Adam Neumann’s ‘Goddess Nature Token’ Is the Future of Crypto—for Better or Worse

Flowcarbon’s status as a Web3 darling says a few things about the movement. First, that attaching the word “blockchain” to any startup business plan draws investors. Second, that Web3 doctrine holds that the tech behind blockchains makes any startup better and its goals more attainable—despite there being scant evidence for that, and plenty of informed critics who disagree. And finally, that in an industry where hype can seem the primary currency, even Mr. Neumann’s notoriety doesn’t preclude getting funded.

Web3, for those unfamiliar, is billed as the future of the internet and everything on it. Think of Web 1.0 as relatively basic webpages from the likes of Yahoo and Excite, and Web 2.0 as today’s interactive online services, dominated by

Facebook,

Google and other tech giants. Web3, according to its proponents, is all of that built with new tools that distribute control and benefits much more broadly.

More specifically, Web3 is the evolution of cryptocurrencies and the blockchains—databases distributed across computers on the internet—on which they are built. Instead of being simply money, like bitcoin, blockchain tokens can also store other data within them. That could be anything from a receipt for a piece of digital art—known as a nonfungible token or NFT—to a “smart contract” conferring ownership of a real-world asset, such as a mortgage or a carbon credit.

In other words, Web3 tokens can represent not just data but ownership and access, and can be traded like money. Web3 has the potential to financialize just about every possible human activity.

For believers in all that Web3 potential, the fact that the value of the world’s crypto has dropped by more than $1 trillion since its peak in November is, while unpleasant, no reason to lose faith.

“The short-term fluctuations [in crypto prices] can be painful in the moment, but frankly in the public markets many companies are also down 70% to 80%,” says Arianna Simpson, a general partner in charge of crypto investment at Andreessen Horowitz. The firm is one of the biggest bettors on crypto, having just announced its third fund dedicated to Web3, this one for $4.5 billion. “What matters at the end of the day are, are there products and services being built that a large number of consumers want to use?”

Among these new products and services that may or may not become real businesses is Flowcarbon and its Goddess Nature Token, or GNT for short. The carbon offsets represented by GNTs are a certificate, verified by a third party, that says that some company or other entity reduced the amount of carbon in Earth’s atmosphere, or prevented it from increasing. Offsets can be created by, for example, growing forests (because trees absorb carbon)—or by declining to cut them down.

For reasons related to corporations and governments trying to avoid the worst ravages of climate change, there is a growing market for such offsets. A Goddess Nature Token represents an offset and happens to live on a blockchain.

The reason Goddess Nature Tokens are now a thing is that, upon discovering that they could earn some carbon offsets from property they owned, Mr. Neumann and his wife,

Rebekah Neumann

—also one of Flowcarbon’s five co-founders—began making inquiries about why the markets dedicated to creating and trading such offsets were so slow-moving and illiquid. That eventually led to the founding of Flowcarbon, according to Dana Gibber, the company’s chief executive and another co-founder.

Ms. Gibber says inefficiencies in the infrastructure of existing carbon markets have impeded their success. Carbon credits are “a perfect use-case for Web3,” she adds, because they are already digital certificates, like a stock or some other financial instrument. The way carbon offsets work now, they’re hard to create and to trade, which means there is too little transparency about how they are priced, and too few opportunities for that price to change, as would be the case with an instrument that’s easier to exchange.

Flowcarbon’s aims actually seem modest by comparison to the ocean of madcap Web3 ideas about simultaneously reinventing how companies are built and owned, who owns our data and profits from it, and how the fundamental technical architecture of the internet should be built.

Carbon offsets are, after all, already digital goods that trade on markets—$84 billion worth in 2021, an increase of 60% from 2020. Turning these assets into tokens—“tokenizing” them, in the lingo of Web3—immediately injects them into the sprawling and nearly borderless world of the financial markets that Web3 developers are elaborating on by the hour. Perhaps unsurprisingly, Flowcarbon already has plenty of competition.

And yet, for all the hype and money around Web3, it remains unproven and distinctly unclear whether using blockchains will ultimately allow companies to do things they couldn’t do better with other technologies.

“People have claimed that if the crypto bubble collapses, or regulators step in, that it doesn’t matter because this is the future of the web, regardless,” says Molly White, a software developer who documents the frauds, failures and setbacks of crypto and Web3 on her blog. “But the reality is very, very different. People are using the blockchain not because it’s a technical benefit to the project.”

The technical debates around the merits and demerits of blockchains are complicated, to say the least. Suffice it to say that most of the people who advocate for or criticize Web3 and the use of blockchains can agree that they are as much a social technology as anything, and a way to create incentives for people to do things, such as paying hundreds of thousands of dollars for an image of a bored ape, or to reduce their carbon emissions.

Aaron Levie

is CEO of

Box,

which provides cloud-based file sharing and collaboration tools primarily to businesses. As someone who built a company in what was then an emerging sector, he might seem likely to be enthusiastic about Web3.

And yet, like both Elon Musk and Jack Dorsey, he has made it clear he is a skeptic of Web3, primarily by using

Twitter

to tweak those who argue that it is the next big thing—even mentors of his, like Web3 investor and advocate Mark Cuban.

“I’m not anti-crypto,” says Mr. Levie. “I think there are plenty of use cases that could be viable, but those aren’t what people are generally talking about.” For example, he says, creating a social network or a search engine using the blockchain—as many startups are trying to do—might not work for a whole host of technical reasons, including how slow and expensive it is to use existing blockchains to store and access data.

These seemingly inseparable technical and economic challenges are one reason blockchains have so far been used primarily for financial speculation, says Nader Al-Naji, founder and head of the DeSo Foundation, a nonprofit effort to create a new blockchain that solves some of those challenges.

His project aims to create a blockchain on which social networks can be built that will ultimately reward the people who use them, by giving away crypto tokens. DeSo was launched with much fanfare last summer. A total of $200 million was invested in the token underlying the project, through a direct purchase of DeSo tokens by Andreessen Horowitz,

Sequoia,

and Winklevoss Capital, among others. The DeSo token is now worth about a 10th of what it was worth when I last wrote about it in December, and a 20th of its level in June 2021.

Mr. Al-Naji says he is “not worried at all” about the cratering price of the DeSo token. His faith in Web3 is unshakable: “We know that at some point the market will recognize there’s a need for a social blockchain.”

One reason Web3 projects can fail is that they subvert the most basic logic by which companies typically operate, says Mr. Levie: Build a product that people want to buy, and make it easy for them to give you money for it.

Instead, for many Web3 startups the focus is on luring users with the promise of growing rich by being an early adopter. This is enabled by “tokenomics,” the ability of these startups to reward their earliest users by doling out tokens they say will become more valuable as more users join.

The result is that it’s often not clear if a service has users who find it valuable, or if they’re just hoping to earn a big return and will bail once the company’s token stops going up, adds Mr. Levie.

To date, the biggest Web3 companies are the exchanges that make it possible to buy and sell the tokens that are integral to Web3 projects. And even those companies, like

Coinbase,

are hurting right now, and have lost most of their value.

If all that makes the entire Web3 enterprise sound like it could be an enormous pyramid scheme—one that only works for as long as those building it can find “greater fools” to continue pouring money into it—that’s because it is, says Dror Poleg, an economic historian who teaches executives about the crypto industry.

Mr. Poleg doesn’t think that’s necessarily a bad thing. He says giving away tokens can be seen as just another strategy to gain market share early—the Web3 equivalent of initially offering goods and services at loss-leader prices the way Web 2.0 companies like Amazon, Uber and Lyft have done.

The ultimate goal of DeSo, says Mr. Al-Naji, is to make it possible for anyone to be an early-stage investor in what he believes could ultimately become the next Facebook. Likewise, many of the most promising Web3 startups aim to make all sorts of financial transactions more accessible, says Ms. Simpson of Andreessen Horowitz. Like Flowcarbon is trying to do with carbon-credit trading, for example.

To critics of Web3, blockchains are at best an unnecessary encumbrance on a startup like Flowcarbon. And at their worst, Web3 and its largely unregulated financial machinations are just a new way for the rich and powerful to siphon money from less wealthy and sophisticated investors.

From the perspective of those who build with the tools of Web3, however, it’s the system of investor protections that’s broken and needs to be fixed. “Being able to trade early-stage companies in a liquid fashion is going to create way more value than it destroys,” says Mr. Al-Naji. “The expense you pay for that is there will be a higher risk that ordinary people will lose money.”

The solution, he argues, isn’t a lack of regulation, but a more scientific approach to it: “See what breaks, then legislate.”

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Write to Christopher Mims at [email protected]