Wise words from Lord Acton back in the 19th century, referring then to the church and challenges with the role of the Pope, but timeless in it’s proclamation. In what has been a tumultuous few months in the world of Web3, it’s this quote that keeps coming back into focus for me as I reflect on what’s going on.
Luna collapse aside (this was much more about design/technology), the other high-profile failings - Celsius and more recently, and of higher profile, FTX are not failings of Web3, or indeed Crypto specifically, they are the failings of individuals. Individuals with power, seeking to be opportunistic in what was a bull-market run. Ironically, it’s exactly this centralisation of power that the broader Web3 technologies are being built to challenge. We’re promised decentralisation, but have so far largely been given centralisation. As a result, it’s created power, and as a result corruption.
The genius of Web3, decentralised computers (blockchains) with an in-built financial system (crypto/tokens) has been to this point also it’s failings. The crypto bit, lends itself to speculation booms, and indeed bust. This, combined with a low-level of technical education and knowledge of the field by those speculators, has been a potent mix. Leading to a centralised approach (i.e. need to simplify), which has proven to create single-points of failure in the system.
This isn’t the death-nail for Web3, it is however a set-back, some of which could have been avoided. There are sensible and regulated exchanges (Coinbase/Kraken) who do offer Proof of Reserve (a pretty important indication of liquidity), which will continue to act as a good on-ramps to Web3 projects whilst the underlying technology gets built out – as it continues to do so.
Some of these issues have stemmed from the lack of speed to introduce regulation, or smart regulation that understands Web3. As a result, Celsius and FTX were all set-up or forced “off shore”, where there is little to no scrutiny, ultimately putting US citizens investments at high risk.
What I believe is now needed is for an industry wide, not an individual entity, approach to re-establishing trust. Coalition building, association crafting, standards setting and proactive engagement with regulation to provide a framework that provides safety but also enough freedom to innovate. Further, the key players need to get their head up out of their project and recommunicate the purpose behind these technologies. The industry is lacking awareness of the vision. And the speculators need reminding of the mission.
The Blockchain was, by many, seen as trust-protocol but currently is leaving many lacking trust.