Why Everyone’s So Confused About Web3

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Coinmonks

10 min readMar 29, 2022

For the past 6 months, a wide spectrum of media publications have labored to supply an answer to the question: “What is Web3”?

web3 search interest over time — Web3 search interest over time

At the same time, “Web3” has met strong pushback, mostly from voices that are fundamentally skeptical of crypto as a whole:

I’d like to supply a take from the point of view of someone who is fundamentally optimistic about crypto, but nevertheless very skeptical of the way “Web3” is being positioned. For full disclosure, I’m a software engineering manager at one of those evil centralized Big Tech companies that Web3 is supposedly going to save everyone from.

We will begin with an analysis of the “Web3” meme as a media phenomenon. The timeline that follows is an attempt to supply an irreverent narrative for how we got into this terminological quagmire:

2014

As many of the “What is Web3” explainers correctly point out, Ethereum co-founder Gavin Wood deserves credit for first coining the term in a crypto context back in 2014. Here’s his original April 2014 blog post.

Wood’s vision boiled down to the idea of hosting most of the data on the web via decentralized technologies. So instead of your cat videos (static files) being hosted on servers operated by corporate giants such as Google, they would be distributed across an uncensorable network of cooperating nodes. To manage mutable state, such as your follower list, distributed transactional consensus engines (such as Ethereum) could be used. So yes, in this vision of a rebuilt Internet, every “like”, every “tweet”, every “share”, would presumably need to pass through the heavyweight machinery of a consensus engine (a blockchain), so as to avoid having to trust those evil corporates with the management of your precious data. Wood motivated this idea using the controversy of the time, calling it an architecture for the “post-Snowden web”.

To anyone that interacts with blockchains regularly today, or is familiar with how they work from an engineering standpoint, this probably already sounds harebrained right off the bat, but to Wood’s credit, the original blog post does at least contain some content that approaches an actual technical proposal — and this is much more than can be said for later iterations of the term. For completeness, let’s cover them: Wood lays out 4 main necessary components to the technical stack that would need to be built to achieve his vision of a completely decentralized web:

Static content publication: Wood describes a scheme that sounds basically like what would become Filecoin & IPFS, which is the crypto-native file hosting service used for many Ethereum based NFTs. In Wood’s vision, all static content would be hosted from systems like this.
Dynamic messages: Wood describes a system for encrypted peer-to-peer messaging. Arguably, this need has already been filled today by services like Telegram (though in Wood’s vision this would be a much lower-level, Internet-wide service)
Trustless Transactions: This would be the engine for updating all the mutable state (things that we store in fast, efficient, scalable, but apparently to Wood, old-fashioned technology like relational databases, key-value stores, or any other of the myriad kinds of datastores that exist). Since Wood was still part of the Ethereum foundation at this time, Ethereum is presented as the “first workable” example solution for this piece.
Integrated user-interface: This would be a new kind of browser, that would know how to talk to the preceding layers. Arguably we have actually seen this piece pretty much realized through browser extensions like Metamask.

After this threadbare blog post, in terms of “Web3” meaning something specific and concrete from an engineering standpoint, things only went downhill from here.

2015–2019

The “Web3” meme persisted, albeit limited to relatively niche crypto circles. A popular Ethereum javascript library (web3.js) had its first 0.0.15 release on Feb 24th 2015 (incidentally, use of this library was my own first exposure to the term “web3”).

During this period, the term “Web 3.0” was for a while more popularly used to refer to the now-forgotten “Semantic Web” concept whose hype cycle died out (e.g. see Wired in 2014: ”From E-Commerce to Web 3.0: Let the Bots Do the Shopping”)

By 2017, Wood had moved on from Ethereum to Polkadot. In 2017 he founded the “Web3 Foundation” which was used as a vehicle for a shameless $150M presale of DOT tokens, primarily to undisclosed Chinese investors (hilariously, over half of which was lost through incompetence). Amidst finding time to scrub the web of his disgusting “fiction” (better not lose your deletion keys if this had been Web3!), Wood releases an updated technical vision for the “Web3” technical stack, which now apparently requires a “Layer 0” foundational technology that of course Polkadot will supply.

2018–2019 saw the deep bear market “crypto winter”. There was still no real traction for the crypto-centric “Web3” concept in mainstream media.

2019–2022

Anti ”Big Tech” sentiment reaches a fever pitch in the U.S. The flames of this sentiment are cynically fanned by politicians of both parties, despite the parties having diametrically opposed policy prescriptions for what to do about it (either demanding increased or decreased levels of government censorship). “Big Tech” becomes a convenient bipartisan scapegoat for working class Americans who can see that they are falling further and further behind — thanks in part to the relentless financial asset inflation unleashed in the stock & housing markets, caused in no small part by the politicians’ own multi-decade-long debt binge and disgraceful bailout of the financial industry in 2008, which necessitated a decade of Federal Reserve QE & ZIRP.

In June of 2020, heads of major tech firms are hauled before Congress for ritual televised shout-downs. On October 6th the House Antitrust Subcommittee released a major report calling for tough new Big Tech regulation.

Two weeks later, on October 13th 2021, prominent VC firm Andreesen Horowitz (a16z) rushes to inject itself into the policy conversation with How to Win the Future: An Agenda for the 3rd Generation of the Internet. “Web3” is featured prominently as its organizing theme. Their definition for Web3: “A group of technologies that encompasses blockchain, cryptographic protocols, digital assets, decentralized finance and social platforms, NFTs, and DAOs”. So, explicitly, this new iteration of Web3 is defined as a catch-all grab bag. We have exited the realm of technical vision or roadmaps and entered into the realm of politics and influence.

The a16z report capitalized on the zeitgeist by skillfully echoing just enough Big Tech scapegoating, and then proceeded, judo-like, to redirect that outrage and concern into advocacy for crypto-friendly regulation as the solution to it all.

“Web 2.0 has transformed our economic and social interactions in ways that have profoundly benefited society. At the same time, few would debate that Web 2.0 — social media and today’s large tech platforms — took a wrong turn along the way. Neither the public sector nor the private sector has figured out how to grapple with the Pandora’s Box of privacy breaches, disinformation, monopolistic practices, and algorithmic biases that have come to define much of the internet. Meanwhile, authoritarian governments have never had more data with which to surveil, censor, and manipulate their citizens and those of other nations.”

The release of this report represents the upwards knee in the “Web3” meme growth chart shown above. On a16z partner Chris Dixon’s Twitter account alone, we go from zero “web3” tweets over the preceding 6 years to multiple web3 tweets per week. It starts to penetrate my personal filter bubble around this time: I start seeing it popping up in my LinkedIn feed, and good friends of mine start using it, each with what appears like their own personal conception of what exactly it means.

A Personal Take

The Gavin Wood edition of the Web3 idea was unworkable from inception and represents little more than the hazy sketch of an engineering idea. The visual that comes to mind for me for it would be a crypto bro taking a gigantic bong rip, coughing out smoke loudly, and then pronouncing, “what if we, like, just decentralized everything, man? We could just rebuild the entire Internet on Ethereum! No, on Polkadot!”.

Very, very few applications actually merit the use of a decentralized consensus engine to manage their state. Non-sovereign money could certainly be one; encoded financial contracts on top makes sense to me as another. But it makes absolutely no sense to try to rebuild Web2 Platform services like Facebook, Amazon, Google, and Twitter on top of blockchains in order to save us from “deplatforming” and the evils of centralization, even if blockchain L2s improve their ability to scale. It is akin to outfitting every plane on earth with the same ultra-heavy ballistic armor of Air Force 1, forcing the associated costs of the unnecessary weight to be borne by passengers. It needs to be acknowledged that this would make the Internet as we know and love it impossible.

Additionally, open-source, self-hosted alternatives to things like social media platforms already exist. They are a dime a dozen. You can already share your inane thoughts via your own server so you don’t have to trust any evil corporations with your data, if you wish. You don’t hear much about this because people in general don’t perceive enough of a problem with the status quo to be bothered. Crypto is simply not the right tool for wresting “control of your personal data” back from the big bad centralized Internet ad & e-commerce companies.

The newly Crypto-curious might be tempted to conclude that Crypto actually has no value at all, based on how disingenuous this marketing campaign has been. But I think that is wrong. My belief is that Crypto is helping expand how we think about money, and helping explore an exciting design space in digital assets & digital financial instruments. Fundamentally, Crypto APIs are focused on moving digital assets around; in over a decade, the only “product-market fit” that Crypto has ever found has been in this financial & monetary domain. So although it would be crazy to try to predict the limits of how far the reach of something like Crypto could ultimately go (like trying to predict the ultimate limits of the Internet revolution in the early ‘80s), it seems clear that if Crypto is to revolutionize anything, it is in the financial domain that the revolution should start (note “financial domain” should be interpreted broadly, to include things like financialized / tokenized digital collectibles or NFTs, social tokens, etc). Only with that goal achieved and in the rearview mirror, would it make sense to start to talk about rebuilding what is currently serviced extremely well by “centralized” Web2. I don’t expect Web3 to see any traction in places where Web2 is already successful.

This is my main problem with the latest crypto-grab-bag version of the Web3 idea: the cynical way it participates in the scapegoating of America’s crown-jewel Internet companies as the main problem to solve for right now, encouraging a bizarre and unproductive focus on rebuilding Web2, instead of using the power of crypto to break free of centralized banks & financial intermediaries. It is unfortunate that for the sake of political expediency, the wrong villain had to be cast at the center of the Web3 narrative. Centralized Internet companies are not the problem crypto helps to solve; central bankers and our centralized financial system are.

Let’s recap. The original Gavin Wood vision of Web3 had bits and pieces of it achieved, but as a grandiose end-state that we’re supposedly working towards, had about the same amount of engineering substance behind it as a cloud of pot smoke (and in practice was mainly used to promote Ethereum and Polkadot). The newer a16z Web3 reboot is a transparently cynical political ploy. So where does that leave us?

It might seem shocking after this diatribe, but I’ve actually started to use the term “Web3” myself and have grown to kind of like it. Like nearly everyone else, I have my own personal conception of what it means, though.

I can see how “Web3” is an excellent term for describing the emerging experience of using browser-based wallet software to log into web-based DeFi UIs that connect to smart contract based decentralized applications. It’s kind of the Gavin Wood vision, but on a sensible, appropriately constrained scale.

I like that “Web3” puts a focus on building and innovating as opposed to merely trading and holding. I like that it positions crypto as a new phase in the Internet’s evolution. I like that the cause of crypto-friendly regulation might be advanced because of it. And I like that it is giving a new generation of users a reason to get excited about this space.

But I also see why it confuses the f*** out of people.

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Written by EVK