Web3 is a term coined to refer to a new iteration of the internet, in which users are promised a wealth of data control and ownership over their services. The associated decentralized technologies - blockchain networks, wallets, peer-to-peer technologies, etc. - have reduced the barrier to creating digital commodities. As such, over-use of these technologies saturated the market and has often failed due to lack of utility, terrible UX, or, in the worst cases, jail time and scams. While the theory claims to represent a utopia, its practical implementations have fallen short, reducing trust in the concept and all its related technologies.
Many of these problems can be attributed to misuse of the technology for unintended applications, and loose definitions that frame it as what it’s not - advancements in modern cloud technology instead of a shining light for a new internet. Understanding what the decentralized technologies are best used for, and how we can build a roadmap for mass adoption is the only way to take this space from the pits that it is in, to the practical utopia it was promised to be.
As is customary in every piece about Web3, let's contextualize what Web3 means to the average customer. In the early ages of the internet, companies would provide content for users to enjoy. The next iteration (Web2, the current web) allowed users to not only ingest content but also contribute to it through posts on social media, payments in a marketplace, and so on, building a global interactive ecosystem in which data could move more rapidly. The latest iteration, Web3, claims to be the latest and greatest in connectivity through the inclusion of ownership as an additional facet to the pre-existing read-and-write functionality that Web2 offers.
The State of Web3
This model of subsequent ages of the internet demonstrates that Web3 (as were Web1 and Web2) is nothing but a set of principles and theories upon which new apps could be built, and the implementation of those principles, like peer-to-peer networks, is simply a collection of new technologies that make those ideas possible. For example, write on Web2 added greater interactivity to the web experience, relative to its predecessor, and, thus, greater convenience and gratification to the end user, and was made more possible by new APIs and backend structures. However, there is currently no significantly more convenient use case for data ownership (as ownership is the primary differentiator for Web3), and as such, there are no visible and positive user experience changes to promote it.
The Problem with Web3 dApps
Let’s call this group of technologies what it is: distributed cloud technology (DCT). Blockchain, peer-to-peer databases, and more are nothing but innovations in distributed cloud technology. For context, distributed cloud technologies are cloud technologies and infrastructure that are spread across various compute centers and edge devices to allow for a more reliable service for end-users. These technologies are simply additions to address the limitations of existing cloud technologies, and that’s what they should be used for. Until we can implement solutions that provide significantly more convenience or gratification for users than existing solutions, where data ownership is integral to their functionality, we will not see a Web3 in which users want to use it. However, these technologies can still be used as alternatives for standard cloud technologies without having to fully replace them, still justifying the zero-dependence principle of Web3. For example, peer-to-peer networks are an extremely viable alternative to centralized cloud networks, as they remove dependence on a singular service provider and lowers developer costs and overhead.
One of the reasons the most popular Web3 “solutions” have failed spectacularly is because of visionaries looking to apply DCT to all sorts of applications to supposedly improve trust between the parties involved in the application. Most crypto coins and NFTs are worthless in their current state due to a lack of compelling utility for most users. If not for utility, the other justification is to increase trust between relevant parties.
However, the greatest pitfall is that creators of these applications and communities believe it is possible to manufacture trust on a large scale. The reality is that most consumers can quickly identify manufactured trust and would rather stick to existing market solutions where their perception of authenticity and trust has grown organically over time. Consumers would rather stick to a brand they know and trust and have been trusting over many buying cycles. For example, art collectors (or even anyone looking for a piece for their living room) may purchase art from an art gallery or mutual friends they trust, or even through a digital Instagram art seller whose work they have followed for a while. The community of strategic partners, customers, employees, and other fellow humans affiliated with an organization project a sense of natural trustworthiness to the customer.
The additional usage of DCT to increase trust between two parties reaches an organic asymptote in which any additions on top are viewed as unnecessary to the status quo and may even be a point of repulsion. The success of a product comes from the significant gain in convenience for a customer, not the so-called data ownership, contrary to what many proponents of Web3 would believe, which must outweigh the migration friction from the status quo solutions. This manufactured increase in trust through technology doesn’t provide any increase in convenience. In addition, the implementation of these technologies, such as the overreliance on ledger transactions to the user, is so poor that it diminishes its value.
Use cases: Do’s and Don’ts
Of course, I would be remiss to remark on the pitfalls of current “Web3” solutions and not provide solutions that are ideal for an application that uses DCT.
Helium enables members to provide hotspots using their own internet, increase network coverage, and be rewarded for their contribution. In this case, there is a single fungible commodity provided to members of a community, where buyers and sellers are equal in nature. Here, DCT provides a better balance in power between buyers and sellers; i.e. sellers do not hold a significant value proposition over the buyers. The power equity amongst users and lack of "greater authority" create a vacuum of authority to dictate order, especially amongst a group of trustless members. This is where DCT can thrive, as it acts as a natural accountability tool for users interested in acquiring and providing a commodity through a unified set of protocols.
Carbon credit trading between oil companies is another valid example, where parties who compete and therefore inherently will never trust each other, trade a specific commodity of fungible carbon credits. This system is in practice today and has shown great promise at its intended goal of managing emissions, a collective goal fulfilled by polar parties. DCT, in this case, enables a competing collective to trade towards a greater good.
These applications of DCT are hyperspecific and provide value to the end user that does not simply involve data ownership, but rather greater convenience or gratification that cannot be provided without DCT. Applications of DCT such as crowdfunding may not be a good use case because, when a trustless collective requires a central entity to represent the transaction from the digital world to the physical world, it undermines the need for the technology (Kickstarter and Fundrise work well on their own, and the trust is built between the central entity and users, who are unequal parties, not between users). Services such as crowdfunding and one-way marketplaces do not necessitate Web3, since trust is grown organically between end parties, just as it is grown in everyday markets.
The misuse of DCT technologies by a few applications causes the providers of these technologies, such as blockchain networks, to also fail to gain traction. As there isn’t a critical mass of people interested in the trust it provides, the number of participants remains stagnant at a low level, preventing it from reaching the potential speed and security it aims to provide. The reality is that the average person doesn’t care about the integrity of a chat message between two people that isn’t relevant to them or any sort of transaction that isn’t relevant to them, so there’s no proper applicable incentive for them to partake.
How to save the industry
I trust that, with the natural evolution of technology, the general market will transition itself to such use cases of DCT. There is an organic pathway to the growth and appropriate application of this technology, and I wholeheartedly support this clarified vision and am excited for what that holds. My proposed roadmap for increased adoption of DCT is to ideally deploy micro-networks per commodity or application (these can be pseudo-micro-networks; the network could be an existing public blockchain network but to the user, it is specific to the application). This reduces the number of people required to validate a transaction. As such an implementation may take a few years to evolve, I believe we can emulate this model by encouraging applications that wish to use DCT to set up their own nodes to contribute to the strength of the network instead of depending on random entities.
On a personal note, I embarked on my Web3 journey around one year ago and started my venture, Three0, because I trusted that the market had grander visions and ideas for Web3 than I did. I built simple and familiar services using blockchain and peer-to-peer technologies to foster agile innovation and lower the barrier to entry, so entrepreneurs didn't have to worry about the technology, only the quality of their product. As time has moved forward and recent events of scams and jail time have populated this promising industry, I found myself asking the question, "Why Web3?" This piece has been the result of my expedition, and I can proudly say I’ve found a clarity that I trust will propel the industry forward into one of ethics, quality, and innovation.
Edited by Neha Desaraju