The Economist - USA (2022-01-29)

TheEconomistJanuary29th 2022 Business 55

doeswith Android) or cloud­computing
data centres(including those owned by
Amazon,MicrosoftandGoogle).
The web3 movementisareactionto
perhapsthegreatestcentralisationofall:
thatoftheinternet.AsChrisDixon,who
oversees web3 investments at a16z, ex­
plainsit,theoriginal,decentralisedweb
lastedfrom 1990 toabout2005.Thisweb1,
callit,waspopulatedbyflatwebpagesand
governedbyopentechnicalrulesputto­
getherbystandardsbodies.Thenextitera­
tion,web2,broughttheriseoftechgiants
suchasAlphabetandMeta,whichman­
agedtoamasshugecentraliseddatabases
ofuserinformation.Web3,inMrDixon’s
telling,“combinesthedecentralised,com­
munity­governedethosofweb1withthe
advanced,modernfunctionalityofweb2”.
Thisispossiblethankstoblockchains,
which turnthecentralised databases to
whichbigtechowesitspowerintoa com­
mongood thatcanbe usedby anybody
without permission. Blockchains are a
specialtype ofledger thatisnotmain­
tainedcentrally by a single entity(asa
bankcontrolsallitscustomersaccounts)
butcollectivelybyitsusers.Blockchains
haveoutgrowncryptocurrencies,theirear­
liestapplication,andspreadintonfts and
othersortsof“decentralisedfinance”(De­
Fi).Nowtheyareincreasinglyunderpin­
ningnon­financialservices.
Theportfolioofa16z offersa glimpseof
thiswildnewworld. Italreadyincludes
morethan 60 startups,atleasta dozenof
whicharevaluedatover$1bn.Manyarede­
velopingtheinfrastructureforweb3.Al­
chemyprovidestoolsforotherstobuild
blockchain applications, much as cloud
computingmakesiteasyfordevelopersto
createweb­basedservices.Nym’s“mixnet”
isa decentralisednetworkthatmixesup
messagessothatnooneelsecantellwhois
sendingwhattowhom.
Othera16zbetsareservingend­users.
DapperLabscreatesnftapplicationssuch
asnbaTopShot,awebsitewheresports
fanscanbuyandselldigitalcollectables
likedepictionsofkeymomentsinbasket­

ball games. Syndicate helps investment

clubsorganisethemselvesinto“decentral­

isedautonomousorganisations”governed

by“smartcontracts”,whicharerulesen­

codedinsoftwareandbakedintoa block­

chain.AndSound.xyzallowsmusiciansto

mintnfts tomakemoney.

Whatallthesecompanieshaveincom­

mon,explainsMrDixon,isthatitishard

for them to lock in customers. Unlike

GoogleandMetatheydonotcontroltheir

users’data. OpenSea(inwhicha16zalso

hasa stake)andAlchemyarejustpipesto

theblockchain.Iftheircustomersareun­

happy,theycanmovetoa competingser­

vice.Evenifhewanted,hecouldnotkeep

themfromleaving,saysNikilViswanath­

an,Alchemy’sboss.“Asa business,I would

lovetohaveproprietarychokepoints.But

therearen’tany.Wetriedtofindthem.”

Theideaisthatthismakesweb3com­

paniestryhardertosatisfycustomersand

keepinnovating.Whethertheycandothis

whilealsomakingpotsofmoneyisanoth­

ermatter.It isnotclearhowmuchdemand

existsfortrulydecentralisedprojects.That

wastheproblemofearlyweb3offerings

(thencalled“peer­to­peer”or“thedecen­

tralisedweb”).ServicessuchasDiaspora

andMastodon,twosocialnetworks,never

reallytookoff.Theirsuccessorscouldface

thesameproblem.AservicelikeOpenSea

wouldbemuchfaster,cheaperandeasier

touse“withalltheweb3partsgone”,says

MrMarlinspike.

Amore fundamentalproblem isthat

evenifweb3workedassmoothlyasitsim­

mediatepredecessor,itmaynevertheless

lenditselftocentralisation.Lock­in,reck­

onsMrMarlinspike,tendstoemergeal­

mostautomatically.Thehistoryofthein­

ternethasshownthatcollectivelydevel­

oped technical protocols evolve more

slowlythantechnologydevisedbya single

firm.“Ifsomethingistrulydecentralised,

itbecomesverydifficulttochange,andof­

tenremainsstuckintime,”hewrites.That

creates opportunities:“Asure recipefor

successhasbeentotakea 1990’sprotocol

thatwasstuckintime,centraliseit,andit­

eratequickly.”

Centralisationandlock­in havebeen

incrediblylucrative.Infact,a16zhasmade

billionsfromMeta,inwhichit wasanearly

investor;oneofa16z’sfounders,MarcAn­

dreessen,sitsonMeta’sboardtothisday.

Web3’s vcboosters maybe countingon

somethinglikethishappeningagain.And

toa degree,italreadyis.Despitebeinga

relativelyrecentphenomenon,web3isex­

hibitingsignsofcentralisation.Becauseof

the complexity of thetechnology, most

peoplecannotinteractdirectlywithblock­

chains—orfindittootedious.Ratherthey

relyonmiddlemen,suchasOpenSeafor

consumersandAlchemyfordevelopers.

AlbertWenger ofUnion Square Ven­

tures,avcfirmthatstartedinvestingin

web3firmsa fewyearsago,pointstoother

potential“pointsofrecentralisation”.One

isthattheownershipofthecomputing

powerthatkeepsmanyblockchainsupto

date is often very concentrated, which

givesthese“miners”,astheyarecalled,un­

dueinfluence.Itcouldevenallowthemto

takeoverablockchain.Inothersystems

theownershipoftokensisheavilyskewed:

at recently launched web3 projects, be­

tween30%and40%isownedbythepeo­

plewholaunchedthem.

These dynamics, combined with the

latestcrashthatmaycoolinvestors’appe­

titeforallthingscrypto,suggestthatweb3

willnotdislodgeweb2.Instead,thefuture

maybelongtoa mixofthetwo,withweb3

occupyingcertainniches.Whetherornot

peoplekeepsplurgingonnfts,suchto­

kensmakea lotofsenseinthemetaverse,

wheretheycouldbeusedtotrackowner­

shipofdigitalobjectsandmovethemfrom

onevirtualworldtoanother.Web3mayal­

soplaya roleinthecreatoreconomy,an­

otherbuzzyconcept.LiJinofAtelier,avc

firm,pointsoutthatnfts makeiteasier

for creators of online content to make

money.Inthislimitedway,atleast,even

themastersofweb2seethewritingonthe

wall:onJanuary20thbothMetaandTwit­

terintegratednfts intotheirplatforms.n

More than a token effort

Crypto venture-capital deal value, $bn

Source:PitchBook

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Rest of world

United States

Softwaredevelopment

Going codeless

I

n 2018  a field technician working for Tel­

stra,  an  Australian  telecoms  firm,  built

an app that unified 70 messaging systems

for  reporting  phone­line  problems.  The

technician did this despite having no cod­

ing  experience.  The  interface  may  look

cluttered: the landing page jams in 150 but­

tons  and  a  local­news  ticker—the  app

equivalent  of  an  airplane  cockpit,  quips

Charles  Lamanna  of  Microsoft,  who  over­

sees  the  software  titan’s  Power  Apps  plat­

form that made it possible. But it has been

a hit. Some 1,300 other Telstra technicians

employ it, saving the firm an annual $12m.

Professional  developers  (pro  devs)

might poke fun at the technician’s diyapp.

But  the  trend  it  exemplifies  is  no  joke.

Since  well  before 2017,  when  Chris  Wan­

strath, co­founder of GitHub, a coding­col­

laboration site, declared that “the future of

coding  is  no  coding  at  all”,  so­called  low

code/no  code  (lc/nc)  tools  have  bur­

geoned.  They  allow  anyone  to  write  soft­

ware using drag­and­drop visual interfaces

alone (no code) or with a bit of code creep­

Firms are letting all workers write

software, not just the geek elite