ISTM #49. Revisiting Web3
I’m a business writer. Mostly, I try to be early to identify technologies that might disrupt the status quo. I try to identify new practices that will disrupt current best practices, and I also try to simplify technology complexities without dumbing them down, and I use new jargon sparingly. I was reluctant to use the word algorithm, and it took an even longer period before I could use it without spell-checking.
When Web 3 started edging itself into the business-technology conversation, I elected to avoid the subject.
I had three issues:
1. There was just too much confusing jargon that needed to be understood and explained. Business decision-makers want quick, accurate answers to what a new technology does.
2. I did not see a compelling reason why business decision-makers should learn and use it.
3. There was something about Web3 that looked like a giant Ponzi scheme to me.
I have maintained those thoughts, annoying friends who felt I just didn’t get something that was significant. When I asked questions that concerned me, I was sometimes dismissed as someone who just didn’t get it.
I have to concede the point: Web3 has grown at a meteoric pace. The recent Alchemy Web3 Development Report estimates that Web3 has been growing by 577 percent per year for five years and will host 10 million unique monthly visitors within the next three years.
When I last dug into Web3 in 2017, I walked away with the impression that Web3 was being driven by technologists who were decidedly against large corporations, banks, marketers, and capitalism in general.
I don’t think that was entirely untrue, but the capitalists have wisely decided that it was more profitable to join them than try to beat Web 3 champions.
JP Morgan Chase, a decidedly capitalistic organization, was the first Fortune 100 member to step into Web 3. It has since been followed by Meta, Microsoft, Google, Amazon, IBM, Oracle, SAP, Salesforce, Visa, Mastercard, PayPal, Citigroup, IBM, Oracle, SAP, Salesforce, Visa, Mastercard, PayPal, Citigroup, and Goldman Sachs.
Web3 is generating no small amount of capital itself. According to Market.us, a proprietary research organization, Web3 will reach $107.32 billion in revenue by 2025: That’s in dollars, cryptocurrency. It grew at a Compound Annual Growth Rate of 39.3 percent from 2021 to 2025, and the rate is accelerating.
Why I’m Posting
Most writers are reluctant to publish declarations about how wrong they may have been, and I am no exception. But I figure that if I missed the point, many of my readers have as well.
I want to share what I learned with you.
If you are among my readers who are already tuned into Web 3, then I respectfully request your assistance. I ask you to read along and point out any inaccuracies or omissions I may have made. If you find an issue, please comment here, or if you prefer confidentiality, email me.
How Web3 started
In 2014, Gavin Wood, a co-founder of Ethereum, a cryptocurrency (crypto) pioneer, wrote a white paper introducing the concept of a decentralized, egalitarian internet that could wrest power and control power from large corporations and award it to individuals. In his vision, no one would be in charge, nor would anyone be under government, corporate, or institutional thumbs.
He called it Web3, which was the source of the first point of confusion. There already was a Web 3.0 (the Semantic Web), which is all about making Web 2 more machine-readable and understandable.
Wood’s vision was for a Web3 that was by and for people, not enterprises. It centered on peer-to-peer interaction, not top-down message sending. While Web 2 is modeled so that one person talks and everybody else listens to the monologue, Web3 is designed to facilitate conversation, as blogs were once designed to do.
Six Terms
While I had been turned off by what I felt was a plethora of foreign-sounding jargon, my recent research convinces me that are really just six new terms you need to know to get started in Web3.
1. Blockchain is a distributed ledger that is fundamental to the authenticity of all Web3 transactions. It’s sort of a virtual Registry of Deeds.
2. Cryptocurrencies (crypto) such as Bitcoin, Ether, and Tether are used for all Web 3 transactions.
3. NFT is short for non-fungible token. Nonfungible simply means unique, which would have made it easier for many of us to understand. Tokens represent digital asset ownership and enable access to services and the right to vote in a decentralized We3 organization.
4. Artificial Intelligence (AI): Particularly, Machine Learning is used to create more personalized and secure conversations and transactions.
5. The Metaverse is a hypothetical iteration of the internet as a single, universal, and immersive virtual world that is facilitated by the use of virtual reality (VR) headsets. In colloquial usage, a metaverse is a network of 3D virtual worlds focused on social and economic connection.
6. DeFi, or Decentralized Finance, is built on blockchain technology. Users can conduct transactions without disintermediation by banks or other financial institutions. DeFi is used on Web3 for lending, borrowing, trading, and investing.
While these six elements are loosely joined, blockchain is the super glue that binds and seems to me that the blockchain is the heart of Web3. It ensures secure, transparent, and usually tamper-proof transactions and ensures the safety of self-executing contracts.
Blockchain enables borrowing, lending, trading, and investing assets without intermediaries. Proponents predict Blockchain is creating a transparent, equitable, and secure online world.
It isn’t there quite yet.
Schemes and Scams
Schemes and scams go back almost to the very start of Web3, and there are some observers who warn the entire Web3 ecosystem is ripe for fraud. There are clearly flaws, which has to be expected when a worldwide ad hoc leaderless virtual organization forms without regulations, trusting technology to keep transactions safe.
There have been several well-publicized Ponzi schemes of significant size. Perhaps the best-known was iComTech, a crypto mining and trading company that started in 2018. It raised hundreds of millions in two years, in which the founders never invested: They just pocketed the money. Its charismatic CEO, Marco Ruiz Ochoa, is now serving 20 years in the slammer for engineering a new form of grand theft.
This incident inspired others. To name a few of the largest:
--BitConnect fleeced investors for over $2.5 billion before it collapsed in 2018.
--Plustoken collapsed in 2020, and investors lost over $4 billion the founders took the money, ran, and have not been apprehended.
--OneCoin was the same story, netting the scammers$4 billion in 2019.
Bard provided me with five similar cases. These do not really constitute a major threat when you consider that Web3 is a new and unregulated organization. According to CoinGecko, a cryptocurrency tracker, there were over $1 trillion Web3 transactions in the past year valued in excess of $10 trillion.
But I think Web3 proponents should moderate their claims of infallibly secure transactions.
Something there is that makes many of us prefer grassroots movements to banks and credit card companies, but when their systems fail to protect our accounts and transactions, we get the money back, which is not the case on Web3. I’m sure that Web3 will get better at discouraging Ponzi and other Web3 schemers, but cybercrime is like the Cold War. Whenever the good guys get better at making us safe, the bad guys find a new and more sophisticated way to bilk us. It’s an existential problem that may have no end to it.
New Opportunities
The latest trend is that Web3 has started offering Generated AI Art and Music, much of which I’ve seen is original and remarkable. I don’t yet have a sense of how they are doing, but I will visit that down the line and report here.
This indicates that Web3, whose growth has recently slowed slightly, may explode into a whole new area. Most retailers maximize payment options, giving customers as many options as possible.
I wondered why Web3 retailers don’t also offer traditional credit card payments, which may go against the grain of Web3’s founding fathers but might be preferred by a huge percentage of potential customers of art, music, and whatever comes next.
I asked about this on Facebook, and my friend Shel Holtz, who has long been a Web3 champion, wrote that sites would need “… a different payment layer, which just doesn't exist yet. It will be based on smart contracts and encrypted transaction records as opposed to what you're talking about.”
Maybe so, but the financial upside could be significant, and it seems to me to be easier to solve than making Web3 as absolutely secure as some claim to be.
I also come to wonder why there are no Web3 killer apps yet that would create stampedes of people leaving Web 2 for Web3, the way many of us once abandoned radio and TV for Web 2, but now I wonder if comparing the two is the wrong comparison.
If size matters, the Worldwide Web will reign for a long time to come.
According to Statista, Web 2 has about 5 billion monthly visitors per month, and its annual revenue is just short of $3 trillion per year, but it seems to me that matters far less than I had originally thought. That kind of makes Web3 puny with its 10 million monthly visitors. But that may not be the point, although it’s the way most of us traditionally measure such things.
I no longer see Web3 and Web2 as if they were horses in a race competing for one grand prize. Both will continue to compete with how you, your partners, and your customers use their time.
Right now, I believe that it's time to start paying attention to Web3. It’s time to get your toes wet, but not yet time to dive into the deep end.
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Web3 will eventually happen, as all things evolve, and will likely be federated and decentralized. A decentralized ledger technology (whether or not Blockchain continues with its faults, or better algorithms take over) as a basis for W3C Decentralized ID (currently using Blockchain) will be required, as well ActivityPub or similar federated sharing mechanism. RSS is due for a comeback in this scenario.
NFT and most cryptocurrency ideas, and Metaverse, are all best discarded to the dustbin of bad tech.