As we enter another crypto winter, it has become de rigueur for tech types to go on record espousing that Web3 is nonsense, that blockchain is a terrible technology, and that cryptocurrencies (all of them) are Ponzi schemes. There is seemingly no end to the tweets and blog posts from highly credentialed people about tulips and “The Emperor’s New Clothes” and greater fool theory. It’s as if the technocrats want to make sure that they know that you know that they know that all things Web3 are technologically inferior to all things Web2. Are they right?
Blockchain Is Bad at What It Does
It is no secret that blockchain is almost never the best way to store data. It’s a “write once, read many” database that is publicly viewable and is supposed to be immutable, although under certain circumstances blockchains can be rolled back or changed (“forked”). For example, the Bitcoin blockchain has been forked several times, including Bitcoin Classic, Bitcoin Unlimited, SegWit, Bitcoin Cash, Bitcoin Gold, Bitcoin SV, and Taproot, as has the Ethereum blockchain, starting with the 2016 hard fork, which in defense of an attack forked the Ethereum blockchain into Ethereum Classic (the original blockchain) and Ethereum.
With regard to transactions per second (tps), blockchains are notoriously slow (although several chains claim to have beaten the blockchain “speed, security, or scale” trilemma). For reasons that have become clear over time, blockchains are generally not deployed with the rigorous DevSecOps (“development, security, and operations”) the Web2 world has come to expect.
Which all leads to the very first question you need to ask if you are thinking about creating a Web3 project: Why is blockchain (Web3) a better solution than a well-structured database (Web2) with a secure password? If you don’t have a very good answer to this question, score a point for the naysayers.
However, if you are thinking about a project that will thrive in a trustless, decentralized, online world, your Web3 project is starting on solid ground.
Decentralized vs. Centralized
Are there projects where outcomes are best achieved without a central authority? Asked differently, is there an approach to social networking, social selling, influencer marketing, entertainment, sports, gaming, gambling, etc., that would offer greater benefits to users and content creators than centrally controlled platforms such as Facebook, Instagram, TikTok, Netflix, ESPN, EA, and DraftKings?
When speaking about value exchange, are there benefits to decentralized finance products (DeFi) over and above centralized finance products? Asked differently, do Uniswap, dYdX, and other decentralized exchanges offer financial services that a regulated commercial bank could not or would not?
Crypto Winter
I don’t spend too much time wondering about why crypto prices are 50%–70% off their highs right now. As I said in my essay Does 2022=2000?, “The vast majority of the 19,000+ cryptocurrencies are going to fail. And the vast majority of blockchain-based businesses are going to fail. Failure is how we learn.” If the road to Web3 follows a path similar to Web 2, we will see a few decentralized platforms become mega-successful and the Web3 world will bifurcate into the realm of the very big and the realm of the very small.
Web3 Today and Tomorrow
Unlike many of my technocratic friends, I believe that the path to Web3 is not a technological path, but an ideological one: Web3 platforms will empower both users and creators to share in the value they create. So specifying the business outcome (not the technology) is the most important aspect of any proto-Web3 project.
Most of the Web3 projects my company is working on are based on adding decentralized capabilities to centralized platforms. For instance, the sports leagues and brands we work with “are” the central authorities for their respective sports or categories. So hybrid platforms must be created to allow collectables (such as NFTs) or other assets to be exchanged on third-party platforms and trustless exchanges. You can call this Web2.5 – it’s a group of bridge technologies that are teaching us the way forward.
The Web3 Challenge
The next time you get into a conversation about cryptocurrencies, NFTs, smart contracts, the metaverse, and Web3, concentrate on what you are trying to accomplish, not how. Is blockchain bad technology? Is there a better way to cryptographically hash a public/private key pair? Is a good, old-fashioned API a better, more secure way to move your data? Unless you’re the engineering manager on the project, don’t worry about it. Define your goals, not the tech. It’s the best way to get the most out of the as-yet-undefined world of Web3.
Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it. I am not a financial advisor. Nothing contained herein should be considered financial advice. If you are considering any type of investment you should conduct your own research and, if necessary, seek the advice of a licensed financial advisor.