Coinbase Board: Take a Longer-Term View on Web3
TechFlow Selected TechFlow Selected
Coinbase Board: Take a Longer-Term View on Web3
How did one of the largest cryptocurrency exchanges collapse so quickly? And why do such failures keep happening repeatedly?
Navigating Web3 tides with focused insightsAuthors: Katie Haun, Fred Wilson
Translation: TechFlow
The events surrounding FTX have shaken the confidence of many. How did one of the largest cryptocurrency exchanges collapse so quickly? And why do such crashes seem to keep happening?
In times like these, we should step back and take a broader view of Web3—not just a long-term forward-looking perspective, but also an understanding of where we came from.
As long-term investors in Web3 and board members (as well as individual shareholders) of Coinbase—one of the industry’s oldest and most reputable companies—we believe we can offer some thoughts.
Web3 is software-driven innovation with built-in financial systems. This is both a strength and a weakness.
-
On one hand, tokens enable developers and users to contribute to open-source protocols and share in their economic upside, fostering strong developer communities. This is a positive shift compared to past models of software development, monetization, and governance.
-
On the other hand, the boom-and-bust cycles of tokens are more pronounced, leading many to see Web3 as purely speculative with no real underlying value.
This perception is reinforced by individuals who launch Web3 companies and projects whose sole purpose is to make quick profits through leveraged trading, token pumping and dumping, or even outright fraud.
Most high-profile failures in Web3—from Mt Gox to 3AC, Celsius, and Alameda/FTX—have occurred at centralized firms running trading, lending, and speculation businesses.
Many of these failed companies were based overseas, and all were essentially unregulated. These companies and their activities have tarnished the reputation of Web3. While we’ve also seen notable decentralized projects like Terra fail due to design flaws, those failures unfolded transparently—an inherently healthier process than the opaque collapses of centralized entities.
Compare this to regulated Web3 firms operating in the U.S., such as Coinbase, Kraken, and Anchorage—you’ll find that companies that follow the rules and act responsibly have weathered these storms.
Since Bitcoin’s whitepaper 14 years ago, the most important software innovations of the past decade have been open-source software and decentralized protocols—the foundation of Web3. These protocols have survived recent market volatility. Because the software isn’t controlled by corporations but by open-source communities, with built-in safeguards and greater transparency than today’s tech and financial systems, we remain confident in Web3’s future.
These Web3 protocols are actively being developed for mainstream adoption, but some key features are still missing. For example, blockchains were originally built to be public by default, which isn’t suitable for most applications. Imagine if your emails, bank details, and social data were publicly visible on a blockchain for everyone to see.
Additionally, blockchains are slow and complex networks. Improvements in performance, scalability, and privacy are happening at the infrastructure layer of Web3 technology. Emerging technologies like zero-knowledge proofs and rollups are beginning to solve these issues without sacrificing decentralization. These breakthroughs are still in early stages, deployed by only a small fraction of developers. The quiet, behind-the-scenes progress is laying the groundwork for Web3 to go mainstream.
Ultimately, as Web3 infrastructure improves, the user experience gap between on-chain and off-chain will narrow. More users will feel comfortable self-custodying their assets in software they control and managing the private keys that grant access to those assets. This is already how many Web3 users interact with decentralized applications like NFT marketplaces.
When Web3 becomes a viable mass alternative to Web2, large centralized companies like Facebook, Apple, Amazon, and Google will have to compete for access to our data, reshaping how we use the internet. Software development will become more open-source and composable. Large financial institutions like banks and brokerages—including FTX—will no longer control our assets or lend them out without our permission.
Ironically, Web3 is about returning control of data and assets to individuals and taking it away from large centralized corporations. Yet the transition from Web2 to Web3 is slow and messy, and many early Web3 companies have simply mimicked the products they aim to replace. This is the risk within the Web3 ecosystem—and what we need to move beyond.
The lesson policymakers should take from recent events isn’t that Web3 is bad and must be restricted, but that pushing innovation offshore is harmful.
We need trusted, well-regulated centralized entities to survive and thrive, and we also need decentralized Web3 protocols to evolve and provide a path toward fully decentralized networks.
Both are possible, and the good news is we’re already on that path. We need to stay the course, build a healthy Web3 sector in the United States, and stop pushing American users toward risky, opaque offshore entities.
This is another difficult moment for Web3, and we’ll likely see negative headlines about "crypto" for a while. But it's important to remember that these headlines focus on the speculative/trading side of Web3. The more important foundational software innovation continues beneath the surface. That’s what we believe in—and what we will continue to fund and support.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
