In the wake of the second-largest bank collapse in US history, much ink has been spilled about centralization in the Financial industry, but that is only part of the story. Let’s consider what this collapse exposed about the extreme centralization in the Tech Industry. For years, all the main tools of our everyday digital lives – from our browsers to our social platforms – have been under the control of the “Big Tech” oligopoly. We’ve long resigned to having our public forums be effectively owned by an Elon or a Zuck, and those who complain turn to centralized government to “do something”. The fact is that these platforms are too big – and one-size-fits-all solutions may create more problems than they solve.
Our technology is centralized because Web2 companies were funded by venture capitalists, who bought shares in the startups. Some of them, like Peter Thiel, openly said competition is for losers, build a monopoly. (Thiel is, incidentally, the same person whose fund started the run on Silicon Valley Bank.) But consider this: The Silicon Valley VC industry is so centralized and close-knit that nearly half of the VCs and their startups all bank at the same bank! It’s right on SVB’s website..
Capturing the Competition
Looking to centralized government or the startup industry to give us a true alternative to Big Tech is foolish. The VCs often fund startups to develop a feature and be acqui-hired by a Big Tech company, further consolidating their technology and workforce. In fact, by taking on shareholders, startups get a class of investor who expects to benefit by perpetually extracting rents from their marketplace, such as when Uber squeezes drivers or Amazon squeezes workers. By “going public”, the shareholder class is expanded, creating even more pressure on the company to extract rents.
When Mark Zuckerberg built his first “big thing”, Synapse, he was approached by many companies, including Microsoft, to sell it for around $1 million. Instead, he eventually open-sourced it. When he eventually started Facebook, he was approached by Sean Parker and got a $500K investment from Peter Thiel, whose fund Clarion Capital turned it into $5 Billion. Early on, Zuck still retained a predilection for open-source, decentralized software, launching Wirehog, a peer-to-peer file sharing system. “We put a bullet in that thing,” Sean Parker proudly recalls. Mark was to focus on building a monopoly, extracting rents, and become a corporate golden boy who buys up competition like Instagram, WhatsApp and Oculus, slapping golden handcuffs on their founders for a few years before they leave, far richer but disappointed with the industry.
Sean Parker, earlier, had to learn his own lesson about gift economies being anathema to a different but related industry: Movies and Music. Napster, the company he started to let people share songs freely, was sued by the RIAA and MPAA into oblivion. Sean learned from that experience, starting Plaxo and later coming aboard at Facebook. These stories illustrate how young, idealistic technologists “join the empire”. Money talks.
Open Source Gift Economies
The main alternative to centralized control has long been open source software – it was run as a gift economy where authors get little beyond fame and recognition. Gift economies have indeed been very successful – wherever they were introduced, they systematically eclipsed their closed, centralized counterparts. Science as an endeavor brought humanity much more than secretive alchemy cults. Wikipedia when it debuted quickly overtook the top corporately owned encyclopedias of the day: Britannica and Microsoft’s Encarta.
Open protocols, like SMTP powering Email, and HTTP powering the Web, have long ago unshackled humanity from having to depend on gatekeepers in order to send a message or publish something. In fact, the open Web 1.0 was what enabled Web 2.0 venture-backed companies like Facebook, Google and Amazon to even start and gain traction. What’s more, it’s all that open data and art that has now been scraped by AI companies like ChatGPT and DALL-E. Humanity should be proud – the artificial intelligence is based on all those individual contributions which were publicly made available.
But historically, gift economies didn’t always pay the bills, and many scientists and technologists were driven to “join the dark side” instead. Biologists and chemists doing research with public grants ended up joining pharma companies. People like Sean Parker and Zuckerberg joined Silicon Valley, and created a shareholder class that holds billions in stock and demands the companies generate profits every quarter.
Open Source Revenue Models
But now, thanks to crypto, open source authors of popular software can be compensated handsomely for their work, while ensuring that, in the end, the network is owned by its participants. By selling utility tokens, the authors make money on the primary sale, in direct proportion to how much demand there is for their service. At the same time, once the token is out there and trading in secondary markets, the ownership and drive for innovation gradually transfers to the actual users of the network. Protocols can remain open, and anyone can be attracted to build atop the ecosystem, without being hired and told what to do by the original team.
Tim Berners-Lee started the World Wide Web. Linus Torvalds started Linux. Vitalik Buterin started Ethereum. These platforms have unlocked vast amount of wealth and prosperity for the world, and spurred on innovation in both technology and business models. Unlike the Big Tech companies, these ecosystems will continue regardless of what happens to their original founders, or anyone else for that matter. But unlike Tim and Linus, Vitalik personally got access to billions of dollars, because he was able to sell the tokens use as “gas” in his ecosystem. This new way of funding projects eliminates the middleman – the shareholders – and leads systems that remain open and permissionless. It’s a robust alternative to the Silicon Valley model, producing results that are far better for the world, and our governments would do well to allow it to flourish – even encourage it.
Intercoin works to make decentralization mainstream. We’ve built Web3 smart contracts to power entire communities, without having to trust any middlemen. Now, communities around the world can power Elections, collect Funds for Refugees, and even entire Smart Economies, either locally or globally, by simply relying on audited, battle-tested, code.