Feb 7, 2022 - Economy

The pirates of Silicon Valley are back with the "Web3" boom

Illustration of a laptop with shapes of color revealing a dollar bill

Illustration: Sarah Grillo/Axios

The pirates of Silicon Valley are back. This time they’re armed with digital tokens and blockchains — and the Bay Area address is optional.

Why it matters: The so-called “Web3” category of technologies is not only an opportunity to rebuild the internet, as its evangelists say. It's also an opportunity for the tech industry's VCs and entrepreneurs to reclaim their status as the underdogs after years of discomfort with being part of the new establishment.

Screenshot: @sama/Twitter

The big picture: While Bitcoin emerged over a decade ago, the recent explosion in new applications and advances in cryptocurrencies, protocols and digital assets has morphed into a new genre of projects and companies — which proponents say will shift how we interact with the internet. They call themselves “Web3.”

  • These proponents see this as a remaking of business models and incentives and a shift of data ownership (from companies to users).
  • Web developers and techies are moving their focus to Web3 as well, with many leaving jobs at companies from the prior era (like Facebook and Google) to join nascent startups. Just this week, YouTube gaming chief Ryan Wyatt announced his own such move.

Thought bubble: While evangelists are loudly voicing genuine criticisms of “Web2” and its tech, business models and practices, under the surface something else is also bothering them — Web2 companies have come to represent a seemingly unabating era of scrutiny, criticism and villainizing of the tech industry.

  • Many, especially in the startup corner of the industry, seem to resent what they view as other institutions of power like the government scapegoating tech companies for society's problems.
  • So while establishment Big Tech continues to face questions around content moderation, user privacy and business practices, Web3 offers an opportunity to develop new approaches to these problems, supporters argue.

Worth noting: Some prominent Web3 supporters are still intertwined with the prior era's Internet companies: VC Marc Andreessen is still on the board of Facebook, and Block CEO Jack Dorsey was until very recently also CEO of Twitter, just to name a couple.

Screenshot: @imkialikethecar/Twitter

Zoom in: For VCs, investing in Web3 also means changes in practice.

  • Many are now buying digital tokens (or promises of future tokens) instead of traditional equity.
  • They’re interacting with entire communities of shareholders, who may reject them, instead of just a company’s founders.
  • Their access to investment discounts is increasingly questioned (and even denied at times).
  • And many are welcoming the humbling that these changes bring — it supports the idea that they're here to fund the future and are in service of the entrepreneurs building it.

The bottom line: To its more zealous supporters, Web3 represents much more than a technological evolution.

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