The biggest draw for Web3 is its decentralization. Web2 is currently dominated by Big Tech and government oversight which means that all the power and control of information reside with these centralized forces. Web3 aims to decentralize the internet so no one company or government can exert their control over it.
But those in power aren’t going to give it up without a fight. As governments, large financial institutions, and Big Tech get into the Web3 space, there is a major threat to the decentralization so important to the third iteration of the internet.
What does the future of Web3 look like as mega corporations begin to seize control? Is the entire concept of Web3 possible when Google and the US government hold the reins?
Let’s discuss some of the early warning signs and future triggers to look out for.
Signs of Big Tech and government influence in blockchain and Web3 are already prevalent.
For example, earlier this year, the European Union’s 27 member nations voted 31-4 in favor of advancing a years-in-making proposal to create a regulatory framework for the cryptocurrency industry. As a result, cryptos deemed wasteful in energy consumption are seen as a potential low-hanging fruit.
While some level of government regulation was inevitable - and some level of crypto regulation is a good thing - there are other warning signs that paint a concerning picture of the direction Web3 is heading.
The U.S. Treasury Department recently took a giant step toward launching a U.S. Central Bank Digital Currency (CBDC) as part of the White House’s first-ever wide-ranging framework on the responsible development of digital USD. The White House’s March executive order tasked federal agencies to study and plan to issue a government-backed USD cryptocurrency if there is a “national interest” for the token.
Should the government pass the relevant legislation and the digital dollar is designed well, there’s a real danger that enterprises that have been largely skeptical of cryptocurrencies would prefer it over independent cryptos for international transfers and erode the gains already made. This would give the U.S. significantly more control over their own cryptocurrency compared to independent coins like Bitcoin.
Leading payment processors Visa recently filed trademark protection related to digital wallets, non-fungible tokens, and the metaverse that portends an impending expansion into the sector. With over one billion Visa cards circulating worldwide, this would open the crypto space to a much larger user base.
Visa is joining a growing list of competitors like PayPal and Western Union lining up to develop the ability to manage crypto wallets amid growing global interest in cryptocurrency and NFT adoption. As the banking industry races to compete and profit from what they can’t stop, they have adopted a two-pronged approach of trialing with cryptocurrency and urging regulators to write rules that favor them.
Banks and governments that control the flow of money are threatened by the emerging alternative financial world of DeFi. If a U.S.-backed coin gained traction using crypto wallets provided by big banks, this would put the control right back into their hands.
The U.S. Securities and Exchange Commission (SEC) is highly interested in the notion that Ethereum is a U.S.-based network. The implication of the SEC’s new attitude is related to whether cryptos like Bitcoin and Ethereum constitute security offerings. The result of such reasoning would theoretically bring the entire Ethereum network and all its attendant projects under the SEC’s jurisdiction.
As soon as Ethereum implemented the proof-of-stake consensus mechanism, the SEC quickly pointed out that since over 44% of the nodes were based within the United States, the entire blockchain falls under U.S. jurisdiction Such an approach is frightening since it signals that the SEC could be interested in asserting its authority over the crypto industry.
Another clear indication that tech giants have trained their eyes on Web3 is Google’s launching of a cloud-based node engine designed explicitly for Ethereum projects. Nodes are computers that run blockchain software that validates and stores transaction histories on the blockchain network. Dubbed the “Google Cloud Blockchain Node Engine,” the mode-hosting service is meant to lessen the need for node operations. As a result, Google can monitor node activity and restart them during outages.
Google already has a stranglehold on the exchange of information and personal data on Web2. If they gain a high majority of Ethereum nodes, Google could gain a whole new way to collect data and monitor online activity. Moreover, if Google gained control of over 50% of Ethereum nodes, they could make any changes to the blockchain they wanted.
The U.S. government – whose dominant dollar enjoys the lion’s share of global profits – is taking note as consumers’ worldwide flock to cryptocurrencies and embrace more decentralization. Custodial wallet adoption by large banks fighting to protect their businesses from the emerging market disruption will automatically rope in the Federal Reserve with its digital dollar, lest the U.S. loses the economic and geopolitical advantage afforded by the dollar’s global dominance. In such a system, account holders would have their digital money held by large banks that partner with the FED, making subsequent mass-scale adoption inevitable.
The FED would act as the intermediary transferring funds from one wallet to another and bypassing the complex electronic payments network. While a FED-backed digital dollar could include some elements of decentralization, it would still be issued and regulated by the country’s central financial authority. Still, unfortunately, the primary concern is that the government would monitor everything custodial wallet holders will do with their money, introducing a potential for official abuse.
Officials of the U.S.-controlled International Monetary Fund (IMF) have opposed countries adopting Bitcoin, claiming it exposes countries’ citizens to its volatility besides facilitating money laundering and undermining capital controls. While the IMF fronts itself as a neutral aid organization, the truth is that it’s the economic arm of a titanic power structure, and cryptocurrencies are an affront against everything that the IMF represents.
If that’s true, the agency’s contentions against crypto are aimed at preserving the dominance of governments and central banks on the global monetary systems. As the IMF’s actions suggest, they foresee and are scared of the possibility of a crypto-aided financial escape of defiant countries. If the agency stops railing against countries using Bitcoin and other coins, it could mean they have seen a way through it and would no longer be scared of losing their tenacious grip on the world’s economies.
We live in a world where a handful of companies control the reins of the economy. These companies aren’t going to suddenly surrender the power to decentralized organizations, no matter how good the promise is.
It’s a catch-22 situation for big tech companies as blockchain and Web3 present both an opportunity and threat as they push toward decentralization.
Government regulation will make many people and enterprises feel more secure entering the Web3 space. Big Tech can create new solutions and integrations with existing tools that will further Web3 adoption. But how much regulation and corporate governance is too much before we lose the entire promise of decentralization?
Is there a way to create the Web3 we need or was it always inevitable that governments and mega corporations would seize control? Only time will tell.