money·6 min read

Future-Proofed: Web3, Rug Pulls, and The Surge in .eth Domain Name Sales, Explained

What you can do on the web: Web1, read; Web2, read & write; Web3: read, write, and own.
Design: the Skimm | Photo: The Cold Wire
Aug 22, 2022

The way we bank, spend, and invest is changing. And women have a unique opportunity to get ahead of the game when it comes to what’s next for money. Whether it’s a world of cryptocurrency, decentralized finance, Web3…or something else entirely. Welcome to Future-Proofed: Your monthly resource to learn all about the future of money, from the basics and lingo to the wild news and hot coins.

So This Web3 Thing…

The Story

Web3 could be the next version of the internet. 

Back up. What are Web1 and Web2?

Web1 is the internet of the ‘90s and early ‘00s when websites were basically static pages and banner ads. Think: Dial-up and AOL. Web2, aka today’s internet, refers to the version of the web after the invention of social media. The main difference between Web1 vs. Web2? The internet became much more interactive. So instead of just reading content, users could also create and share it (hi, TikTok). 

And what is Web3?

Web3 is a vision for the next iteration of the internet. It’s still a WIP, but fans say that it would be decentralized and built on blockchain (reminder: the technology cryptocurrency relies on). The idea is that users would be able to create and share content without relying on platforms like Facebook, Instagram, or Google. Proponents of Web3 say that it could give people more ownership over the content they create and consume.

How would that work?

Take Instagram for example. Users don’t own their handles, Meta does. And the data users generate by scrolling, liking, saving, and commenting is also owned by Meta. With Web3, the idea is that, instead of posting content to a platform like Instagram, users would share content on a blockchain-based platform. And rather than big tech controlling and monetizing that content, it would be maintained by users and communities through blockchain transactions. Which could mean that users would not only have the ability to create and share their own content but also, potentially, make money from it. 

Wait, there’s money to be made here?

There could be. Today, social media platforms like Instagram make money by collecting users’ data and selling targeted ads against it. A Web3 reimagining of the social media platform could enable users to own and monetize their data or make money by creating and sharing quality content. (TBD on how that would work exactly.) And even the content itself (think: photos, videos, etc.) could be considered digital assets with the potential to be bought and sold. (TBD on how that would work, too.)

theSkimm

Web3 is another possible iteration of the internet. Fans say it will be decentralized and could give people more ownership over their content and a greater share of the profits generated from it. But TBD on the details. For now, it’s mostly theoretical.

To the Moon

When a cryptocurrency is going “to the moon,” that means the price of a particular coin is rising off the charts. Each month, we’ll talk about a coin, NFT collection, or other blockchain-based investment that has a lot of buzz...and discuss whether that buzz is legit.

Imagine snagging the Instagram handle @Nike before the company could get to it. That’s the kind of gold rush that’s happening right now for .eth domains. The Ethereum Name Service (ENS) allows users to purchase domain names on the Ethereum blockchain. When someone types that domain name into a database like Etherscan, it displays all the user’s NFTs and transactions. Like connecting your Instagram with your Venmo, but make it Web3. And those domain names themselves are NFTs, meaning if a brand like Nike or any other user wanted that domain name, they’d have to buy it. (Hint: dotswoosh.eth recently sold for about $38,000.) ENS reported a record 378,000 .eth domains registered in July alone, generating more than $10 million in income.

Asking for a Friend

Design: theSkimm | Photo: Alyssa Blackburn

Since its inception, the Bitcoin blockchain has been hailed as a decentralized, trustless financial system. Read: Computer code validates transactions instead of a bank or other central authority figure. But a person (or a group of people) had to write that code. theSkimm spoke with data scientist Alyssa Blackburn who set out to find just how much trust early Bitcoin adopters put in those programmers. 

theSkimm: Can anything — even algorithms, computers, tech — designed by humans really be trustless?

Alyssa Blackburn: Bitcoin was designed to not have to rely on a trusted third party. For early users, this meant the promise of no single entity preventing users from accessing and spending funds. During our time of study, we found that this was not the case. There were often different users who were effectively the arbiters of the network. When using any kind of financial software, or even software in general, you are implicitly trusting the writers of this software to have written it with good intentions and to not have made errors leaving you vulnerable to theft or fraud.

This interview has been edited for clarity and length. Learn more about Blackburn’s findings here.

Thing to Know

Rug Pull

Basically, a scam. Crypto is a relatively new industry, and there aren’t a lot of regulations in place to protect consumers. So almost anyone can develop a project on the blockchain (think: create a new cryptocurrency) and manipulate its prices. Enter: a rug pull. Which happens when a developer abandons a project and runs away with investors’ money. Last year, developers of a Squid Game-inspired coin made off with $3.3 million after a rug pull. What draws victims in? FOMO. Scammers leverage social media to make would-be investors believe their project is the next big thing and that missing out would be a lost investment opportunity. Reminder: If it seems too good to be true, it probably is. 

Pop Quiz

Which group makes up about one-quarter of Web3 investors?

A. Gen Zers

B. Retirees

C. Women

D. Hedge fund managers

Hot Off the Web

Pop Quiz Answer: 

C: Women. According to the cryptocurrency marketplace Gemini, 26% of Web3 investors are women


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