The case against crypto in the metaverse – POLITICO

This newsletter has already asked if crypto is going to be fundamental to the metaversebut it’s a question worth looking into.

The pro-crypto argument is that the technology is the only way to guarantee digital property rights. As The Andressen Horowitz memo on the “essential ingredients” of the metaverse says so “true digital property rights were not possible until the use of cryptography, blockchain technology and related innovations such as NFTs.” Consider the recent craze for metaverse property: NFT is a certificate of authenticity that acts as the “deed” to one’s “home”. This principle can then apply to everything from the avatar’s clothes to their virtual car to any other object used in a virtual world.

But Minecraft, one of the greatest metaverse-like spaces, just prohibited NFTsand directly accuses them of being vehicles for financialization that are “inconsistent with the long-term happiness and success of [their] players.” Does that make the game an underdog, or ahead of the curve?

I spoke with Liron Shapira, an investor, entrepreneur, founder of relationship coaching app “Relationship Hero”—and an outspoken crypto-skeptic and Twitter pugilist, and asked him to weigh the relative merits of the Web3 metaverse boosters’ claims.

“It’s such a classic case of abstract reasoning that sounds like it makes sense at an abstract level, but when you unpack it and get more specific it unravels,” Shapira said of the argument that blockchain is the key to interoperability and freedom from Big Tech has a stranglehold on our data. “It’s kind of nice to think, what if you didn’t have to trust [those companies]but in practice it’s just not a big deal … their examples don’t make a compelling case.”

A good example of Shapira’s argument came in his January debate with Balaji Srinivasan, a former partner at Andressen Horowitz (and former Coinbase CTO) who argues that blockchain is a world-changing technology. Shapira asked Srinivasan why use blockchain for, say, record keeping or fundraising, when DocuSign and Kickstarter work just fine? Sophisticated payment rails for digital financial transactions already exist; why add another layer of “wallet” based obfuscation? (Srinivasan’s counterargument: That the programmable nature of blockchains makes them uniquely valuable for facilitating the flow of money, and scaling up the number of possible transactions on it.)

But you don’t have to be a full-on crypto evangelist like Srinivasan to see the technologies as potentially complementary. When I spoke to Matthew Ball upon the publication of his book “The Metaverse” — detailing both the pros and cons of Web3/metaverse integration without taking sides — he said he sees the technology’s potential to make users less dependent on big companies, but is sympathetic to gamers and other consumers simply looking on it as making money from the scheme (the very thing the “Minecraft” developers did when they announced the NFT ban).

And it’s not just players that crypto’s reputation is at an ebb right now, given the market crash and increasing likelihood of a regulatory breach. In that light, it’s easy to imagine giant companies keeping a wide berth (especially given Meta’s own tortured history of crypto).

The best argument for crypto’s instrumentality to the metaverse would be an everyday, ubiquitous demonstrated use for it — but virtual real estate is more of a speculative bauble than an impactful app like Google Maps or, well, Facebook. Perhaps a new use will emerge, but as the two technologies evolve, their relationship looks less like interdependence and more like good old fashioned overlap.

The Ministry of Finance today sanctioned Tornado Cash, one of the world’s largest crypto mixers, for the role it played in helping North Korean (and other) hackers launder stolen money.

What is a “cryptomixer”? A helpful one Ars Technica explanation describes them as “creating a disconnect between the funds a user deposits and the funds the user withdraws,” by pooling large amounts of users’ funds and then allowing users to withdraw the first amount they deposit, but not the same deposit. There are legitimate reasons why someone might want to protect their privacy, but it also presents an obvious opportunity for large-scale money laundering.

And on a grand scale, Tornado Cash went: like POLITICO’s Eric Geller known to Pro subscribers today, the Treasury Department is accusing North Korean hackers of laundering $455 million worth of Ethereum through the service that was stolen as part of a heist in March. (And more than $7 billion in total.) Nor is Tornado Cash the first mixer to be busted for offering such a service, following Blender.io in May.

A senior finance official told Eric that the effort is intended to “send a strong message” to crypto companies with overly lax information-gathering capabilities.

It’s time for a long-awaited update from DFD’s Future History department — this time from the literary world.

As part of a Wikipedia rabbit hole over the weekend, I came across an essay by Thomas Pynchon entitled “Is it OK to be a Luddite??”, 28 October 1984 New York Times Book Review. In it, the giant of postmodern literature tackles the role of anti-Technologists have traditionally played a role in shaping our technological and scientific culture, providing catharsis for those who feel mystified or oppressed by “progress” – think Frankenstein’s monster, doling out vengeance for man’s hubristic attempts to play God.

The essay includes some curiously optimistic speculation about the “computer age”, observing that there seemed to be “a growing consensus that knowledge really is power, that there is a fairly simple conversion between money and information, and that somehow way, if the logistics can be worked out, miracles may yet be possible”, including a finale approach between the so-called Luddites and the techno-optimists. (So ​​much for that.)

Pynchon also alludes to the potential for a similar modern Prometheus moment in the essay’s conclusion, where he points out that “If our world survives, the next great challenge to watch out for will come—you heard it here first—when curves of research and development within artificial intelligence, molecular biology and robotics are all converging.”

Which sounds very “Blade Runner” (a film that was only two years old when the essay was published). But these curves—in the ongoing debates about how humans respond to AI, the ethics of genetic engineering, or the meaning of “work” in an automated world—have only bent further upward since Pynchon’s writing, if not yet reached an explosive convergence. as he could have imagined. Not much has been heard from the reclusive author in recent years, but perhaps it is not too much to hope for an exploration of the themes in yet another twilight novel.

Stay in touch with the entire team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]). Follow us on Twitter @DigitalFuture.

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