Almost a month has passed, and I am fully immersed in the web3 world. I must say I’m a bit surprised at some reactions and hot takes I’ve seen to the term Web3 and the strength of opinions in the space.
It’s A Scam! Or, Is It?
I’ve spent the past few days digging into the idea that web3 is just a scam or a fad that will pass. While I can’t predict if the latter will come true, I, personally, think that it’s a shift in thinking which will result in a permanent change in technology.
As to web3 being a scam, I disagree. That isn’t to imply that there aren’t scams. In much the same way that emails tell us that many a prince needs your help with their inheritance, web3 has its problems. This does not lead me to the conclusion that either email or the technology powering web3 are the concerns.
Technology amplifies humanity.
Why I Think Web3 Matters
There are several areas that drew me into the web3 space.
Decentralization
Decentralization isn’t new. However, I haven’t seen it adopted broadly or presented as a core value in the same manner that web3 has brought to the forefront.
Decentralization provides one major benefit that is becoming more and more relevant in the world today. It prevents one entity from deciding to turn off access. This problem could be solved via self-sufficiency as well, but having that level of technical expectation for users is problematic. It seems that creating a global system that prevents censorship is good…right?
I do sometimes wonder if all censorship is bad. Perhaps a better way to phrase this is that I would like the ability to curate my inputs easily. If I can censor what I see when I choose to, I’m happy. Censorship resistance is a net positive, and that’s a massive benefit the web3 space can provide.
Trustless
Truth > Trust Trust is good, right? Well, sort of. If you have trust, and it works out, it’s great. When trust doesn’t work out, that’s when problems arise.
Web3 seeks to remove trust from the equation. What does that mean? A smart contract is a program that will always function the same way. Given that, you can determine what the result will be for given inputs. There is no trust needed, if you understand the program, to ensure the results.
While I’m privileged to live in a society that has a fairly reliable legal system, things aren’t perfect, and I know in other parts of the world things are even less optimal regarding legal systems. Having contracts that operate based on truth and not trust is a massive paradigm shift.
Ownership
You wouldn’t download a car? I remember seeing these ads back when pirating music was a ‘big deal’.
Digital products have struggled for a long time to solve the issue of validity and ownership. DRM fixed this from the issuing side but didn’t replicate real-world assets very well. I, personally, love reading books on my Kindle and can send them to friends to ‘borrow’ for a very short time frame. Amazon could enable a better lending service, but the big difference between a Kindle book and a physical one is I can’t just hand it to a friend and say here, give this a look.
In the NFT space, that’s totally possible, without needing the involvement of a third party. The last bit is the key. I don’t need to reach out to the author or publisher and say, “Hey, is it ok if I let my friend read this?” Web3 empowers users by providing them with ownership and removing the intermediary altogether.
Following the ownership thread a bit further, I had a somewhat worrying thought about my bank. Here’s the deal, many web3 champions talk about creating a trust-less ecosystem. This means we don’t need to ‘trust’ other entities to do what they say we ‘know’ they will. Thinking about my bank, I realized, who ‘owns’ the money I see when I log in? I don’t have it, if the bank decides to say I don’t have this money anymore, that could be one heck of a battle I’m going to face.
In the world of web3, you own your account. This is due to you being the only one with access to your private key. There is some danger in this setup, if you compromise your private keys, you will be out of luck. I know there is work to be done here to make it more accessible to the average person. Web3 needs to address those who aren’t willing to be on the risky bleeding edge and might make a mistake from time to time.
Creator Support
An aside from digital ownership. Creators can create products from which they receive royalties as they are sold later on. This is massive.
Imagine the book lending scenario above. The secondary market of books has no benefit to Authors. If they received a percentage of all resales of books going forward, that could provide another revenue stream for them in the future. The also opens up new possibilities for good sales going forward. I can’t wait to see what develops in this space.
Identification
The theme of ownership will be repeated here. While not specific to web3 or crypto, one of the advantages of the ubiquity of key pairs, or asymmetric cryptography, is that you can own your identity. Controlling a private key isn’t new or novel, really. It’s been used for things like PGP encryption and signing, as well as SSH, for decades. The big change is that it is becoming more common for people to have them. To access web 3 applications, you have to have a private key.
In the quest for users, applications loath friction. One major point of friction is account creation. A common solution to this is to allow a third party to step in and remove the friction. This looks like ‘_sign in with_’. While this is easy, again you are trading away ownership of your account information. The third party can see all of your accounts and your data isn’t really yours anymore.
Web3 wallets fix this. They provide a built-in method of authentication. One simple method is to have a user sign a response to prove who they really are. It brings a new meaning to the term signing in. Again, this isn’t a ‘feature’ of web3, but the ever-present nature of key pairs enables this functionality.
Store of Value
In addition to providing an authentication method, web3 brings with it a store of value. With the advent of cryptocurrencies, web3 had a native store of value. While this is currently one of the riskier areas of web3 due to the volatility of the assets, it does provide a built-in method of payment as well.
From a web development standpoint, I see this and the authentication as two of the biggest wins for current systems. Users have a method of transferring assets and authenticating built into the web3 ecosystem, if nothing else, these two elements will create change.
Tokens
Perhaps I should have started with tokens, they seem to currently be the ‘face’ of web3 and contain the largest likelihood of being a scam.
To understand tokens clearly, there are a few terms to clarify.
FUNGIBLE: A fungible item can easily be replaced or swapped. One common example is dollar bills. Each one is unique, true, yet they are treated as the same thing. If I were to swap a dollar you had for a dollar I had, there is functionally no difference. The same is true for tokens and currencies like Ether and Bitcoin.
NON-FUNGIBLE: Given the ability to swap fungible items, non-fungible items are unique. There may be a limited number of copies, but they cannot easily be exchanged. Think of a limited number of prints. While each print may share many features, they have unique properties, such as #42 of 100 which identifies its place in the series. They can also be entirely unique.
Tokens are a representation of value or influence in the web3 space. From what I have seen this is where the idea that web3 is a scam comes from largely. Thinking about representations of value, any money, has the same fundamental premise. It has value simply because a group says it does. Without agreement on the value, it’s simply a physical token.
It is true, people create some tokens simply to scam people out of money, this doesn’t mean tokens are bad by default. From what I’ve seen, we are currently in the growing pains phase of this new technology. The market hasn’t settled on the big names in value representation yet. This leads to the risk associated with transferring value into the space. As always, with great risk comes the possibility for great reward as well. People have made life-changing financial gains and losses in this space. Risk doesn’t necessarily mean scam. It should be acknowledged that scams do exist. I, personally, don’t believe that should spoil the whole system.
The Environmental Issue
Web3 requires a fair amount of electricity, it’s true. Proof-of-work protocols require vast amounts of computing power, which means more energy consumptions. There are a few factors that I see helping this.
Many protocols are moving to proof-of-stake, which is much more energy-efficient. There are possible growing pains in this method of verification, but I don’t see that as a showstopper.
Most of what I’ve found about energy consumption leads me to think comparatively to other areas. I’ve seen many articles comparing a network’s energy consumption to that of small countries but haven’t seen anything about the comparison between a network and industries it might replace. For example, how much energy does a single major bank use per year globally? The goal should still be an improvement in energy efficiency, but I view it as a short-term issue that will improve over time.
It’s Still Early
Web3 is new. It’s still finding itself and I see vast potential. I view those of us currently in this space as experimenters. We are throwing web3 at everything to see where it sticks. I don’t know that everything should be on a blockchain in the future, time will tell. I do think that some things will benefit from web3, and it will fundamentally change our future.