I mostly avoid interacting with and discussing the world of NFTs and cryptocurrencies — it’s not for me. However, a couple of blog posts caught my attention recently and I highly recommend reading them.
Moxie, My first impressions of web3:
- People don’t want to run their own servers, and never will. […]
- A protocol moves much more slowly than a platform. […]
One thing that has always felt strange to me about the cryptocurrency world is the lack of attention to the client/server interface. When people talk about blockchains, they talk about distributed trust, leaderless consensus, and all the mechanics of how that works, but often gloss over the reality that clients ultimately can’t participate in those mechanics. All the network diagrams are of servers, the trust model is between servers, everything is about servers. Blockchains are designed to be a network of peers, but not designed such that it’s really possible for your mobile device or your browser to be one of those peers.
This was surprising to me. So much work, energy, and time has gone into creating a trustless distributed consensus mechanism, but virtually all clients that wish to access it do so by simply trusting the outputs from these two companies without any further verification. It also doesn’t seem like the best privacy situation. Imagine if every time you interacted with a website in Chrome, your request first went to Google before being routed to the destination and back. That’s the situation with ethereum today. All write traffic is obviously already public on the blockchain, but these companies also have visibility into almost all read requests from almost all users in almost all dApps.
Molly White, Blockchain-based systems are not what they say they are:
But they grossly overstate the amount of decentralization in web3. The data itself is quite decentralized, at least on the popular blockchains, but that’s about where the decentralization ends. If someone wants to build a dApp on a given blockchain, they usually use one of a handful of APIs built by companies like Alchemy to read and write to their blockchain of choice. If someone wants to pull information about a user’s crypto holdings for a finance platform, they use one of a handful of other APIs, and one only needs to look at the ripple effect of a recent CoinMarketCap glitch to see how widely these data sources are used. An enormous amount of trust is being placed in the relatively few platforms through which blockchain data is being funneled, nullifying many of the supposed benefits of the decentralization of blockchains in the first place.
We’ve also seen prominent examples of how the myth of immutability can intersect with the myth of decentralization. One is in the NFT space. With NFTs, your ape JPEG is your ape JPEG, unless one of the centralized exchanges decides it isn’t legitimately yours and freezes it. In a truly immutable, decentralized world, where “code is law” and no centralized authority can intervene, a transfer of an asset would be final regardless of whether it was achieved through the proper means. But as we’ve seen with thefts of prominent (and pricey) NFTs such as Bored Apes, if a centralized exchange like OpenSea is sufficiently convinced that an NFT transfer wasn’t legitimate, they can freeze the asset so it can no longer be traded, enormously limiting the amount of value a thief can extract as they are relegated to much less-used exchanges. We see this phenomenon with cryptocurrencies themselves, as well—when centralized exchanges are sufficiently convinced that tokens were improperly transferred (such as via a hack), the addresses holding those tokens are flagged and will no longer be able to trade on major exchanges, making the stolen tokens extremely difficult to sell.
Molly also runs a project called Web3 is going just great, which is just fascinating. Here are two recent posts from the timeline.
An hour after releasing their ice cream-themed NFTs, developers of the Frosties NFT project closed their social media accounts and disappeared with $1.3 million, plunging the token value to nearly zero.
fees.wtf, a platform allowing people to see how much money a given cryptocurrency wallet has spent in gas fees, decided it was time to release their own token, and promised to follow it up with NFTs. […] Some traders who were unfamiliar with setting up tolerances for slippage found their orders executed for substantially less than expected, with one user trading 42 ETH ($135,000) for what ended up being less than 1¢ of WTF.
WTF, indeed. lol.
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The more I learn, the more it seems like NFTs and cryptocurrency are just a big fucking scam.
I don’t know why anyone would think the investor class that controls Silicon Valley would pour money into technology that is truly decentralized or truly a radical rethinking of “the norm” when their entire existence is predicated on centralizing power through the consolidation of capital and exploitation of labor.
Just look around at all the wealthiest tech companies and what you see are countless accusations of monopolistic malfeasance — which of course is by design, because that’s where the money is. Truly radical, open, and decentralized technology is a threat to profit-generating business models. The masters of capital are not going to deliberately undermine themselves.