WTF is Web3? • Sheila Warren (Crypto Council for Innovation)

Founder of the blockchain and digital assets team at the World Economic Forum Sheila Warren joins Niki Christoff for a conversation about web3. What is it, what does it have to do with the metaverse, and why is it all over the news? Sheila, who is the inaugural CEO of the Crypto Council on Innovation, makes the case that the potential of decentralization lies in individual empowerment and connection.

"You know, there's something really big that's happening here. And I think no matter where you are in the world, people have a sense of that and they know that it's coming through a digital environment." -Sheila Warren

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Transcript

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Intro:

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Niki: I’m Niki Christoff, and welcome to Tech’ed Up. Today’s guest is Sheila Warren, who sits on the executive committee of the World Economic Forum and runs its technology division. We’re talking Web3. What is it? And why is it suddenly all over the news? 

A note to our listeners: This show is recorded, produced, and hosted in Washington, D.C., so we might be a smidge over-indexed for cynicism. After last week’s episode, in which I was basically just airing personal grievances [chuckles] about apps that don’t work, this show is a counterpoint. 

Sheila is a true believer in Web3 and the metaverse, and by the end of this conversation, she just about convinces me to be one too. 

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Transcript:

Niki: Sheila Warren, thank you for coming on the podcast. I'm so grateful to have you. You have three kids, a huge job, and you're in San Francisco, where it is unconscionably early to come on someone's podcast. Thank you for being here. 

Sheila: [chuckles] Thanks for having me, Niki. It's a pleasure. 

Niki: So, I'm excited to have you because we have had a series of, I would say, skeptics on [pause] certain technologies, including the metaverse, and you are an enthusiast for this space. And part of your job is getting people to understand the real potential of blockchain and decentralized technology.

And what I'd love to talk about today. I want to start with your perspective overall on this potential but also get into some of the basic vocabulary around what is Web3. What does that have to do with the metaverse? [Sheila: chuckles] We're in the middle of a hype cycle where in the last few weeks, it's all over the headlines, and people don't get it. But let's start with your perspective in general, on decentralized technology.

Sheila:  Well, I think that the potential depends to a large extent on what you see as the current state. And so, if you think that the tools we have today, technology we have today aren't necessarily serving people or as many people as they should, or aren't serving people in the ways that maybe they ought to. Then I think you see more room for potential. 

If you don't feel some of these things as pain points or problems, then maybe you don't really care as much. And so, I actually think, what's really been interesting to me, in the purview that I'm in here at the forum is I have a global perspective. And so, I sit across, like, beyond the United States, but what's happening in other parts of the world.

And I can tell you, y’know, there are real problems with how technology is deployed, with how money functions, with how the banking system works, right? Like, in different parts of the world. And in those places, we're definitely seeing more uptake, more enthusiasm, more adoption of some of these innovations.

Niki: One of the things I want to ask you about is this concept of what is Web3 but just to back up for two seconds and try to recap what you just said.

So, we basically live in a world- I'm an institutionalist. So, this is a good conversation for us to have, because I love, I love an institution. [chuckle] [Sheila: mm-hmm] You're not wrong that the system is rigged in many ways. There are tremendous inequities in how people can access financial services, in the way that people have to give up data or privacy to get certain services. And so, let's just do, like a basic, lay the groundwork: What the heck is Web3? [chuckle] 

Sheila: So, yeah, maybe we'll start with, you know, what is Web2. Let's kind of start there. So, the current world we're all familiar with, where we get out our mobile device, or we get on our laptop or whatever, and we post a photo or we post a funny meme or we do something. We're doing that through a centralized platform. Okay? 

And so, a lot of the conversation right now is well, who gets access to those platforms? Who gets to say whatever they want to say? Who gets to sensor or decide what is said? And the reality is, it's not always you, it's not always the person who's posting, right? It's someone else. And it really it's a team of people.

I would argue, really grossly underpaid people, overworked people who are going through it. In some cases, computers, machine algorithms that are deciding what content is appropriate, what content is not. That's just one very concrete example to get their heads around. But there are a lot of other ways that we're seeing centralized platforms engage.

So if you think about, your, your payment app of choice, right. If I go in and right now we went out for a drink and so, we were doing this over drinks and, “Oh, I forgot my wallet, or I forgot my credit card.” Y’know, I'm just going to get out my phone. That's what I would more normally do. And I'm just going to zap you money through whatever system we choose, Zelle- whatever it is, right?

We're relying on that system to handle that for us. And what they're doing is making sure that they have a trust relationship with our banks, whatever those banks are, and that they are engaging through this centralized, essentially, system in the exchange of value between you and me. Right? Or I could just hand you cash [chuckle] Right? I could just literally hand you a $20 bill. 

So, you think about the difference there and just the amount of entities and people and agendas that are kind of between us in one context versus in the other where I'm literally handing you a $20 bill. There's something to be said for maybe we need more opportunities for that direct transfer for me, me handing you a $20 bill.  And maybe those opportunities could actually be digital.

So Web3 is really about, um, it's it's I mean, people who are big fanatics of it call it “the next phase of the internet”, but I think it's more than the next phase of the internet. It's basically decentralized online systems. Ok? So, rather than me having to go through- name your app of choice: Insta, Facebook, Twitter, whatever it is to get content; I can do that directly.

There is no platform that's controlling what happens there. Ok, so there's no central gatekeeper that's deciding, there's no intermediaries, we call it, who's deciding what happens, where there's nobody else who owns that data. There is no other third party that's, like, mediating or mitigating or sitting in the middle of anything. Users do that.

Niki: It’s a little bit mind-melting to me [Sheila: chuckles] because we, the last episode we did was on the metaverse and the reason we were talking about it is because Facebook changed their name to Meta. And so, the concept was that Facebook is potentially creating something of a walled garden, and I really genuinely don't get it. When you say- is the idea that I would be, I would own all of my own data and go between these different worlds and these different apps?

Sheila: Let's go back because the metaverse… I think the easiest way to understand the metaverse is through gaming. Okay. And so, not everyone's a gamer.  I'm not a gamer, but I think that anyone who has children is probably pretty familiar with the idea that a lot, they spend time online, whether they're playing like Pokemon go or whether they're playing, y’know, some math game, like my kids. I’m trying to groom to be giant nerds, [chuckles] unsuccessfully [Niki: Yes], but I'm trying. [chuckles] They're playing some math game. Right? And they, like, beat a level. It'd be with some dragon or whatever, like with math problems. And then they get something like a cape, or a wand, or an apple, or what- a flower, whatever it is. [quickly] I have no idea what it is, actually, y’know.

And so, right now, all that's contained within that game. So they can, like, my daughter has, like, purple hair and she has this cool sword and she has a dragon companion. Whatever! She can't take that out of the gaming environment with her. That's all within that game. Right? And that's how a lot of games function. So, you work your way up levels. You do whatever it is and you earn loot. We call it loot. And basically, that loot has to stay within your game. 

Now, there is this really interesting secondary market that's emerged where someone's like, I am not capable gaming wise and earning the sword of whatever, you know, but you have one. Wow. What if I could buy that off you? Using, like, actual cash. Like, I could usually literally use U.S. dollars and buy that thing off you because it's so cool. So, that's where you kind of get into this thing called NFTs, which I'm sure you've probably talked about at some point. [Niki: Yeah, we did do an episode…] Ok! So NFTs are, sort of, you can imagine that they are a way of creating scarcity where there's really abundance.

Okay? So, basically, if you're like, well, anyone can go out and, like, claim they own a screenshot of something, but now some people can prove that they own that. There's actually a mechanism for proving “No, I really am the owner of the original art”. Or whatever it is, the original Cape, the original one, the original, whatever it is, right?

That has value because it's now- there are only 50 of these wands in the world or whatever that's going to be using flags that, well, there's only 50 of this, y’know, jewel in the world. Right? And so, if I want to trade it or sell it, there's value to that. That's how markets are created. Scarcity is what creates markets in many cases. Ok?

So, if you can do that and you can move the thing from place to place, suddenly you have a much more attractive system than if you're kind of stuck within one universe. Does that make sense? [Niki: Yeah] So, that's kind of how, that's, how I think you think about the metaverse in that way. And so, the idea is that there's going to be, like, maybe there'll be multiple metaverse.

What governs the rules of engagement? Is Facebook going to have its own metaverses, and then Roblox will have its own metaverses?  Y’know, whatever it is will have these totally distinct unique metaverses, and you can't engage across each other. That's less interesting than, kind of, one online intermediated world where you have the ability to be who you want to be in these different places and kind of take your identity from place to place.

Niki: Okay! So, I'm going to sum this up and tell me if I'm getting it right? So, Web3 is the concept of, instead of Web2, where we have these large, mostly a small number of companies or institutions, banks, tech companies, managing- being the intermediary between us and someone else. 

Web3 is the idea that there are no intermediaries, you, sort of, own your own assets, data, wands, capes, [both chuckle] whatever it is.  And you can take that between different worlds; you take your data, your metadata, your loot, and you- it's decentralized in the sense that you don't have to depend upon these intermediaries and you're not, you're not captive to their systems. You can go between them. And the metaverse- what I'm hearing you also say, is just an example of a three-dimensional online space, where this is already kind of playing out with gaming, but in theory, Web3 could be any kind of decentralized system, including financial systems.

Sheila: I think that's a, that's a, pretty nutshell way of putting it! Yeah! 

Y’know, I, I think that- let's take it back and maybe slice it one different way. That might help. So when you think about your identity, right? So, those of us who are kind of, so I came of age when, y’know, I was the first class in college where everyone got assigned an email address. So, I remember teaching when I was a freshman teaching seniors, like, there's this thing called email, and you can actually write somebody a letter, and it goes through a computer, and then you can, like, pull down a mailbox. And it was like, “Oh, like, [funny voice] woo!” Y’know? So, that was where I grew up. 

So, I grew up with an era of like, we watched TV at a certain time and God help you if you miss your show, y’know. Now, think about my children. I have an eight, five, and two-year-old- I mean on-demand everything, which is its own issue in its own way. But there's a very different experience that they have. They fluidly move through an online and offline environment. So my eight-year-old, especially during this pandemic- and she gets on FaceTime with her best friend on her iPad and they play this game together.  Again, it’s this nerdy math game [chuckle], they play this game together, but they're looking at each other and video chatting while they're in the same world. And think about the fact that she's got her avatar wandering through this world and then her face on FaceTime talking to her best friend, and they're both doing this.

And so, the identity she has in this world is, again, it's the purple hair and the wand and the, whatever, the dragon’s following her, but then she's just herself on the video. And to me, I took the screenshot at one point  ‘cause I was like, that is such a powerful [chuckle] example of what we're talking about. 

So, there are people that, their Twitter, on Twitter, they have one voice and identity and brand, you can even call it that. Right?  But then, on Insta they’ve got a different one. There's that meme that went around [both laugh] [Niki: Yes] of, like, the four pictures of someone: like, their LinkedIn picture, their Twitter picture. Right? And it's different! Why is it different? Because you're presenting a part of who you are in that environment based on the parameters and the etiquette of that environment.

So, you don't put your Tinder photo on LinkedIn, well maybe you do [chuckle], depending on your profession.  Most people would probably not do that,  I'm assuming. Right? So, so there's different ways that you want to be. And so, the idea here is that you should have control over what you display and when. But also, with these kids, tweens and younger, I could even say teens, probably even college students and younger, part of their online entity is their identity. [Niki: Yeah] It's not that, that, like, for most of us, like, my age, we're like, this is my LinkedIn profile. It's my, you know, very professional photo. And I think about those things a little more consciously. Whereas for these kids, they're just much more fluid with who they are and what they are, and the experiences they have online.

Like, I am very certain that my kids will all have friends they primarily interact with in an online environment, digital environment, and they primarily interact with, through some sort of avatar experience. Right? That's the main modality. 

Niki: It's funny to me that you keep invoking your age. So you and I are the exact same age and actually went to the same college and law school. [both chuckle]

And this is, so this leads to- you're absolutely right. I'm sure you're right that for kids right now, it's intuitive that they would have an online self and an analog self,  [Sheila: yes] that they would have relationships in person and relationships online. But I also think it's worth talking about you and I are, basically, again, we're the same age, and you said something to me the other day, you said, “Like, who even uses email anymore?” I use email! [Sheila: laughs] I use email. I write thank you notes. I believe in the art of letter writing, I call people like it's 2005. I just call them on the phone, which I know is antisocial behavior [Sheila:  chuckles], but I do it!  I just pick up the phone and call people and I think it's not just generational, I think it's also attitudinal. 

And in some ways, I feel a wistfulness for losing this in-person dynamic of making eye contact and having relationships in person and being able to use a writing utensil and a stamp to send a letter [chuckles], but you seem excited about it. [Sheila: yeah] So, I would like to close out this conversation on: you're doing really interesting work on privacy, owning your own data.

Like, tell me the positive story of this. ‘Cause I am super skeptical of the metaverse. I'm, I don't think I'm a Luddite, but I like certain things that feel old fashioned, but I've heard you talk with great enthusiasm about specific potential that's empowering. Can you make the case for all of this? 

Sheila: So, so, I think, I think there is something to mourn a bit and be wistful about, y’know? So, I definitely grew up writing the thank you notes. I hate email because my inbox is a disaster. Not ‘cause I don’t think it’s efficient but because I think we never solved the spam problem effectively. [Niki: Yeah] So so much junk still makes it through. And it's really frustrating to have to sift. So, I'm still a person who meets up with my friends in real life and, like, goes and has girls' nights or whatever it is. Right? So I think there's something to definitely be a little wistful about. 

But I also think, when I think about, y’know, I am the daughter of an immigrant,  I am the wife of an immigrant. We are in such amazing touch. Cousins, like my daughters, have relationships with their cousins who live half a world away that would never, it would not be possible without it, honestly, an asynchronous online kind of environment in many ways.

And so, whether that's a video call, which is, y’know, it's still a similar, similar thing to what you're talking about. You're still engaging real life with a person, or whether it's just like their ability to just, I don't know, be in an environment together where they can just leave things for each other here and there, like hide as something in the environment that they're in whatever game or whatever that they're in.

I think I was somebody you said for kind of opening up the world to people and giving them the opportunity to experience and meet people and engage with people beyond their immediate in-person environment. I just think that's really interesting to me, particularly for those who don't have the means or ability to travel, to see the world, you know, there's climate implications to all of that.

This stuff is really, to me, important and fascinating, but I'll also just give an example. I have a podcast called Money Reimagined and we did an episode recently, uh, on the Philippines. I love doing these country episodes where we really talk about what is blockchain and crypto doing in these different places.

And so in the Philippines, you have to understand that the, the economy of the Philippines is very much a remittance-based economy. It is based on people that leave the Philippines; they go to other countries to earn wages that they send back to the Philippines. So, when you look at the fact that in the state of California, nurses are Filipino by and large, like, that is the number one cultural demographic and ethnic background of nurses in the state of California is Filipino. So, they're in Dubai. They're all over the place. They’re doing all kinds of, of, this work and sending back.  There is this game called Axie Infinity, and it's created, what they call, what's called a play- to-earn model. People are actually earning money, like real money, that they can convert into actual money to go buy things with, right? Like, to support their families through this game. And it's really fascinating to observe this phenomenon. It's blown up. 

Just think about what that's opening up for these economies. And so, they had this concept that they're talking about of the emotional tax of leaving your country as an immigrant, moving somewhere far away for more opportunity. And strictly, you're doing that to earn money. These are not people who are moving for an ex-pat experience and to have, like, a jaunty year abroad or gap years. [Niki: Right] They are people who need to feed their families, and they need to do that by leaving everything they know.

That's too high a price to pay, but there should be options. And so, part of what I think Web3, even the metaverse, NFTs, like, all of these different technologies are ushering in is, ironically, the ability for these folks to spend more time in person with their families and loved ones in the places they were born and raised or near their communities, right? In places that, that, feel comfortable and meaningful to them and not be forced to strike out in these often dangerous ways. 

So I think, when you think about diaspora communities, you think about what pushes people to leave a country for another country. More often than not, it's the lack of opportunity. And when you move things to a digital environment and you give people real income-generating opportunities, that to me is just tremendously important and really, really powerful, not just an individual level in terms of, like, the “I invested in Bitcoin and made a lot of money, blah, blah, blah.” But for what it can do for communities, y’know, like the fabric you can weave, I just think it's, it's incredibly powerful and really interesting. 

Niki: Okay, this is exactly why I wanted you to come on this show [Sheila: laughs] because I think people, I sit in Washington DC, and a lot of the attitude toward cryptocurrency, I think people think of it as like revenge of the virgin nerds. [Sheila: HA!]  Like [Sheila: that’s so…] nobody's really rooting for it. And if you can, instead, think of it as, Web3 is a way of removing these gatekeeping institutions, giving people the power to send money seamlessly and with lower fees to reduce the friction in the way that they provide for their families, their loved ones. It's an opportunity for your kids and kids around the world to connect with people globally so that they aren't just with the kids in their zip code. We will be able to own our own data. We will be able to decide what, y’know, if we want to be paid for that data. This is sort of the vision, right? It's not just gambling on tokens. There's this idea that we're going to dis-aggregate and disrupt institutions to empower people. 

Sheila: I think that's exactly right!

And the other frame I'll just throw in there is what if we had a more equitable way of allocating risk and reward? So, right now, we think about how a traditional corporation is set up. You've got a lot of the risks on the employees, on the lay workers, whatever it is. And a lot of the reward is held by shareholders or by the board, right?

There are ways of actually using a token economy to actually empower people like employees, workers, users, customers, whatever it might be, and to balance, to actually balance some of that, to say, “Maybe decision-making should come from some of the users of a service. Maybe they should have more say in what actually products get rolled out or how things look or whatever it might be.”

That might be something that's more pro-social behavior, rather than this very extractive model, which kind of leads to antisocial behavior. I'm not going to cite the Sacklers as an example, but that's a very extreme example of extreme antisocial behavior. Right? You can imagine more pro-social behavior if the doctor– I just watched that documentary, so this is what’s going on in my head. 

You could imagine a more pro-social system if you'd had doctors able to kind of weigh-in, whether it's tokens or something else, on what was happening there. So, when you think about a stakeholder set, the people that are engaging with a product or a service, having the ability to have a voice in that system, that to me means- I think that necessarily, if you believe in democracy, which I do, I think that means that you're going to get to a better outcome.

It may not be linear or clean. It might be messy. It's going to have its own hiccups, its own challenges. But I certainly think that we have evidence that the current system is leaving so many people behind in ways that are just not fair, not equitable. Uh, and I don't think sustainable, frankly, I don't mean on the climate way, but I don't think our systems are sustainable the way that they're currently set up over the longer term. This is a chance for us to think about creating a new foundation to how we interact with each other as a society that I'm hopeful will lead to more wellbeing and more happiness [chuckles] [Niki: Yeah], which is, ultimately, what I'd really like to see. 

Niki: It's funny that you mentioned the Sacklers, we've dragged the Sacklers on this podcast [Sheila: laughs], and we've also dragged some big companies that are sort of setting the rules of the road.

And so, if we think about Web3 as a tool of empowerment for individuals that creates a borderless opportunity to get out of this extractive situation of fees, of giving up your data, of having your data walled off and y’know, not portable and we think of it instead as empowering individuals to move seamlessly across these online worlds digitally… [with surprise] Then maybe I'm for it?

Sheila: [gasp] Oh, my gosh!  And I think you should be! [chuckles]  I've convinced you or at least  showed you a different way of thinking about- 

Niki: You have! Sheila, thank you for coming on the podcast. You are a rival podcaster, although significantly- you've been doing this for a lot longer. [Sheila: chuckles]I'm so grateful you came on, you have a show called Money Re-imagined, it's part of the CoinDesk network. You interview people. They're more long-form; they’re super detailed.  People should give it a listen! 

Sheila: Thank you, Niki. And there's no such thing as rival podcasters; I think we're all just trying to make sense of this. I think we all sense there's something really big that's, kind of, bubbling up, y’know, it's like the image of that boat and there's the giant whale underneath it. You know, there's something really big that's happening here. And I think no matter where you are in the world, people have a sense of that and they know that it's coming through a digital environment.

And so, we're all trying to make sense of it. So I think, you know, I'm really grateful to you for having me on and giving me a chance to talk about why I'm so excited about this space.

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Outro:

Niki:  Next week, I’ll be joined by Leo Rees to talk about international attitudes towards artificial intelligence and how these feelings will shape AI’s evolution in the years to come.  And, as a bonus for our crypto fans, Leo tells me his story about buying a Damien Hirst NFT at the end of the episode. 

Be sure to follow Tech’ed Up wherever you get your podcasts. New episodes come out every Thursday.