If the technological movement known as Web3 represents the next great Internet gold mine, why don’t we hear more about the truly useful applications that will be built on this new platform? And why aren’t more developers flocking to make their fortune?
Those questions hang uncomfortably over Web3 as the crypto asset boom, supposedly oiling the wheels of the new applications this movement will create, continues. Something like $1 trillion has leaked out of the crypto bubble since November, but $2 trillion is still left. What are the end uses of these digital assets that justify such a large number?
The case for Web3 is based on the belief that a blockchain-based technology platform will become the foundation for a new class of applications, with digital tokens mediating interactions of all kinds in a so-called “trustless” online world. . There will be no digital gatekeepers setting the rules or taking most of the profits. Users will be in control.
However, so far it is difficult to discern the main uses of this technology. The main applications (non-fungible tokens (NFTs) and decentralized finance) are almost entirely based on financial speculation and regulatory arbitrage. When speculators take a bath and regulators decide it’s time to close the loopholes, what will be left?
A truism in Silicon Valley has always been that if you want to know where the next great ideas will come from, look at where capital and smart developers are going. In the case of Web3, there has certainly been no shortage of capital. But relatively few developers have decided to pool their fortunes on this particular train.
One explanation for this is that very few developers master the new languages needed to build decentralized applications. That, says Tunguz, limits the speed at which Web3 companies can grow, but the problem should ease as more tools are created that make life easier for engineers working in this field.
This is just one part of the broader upgrade needed to make Web3 technologies more practical. Ethereum, until now the dominant blockchain for running decentralized applications, can handle a maximum of around 30 transactions per second, a bottleneck that has increased transaction fees. Much of the money poured into crypto startups in recent months has been directed at the infrastructure needed to build and run blockchain-based applications.
However, this revolution has already been years in the making. Ethereum was launched almost seven years ago. The first wave of Web3 developers attracted to cryptocurrencies peaked in 2018, when Bitcoin first peaked. Only about a fifth of those people are still actively working in the field. The latest wave is almost twice as big, but how many of these developers will keep the faith if another crypto winter hits?
Delays might matter less if it were clearer what Web3 is really for. When the world wide web emerged in the mid-1990s, it was possible to imagine activities of all kinds moving online for the first time, from shopping to watching movies. And that was before anyone even dreamed of giant new Internet markets like search and social media.
The case for Web3 is not so much based on the “what” but rather on the “how”. Decentralization itself is said to be the draw: the opportunity to reinvent many of today’s online activities in a new form.
Idealism is not likely to last long if the mass of online users do not see some tangible results, apart from the possibility of rampant financial speculation and the creation of memes. Additionally, today’s crypto fortunes are concentrated in the hands of the relatively few, challenging the idea that this move will distribute wealth more evenly.
The financial conditions that fueled the cryptocurrency boom are beginning to recede, as inflation takes hold and interest rates begin to rise. A similar situation ended the dot-com bubble, wiping out most startups, though a handful of truly innovative companies like Amazon, Yahoo, and eBay survived. So far, it’s hard to see who will be the survivors of Web3.
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