Boom, Crash, Reboot, Repeat: Toward a Better Internet

Nine a.m. I’m standing in the middle of a generic Hilton conference venue in Midtown Manhattan. It’s Blockchain Week NYC, and it’s pandemonium. You can’t move for all the pink-faced delegates and oversized name badges. It seems like the whole crypto world—geniuses, promoters, and scammers—has descended on this hotel at this very moment. It’s nigh-on impossible to walk from one side of the hall to the other.

“It’s like 1998 all over again,” I hear someone say that first morning (and others say throughout the week). That’s why there are 8,500 people here. Nobody wants to miss out on the next big thing, even if most of the room doesn’t know what that is exactly. The year-to-year comparison seems like a way of making sense of the madness, and excusing it. All the promotional bling—the gold Mac chargers, the bitcoin-embossed jewelry—doesn’t seem so excessive when it takes on historic importance.

I saw some of the dot-com explosion in the 1990s, as a young reporter, flummoxed then as I am now. So I wonder how the new boom will be like the last boom. Will it be another era when plumbing is laid for a revolution of business, culture, and society? Or will the startup bros partying with Snoop Dogg end up on the equivalent of (a deadpool parody of new age boosterism)?

The analogy to 1998 is useful, but it has its limits. For one, there’s more money this time, and it’s arriving earlier. In the 1990s, when VCs started taking meetings, the internet had already been through years of important tech development. There was a domain name system (developed in the 1980s to support Arpanet) and the World Wide Web (conceived by Tim Berners Lee in the early ’90s) was already letting people surf. Though peer-to-peer databases preceded Satoshi Nakamoto, blockchain emerges now without the same history of technical forethought. The technology has not been made safe for consumers. There’s a lack of user interfaces and black boxes to hide the wiring.

The blockchainers are on another level, particularly in their attitude to freedom and in their anarchic politics. They’re proposing something a lot more radical than a new form of shopping.

“There’s a real risk that if investment comes too early before the technology wave is ready for it, you end up funding a whole lot of bad ideas, and the good ideas have trouble rising above the noise,” says Brian Behlendorf, executive director of the Hyperledger project and a veteran of open-source software. He thinks too many crypto startups want to develop fundamental platform technology—blockchains like Ethereum—when what is needed is stuff that people can actually use.

The second difference: There’s more at stake this time. Everyone thought the dot-commers were pretty outré with their foosball tables and complimentary office massages. It was amazing to buy a book or flight online when you usually had to visit a store or travel agent. But the blockchainers are on another level, particularly in their attitude to freedom and in their anarchic politics. They’re proposing something a lot more radical than a new form of shopping.

Many want to reinvent finance and money itself, taking away the power of banks and governments as the prime arbiters of value. “In the long term I don’t think people will want to hold value in a currency that loses three percent of its value every year,” says Erik Voorhees, a leading bitcoin maximalist and avowed enemy of the Federal Reserve (he’s referring to how printing money drives up inflation and reduces the value of dollars in our pockets). “That creation and manipulation of money is not going to be under their purview for much longer.”

The “internet of value” is one of blockchain’s big ideas. Blockchainers imagine a new financial system mediated by open protocols, allowing people to send value (that is, digital assets of all kinds) as if they were sending email. Which is to say, easily, and without going through an intermediary that charges you for the pleasure. Voorhees says he’s okay with banks like JP Morgan Chase and Credit Suisse bastardizing the idea of the bitcoin blockchain by promoting private distributed ledger projects. But, secretly, you sense he just wants them around so he can laugh at them.

“They’re building this walled garden of finance only to realize that the innovation of crypto is removing the walls,” Vorhees says. “It is creating a protocol that the entire world can use for money and everything built on top of it. The world is going to move to an open protocol, just as it moved to an open internet. The internet dream is still very much alive.”

If someone had talked this way about money in 1998, they would have been laughed out of Sun Valley. The dollar was supreme, an encapsulation of our shared prosperity and shared sense of purpose. Then came the financial crisis, social media polarization, and galloping inequality, and suddenly outlandish ideas were in. The naysayers scoff about bitcoin, pointing to its fluctuating price. But their efforts at debunking sound less credible in a world that somehow elected Donald Trump. These days, anything seems possible—good and bad—which is another big difference from 1998. Bitcoin may represent the future, whether in its own form, or more likely, as a precursor to more flexible forms of exchange.

The detractors’ case was summarized last December in a viral post by Kai Stinchcombe, a financial manager who describes himself, disarmingly, as “whatever the opposite of a futurist is.” “Each purported use case — from payments to legal documents, from escrow to voting systems—amounts to a set of contortions to add a distributed, encrypted, anonymous ledger where none was needed,” he wrote.

He said the bitcoin blockchain was too ungainly to handle high volumes of transactions (Visa is quicker and more robust); that smart contracts—self-executing legal text written as a code—don’t resolve the need for human intervention (you want to be able to call someone when the contract goes south); and that using a blockchain as a distributed data storage system is no better than Dropbox or

Stinchcombe has a point on these questions, but his critique reminded me of Newsweek’s famous hype-skewering article from 1995, “Why The Web Won’t Be Nirvana,” which giggled at the idea that we’d soon be buying books online. Similarly, it’s impossible to hear Paul Krugman call crypto “evil” today without recalling that he once said the internet was no more important than the fax machine.

As the veteran futurist George Gilder writes in his Life after Google: The Fall of Big Data and the Rise of the Blockchain Economy, criticizing blockchain in 2018 may be valid, even useful, but it shows a courageous lack of imagination about the future: “[Stinchcombe] sees all the flaws and limitations of most of the existing solutions, but that makes him no more perceptive than their authors.” In other words, how you feel about blockchain’s potential comes down to how you feel about the capacity of developers to come up with solutions to the problems they’ve created. Gilder, a free marketeer, believes the future isn’t fixed in a straight line: an extension of whatever powerful companies like Google, Facebook, and Apple say it will be. They may want to keep us hooked within their self-contained worlds of apps and tools. But there’s enough creative energy around blockchain to find secure and efficient ways to distribute services to open protocols, if that’s what we want. The advantage of open source networks is that they invite creativity from every corner, something that platforms—even those as powerful as Google and Facebook—find hard to match.

“When you compare centralized and decentralized systems you need to consider them dynamically, as processes, instead of statically, as rigid products,” writes Chris Dixon, a leading VC and advocate for a decentralized internet. “Centralized systems often start out fully baked, but only get better at the rate at which employees at the sponsoring company improve them. Decentralized systems start out half-baked but, under the right conditions, grow exponentially as they attract new contributors.”

What’s more, automation normally wins, because it’s cheaper. Financial disintermediation—taking out the financial middleman—is a political goal of anarchists, libertarians, and Occupy Wall Streeters. But many Wall Street analysts also love it because they see the capacity of blockchain to wring efficiencies out of inefficient transactions, from everyday legal contracts to international supply chains. In this sense, blockchain is a piece with many phases of automation throughout history. “Every advance for mechanization and industry, from the loom to the sewing machine, the linotype, the metal cutter, the telephone switch, and the internet router to the World Wide Web, has required relinquishing some measure of human control to machine languages of various kinds,” Gilder writes.

International payments seem particularly ripe for open protocols and cryptocurrencies. One morning at the conference (organized by Coindesk), I meet with Jeff Garzik, one of the core developers of bitcoin and now CEO of blockchain startup Bloq. He tells the story of how he wanted to send $1,000 to Croatia, so his uncle could buy new tires for his car. Because of the fees charged by a money-forwarding service, by the time the money reached its destination, it was worth only the equivalent of $800 in local currency. His uncle could now buy only three of the four tires he needed.

Cryptocurrencies are a workaround from using corresponding banks on both sides of a border, allowing businesses and consumers to swap their money in and out of fiat money without going through the traditional exchange system. In the case of immigrants who use long-in-the-tooth agent networks like Western Union or MoneyGram, they’re a way of avoiding what development economists call a “super tax” on the world’s poorest. The London-based Overseas Development Institute says those two companies alone account for more than $500 million in lost annual remittances, mostly gouged out through “opaque foreign currency charges.” The case for blockchain becomes stronger outside the U.S., where millions of people don’t enjoy basic economic infrastructure that we take for granted (like a bank account). As Elizabeth Rossiello, CEO of foreign exchange startup BitPesa, likes to say, bitcoin’s price fluctuations and processing fees are nothing compared to the issues plaguing traditional financial systems in Africa and elsewhere.

Bloq is launching Metronome, a fast-resolving cryptocurrency aimed at the business-to-business market, following in the footsteps of startups like BitPesa and Abra. Garzik predicts that growing parts of international corporate operations will become automated through smart contracts, with payments moving between parties using cryptocurrencies to avoid banking charges. For example, if a contract manufacturer like Foxconn moves goods from a factory in China to a Walmart store in Illinois, that will trigger a payment using a cryptocurrency as a global vehicle.

“It’s not hyperbole to say we’re changing money, and we’re changing the way businesses interact with each other. We’re automating some parts of businesses that have never been automated before,” Garzik says. Supply chain payments may not excite bitcoin maximalists, but they’re an effective answer to people like Stinchcombe who can’t imagine anything better than the status quo. They show how blockchain and crypto-assets can stand in for existing processes.

I’m still not sure that the wilder dreams of people like Voorhees will ever become a reality. But I’m not prepared to bet against the reinvention of money (and the structures that surround it) through the application of novel technology. History shows that technology plus the kind of energy in the room at Blockchain Week NYC has a habit of coming through, even against the might of banks and powerhouses like Google and Microsoft. Back in the day, people couldn’t believe that we’d be using the web for anything more than looking up information.

In 2014, Marc Andreessen, who helped develop the formative Netscape browser, wrote about how technologies like bitcoin tend to invite skepticism before they’re embraced by nerds who can’t get enough of them. Then “mainstream products, companies and industries emerge to commercialize [them].” Meanwhile, the naysayers who were wrong in the beginning never recant their predictions, carrying on as if they’re far-seers of the future. “Rich old white men crapping on technology that they don’t understand can be counted on to be wrong roughly 100 percent of the time,” Andreessen says.

Here at BREAKER, we’re not blind to the limitations of the decentralized internet (and we certainly don’t want to sell you on another dodgy ICO). But we’re pretty sure that the current internet isn’t what its founders intended or hoped for. With its monopoly platforms, all-too-frequent data leaks, and its tendency to polarize and misinform, today’s network is not serving us as it might. Two decades on, it’s time for a new generation of ideas and leaders to take us forward.