To those working in web3, a new and fairer economic system underpinned by smart contract platforms feels like a given.
Yet on Dec. 20, Jack Dorsey decried web3 as a domain controlled by venture capitalists and their limited partners in a tweet. It triggered disagreement among users of the microblogging service he founded and led until recently as CEO.
“You don’t own ‘web3,’” Dorsey’s tweeted. “The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label.”
Dorsey does have a point — a chart from Messari, a crypto intelligence platform, shows blockchains with outperforming tokens like Solana allocating 48% of SOL to VCs, as well as the team and company behind the project. Binance, Avalanche, Celo, Blockstack, Flow, Internet Computer, and Near all allocated more than 38% of their respective platforms’ tokens, according to Messari’s chart.
Indeed, accredited non-US investors were able to purchase Avalanche’s AVAX token at $0.50 a piece with one year vesting or $0.85 a piece with no vesting as part of a Jul. 15 token sale, according to a report by Messari. At AVAX’s Dec. 21 price of $123.65, both selections have easily returned multiples of 100x in the last year.
Solana had a private round in 2019 at the $0.225 price point and one in 2020 at $.25, according to another Messari report. At SOL’s Nov. 6 all-time high of $259.96 as reported by CoinGecko, both investments would’ve produced returns of over 1,000 fold.
Ethereum is generally heralded as the most decentralized smart contract platform. It, too, has trended towards centralization of wealth: On May 18, 2018, more than 95% of the ETH came under control of the top 1% of addresses for the platform and has remained above that level ever since, according to GlassNode, an analytics provider.
A concentration of wealth doesn’t necessarily counteract Dorsey’s contention about VCs and their LPs. Even so, many of the largest Layer 2s for Ethereum, like Optimism, Arbitrum, Starkware and zkSync, have received VC money. And Vitalik Buterin, Ethereum’s co-founder, says such technologies are essential for scaling.
Mike Dudas, general partner at Red Pill Ventures, a web3 investment firm and founder of The Block, an information platform, isn’t buying Dorsey’s take. “The public is often offered a direct opportunity to purchase tokens prior to any public listing on centralized or decentralized exchanges,” Dudas told The Defiant. He said average investors rarely get a chance to buy shares in the initial public offerings of non-web3 companies.
Indeed, Solana did have a public sale on CoinList, which facilitates token sales to the public.
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Dudas also added that web3 and crypto offer greater opportunities for governance, direct participation, and ownership than previous iterations of the internet. “The democratizing force of decentralization has inspired millions to build, use and participate in novel communities, products and networks that simply weren’t possible in an age of closed, proprietary development, ownership and algorithmic manipulation of the web2 internet,” Dudas said.
Dudas also publicly responded to Dorsey, saying the Twitter co-founder’s tweet will stifle people working to shape web3.
Dorsey’s tweet disparaging web3 as a badly disguised centralized entity doesn’t come as a surprise. He openly supports Bitcoin and recently said that the cryptocurrency would overtake the US dollar. After stepping down from Twitter last month, Dorsey changed the name of Square, a payments company he co-founded and leads, to Block.
Dorsey also sold his first tweet for $2.9M, converted the proceeds to Bitcoin, and sent 50.8 of the token to GiveDirectly, the nonprofit for direct cash transfers to the world’s poorest households. The billionaire notably used an Ethereum-based service to sell the tweet.
In all, Dorsey has sparked a massive amount of conversation about web3 — his tweet has more than 2,500 quote tweets.Google Trends shows searches for “web3” spiking since August.