Teens are hearing about it everywhere, promised a future where they control their data, own their digital creations, and participate in a new, democratized internet. But before we uncritically welcome our kids into this brave new world, in their best interest shouldn’t we be asking ourselves some tough questions?

Regulation? Ethics? Where’s the Guardrail?

The Wild West had its charms, sure. But it was home to stagecoach robberies and snake oil salesmen. At least for now, Web3 seems much closer to the former than the latter. Where are the sheriffs?

Consider Bitcoin's dramatic rise and fall. Or the investment worth of the Bored Ape Yacht Club crashing up like Camilla’s giggle. These ideas are not just academic, they have practical, real-world consequences. The volatility and potential for loss can truly ruin young, inexperienced investors. We impart our children with lessons on the virtues of spending, saving and investing in the traditional financial system. So how can we, in all honesty, ask them to jump into a space where the playing field is just now being established? It’s even more alarming if those rules aren’t established whatsoever.

The absence of specified, transparent regulation is a dangerous minefield. Cryptocurrencies, NFTs, DAOs – they’re all doing this in a regulatory blindspot. Now picture that same NFT-creating, selling teen accidentally infringing on someone else’s copyright. Or being a member of a DAO that votes on decisions with illegal or unethical ramifications. Who's responsible? The teen? The DAO? The platform? The law hasn’t quite been able to keep pace, and teens are being put at risk for everything from scams and fraud to even arrest or prosecution.

Let's talk about the political implications. Decentralized finance (DeFi) has the potential to truly upend the world’s financial institutions. Most people see this as great news. Despite these merits, we should not turn a blind eye to DeFi’s potential to undermine governmental authority over monetary policy. We all know that a robust, resilient, stable financial system is critical to national and economic security, and to social well-being. Are we really ready to give up all this stability just to chase a pipe dream of decentralization? I'm not.

NFTs: Digital Art or Digital Landfill?

NFTs – Non-Fungible Tokens – are often touted as a way for artists to monetize their digital creations and protect their work. There's some truth to that. The reality is far more complex. The climate footprint of some blockchains, especially those that operate under a “proof-of-work” consensus model, like Bitcoin, is huge. Think about the energy consumption.

  • Bitcoin: Consumes vast amounts of electricity.
  • Ethereum: Transitioned to a less energy-intensive model (proof-of-stake).

Not only are there environmental concerns about these practices, but the ethical implications in regard to intellectual property rights is troubling. Digital art is distinct in that any copy that exists can be easily minted as an NFT. This leads to some very difficult issues in terms of ownership and authenticity. Let’s not overlook the future rubbish of artists, too. Everybody knows that shady characters prey on naive, inexperienced creators, looking to scam the next big creator out of a quick dollar.

I personally think of NFTs as the Beanie Babies of the digital age. You recollect the Beanie Babies fad of the 90s? Buyers were waiting in line around the block, certain they were buying a gem of an investment-grade collectible. And then the bubble burst, rendering millions of new stuffed animals just as worthless. I am afraid that NFTs are going the same way.

Decentralized Autonomous Organizations (DAOs) are digital communities governed by a set of rules written into computer code and stored on a blockchain. The premise is that DAOs can be more democratic and transparent than traditional organizations. DAOs are no less vulnerable to governance capture, hacks and disasters.

DAOs: Democracy or Digital Anarchy?

Yes, imagine a DAO that’s really in charge of managing hundreds of millions of dollars. Because if the DAO’s code has any flaws in it, it’s subject to attack. A bad actor could gain control of said majority voting power, resulting in the possible theft or misappropriation of billions of dollars. And since DAOs are decentralized, there may not always be a feasible way to hold anyone accountable.

Furthermore, DAOs can exacerbate existing inequalities. Whoever has the time, money, and technical expertise will be the ones to show up, and they will be the ones shaping the decision-making process. This can result in the experiences of overburdened communities being sidelined.

What I’m concerned about is DAOs being used to pursue illegal purposes. A DAO would be a convenient means of laundering money, financing terrorism, or otherwise coordinating illegal acts. The decentralized, transnational nature of DAOs provides a perfect cover for criminals, making it hard for law enforcement to track and prosecute these crimes effectively.

Web3 holds immense promise for individual empowerment through true ownership, community-driven projects, and long-term skills development. Let's be honest with ourselves. It poses major security, complexity, opacity, and regulatory difficulties.

We should come to Web3 with a healthy dose of skepticism. We need to educate teens about the risks as well as the rewards. Now more than ever, we must hold our federal regulators accountable to comprehensive regulation and ethical practices. We need to make sure that Web3 is available to every teen, not just those from privileged backgrounds.

We can’t allow the excitement about this new technology to overshadow the very real risks. The fate of an open and equitable internet now rests on their shoulders. It’s on us to do so, and it’s on us to help guide the next generation down a safe, responsible path. We owe it to our communities not to make the same mistakes. Hopefully, we can all learn from the mistakes of the dot-com bubble and the financial crisis. Together, we can create a Web3 that is safe, equitable, and sustainable. A Web3 that more fully realizes its immense potential.

We need to approach Web3 with measured skepticism. We need to educate teens about the risks as well as the rewards. We need to demand clear regulation and ethical guidelines. We need to ensure that Web3 is accessible to all teens, regardless of their background.

We can't let the hype blind us to the potential dangers. The future of the internet is at stake, and we have a responsibility to guide the next generation down a cautious and responsible path. Let's not repeat the mistakes of the past. Let's learn from the dot-com bubble and the financial crisis. Let's build a Web3 that is safe, equitable, and sustainable. A Web3 that truly lives up to its promise.