Scoop: Legal battle over ownership of Web3 escalates

With help from Derek Robertson

A legal battle over the software infrastructure behind much of the crypto activity is heating up with a new Swiss court ruling. The fight pits billionaire Joe Lubin, considered a de facto co-founder of Ethereum, against a group of his former employees at ConsenSys AG, a company that was central to the development of the second oldest blockchain network.

While on some level the lawsuit amounts to a squabble over corporate governance and the value of some key assets, it can also be seen as symbolic of a larger question shaping the world that crypto and Web3 evangelists hope to build: should blockchain systems embrace existing corporate and government structures, or maximize their independence from them?

In the crypto world, a more pragmatic and business-minded camp sees the involvement of major banks and government agencies as a validation of the technology and a prerequisite for reaching its potential. Crypto purists, on the other hand, distrust those incumbents and see their arrival as a threat to the blockchain’s original promise — for example, by collecting user data or enforcing government regulations that the purists consider unjust.

The latest ruling extends a feud that has divided an important group of early crypto pioneers.

ConsenSys’ former employees, who are also minority shareholders in the company, allege it improperly transferred some key assets to a separate entity now owned by Lubin and a who’s-who of major investors including JP Morgan, Microsoft , Softbank and Singapore’s state-owned Temasek.

Those assets include MetaMask, a popular crypto wallet, and Infura, a suite of software tools for blockchain developers – meaning those tools are now owned by a company backed by major financial powerhouses.

In March, the minority shareholders submitted a request for a special audit. Soon after, it filed a demand that the transfer be retroactively voted on by shareholders. Last month, a judge in the Swiss canton of Zug granted the former employees’ demand for that shareholder vote in a previously unreported decision.

For the claimants, the victory is purely tactical. Since Lubin himself owns the majority of shares of ConsenSys AG, the vote is expected to ratify the transfer. But the decision paves the way for more legal wrangling, as the vote would produce a shareholder resolution that could be challenged in court, allowing minority shareholders to argue the substance of their legal challenge: that Lubin’s interest in the new entity constitutes a conflict of interest. , and that the assets were bought at an undervalued price – about $50 million.

“Any way you look at it, this is really bad management of our assets,” said Arthur Falls, one of the former employees who serves as spokesman for the group. The group argues that the hundreds of millions of dollars invested in the new entity, ConsenSys Software Inc., since the transfer imply a much higher value for the assets.

In an emailed statement, a spokesperson for ConsenSys AG, now doing business as ConsenSys Mesh, denied the allegations, saying the transfer was made in consultation with leading law firms and based on an independent valuation by PwC. The statement claims the price was reasonable at the time the transfer took place in 2020, during a moment of pandemic-induced economic uncertainty, before the latest crypto bull run and the NFT craze pumped the asset’s value to new highs.

Given the obstacles in the way of reversing a complex, years-old transaction, it’s unclear what the outcome of a successful legal challenge might hold. But the conflict highlights the industry’s difficult transition from its roots in shoddy, informal projects fostered by idealistic computer programmers to a major global corporation. Falls said one updating the privacy policy released last month that allows MetaMask to collect users’ IP addresses was symbolic of MetaMask’s distaste for crypto’s ideals under its new owner.

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One of the pioneers of the gaming world has had enough of meta.

On Friday afternoon Insider reported that John Carmack, the designer of paradigm-changing 1990s video games like Doom and Quake, would leave Meta, where he had been CTO since 2013 and advised CTO for Oculus.

Carmack’s rationale: that the company is run inefficiently, with the very thing that enables its expensive and ambitious investment in the metaverse – that is, the sheer size of the company – the project bogs down in bureaucratic red tape.

“We have a ridiculous amount of people and resources, but we are constantly sabotaging ourselves and wasting effort,” Carmack wrote in the post announcing his resignation, which he later fully placed on Facebook. “There’s no way to cover this up; I think our organization is operating at half the effectiveness that would make me happy.”

Long one of the most outspoken game developers of his generation, Carmack lamented the same issues Lex Fridman’s Podcast earlier this year. However, age seems to have mellowed Carmack, who nevertheless insisted in his suicide note that “VR can add value to most people in the world, and no company is better positioned to do so than Meta” – and on Twitter, Meta’s CTO Andrew Bosworth wished him well saying “it’s impossible to overstate the impact you’ve had on our work and the industry as a whole… Thank you and see you in VR.” — Dirk Robertson

Point, counterpoint: Not everyone is convinced of big language models like the one on which ChatGPT runs is going to “finish the homework”.

Robert Pondiscio, a senior fellow at the American Enterprise Institute, disagreed an essay published last week by the think tank, arguing that the element of human judgment involved in communication makes it impossible to automate except for routine or functional tasks.

“…It takes knowledge to convey knowledge — or even to have the discernment to judge whether an AI-generated piece of text makes sense or responds adequately to a prompt,” Pondiscio writes. He further argues that the assumption that AI could replace human writing is in itself dangerous for literacy: “Artificial intelligence will provide time-saving tools for knowledge-haves, but it will be fatal to the interests of knowledge-have-nots, if they are denied the chance to develop the language skills, the highly educated take for granted, and that is what makes AI tools useful.

In other words, as fellow wonk Samuel Hammond wrote his own recent post about the social implications of AI, it’s not about what the technology can do, but what we choose to do – and choose not to do with it. — Dirk Robertson