From Web1 to Web3: Why Are We Here? | Matt Cutler

Welcome to the Bankless Summit, a series of talks from speakers all around the Ethereum ecosystem, which were all presented at a one-day event hosted the day after DEV CON called the Bankless Summit. We are releasing some of these talks on the podcast throughout all the week, and the rest will be available on the Bankless Premium feed. Matt Cutler is a combination of a fantastic storyteller and a fantastic data analyst. He's the founder of Block Native, which dives deep into the Ethereum mempool and MEV layer. But this talk is a little bit more zoomed out from what people might be used to when hearing from Matt. Blocknative is not Matt's first company or second or third. It's his fifth. Matt's first company was an internet company that he started in the 90s, well before the dot com boom, and he's founded a company in every major internet era since, including the desktop and mobile eras, and now in crypto. So it's the least to say that Matt knows a thing or two about internet businesses. And so let's go here from Matt's wisdom. Yeah.

Thank you, Dave.

Good afternoon, everyone. It's super fun to be here. And by Saturday of DEV CON week, is your brain totally full? Like DEV CON is many things, but it's mostly right curve. And I tend to do right curve stuff, and I've been in a whole bunch of right curve things. And this is gonna be a definitively left curve talk. Okay. So everyone can take a deep breath and relax and just sort of chill out and let it go. And I'm just gonna tell some stories about something that I have more than probably all of you in the room, maybe in the top two or three, which is years on this planet.

Okay.

So I am Matt. I'm founder and CEO of Block Native. We've been building largely in the Ethereum ecosystem for six and a half years now. But I started my entrepreneurial journey when I was still an undergrad at school long before it was fashionable to do internet companies, long before it was fashionable to do them as an undergrad. And one of the things that I've learned throughout my entrepreneurial journey is to basically have this question of why are we here? Like, why are you doing it? Now, when I started to build this talk and talk to David about being here, basically we were still kind of in a crab market. It was like sort of going sideways. And I get this question all the time from my normie friends, which are most of my friends, why are you building in crypto? Like, isn't that kind of scammy? And now that everything seems to be turning around, which is pretty exciting, you're gonna get the same question again. And so I can't really answer this question for you, but I can answer this question for me, and I can share that with you. And hopefully this will give you some tools so that as you inevitably get this question, why are you in this ecosystem? Why are you here? You'll have some answers to that. So this shows how old I am. This is me on my first day of college with my mom. This is 1991. Please don't raise your hand if you weren't born yet. Okay. I'm standing in front of what's known as lobby 10, which is the great dome at MIT, where I was a freshman. And when I went to MIT, this is where we did our work. This is called an Athena cluster. It looked just like this. There were Unix workstations, they were CRT monitors. When I first got there, there were only black and white ones. The color of this that you saw here was sort of a newer thing. And I don't know, you went to MIT, there were computers, your classwork was on them. You could do all sorts of cool stuff. You could message your friends, you had email, you could talk to people at other schools, there were games, and like we literally did not know any better. Oh, they also all had high speed Ethernet connections.

Okay.

Had no idea. Well it turned out

This is the internet. We're like, huh.

And this is this new networking thing that basically allows these computers to talk to each other. And we didn't really think much about it, even though this is true, MIT has a class A subnet. What that means is in the IP address range, 18 dot.

That's entirely MIT. Okay. Stanford has a class A subnet. Xerox Pac PARC has a class A subnet. And so this is this whole thing about hey, the future is already here, it's just not evenly distributed. And I happen to be at MIT at the moment where I had among the best internet access in the entire world. And of course, we all kind of took it for granted. Now, this is what it looked like the interesting part of the internet. Not the interesting part, the accessible part of the internet when I first got to school, and this is known as Gopher. I would doubt that anyone here has ever used Gopher, but it was a text-based protocol. I think I just saw a hand raised. Yeah, yeah, Gopher user, awesome. And gopher was like relatively usable, but entirely text-based. This is the best image I could find of Gopher. This is a DOS font, my one on a Unix font. But you can kind of like navigate through it and you're like, mm, okay, right? But while I was at school, I went to school in 1991, in 1994, this thing dropped, which I'm sure many of you are familiar with. This is the Mosaic Browser. And I was on the mosaic browser really early in its life cycle, and it kind of changed everything. Now, a little side note the mosaic browser was done by Mark Andreessen's team at the University of Illinois, and it was based on this brand new protocol called the World Wide Web, which was Tim Berners-Lee. Who I was gonna say, do you guys know who Tim Berners-Lee is? He's like the father of the web, and I happen to get lost coming up here. So instead of coming up the escalator off the BTS, I wandered around downstairs, and there's a freaking shrine to Tim Berners-Lee down there, which I highly recommend checking out. And Tim Berners-Lee worked at CERN, the European particle accelerator, and he was building this protocol to enable new forms of communication and collaboration among the researchers. Because he realized CERN was generating so much data that using traditional tools like email, like research papers, would be insufficient for them to convey the information with significant speed and fidelity, and they actually needed whole new communications protocols, right? Is this starting to sound familiar to you? Because it is.

It was pretty obvious how the future was going to be because it was like way better than AOL or CompuServe or anything else. It was programmable, it was flexible, it was visual, it was point and click, and you could do weird stuff on it, right? But if you were outside the internet, which was everybody else, it wasn't at all obvious. It was not at all obvious that this funny little research network that connects these universities would be the future. And, you know, starting a company in 1994 on the internet sounds really romantic, but let me tell you, it sucked. And the reason why is because.

Nobody really cared.

For a long time. The online world was growing, but it grew slowly until it kind of popped on the scene in 1999.

Which 1994 to 1999 doesn't seem like that big of a deal from our point of view right now, but it was five years.

Five years of building. And five years of building when I was 21 years old to 26 years old. It's a long time. Okay? And so, hey, and then what happened? 2000, everything exploded, and we actually took that company public. At the time we went public, which by the way, February 29th, 2000, which was a funny day, leap year day 2000, we were one of the top 35 IPOs in history, which is crazy. And then it all fell apart shortly thereafter with the dot com boom. And now we live in this world where online used to be this place you could go. When it started, I could hold it in my hand.

And today, it's someplace we escape. We have to go somewhere to get offline, right? To the edge, to the wilderness, to the wild where there's danger and you go, you know why I like being way out here? Because there's no cell service.

Because my toaster can't connect to the internet from out here, right? And so this trend, this phenomena, it seems somewhat inexorable, but it takes a long time to roll out. And what seems so sort of obvious and common sense today was not at all obvious and common sense in the beginning. Okay? Now you can probably see where this is going. Oh, I've done a whole bunch of startups. I've done a lot of tech startups, I've done a bunch of other startups, but I tend to be early in each one of these major revolutions, and they have different outcomes. Two of them, one I took public, two did not have great outcomes. The last one I sold, and now I'm going for the trifecta. I don't know if anyone's ever done this before, but take a company public, sell one to a public company, and exit the community with a token. So I'm going for that. We'll see if I can get all three together. And one of these things I want to say, by the way, is Matt still here? So, Matt, okay.

I was you 30 years ago. When I started in that Genesis, I was the youngest guy in the room, always. And it was really, really interesting. And now, as I said at the beginning, I'm one of the oldest guys in the room, right? Which is sort of an interesting thing to think about. And so, Matt, I really, really, really, really, really hope for you in 30 years you can give this talk to a different audience. Okay? And so here we are, in the middle of this new rebirth of Web3, and this is what it looked like when I started. Now I got into Web3 in 2017, and this is, believe it or not, the MetaMask interface from 2017. And it looks shockingly familiar to the one today, which is saying something, but it was really pretty lousy. MetaMask has come a long way. It was full of, at that time, all these phantom clicks. Like you could click something, you'd get no feedback from the wallet. And it was actually doing something in the background, and there was all these sort of uh really gnarly UX issues. And at the time, what drew me in was this CryptoKitties, which sort of seems old and funny right now, but it was one of the first sort of human relatable things happening on Web3. Now, what are some of the parallels that I observed? Now, when I first got on the internet, it was hard, it was slow, it was complicated, and it was weird, but it was cool, right? And when I did this in 2007, it had all that same stuff. I'll often tell this story. How do you imagine someone got online in 1995? Like literally, one of your friends would have read an article in Wired magazine or something else, you didn't really hear about it anywhere else, and they said, I've heard about the internet. Can you help me get online? You'd say, Why? And they go, I don't know, it sounds interesting.

Say great, we'll do it over the weekend because it basically takes a full day to do. Now, before I'm gonna come over to your house, you gotta go to the computer store in your car and get a piece of hardware called the modem. Okay. Oh, and by the way, you gotta figure that out because it's gonna plug into the wall, but it's also gonna plug into your phone line, and you might need to be go to Radio Shack and get a long cable.

Okay.

Now, really fun fact about getting online in 1995 is Windows, which was the predominant operating system of the time, did not ship with a TCP IP stack. So how the hell do you download a TCPIP stack if you don't have one in the first place? This was what we had to deal with then. So you had to even know what a TCPIP stack was, which I would argue there's people in this room who may not know what it is. And then you had to so get online, get the thing, plug it in, configure it, find a TCP stack, download it, install it, know what a browser is, know where you could find one, download the browser and install that. And then and only then could you type in a URL to go to someplace interesting. And you know what people wanted to do? They wanted to go to the New York Times. No, they didn't want to do that at all. And the reason is the New York Times was readily accessible. You could get it on the newsstand, you could get it from AOL. They went on the internet to do weird shit.

Okay.

They wanted all the stuff that you couldn't do anywhere else. And they're like, I've heard some interesting weird stuff is there that I can't see. And you're like, it might be dangerous. And you're like, that's kind of the point.

I go to the frontier, I go to the wilderness because it's dangerous. I don't want to go out on some trip way in the wilds of Thailand and go look a squirrel. I can see squirrels at home. I want to see things I can't see anywhere else. And so the same is true here in Web3.

I have done this. Hey, I want to get on chain. I want to get into crypto. I'll come over for the weekend. I'll set you up, right? Do the whole thing. Go back and forth. Install a wallet. Connect an account. Set up an exchange. Move some funds over. Now what can I do? Hey, this is weird. That's why I'm here. It's the weird stuff. Okay? You don't go on chain to get access to your bank account because you can only get access to your bank account. It's to do weird and different things that you can't do in other domains with some thrill of danger. So by the way, I'll talk about this a little bit, but that's why meme coins are a big deal. It's like this is cool, I can't do it anywhere else, and it's kind of dangerous. I like it, right? So I'm not here for the meme coins, but I kind of get the appeal of meme coins because you can't get it anywhere else. So by the way, we have this whole conversation in crypto about what's the mainstream application. Like, do the weird stuff first, right? Which we're kind of doing already. We're doing a lot of that, and we're mainstreaming as well. So in 2017, the on-chain world was this tiny little thing, teeny tiny, could fit in my head. And I was like, this is gonna be a great time to start a company. So in 2018, we started BlockDenob. And then in 2019 and 2020, it kind of went a whole lot slower than the internet. And this is super frustrating. Why isn't it bigger? Why isn't it going further? Why isn't it going faster? And this tells us that, you know, history doesn't repeat itself at rhymes. But one of the things I didn't really appreciate in the 90s was that the Clinton administration in the US took an aggressive anti-regulatory approach to the internet. All of us who are building never thought about the government. Not at all. We thought about standards and we thought about commerce, we thought about big and all these sort of problems that we didn't really talk about the government one bit. Think about how much in Web3 we talk about the government. And it's because, particularly in the US, there's been this really aggressive regulatory policy that's incredibly suppressed the evolution of the industry there. Now, what does the US have that has more capital than anyone else, that also has more software developers than anyone else? And so right now we're going through this interesting transition in the US, where we may be going from a very aggressively anti crypto regulatory regime to a much more supportive regime. And I think that the whiplash that that's going to create might be pretty interesting. So the question is when do we do that? And it's perfectly possible, and I would say probable, that this moment is right now.

that we are at the very precipice of this which will eventually lead to that.

It's crazy to think about. But hey, just think about how much of the world today is off-chain that should be on-chain. And to me, as a technologist, as someone who's seen this stuff before, the trends are inevitable. It's just a matter of time. And the timeline that we're on has been artificially suppressed by the regulatory environment, and that timeline's about to get accelerated. And that's super fun. Not financial advice, do your own research, but we're in a really interesting spot. Okay? So

why am I here?

And this is what I tell my normie friends

that the global GDP, the amount of economic output in the whole world, is just under 110 trillion and it's growing at 3.2% a year. This is the one that always knocks people out of their chair. The financial services sector is 33.5 trillion.

or 31% of the global economy and growing twice as fast.

Everyone I've ever told that stat to is like, wow, that's way bigger than I thought. I go, isn't it fascinating that 30% of the money goes to the money?

That seems like a big opportunity for, like, I don't know, a new class of technology to make it a lot more efficient and to free up existing GDP to solve new problems. Oh, this is don't take my word for it. This is the CEO of Robin Hood shortly after their earnings. It costs us roughly an order of magnitude less to operate a cryptocurrency business and offer the exchange of assets than it does on the TradFi side. That advantage is undeniable.

How is it possible to do it in an order of magnitude cheaper? It's because we're using next-gen technology, right? Just like the exchange of information over TCPIP and Worldwide Web Protocols was massively more efficient. Like this is happening. And so, like, let's make financial services efficient again. By the way, not a great acronym. And if let's just, for the sake of argument, say we can make it 50% more efficient, we can free up 16 trillion of existing GDP.

That's 16 trillion of existing economic output per year.

It's an unfathomably large sum of money. We don't need to grow our way into it. It's right here in front of us. And using the sorts of things that we're talking about all week at DEVCON, I think we can get there. And what could we use that for? I don't know. Scale up carbon sequestration, of which there's been a whole lot of innovation around that, but it's gonna need a ton of capital to get it to be big. We can really accelerate fusion, which by the way, free energy, no emissions, changes the world. We can ensure a line AGI so don't get destroyed by our artificial intelligence. We can even build sustainable off planet habitats, and we can build meme coins too. And so when I look at this and I think about why I am here, my answer is really simple it's to fix the world.

So when people ask me, why are you in crypto? I say to fix the world. Okay?

To free up the economic resources so that the next generation can scale up these technologies so we can solve our challenges. Now, I have three kids, two of my kids are in college, and they have grown up in an environment which tells them they're screwed.

The world is ending. Climate change is off. Income inequality is like it's so frustrating for me as a parent how they're told that they have no hope. And they deal with depression as a result. And I go, look, look, I'll be honest with you the challenges facing our society are real. But when I was growing up, you know what I was worried about? Global thermal nuclear war.

How often do you think about that, kids? Like, hmm, not at all. And you know when I was in college, you know what I thought about? The HIV AIDS epidemic. I was terrified of dying by having sex. Because if you got it, it was a death sentence. How much do you think about HIV, kids? Not at all.

You go, huh? These are massive, massive global societal problems that prior generations faced and solved through technology.

So guess what?

These challenges facing you, your opportunity, your challenge, your obligation is to face them with optimism and to innovate your way out of these challenges. I'm not saying they're not real, but guess what? Every generation deals with its own existential crisis. These happen to be yours. My participation in this ecosystem is to help free up the economic resources so that those challenges can actually be tackled. And you know what? I'm pretty optimistic about it.

And I hope you are too. And I hope you pass that around. Okay, so that's why I'm here. Now I'm gonna shift gears a little bit. And the title of this talk is Next Gen Architectures, Next Gen Challenges. And there's sexy problems out there and less sexy problems. And as you're thinking about building, I want to encourage you to not just think about the big headline, sexy ones, but there's a universe of less sexy ones. Little interesting things that require attention if we are in fact going to build the Foundation Next economy. And there's been one that's been mentioned a bunch of times on stage here, which I'm always excited about when I hear, which is one that everybody kind of glances over. And in fact, Ansgar, who's a buddy of mine, said it's not that big of a deal, and that's gas.

Gas. Doesn't even sound sexy. But you know, there's sort of a shocking amount of money that's spent on gas. So we looked up online how much is spent on web 3 fees in the past year, and we found nothing.

Which was kind of surprising to me. We did our own on chain research, and we're pretty confident the actual number spent on Web3 fees in the past 12 months is 5.2 billion.

Another number that everybody is surprised by when I share. An easy way to think about it is every 100,000 ETH that gets burned at $3,000 ETH is about 1.2 billion of fees. Okay? So ETH is more than half of all the Web3 fees, but obviously there's a lot more out there. And you know, there's sort of three guarantees in life now: death taxes and web three fees. You can't escape them. And so when we're thinking about what to build, what to make a utility of, as Arjun said, we think that there's a whole bunch of opportunity around this. And by the way, at Block Native, so I've been building for six and a half years, I am oftentimes challenged to build the right way, the new way, the modern way. And Arjun said it really, really well, which is build protocols, not products. And so we see this really interesting set of opportunities around gas as growing in complexity. Matt talked about this. Gas was one-dimensional, and then it became two-dimensional in 1559, and now it's three-dimensional in 484. And right now it's about to get four-dimensional with pre-confirmations, and as we look ahead to Pectra, it's gonna get multidimensional, and that's just Ethereum alone. And all this stuff is gonna need to get navigated in an increasingly interop world. And so we're trying to do something about it. This is the first time it's ever being talked about publicly. We're introducing the gas network. Okay? And the whole idea of the gas network is take the gas markets and put them on chain. And so it's basically an Oracle platform that you can basically get the real time market conditions from any chain to any chain. And by the way, if you want to check this out, gas.network is the URL. We're really proud of that one. And I talk about this in the context of this whole big picture because while there are these big opportunities going on out there, there's also a lot of small work that needs to get done.

And so as you're building, as you're looking for opportunities, as you're looking for investment ideas, a lot of this sort of under-the-covers, unsexy stuff is going to need to get addressed. And there's a ton to do. There's a ton to do. And so we think this is necessary stuff for on-chain interoperability. And we're at DevNet now, we're at TestSet soon, and we really want feedback on this. And so as we think about the big picture and why we're here, I also encourage everyone to think about the problems to solve. Down the line, we'll do things like a foundation, we'll be labs and a shared governance model. I'll go through that. So that was my

Extended journey from Web 1.0 to Web3. And I think the opportunity in front of us is to fix the world in ways large and small. By the way, when I say fix the world, I don't just mean fix the world technically. I also think we have the opportunity to fix the world emotionally, give everybody hope. I think we have the opportunity to fix the world philosophically, get rid of some of the challenges that I think we're seeing around the world and have a better, more constructive way to talk to each other and have disagreements and coordinate and collaborate. So there's so much opportunity inside this ecosystem. And I think the best of this ecosystem is present here at DEV CON and present here in this room at Banklow Summit. I think the fact that all of you are here in this room with me would suggest you're on the leading edge of this, which congratulations, welcome, we're happy to have you here. And I would encourage you, if this sort of resonates with you, if this is left curve enough for you, to try to share this some of the ideas and these sorts of vibes with people outside. Because we do have a massive PR problem.

We do have a lot of people who've been indoctrinated by mainstream media that this group is just a bunch of grifters, just a bunch of scammers, just a bunch away to rob you and be greedy and not want regulation. And what's so frustrating for me is it couldn't be further from the truth that that's what's going on here. But we got to get the word out about that. And I want to thank David and Ryan for being among the leading edge of that. It's really true, bankless does make a huge difference. And that's why I'm here.

So

thanks so much. Really a pleasure to be here.

All right, questions. Anyone got a question? Question from Matt.

Hey Matt, thank you for the talk and the history. Um

quick question. How do you you know the fact that uh the twenty two thousand explosion of the internet after five years and well we're here uh since a bit more than five years, not that yet.

My intuition is that uh money scares people, right? You because when what I remember when I connected to the internet, it was to steal MP3s and movies, and I could only win.

and scammers and blah blah blah, I can also lose. Um so how do you imagine

that making a break or making it not accelerating because

the newcomers can understand that they get something to lose connecting to this new uh network

If I had the answer to that, I probably wouldn't be here speaking to you guys, first off. But I will say something. So, what changed in 1999? Like, it's a really worthwhile question. Like, what was the thing? Like, was there some new piece of tech, some new piece of innovation, some fundamental change? And the honest answer is I'm not entirely sure, but from my experience as a builder, one bit flipped. And that was the corporations in the US went from not knowing about, not caring, or fearing about the internet to saying if we don't have a strategy here, if we're not on this, we're screwed.