Ten years ago, the rebels had not won. There was no Web 3, no non-fungible tokens (NFTs), no decentralized finance (DeFi), no decentralized autonomous organizations (DAOs). No Coinbase, no Ethereum, no a16z Crypto.
Now, in 2022, we have all these things.
Elon Musk promotes Dogecoin on Twitter. The Miami Heat shoot baskets at FTX Arena. Matt Damon promotes cryptocurrencies to millions of viewers during the Super Bowl.
Rhys Lindmark is CEO and co-founder of Roote, a nonprofit startup studio that tackles system-level design problems. He will present a version of this essay on the "Big Ideas" stage at CoinDesk's Consensus Festival, taking place June 9-12 in Austin, Texas. Learn more.
Now our feeds are full of NFT profile images, there are $100 billion worth of tokens deployed in dozens of DeFi ecosystems, and DAOs are (almost) buying constitutions and Parisian art. Meanwhile, FTX CEO Sam Bankman-Fried casually becomes President Joe Biden's second largest donor.
Web 3 is the biggest event in the history of wealth creation. The crypto rebels won.
But we're only 10 years in. What will happen in 2040? What does that mean for society? What does it mean for philanthropy?
To understand what will happen in 2040, we will look at three aspects:
Past: Web 3 in the History ofWealth CreationA
there were no crypto billionaires. Now there are dozens of them, with Twitter-optimized acronyms like "SBF" for Sam Bankman-Fried and "CZ" for Binance CEO Changpeng Zhao.
We've seen this before. The old rich are making way for the new rich. Emperors like Ghengis Khan and Caesar once controlled all wealth.
Then the Industrial Revolution produced billionaire oil tycoons like John D. Rockefeller and steel magnates like Andrew Carnegie.
Computers and Web 1 produced billionaires like Bill Gates and Michael Dell. Web 2 created today's elite: Jeff Bezos, Steve Jobs, Mark Zuckerberg, Sergey Brin and Larry Page. And now Web 3 has spawned SBF and CZ.
But are these crypto billionaires like SBF and CZ just a flash in the pan? Or are they harbingers of an impending wave of wealth creation?
1.How People Are Getting Rich NowInApril
2021, Paul Graham wrote an essay titled "How People Are Getting Rich Now." Using the Forbes Top 100 Richest People, Graham shows how wealth creation has shifted over the last century from industrial technology to inheritance and now to digital technology.
First, Graham shows how wealth has shifted from industrial technology (1892) to inheritance (1982).
In 1892, the New York Herald Tribune compiled a list of all the millionaires in America. How many had inherited their wealth at that time? Only about 20%. Instead, economist Hugh Rockoff noted that "many of the richest ... gained their initial advantage from the new technology of mass production."
Also in this series: Matt Prewitt: Let's use new forms of money to engage our communities
But in 1982, the most common source of wealth was inheritance. Of the 100 richest people, 60 inherited their wealth from an ancestor. There were 10 du Pont heirs alone.
The simple chart below shows how wealth was increasingly inherited throughout the 20th century.
This led to the rise of investing and digital technology. Paul Graham again: by 2020, the number of heirs has been cut in half, accounting for only 27 of the 100 largest fortunes.
Of the 73 new fortunes in 2020, 30 are from digital technology, 26 from industrial technology, and 17 from investing.
What about cryptocurrencies, the intersection of digital tech and investing?
Graham didn't cover cryptocurrencies in 2021, but in 2022 we now have two crypto billionaires in the top 100: SBF and CZ.
The chart shows a new player in town: crypto (above in orange).
That may not seem like much, but it's rare that we find an entirely new category where the richest people are making their fortunes.
More importantly, is this a trend? Will the chart soon be all orange?
2. How many crypto billionaires will there be?
Serial entrepreneur, investor and influential essayist Balaji Srinivasan and Polychain Capital founder and CEO Olaf Carlson-Wee estimate that:
This is a massive shift in who controls wealth. Is that tenable? To find out, we can do some calculations on a napkin.
How many billionaires are there? In 1982, there were only 15 billionaires; today, there are 2,668, and we expect that number to rise to about 3,300 by 2025.
But how many crypto billionaires are there?
Given the volatility and pseudonymity of cryptocurrencies, this is a difficult question to answer.
For the sake of simplicity, let's use Forbes' estimated figure of 19 crypto billionaires.
So our chart looks something like this:
Even this new cryptocurrency spike is pretty small. Right now, only 1% of billionaires are crypto billionaires (19/2,668).
However, this is something completely different. The real question is: what does the trend line look like? Will the orange cryptocurrency conquer the chart?
More napkin math: as I write this, Bitcoin (BTC) is at $30,000. What happens if BTC rises to $200,000 by 2025 and the rest of the cryptocurrencies rise with it? Then there would be about 400 BTC billionaires, 200 Ether (ETH) billionaires, and 200 other billionaires.
With 800 new crypto billionaires, a chart like this would result:
This would make the 800 crypto billionaires about 20% of the total. Based on these rough calculations, I disagree with Srinivasan and Carlson-Wee that $200,000 BTC makes 50% of billionaires crypto billionaires. I think it's more like 20%. Still, 20% is a huge increase. And $200,000 BTC is not unlikely.
Going back to Graham's article, we could expect the graph to look something like this:
That's a huge change! The orange number goes way up.
Finally, the calculations above don't even take into account the long tail of wealth creation.
BTC mining has produced thousands of millionaires. The ETH initial coin offering (ICO) created thousands more. DeFi has also created thousands of sword millionaires.
No matter how you do the math, Web 3 is a huge wealth creation event. How will the nouveau riche use it?II. present day: how cryptovals are using their wealth todayAll of us
know the famous quote (wrongly attributed to Gandhi):
First they ignore you, then they laugh at you, then they fight you, then you win.
This applies in a similar way to digital technologies in Web 2 and Web 3:
- At first they ignore your protocols. From TCP/IP to ERC-20 and ERC-721.
- Then they laugh at your Super Bowl ads. From Pets.com to Crypto.com.
- Then they fight your influence. From the US banning file sharing to China banning bitcoin mining.
- Then you win ... And get a crappy government implementation from Healthcare.gov to "GovCoin Coming Soon".
Another framework for technology adoption is Carlota Perez's S-curve. All technologies move from the installation phase to the deployment phase.
Web 3 is still in the installation phase. How is it impacting society today?
We can break this down into three categories:
Value creation: the direct impact
understand the impact of Web 2 by looking at the mission statements of technology companies:
- Microsoft: a computer on every desk and in every home.
- Google: To organize the world's information and make it universally accessible and useful.
- Facebook: To make the world more open and connected.
- Amazon: Where customers can find and discover everything they want to buy online.
But in Web 3, the mission statements are focused on money instead of information:
- Coinbase: For more economic freedom in the world.
- OpenSea: Building an open digital economy.
- FTX: A cryptocurrency exchange developed by traders for traders.
The direct impact of Web 3 will be a digital economy open to the whole world.
2. surplus capital: philanthropy and Web 3Web2
has spawned a number of "traditional" foundations:
- Bill and Melinda Gates Foundation.
- Schmidt Futures.
- Chan Zuckerberg Initiative.
- MacKenzie Scott Foundation.
- Open Philanthropy.
Web 3 is getting a little crazier.
Brian Armstrong funds $100 million for longevity research.
SBF has launched the FTX Future Fund, which has doubled the amount of money focused on longevity. (See chart below.) It has also given more than $10 million to Carrick Flynn, an effective altruistic political candidate from Oregon. (That's three times the donations of all other House candidates.)
3. #SquadWealth: Collaborative Ecosystems on the Web 3Finally,
take a look at the long tail of wealth creation.
In Web 2, this manifested itself primarily in the form of AngelList syndicates and angel investor networks. Groups of early-stage employees who exit with tens of millions of dollars reinvest that money back into the tech industry.
In Web 3, this goes even further. Each round is a collaborative round, with NFT Degens and crypto VCs participating together. This is reinforced by the Web 3 version of syndicates, Syndicate DAO - here's a link to the first 100 investors. Crypto fundraising is community fundraising.
But we also have an entirely new form of community fundraising built on abundance: Impact DAOs. These are collaborative networks that have positive externalities.
Gitcoin grants give back to the open source community. ClimateDAO gives something back to the environment. #DeSci gives something back to fund new scientific research.
I think of these as DAOs succeeding in the presence of other DAOs, which in turn succeed in the presence of DAOs. Here is a map of the DAO space from Gitcoin and FiftyYearsVC.
People give back to fund crypto infrastructure through Gitcoin Grants. And then these funders are later rewarded with retroactive funding of public goods.
In Web 3, we see the huge impact of cryptocurrencies through direct impact on businesses, philanthropic initiatives, and new forms of #SquadWealth.
What will happen in 2040?III. future: decentralized solarpunk societyWe can
project these three trends into the future to understand a decentralized solarpunk society (#DeSoc).
The following ideas are speculative, but should give us a rough sketch of where we areheaded.
1. value creation: the direct impact of Web 3Software eats the
Web 2 started with eating bits and then moved to atoms.
Web 3 will stop consuming bits and then move to atoms as well.
- The meatspace and metaverse will be fully intertwined with the Internet and blockchain protocols.
- Just as the Enlightenment separated church and state, crypto will separate money and state.
- Every community will have a currency.
- Each person will have a soul (a far-reaching idea of identity tokens) and each soul will operate in trusted networks.
- The network state will form in the cloud and then penetrate every acre of land.
2. surplus capital: philanthropy and web 3
- In addition to Coinbase Giving and the FTX Future Fund, there will be dozens of massive Web 3 foundations that donate in a bottom-up way.
- These foundations will take the form of what Nadia Asparouhova calls idea machines, funded organisms that turn ideologies into outcomes.
3. #SquadWealth: Collaborative ecosystems on Web 3.
- In 1976, Vanguard gave retail investors access to the stock market index. Now we have new indices for cryptocurrencies like the Coinbase 10, DeFi Pulse, DeFi Innovation, and NFT Index. Through indices like these, the public will collaboratively participate in and benefit from the value creation of Web 3 (and AI).
- There will be a clear, risk-adjusted investment ladder for public goods projects, just as VC is an investment ladder for startups. We will have Seed, Series A, Series B, etc., but for nonprofit public goods. Donors will be compensated through retroactive funding of public goods.
- Corporate mergers and acquisitions will be phased out in favor of DAO token swaps and shared liquidity pools. The DAO ecosystem will rise and fall together as a complex adaptive system.
Software is eating the world. Crypto is accelerating this process.
By 2040, Web 3 will be the water we swim in - full of cryptowhales, millionaire minnows, and the rest of us little krill.
Let's make the water (and the land!) nourishing and balanced.