Elon and Jack have doubts about web3.
In just the past few days, Elon tweeted that web3 is more hype than substance. Jack tweeted that VCs own web3.
They’re right, but that doesn’t mean web3 is doomed. Every new technology is more hype than substance when it first starts. We’re just ending Year 1 of web3. If it were more substance than hype, it would have had to start sooner.
It’s also factual that VCs have invested significant amounts of money into web3 companies. Those VCs are obligated to generate financial return for their investors, so those investments have to generate financial return for them.
The web3 community’s response to Elon and Jack — mostly Jack —has been something along the lines of “You don’t get it” to “You suck” to “Twitter sucks” or worse.
I’m a web3 believer, but I’m also a rationalist. There are valid criticisms of web3 that hopefully get factored into how it’s built. Here are three most important things I’m taking from the great web3 debate:
1. The ownership layer for the next iteration of the web must be decentralized.
The foundational underpinning of the next iteration of the web — web3 — is that the users own assets in the ecosystem. True ownership of digital assets cannot exist through centralized overseers. In that scenario, users aren’t likely to be able to take assets with them to different platforms, thus any asset value is trapped in the ecosystem of the central authority. This is the world we largely live in now with the large web2 companies.
Decentralized digital ownership, which is analogous to digital rights, is the paradigm shift of web3. As long as we get that right, a lot of the rest of these arguments are noise.
Hype or not, the ownership layer exists today via Ethereum, and it’s survived the challenge of broad market testing via the various experiments we’ve seen in NFTs. It’s true the use cases are limited for digital assets right now, but use cases are always limited for new technologies. This was true for web1 and web2. Social media skeptics didn’t think users would ever do more than post what they ate for breakfast, leading them to assume social was doomed to failure.
As more creative energy unlocks the potential of persistent ownership of digital assets in the web3 world, the hype will become substance.
2. The average person doesn’t care, and will never care, about decentralization.
Without a decentralized ownership layer, web3 cannot exist as envisioned; however, that doesn’t mean that every participating organization or product in web3 needs to be decentralized. Just like people don’t care about the network effects that lend power to social networks, they won’t care whether some web3-based service is centralized or decentralized. Users just want great products that do things they can’t get anywhere else regardless of the technology or philosophy behind it.
We should remember we’re in the earliest stages of web3 where pioneers must care deeply about the structure of the underlying tech. New tech needs zealots willing to risk everything to build the new world, then it needs evangelists to excite the next wave of users. Zealotry and evangelism — and I don’t use those terms insultingly — cannot happen without deep religious belief in something about the new world. In a few years, when we have 100-1,000x more people involved in the new world of web3, the majority won’t care about decentralization just like today’s Internet users don’t care about TCIP protocols. From an end-user perspective, decentralization is overrated.
The layman’s apathy to decentralization extends to the debate around DAOs vs traditional corporations and VC funding.
It’s fair for Jack to question how on-brand it is for web3 companies to build on VC money, but
both centralized and decentralized structures will function in web3. If a decentralized operating structure somehow enables the creation of incremental value for the user base, then the decentralized structure will win, but sometimes centralized will work just as well. For this reason, I find the VC argument irrelevant.
To address Elon’s point, we just need great experiences built on the decentralized underpinning of web3 to give it more substance than hype. It doesn’t matter whether those experiences are centralized or decentralized as the market will gravitate to the services that fit needs best.
3. Recourse is a feature of our current systems, not a bug.
Prior to the Elon and Jack comments, Alex Stamos, former chief security officer at Facebook, made a far more interesting argument around the web3 community not appreciating the security flaws of the movement.
Trying to eliminate recourse through code will probably never work because its antithetical to human nature. This comes back to getting the average person to participate in web3. If someone risks losing their entire life savings not only to a nefarious Russian hacker but merely by losing one’s private key, then the system will never garner mass adoption. If we think that Ledgers and cold storage are viable long-term solutions for the layman, we’re fooling ourselves.
Historically, technologies that make lives simpler are the ones that thrive because they’re the ones people want to use. The average person doesn’t want technology that makes life obviously more complex. The past two web paradigms of search and social made it incredibly easy to find the answer to any question and connect to anyone in the world.
If web3 is to make it incredibly easy to create and trade digital assets, users need safe and simple tools to access and protect their assets.
Recourse is a massive opportunity in web3. I think that’s the best way I could describe Coinbase’s opportunity. People want to trust banks, physical or digital, and trust involves taking care of them when they have problems with their money.
Complete non-recourse is a web3 bug that we need to address, not a feature.
The biggest bug here is binary thinking. One can still use Web3, Dapps, etc. and decide whether to maintain the control over private keys or give up the custody.
“I do not fear computers. I fear the lack of them.”
― Isaac Asimov
Check out this take on web3. https://medium.com/@tradechamps-founder/all-your-decentralization-are-belong-to-us-6dd34e8afee4