It's impossible to architect a compelling experience backwards from a desired financial outcome. So if you start with let's make a lot of money and then you try to work backwards from that to make a story or anything creative, it's not going to work. Premature financialization is the root of all evil. You know, if we try to resist that temptation to just immediately financialize everything and concentrate instead on the intangible value of what people are creating, that there's an opportunity to make something that's going to be more stable.
You've made that point again and again that kind of like we've gotten a lot of things wrong. So maybe let's talk about the things that you think genuinely should matter in Web3.
Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I am Federica Ans and today I'm speaking with Neal Stephenson, who is a visionary author whom many of you may know, and the co-founder of blockchain project Lamina1. Few writers have had their fiction mistaken for blueprints quite like you, Neal. Your cautionary tales somehow became the instruction manuals for a lot of the digital age. Super happy to kind of talk with you about Web3 and your general take on the ecosystem. But before we do that, let me tell you about our sponsors this week.
This episode is brought to you by Gnosis, building the open internet one block at a time. Gnosis was founded in 2015 and it's grown from one of Ethereum's earliest projects into a powerful ecosystem for open, user-owned finance. Gnosis is also the team behind products that have become core to my business and that of so many others like Safe and CowSwap. At the center is Gnosis Chain. It's a low-fee Layer 1 with zero downtime in seven years and secured by over 300,000 validators. It's the foundation for real-world financial applications like Gnosis Pay and Circles. All this is governed by Gnosis DAO, a community-run organization where anyone with a GNO token can vote on updates, fund new projects, and even run a validator from home. So if you're building in Web3 or you're just curious about what financial freedom can look like, start exploring at gnosis.io.
Neal, it's a pleasure to have you on.
Good to be here. Thank you, Federica.
So, you've written so many books and they often feel eerily prescient. You wrote about the metaverse in the early 90s and about cryptocurrencies a few years later, and so many of those ideas have since come to pass that there's even been speculation that you might be Satoshi. Do you think of yourself as kind of predicting technology, or do you just notice what others haven't yet articulated?
I'm a storyteller, and you know, the primary job of a storyteller is to tell a good story or a yarn, as we say, that will keep people turning the pages and keep them engaged. And in science fiction, you're creating an imaginary world, and that world has to make sense, because readers are very sensitive. If they see something that doesn't add up, that doesn't make sense, that's inconsistent, they immediately lose their interest in the book. And so, you know, if you're creating an imaginary world that has some technology in it, or that has a business, or, you know, something, you know, people who are trying to do something in an organized way, that has to make sense. It's got to add up.
And so in science fiction, particularly what we call hard science fiction, part of the writer's job is to have fictional technologies that make sense, that are plausible. And so when we're building such a world, we try to think it through. We try to do some research. We try to learn something about how these technologies actually work, what is and isn't possible. And then we make up imaginary rules for our imaginary technologies, or if we're writing about a corporation, some kind of business, we need to have some idea of why that business makes sense. How do these people make money? You know, would it actually work? Because if you don't do those things, eventually the whole logic of the story breaks down somewhere. So in the case of books like Snow Crash and The Diamond Age and Cryptonomicon, you know, I tried to be sort of careful about creating these imaginary technologies and businesses and so on in that way. So I think that when engineers, nerds, technologists, entrepreneurs, when they read a book like that, they can kind of see, oh, okay, you know, this sort of makes sense. You know, this could actually happen. So some of them may decide that some version of that imaginary technology or that imaginary business plan is worth actually trying to bring into the real world.
When you kind of see your ideas come to life that way, I mean, sometimes decades later, does it do something to your own sense of reality? Kind of, does it feel validating or creepy or unsettling, or are you kind of detached from your ideas by then?
I'm pretty detached. I mean, the typical way it works when you're writing a book is that during the time that you're working on it, you're completely immersed in that world and thinking about all of the details and doing all kinds of research. And then as soon as you're done with the book, you move on to something else, and your memories start to recede into the distance, and you begin to take up all of that space in your brain with new stuff. And so, you know, by the time a book is actually out in print, I've already moved on to something else. And in the case of books like Snow Crash or The Diamond Age, these are things that I wrote 30, 35 years ago. And so it's been quite a while. And I don't think it would be healthy to just sit around, you know, decade after decade, you know, paying close attention to what was happening, you know, with such things, because you do have to move on and kind of get on with your life. So it's, you know, it's always kind of interesting when something emerges that looks like it might have been influenced or inspired by something I wrote, but I don't go out of my way looking for it.
Yeah, I hear that. And I think kind of like the fact that it's been so long adds to that for sure. A lot of the people in this space see you as this visionary. And I feel often people don't appreciate that a lot of your stories are actually, at least I read as, cautionary tales, right? So kind of like it's not a techno-optimist endorsement of everything that's going to happen. How do you feel when kind of like your books are almost treated like instruction manuals?
Well, I think for the most part they are realistic, kind of balanced treatments of these subjects. I don't think it would be very interesting to just be very dark and pessimistic about everything. I don't think it would be interesting either to just be blindly optimistic. And so what is interesting is, you know, if the characters in the books and the situations in the books have a realistic degree of complexity and ambiguity. So in the case, for example, of the metaverse in Snow Crash, you know, it's a lot. Some people look at it and say, oh, well, it's very dark and dystopian. And I understand why. The society that's depicted in the book definitely has some aspects, you know, that don't seem all that optimistic. I don't think that that world is much more dark or pessimistic than the world we actually live in. And I think it's got a realistic degree of good and bad. And if you look at the ways in which the metaverse is actually used in the pages of the novel, sure, there's some stuff in there that's kind of sleazy, you know, pornographic, whatever, appealing to the lowest common denominator, but there's also art. You know, people use it for communication. They use it to cultivate relationships. They use it to do business. And so it can be a, you know, a positive tool as well as, you know, kind of a sleazy strip mall. So I think that, and, you know, similar statements could be made about the technology that's shown in The Diamond Age and in Cryptonomicon. And again, to do otherwise, I think, would result in a kind of simplistic storyline that most intelligent readers would pretty quickly get bored with.
Yeah. You've had a somewhat complicated relationship with Web3. So, I mean, there are clearly some kind of like some core promises that appeal to you and a lot of other people, but kind of you've made the point again and again that kind of like we've gotten a lot of things wrong. So maybe let's talk about the things that you think kind of like genuinely should matter in Web3, kind of the values we should try to imbue technology with, and where do you think kind of we stand with respect to these values and promises today?
Well, to begin with, I don't claim to be an expert on the current state of things. It's a very fast-moving field, lots of companies, lots of people trying different things. And so I don't make any effort to really stay abreast of the very latest developments. I'm working on a specific project that we can talk about in a bit, but for me it's always more interesting and informative to actually try to do something rather than attempting to understand and follow everything that's happening in the whole universe. So having got that out of the way, I mean, the general trajectory of the web over the last 30 years has been that, you know, when it came out and during the kind of the early phase, the 90s basically, it was, you know, if you want to call that Web1, it was inherently decentralized. So anyone, I mean, the whole structure of the World Wide Web is such that anyone could put up a web page written in HTML and it would be viewable on any browser that knew how to parse HTML and it was on the internet. And so, you know, people began to put up simple web pages all over the place. And in that era, it was truly decentralized and there was a kind of idealistic ethos around it that was very much kind of, you know, sort of grad student, hippie, idealist mindset of, you know, we're going to make all of this knowledge available. We're going to allow people to communicate with each other freely in a decentralized way and somehow that's automatically going to be a good thing. But even in the late 90s, you know, I began to hear from people in the sort of crypto and privacy worlds who saw that this could lead to problems, that not all communication is good. You know, not everything that was going up on the internet was socially constructive or was having good results. So, I'm being distracted because a popup just showed up in my browser saying try Gemini in Google Chrome, you know, and I have to... This is classic Web2. Let me make it go away.
So then Web2 is the era of consolidation. It's the era of various players figuring out ways to create centralized platforms and services that turned out to be very popular and very commercially successful, but that, you know, were going in the other direction, going very much in a centralized direction that kind of contradicted the original, you know, Web1 ethos. And that's what brought us to where we are today. One hopes, one would like to think that, you know, with Web3 we could go back in the direction of a more decentralized approach to things. And, you know, this has always been the kind of the mindset of crypto libertarian tech nerds, the kinds of people I was writing about in Cryptonomicon, who were just automatically suspicious of any kind of centralized power system. You know, centralization of power always leads to bad things happening. And so, you know, we're going to try to use technology of various kinds to fight centralization. I think that's the... if you go to a conference where there's people from the crypto industry hanging around, you see a mix today of people who are genuinely driven by kind of the belief that they're doing something socially constructive for society by getting us away from centralized financial institutions and centralized information brokers and in the direction of decentralized versions of all those things, you know, and that's mixed in with a lot of other attempts to commercialize this that I think are often driven by less idealistic considerations. But it's all, you know, it's all a mix of those things. It's not one or the other. They're all kind of wrapped together. And so you just have to keep your wits about you, I guess, and know how to distinguish, you know, between those things.
What are the metrics that kind of would become better if the web became more decentralized again? I mean, I think it's very easy to kind of make kind of the criticism of centralization. I mean, it's become much more efficient in many ways. Kind of like if you look at kind of like, for instance, how much data kind of YouTube is able to stream. I mean, kind of like people in Web1, kind of like it would have blown their minds, right? And kind of yes, we can say, okay, you can't really do anything on the internet without kind of accruing value to kind of the same five corporations, and kind of like somehow that's bad, I think. But what are kind of what are the metrics that we should monitor to see whether lives for actual people actually get better? So kind of because kind of like with any technology that's kind of aspirational in that sense, you kind of have to take it down from kind of this very abstract level of kind of like centralization is bad and decentralization is good to concrete value propositions, right?
Well, I mean, one metric we might look at is how much do the creators of content get paid?
So famously, musicians aren't making very much money at all from putting their stuff on Spotify or Pandora or YouTube or, you know, any of those. And yet those are profitable companies, right? So somebody's making money, value is accruing, as you say, but are the people feeding that content in, are they getting their fair share of compensation or even just enough compensation to make some kind of decent living out of what they do? And are they getting to maintain control over their data? You know, do they have the mailing list of all the people who are subscribing to their service? You know, can they reach out to their fan base? Can they talk to their fan base directly without the intermediation of a company? Can they monetize their popularity in a way that, you know, compensates them instead of compensating the venture capitalists who funded the creation of the platform that they're using?
This is also kind of where the story of Lamina1 kind of begins, right? So for listeners who might not be familiar, what is Lamina1 and what was the motivation behind creating it?
So it started out around the end of, I think, 2021 when Facebook changed its name to Meta and announced that they were now the Metaverse company. And then a bunch of other big companies within 48 hours also jumped in and said, oh, no, no, no, no, we're the metaverse company also. And then a lot of startups in the wake of that began styling themselves as metaverse startups because that was kind of the hot buzzword of 2022. I went to South by Southwest in March or April of 2022 and you couldn't look in any direction without seeing the word metaverse somewhere. The idea was if there's going to be a metaverse that's anything like the metaverse that's described in Snow Crash, what has to be true in order for such a thing to come into existence? In order to build a metaverse presence, you know, a place, a virtual space in the metaverse, basically you need to use a game engine as the tool that you're working from because game engines have got all of the apparatus, all of the code base, all the capabilities that are needed to create 3D environments that are interactive and that can be styled to look the way and behave the way that you want. And if you look at game engines and the companies that build games on them, you know, it is a... every game, every experience is a package of many, many different assets, so-called, of, you know, meshes, animations, materials, textures, sound effects, logic, avatars, and each of those assets typically is created by a different category of artist. And so, and each one of them, you know, is an expert in using a different kind of tool chain, whether it's Blender, you know, 3ds Max, or an audio mixing program. And so you've got to create a sort of set of economic rails that makes it possible for all those people to collaborate and for their contributions to be tracked and for compensation to flow back to them to the extent that whatever they did is part of a successful project. And in a traditional game environment, that's all handled by having the whole game exist as a encapsulated thing unto itself. And so, you know, gamers buy the game, they give money to the publisher, the publisher gives money to the developer, the developer has some way of parceling out compensation to the people who worked on the game. And that all works as long as the game is a sort of a freestanding system. But that starts to break down when you think about how a metaverse would work. So if I'm running around in the metaverse, I've got my avatar. I've got the avatar's clothing that it's got a bunch of cosmetics, hair, makeup, you know, whatever, that all have to be designed and, you know, and created by artists who know how to do that kind of thing. I've got props, you know, I might have, you know, a magic sword that I carry around or what have you. And those could all come from different places. So, and every time I step across the boundary from one space in the metaverse to another space, I have to bring all that stuff with me and it has to be rendered. It has to appear to the people who are in that space watching me walk in the door. And so there's no longer this circumscribed boundary, this kind of cell wall that encloses the game. And instead, you know, what you've got is this complicated economy of assets that are crossing boundaries all over the place. And there's additional complications and details. You know, if I take a... you might get, say, the magic sword from someone and then later it might... maybe a new version of that gets created, it gets improved or enhanced somehow. And in that case, you know, you'd like to see some royalties, what we used to call royalties, flowing back upstream to the original creator of that prop. So when you think about all of these things that have to be true in order to actually make a metaverse that would work and kind of make a list of everything that has to be implemented, there's actually a lot of overlap between that list and the basic capabilities of blockchain systems. So, you know, blockchain systems, you know, are very good at things like keeping track of who created a thing at a particular time. And they're good at handling transactions in which ownership, you know, changes hands between different parties. And they're good at distributing funds to not just to one person, but potentially to a whole list of people who might have been part of a particular creative project. So the idea that got us going with Lamina1 was to, you know, create a blockchain-based system that would be optimized to carry out all of those functions. And I would say the only thing that's really changed that much along the way is that it's sort of occurred to us that there's all kinds of other creators who need the same stuff. Okay, so if you're a movie maker, if you're a musician, what have you, that you could benefit from having the kind of system I just described, even if you're not yet or not today building the metaverse per se, even if you're just trying to release an album or get a movie project financed or, you know, so in some other way make a living as a creative artist.
So are we talking about a financial layer for the creator economy? Or are we talking about a place where also kind of like the game engines and so on can live? Because kind of like I'm confused a little bit because you talked about kind of the games and kind of like how people would cross over from one place to another. And I'm not quite clear what the exact specifications are.
Well, I mean, at one level, it's just we need to keep track of who created what when, and how that's being used, how it's being accessed, and then, you know, we'd like to see people get compensated for any of that usage. And the game engine example is more complicated just because games have lots of different types of assets in them all sort of working together. But a simpler way to think about it and to sort of an entry point to all of this is to start with people making sort of simpler and more traditional forms of creative art like just a movie or a song.
Okay, I get that. Why did you feel you needed to create a new base layer for that? Because kind of like had you put it on an existing base layer, you could have integrated it much more easily with existing protocols. So for instance, say you want to finance an album or movie, you could kind of tokenize it ahead of time and already borrow against it and so on. So kind of having these financial infrastructure tools around is super useful and kind of like replicating them on every chain is cumbersome and kind of bridging is difficult. And so you said in the past that smart contracts aren't contracts, right? So how do you make on-chain rights legally meaningful for creators and artists?
Yeah, so the issue was, this is a couple of years ago, that there weren't really enforceable legally binding contracts in these transactions. And there was a guy, the late, I'm forgetting, Josh, Josh Kramer, this is a piece he wrote four years ago. He was an entertainment lawyer with a technical background who wrote code. And he had a company called Grapevine that was working on this. And he had come up with a system that crossed the boundary between blockchain and legally binding contracts, but sadly he's no longer with us. Anyway, this gets into sort of almost metaphysical topics of what a contract is. And it's kind of a deep topic. You know, if I have a house, say this is my house, what does it really mean to say it's my house? Well, it means that there's a bunch of paperwork that got signed. And according to our legal conventions, you know, this paperwork has the net effect of allowing me to say that this is my house. But at the end of the day, the ultimate source of authority is, at least in this country, a government office at the county level that maintains a list of deeds to property. And basically, if push comes to shove, if there's a legal dispute, that is the ultimate source of ground truth. And somebody can go to that filing cabinet, pull out their drawer, and look up the file for a particular piece of property and say, well, okay, the deed is registered, you know, okay, so-and-so owns this house. The world of blockchain, there's not necessarily that kind of ultimate source of truth. And so it raises questions about the enforceability of some of these contracts. And so really the question that kind of boils down to is, you know, is it good enough? You know, is the smart contract, whatever it says, is it sufficiently strong or sufficiently enforceable that when push comes to shove, the creator is going to get paid, going to get paid money. And so that's what that was about.
Okay, I see. So in the traditional creator economy, you rightfully said that creators often get squeezed and kind of like they put their songs on Spotify and they see almost no revenue and so on. Usually it's because there's some sort of monopoly that arises and really you can't afford to not put your...
Stuff on Spotify or similar platforms. How do you prevent kind of the new creator platforms from simply recentralizing power under a different label? Because kind of like wherever you kind of have these chokeholds on creators or these bottlenecks, kind of in principle you could see the same dynamic, right? Just by virtue of being decentralized doesn't mean something is morally good.
That's not automatic. But I mean, there's no... so you know, if you look at, you take the example of music, it used to be that the only way for fans to listen to music was to go to a store and buy a piece of plastic that had the album pressed onto it and take it home and play it on their record player, right? And so the stores could be somewhat decentralized, anybody could open a record store, but the companies that pressed the actual discs and shipped them to those stores did become highly centralized over time. And it's because at the end of the day, there has to be a machine that presses the disc, you know, and there has to be a distribution network that prints the album covers and puts them on trucks and ships them out to the stores. And you could make similar arguments about movie distribution or the distribution of books or any other physical media. There's a kind of an ineluctable physical reason why some degree of centralization is naturally going to happen in those situations. You're not going to have people stamping out LPs, you know, in a cottage industry kind of environment.
Now that everything's digital, that has gone away. There is no physical layer present that stands between people creating the bits and people downloading the same bits, you know, off of the internet. And so it kind of raises the question of, you know, what is it that these companies are doing that adds value, that, you know, adds more value than they're taking away. While I would certainly agree with you that just being decentralized doesn't mean it's automatically good, I think it's no longer the case that there's an inherent reason why these companies need to be centralized and kind of monopolistic to the degree that they are.
But in some respects, haven't we seen the opposite? So kind of like if you look at how many publishing houses we used to have in the '90s and how many of them perished despite the fact that kind of they had to have real printing presses and distribution networks and so on. In principle, I agree that distributing bits on the internet should be a much lower barrier to entry. But nevertheless, we've kind of seen these enormous forces for centralization, right? I mean even for something that's completely digital. So kind of like say I buy a Kindle book from Amazon, in principle there's no reason why kind of like everyone or 90% of people who kind of read ebooks should buy them from the same place, right? So kind of like where do you think kind of like the architecture of the internet failed?
Well, it's a big question, a very interesting question. The, you know, a lot has to do with just the convenience, you know, the vertical integration of, or I guess it'd be more like horizontal integration of different things together. So, you know, Kindle's connected to Amazon. So if I have an Amazon account and I'm used to buying things on Amazon, it's very easy to buy things, to buy an ebook on Kindle or what have you. So, friends with Cory Doctorow, who, you know, has been doing some great writing and thinking about enshittification, right? Which is a term that Cory coined. And, you know, the basic story of it is that when these companies achieve that level of market penetration, they start treating their customers badly and they start treating their business partners badly in an effort to maximize the amount of profit that they're making. So there are very strong forces even in a completely non-physical, purely digital environment like you're saying, there are these strong forces that lead to centralization. As time goes on, we see that those centralized platforms decay, and they decay very, very rapidly in the quality of the user experience because of the powerful drive towards enshittification that they all seem to be susceptible to. And so while I'll agree that the trend towards centralization has been very powerful during the last couple of decades, I think that we're beginning to see signs that it may have peaked and may be sort of in an advanced process of decay that could create some opportunities for new approaches.
Which signs would you point to there?
I mean, just when I was trying to start this conversation with you, I got interrupted by an unwanted advertisement that popped up on my screen, you know, from Gemini. I was irritated by that, you know, I found that to be intrusive and unnecessary. And so that's just a small example of it. But, you know, another example is that it's very difficult to find things on Amazon now. So it used to be that if I needed to find something or to buy something, well, it's very easy. I go on the Amazon site, I do a search, and I, you know, immediately see a bunch of products that match my search terms. And now that's no longer the case. There's so much sponsored content that it's extremely difficult to actually find what you want. And so instead, I have to sort of go on... I was going to say Google, but I can't use Google either because it's also been enshittified. So I use Kagi, K-A-G-I, which is a service that you pay for. It's a search thing that replaces Google. So I go there and I search for what I want and try to comb out the sponsored things and the AI slop. And eventually, if I'm lucky, I actually find, you know, the thing that I'm looking for, you know, and once I've identified it, then I can sort of try to go back and find it on Amazon or some other retailer that'll sell the thing to me. And so that's, I mean, those are just some small samples of this trend. And I think everyone who uses the internet is being exposed to this every day. So again, I think we're at the end, in the sort of decline of the Roman Empire stage of Web 2, and that this might create some opportunities.
