Alex Tapscott

Navigating the next chapter of the internet's cultural frontier
October 3, 2023
Leo Nasskau
44:19

You can feel the foundations of our life online shaking under the disruption of emerging technology. Alex Tapscott has spent his career trying to piece together what it means.

He speaks to Leo Nasskau after the launch of his latest book Web3: Charting the Internet's Next Economic and Cultural Frontier. The conversation explores how blockchain and artificial intelligence will intersect to create the next generation of the internet, diving into why he thinks internet users will embrace owning digital assets, the future of community-led organisations online, and how new building blocks for the internet can transform how we work and play online.

Read below for the full transcript:

Leo:  Hi Alex, thank you so much for coming on to the Culture3 podcast. I want to start by taking the big picture view and thinking about how the internet will be different in 2030. or something like that. If I'm a kid online in 2030, how do you think web3 is going to make it feel different to how it does today?

Alex: I think that there are several technologies today that are all emerging at once and really hitting their stride. I think by 2030, if we want to use that as the end point, I think all of them will be deeply integrated into our experience as people and our experience as internet users. The foundational technology of that is blockchain – that's the thing that drives Web three.

Blockchain is a digital medium for value, it's a way to express property rights online, and it's also a way to automate business processes so that you don't need as many intermediaries and middlemen acting as trusted sources of truth. All of that, collectively, is going to usher in a new age of ownership, but there are several other new technologies that are also emerging.

One of them is extended reality: the idea that our experience of how we intersect and interact with the internet is going to be 3D and spatial. If web1 was two dimensional and accessed on desktops, and web2 is 2.5 dimensional and accessed on Smartphones, then web3’s going to be, potentially, 3 dimensional. Then the final thing we have to think about is the rise of artificial intelligence, and what impact that is going to have. AI' is allowing us to reimagine what computers can do and also what people can do, empowered with these tools.

So what does the world in 2030 look like? I think that your average internet user will be an owner of the services and applications that they rely on. I still think they might use web2 platforms like Google and Facebook but, increasingly, they will have a way to express their ownership of the web. That can be ownership of their identities; ownership of their data; ownership of digital goods, such as virtual assets they buy in games or other environments; or financial assets that they can take with them through the world and express digitally, which is something that's not possible today.

I think that every single person will probably have their own AI bot assistant and, for a young person, that AI bot could be one of their very good friends. You know, if you're seven years old or ten years old today, then by the time you're 17, that bot could be someone who's been with you through all your formative years and knows you really well. That bot can do everything from provide recommendations on the suitability of an investment, to giving dating advice, being a tutor or teacher.

The final aspect is virtual reality and extended reality – I don't think we're going to be spending all of our time in a headset, but I do believe that the way in which we experience the web is going to become more spatial.

In short, I think the web is going to be unrecognisable compared to what it is today; not because of one technology, but because of several technologies all emerging right now.

Leo:  I think that's what makes it so exciting as well, and I love that you're thinking about those three things: AI, extended reality, and blockchain working at the same time. I want to start with blockchain, and the big thing that you were talking about there was ownership – people owning parts of applications, owning their identities, visual goods, financial assets, etc.

What are the main ways you think that will manifest?

Alex: I think about tokens as basically containers for value. They can be programmed to contain anything that requires scarcity in order to have value. That can be cryptocurrency-a digitally native money like Bitcoin-but it can also be a real world asset like dollars or any other financial asset. It can be a vote in an election or art collectibles, or it can be a virtual asset in a video game. I think that the idea that we can create a seemingly endless variation of assets is something that's going to be really powerful for a lot of people, and I think it’s going to express itself in how we interact with the web.

One of the ways in which we're going to interact with the web in the future is through wallets. In the same way as a physical wallet that has things of value like money, aspects of your identity, ways to connect to financial institutions, I view the wallet online as something similar. Your MetaMask wallet, for example, is a very primitive version of where we're headed, where individuals will have sovereignty over their value, and over the assets that they own.

To me that's really significant, and it’s going to change the business model for a lot of internet platforms and companies. Platforms will emerge that provide users a different kind of experience, and ownership will be part of it. If ownership as a concept really resonates with people, if it resonates for the mass market, then it's going to cause a whole new crop of organisations, projects, and networks to emerge.

I think that will start to take away mind share and economic activity from web2 platforms. That doesn't mean the end of web2 by any stretch of the imagination; we still have lots of web2 based applications and websites – we also have companies that missed the web altogether, such as HP or IBM, that still continue to exist. These companies don't blow up, they just don't capture the future opportunity set in the way new entrants can.

Leo: When you were talking about ownership there, it made me think of ownership on two different levels. You can own individual things, and then you might own part of an organisation in the same way that you might own a cooperative in the real world. Do you recognise that sort of  distinction?

Alex: I do. I think the idea of ownership as part of the user experience, and as part of the growth strategy for web3 applications, is deeply ingrained. From a practical perspective, I think ownership has two benefits: number one, Silicon Valley has long understood that in order to attract the best people, you need to cut them in on the action. Why would someone take a risk and leave a cushy job to join a start-up unless they believed in the vision, but also had some economic stake in the thing? People work towards that opportunity of owning something, and I think that concept worked really well to drive innovation into new organisations in the US and in the VC world.

When it comes to internet native organisations that are global, there's not really a way to do that, or there wasn't until tokens came along. With a DAO, an internet native organisation, that has a token holder base instead of a shareholder base, you have an easy way to give them ownership for contributing to the platform. So, I view the DAO and the token based model, as inherently well-suited to digital businesses that are global in nature from day zero. That's number one.

Number two, many new technologies and applications are primitive, or are not as useful as existing platforms. That could be because the existing platforms have better or more robust technology, or it could be because they have a lot of network effects from having tons of users. So, how do you bootstrap a new application or company when you don't have network effects or when you're in a new technology world? You need to create this incentive for users to participate.

In the book, we interviewed Chris Dixon from a16z and he explained it this way: in the early days, ownership is actually part of the user experience and then the utility comes later. The ownership component, being part of a community or a network, is something very important. He calls it bootstrapping a network, and I think that's a really interesting way of looking at it.

The one thing that concerns me a little bit about what I've seen, at least in the world of decentralised applications in web3, is that there seems to be a bit of a preoccupation with ownership as the end goal of all this; this idea that the tokens are the thing that matters. I think that’s ownership for ownership's sake, and speculation for speculation’s sake.

All these users are coming in trying to identify the next thing that offers a token or reward that they can go sell and make a little money on it, and they're not really interested in the underlying utility or the objective of the application. I think that's probably less of an issue in the De-Fi space because it's inherently financial in nature, but there are all these other attempts to apply that same model to social media and to other creative endeavours, and I think it's running into some headwinds. Basically, if you make the application ownership for ownership's sake, then you're attracting the wrong kind of people.

With a lot of these applications, maybe speculation is part of playing, or maybe it's part of working and a way to earn money, but I don't think it's achieving what we think we want with web3 – which is to have user owned networks and applications. People use it for various reasons but, by using it, they’re earning a piece of those platforms and creating a user owned internet.

To me, that's the objective. I think a user owned internet is something we should be striving towards because, all things being equal, if you're creating value for something then you should own a piece of it. I also think that user owned networks could create better governance models to help those networks grow; to ensure they stay open, to make sure they don’t become platforms for data aggregation, advertising, and so forth.

Leo: Going beyond ‘ownership for ownership's sake’ and thinking about new users in web3, maybe that average user in the year 2030, what are they actually going to be doing with the things that they own?

What are the main reasons to get people excited about ownership? What are the core benefits to them that they can go and talk to their friends and say ‘this is different because I own it, and that matters because x’.

Alex:   I think one of the big examples is in the gaming and interactive entertainment space, that's a whole chapter in the book. Right now, people already spend tens of billions of dollars a year on virtual assets, but they don't own them. They buy them, but they don't have property rights. They don't have the ability to custody those assets themselves, they don't have the ability to sell them peer-to-peer, or to participate in the upside should those assets become more valuable or more scarce over time. People are beholden to the rules of whatever game environment that they operate in.

In my view, as gaming continues to advance, and as we spend more and more time in a combination of extended, virtual, or augmented reality, we need a way to move assets between different environments and a way to express property rights.

A lot of people who believe in the Metaverse failed to take into account this very core concept. If Facebook, or some other big studio or platform, is creating a virtual world where you can buy assets and you can participate in the game, but ultimately all the economic value accrues to the company and you can't move your data, assets, identity off that environment, then off you're not creating some new plane of reality; you're just creating a virtual Disneyland. So, ownership gives you the ability to have assets that you can buy in a virtual world and then take them with you outside of that world.

Right now, as a practical matter, there are all sorts of challenges towards creating interoperability between different environments and organisations like OMA3-which is a consortium of companies working towards a set of common metaverse standards-are working on. In the meantime, the mere fact that you can take an asset offline and you can monetise it, or custody it outside of the game environment, is actually a superpower. It's something that hasn't been possible before and something that users really, really want.

Leo:  The gaming community, when it comes to the term NFT, is one of the biggest ecosystems of people who really don't like that term, but at the same time, you can buy and sell digital accounts on eBay and things like this. So, is the gaming community actually going for this sort of thing?

Alex: It seems like a bit of a paradox, doesn't it? You have a community of people that buys and sells virtual assets, but yet is  resistant to a category of token like NFTs. Honestly, I don't know what the answer is, but I suspect one of the reasons is that the NFT mania soured a lot of people on the asset class.                                                                                                              

They saw people trading for values that didn't seem rational, they saw people promoting NFTs as investment schemes. So, they didn’t want to sour the experience with this speculative financialisation of assets. Sure, they buy and sell accounts, but it's in service of the bigger picture, which is the gameplay experience.

Once again, it goes back to this idea of where ownership fits into the whole thing. I will add that it's not for me to decide what's good or what's bad. We have a market that is engaging in this and if people find it fun, useful, interesting, and enjoyable to speculate on NFTs, then I have no moral qualms about that. But, I do think I understand what the mass market wants out of this, and it's to see these tools become more integrated into other things that they enjoy.

Leo: You spoke about interoperability earlier. I think one way to look at that idea of ‘gamers don't really like NFTs but they happily trade assets within a game’ is that they're happy sort of within an ecosystem. Once you add interoperability, is that part of what makes real ownership something that is worth getting  excited about?

Alex: Yes, I think so. Right now, the fact that you can own an asset and trade it on OpenSea is not a feature of the gameplay. But, if you take a skin from Fortnite and put it into Call of Duty, if you integrate one environment into another, then that would be really interesting.

I do think that as a practical matter, we're so far off from that ‘Ready Player One’ sort of environment, where all these things are interconnected with a common set of standards. I don't really know how that comes into being, but I think that there's interesting work happening.

This issue of interoperability takes many dimensions. There's the interoperability of just the basic blockchain platform that you're using – i.e., if you've got a Solana NFT and you want to move it to an Ethereum based game, then that's going to be an issue because there’s a different set of technical standards. So far, the solution that we have  is to bridge between these things, and, in my view, that’s not sustainable because those things have become honeypots for exploitation.

Not to get too deep into the weeds on this one, but I really wrestled with this in the book. I was always of the assumption, perhaps naively, that in the same way we have HTTP and TCP/IP as a set of common standards to connect different disparate networks, that we would see something similar in the blockchain world where you'd have some sort of like common communicating protocol allowing us to connect.

It just hasn't happened yet; that doesn't mean it won't happen but it makes you wonder whether Ethereum and EVM compatible blockchains are really going to be the future or whether others will exist but never connect, and so, if you want to be where the action is, you're going be on a common set of standards. In that scenario, Ethereum becomes the canonical ‘internet of value’. I'm not totally sold on this idea, do you have a view on that, Leo?

Leo:  That’s an interesting one. Personally, I think what's likely to happen is the different chains end up optimising for very different sets of use cases. I'm not quite sure what that looks like.

I'm interested to talk more about that interoperability idea. What are the exciting ways that you see interoperability creating new opportunities beyond just gaming and when people are going on different websites and building their identities and adding to their wallets online. What are the ways in which, beyond gaming, interoperability can be interesting?

Alex: Finance would be another obvious one. For markets to be useful they need to be liquid, and if all of the liquidity is siloed in different blockchain environments then it becomes inherently less useful. So, there's a lot of people in the web3 world talking about composability; the idea that applications are like interlocking bricks and you can build them into a million configurations.

The problem is that they're all different standards. If Ethereum is Lego, then Solana is Duplo – i.e., a different set of standard blocks that don't click together. They're not composable at all, but if they were then you would have a globally liquid market where everyone could have a wallet expressing their identity and credentials. That would be a way to access a whole range of services: accessing token gated communities; accessing financial services with a credit score composed of your on-chain identity; the ability to buy and sell; the ability to move and store value anywhere in the world and across different blockchains. All that kind of stuff, to me, is incredibly exciting.

Another thing we talk about in the book is decentralised physical infrastructure, which is the idea that you can use the ability to network with a token, to coordinate with all sorts of physical infrastructure. I think a lot of people probably know about Filecoin or some of these other decentralised clouds. The Render Network is one that we talked to and discussed a little bit in the book, another really interesting one is Hive Mapper.

Leo: What makes the leveraging of assets that a distributed community of people have exciting to you? What is it that really attracted your attention?

Alex:   For web3 to succeed, the question is how decentralised does the whole stack need to be – that’s what attracted my attention. If ownership is expressed through blocks on the Ethereum network, but the application is being run on a server at AWS, is that really truly decentralised? Do we need to create decentralised physical infrastructure and computing infrastructure in order to fulfil the promise?

To me, this goes back to the idea of missionaries, mercenaries, and pragmatists. A lot of missionaries would say ‘web3 is a decentralised name only because in the end it's based on centralised platforms.’ That might be true, but that doesn't mean it's a bad idea to dip into the web3 toolkit.

I do think, longer term, we do need to create decentralised physical infrastructure so that there's no single point of failure for transactions in these applications. But that's the philosophical driver for why I think this is important as a practical matter - the idea that we can use an incentive to get people to pool latent capacity or excess capacity into a network to address a global need is very interesting to me.

So, you know, I was speaking with the founder of the Akash network last week and he was telling me how, because the rush to get into the AI space, data centres and end users have overbought some of these top of the line NVIDIA chips. In some cases they may be sitting on a server rack not being used, or they might even still be in the box. Akash is saying, ‘hey, take that excess capacity and pool it into this decentralised cloud, and get paid to do it’. They're having a lot of set success bootstrapping this network by getting people who already own top of the line chips to put them into what is effectively a commons, and in the process take a piece of ownership as a result.

What does that mean for the world? It means that you've got a more robust, decentralised physical infrastructure for computer rendering and for AI processing. It means you've got alternatives to the big players. In web2, we talk about platforms such as social media, search, or e-commerce forming into natural monopolies. But there are other kinds of monopolies or oligopolies as well; cloud computing is one kind of oligopoly. So, having a choice there is really good.

Leo: How much of that is creating better infrastructure, in terms of what is already available, versus creating more opportunities for people to run cloud applications and enabling a lot more people to participate and to use compute resources?

Alex: I think it's all of the above. To create a decentralised cloud that fulfils the objectives of web3, to get latent capacity working for some common good, and giving people optionality and choice – those are all valid reasons why something like this is a good idea.

Leo: You also alluded to the ideas of a commons and governance there. In the book, you also  talk about managing open source software, about how in the real world we have a lot of ‘tragedy of the commons’ style problems.

With web3, to what extent do you think there's an opportunity to rethink how society approaches those scenarios and create different models of governing public goods and the  resources that we have?

Alex: Honestly, I think that it's still to be determined. The idea that tokens create a way for contributors to get compensated for adding value to open source projects-something Brad Burnham and Albert Wenger at Union Square Ventures pioneered as a concept-is a really interesting one.

The Ethereum network is proof positive that this can work, right? I mean, the Ethereum Foundation was able to shepherd a $200 billion juggernaut through this crazy thing called ‘The Merge’, where they migrated the entire network from one system of consensus to another. That was a remarkable example of how user owned networks can, with an open source community, work together using a coordinating mechanism to solve a problem.

Can we extrapolate the success of Ethereum and some other chains to solving global problems in the world? I think it's very intriguing. Certainly I think if more people were economic stakeholders in something, they would have a greater vested interest and maybe care more. I think that's important, I think that it's worth a shot, and that we should continue to try it.

In terms of what it means for the common, the tragedy of the commons and this idea that if people don't own anything, but they all use it, that it will get exploited… Perhaps it solves it. What makes tokens so interesting is that they're an easy way to express digital property rights. So, we can apply them to any kind of system – and that doesn't mean over-financialising everything we do, it just means giving people a stake in something that's important to them.

Leo: I wanted to go back to something we touched on. We were talking about cooperatives and ownership not just of individual assets but of more organisational types of things. I often think about how there are cooperatives in the real world – you have REI, you have Costco basically selling everything at cost relying on membership. It makes me think that web3 makes it easier to create these kinds of organisations, where customers are really owners.

But maybe it's the case that the organisations which really wanted to go down this route of customer ownership have already done it, and web3 is inviting companies that don't really care about customer ownership to go and do that anyway.

Does it really make much of a difference? If the companies that want to do customer ownership have already done it, perhaps the impact is limited?

Alex:   That's a very interesting question. I would say only that history is a guide, but it's not a determining factor. A lot of big American corporations chose to organise themselves as companies, and they did that because it was the easiest way to organise – though, I should say that obviously they could organise as a collective or a cooperative. However, the idea that you could be not just a customer owned company, but a user owned network is a very different concept, I think.

Also, if you're a local business that's retailing things at cost, you could be a collective or a company but you're probably not going to be a DAO, that would be my thinking. That's probably true for a lot of more traditional businesses. I mentioned at the outset that I think it's unlikely Facebook and other web2 platforms become open, user owned networks, and I think that's also true for most large corporations.

But, I also know that history may not repeat, but it does rhyme. What we know from history is that every once in a while there's a period of creative destruction, where leaders of old paradigms are swept away or marginalised and some new crop of organisations who do things differently appear. I think that that's something that we're seeing right now in web3 with the rise of blockchains, AI, and all these other technologies.

Leo:  In web3, these sorts of user govern networks are often working through a DAO type infrastructure, where it's decentralised and autonomous. How optimistic are you that DAOs can really drive a big shift in how people organise beyond that web3 ecosystem?

The more pessimistic perspective might be that the most effective DAOs have increasingly adopted layers of bureaucracy that resemble traditional organisations. Are you more optimistic that  DAOs can really do things differently?

Alex: I think that just because you're decentralised doesn't mean you need to be disorganised, I also think that the idea of autonomy as ‘autonomous’ is totally a misnomer. I’m not aware of any DAO that functions without any human input or has no form of coordination or leadership, at least not one that's effective.

Personally, I don't view DAOs as needing to throw away all the things that work for traditional organisations. I just think that they're a new structure that works really well for digitally native projects and companies; an easy way to scale ownership across a global user base or a global contributor base. We can pursue DAOs in that way, while also having different governance models where you've got people in charge, or you've got a board of directors, or a charter constitution that governs it like a company or like a nation state. To me, that is perfectly fine.

They're a tabula rasa for new models of governance using this new artefact called a DAO, and I think that's really cool. There's certain standards now, as it relates to public companies, but you can organise a corporation in a million different permutations and combinations, right? Not every company looks the same, and not every DAO needs to look the same either.

Leo: At the start of our conversation we spoke about blockchain alongside extended reality and artificial intelligence. Blockchain, AI, and XR have all been around for decades- since the 20th century-but appear to be accelerating or coming into the popular consciousness right now. How important do you think it is that these three technologies are coming together at the same time?

Alex: From the outside looking in, a lot of these technologies look like overnight success stories, but the reality is they're often decades in the making. What's interesting is that AI and Cryptography, which is foundational to how blockchains work, both came from the same starting point in a way. Alan Turing was the first person to crack the enigma machine, and he was also the first person to pose the hypothetical: could a computer fool a person into thinking that they were also human?

So, these things have been interlinked for many decades. What's interesting is that all of these things are hitting this inflection point all at once. Anybody who's familiar with management theory knows about the S-curve – that, in the early days, a lot of time goes by with relatively little economic output, but then things hit a tipping point where for every unit of time and dollar invested, you get an exponential rate of return. I think a lot of these different technologies are hitting the inflection point.

The first Oculus headset was almost a decade ago, and everyone at the time thought that it was going to be the next big thing, but I thought it was never going to take off until the form factor changed. Now, we've got Apple's Vision Pro and maybe that's going to be the thing that tips it over. Similarly, AI-machine learning and large language models-have been around for a long time, and it took ChatGPT, a rudimentary consumer facing application, for everyone to sort of realise that this is really happening.

I think, with blockchain, we haven't quite hit it. I mean, 30 million people, according to MetaMask, are active monthly users. Probably 10 times that many people own crypto assets as an investment asset, as a store value, or as a medium of exchange. So, we're into the hundreds of millions, but it's not into the billions yet.

I think we're still waiting for something to act as that inflection point, but I think it's going to happen really soon. So, it’s a really exciting time to be in any of these fields and, as we progress, I think these fields will converge on each other. In the same way that the word ‘internet’ went from describing a very narrow set of inter-networking technologies to describing not only a whole range of technologies but also business models and social behaviours, I think the term web3 will come to describe this new era that we're entering.

Leo:  As those trends converged, what sort of principles would you advise people to bear in mind as they try and navigate that web3 era?

Alex: Well, the new book is called Web3: Charting The Internet's Next Economic and Cultural Frontier, and the word ‘frontier’ is an important one for me. Frontiers are places where there's a lot of opportunity, but they're also somewhat unknown and they have their fair share of risks and dangers.

Some frontiers in human history have required huge amounts of capital or expertise – i.e., venturing to the moon. But, the most bountiful of frontiers, the ones with the most economic promise, are typically pushed forward by people driven by circumstances or by an idea to try something new.

I think that those pioneers are really essential to this, but I also think that for the frontier to fulfil its potential, you need all these other, different kinds of people to participate. You need business leaders, you need entrepreneurs, you need capital providers, and you need governments.

Every frontier town needs a sheriff, and the idea that web3 can scale without some sensible regulations around AI and tokens is misguided. My hope is that, not just for the missionaries, but for everyone who cares about the future and wants to play a role in shaping, for anyone who sees this frontier as something that is an unknown and wants to understand it a little better, that this new book I've written, can act as their field guide to this next  frontier.

Leo: Wonderful. Alex Tapscott, thank you so much for coming on.

Alex: Thank you.

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Leo is part of the founding team at Culture3. An award-winning editor, he is also the Chair of UniReach, an EdTech non–profit he founded whilst studying at the University of Oxford. He writes about technology, change, and culture.

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