To understand the latest incarnation of the colossal crypto grifts
that continue to engulf the internet, I suppose we should start with all those
bored apes, because how could we not?
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I do not mean real apes — little of what is in this
column is about stuff you could call in any tangible sense “real”. Instead, I
am talking about the collection of digital art known as the Bored Apes Yacht
Club. Created about a year ago by a quartet of mysterious, pseudonymous
cryptocurrency enthusiasts, Bored Apes is a collection of thousands of
“programmatically generated” hyper color drawings of coolly disheveled primates,
the kind you do not bring home to mama.
For reasons that do not seem much deeper than weird
things happen online, bored apes have become a hot commodity in the market for
nonfungible tokens, or NFTs. As of last Thursday morning, the cheapest
available Bored Ape NFT — a kind of digital certificate that grants its holder
nebulous ownership of the ape illustration — was selling for the equivalent of
about $340,000; last year, an NFT of a very rare Bored Ape, one of a small
number with gold fur, sold at Sotheby’s for $3.4 million.
Are you with me so far? People online are going ape
for what are essentially primate Pokémon. You may be wondering what the apes
do and why people are paying so much for legally uncertain claims to them, and
how you ever got so old and out of touch. All good questions — but we are well
past those now.
In the past year, Yuga Labs, the well-funded startup
that makes Bored Apes, has embarked on a parade of new and even farther-out
digital spinoffs of its simians. Its latest ventures have highlighted the
head-scratching, money-burning, broken-casino vibe of what is being called the
internet’s next big thing. Cryptocurrencies, blockchains, NFTs and the
constellation of hyped-up technologies known as “web3” have been celebrated as
a way to liberate the internet from the tech giants who control it now.
Instead, what is happening with Bored Apes suggests that they are doing the
opposite: polluting the digital world in a thick haze of errors, swindles and
expensive, largely unregulated financial speculation that ruins whatever scrap
of trust still remains online.
Of course, buyers participated in the sale willingly. You might find it hard to muster much sympathy for folks who paid huge sums to speculate on digital goods in an unbuilt corner of the metaverse. Play stupid games, win stupid prizes.
The latest ape sale took place last weekend, and it was
a disaster from top to bottom. Huge demand overloaded Ethereum, the open-source
blockchain that hosts the Ether cryptocurrency and had been developed to be a
more capable crypto system than Bitcoin. The technology’s shortcomings led to
thousands of people paying about $180 million collectively in transaction fees.
Some appeared to pay more in fees than what they paid for the NFT. They were
the lucky ones; some paid steep transaction fees only to see their ape
purchases fail for unknown reasons. (Yuga said it has refunded money spent on
failed transactions.) Still others suffered various hacking and phishing scams.
Meanwhile Yuga, whose backers include some of Silicon Valley’s biggest venture
capital firms, generated at least $320 million in sales. Sales of what? Oh,
plots of “land” in Other side, a virtual world that might come out soon.
Of course, buyers participated in the sale
willingly. You might find it hard to muster much sympathy for folks who paid
huge sums to speculate on digital goods in an unbuilt corner of the metaverse.
Play stupid games, win stupid prizes.
But Molly White, a software developer who runs Web 3
Is Going Just Great, a website and Twitter feed that documents the spectacular
crashes happening seemingly every day in crypto, told me that a lot of people
are getting suckered into being guinea pigs for a set of new technologies that
are much less solid than boosters acknowledge.
“On the one hand we are seeing problem after problem
after problem on a scale that has not been seen in most technologies,” she told
me.
On the other hand, well-funded companies are running
Super Bowl ads pushing crypto to the public, and big financial firms are
gearing up to let people invest in digital currencies as part of their
retirement funds. And much of this stuff is unregulated.
“There will only be a lot more damage as it
continues,” White said.
Web3’s nominal aims are quite noble. The original
internet boom of the late 1990s, what you might think of as web 1.0, was a time
of great stock-market valuations that created a few enduring companies and a
lot of dead dot-coms. The post-bust, web 2.0 era of mid- to late 2000s was
marked by an explosion of new technologies and new companies — mobile devices,
social networks, streaming services and a much more dynamic, interactive web.
In the past decade, though, four companies — Google, Facebook, Amazon and Apple
— emerged as the central gatekeepers of the internet and, in a larger sense,
the tech industry.
Proponents of crypto and associated web3 innovations
say these technologies can reverse the internet’s monopolistic turn. They argue
that by building the next generation of internet apps on blockchains —
essentially public ledgers that can record monetary transactions and store data
in a way that is decentralized, meaning not under the thumb of any tech giant —
we can pull the rug out from under today’s internet giants. Web3’s boosters
also point to a variety of other so-far-unrealized virtues. They say crypto
will free us from large financial powers like Wall Street and the Federal
Reserve, that it will allow people to send and receive money cheaply, or will
bring millions of the world’s “unbanked” into the modern financial system.
Honestly, I have long tried to keep an open mind to
these claims, because I have been incredibly dismayed by the way a handful of
firms have taken over an internet that I once thought of as a font of
innovation. If there really is a new web that is going to solve all the
problems of the old web, sign me up.
But the continual blowups should crater those
expectations. At the same time that the Ethereum blockchain was getting crushed
by last weekend’s Bored Apes sale, another supposedly smart crypto network,
Solana, was taken offline by bots — one of several full or partial outages it
has experienced this year. Two other crypto ventures, Rari Capital and Saddle,
were hit with attacks that led to a loss of a combined $90 million in Ether.
Early last week, Deus Finance lost $13.4 million in the second attack in two
months. I could go on — and on, and on.
There is also little of the decentralization that we
are being promised. Many web3 companies are funded by the same people who built
the web we are now trying to reform.
The main problem is not that these technologies will
become the basis for the future of the web. They are clearly not ready for
that. As White put it, “if web3 cannot handle 55,000 Bored Ape NFTs, how can it
handle web-scale technology?”
But how many people have to lose their shirts before we
realize that web3 is not a solution to any of our problems?
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