If the technological movement known as Web3 represents the next great Internet goldmine, then why aren’t we hearing more about the truly useful applications that will be built on this new platform? And why aren’t more developers flocking there to make their fortunes?
These questions weigh uncomfortably on Web3 as the boom in crypto assets – which supposedly greases the wheels of the new applications this movement will create – rages on. Something like $1,000,000 has slipped out of the crypto bubble since November, but there is still $2,000,000 left. What are the ultimate uses of these digital assets that justify such large numbers?
Web3’s case rests on the belief that a blockchain-based technology platform will become the foundation for a new class of applications, with digital tokens enabling interactions of all kinds in a so-called “trustless” online world. “. There will be no digital gatekeepers to set the rules or take the lion’s share of the profits. Users will have control.
So far, however, it is difficult to discern common uses for this technology. The main applications – non-fungible tokens (NFTs) and decentralized finance – rely almost entirely on financial speculation and regulatory arbitrage. When speculators take a dip 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 big ideas are coming from, look where the capital and smart developers are going. In the case of Web3, there was certainly no shortage of capital. But relatively few developers have decided to tie their fortunes to this particular bandwagon.
According to a recent study by Electric Capital, around 18,000 developers were actively working in the crypto world at the end of last year. That may seem like a lot. But as Redpoint venture capitalist Tomasz Tunguz points out, that’s nothing compared to the 16.4 million developers working in JavaScript, the main programming language for the current generation of web applications. Even the figure of 18,000 may exaggerate reality: the number of people who spend at least 10 days a month working on Web3 is less than 5,000.
One explanation for this is that too few developers master the new languages needed to build decentralized applications. This, says Tunguz, limits the speed at which Web3 businesses can grow, but the problem should lessen as more tools are created to make life easier for engineers working in this field.
It’s only part of the larger upgrade needed to make Web3 technologies more practical. Ethereum – so far the dominant blockchain for running decentralized applications – can handle a maximum of around 30 transactions per second, a bottleneck that has driven transaction fees up. Much of the money poured into new crypto ventures in recent months has been directed towards the infrastructure needed to build and run blockchain-based applications.
However, this revolution has already taken years to prepare. Ethereum was launched almost seven years ago. The first wave of Web3 developers attracted to crypto peaked in 2018, when bitcoin reached its first peak. Only about a fifth of these 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 sets in?
The delays might matter less if it was clearer what Web3 was actually 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 about the “what” as it is about the “how”. Decentralization itself is said to be the draw – the chance to reinvent many of today’s online businesses in a new form.
Idealism is unlikely to last long unless the mass of online users see tangible results, other than the possibility of rampant financial speculation and meme-making. Additionally, today’s crypto fortunes are concentrated in the hands of a relatively small number, challenging the idea that this move will distribute wealth more evenly.
The financial conditions that fueled the crypto boom are starting to fade, as inflation sets in and interest rates start to rise. A similar situation ended the dotcom bubble, devastating most start-ups, although a handful of truly groundbreaking companies such as Amazon, Yahoo and eBay survived. So far, it’s hard to see who the survivors of Web3 will be.
richard.waters@ft.com
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