Web3 Shouldn't Be Everywhere
The dangers of hypermonetization
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Web3 is restructuring the relationships that make up our society. But how can we tell if these changes are good?
Today’s focus is on answering this question for two specific types of relationships: 1) creator <> consumer and 2) consumer <> consumer. Web3 improves these specific relationships because:
Web3 is money native, enabling creators to more easily monetize and share upside with their supporters in ways that simply aren’t possible in web2 (see my previous article on how). Consequently, anyone can quickly become a creator.
Web3 supports open data, meaning that third parties no longer hold a data monopoly. Open data increases competition and lowers switching costs, giving both consumers and creators the freedom to use the products that best serve their needs. In the web2 world, it is close to impossible to bootstrap a new social network, leaving all of us chained to outdated platforms like LinkedIn and Facebook.
However, these attractive qualities of web3 often have a dark side. Many web3 projects are monetized through tokens and subsequent speculation on those tokens, essentially creating mini unregulated free markets which can pollute the spirit of a project. It’s difficult to tell if a project is genuinely creating value or trying to make a quick buck. Moreover, once a project starts to take off, the promise of instant wealth for early adopters can lead to widespread selloffs and leave innocent participants with a worthless coin.
Web3’s culture of intensely focusing on economic upside will be detrimental in the long run. There are certain areas of our lives that shouldn’t be yet another way to participate in an economy.
To illustrate my point, I’ll dive into each type of relationship I mentioned earlier and explore the potential downsides of injecting web3 into them without recourse.
Creator <> Consumer
In my previous article, I wrote about how artists can release a song with a NFT and share the royalties they earn from the song with NFT holders.
What’s lost in this new way of risk sharing is the now implicit connection between the quality of an artist (as determined by their fans) and the NFT price. As artists produce more quality content and increase in popularity, their NFT price goes up, at least in theory. However, we all know how irrational and reactive crypto markets tend to be, especially since anybody can participate with just a few clicks.
With the irrationality of these markets, I see two major implications for creators and consumers.
By endorsing a tradable asset, creators essentially become the sole employee of a public company and have to manage their
stock NFT price as such. Instead of focusing solely on aspects that they can control (i.e. their music), artists now must attempt to constantly wield influence over a volatile asset. In web2, fans don’t interact with anything on a daily basis that has direct monetary consequences for an artist. In web3, one small miscue on social media can cause artists’ funds to dissipate in hours. As artists introduce web3 to their audiences, they’ll have to be ready for that kind of responsibility.
On the consumer side, say someone buys an NFT to support an artist they really enjoy listening to. Now, for reasons unknown to them, the NFT price tanks. How is the fan supposed to react? I can imagine—and this fear was echoed by musicians I interviewed as well—that a nonzero number of supporters would sour on the artist even though the artist has little control over the NFT price! Even if the consumer was aware of the potential downside, I’d wager that a cratering NFT price would in some way affect the way they enjoy or share the music with their friends.
Consumer <> Consumer
Consumers primarily interact with one another through social media platforms. It’s commonly accepted that social media can negatively impact people, especially younger generations. A study on Instagram by Pew Research found that
37% of teens feel pressure to post content that will get a lot of likes and comments … 43% of teens feel pressure to only post content that makes them look good to others.
Likes and comments are the (social) currency on Instagram. Over one-third of teens feel some sort of negative emotion when using the app, namely because of how their (social) net worth can fluctuate with every post. Furthermore, Instagram is clearly adapting in response to the mounting evidence that the app can cause harm by hiding like counts in posts.
In the web3 world, products like DeSo take the concepts of likes and comments as social currency one step further by attaching a real currency to people’s profiles, making each individual a real time stock market. In the past, I’ve covered how DeSo embodies many positive web3 qualities in that it’s money native and supports open data.
However, I had never thought about the social downsides of using something where you can literally see your net worth fluctuate in real time. If we already know the mental toll that competing for Internet Points (i.e. Instagram likes) takes on people, imagine what this kind of product could do. I’m reminded of the Black Mirror episode where people constantly rate their interactions with others on a 5 point scale, and your score would have real world consequences (think Uber stars, but for everything).
So, What Should We Do?
Web3 is here to stay. It’s already revolutionizing the global financial infrastructure and is democratizing access to opportunity across all sorts of industries. Nonetheless, it has a culture problem.
With web3 projects, no matter what niche, there is an expectation of high economic upside for users. At one level, I get it – people want in on the action to see their projects 1000x overnight. There really is nothing like it.
However, there is danger in attaching risky and unregulated investment vehicles to all aspects of our lives. We all need to take a step back and consider if it’s worth it. And if it is, where do we—or, where do you—draw the line?
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