A Tale of Denver and D.C.

This month I traveled to Denver and D.C all bright eyed and bushy tailed, excited to meet people who are building the future of the internet.

I left Denver inspired by the rapid progress being made by 15,000 blockchain builders who converged there. I left D.C. discouraged by the federal government’s efforts to slow down progress in this burgeoning industry.

It’s hard to describe how different the atmosphere was in these two American cities, but I will try.

Part. 1 - Denver

At ETH Denver, it was clear that decentralized identity, social media, gaming, finance, philanthropy, and commerce are about to take off. While speaking with builders and demo’ing products I recognized that it won’t be long before web3 enters the mainstream to change our lives in very cool ways.

Here’s a plate from the buffet of blockchain innovation on offer at ETH Denver:

• You will be able to prove your identity and credentials (age, citizenship, insurance, licensing) without needing to reveal any personally identifiable information.
• You will have control over your online data and will be able to make decisions about who gets to buy (or rent!) it and how it is used. Advertising? No. Academic research? Sure.
• Rather than Facebook, LinkedIn, or TikTok, creators themselves will own their social media contacts and posts, enabling more ways to reach an audience and monetize the value they are providing.
• Ownership rights to expensive assets like real estate and intellectual property (i.e. music, art, algorithms, pharmaceutical recipes, etc.) will be fractionalized, enabling more people to become asset owners and build wealth.
• Recipients of foreign aid will have more of a say in which programs get funded, and those who are intended for the aid will be able to receive it directly without any threat of bank or government graft.
• Corporate loyalty programs will become interoperable with each other and with real currency, meaning that someday the points you accrue at Dunkin’ Donuts can be put towards a flight to Mexico or cash back to your USDC account on ethereum.

ETH Denver showed me that these blockchain-enabled technologies are much closer to becoming part of our everyday lives than I thought. The positive impact on society will be tremendous.?As I flew home, I was convinced that I am working in the right industry at the right time.

Part 2 - Washington, D.C.

A few weeks later, I took the train to D.C. to meet with blockchain builders inside the Beltway.?

I expected to learn about ways that the technology is being researched and developed by civil servants and social entrepreneurs to advance the public good in novel ways.

Instead, I heard repeatedly about censorship and fears of enforcement action towards businesses where the government has offered no regulatory guidance.?

One high-ranking Democratic policymaker who I spoke with lamented the presidential administration’s “authoritarian” attitude towards crypto, in his words, because it contradicts our foreign policy mission to advance internet freedom, free markets and other basic liberties around the world.

Here are a few more anecdotes and reflections from my visit to D.C.:

[Note: I am not writing a political article here. I am relaying statements from people on the ground in D.C. about current political leaders’ attitudes towards web3. Please don’t misconstrue this as an indictment of a political party.]

Censorship is Creating an Echo Chamber

Given the White House’s January 2023 RFI for digital assets research and development, I was surprised to discover that executive branch civil servants who want to use blockchain technology to advance their agency’s mission are being stifled.

A member of The White House’s Digital Assets Working Group told me that cabinet-level officials don't want to hear about potential positive uses of decentralized ledger technology. Department leaders are directing their staff members to focus on the risks that web3 can bring. As Politico reported this week, the President’s annual economic report “describes [digital assets] mostly as risky financial instruments with little purpose.”

It appears that the administration has made up its mind about web3 before beginning the research and development program that was announced just two months ago.

According to my contacts, multiple web3 symposiums across federal agencies that were being planned for 2023 have been canceled.?

How can American society make progress when our leaders actively shut down discussion of how a new technology could be used to advance the public good??

I am reminded of Tim Urban’s new book What’s Our Problem: A Self-Help Book for Societies, which contrasts two types of organizational cultures:?

• Idea Labs encourage discussion, dissent, and seeking truth.
• Echo Chambers enforce conformity to the most powerful person’s viewpoints.?

Idea Labs attract scientists, idealists and makers, the kind of people who made the United States the most dynamic and prosperous place on the planet. Echo Chambers attract pundits and grifters, the kind of people who seek power for themselves at the expense of others.

In an Idea Lab, science and technology are used to make progress in society. In an Echo Chamber, technology is used to oppress people.

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Founders Are Afraid of Regulation by Enforcement

A few days before my arrival, Signature Bank had just been shut down by regulators. The Wall St Journal reported that the bank was solvent and had not been violating any rules. Many people I spoke with in D.C., including a former SEC official, presume that the government shut down Signature because of their ties to crypto.?Since 2019, Signature Bank had provided financial infrastructure for crypto-to-dollars conversions.

To be clear, crypto is not illegal in the United States.

Over lunch, a friend shared with me that he’s leaving his web3 startup to go work in the government. The business he’s in faces too many risks due to undefined regulations. The risk of regulation by enforcement is existential to any blockchain startup.?While joining the feds to help write the rules for digital assets could be seen as noble, he seemed disheartened to be deferring on his dream, for now.

That afternoon, I met with a startup team who, after a year of software development and millions of dollars raised from investors, have decided to launch their product in private beta. They’ve hired enough lawyers to be sure that what they are doing is legal and good for society, but they told me that they can’t take the risk of being targeted by the current SEC, Treasury, or Senate leadership. They’re delaying the public product launch until they feel they can trust the regulators of their industry.

Given the aspirations that so many web3 builders have for maintaining America's technological leadership while making the world a better place, we would like to look to D.C. for support and guidance.

My travels this month convinced me that we need to look elsewhere.

If you are doing anything to promote healthy conversations in Washington about web3, blockchain, digital assets, and the like, I would love to hear from you. You can email me at [email protected].