Some of us have been saying it for a number of years, but by now it should be completely clear to nearly everyone on the planet: “The world is broken.”
Trust in nearly all institutions is lost.
The complex systems we rely on for our survival are daunting and unwieldy.
Bad actors of all stripes exacerbate or take advantage of the mess.
It is easy to understand why virtually everyone on the planet feels like they are going a bit insane.
Supercycles
We are in the dying stages of an 80-year monetary regime and debt super-cycle. Whether you think of it in terms of a Strauss & Howe “generational super-cycle,” or in terms of monetary policy, the conclusion is clear: the current system is unsustainable. The global financial system is teetering on the brink. Fixing one issue exacerbates another. Do we want a government that can pay its debts or continues to borrow, or do we want a currency that retains its value? Do we avoid bailouts or embrace moral hazards? Do we want stability, or do we want rule of law?
We are in the end game of the current supercycle and the stakes have never been higher. The “winner” gets to write the rules – the meta – for the next supercycle.
Moloch: The God of Coordination Failure
These complications are all rooted in what existential risk sense maker Daniel Schmachtenberger has eloquently described as a large set of “existential coordination failures.” For example, small groups of sociopaths are now able to unleash large-scale catastrophic weaponry. Another example is negative externalities – like damage to agricultural land due to large-scale industrial farming.
Many of you in our ecosystem are acutely aware of Moloch, the god of coordination failure.
Humanity needs a paradigm shift – a systemic approach to slaying Moloch. Thank goodness, we are in the early stages of such a shift.
A New Kind of Trust: Decentralized Trust
For millennia centralized trust in society operated top-down with authorities tasking intermediaries to do their bidding. These intermediaries managed their domains with carrots and sticks, maintaining ledgers to track who owned what and who had which privileges.
Those “trusted third party” intermediaries could write or erase entries in their ledgers either by following accepted rules if they were good actors or more capriciously if they were not.
For millennia, vertical coordination mechanisms (i.e. top-down command and control) served the development of society well.
But 99% of society is now acutely aware that these vertical mechanisms no longer serve 99% of society well.
In 2009, Satoshi Nakamoto invented a new kind of global ledger, the blockchain.
This new kind of global database can transparently log all of society’s transactions so that anyone can inspect what happened and when. And so that it is economically prohibitive to overturn the history of the database — provided the system is sufficiently decentralized.
Satoshi invented a fundamentally new kind of trust — decentralized trust. Satoshi flipped the societal trust vector upside down.
The Paradigm Shift Will Be User-Powered and Community-Centric
Power has always been with the people and now trust can be anchored in the new decentralized trust foundation, and can flow bottom up, enabling a new democratized global decentralized financial layer.
These two new foundational layers — decentralized trust and finance — are powering the crossing of the chasm of this new paradigm.
The paradigm shift will be user-powered and community-centric.
The paradigm shift will usher in decentralization as the overarching organizing principle that empowers and yet knits together composable human systems and communities in a loosely coupled manner.
The paradigm shift adds newly developed horizontal coordination mechanisms to the vertical strands of traditional top-down control to form a more effective and robust social fabric.
We’ve Finally Discovered the Native Business Model of the Web
The business model of the last few millennia saw organizations operate in an adversarial relationship with their customers or citizens, extracting as much as possible in exchange for as little as possible.
In many ways, the business model of the web so far has been a hangover from the dominant business model of the 20th Century: manufacture products for sale, and advertise to create (often artificial) demand.
The paradigm shift of web3 will rightsize or replace intermediaries in all industries where that intermediary is extracting outsized value or wielding power based on their station.
Web3 is anchored in cryptography and crypto-economics. Its profound breakthrough is in creating decentralized trust and digital scarcity. And from these elements, we can construct digital assets, digital identity and reputation, and decentralized communities.
The paradigm shift is disrupting the entertainment industry as we speak, where creators are able to reach their fans without the extractive assistance of traditional intermediaries.
Already we are seeing more economic and political agency for individuals, and empowered communities that can self-organize to identify, fund, and satisfy their needs. In the entertainment industry for example, millions of creators and collectors have redefined the visual art world.
It is starting to gain traction in the music industry as well.
Of the 8 million people that uploaded music to Spotify in 2021, only 2.5%, earned over $1,000 USD. In web3, creators are able to reach their fans without the extractive assistance of traditional intermediaries. By delivering music as NFTs, artists are transforming their music into life-changing valuable assets, and instantly building their community from all the addresses that bought their music. Artists get all of this without relinquishing their copyrights. And increasingly musicians are even choosing to create their own customized minting sites: a website owned, created, and controlled by the artist, where fans can mint NFTs directly. Decentralization is liberation technology.
The New Fundamental Construct of Civilization Will Be Decentralized Communities
The new fundamental construct of civilization will be decentralized communities that are robustly stitched together by vertical and horizontal coordination mechanisms.
Decentralized communities, called DAOs, source political and monetary capital from their members. They enable broad participation in governance and other roles. And via smart contracts and tokenized stakeholderships, they can immediately and automatically share any new value created. There are now thousands of DAOs animating the Ethereum and web3 ecosystem.
Communities can form around protocols, NFTs, sports teams, musical acts, and any other shared interest.
Tools like DAOs, staking, Decentralized IDs, Verifiable Credentials, badges, NFTs, and governance tokens are all growing in maturity to enable communities to form and operate.
If fragments of communities have irreconcilable differences they can fork so that each fragment can explore its preferred path forward.
When members of a system, community, or economy have a shared purpose, and a shared stake in each other’s success, they tend to avoid supporting selfish decisions and short-term thinking that can harm the group or related groups.
Overlapping membership in diverse communities and staked agreements between communities will drastically reduce selfish behavior and harmful externalities.
The CeFi debacle of ’22 and the ongoing banking and monetary challenges of ’23 have given us much to talk about. When some use these debacles as a condemnation of crypto, they actually highlight just how important decentralization and self-custody are, and that crypto technology is how you guarantee the integrity of a system. While Money Crypto like FTX collapsed, Tech Crypto like DeFi protocols hummed along. Activity that runs on-chain can’t be corrupted, and participants and regulators alike can inspect the integrity of protocol treasuries themselves, without having to rely upon the disclosures of a biased company.
We are building a future where you don’t — where you shouldn’t — have to trust an institution to ensure you have access to your assets.
These painful aspects of the paradigm shift are what we’ve expected and why we have been building. These tectonic shifts are inevitable and necessary because the end of the old regime is upon us. Yes, it will cause much near-term pain, but the alternatives are worse.
We Have Built the Foundations for the Next Supercycle, and It Has Begun
We are no longer in a period similar to the dot com boom, filled with irrational exuberance for many exciting ideas that did not yet have sufficient enabling infrastructure.
We are in a period much like the post-dot-com bust, where economic and geopolitical challenges are extreme and irrational exuberances are unlikely.
Yes, there will be more great innovation in our space, but the difference between now and the 12 years leading up to ‘22 is that then we were building enabling infrastructure, and now we have sufficient scalability and constantly improving usability so that real use cases are attractive to many people and businesses.
With the recent usage of our tech by so many major brands, we now find ourselves in the era of Web3 commerce.
Consensys
Consensys, along with many other companies in the space, has played a significant role in building the enabling infrastructure. We currently operate a flywheel: Infura gives people the tools to build applications that are then accessed via MetaMask. Very soon we will be adding our zkEVM layer 2 technology to the flywheel.
Shoutout to the brilliant ConsenSys zkEVM team, many of whom are based here in France. They have been doing brilliant work for years as core members of our large ConsenSys France team. Currently, our French team is over 70 people.
zkEVM is a technology that will support the scalability and performance we need.
Our zkEVM’s recursion-friendly, lattice-based prover offers fast finality, seamless withdrawals, and the full security of Ethereum settlement. Full EVM equivalence means existing apps can be migrated with little to no rework and out-of-the-box integrations with popular tools like Infura and MetaMask remove friction for developers and users alike.
Just as in the legacy economy, there will be economic regions and major economic centers. The major continents will be Layer 1s like Ethereum; L2 RollUps will house different L3s, L4s, and higher. App chains, game chains, corporate chains, and more, will all coexist and be bridged to one another.
The tools, components, and infrastructure necessary for Web3 are ready now to support the killer apps that will define the next-generation hot virtual neighborhoods and killer ecosystems. Various regions of the Web3 world will support an expansion of the domains of NFTs — in art, gaming, ticketing, reward points, identity and reputation, and social networking where you are in full control of your profile and your social graph apps give you the tools to operate on your own data.
All of this leads to more financial and political agency for more people and small organizations.
A Universe of Constant Progressive Decentralization
The universe is saturated with awareness, and likely brimming with life and intelligence. If you were the universe — alive since, say, before the beginning of time, you’d crave novelty, invention, and creativity. You’d champion diversity and decentralization so all of the fragments of yourself can be empowered to self-organize and become sovereign and god-like, like yourself. You’d crave entertainment and … company.
It is well understood that the powers that be — whoever they are — influence or program human society via the media: traditional news, movies, television, and social media.
When I was growing up I used to watch movies all the time. They were an excellent way to learn about the world and experience others’ perspectives. Then something shifted. At some point, the film industry became saturated with superhero films mostly from DC and Marvel Studios.
At the time I assumed it fed a need for escapism and fantasy, but more recently I feel that it will have a more profound and constructive effect.
There is a massive generation of Millennials that have grown up on video games, superhero graphic novels, and movies. And they don’t trust a system that sold their future out from under them.
Soon augmented and virtual reality will fuse into our standard reality and guess what: they and we will all have powers like superheroes and gods. We will all be able to operate according to whatever physics engine our virtual world of choice implements. And we will all have super-intelligent AI tutors and mentors to help us level up on virtually anything in real-time. In a very real sense, all humans on earth will be able to acquire superpowers and become sovereign – even godlike – in domains of our choosing.
All of us will very tangibly become the architects and builders of our realities.
Maker, Teacher, Steward –> Builder
ConsenSys is about offering tools and support to the makers, the teachers, the stewards, and the builders in all of us.
At ConsenSys we consider collaboration one of our superpowers. If you have ideas for things you want to collaborate on, send us an email with a short description, and we will reach out to hear more: [email protected]
All of us in this room share a rare privilege. We know what the stakes and opportunities are and we know building is what we have to do.
It will be complicated and it will be hard over the next few years, but the only way through is to build.
