Bitcoin illustration by James Graham

“Sequestering your own data and mining it with decentralised algorithms will replace every middle agency making your life expensive right now.

Decentralised social media #desome will empower this change, reduce friction points, give ultimate transparency and value creatives.

Ask me how it works.”

Social platforms are brimming over with these kinds of posts at the moment, offering everything from creative empowerment to the total annihilation of existing financial systems. It's not a new phenomenon, but in recent years the relentless promotion of Crypto, Blockchain and Web3 technologies as a panacea has reached fever pitch, making it nigh on impossible to discern which platforms, currencies, ‘founders’ and decentralised autonomous organisation (DAO) evangelists are legitimate and which are just peddling a fantasy. Some, of course, are doing a bit of both.

For the average ‘very online person’, it's simply a minor annoyance, but for the folks currently building useful tools with these technologies, ‘maxis’ — the most die-hard evangelists — risk drowning out the real promise of crypto and blockchain tools.

Sadly, the people who can’t see beyond the dollar signs are missing the best of what this tech could offer.

“I think that a lot of the dislike and distrust of Web3 and crypto is a response to the tone of the discussion,” says Yancey Strickler, former Kickstarter CEO and one of the founding ‘squad’ of Metalabel, a blockchain-enabled platform sharing knowledge, resources and spaces for artists, musicians and other cultural collectives. “It gets talked about in such ridiculous ways that it’s hard not to flinch.”

Strickler has been fully immersed in the Web3 world since stepping down from his post at Kickstarter in 2017, meaning he’s had more snake oil waved under his nose than most. He nevertheless remains a firm believer in the potential of these technologies and their next stage of development, particularly for the power they offer artists and creators. But he warns against believing too much of the hype. “As I ventured in, I kept reminding myself to stay focused on what I knew was real, rather than what people wanted to be real,” he writes in a recent article for Friends With Benefits (FWB).

“It’s obvious there’s a lot of speculation going on in crypto,” agrees Lewis Gudgeon, a PhD candidate in computer science at Imperial College London and one of the founders of Gyroscope, an asset-backed stable coin. “Everyone’s interested in price predictions and all of that stuff, but it’s just noise. If you really invest the time to learn about what’s going on behind the speculation then you won’t believe that all these hopeless project claims are true.”

The current problem with the crypto space isn’t that the technology is fake or even just flawed (although the currency market is extremely volatile and prone to shocks), it’s simply that many of its most ardent supporters are only in it with one end goal in mind: to get rich quick.

“Chasing money is not my idea of a good time,” says Strickler, but it’s a big part of the modern human psyche. Sadly, the people who can’t see beyond the dollar signs are missing the best of what this tech could offer.

icon of a person with bitcoins in their eyes

Before we wade further into the world of crypto, blockchain and Web3, we should clarify exactly what these three terms mean.

A cryptocurrency is the name given to any digital asset with the same functionality as bitcoin (the original cryptocurrency). These take the form of digital tokens, which are managed on a blockchain, and can be redeemed in all manner of different ways. More on which later.

A blockchain, the technology that underpins all cryptocurrencies, is a publicly-managed digital ledger that cannot be edited. This means it offers a transparent permanent record for transactions and applications on the database.

Web3 is the name given to the web currently being built on blockchain technologies that makes use of cryptocurrencies, NFTs (non-fungible tokens — a record on a blockchain associated with a specific digital or physical asset or token) and governance tokens in its operations. Web3 is still emergent and ill-defined, one of the reasons why so many specious claims can be made about it.

For Gudgeon, the blockchain itself is the most exciting proposition; the transparent architecture on which new and more reliable financial systems can be built. Gudgeon began his university education just two years after the financial crisis of 2008 and recalls attending a number of lectures that explored the fallout from a philosophical as well as economic perspective. “I remember thinking that the theme of the whole thing was recklessness,” he says, “I had this feeling that the main reason why it all happened was down to a lack of transparency. Once people started to default on their mortgage payments and so on, it was hard for banks to assess the underlying risks of their asset holdings and those of other institutions.

“There were other factors of course — like bankers becoming too greedy and lending funds on things that were too risky — but for me, lack of transparency was one of the root causes of the financial crisis.” Using fully-transparent technologies will, he believes, remove the smoke and mirrors that obscure global financial markets and permit the kind of dangerous trading that led to the crash. “I want to see financial systems get better,” he says.

DeFi, or decentralised finance (the ecosystem of products and services that interact with cryptocurrency), promises to bypass all the shady backroom dealing that Gudgeon believes caused the crash, and replace intermediaries like banks with automated protocols and smart contracts (algorithms). This enables individuals to transact directly and transparently, with all transactions recorded permanently on the blockchain.

“Everything is open and auditable and you can see everything that’s going on,” says Gudgeon. “Of course it's not easy to do it; you still need good risk analytics tools and it’s not always straightforward to extract insights, but nonetheless all of the data is available and accessible.”

So far so good. But if everything is so transparent, then how come the global crypto market has already experienced an alarming number of life-changing crashes? At the start of 2020, the entire market was estimated to be worth more than $3 trillion, but a crash in June 2022 led to a recent valuation of less than $1 trillion.

That’s down to the speculation and Gudgeon isn’t phased: “To be honest I've seen a few of these crashes up close and I've stopped caring about them.” The folks losing money in these crashes, he says, are the ones hoping to make a buck, buying into the hype and not doing their research, or simply prospecting on novelty products.

Compared to other cryptocurrencies, he says, the Gyroscope stablecoin offering is designed to be insulated from these types of crashes as it’s asset-backed, meaning that every unit of digital currency corresponds to a range of assets that diversify more than price risk, and that diversity is automatically factored into the system. “Compared to USDC, where you have to trust a company to maintain a bank account, with what we’re building you can just see the state of the reserve through a computer terminal,” he says.

By creating a stable digital currency, Gyroscope hopes to empower individuals to transact and trade on and offline without having to rely on banks and without being exposed to the risks of other volatile crypto assets. It's a similar premise that underpins Strickler's work at Metalabel, where he and his team are creating tools to help communities of creators to better distribute their products away from exploitative systems.

Here, too, the emerging market has been volatile, with the value of NFTs and other tokens flip-flopping to such an extent that the idea of investment in these products seems deluded. While Bored Ape Yacht Club NFTs initially sold for $1-3 million, they have drastically depreciated in value since their launch.

an icon of a white bitcoin

Once the hype of the emerging crypto markets dies down, he believes the blockchain infrastructure will give way to as yet unimagined areas of innovation.

Six-figure NFTs aren’t what Metalabel is about though, and to talk about them in the same breath is exactly the kind of negative association that Strickler is rallying against. Rather, it’s producing tools to help creators be more autonomous online, enabling them to foster their own communities outside of the centralised systems of existing platforms and labels.

Like Gudgeon, Strickler is unphased by this early period of boom and bust. Recalling Carlota Perez’s Technological Revolutions and Financial Capital, he says, “There’s always an initial bubble as a new piece of technology or infrastructure gets built. If there’s no utility, it crashes. And then there’s a period of time before a different group of people come along and start building on that infrastructure, but for a new kind of purpose.”

Once the hype of the emerging crypto markets dies down, he believes the blockchain infrastructure will give way to as yet unimagined areas of innovation.

an icon of two pink bitcoins

In the immediate future, the music industry is one field begging for change and seems an obvious place for Metalabel’s values to be put to immediate use. Existing labels have failed to safeguard the revenue of their artists or institute transparent systems of payment, and rentier platforms like Spotify have reduced all but the most regularly-streamed artists’ earnings to peanuts. As Strickler puts it in the above FWB piece, “creators are almost never the owners of the platforms they use” and “platforms certainly didn’t profit-share with creators.” But it’s the creators that bring value to any platform or distribution network.

“Artists aren’t brought into the industry as empowered people,” said Orlando Higginbottom of Totally Enormous Extinct Dinosaurs in a recent interview, “they’re brought along as these sort of fragile, coddled babies who are difficult and creative, and they have managers, and they have record deals.”

Their managers and labels open them up to exploitation and money that should be theirs as fair compensation for creative output is scooped up by someone else instead.

“So much can happen in the first three years of an artist’s life before they even understand how money gets from Spotify to them,” says Higginbottom. “They might have 10 million monthly streams on Spotify, and they say they don’t really understand. [They] should be buying houses because somebody’s buying houses from that.”

Blockchains could change all that in any number of different ways: by breaking the monopoly that Spotify and Apple have over music through the interoperability of platforms — something that Strickler says is fundamental to the principles of Metalabel; by creating more transparent payment and contractual systems between labels and artists; and by widening distribution of an artist’s music by strengthening their community of fans and rewarding them for their fandom.

How exactly this shakes down is a matter for speculation (not the financial kind), but it’s clear that if you can look past the hyper-capitalist phase of the crypto project that we’re currently in, the ‘quasi-socialist’ principles that underpin blockchain’s infrastructure and modes of organisation and distribution could offer some exciting alternatives to a number of global online systems that simply aren’t fit for purpose.