Getting Scammed in Web3: A Short Story
Stretch Four Insights Volume 7
Welcome to the latest issue of Stretch Four Insights — a newsletter that provides a weekly brief on all the things I am consuming across technology, startups, and the NBA.
If you are a new reader, thank you for checking in. Feel free to check out last week’s newsletter, which is the best way to explain what you will get here.
In addition to the weekly newsletter format, I will occasionally write a long-form essay on something I feel obliged to write on, it could be an adjacent startup or competitor to what we are building at ModernTax or this week an experience felt the need to decompose.
📬 To get future issues delivered to your inbox, subscribe below.
If you are already a subscriber share the newseletter with somone you feel would enjoy, learn, or general get something out of it. I am also always looking for feedback to ping me any time.
I've read American Kingpin what feels **like a hundred times in the past four years. It reads like the Bible for getting rich on Bitcoin. Despite memorizing parts of the book, I haven't done as much as dip my toes in the water of cryptocurrency and Web 3.0. Sure, I've purchased coins sporadically but I have mostly stayed on the sidelines. This past month, I figured it was time to put my money where my mouth is and get some real skin in the game.
While I am a novice, I have been following the proverbial experts for the past few months. Diving deep into articles and podcasts, but learning by doing seems to be the best decision I made to form my own opinion.
This week I'll do my best to unpack my experience of purchasing my first NFT and shed some light on:
How did we get here
What is Web 3.0
How one gets paid
How I got scammed
The future implications
How Did We Get Here
I have always felt special energy about how Ross Ulbricht, supposedly, built a billion-dollar enterprise, The Silk Road, which made it easy for anyone to trade cash for Bitcoin, trade Bitcoin for drugs, and wait for drugs to show up at your doorstep.
The Silk Road reached its peak ten years ago, so of course, now that Coinbase is a $60 billion dollar publicly-traded company we can all feel safe transacting in cryptocurrency right?
Wrong. What I would call Silk Road 2.0 and more formally recognized as Web 3.0 still includes many of the same money-making tactics, pure enjoyment, risks, scams, and illegal activity that was taking place years ago.
On one hand, it's par for the course. Scammers are going to find their way into any opportunity to capitalize and make money. On the other hand, for Web 3.0 to become mainstream it cannot be so easy to get scammed not to mention so expensive, but that is a story for another day.
Just as easy as it was to trade some cash for Bitcoin and buy heroin on The Silk Road, it is similarly as easy to have cryptocurrency stolen from you, lose your coins down a rabbit hole of secret recovery phrases, or be duped in the plethora of NFT scams. And just like in 2011, there are no repercussions or regulations to retrieve your stolen funds back.
That being said, I started a Web 3.0 journey a few weeks ago, when I saw many influential people in the VC and startup space retweeting and pumping a new NFT project called Chain Runners. I was intrigued.
You might be wondering what Web 3.0 is and why I consider it to be the second coming of Silk Road. Let's start with the basics.
What is Web 3.0?
Similar to the Silk Road with illegal activity being the backbone of its product, Web 3.0 is solving the problem of making money for your time and attention on the internet. In a perfect Web 3.0 world, games are paying people to play, streaming services are giving people rewards for listening, and apps and protocols are giving people rewards for using their service.
One example is how much time we spend on our phones. Last week on average, I spent 12 hours and 26 minutes on my phone. The problem is not me spending that much time on my phone. The problem is that my time spend equals money for companies like Apple, Google, and Meta.
In a Web 3.0 world, I monetize through tokens, rewards, and other communal benefits, and those mindless hours we spend strolling, socializing, and exploring can turn into a real financial upside.
If Web 3.0 gets mainstream adoption, there is an app, or should I say dapp, that will pay us for our time and engagement.
In short, the energy behind Web 3.0 is justified. If it works, it can solve a real problem.
So Web 3.0 is About Getting Paid?
Well, "money" in Web 3.0 is in the form of cryptocurrency, and this currency all lives on the blockchain. While the Silk Road and illegal drug trade were the first use case of cryptocurrency, we have now expanded into a foray of new use cases, none yet being interesting enough to read a book multiple times. But we see some fascinating things happening, people are getting rich, and Web 3.0 is what I would call much more fun than anything than the traditional internet particularly when you dive deep into how it can change the way we think about money.
Mario Gabriele explains in a recent piece, MetaMask: The Hero Crypto Deserves, that in the Web 3.0 world your wallet not only serves as your digital wallet but as your bank account, passport, and browser all in one.
“On the internet, all the actions that we’re taking on all these platforms are already financialized – our likes have value, our retweets have value, the content that we put out there has value. But today, that value does not accrue to the individual user. Tokenizing our work and our actions allows that value to accrue back to the individual creators.” - Li Jin
In this world, you receive tokens for your attention and time, art i.e. NFTs, or heroin (there have been multiple new Silk Road type marketplaces).
I am able to trade tokens on one of the many Web 3.0 exchanges, swap my coins across wallets, and buy more with fiat currency. I am able to do all of this anonymously or I can create a username to identify myself. As you may already have been led on to, this opens the door for fraud and to get scammed out of your cryptocurrency.
How Did I Get Scammed?
When I stumbled upon Chain Runners, I was eager to take part. It seemed like one of the next big NFT projects.
Participating in Web 3.0 and making money requires some upfront research and, from what I have experienced, a good amount of money to blow. From the complexity standpoint, you may get introduced to several wallets, passwords, fees, and many badly designed apps and sites.
To transact in almost all Web 3.0 apps you'll first need to fund a crypto wallet with a native token. In the case of Chain Runners, I missed the initial sale so to participate I needed to purchase on the secondary market, OpenSea.
OpenSea has built a $10B business in less than 24 months by building an eBay-like experience to purchase NFTs after they are sold out by the creator. To simply fund my wallet, I need to move across at least three different user interfaces. Additionally, once a project starts to gain traction there are several scams that can be created quickly.
There are whole scam farms that kick up new websites to mimic legitimate projects. These teams can also easily kick up wallets to receive funds as well in a matter of seconds.
One of the reasons scams work so well in Web 3.0 is due to so many different user experiences that are fairly new to consumers.
The brains behind the scam that duped me for 0.11 ETH accumulated 78.295 ETH in nine days on a simple website that copied the actual Chain Runners website.
There is no way anyone duped can get their funds back. No one to call to make a dispute. At the time of publishing, this wallet is still accepting ETH and very likely on to the next scam.
What Are The Future Implications?
Sending what is now $477.75 into the Web 3.0 abyss is a monetary loss for me. But chalking it up as a learning experience is the best and only thing I can do to move forward.
What makes Web 3.0 so fascinating is there are absolutely no stop blocks to losing your tokens. In the chart below I can track the wallet being used to receive the ETH that people were sending.
The fact that wallet 0xa0666cceaf9bb4a3b982875d1fdc2ec955a99f6b can simply sit out there and collect ETH with no repercussions is scary and fascinating at the same time as more and more people adopt Web 3.0 as a way to transact.
You can imagine a surplus of new products built-in Web 3.0 to combat fraud, but what is key to realize is these products will not look like the ones we saw in Web 2.0.
There are three big future implications of the emergence of Web 3.0 and these implications will make or break the adoption:
Community
The community is currently the only reliable way to protect yourself. Fortunately, the community is one of the strongest developments thus far in Web 3.0.
To quote Wesley Snipes as Nino Brown in New Jack City, "We all we got." Below is a tweetstorm from a member of the Chain Runners community, that shows how this happens in real-time.
Josh Buckley stepped in repurchased the stolen NFT and gave it back to the original owner. This is one of the reasons I like being a Chain Runner member, but not all communities are this kind.
Discord Groups
Discord is a mecca of Web 3.0 communities. If you want to be active and have a standing chance to be a part of what is going on you need to become a native Discord user. I would recommend this long nerdy breakdown of what Discord is today, but in short, it is an AOL meets Slack meets Twitter type service where all Web 3.0 communities, projects, and knowledge lives. While Discord servers are not communities themselves they are table stakes to understand how things work. Generally, these servers also provide information on what scams are happening in real-time.
Conclusion
In closing, the Web 3.0 universe seems to be gaining steam on a daily basis, going one day without checking in you may miss the next great project. It would say dedicate money that you have the ability to lose to participate in a project, but do not expect immediate returns. Delve into the community, be active in the Discord server, and learn what is going on.