Do Marxist Principles Have a Place in Web3?

Web3 has been gaining momentum and captivating users from all walks of life. This term is currently used to refer to an innovative, decentralized internet, which offers never before seen benefits and opportunities to people around the world. 

However, despite the rapid growth of Web3 the global community has been worrying that it is spreading the theories of Karl Marx.

This article was created to explore the concepts of NFTs, DeFi, and DAOs - the three fundamental components of Web3 - in terms of Marxist interpretations. Does Marxism really have something to do with the next generation of the world wide web, or are these just empty statements without a solid foundation? 

Nature of Web3 

First I will cover some basic information in regard to Web3 which will make it easier to prevent potential demagoguery. 

In a broad sense, the beauty of Web3 lies in implementing breakthrough technologies like cryptocurrencies, blockchain networks, and NFTs. Developers utilize these novice concepts to provide internet users ownership of the things they use in the digital space on a daily basis.

The Web3 concept is built on several primary principles which differentiate it from Web2 and Web1.

Firstly, Web3 is fully permissionless and can be accessed by any user with no exceptions. Secondly, it is fully decentralized, since there are no specific authorities or institutions to regulate it. Most importantly, ownership within Web3 is shared by its builders.

Additionally, Web3 boasts a native payment system since it uses cryptocurrency for conducting safe and secure transactions online, leaving conventional and old-fashioned financial institutions out of the picture.

In the 2020s more and more companies, developers, and users are talking about Web 3.0, the third "generation" of the Internet in which blockchain technology will play a major role. According to this new philosophy, power will no longer be concentrated in the hands of large corporations and institutions. 

More than 34,000 new developers joined Web 3.0 projects in 2021 and companies have invested hundreds of millions of dollars in this field. For example, in November, the co-founder of Reddit and Solana Ventures launched a $100 million joint investment fund.

Theories of the Internet of the future have been discussed since 1998, when the creator of the World Wide Web, Tim Berners-Lee, introduced the idea of a semantic web in which the content of sites would be described using a metalanguage, and would be understandable to computers. 

Tim O'Reilly, the author of the term Web 2.0, also believed that Web 3.0 would involve semantics through which the web could interact with the physical world. However, he advised against identifying the Internet with the semantic web because he expected new technological shifts to occur between 2010 and 2020.

The official term Web 3.0 was formulated in 2007 by Jason Calacanis, the head of Netscape.com. He associated the Internet of the future with the creation of quality content: online resources will no longer be monotonous or useless, and the content will be created by professionals using a certain platform. 

Calacanis did not describe the platform itself, but today it is obvious that Web 3.0 is not one system, but rather a multidimensional concept that covers many facets at once. 

Each of these advantages and features led users to draw parallels between Marx's ideas and the concept of Web3. Even though the biggest cryptocurrency gurus Nick Szabo and Ameen Soleiman advocate the fact that it is completely unmarxist, the discussion is still up for debate.

Cryptocurrencies and Marxism

In his work “Would Karl Marx Support the Existence of Bitcoin?” Henry Corderman says: 

“The main reason Marx would support Bitcoin is that the decentralized aspects of socialism are quite reflective in nature to Bitcoin's use of blockchain. As previously mentioned, Bitcoin was created in a way where there was no need for a central authority.

The similarities between Bitcoin and socialism is based on their democratic core values as well as their distrust for centralized institutions. For these reasons, Marx would certainly support the existence of Bitcoin.

Just as Marx advocates for workers to become the state, Satoshi advocates for customers to become the bank. By cutting out the middleman, you do not need to place your trust in any centralized entity.“

To look at cryptocurrencies through the prism of Marxism, readers need a little insight into the primary economic principles promoted by German philosopher and thinker.

Marx distinguished four stages in the development of forms of value: simple, expanded, general, and money-form of value.

In simple terms, the value of a single product was accidentally expressed in some other product. It can be represented by the equation: commodity A = commodity B. Commodity A expresses its value in commodity B, therefore it plays an active role and is in the relative form of value. Commodity B serves as a means for expressing the value of commodity A, plays a passive role, and is in an equivalent form of value. 

Any commodity can be exchanged for any other product through barter. The problems with this stage: are the lack of a form of wealth preservation, a single scale of value, and a unit of account and payment. Finally, for the transaction to take place, there must be a collision of interests and consensus between buyer and seller.

Expanded form: the same commodity (A) began to express its value not in a single commodity, but in a number of other commodities. Commodity A can be exchanged for commodities B, C, and D. There are several equivalents for the exchange, which allows for a large number of transactions.

General form: a commodity that has the ability to be directly exchanged for all other commodities. Its use value becomes the common form of value for the entire commodity world. It implies that many commodities are henceforth equated to one commodity, as happened with gold.

The final form - the monetary form of value - appears when the role of the universal equivalent is firmly fixed for one commodity, becoming its social monopoly. This equivalent is money. When it meets a special commodity, the labor force, it begins to reproduce itself without ceasing- turning into capital.

As everybody knows, capital is formed by a certain sum of money and back then, by “money” Marx meant gold and silver. Nowadays these metals have been replaced by paper and electronic money, which are more convenient equivalents. 

But the world and the economy are developing rapidly, and a new phenomenon is emerging in the global economy - cryptocurrency. Money existing on the principles of digital cryptography does not yet have a material form and is not controlled by the main “banker”, i.e. the state, and due to its convenience and security, it is rapidly gaining popularity. The fundamental novelty lies in the fact that cryptocurrencies do not carry traditional currency, but generate new ones.

Bitcoin was created as a decentralized, peer-to-peer payment system operated by the participants themselves, and all transactions are registered using the blockchain. In order to encourage enthusiasts to use resources for operations, participants receive a reward in the form of a certain amount of bitcoins for each new block of transactions — this is the mining process. In 2009, when bitcoin ideologue Satoshi Nakamoto generated the first block, no one could have imagined that this ephemeral virtual currency would be quoted as more expensive than gold, or that hundreds of other cryptocurrencies would flood the Internet.

One of the main advantages of money is liquidity. Currently, Bitcoin is accepted for payment by business projects, online supermarkets, hotels, airlines, gaming companies, mobile phones, and accessories. Thus, Bitcoin is actively penetrating into business arenas becoming more and more liquid due to increasing demand. This also includes the functions of a measure of value, a universal equivalent and a means of payment - after all, Bitcoin today has an equivalent value in fiat money, and businesses are ready to accept this equivalent for payment.

The security and privacy offered by digital currencies have prompted not only ordinary internet users but also many technology companies to adopt "crypto" as a form of payment. In particular, Dell, Microsoft, Google, Amazon and other notable companies have done so.

Today we are witnessing a dualistic picture of the world — the parallel coexistence of two systems built on different principles: an inert, stagnant, conservative, controlled, and unwieldy traditional economy backed by nation-states, and a digital one - a rapidly developing, variable, mobile world in which borders are not a hindrance. Digital tools are becoming more and more deeply embedded in our lives and an indispensable attribute of work. The means of production, as we know, determine the social relations of production.

The functioning of the electronic money market, and cryptocurrencies, in particular, is a consequence of the development of both the scientific and technical process and the money circulation that serves the economy. The actions of the state in the modernization of settlements have led to various positive consequences: reduction of government expenditures on money issuance, transparency of payments, improvement of the process of inflation regulation, and improvement of the efficiency of the use of funds both at the individual, institutional, and state level overall.

However, the desire to reduce the share of cash in settlements has led to some difficulties, most of which are related to cryptocurrencies. The cryptocurrency market is growing rapidly, and the pressure on monetary circulation and its impact on the national economy as a whole is increasing. Consequently, the issue of studying the direction of their influence on the payment system, financial market regulation, and the policy of central banks to ensure financial stability and price stability is becoming increasingly relevant.

 All of the above is true in regard to cryptocurrencies, but what is really intriguing is the question of whether the NFTs, DAOs, and DeFi market would have been approved by the philosopher? It is high time to figure it out.

NFTs as a solution to the issue of private property in Marxism 

Let’s start with sorting out the roots of the property and private ownership dilemma.

There are still some discussions about whether Marx promotes the idea of eliminating property ownership or denying property as such. Based on this thesis, one might initially assume that the philosopher proposes to surrender property rights to the proletariat. 

In order to grasp the initial idea of the philosopher, one must turn to a fundamental document called the Manifesto of the Communist Party, where Marx and Engels both claim that the annihilation of property is not the hallmark of communism, but rather the cancellation of private property. 

This formulation is quite opaque, so as not to disturb the ordinary members of trade unions and to emphasize the removal of the bourgeoisie from its illegitimate profits. 

This is undoubtedly a speculative device in the name of evading the issue of workers' property and smoothing over the paradoxical nature of the anti-immovable position in Marx’s philosophy.  

Marx also expressed the idea that trade governs economies using terms such as supply and demand, a relationship that ruins people's lives and creates acceptable conditions for building empires, which in turn causes entire nations to suffer.

Many critics of the NFT movement share this point of view since supply and demand assign value to goods not in the accordance with what utilities they can offer, but rather because of the scarcity within the market. 

This is why, in all likelihood, Marx would not find the concept of Web3 appealing. However, what occurs when workers gain mastery of the means of production?

When this happens, each individual can attain the unique role he was destined for. He must occupy a social unit in a particular craft, and ought to stick to it unless he has a desire to lose his source of income. On the contrary, in a communist society, where everyone has the opportunity to excel in whatever branch he likes, society is in charge of general production regulation. Hence, people are free to choose the activities that they wish to pursue without fear of losing their livelihood.  

As it turns out, the main means of production for Marxist adherents are not the tools of labor or factories but rather time and a sense of self-esteem, which can only be attained with leisure time. These two factors make it possible to achieve sovereignty in life by choosing the role in our community that we play in creating profit.

Here again, there is another inconsistency: if everyone does what he likes,  how does society collectively work? In this way, Marx introduces the idea that society regulates general production.

Extrapolating Marx's rhetoric to the Web3 era, it is worth asking whether developers should have ownership of the products of our labor, or whether they should be open source for all who can use them?

The best way to answer that question is to dig deeper into the shaping of the creator economy over the past 10 years. Looking at the big picture, it's easy to draw a parallel between the creator economy and Web3 culture. 

Broadly speaking, the creator economy has set the vector for the general movement toward a freelance economy and the exaltation of the person who does what they love for a living.

Globally, the creator economy is nothing more than the apogee of the failures of the gig economy, which dominated for the previous 30 years under the promise of worker sovereignty, and the reality of worker isolation. In our current reality, the gig economy has grown by 33% and is growing much faster than advanced economies around the world. 

According to recent studies, there are already more than 1 billion gig-workers successfully performing their jobs, which has been achieved through benefits such as enhanced freedoms over regular wage workers including setting their own hours of work, remote workstations, and more.

Similarly, the creator economy offered us the Marxian vision that anyone can be a successful artist, solely by working via platforms that make exorbitant profits out of the laborers who bring them success. 

Freelancers are therefore at a disadvantage because of open source, since everyone is free to use their work, whereas the platforms they work through have enormous monetization opportunities. In simpler terms, freelancers were given open-source, and platforms received proprietary rights.

Ultimately, to answer the original question, Web3 might be a response to the politically polarized failures in the corporate ladder and economy, with closed companies on one side and open-source freelancers on another. 

Going back to Marx's rhetoric that the freedom to make what one wants would work under the condition that there is an established and well-developed system of common production - we are only able to own our work if there is a willingness to sacrifice it for some collective benefit.

This is where NFT culture comes into play. 

NFTs manage to represent the interests of digital artists and creators who can profit from their efforts and at the same time gives the community ownership over the unique image, which is essentially open-source.

NFTs provide creators with full ownership of their artworks while allowing them to make a livelihood out of it. But most importantly, in doing so, they do not put their work in the hands of private property but open it up to the public.

An alternative answer to the question of the deprivation of individual property rights is the DAO. To see how this subcategory of organization solves this problem, read on.

Elimination of investment problems with DAOs   

Marx, in his most well-known “Capital”, argued extensively on the subject of debt and investment, emphasizing the difference between these two concepts. He described the debt as fictitious capital or, to put it another way, an obligation for future money that is de facto fictional.  

What he really considered an investment, according to his rhetoric, was investing one's money in other companies or enterprises. According to Marx, the purchase of stocks is real capital, since they are not just debt receipts, which could exist twice just like currencies and loans. 

What is meant by the phrase  "exist twice" is that on the one hand capital has the value of title deeds (shares), and on the other as real capital invested or to be invested in these enterprises.

Marx's reasoning also includes the concept of  "illusory capital”, of which government bonds are an example. Due to the fact that they involve repayment at interest which cannot, in practice, be used to create itself, the state is able to create money out of thin air. 

Returning to the topic of stocks, it is unknown exactly how their price is formed. One can say that the price formation process is based on investors' belief in the expected future earnings of the company, which factually enables institutions to successfully generate income out of thin air.

Our expectation that the value of stocks would rise, analogous to debt, is a claim on future production. Until now, this catch has not carried any weight because traditionally there has never been a way to leverage IOUs as capital. 

With the advent of the DAO concept, these possibilities miraculously appeared because shares were replaced by tokens with which users can do various manipulations, including investing, buying, and trading.

DAOs enable everyone to access illusory capital without having to pay interest, because each user has an opportunity to issue his own tokens. The audience of the project or product purchases a crowd sale token, providing the creator with the capital. 

In return, the community acquires the power to take part in the development of the project by influencing its various aspects according to the pre-written rules in the smart contract. Since DAOs are public institutions, there is no chance that the rules will be changed without people noticing.

Essentially, DAOs enable users to own the platform as a collective, where tokens act as a more advanced version of shares in a company. Undoubtedly, these opportunities sound exciting but if you dig deeper, decentralized anonymous organizations could pose a threat to already established financial systems. For the most part, that's because DAOs are ideal vehicles for fraudulent and failed projects. 

On the other hand, these organizations will contribute to the use of various innovations and raise capital for ambitious ideas never before seen and only possible thanks to Web3. 

"What I find most appealing about the DAO philosophy is that it makes individuals feel important within the project, allowing them to engage in the development and management processes. Aside from that, decentralized anonymous organizations open up so many precious opportunities for developers, enabling them to make most ambitious ideas come true with the power of unity and joint efforts." – Uladzimir Hryneuski on DAOs. 

DeFi & liquid capital 

Liquid or circulating capital, which can easily be turned into commodities according to Marx, is indifferent to any particular form and can drop or take any of them as equivalent incarnations.  

To put it simply, liquid capital can take any form and is not restricted to a specific use scenario or a specific territory where it is applicable. 

Theoretically, liquid capital makes a good fit for representing any object or commodity and is perfectly mobile, as it is deprived of problems such as overstocking or initial expenses which require huge sums of investment. 

In this case, it is not hard to compare liquidity with digital money, suggesting that it, together with the enormous popularity of Web3, can become the ultimate solution to the reality of scarcity. However, this is not quite the case. 

Infinite liquidity implies the use of a simplified process of borrowing money not regulated by any centralized institution, which is bound to lead to a financial collapse due to unregulated lending. 

Because liquid capital ensures financial sovereignty, it spares people from intermediaries profiting from their money. DeFi's idea relies on the fact that users no longer have to pay banks for their setbacks without being rewarded for their accomplishments. 

Ultimately, DeFi allows users to act as lenders themselves by providing liquidity in the markets without third parties. To do so, they only need a cryptocurrency wallet and an Internet connection.

Bottom line

Web3 does have some commonalities with certain rhetorics of Marx, but is this really a bad thing? It has been revolutionizing the digital space, simplifying digital interactions for millions of people across the globe. 

For all the skeptics out there, only time will show how Web3 will establish itself in the long term. However, as of now, it has impressive prospects for growth and development.