Technology

Celsius meltdown and the rise of Web … 5?


With help from Derek Robertson and Sam Sutton

It’s been an eventful few days in the world of blockchain.

Following another slide in crypto markets over the weekend, all eyes are on Celsius, a crypto lender that has suspended withdrawals, citing market volatility. Celsius offered depositors Terra-like yields of up to 18 percent, and now it threatens to follow in Terra’s footsteps as the next big crypto collapse (more below from POLITICO’s Sam Sutton).

In the meantime, neither snow, nor rain, nor the deep freeze of crypto winter is keeping tech moguls from pursuing their grand visions for a blockchainified future.

On Friday, Jack Dorsey’s TBD escalated its crusade against the still-nascent-and-amorphous Web3 by unveiling his vision for Web… 5.

It was that sort of Elon Musk-esque announcement that had people wondering, is this a real development or a joke?

Web3 still barely exists. And as Dorsey antagonist Marc Andreessen asked on Twitter, “What happened to Web 4?” The joking response to such questions from Dorsey underling Mike Brock: “We don’t talk about web4.”

But Dorsey is serious. His vision is to build this version of the web using Bitcoin and a bunch of non-blockchain tools — forgoing the many VC-backed blockchain tokens vying for a place in Web3.

Dorsey has been a vocal critic of Web3 since he left Twitter last year to focus on Bitcoin fulltime at his payments company Square (which he promptly renamed Block, as in blockchain). He casts the whole concept of “Web3” as a money grab by venture capitalists like Andreessen and a betrayal of Bitcoin’s open-source spirit.

His pitch for Web5 (fleshed out in a slide deck by TBD — Block’s Bitcoin-focused unit) is that it will offer a decentralized internet on which users control their own data and identity.

Yes, that sounds a lot like the pitch for Web3. But Web3 applications tend to use blockchain networks — such as Ethereum, Solana, and Cardano — that often tout more features like higher speeds, more customizable applications and lower energy usage than the Bitcoin network. Dorsey has argued that Web3 blockchains are more centralized than their backers let on and largely designed to benefit small groups of insiders. TBD envisions Bitcoin playing a role in payments in Web5, but generally eschews blockchains in favor of other decentralized tools, including TCP/IP, the set of basic communication rules that the internet has relied on for decades.

As POLITICO’s John Hendel explained earlier this month, the transition to the next generation of cellular telecom infrastructure, 6G, involves a consortium of huge companies, years of planning and longstanding considerations of national technological competitiveness.

In the heady and ethereal world of blockchain, on the other hand, you can skip ahead to whole new generations of the internet with little more than a PowerPoint presentation and some jokey tweets. As much as that may sound like a shortcut, the fight to design Web [insert preferred numeral here] is going to involve a lot of money and ego — and probably more philosophically charged Twitter duels.

Back on planet Earth, I wrote this morning about mounting tensions between developing world governments interested in adopting Bitcoin and the stewards of the global monetary system.

The continuing rout in crypto markets only gives more weight to the arguments from institutions like the International Monetary Fund that the volatility of cryptocurrencies makes them a poor choice for national currencies.

But as I learned, the efforts of big international institutions to push back on national crypto-experimentation face a different complication: Many of their rank-and-file employees are really into the technology.

As one former IMF staffer told me, “Even if the Fund were somewhat anti-crypto, there’s people in the bowels like myself who are buying and selling crypto.”

The already glum news from crypto-world just keeps getting worse. POLITICO’s Sam Sutton has the story, reporting that “With Celsius’s reported $11.8 billion of assets under pressure, the disruption accelerated a selloff in high-risk digital markets that were already reeling amid rising interest rates and a possible recession.”

“Bitcoin, the most widely traded digital asset, has lost more than 17 percent of its value over the last 24 hours and is now trading below $23,000 — roughly a third of where it was valued in late fall… Celsius’ problems are landing only a month after another popular DeFi protocol, TerraForm Labs, sustained tens of billions of dollars in losses following the collapse of its algorithmic stablecoin TerraUSD.”

It’s more bleak news amid the so-called “crypto winter” that has sent investors scrambling. But as DFD reported last week, even amid the market grisliness, mainstream institutions continue to formalize their relationship with the technology, with 19 of the G20 countries actively exploring a central bank digital currency. — Derek Robertson

From classic novelty ditties to horror films to Saturday morning cartoons, summer camp has been a staple of the American cultural experience for decades.

Which is exactly why it needs to be moved into the metaverse, apparently. Camp Integem is a self-described “AR Camp” with both virtual and in-person offerings at its 10 locations in the Bay Area that offers programs in coding, game design, AR digital art and animation, according to its website. It might be surprising that something so stubbornly future-focused, and screen-centric, would stick with branding and iconography more associated with mosquito nets and leaky canoes.

What’s not surprising at all is that a AR startup like Integem would want to gin up the civic good vibes generated by bringing STEM education to the youth, especially in Silicon Valley — and also as digital literacy and safety for kids shape up to be some of the major policy issues and public concerns in the metaverse as it takes shape. — Derek Robertson

Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]);  and Heidi Vogt ([email protected]).

Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.

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