What’s next for Web3?
FTX officially ended the sugar high
For folks in Web3 the past few months have felt like years. If you know a NFT degen, DiFi bro, wizard engineer, or any of the other passionate people dedicated to the future of Web3 give them a hug.
But after, they are likely to get back to work. This is because today the future of Web3 is uncertain. There is still not a clear winner among the public blockchains. Private blockchain implementation is very nascent. And a recent survey revealed a super-majority of people still aren’t even sure what Web3 is.
The collapse of FTX laid bare many of the failures of Web3 thus far. Polygon a popular Ethereum-side chain has been waging a PR and investment war against Solana, their closest competitor. Meanwhile, other public blockchains such as Cosmos and NEAR are on the hunt for a leadership position. The NFT market has virtually collapsed, mostly because it came to realize that a majority of NFTs were useless. And worst of all, greed infiltrated the industry through blind sums of venture investment and promises of unrealistic profits. Today, Web3 looks like a collection of snake-oil salesmen.
This is a damning assessment, but it is a realistic one. The industry as a whole needs to take a step back, preferably a step out, and introspect on what the world currently thinks of Web3. Today, Web3 might be described as a fraud, a pipe dream, unrealistic, a Ponzi scheme, the darling of too much VC capital. But I know from serious Web3 builders that these aren’t the words they use to describe the Web3 they are building. Their blood, sweat, and tears, aren’t shed so Sam Bankman Fried doesn’t go to prison, or so Yuga Labs returns hefty profits to their investors. These builders do it for the basic tenants of Web3. And it’s time to get back to the basics…
So what exactly are the basics?
1. Transparency
2. Immutability
3. Choice
Transparency
The saying goes, if it’s on the internet everyone has access to it. In practice, we know Web2 is full of private data protected by firewalls, passwords, and encryption. The average person, knows very little about their data on the internet, while Facebook is likely a better surveillance-arm than the NSA.
In Web3, everything is inherently published to the blockchain, and on public blockchains, this means anyone can view any action you take on-chain. It also means anyone can see what you own, what you owe, and what you do. FTX and their highly private structure was not transparent and therefore I’d argue wasn’t Web3 at all. Instead, they hid behind complexity and secrecy to fleece the average Joe. Joe had no chance.
There are a considerable number of brilliant startups who are working on novel solutions to better aggregate and analyze public blockchain data. Their work is critical to our future ability to manage risk, crime, and all sorts of things transparently and in real time. We need it. Just this week the Bank of International Settlements announced in their quarterly review that global FX swaps (obligations) rose to $80 trillion. An astute journalist asked the obvious question, “Why hasn’t $80 trillion been reported previously”. The answer? FX obligations are typically reported off-balance sheet. At a sophisticated firm, tracked in one of these fire-walled databases. Perhaps in a less sophisticated firm in an Excel sheet. Imagine a world where we can track derivatives risk in real-time, using public and transparent data. We would likely be saving ourselves from the next global financial crisis.
Immutability
It isn’t hyperbole that the Federal Reserve can create money out of thin air by typing a number into a computer and… poof! In fact, they could then also turn around and delete that same money they created. This isn’t that different from a social media site deleting a user’s controversial post, or even a Dictator burning the ballots of their rival to maintain control of a country. Today most things are mutable, that is, if you control it, you can change it. From the very beginning of Web3, public blockchains were designed to be distributed, and in-turn immutable by any one actor. The power of this design presents the most hope for Web3’s survival. Immutability ensures if the blockchain giveth, the blockchain cannot taketh. That is pure magic. A truly distributed blockchain would inherently facilitate two-sided transactions… goodbye Escrow holding periods. It could verify the integrity of an election, it could even help us track and verify precious one-of-a-kind pieces of art.
Choice
Choice tends to be the forgotten tenant, because most business’ don’t like competition. But choice is perhaps the most important tenant of Web3. Choice means a user owns each individual interaction with a business. And when that user wants to withhold an interaction, they can take their business elsewhere without any friction at all. Take for a example a wire transfer. Imagine today Chase asked you to pay $15 for a one-time wire. But Citi, could offer $12. Without Web3, you would have no choice but to go with the bank you are already locked into using. In Web3 you could bank with Chase one day (whatever that might look like in the future) and bank with Citi the next. Each interaction is a chance for businesses to win the customer by offering a better and cheaper service. It also unlocks new levels of cooperation. Today, every store has a completely and totally separate rewards program. Let’s be honest, it’s annoying. In Web3, we could see a completely new breed of business focused just on administering loyalty programs. Now when Brooks Brothers wants to revamp their rewards program, they don’t hire an overpriced consultancy to build a custom solution, they simply integrate with a larger loyalty system that already has the bells and whistles customers expect. Meanwhile, Brooks Brothers can use this system to undercut their competitions in realtime. Have 80 points that you gained from shopping at Banana Republic? We will let you use those points in our store if you spend $50. The marketing schemes are end-less. And most importantly, consumers can fluidly move from store to store in a whimsical motion of blissful consumerism. This is the kind of choice Web3 can offer.
Many if not all of the examples I gave seem far from reality. That is because they are. The Web3 of today isn’t just in the ICU, it is going to to take a considerable amount of post-hospital rehab to reach its full potential. As long as that rehab is focused on the three tenants above, I have no doubt Web3 is going to be just fine, and in the process, it is going to change the world.
Gabriel Unruh is a repeat founder and futurist dedicated to cutting-edge digital transformation. He runs an independent product consulting firm, Divination, where he focuses on helping clients launch new products in cutting-edge industries.
