By Oliver Yao, BubbleDAO Contributor
It’s all the rage. If you look at Google search trends, the term “web3” spiked in search frequency in 2021. Why? Well, people have been hearing about it all over the news. And the million-dollar question is, “Is it just hype or is there any real substance to it?” Well, there are many strong opinions in this multi-sided debate. But before we get into these opinions, it’s helpful to know what web3 is.
Web3 is a term used to describe the suite of things possible from the recent development of blockchain technology. Blockchains are networks of computers that manage a ledger, or collection of data, and stay up to date with each other continuously. A key attribute of the network is decentralization, meaning that one rogue computer can’t do something that disagrees with the ledger, such as buy something if that person doesn’t have money. The ledger can hold anything from transaction details in terms of cryptocurrency to a virtual machine that allows people to vote on group decisions. The goal of web3 is to help the user/creator by giving them full control over their underlying data, any content they create, as well as digital assets they have purchased. Furthermore, the goal is to create a trustless system where users don’t have to trust the leaders of a company, but rather they just have to trust the lines of code that are open sourced so everyone can see. In an ideal world, there are many advantages to web3, including:
Decentralized innovation since users can work together to build on top of each other’s open-source code, which means anyone can read and potentially contribute to the code.
More incentives to reward users and creators since the middle-man centralized platform (e.g. YouTube) is removed and new incentive structures can be used.
More user trust, since instead of having to trust humans, there are “smart contracts”, or code that executes once a predetermined condition is met.
Keep in mind I said, “ideal world.” In practice, the web3 ecosystem is still infantile and constantly changing. There’s the pessimistic side, arguing that web3 is a made-up term used by those who seek to shift current power structures to a new one that benefits those who got there first, financialize everything to make supply scarce and thus profitable, and scam people into fraudulent technology that doesn’t have the base functionality that it claims to have. The other camp is arguing how web3 is a democratization of the internet, where we all have access to our own data, creators and fans who can be rewarded fairly for their contribution to community, and there will be new ways of organizing in a decentralized, autonomous organization that automates human error away and gets all members engaged in governance. Anyway, what I just said may not make any sense to you at all now, but I’ll try to break things down in as simple terms as possible in this essay.
In a gigantic two-hour video essay, video creator Dan lays out his argument against the validity of several web3 creations including cryptocurrency, DAOs, and NFTs. He does so with meticulous detail as he gives examples after examples of failed creations, scams, and malicious actors. He points out a unique take: the economic disparity underlying the growth of these digital assets. At the top, you have “the wealthy and tenuously wealthy looking for a space that they can dominate, where they can be trendsetters and tastemakers and can seemingly invent value through sheer force of will,” while at the bottom there are “people who feel their opportunities shrinking, who see the system closing around them, who have become isolated by social media and a global pandemic, who feel the future getting smaller, people pressured by the casualization of work as jobs are dissolved into the gig economy, and want to believe that escape is just that easy.” He takes it even further by saying that those who thought 2008 didn’t give enough opportunities for regular folks to participate in the housing market speculation are the ones driving this web3 movement. He is comparing the growth and frenzy of web3 digital assets to the growth and frenzy of housing related securities in the 2008 financial crisis. His overall theme is that, “A different system does not inherently mean a better system.” Olson seems to see the downstream effects of web3, specifically the actions of people engulfed in the system, and he doesn’t see much good. However, upstream in the communities, there is cautious optimism regarding the future of web3.
Tim Roughgarden, a professor at Columbia University, in a fireside chat with Protocol Labs says, “I like to talk about this virtual computer that sort of lives in the sky and runs as a public good… It’s a good sign when the more you understand, the more excited you get.” When asked about the risks that the space introduces, one that lacks the traditional academic rigor and scrutiny, he says, “It sort of depends on the risk profile on the project… I feel like my job is to say here are the risks if you do this… it’s often going to be a business call” (Roughgarden 17:40). I think this is just an example of him skirting responsibility for the consequences of rapid development and unregulated markets. He is solely focused on advancing the technology behind these web3 “businesses” and any forms of scams, whether intentional or not, is not his problem. I think this is an example of the danger of separating academia from the real world, where academia is seen as pure and truth-seeking, and the outside world is seen as responsible for the difficult decisions that involve trade-offs and peoples’ wellbeing are at risk. In an article about the current issues with digital property, the authors give examples of art fraud with NFTs facilitated by online “Mafias,” hoarding digital assets amongst top elites that goes against the idealized notion of democratized ownership and money laundering and counterfeits in the NFT space. Ultimately, they conclude that “It is not impossible that the metaverse will form the backbone of the next iteration of the internet, web3. But it is fair to say that its PR greatly precedes it” (203). They argue that the technology has yet to be fully understood, and it will take years for the judicial system to catch up to the new issues introduced by the technology.
All in all, it is safe to say that the evolution of web3 and how it will affect the world entirely is too soon to make a conclusion on. However, the beginning efforts of it have proven itself adaptable to those able and willing to explore it. At some point, we will be steering away from our present technology, and moving into a new and advanced world of technology, though only time will tell exactly how long that will take and what type of new evolution will be successful.
Belk, Russell, et al. “Money, Possessions, and Ownership in the Metaverse: NFTs, Cryptocurrencies, Web3 and Wild Markets.” Journal of Business Research, vol. 153, 2022, p. 198–, https://doi.org/10.1016/j.jbusres.2022.08.031.
Dan Olson. "Line Goes Up – The Problem with NFTs." YouTube, uploaded by Folding Ideas, transcribed by Eize Basa, 21 January 2022, https://www.youtube.com/watch?v=YQ_xWvX1n9g.
Shin, Laura. The Cryptopians Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze. PublicAffairs, 2022.
Tim Roughgarden. "Fireside chat with Tim Roughgarden." YouTube, uploaded by Protocol Labs, 24 June 2022, https://www.youtube.com/watch?v=8kLmRkkPoKo
White, Molly. Web3 is going just great, https://web3isgoinggreat.com. Accessed 7 Oct. 2022