Web3 isn’t a scam – but your cryptocurrency probably is

A few weeks ago, I had a developer and aspiring entrepreneur slide into my DMs on Twitter.

He had heard I was launching a Web3 Podcast and wanted to know whether I would be interested in partnering up on what he believed to be a pioneering new concept – a decentralised dating app. ‘Imagine Tinder in Web3!’ was the excited pitch.

‘Cool!’ I messaged back. ‘What problem does a decentralised dating app solve?’

‘It solves the same problems as the centralised app, but with different features’

‘Okay, and why does it need to be decentralised?’ I asked.

I was immediately informed that I was ‘clearly not the right person to work with on realistic projects’ and promptly blocked.

I relay this anecdote as illustrative of the biggest fallacy in Web3: just because something can be decentralised, doesn’t mean it should be.

The cultish appeal of Web3 as the new frontier in tech has led to a stampede of talent, investment, and media attention. The evangelism of these early adopters, combined with the instinctive dislike of centralised authority prevalent amongst crypto natives, has led to a misplaced idealism throughout the ecosystem.

As a result, we have seen a slew of new start-ups promising to be ‘X for Web3’ or ‘Decentralised Y’, without considering why a decentralised model is better for the users of the product. When pressed, these founders will usually say something about user privacy and data ownership.

Whilst most users value their privacy and care about protecting their data, they value convenience more. Even in the Web3 community, which you would expect to be a bastion of decentralisation, you see Twitter, Medium and Discord predominate as preferred communication channels.

If it seems that decentralisation for the sake of decentralisation is the hallmark of many Web3 communities, that’s because it is. A narrative has taken hold that advocates ‘sticking it to BigTech’ or the government, as if Trump being banned from Twitter is indicative of an imagined slide into autocracy.

These zealots have attracted an array of criticism, and a number of sceptics have gleefully pointed out that decentralisation is largely a myth, blockchains have failed to solve any real problems, and that Web3 is basically one giant fraud. In many cases, these pundits have a point. In many others, they do not.

Horses for Courses

The vehemence with which some ‘haters’ have reacted against Web3 is downright odd.

Broadsides have been levied at the inefficiencies of the blockchain, always in reference to Ethereum and Bitcoin, whilst ignoring the fact that newer arrivals and upgrades have solved many of the problems that plagued these forerunners.

These same sceptics have denied any ‘real world’ applications for this technology, instead claiming that Web3 is essentially a Ponzi scheme. The promised benefits are always just around the corner. Early adopters get rich, and late comers are left ‘holding the bag’. Fair enough, this may be true in the murky world of crypto shitcoins and NFT rug-pulls, but to apply this argument to Web3 ecosystem in its entirety is a straw man.

It seems these critics have forgotten that blockchains are already in commercial use. HYPR and Xage provide cybersecurity for Internet of Things (IoT) companies, having sold hundreds of millions of licences between them. Anti-money laundering start-up Ocular employs a blockchain to ensure data cannot be manipulated as it changes hands between different parties. A recent article by Forkast highlighted that 81 of the top 100 public companies are using a blockchain in some capacity, up from just 2 (PayPal and Walt Disney) in 2014.

Digital Scarcity

The big innovation of Web3 has been to create scarcity in the digital world, which allows for provable and transferable digital ownership. Whilst it’s easy to dismiss NFTs as a ‘fad’, the eye-watering prices people are willing to pay for a Bored Ape or a Cryptopunk are proof that they are valued by the market.

It may be a marketing gimmick – but then so are many things that humans place a premium on. Ultimately, an asset is worth whatever the market decides it is. There is no reason why diamonds should be valued more than, say, Tanzanite, based on their scarcity alone.

It really is early days

Since the birth of Bitcoin in 2008, a group of technologies have evolved and coalesced into what we are now calling Web3.

Many of these new innovations have only gained prominence in the last twelve months and have still to break into the mainstream. It is up to us, as early movers in this space, to decide and discover what these innovations can (and should) be used for.

Yes, Web3 is rife with scams and bad actors, but there is a lot of good here too. As more smart minds are drawn to the space and the ecosystem begins to mature, we will look back on these heady days as the dawn of something amazing.

We just might have to experience a few rugpulls first.