Oct 25, 2022 • 1HR 11M

Why web3?

On blockchain, web3, regenerative finance, and more.

4
 
0:00
-1:11:09
Open in playerListen on);
What-ho, what-ho! Join me, the foxwizard (Dr Jason Fox, bestselling author and rogue philosopher) as I attempt to unravel a semblance of ‘sense’ amidst the perplexities that pertain to living and leading amidst this fraught epoch. Together we shall foray heartily through complexity, ambiguity, paradox and doubt—so as to obtain the freshest, darkest and most dubious fruits of ‘wisdom’ for our combined edification and delight.✦
Episode details
4 comments

gm and what-ho,

I am long overdue in writing a letter to a friend who has expressed some scepticism about blockchains/web3—yet remains open to learn more.

This museletter is a first draft attempt to explain why I am so enthusiastic about web3. And why you ought be, too.

I appreciate scepticism, and find it to be an apt stance when encountering any new thinking/ideas/paradigms. It is the disposition of a scientist—sceptical, yet curious.

Because there’s *so much* bullshīt out there—it makes sense to reserve judgement until you have accrued enough insight to form a working protosynthesis (a tentative and knowingly incomplete-yet-updatable disposition formed from the synthesis of all that you know about a particular thing).

Note that scepticism is different from cynicism—which is where one pre-judges something to be bad, before any (meta-)rational consideration. This is largely the result of cognitive biases formed from past experiences; if you have been burnt before, chances are you’ll subconsciously protect yourself from similar such (even if this is expressed irrationally). It takes a certain self-awareness to know if we are being open to new thinking, rather than simply scanning for points of rebuttal so as to affirm our own stance (and thus feel more secure).

The Algorithm grooms us to believe we need to have a Strong Opinion about almost any (seemingly) divisive topic these days—to declare our stance!—but I find it far more apt and appropriate to mostly dwell within the complexity and ambiguity. Particularly if you don’t know enough to have any strong stance. This is the epistemological humility I’ve spoken of before. It is also akin to the fox-like tendency to harbour weak views (albeit strongly held). This notion I lifted from Venkatesh Rao’s wonderful essay of eight years ago, The Cactus and the Weasel, wherein he speaks of his own fox-like disposition:

“I do not hold truly strong views because I do not have much of a capacity for deep domain-specific detail, and outside of very narrow areas, am not much of a doer, which means I have far fewer specialized habits of expertise than powerful doers.

In most areas: politics, culture, governance, technology, startups and all the other topics about which I offer views from an armchair, my thinking could be characterized as weak views, strongly held. Even in areas where I have some home-domain expertise and doer skills, I don’t hold particularly strident and detailed views. To a large extent, I have no home domain. I am a cognitive nomad. 

So by weak views, I mean I primarily approach all areas (including my nominal home domains) as an outsider, with the intent of identifying and forming opinions about fundamental premises, rather than achieving insider status and mastery.”

I’m sure there’s some nominative determinism at play here for this here Dr Fox, but—I am much the same. My relatively weak views make me quite ineffective at winning arguments, because; I don’t really want to nor feel any need to. The infinite player within me doesn’t need to ‘win’. Thus I have no real agenda—no singular vision of utopia to convert you to. I proselytise not.

But I *do* wish for my clever friends and readers to be more effectively curious and open to what is emerging in web3. Because, verily, I believe that within this burgeoning field of web3 we are witnessing the experimentation and unfurling of whole new ways of coordinating amidst higher orders of complexity, at scale.

Which—you may have noticed—is a theme I keep returning to. I’m attracted to such.


Btw, this is the museletter of the wizard Dr Fox. If a friend forwarded this to you (how lovely) you can join over 11,000 readers who subscribe. 🧡

Also, if you happen to be in Melbourne this Thursday 27th of October, from 530–715pm we shall be gathering for another Rekindling. This time we shall be unpacking web3, regenerative finance and sacred economics—and then kicking on for dinner and drinks together in casual intellectual speakeasy salon form. We’d love to see you.

Tickets are available now. ✨


In this letter I shall attempt a high level tour of the following topics: blockchain, web3 and regenerative finance (ReFi). By no means is this encyclopaedic, reliable or complete. And certainly, nothing I say ought be treated as financial advice.

Yet nonetheless: I care about my friends, and I care about you. I want minds like yours to be safely exploring and contributing to what unfurls here. After years of feeling very sad about our inability to coordinate to effectively mitigate the ravages of the hyper-object that is anthropogenic climate change—something that we have collectively manifested*—I finally find a glimmer of hope amidst the dark forests of web3. It could be a will o’ the wisp, and I might be a fool—but there’s something there. And this potential alone is too important to ignore.

* Not fun fact: Australia is the world leader in mammal extinctions.

Blockchain is possibly the greatest innovation in collective coordination since the Internet. It is at the heart of what Kim Stanley Robinson’s Ministry for the Future finds as one of the only effective ways we might collectively mitigate climate change (via global carbon quantitative easing through the issuance of a blockchain based complementary currency called ‘carbon coin’, which is issued in proportion to the mass of carbon that is mitigated—something very similar to what the folks at Klima DAO are developing).

Mind you, KSR has since seemed to have distanced himself from this proposition; possibly because the public perception (and actual maturity) of blockchain technology is not anywhere near where it could be.

You may note a slight defensiveness from me as I wade through this (at this point I am giving up on the pretence that this is a letter to a friend; I feel the need to vent aloud instead—I shall respond to them another day). I have been met with a lot of cynicism regarding web3, including open hostility from even close friends. Oft-times this comes from folk who have never interacted with a smart contract, and who are instead simply engaged in memetic propagation (as befits their tribe). And, that’s fine. I also understand that anything associated with finances is a spicy topic. Sometimes it comes from folks who have ‘bought crypto’ on centralised exchange and simply treated it as a bit of a gamble. Maybe they lost money because some crypto-bro influenzer told them to buy $CUMROCKET at the top and they have since realised it is Not A Sound Investment and they are bitter about it, claiming that the entire industry is ‘a scam’. Or heck, maybe some were actually scammed: it happens, and navigating web3 currently requires street smarts. Or rather; dark forest smarts.

But regardless of where folks stand on this, let’s also remember that money itself is a intersubjective meme; an emergent shared illusion that serves as a coordination technology for us. It is possible to collectively reimagine what this looks like and how this might work (hence the thesis of Charles Eisenstein’s Sacred Economics). But we can’t do this if we keep tearing down any attempts to quest beyond the default.

It is quite fashionable amidst the post-modern elite to be hellishly critical of any new ideas; not accepting anything but pure perfection (which doesn’t exist). Near-perfect is not enough—if there’s even something slightly problematic to hone in on, then that is grounds for resistance and cancellation. Best be the one to point it out first.

Apt critique of the emergent and the established is of course genuinely needed (most web3 protocols welcome constructive criticism)—but I would suggest that a lot of the criticism thrown at blockchain and web3 is not constructive. Instead, it is merely ‘clever’, and simply serves to maintain the existing status-quo of civilisation—which, let’s remember, remains set on a self-terminating path. Or it’s trapped within a black and white ‘either-or’ paradigm (‘blockchain is a distraction, we should focus on X instead’) rather than something more polyphonic/pluralistic/multitudinous.

Our current economic systems perpetuates extraction, inequality, and ecological devastation. Let us be open to the idea of exploring new ways, I say. Even if it means accepting that some things are still ‘in draft’. It is relative utopia we seek.

I’m not alone in meeting resistance to this, of course. Scott Belsky—founder of 99U and author of Making Ideas Happen—has also been met with resistance to this new thinking. Here’s a thing he tweeted this a while back.

I was lucky to have been advising a strategic innovation team at a large institution that was experimenting with Ethereum smart contracts back in 2018 (specifically in the realm of having teams collectively self-organise in a transparent manner, on-chain). No, I didn’t buy any eth at the time, but I kept an interest in how things were progressing. A few years ago I also had the good fortune to learn of web3 and regenerative finance from the lovely lunarpunk Stephen Reid. Stephen also runs a ‘How to DAO (decentralised autonomous organisation)’ course, to which he generously shares his curated resources. You can listen to him and my friend Joe Lightfoot in this lovely interview. Anyhoo, through this little web I have met a lovely mix of folks from around the globe—brilliantly smart folks including climate journalists, macro-economists, software developers, gardeners, and more— that now form an ongoing sensemaking pod.

Suffice to say, my introduction to web3 has been wholesome af. I’ve met mostly really lovely people who are opportunistic-yet-caring-and-curious, keen to participate in the co-creation of better ways of doing things. Just one example of this can be found in this comprehensive primer for Decentralized Decision Making, written (and discussed) by the relatively pseudonymous character known as Ouija, whom I’ve had the joy of conversing with across discords. Others can be found in the GreenPill podcast.

Of course; 40% of the space *is* repugnant, and 40% is questionable—but when you find the builders, the artists, and the folks genuinely co-creating this new paradigm then, well, the experience is *much* better. Wholesome, generative, inspiring.

I’m finding it hard to stay on track here because there is so much to be fascinated by. Since the pandemic gifted me with some time, I have been on an ongoing learning binge; a relentless torrent of cascading inquiry and insight. Tim Ferriss described his own experience of discovering web3 as a kind of physiological quickening—I and many others feel it, too. Jordan Hall sees blockchain as a self-organising complex intelligence (SOCI) that will eat the traditional finance world. There’s certainly something emerging here; something so nascent yet so potent, it can’t help but draw folk like me DEEP down the rabbit hole.

But before I get carried away—as I suspect I already may have—let’s cover some fundamentals.

Blockchain

Put simply: a blockchain is an immutable distributed public ledger.

Here’s the most-watched video explainer of *how* blockchains work. Note that distributed ledger technology and blockchain are not the same thing—there’s an important nuance. Sometimes big corporations promote their own private blockchains; don’t be fooled by this. They might use the word ‘blockchain’—but if it’s privately owned, then it’s privately censorable. A true blockchain is decentralised, permissionless, uncensorable, open source, transparent and public. It is the antithesis to what we see in web2, where centralised monolithic corporations own your data and assets (more on this, soon).

Blockchain works via cryptography (hence the ‘crypto’ part of cryptocurrency—I don’t really like the term ‘crypto’ though; makes me think of crypts and yobbos). But this museletter is at risk of getting very technical, very fast. If you’re fascinated by this, then—as we say in the space—DYOR. That is: ‘do your own research’.

Yet as someone with a background in research, I would hope that research is done by experienced professionals—that’s what we have academics for, eh? Eh? But the pace of change in this space combined with rampant disinformation (exacerbated by influenzas, bots and paid shills) and the relatively ease of which a small industry can be manipulated means that… you probably don’t want to trust overly in any other’s research. Or rather, you do—but you need to synthesise insight from a large number of sources, metarationally. Ergo: if you are to make any headway, you will need to do your own research.

Which means: rolling up your sleeves, donning the fox-mask, and venturing into the dark forests of web3.

”Woah, wait! I thought blockchains were destroying the planet. How can you not mention that?”

Bitcoin (the first cryptocurrency; aka ‘digital gold’) does use a lot of energy. This is due to its ‘proof of work’ (PoW) consensus mechanism, which means that this particular blockchain has an annual energy consumption of ~200TW/y. (An article from the World Economic Forum puts it closer to 62TW/y—less than the use of domestic tumble dryers in the US. I’m a little sceptical of this, but I like the point the article makes about checking our Western privilege).

Ethereum (the second cryptocurrency, aka ‘the world computer’) initially used PoW—but it has recently shifted to a much more energy efficient ‘proof of stake’ (PoS) consensus mechanism—making it 99.98% more energy efficient.

The annual energy consumption of Ethereum is now ~0.01TW/yr. Most PoS blockchains use even less than this. For contrast, the annual energy consumption of YouTube is ~244TW/yr (nearly 25,000 times more energy intensive than the Ethereum blockchain). Even PayPal is 25 times more energy intensive than the Ethereum blockchain. Further, there are carbon-negative blockchains like Polygon where any carbon impact is more-than-offset.

Suffice to say, the concern over energy use is important but often misplaced—there are much more energy-intensive industries we ought focus on. And meanwhile, those in web3 continue to innovate and improve.

Btw, I should point out that as a complexity practitioner I have never felt quite as alive as I do with what is unfurling here. So much so that I am currently putting together an offering for my clients: wizardly guidance for those who seek to quest within the dark forests of web3. It will be a premium offering for small executive peer groups that want to: a) cultivate fellowship and scenius, b) gain participatory knowledge of web3, c) accrue the wit and wisdom of sensemaking complexity practitioners via skin in the game, and d) to garner enough cultural subtext so as to not embarrass themselves in their adventures on the frontier. If you think your organisation might be interested (it will be capped at pods of 4±1 people, btw), then let me know and mayhaps you can be one of the early few.

web3

So: what is web3? Is this just a buzzword? Established media institutions and those happily encumbered in web2 would like to have you believe so! But allow me to unpack this a little further.

Think back to web1—the wondrous innocence and naïveté of the original World Wide Web. Back then, the web was ‘read only’—that is to say, you could read things. But that’s about it.

Then with web2 we entered the world of read-write. Now we could not only read the work of those clever enough to create their own websites—we could contribute, too. This meant that those who controlled the platforms, win. Hence the spawning of the advertising-based revenue models of social media, whereby creators now provide content for advertising platforms to capture the attention of its users (and to sell this and their data to advertisers). The creators themselves don’t own or benefit from this monetisation of course, hoho. That’s not how web2 capitalism works, silly. The rich instead get richer, whilst the rest of us slave to provide content to attract the attention of others in order to feed their machine.

(Btw, I am mostly riffing this from this fine article on web3 from the Ethereum Foundation).

Now, with web3, we get read-write-own.

Ownership itself is a funny construct—it only exists via social consensus. The blocks of blockchains exist via consensus. What we see now is a messy emergent field of some genuine decentralised protocols (with transparent tokenomics and fair governance models) mixed with opportunistic protocols pretending to be decentralised (with obfuscated tokenomics or dodgy or unaudited smart contracts). The savvy can decipher betwixt the two, and the transparent nature of being on-chain—where you have many eyes scrutinising what’s at play—means that any potential issues are usually brought to light. Hacks, of course, still happen—but this is the antifragility of the SOCI of web3; we learn and do better.

Some dismiss this as a ponzi scheme, akin to fiat currencies. The bad protocols (the meme coins and the rug-pulls) certainly are like this. But the good ones operate more like a ponzi game, in that the rules are clearly stated—you know what you are getting into. Part of me likes the thought of eco-ponzi’s—those slowest to support the mitigation of climate change having less advantage than the ones that move faster—but I am getting carried away here (and this, too, is Problematic™️).

A more practical example of web3 today is perhaps Lens Protocol—a permissionless, non-custodial, user-owned open social graph wherein you own your content and data. It’s early days yet, but you can glean where this is heading. And you can understand why major players—like Facebook/Meta—would be both fascinated and threatened by this, and would want to ensure the audience they’ve captured remains captured. (Hence we will see major web2 players use the language of web3 without the actuality of its ethos).

To many, web3 represents the glimmering potential to build a better internet. To rekindle the naïveté of web1 with the knowingness that making everything ‘free’ leads to the very conditions that spawn the web2 attention and predatory surveillance economy we have been mired within. Instead of making payment and ownership hidden or abstracted away (so that more savvier platforms can hoodwink you), web3 instead has it right at the heart.

I find this incredibly liberating, as witnessed with the blossoming domain of artists—most of whom have been taken advantage of by web2 (with the small exception of a few outliers). We see this with the music industry, too—liberating musicians from the paltry rewards offered by the oligarchy of centralised platforms. At some point I’ll write more on this. I live for a world in which artists, poets, writers and musicians flourish!

I also live for a world in which our ecosystems might flourish again, too.

Regenerative Finance

This too is at risk of becoming diluted, distorted, and rendered into buzzword form (as all good things are). Regenerative finance (ReFi) loosely refers to the use of money as a tool to regenerate communities and ecosystems. Its goal is primarily to heal, restore and create shared value, with profits being a consequence of this (and also: a means to further progress). In regenerative finance, circulation replaces accumulation. The World Economic Forum has a nice little piece on the topic.

ReFi is blossoming within web3. Protocols like Klima DAO, Regen Network, Toucan Protocol, Moss (and more) have been pioneering new ways to make regenerative finance more open, transparent, verifiable, impactful and real.

Which brings me to the precarious topic of carbon offsets.

Carbon offsets

Many folks are sceptical of carbon offsets—as they should be! For too long the industry has been a warren of dodgy projects, entangled with profiteering middlemen, obfuscation, double-accounting and more. It has been an easy way for companies to make environmental claims, without ever having to readily prove them.

But hopefully you have connected the dots here.

Blockchain—the decentralised, permissionless, uncensorable, open source, transparent and public technology that allows us to verify any and all transactions on a public ledger—solves many of the issues with carbon offsets. I don’t know how any carbon offset initiative could work without it—because without blockchain we’re left with the whole “oh trust us, we’re offsetting, look here’s some pictures of trees, and here’s a spreadsheet we conjured from nowhere”. Of course this does not and will not work.

Whereas with a protocol like Klima DAO, you can literally verify any offset claims in just a few clicks. Take gmDAO for example—a wonderful collective of generative art enthusiasts. At gmDAO we have overcompensated by a factor of five; that is, retiring five times the amount of carbon offsets based on the carbon emissions from recent collection releases. This more-than-offsetting is verifiable, too—gmDAO’s docs links to the actual retirements. (Mind you, these weren’t the best quality credits—something I only just realised as I was writing this. I have since raised this with the dao and we’ll do better.).

Joseph Pallant, founder of the Blockchain for Climate Foundation—speaks of ReFi warmly and elegantly on this episode of Planet of the Klimates. (The hosts sometimes come across a little too green and Lawful Good for my tastes, but you’ll get a deep gist of what’s at play here, and how tokenised carbon offsets works in accordance with the Paris Agreement.) If this interests you, you can also view the recent talks and panel sessions from The Green Blockchain Summit. Or you can join any protocol’s discord server, ask questions and participate in open-office calls they have. You can join the gathering of intelligent folks who care for the planet, and who want to ensure that any carbon offsets are actually trustworthy, real, measurable, permanent, additional, independently verified and unique.

When Klima DAO launched they attempted to ‘raise the floor price’ of carbon pricing, sweeping up the cheapest credits to remove them from the market (making it thus more costly to greenwash and more economically viable to sequester carbon or otherwise engage in regenerative finance). This has caused some consternation—in amongst this sweeping, a bunch of old and dubious carbon offset credits were acquired. Klima DAO have since cleaned up these credits at their own expense, removing them from circulation altogether. But even now, more nuanced debates continue as to the nature and quality of various carbon offsets.

And this is a great thing! Only possible because of the clear, transparent and verifiable nature of blockchain. We want for there to be more scrutiny in this domain, and for nature-based projects that support biodiversity and other ecological services to be valued higher. Decarbonisation goes hand in hand with this—we need to price carbon into our economy, and to put a stop to new fossil fuel mining projects, and eliminate carbon emissions (and other environmental externalities) where possible. And many other things.

Offsets are only part of the equation—and not even the primary part. But, I do believe, if we are canny enough, we might just be able to pull off The Grandest Trick.

The Trick

The Trick (which I gleaned from this yarn from the folks at the Indigenous Knowledge Systems Lab) is to phase-shift our economy into a situation where it is more practically in our economic best interest to not f–ck the planet. To somehow put our planetary life support systems at the heart of what is valued in our economy.

To do this, I imagine we need to collectively conjure a transnational means to verify the veracity of carbon offsets. But then further: we need to integrate qualities such as biodiversity, soil health, water health, and other vital ecological services into what we account for and consider as valuable. And to have this so compellingly clear and aligned to economic interests that we are overtly incentivised to do what we ought be doing all along. That is: to care for the ecology we live within. To be the custodians, the infinite players, and to co-create a world not only more curious and kind, but one that flourishes into higher orders of complexity, at scale.

It’s messy and by no means perfect—but blockchain and web3 are revealing new ways in which we might achieve this. Combine the intelligence of this with the timeless wisdom of Indigenous Knowledge Systems and, by golly, I think we’re onto something.

In the quest for viable alternative options to the default way we are doing things—it’s worth considering.

Warmth,
~fw

PS: We’ll be discussing this and more at our next gathering of The Rekinding in two day’s time. Would love to hang with you, if you can make it. ✨

PPS: Thank you, as ever, to the folks who ‘like’ these musings. It’s genuinely a lovely gesture, and appreciated. 🧡