5 Web3 Challenges We Need To Solve Before Mass Adoption
Exploring the Potential, Setbacks, and Future of Web3 Technology
Web3 isn’t just a set of standards or trends. It represents the promise of universal access without any underlying compromise on the user data in the new iteration of the web.
Very recently, the evolving technology has had its share of setbacks with failed risk management, bankruptcies, and misuse of consumer funds, causing distrust and confusion among Web3 enthusiasts. I, however, would call these instances of failures as bad actors misusing the tech.
While Web3 holds transformative potential, especially in fintech and payments, some very real risks to mass adoption need addressing. I’ll try to capture the essence of the challenges I face in my journey as a Web3 CTO.
#1 Bad user experience
The learning curve is steep for a user with zero technical background.
Complex onboarding processes, complexities in user interaction, steep learning curves, and private key management are some of the biggest contributors to bad user experience.
Let’s examine each one of them.
- Simplify Interfaces and Enhance User-Friendliness
The complex and cluttered interfaces of dApps contribute to a bad user experience in Web3. Many decentralized platforms struggle to strike a balance between functionality and user-friendliness, resulting in overwhelming user interfaces and confusing navigational patterns.
It is still a daunting experience for a general user to interact with dApps. This overcomplexity has been the nail in the coffin for many Web3 companies.
Web3 marketers and developers must prioritize simplicity and intuitiveness when designing interfaces for dApps.
- Improving Self-Custody Wallet Solutions
To address the challenges associated with private key management, there is a pressing need for better self-custody wallet solutions.
Custodial wallets offer a more user-friendly approach by removing the burden of private key management from users, but you are not in control of your keys. Self-custody wallets ensure the safe storage of digital assets by leveraging advanced security measures such as social recovery and sharding as well as intuitive interfaces.
#2 Web3 Marketing: It’s Not Just About the Tech
Marketers should focus on highlighting the benefits of Web3 products, not their complexity.
In Web2, you use performance marketing like ads on social media and Google, etc. In Web3, the focus is on community building, influencer marketing, and creating ambassadors that promote your project for you.
Marketing is done completely differently in Web3 than in Web2.
However, the simple product development and marketing rule stays universal for both Web2 and Web3 products. It’s the user experience and utility each brings to the table. The easier a user finds to use a product, the more likely they are to continue using it.
Web3 products can be complex, but that doesn’t mean they have to be difficult to use.
#3 Regulations
There’s an urgent need for regulatory clarity.
Most founders are unaware of the associated risks that can jeopardize their Web3 business — the lack of regulations.
Businesses are hesitant to adopt Web3 technologies because they are not sure how to comply with existing regulations, or how to protect users’ sensitive information in a decentralized environment.
Digital assets on blockchains need to be regulated before Web3 can be mass adopted by regular industries. As the internet becomes more decentralized with no central governing body, it becomes more necessary for businesses to differentiate between maintaining transparency and protecting users’ sensitive information.
Be it licensing, consistent services, products, or navigation through the Web3 ecosystem, regulatory benchmarks are essential at all levels. Setting a roadmap aligned with regulatory provisions will benefit businesses in long-term planning and vision.
EU is ahead of the US in this case. Its MiCA regulations are all set to kickstart a licensing regime for all companies that are handling digital assets. While efforts to pass such laws in the US haven’t met the needed traction yet.
#4 Scalability
Scalability, security, and decentralization — The Blockchain Trilemma.
The blockchain trilemma is often seen as a developer problem, but it’s actually a problem for everyone who uses blockchain technology or global finance. These problems are at the root of every product development cycle.
We know Bitcoin and Ethereum were built with a focus on decentralization and security. They were never scalable with Bitcoins 7 transactions per second (TPS) and Ethereum 15 TPS speed against Visa’s 24,000 TPS. Ethereum’s gas fee becomes expensive when traffic on the chain increases while Solana remains congested to the point where it is turned off.
Layer 2 blockchains (L2s) are like a temporary fix for blockchain scalability problems. They don’t offer a long-term solution, and they’re not fast or cheap enough for mass adoption. Sidechains are an alternative invention and they can be launched as high-frequency applications alongside the main chain. Binance, Polygon, Avalanche, etc., all released their sidechains recently.
Sidechains have infinite possibilities but aren’t immune to bad architecture. The Ronin hack on Axie Infinity happened on a sidechain. Each sidechain runs its infrastructure with its own consensus protocols and vulnerabilities and is less secure than the main chain.
L2s and sidechains today have contributed a lot to offer Web3 limitless scalability. We need both if crypto has to achieve mass-scale adoption. And undoubtedly, they are our biggest achievement in Web3 after smart contracts. But there are still greater developments needed to bring everything on-chain.
#5 Interoperability
Vitalik says that the future is going to be multi-chain but not cross-chain.
He argues that centralized bridges are not secure enough to transfer assets between chains and that they introduce a single point of failure into the system. Instead, he believes that we need to develop new ways to connect blockchains without relying on centralized bridges.
Currently, centralized bridges facilitate the transfer of on-chain assets from one chain to another. Their Total Value Locked (TVL) runs into billions of $$$ led forward by the DeFi movement.
However, bridges offer the ability to move funds freely but they are centralized and therefore not secure.
This is the opposite of what blockchains are supposed to do.
When native assets are stored directly on-chain, i.e., Solana on Solana, etc., they are protected against 51% attacks to a certain degree. Bridges act as points of vulnerability since they are the easiest to hack. But as more bridges are added, the more vulnerable the entire network becomes.
Bridges are essentially gateways that allow users to move their funds from one chain to another. But centralized bridges are controlled by a single entity, which makes them vulnerable to attack.
Wormhole and Qubit are two bridges that were hacked in 2022. In both cases, the hackers exploited vulnerabilities in the smart contract code of the bridges.
Instead, as we move ahead, we need to capture the idea that the blockchain ecosystem, just like the internet today is one giant network, needs to be better connected without centralized bridges.
Trustless bridges with standardized smart contracts and consensus may be the way forward right now. But with a lack of regulations and a united front to combat the perils of Web3, a Web3 ecosystem with multi-chains interoperable enough to capture value, scalability, and security together remains a distant future.
My Thoughts on Web3 Challenges and Future Timeline
As Web3 continues to develop, I believe businesses that successfully tackle the challenges associated with it will be well-positioned to take advantage of the new opportunities that decentralized technologies offer.
It is important to remember that Web3 is a fast-paced and ever-evolving industry, businesses that prioritize problem-solving and innovation over simply chasing trends will bring real value to the Web3 industry and create a sustainable path forward.
P.S. I share insights on leadership, strategy, and entrepreneurship from the perspective of a CTO every week.
