The CEO of messaging app Signal blasted NFTs and the blockchain-based internet known as Web3 as “a gold rush” in a blog post on Saturday.
“The people at the end of the line who are flipping NFTs do not fundamentally care about distributed trust models or payment mechanics, but they care about where the money is,” Moxie Marlinspike, the Signal CEO said.
Marlinspike made his withering assessment of NFTs after creating his own NFT platform, where new users buy in to make edits to an art NFT, and then receive royalties when other users join. That’s a business model Marlinspike wryly refers to as “something similar to a pyramid shape.” Marlinspike only built the platform to better understand the mechanics of Web3 and NFTs; it serves no other purpose. But by Saturday, users had sunk $38,000 into the project, leading Marlinspike to conclude that NFTs are a cash grab that would be conducted more efficiently on Web 2 using debit cards and a public list of buyers. Though if NFTs were bought and sold without crypto, “I don’t think it would have taken off,” Marlinspike said.
Still, the Signal CEO acknowledges that users have already poured enough money into the broader NFT space to keep it going a long time.
“I think these market forces will likely continue, and in my mind the question of how long it continues is a question of whether the vast amounts of accumulated cryptocurrency are ultimately inside an engine or a leaky bucket,” Marlinspike said, distinguishing between a scenario in which money raised via NFTs is fed back into the crypto system (engine) or siphoned off to private accounts (leaky bucket).
The U.S.-based tech entrepreneur made his critique of NFTs as part of a broader assessment of blockchain and the nascent internet economy developers are building upon it—dubbed “Web3” or “Web 3.0.”
Proponents of Web3 hail the new protocol as a decentralized alternative to the past two iterations of the World Wide Web. With Web3, every user is also a stakeholder and has full ownership of his or her own data and digital assets. By comparison, in so-called Web 2, users rely on leviathan platforms—like Google and Facebook—to access and utilize most of the web’s services, unwittingly handing over vast amounts of personal data in the process.
A supposed upside of Web3 is that users will be able to control and monetize their own data, as well as maintain independent use of the shared internet space, without having to go through a private organization like Facebook. But, Marlinspike says, power over the Web3 economy has already converged around a few individual platforms.
Most Web3 platforms are built on the Ethereum blockchain, while NFT marketplace OpenSea has dominated the market for NFT sales. Web3’s consolidation around key players, Marlinspike says, means that the “decentralized” web is turning into a less efficient and less private version of the current Web 2 internet.
Web3 is inefficient, Marlinspike argues, because developers can’t iterate new ideas on a decentralized program, and it’s less private because virtually all information on Web3 passes through those few key players.
“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,” Marlinspike said.
Naturally, Marlinspike’s “first impressions of Web3” did little to dampen the confidence of crypto enthusiasts. After Marlinspike posted his critique on Twitter, Ethereum founder Vitalik Buterin replied with a rebuttal—albeit a conciliatory one.
“Moxie’s critiques in the second half of the post strike me as having a correct criticism of the current state of the ecosystem…But they are missing where the blockchain ecosystem is going,” Buterin said, adding that the reason Web3 has yet to live up to its own ideal is due “to limited technical resources and funding.”
But Buterin and Marlinspike did seem to agree on one thing: Regardless of whether Web3 is truly decentralized, most end users might not care; they may be satisfied so long as their Web3 investments, such as ownership of a Bored Ape Yacht Club NFT, continue to earn money.
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