Web3 Impact No. 8

A briefing on the intersection of Web3 and social / environmental impact.

Happy Thanksgiving. Here’s some food for thought…

There is that quote that goes something like: “There are some decades when nothing happens and there are some weeks when decades happen.” This is how it feels in the world of crypto. The last few weeks have been packed with personal drama, financial ruin, and thousands of articles written on what FTX’s collapse means for everyday consumers, financial regulation, venture capital, and the future of web3 technologies and cryptocurrencies.

After years of growing momentum in the corners of the internet, out of view from the watchful eye of financial regulators and largely inaccessible for retail consumers to participate, the crypto sector has worked hard over the last 5-10 years to demonstrate its current legitimacy and future potential by moving mainstream.

That sustained campaign to become mainstream suffered a major setback from the widespread fraud inside FTX. While some web3 enthusiasts protest that the fraud of one crypto exchange shouldn’t translate into a loss of trust in the broader sector, it doesn’t matter. The damage has been done and the crypto and web3 sectors will once again need to rebuild trust and re-establish itself as credible.

The best way to do this is by embracing regulation. For a long time, the web3 space has considered itself a swashbuckling alternative to traditional finance that eschewed regulation, touting itself as inherently trustworthy based on the transparency of the blockchain. But the existence of the blockchain doesn’t guarantee the absence of fraud, nor does the value of transparency always translate into consumers valuing an exchange or a cryptocurrency as trustworthy.

After FTX filed bankruptcy, John J. Ray III was appointed as FTX’s new CEO. He had presided over major corporate failures and criminal malfeasance, and he said: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” 

It strikes us that for all the talk about web3 decentralizing the humans and centralizing the code so we can operate without the messy friction of human intermediation, every technology or DAO or corporate structure—no matter how decentralized—is still the product of human design, and its curation and caretaking is something that humans can’t neglect or outsource. We infuse our biases, our ethics, our very selves into the technologies and companies we build, and to believe we’ve reached a post-human form of collaboration and governance is an abdication of our responsibility to influence the systems we have created and will create.

Sam Bankman-Fried has considered himself an effective altruist, an ethical and moral view that’s connected to the philosophy of consequentialism, which says that “the rightness of an act is determined solely by the goodness of its consequences.” By using empirical analysis and data based on outcomes and consequences, effective altruists determine the best career to pursue or the best charity to donate to. But such a framework requires the ability to neatly measure consequences, and in a world like ours, every action produces a million small consequences fanning out over generations, compounding into both good and bad outcomes. What might produce bad outcomes in six months might have silver linings in six years. What might seem like a good step forward might ultimately create harm far into the future. It’s simply hard to solely rely on outcomes to tell us what’s right today, or how to think about a specific circumstance.

How are we to analyze the collapse of FTX? Maybe it’s too early to tell. SBF and his colleagues have created immense harm to millions of people. The loss of trust has been immense, and the regulatory response will be commensurate. Will the sector recover? What will the future of web3 look like? We don’t know. The consequences are infinite. 

But if we’re not pressed to compute long-term consequences, we can return to our present-day values and convictions. For some, that means continuing to build the web3 products they believe in. For others, that means expanding regulations over the industry. For us, it means continuing to watch and participate in this space, learn as much as we can, and continue to curate this newsletter with the best reading each month.

— Banks and Kyle

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SBF and Effective Altruism

Effective altruism (EA) is a social movement that’s all about using reason and evidence to do the most good possible for the most people. Yet Bankman-Fried, one of its brightest stars and biggest funders, now seems to have done a lot of bad for a lot of people. Here are some questions EA needs to grapple with now: 1) Did EA lean too hard into utilitarianism? 2) Did EA do enough to clarify that the ends don’t justify the means? 3) Is effective altruism trying to be a philanthropic institution, a philosophy, a cultural identity — a political movement? Vox (12 minutes)

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Crypto in Sub-Saharan Africa

Many young people in Sub-Saharan Africa are turning to cryptocurrency as a way to preserve and build wealth in spite of low economic opportunity, as opposed to other countries where many are using cryptocurrency as a way to multiply their existing wealth. Crypto usage is driven by everyday necessity, as opposed to speculation by the already-well off. In Sub-Saharan Africa crypto is used much more consistently in retail transactions. The number of small retail transfers actually grew starting at the onset of the bear market in May. Cryptocurrency usage in Sub-Saharan Africa will continue growing as long as residents face issues crypto has proven it can solve for them, such as preserving savings through economic volatility and enabling cross-border transactions in places with strict capital controls. Chainalysis (12 minutes)

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Crypto but for the Climate

We are in the early days of using the blockchain to address climate change, but more and more people are beginning to see how blockchain might be used to address the dysfunction and fragmentation in carbon markets. Carbon markets can function without the blockchain, but the blockchain might help markets address their issue of double-counting certain credits and paying people across borders for offsetting carbon. The World Bank and the government of Singapore announced a new project called the Climate Action Data Trust to bring together information from the world’s major carbon-offset registries in a single distributed ledger. Politico (3 minutes)

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Project Spotlight

R Labs’ mission is to bring purpose and more utility to Web3 while addressing the generational shift of more than 24 Trillion dollars in wealth this decade to Millennials and serving their desire to mobilize their financial assets for social and environmental good. R Labs is committed to the true democratization of wealth creation and sees the tokenization of impact as a meaningful opportunity to build the world we want to live in through tangible impact opportunities. R Planet

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Web3 Impact

Web3 Impact is a briefing about leveraging Web3 for positive social and environmental impact by Banks Benitez and Kyle Westaway.

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