What’s clear is that Yupp’s recent $33 million seed round – led by none other than a16z crypto – is much more than another funding announcement. It’s a really big red flag, a flashing neon sign pointing towards the collision course Web3 is hurtling towards with… well, reality. We’re referring to the complicated reality of regulation, reality versus the boogeyman of unintended consequences, and regressive promises with potential to be misused.

AI & Encryption: A Dangerous Cocktail?

Yupp’s unique approach combining AI and encryption is being praised as groundbreaking. Let's be frank: innovation without foresight is just reckless tinkering. We’re just going to continue to equip this generation with these incredibly dangerous tools. They think that “move fast and break things” is an acceptable business model. What could possibly go wrong?

Think about it. AI-powered content generation + end-to-end encryption… it’s a deepfake factory on steroids. When deployed through AI, misinformation campaigns would be able to be hyper-targeted, incredibly convincing and virtually untraceable. Are we truly prepared for that? Are we prepared to watch our democracies, already on shaky ground, be dangerously eroded by technology that is still in its teenage years?

Regulatory Void: Welcome to the Wild West

In fact, the current regulatory framework is, frankly speaking, a clown show. Now we’re left out here in legal limbo. Legacy regulations just don’t have the flexibility to adapt quickly enough to the speed at which AI and Web3 technologies are developing. Regulators are still catching up, often years behind the curve. This isn’t entirely their fault – the technology is developing at warp speed. The absence of transparent standards is opening the door for nefarious players to take advantage.

Take for example DeFi, where $3 million was awarded to Silhouette for privacy-protected order matching – that sounds all nice and dandy doesn’t it? What about anti-money laundering (AML)? How do you regulate these transactions when privacy is clearly the number one priority? How do you stop bad guy money from moving through these cool underground payment networks? The answer, right now, is: you don’t, not really.

And while infrastructure projects like Hypernative raising $40M for Web3 security are desperately needed, they are band-aids on a much deeper wound. Security is reactive, not proactive. The truth is we don’t just need better firewalls, we need systemic change.

Innovation vs. Responsibility: Can We Have Both?

While Web3 holds the promise of a decentralized future, decentralization without accountability is a recipe for disaster. Publicly traded companies, such as TV advertising affiliate Méliuz, are increasing their Bitcoin holdings – up to a $32.5 million investment. On the one hand, we can view this trend as a sign that the space is maturing. Are we really preserving the core tenant of decentralization? If not, are we simply recreating the inequality of the old world, but with a blockchain gloss?

Here is a question: do we even want complete decentralization? Do we really want a world where there is no recourse for victims of fraud? Is that the kind of world we want, where it’s impossible to track illegal behavior or to punish anyone involved?

The answer is not to stop innovation, but to encourage innovation that is responsible. Our society can really only meet the promise of this technology if developers and investors choose ethics over profits. We need regulators to engage with the Web3 community in a constructive dialogue, not just issue blanket bans and vague pronouncements.

Too often those of us in Web3 succumb to the hype. They all too often get blinded by the chance for easy fortune. Then they look at Yupp’s $33 million and say, “That could be me!” They’re not considering the second, third, and fourth order impacts of what they’re doing. They’re not considering the unintended consequences of their technology.

This isn't a game. This is the future we're building. Let's build it responsibly.

It’s time to stop declaring every funding round a success and begin the difficult process of accountability. If we pretend this issue doesn’t exist, we risk a regulatory reckoning. It won’t be pretty, rather painful, chaotic and likely to end in a catastrophic wreck.