Ask HN: What if a new generation of developers is right about Web3?

"What if Mr. Ponzi has discovered a totally new way to invest?"

The early crypto holders and their families will become the new 1%. They will cloak their wealth and power behind god and government and keep this whole thing going. What is past is prologue.

My Dad couldn't get a loan from the bank because he had a bunch of kids and a moderatly paying job. He wasn't able to implement his ideas without capital. First generations of immigrants to this country solve this by pooling thier money. Some cultures in America still do this. I'm thinking that web3 is an attempt to recreate those informal pools of captial. GoFundMe, Kickstarter and Patreon were a good start but they still act as gate keepers. I'm just tryint to get a feel for where the enthusiasm is coming from when you look behind the plebes who are getting ripped off to the thinkers with an actual strategy.

Given your use of the phrase "the plebes who are getting ripped off" in a comment, I suspect your sympathies aren't really with the unbanked and the lower classes, but I will nevertheless try to give an answer as if the question was asked in good faith.

No one can really predict the future, but if I had to put money down on it, I would bet that if Web3 attains its technological goals, it will not attain its social goals. If dapps replace web sites, the infrastructure becomes truly decentralized, cryptocurrencies supplant fiat currencies, and people accept the legitimacy of digital scarcity through NFTs, it will probably be a net benefit to some people, but leave most people worse off.

The impacts will be felt differently between the US, the rest of the developed world, and the developing world. I'll start with the US.

Assuming your father was working class in the United States, and assuming that he was unable to secure a business loan from a bank or attract investment money, prior to crpytocurrencies, his only option for securing a loan would be a loan shark. If this was the 1990s or the 2000s, that loan shark could come in the form of a payday loan service. These services are the logical conclusion of unregulated capitalism for a financially struggling working class. Before they were regulated, they would give out loans with interest rates in the hundreds of percent. These rates were a response to the incredible financial risk the lenders took in lending to people who could not get traditional loans. Many would disappear or file for personal bankruptcy to avoid repayment, so they had to make as much money as they could from the people who made repayments.

Nowadays, payday loans are regulated at the still incredibly high rate of 36%, but if crypto projects like Web3 succeed in circumventing government regulations, I suspect we'll see a return to the hundreds of percent loans that were once ubiquitous across the US. Lenders aren't going to get stupider just because they're lending cryptocurrencies. They're still going to calculate the risks of lending money to people like your father and act accordingly. We know this is how they'll act in the absence of regulation because it's how they acted in the absence of regulation in the recent past. Specifically, the ability to take out loans will not improve for those with little or no capital from what it was before.

For the US and the rest of the developed world, ubiquitous cryptocurrencies will cause an increase in money laundering, scams, and robberies. For whose with access to banking, deposits are insured up to a certain amount. This benefit is largely theoretical for the unbanked, and it doesn't cover enough for the upper classes, but it's typically a good amount of protection for the admittedly shrinking middle class. Storing money in cryptocurrencies loses people that protection. Cryptocurrencies also don't have chargebacks or protections against certain kinds of scams. If cryptocurrencies supplant banks, banking becomes much riskier to the middle class, and thefts and scams will accelerate the decline of the middle class, widening the wealth gap.

The ease at which cryptocurrencies can be stolen and laundered is already helping rouge nations like North Korea to finance weapons development and oppressive regimes. It's not that these regimes couldn't and haven't stolen money in other ways, but the mere existence of cryptocurrencies is making these nations richer than they otherwise would be, and I suspect that will have very negative international consequences. [1] For that matter, the existence of cryptocurrencies is fueling ransomware attacks against hospitals, governments, and infrastructure. I expect those will increase as well.

For the developing world, I'm not sure what the net effect will be. I'm not knowledgeable enough to know the details issues facing people in these countries. If I had to guess though, I suspect that crypto will offer them not much more than false hope. El Salvador's bitcoin program is basically a desperation play. Their own currency failed, and they're having lots of issues using the US dollar as a currency, because they have so little control over it. I can see why they felt like they had no choice but to try bitcoin, but I think the same lack of control over bitcoin will lead to similar issues in the long run. For countries which see cryptocurrencies as a threat, I don't think it would be difficult for them to crack down on mining and trading operations in their country. For countries that are indifferent to it, their residents can be crypto millionaires on paper, but if they try to actually import any of that wealth to the country in the form of goods and services, the governments will take notice and tax or seize it.

Some may be able to use cryptocurrencies to migrate to the developed world and establish themselves, but I imagine this will become harder and harder the more cryptocurrencies proliferate. Once the general public get use to them, figure out how they work, they'll start to move them around in the same patterns as fiat currency. The developed world isn't going to start gifting wealth to the developing world and the lower classes just because the money is free from government control.

Similarly, in the US, I know some trans people who got in on bitcoin or etherium early and were able to use it to fund health care that they wouldn't otherwise be able to afford. This is absolutely a net good, but I suspect this too will become more difficult as Web3 ascends. It was only possible because they got in early. But more importantly, it was only necessary because the US doesn't have universal healthcare, and they were financial losers in capitalism.

The core problem with Web3 and cryptocurrencies is that they're more capitalism. I've blogged about this [2], but in short, the fact that your father couldn't get a loan was a consequence of capitalism. Whether that's a feature or a bug of capitalism is up to interpretation, but you can't change capitalism with more capitalism. You can't fix capitalism's flaws with more capitalism. If you really want to improve the ability of anyone to be an entrepreneur no matter their financial status, you have to look to non-capitalist systems like universal basic income, universal healthcare, and other socialist initiatives.

1: https://www.wired.com/story/north-korea-cryptocurrency-theft... 2: https://meipouchou.com/blog/web3-metaverse-lain/