Does Crypto Create Value or Just Redistribute It?
Exploring the Far-Reaching Implications of Open Data
Starting April 2025, all full posts, including archived posts, will be available on my Substack, The Mediator.
Tl;dr:
- The web3 debate often overlooks a key question: what can crypto do better than other technologies and will this create value for a lot of people or not?
- The pro-web3 narrative doesn’t adequately address this question because it emphasizes how crypto redistributes value, not how it creates it.
- The short answer is that the most significant and far-reaching effects of crypto will likely come from open data.
- To show why, it’s helpful to draw a parallel with the Internet. The Internet created enormous value for billions of people by unbundling data from physical infrastructure, enabled by packet switching. This broke the data communications logjam at the network layer, causing the cost of information to plummet.
- The Internet as we know it today, however, has migrated to a client-server architecture and data is stored in proprietary servers, by default. The data logjam has moved up to the application layer.
- On public blockchains, data is open, by default. Crypto effectively unbundles data from applications, breaking this new logjam. Less friction promises even cheaper information and even larger network effects.
- It will take a long time to understand the real-world implications of a more open web. But we can already start to flesh out a few that have the potential to create enormous value for a lot of people: elimination of intermediaries, code composability, data composability, self-sovereign data, data persistence, coordination and financialization/securitization.
- The promise of web3 is not about decentralization for decentralization’s sake. It’s also not primarily about value redistribution. It is decentralization as a means toward openness and the efficiency, innovation and utility this will create.
Web3 is the most divisive topic in technology.
It either heralds a new, egalitarian Internet and an inflection point in human history or it’s a Ponzi scheme with no practical application.
If you follow the space closely, you’ve seen a rising crypto/web3 backlash in recent months. A chorus of prominent CEOs, including Jack Dorsey, Elon Musk, Aaron Levie and Brian Chesky (h/t Austin Rief), have publicly criticized the pro-web3 narrative on Twitter. Former Signal CEO Moxie Marlinspike posted a widely-read essay pointing out that web3 is not as decentralized as its proponents argue. Scott Galloway piled on, with his usual stew of wit, insight and sensationalism.
The inevitable backlash-to-the-backlash followed, with a host of responses, from Vitalik Buterin, Chris Dixon, Packy McCormick and more.
I write because I’m trying to figure out the answers, not because I have them. I also have no dog in the fight. But it seems to me that a lot of this debate is overlooking the most fundamental question: what can crypto do better than other technologies and will that create value for a lot of people or not?
In this essay, I try to answer it. But first, it’s worth exploring why this is an important question to answer now and why the prevailing web3 narrative doesn’t adequately address it.
Click here to continue reading the full post on my Substack, The Mediator.
