What should we really expect from the future of Web3, DeFi and the internet?
Take a moment to think about all the problems of the online world, from data breaches to privacy violations to the hegemony of big tech.
Then imagine these problems suddenly disappear. Gone. Just an instant thing.
Sound appealing ? Well, you just heard the first line of the sales pitch and revolutionary manifesto gaining traction in San Francisco and Washington DC. Its name is web3.
The gist of it can be seen in revolutionary statements throughout history. Take power out of the system and give it back to everyone, making everyone happier and richer.
The tools we are told to achieve this are modern. At the heart of the plan is rebuilding the foundations of the network using the blockchain technology that underpins cryptocurrencies such as Bitcoin .
According to the proponents of Web3, anything online — literally everything — can be put on the blockchain, an energy-intensive ledger that can be used without the need for a central record manager Centrally store data.
Doing this, in theory, you won’t just give everyone the data back, you’ll give them freedom.
Fundamentally unlike Facebook or Google, where before, the website platform owns all our photos, posts and likes and decides how we use or access it, we will own our information and have a say in how it is used.
This is not only because we can safely and easily delete our data in Crypto wallets, but also because the mechanisms of the blockchain enable new forms of coordination.
Anyone using the internet can get a token that gives them control over how the service is used. Because a token is Crypto, its rules can be encoded into it, and because the blockchain cannot be changed by a central authority, these rules are permanent unless every token holder agrees that they should be changed.
Imagine a world where WhatsApp and TikTok are more like John Lewis or the union Unite, whose members have a voice and maybe even share some of the huge profits.
If you’re a big believer in blockchain, that’s just the beginning. The term Web3 refers to the third generation of the web, after the static “read-only” Web 1.0 and the read-write Web 2.0 typified by social media, but since so much of life is now online, it’s conceivable that it’s almost complete changed everything. Why can local governments be democratized in the same way? Or an art institution? Or banking institutions?
If you start to have faith at this point, many people are like you. Even if you suspend disbelief and accept that such a massive project can be built on blockchain technology, there are plenty of reasons to be skeptical. You know, this time last year, the shaky blockchain technology couldn’t process a bitcoin transaction in seven hours.
Many observers point to the so-called revolution being driven by one of Silicon Valley’s largest venture capital firms and heavily backed by Meta executives.
That’s right: the company formerly known as Facebook is cheering the tech giant’s fire. Hardly a precursor to radical reform.
This isn’t necessarily an objection in itself, but it’s worth keeping in mind that Web3 has proven to fall short of its promise.
For all the talk of decentralization, much of the emerging technology infrastructure of Web3 is actually as centralized as Web2. It turns out that even though it is theoretically possible to give everyone a share, it is actually simpler to leave it to a small group.
None of this should come as a surprise to anyone familiar with online history. Twenty years ago, the model for an exciting new web was Wikipedia, the first encyclopedia written by the masses. Many confidently predict that Web 2.0 will be built in the image of Wikipedia. Instead, as the years passed, it turned out to be the exception rather than the rule.
Arguably, even Wikipedia is centralized because it relies on a small group of volunteers to keep its articles up-to-date and unifying insights without arguments. As good as it is, it’s also not completely reliable like we need things like legislation or finance.
Perhaps blockchain technology will change that by increasing funding, enabling contributors or volunteers to work for pay. (Although incentivizing Wikipedia contributors to make changes to articles presents its own set of problems.) It’s not easy.
Even at this early stage, Web3 companies face the kind of challenges so familiar from the old world of social media. One of the most popular platforms for NFT art, OpenSea , is currently battling issues related to plagiarism and spam.
Usually these issues are handled by a central authority, but that’s not very democratic, at least not how web3 fans define democracy. So what should OpenSea do? Remain “free” or allow rampant plagiarism?
It’s an easy question compared to the conundrum faced by social networks like Facebook. Imagine a web3-style “voting” whether to cancel the live broadcast of a mass shooter when a shooting occurs. Incredibly complex – and not very easy to operate.
Of course, many people who are headfirst into web3 aren’t interested in these debates. They’re there for novelty, socializing, and of course, money.
In the end, most of web3 comes back to money. From its origins in Bitcoin to the current hype around NFTs, it has been characterized by a desire for cold hard (Crypto) cash. Even its most interesting innovation, the Decentralized Autonomous Organization or DAO, is first and foremost a way to raise money.
Caring about money is not necessarily a bad thing. The open source movement behind Web 2.0 shrugs off the question of how exactly anyone gets paid, like many contributors to the blogosphere in the early 2000s, and then gets into financial trouble when others get rich from their work. Money matters. But its importance to web3 means that most of its immediate impact is likely to be in online finance.
In this sense, web3 is the high-tech equivalent of the “big bang” of the 1980s, during which nationalized industries were sold on newly deregulated financial markets.
Back then, supporters touted the dream of a new “shareholder democracy” where ordinary citizens would influence the behavior of the world’s most powerful corporations.
Looking back, that seems very optimistic — but the Big Bang did change history. It brought a new class of millionaires, wild ups and downs of prosperity, and, most enduring, a new economy built on more sophisticated forms of finance.
If it becomes a reality, web3 is more likely to be a financialized Internet than a democratized Internet. That means more scams, more self-made stories, and more volatility. Get ready, it’s going to be a wild ride.