowly, then suddenly remembering the nature of financial gravity.

Everyone’s a genius in a bull market. And as a wise old turtle once said, “you only find out who is swimming naked when the tide goes out”.

Roulette Dares in Cryptoland

Revelry has a motto I love: destroy bullshit, and unleash human potential. The team has prototyped and worked with several teams building in the cryptocurrency space since before I got here. I think crypto’s goals align with our values.

Yet given the numbers on the board, it must be said: the overwhelming majority of crypto/DeFi/Web3 projects are, well, bullshit. Despite the waves of speculation, the market capitalization, the anemic user numbers, the fact is that capital-at-large has been profoundly misallocated: I cannot point to a single successful DeFi project that has lived its values of decentralization, innovation, and user empowerment.

As I write this, the bodies are still being carted out on stretchers–Celsius, Three Arrows Capital, Babel Finance–but it’s clear that the user-powered revolution, this was not. In most cases, the products were no different than traditional finance, repackaging risk in a new, cool format for the kids to gamble on. Users–what the finance bros call “retail”–are the ones left holding the bag. Every time, for every token.

The first quarter of 2022 saw losses due to hacks reach $1.23 billion (with a B). This does not include failures such as Terra, which imploded in May to the tune of $60 billion USD.

The reality is it’s exceptionally hard to create decentralized systems, from both a technical and social standpoint, and we’re looking at the result of over 5 years of experimenting by taking shortcuts. Even for the most morally flexible among us, or the most die hard believers in the promise of crypto, you have to ask yourself “what the f are we really doing here?”. We’ve been asking ourselves this exactly.

Building on the Margins

That same week, I attended a conference called Bitcoin++, which, shortened to BTC++, is a cute play on the programming language C++. Put on by base58 and PlebLab, the conference included two days of talks and workshops, from enthusiasts to Core developers, and two days of hackathon at the Bitcoin Commons.

There’s a special feeling of walking into a room of people eager to make a difference and have fun doing it. Throughout the week, I was reminded of how strange an enterprise this Bitcoin thing was, 13 years in. No CEO, no investors, no marketing department. Just a thing people chose to work on because it was interesting and new, and could be of great benefit to people globally. Bitcoiners are by necessity a motley krewe, and it’s fun to see how this network has found appreciation from billionaires to refugees, politically left to right, and everyone in between. Perhaps it’s no surprise that the values of the network result in a community that reflects them: plural, global, and voluntary.

Still, it’s a fairly difficult project to pull off. Who reviews the code? Who is qualified to review the code? Who cares enough to do it for free? It’s hard to put into words a form of communal organization that has become so far removed from our experience: people working on something because they choose to, because they can put their hearts and hands and souls into it, even if they must forsake security and predictability to do so. These bitcoiners remind me of the line cooks I used to work with, always exhausted, forearms scarred by burns, but their eyes bright as they prepped the evening service because they got to do what they love. This is what it’s like walking into a Bitcoin hackathon. I heard exactly zero price talk in my four days in attendance.

Walking into a room full of people ready to build, and not swindle, reminded me of a seminal EpsilonTheory piece and its central lesson:

“Hear me again: your work is holy.

No I don’t mean your job. I also don’t mean your passions. Your life’s greatest work may never be a passion. And no, this isn’t another paean to artisanry, crafts and trades, although these are perfectly legitimate paths to meaning, too. I mean your work: what you make. When you set your mind and hands to work, what do they produce? Does your labor result in knowledge, happiness and health, beauty and wealth, for yourself or for others?”

The developers who work on Bitcoin Core could get paid double or triple somewhere else. They don’t have to work on a leaderless open source project, jumping from grant to grant without healthcare or career security. Yet they choose to. This is human agency, and it is the force which opposes the predatory tactics of DeFi.

This is why we say “Bitcoin, not crypto”. Bitcoin is controlled by no single entity, and the people who work on it do so in part not to recreate the dynamics of the existing financial system, whereas “crypto” has focused on recreating those dynamics. This distinction is not without its consequences: if Bitcoin acts as a neutral network for money on the Web, then institutions which benefit from being a middleman on the Web lose out, and those institutions are very eager to remain relevant and profitable.

I suspect this distinction is still poorly understood by the public, and who can blame them, given the amount of marketing funds behind crypto companies? As technologists, however, it is crucial to understand the distinction since it results in two very different systems which will determine the future directions of the Web itself. Do we want a monetary layer for the Web? If so, should it be funded by VC, and have investors looking to extract a profit from it? Or should that monetary layer be as neutral and resistant to influence as possible?

A Field Guide to Web3 BS Detection

It’s difficult to kill Bitcoin because it’s difficult to kill something that has no leader. Every Web3 project that has investors, a foundation, a fund backing it, simply will not survive. This is the first heuristic, and the one which will save you the most grief.

The second heuristic: if it sounds too complex to understand, it probably is. It may seem quaint in this day and age, but fundamentally, banking should be boring. Money should be boring. If something money related is couched in layers of complexity, esoteric technology, and huge promises, you should avoid it.

The third is more subtle, but important nonetheless: all technology is at a certain level secured by people. This is essentially Eric Voskuil’s Risk Sharing Principle. Any scheme that promises to remove the human from the technical is profoundly misguided about the nature of our relationship with technology. Bitcoin is no different: it is people who choose to use it as money, people who choose to provide energy in return for a reward, and people who choose to review the code. This is why ideas such as “algorithmic stablecoins” cannot work, and why Terra’s demise was predicted.

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So you can stand on a scorching street corner in downtown Austin on the last day of Consensus, and watch half-empty parties for half-empty networks stubbornly continue into the night, and almost see the wave break and start rolling back. The hype, the NFTs, the partnerships and tokenomics, all the crest of a wave riding high on easy money and status games that would continue to unsuccessfully meet reality.

Web3? Honestly, never seen it. Crypto? 99% vaporware. Bitcoin? Still does exactly what it says on the tin.

None of this is magic. It is built and maintained by people, by individuals who choose to make a different future with the little time they have. To me, this is what technology is all about, and the promise it holds not just for our families and communities but humanity at large: to use your time and tools to leave the world better than you found it. I believe that this wave will never–ever–crest and roll back, and so remain optimistic about the future of magic internet money, if only we could get rid of the noise.