The Breakdown - What ChatGPT Might Mean for Web3

Starting point is 00:00:00 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io, Circle, and Cracken, and produced and distributed by CoinDesk. What's going on, guys? It is Sunday, December 18th, and that means it's time for Long Read Sunday. Before we dive in, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers. Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. I'm excited to also share that this week the podcast is brought to you by Galaxy and the Galaxy Brains podcast. Transparency is more important than ever in crypto. If you're here, it's obvious

Starting point is 00:00:50 how important it is to you to find reliable information. For more shows like this, for more shows like The Breakdown, check out the Galaxy Brains podcast. To tell you a little more, here's the host Alex Thorne, Galaxy Head of Research. Listen each week as we take you inside the the biggest stories and projects in Bitcoin and Crypto. Whether it's breaking down market volatility or analyzing the latest technical developments, Galaxy Brains has you covered. Come for the latest market insights from our in-house trading professionals and renowned experts from across the industry. Stay for the occasional rap from yours truly. Check it out at galaxy.com slash research. All right, friends. Well, today for Longreed Sunday, we are going to zoom out. We are going to do

Starting point is 00:01:35 some big idea technology stuff, get away from FTX, get away from finance fud, get away from macro, and just think about the future of technology and what it means for the areas that we spend time in. So the first piece we're going to read today is called Starlink Verizon 5G and Crypto, what the new War of the Currents means for decentralization. It's by Tim Kravchenoski, who is the founder and CEO of CHRP, and first appeared as part of CoinDisc's Crypto-20203 series. Whether it's Verizon courting government contracts for its 5G upgrade, blockchain startups deploying routers with crypto mining incentives, or Elon Musk making Starlink available to the Ukrainian resistance, broadband and Internet of Things IoT technologies are the new battleground for

Starting point is 00:02:21 companies, ideologies, and visionaries. While it is still too early to tell whether there will be a singular or divergent solution, the new technological framework for interoperability will have ideology embedded in its code. Crypto and freedom advocates should ensure decentralization as a principle is enshrined and cooperate to realize and expand on Nikola Tesla's vision of a decentralized, ubiquitous network. In the late 1800s, Thomas Edison, Nicola Tesla, and George Westinghouse found themselves in an ideological battle over the future of electricity. Threatened by Tesla and Westinghouse's widely adopted alternating currents, AC power system, Edison built out his direct current DC stations while deploying ruthless public relations campaigns to undermine his rival's credibility.

Starting point is 00:03:06 As the three men urgently took their products to market and built out supporting infrastructure, corporations on the periphery also competed for market share, including brush electricity company, which installed its arc lighting solutions in key regions including New York City. The AC system won out and became the gold standard underlying all electrification. An important lesson remains for those developing new architecture. The best technology can triumph only when it is also widely adopted. After developing the AC system, Tesla devoted much of his life to revolutionizing wireless electricity. The inventor envisioned infinite energy via a global network of towers that would

Starting point is 00:03:41 electrify the world without wires. While investors, including J.P. Morgan, initially backed Tesla's venture based on his past success with AC electricity, they later cut funding. A system handing such power over to end users, independent of the large companies who clashed during the war of the currents, was too radical for many to handle at the time, and the technology wasn't in place yet. Tesla died penniless in New York City, but his vision of ubiquitous energy run across a decentralized wireless system has served as inspiration for scientists, entrepreneurs, and world leaders. Founders need to think carefully about the incentive structures that go into building such a system, while resisting centralized parties looking to co-opt its mechanisms under

Starting point is 00:04:19 their own infrastructures. The blockchain sector in particular is in a unique position to guard against these attempts. While there is heroism in Elon Musk, an heir to Tesla's legacy, stepping in to provide Starlink for Ukrainian citizens, there are also warnings that founders should note. Following Starlink's deployment, Musk walked back his initial support for the cause and threatened to withdraw the program unless the U.S. Defense Department footed the bill. Although Musk walked back these comments and kept Starlink operational in the region, the reversal revealed an incentive structure based on geopolitics, profit margins, and a billionaire's impulses, which millions of innocent people suddenly found themselves tethered to.

Starting point is 00:04:55 Musk is hardly an outlier when it comes to the murky relationship between centralized vested interests in state power. Telecom companies provide troves of data on millions of users daily to government entities. As the original use case of blockchain technology, Bitcoin allows any individual, no matter their socioeconomic class or country of origin, to take custody of their money. When applied to IoT devices, broadband, and telecommunications infrastructure, blockchain technology can bestow more universal digital rights, including the ability to access modern internet and phone services without being surveilled. In the current builder's market, blockchain developers and founders need to pay close attention to the developments unfolding across telecommunications, broadband,

Starting point is 00:05:34 and IoT, rather than speculative digital asset bubbles that, unfortunately, define the space over the past few years. Whether it's setting up routers to power decentralized wireless networks, following in the tradition of Satoshi Nakamoto sending himself test amounts of Bitcoin, or writing interoperable code, the crypto community should apply the principles of decentralization to this next frontier and work together to ensure the ubiquitous network as envisioned by Tesla can take hold on the same scale as the inventor's AC gold standard. All right, so great little thought piece from Tim here. I think that the core of this piece is about taking a step back from just the day in, day out that we spend our time in in crypto, whether it's debates on Twitter or questions

Starting point is 00:06:15 of even regulation, big picture things, and instead look to what the fundamental systems of power are that we're helping contribute to or helping undermine. One of the most important ideas in the crypto ecosystem is that a network is only as decentralized as its most centralized link. Unfortunately, a lot of the lessons and fallout of 2022 have been a reminder of that exact type of lesson. Now, what Tim also rightly points out is that there is an array of infrastructure that is being built right now or being updated, which will have implications for the decentralization of everything that runs atop it, including crypto networks. whether that infrastructure is built in a way that allows centralized companies and enigmatic or charismatic CEOs to capture all of the value,

Starting point is 00:07:00 or whether they're built in a way that is more egalitarian and decentralized is a question that we potentially have some influence on, but only if we ask it. In an ecosystem where innovation is the norm, it's the basics that are in the spotlight. Nexo is a company that has never put the safety of clients' funds in question. With over 50 global licenses, $775 million in insurance, and a real-time audit of custodial assets, NXO sets an example for security standards in the industry. Apart from keeping their 5 million clients safe, NexO has kept building. They've just announced their non-custodial smart wallet. Visit nexo.io.

Starting point is 00:07:40 That's N-E-X-O.io and sign up today. This episode is brought to you by Circle, the sole issuer of USDC, and a leader in crypto that's held to a higher site. standard. USDA is a fast, safe, and efficient way to send money around the globe. USDC is always redeemable one-to-one for U.S. dollars and has over $45 billion in circulation as of October 13, 2022. Plus, Circle posts weekly reserve reports and monthly out of stations of reserve capital, letting users know that USDA is safe, transparent, and compliant with regulations. Just go to circle.com backslash transparency to see why USDC is a trusted

Starting point is 00:08:20 staple coin. As one of the largest, longest-lasting, and most secure exchanges, Cracken sets the example for transparency and trust while delivering on their mission to empower people with new ways to connect and transact. Millions of people around the world count on the Cracken mobile app as the easiest, safest, and most flexible way to start building their crypto portfolio. Cracken's industry-leading security keeps your funds and information safe, and their award-winning client engagement teams are available for support 24-7. Download the Cracken app on Google Play or the Apple App Store, or visit crackin.com slash breakdown to join. Let's go to our second piece for today.

Starting point is 00:09:06 This piece is by Michael Casey, who is CoinDesk's chief content officer, and is called ChatGPT will kill search and open a path to Web 3. It's been a long time since a software release has consumed the tech community as much as chat GPT, the latest offering from OpenAI, the AI startup founded by Elon Musk. This chatbot trained on massive pools of data and now able to answer any query you might have gained more than a million users in less than a week. Post after post on Twitter revealed the inanimate interface crafting eloquent, believable prose on whatever topic was asked of it.

Starting point is 00:09:41 Economist Tyler Cowan even got it to write a passable poem in iambic pentameter about economist Thomas Schelling's theory of deterrence for foreign policy. ChatGBTGBT is far from perfect. It struggles with facts time to time, as Bloomberg journalist Joe Weisandthal, discovered when he asked it to write his obituary. And the Atlantic columnist Ian Bogost reigned on everyone's parade by observing that the chatbot doesn't truly understand the complexity of human language, ensuring that, quote, any responses it generates are likely to be shallow and lacking in depth and insight. But to Bogos Boss, Atlantic CEO Nicholas Thompson, those imperfections

Starting point is 00:10:14 won't hinder the disruption this technology poses to a key part of the internet. Search. In an enthused video post, Thomas argued the chatbot will resolve most people's questions about the world, such that it will quickly overtake Alphabet's Google algorithm. Rather than Googling something and waiting for a variety of ad-supported answers to come back, people will simply ask a chatbot and get an immediate answer. It's hard to overstate how transformative that idea is. The entire Web2 economy, with its hierarchy of websites, from most traffic to least, is built on a foundation of search. We in digital media have been slaves to it for decades, constantly trying to satisfy ever-changing demands that we tweak the SEO,

Starting point is 00:10:52 search engine optimization elements of our content posts, headlines in particular, to keep up with Google's algorithm. But it's not just media outlets. It's brands, governments, not-for-profits, bloggers. Anyone striving to grab a piece of the world's limited supply of audience attention is locked into a competitive dance ruled by Google's search algorithm. From that structure was built Web2's core business model, the sale of user data to programmatic advertisers who pay fees structured

Starting point is 00:11:17 on a commodity-like measure of page views, uniques, and sessions. All of that, conceivably, could go away. What does this mean for crypto? Well, I think we may have just stumbled onto the catalyst to take the digital economy into the decentralized Web3 era, creating new monetizable opportunities for NFTs, stable coin payment systems, and Metaverse projects. NFT and Open Metaverse enthusiasts have debated for some time about what would drive mass adoption of their projects and lead to their long-for disintermediation of the dominant Internet platforms. Would it be the deployment of digital collectibles in gaming? Would it come from household consumer brands and entertainment companies developing direct

Starting point is 00:11:52 NFT-based engagement strategies to forge, quote, ownership relationships with their customers and fans. Would it lie in the new models of collective value creation and shared intellectual property spearheaded by projects such as Yuga Labs Board Ape Yacht Club? This thinking presupposes these Web3 ideas will drive the opportunity by virtue of their own intrinsic appeal. But the problem has always been that human beings are addicted to or at least dependent on the communities that the Web2 model has fostered. Everyone keeps going to Facebook because everyone keeps going to Facebook.

Starting point is 00:12:20 The Vista Open by OpenAI suggests that our Web3 future might not be dependent on the appeal of Web3 technologies per se, but by a force external to them, one that disrupts the core Web2 economy and leaves the world open to an alternative. If the Web2 advertising model is about to get overturned, how will brands and media companies reach their customers and audiences to generate revenue? Maybe with NFTs. An end to search means that suddenly the NFT projects of Nike, Starbucks, Anheuser-Busch, Time, and others, all of them championed as a new way of correcting directly and meaningfully with loyal fans, could go from being queued ideas to a viable way to re-monetize customer relationships. All of this portends massive challenges

Starting point is 00:12:58 for many Web2 founded businesses. There are also legitimate fears that AI systems like chat GPT could become manipulated by agents of disinformation and do even more harm to human free will than the surveillance capitalism introduced by Web2 Internet platforms. Still, to think we may no longer be controlled by a single Silicon Valley company is appealing. All right, so cool piece, great thoughts, a couple follow-ups. First of all, Google is one of the two main types of web two business models. It's not the only one. Search is, yes, a huge, huge driver of performance advertising for companies of all stripes. But social network advertising is a little bit different. Part of the appeal to advertisers of social networks is that theoretically these networks have

Starting point is 00:13:39 unique access to information about the things that the people who you're advertising to are interested in, as well as a better ability to target. Now, Google's targeting, is profound because people are actually searching for the thing that you're hopefully offering. But today's social algorithms have gotten extremely, extremely sophisticated. It's why it can feel so creepy when you're served an ad for the exact type of thing that you were just talking or thinking about. ChatGPT in its current form doesn't necessarily threaten those types of advertising models. In fact, the biggest threat to those models is that the networks themselves become so hostile or unusable that people just abandon them and go other places. What's more, what's to say that

Starting point is 00:14:15 chat GPT doesn't evolve into a Google-like product? where you're being served ads based on your queries, just as you would be when you were searching Google. In fact, if there is a dominant AI, such as ChatGPT, it could be even more concentrating than something like Google is. Because instead of having to actually browse around the web, where you could at least be served other ads, all of the information that you're looking for is coming to a single point of entry, aggregated, curated, and displayed in a way that you can understand without clicking around. Perhaps a better consumer experience on the end, but it means that the only ads you see are the only ones that the service at the middle chooses to display. Now, this is not to say that for sure

Starting point is 00:14:52 chat GPT and other AI search technologies won't disrupt the search business model. It's only to say that you should have some amount of warning when any new technology paradigm looks like a panacea when it comes to opening up new possibilities for business models. So far in the history of the internet through phases one and two, base monetization of attention has been extremely, extremely lucrative. But at the same time, changes do create new opportunities. And to the extent that we can help companies find alternative methods to monetize their audiences than just the same types of boring advertising, this is as good a time as any to try that. Anyways, I hope you guys are having a great weekend. Thanks again to Tim and Michael for these really thoughtful and interesting pieces.

Starting point is 00:15:36 Thanks to my sponsors, nexus.com.I.O., Circle, Cracken, and Galaxy brains for supporting the show. And thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - What ChatGPT Might Mean for Web3

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