web3: Disrupting the Internet or a Daydream?

This debate around web3 is perhaps the biggest one that has erupted in the tech world in recent years: on one side are tech utopians, companies that provide various web3 services, and their venture capitalists. They claim that web3 is the next big thing in cyberspace, is truly decentralized, and is sure to pay big dividends. Globally, VC deals in the crypto space hit $25 billion last year, compared to less than $5 billion in 2020. A16z, one of the most famous VC firms in Silicon Valley, is also the largest web3 backer in Silicon Valley. On the opposite side are web3 skeptics, many of whom are also respected by tech-utopians. They point out that a decentralized internet is a pipe dream — “You don’t own ‘web3’. It’s VCs and their LPs who own it.” For the less vigilant investor, the dream Can be very dangerous.

web3: Disrupting the Internet or a Daydream?

“The Economist Business Theory” 2022-02-

Rewebbing the net

“Reweaving the Web”

Will reorganizing the web  web3 reshape the Internet industry?

will be partially remodeled. but may not be as thorough as its proponents expect

Moxie Marlinspike also created a non-fungible token (NFT), just like almost everyone is doing now. This digital certificate uses sophisticated encryption technology to prove that a buyer owns a unique digital property without the need for a central authenticator. Aside from cryptocurrencies like Bitcoin, NFTs are the most obvious example of “web3”. web3 is built on a distributed ledger called a “blockchain,” and its fans and venture capitalists extol it as a better, more decentralized internet. Technologists, digital artists, celebrities, and even newspaper specials, such as Marlin Spike (who founded the encrypted instant messaging app Signal), issue and sell NFTs to collectors, often at a premium (this issue is not a physical version) cover image sold for over $400,000).

Although from a cryptographic standpoint, MarlinSpike’s token is as reliable as every other NFT, it will look different based on who opens it. If you buy it and view it on your computer, it turns into a poop emoji. Within a few days, this NFT was removed from the digital collection market OpenSea. This is right in the hands of Mullin Spike. Because his purpose is not to raise money, but to draw attention. His token shows that NFTs are not as non-fungible as advertised. And OpenSea’s response also shows that the so-called decentralized web3 also has its own gatekeeper.

Marlin Spike’s trick is the latest twist in a debate. This debate may be the biggest one that has erupted in the tech circle in recent years. On one side of it are tech utopians, companies offering various web3 services, and their venture capitalists.They claim that web3 is the next big thing in cyberspace, is truly decentralized, and is sure to pay big dividends. Globally, VC deals in the crypto space hit $25 billion last year, compared to less than $5 billion in 2020 (see chart). Andreessen Horowitz (a16z), one of Silicon Valley’s most prominent VC firms and the biggest web3 backer in Silicon Valley, reported last month that it was working on three existing funds totaling $3 billion. On the basis of , raise another $ 4.5 billion web3 related fund. A senior partner left a16z last month to start a web3-focused company.

web3: Disrupting the Internet or a Daydream?

On the opposite side are the web3 skeptics, with figures such as Marlin Spike, whom even some tech-utopians respect, and the two platforms created by Jack Dorsey (the field of social media). Twitter and Square in payments) are both people who disrupt the web3. They point out that a decentralized internet is a pipe dream — “You don’t own ‘web3’. It’s VCs and their LPs who own it,” Dorsey warned in December. And for the less vigilant investor, the dream is also very dangerous: Since last November, about $1 trillion in value in the web3’s most mature sector has been wiped out.

This debate can be esoteric. But it’s at stake. It could change the trajectory of the Internet and the trillion-dollar business models it has enabled.

The history of modern computing is one of constant struggle between decentralizers and recentralizers. The shift from mainframes to personal computers in the 1980s gave individual users more power. Microsoft then took back some of that power with its own proprietary operating system. In more recent years, users can download open-source software for free and adapt it to their needs, replacing some of the proprietary programs in the computer industry — only to be taken back by tech giants to run their own mobile operations systems (such as Google’s Android) or cloud computing data centers (including Amazon, Microsoft, and Google’s cloud).

The “web3 movement” is a reaction to the centralization of the Internet—perhaps the largest of its kind to date. The original decentralized web lasted from 1990 until around 2005, as Chris Dixon, who heads web3 investments at a16z, explained. This is what people call web1, consisting of flat web pages governed by open technical rules jointly developed by various standards bodies. Its next iteration, web2, enabled the rise of tech giants like Alphabet and Meta, which managed to amass vast, centralized databases of user information. In Dixon’s words, web3 “combines the decentralized, community-governed ideas of web1 with the advanced, modern functionality of web2.”

This is possible because of the blockchain. Blockchain has turned the centralized databases that big tech companies dominate into a public good that everyone can use without permission. A blockchain is a special kind of ledger that is not centrally maintained by a single entity (as a bank controls the accounts of all its customers), but is maintained collectively by its users. The development of blockchain has moved beyond its earliest application, cryptocurrency, to NFTs and other types of “decentralized finance” (DeFi). Now, they are increasingly becoming the underlying technology for non-financial services.

a16z’s portfolio offers a glimpse into this wild new world. It has invested in more than 60 startups, and at least 12 are valued at more than $1 billion. Many companies are developing web3 infrastructure. Alchemy gives other companies the tools to build blockchain applications, just as cloud computing enables developers to easily create web-based services.Nym’s “mixnet” is a decentralized network that mixes messages together, making it impossible for others to track who sent what to whom.

a16z has also invested in companies that serve end users. For example, Dapper Labs has created NFT applications such as the NBA Top Shot website, where sports fans can buy and sell digital collections, such as highlights from basketball games.Syndicate helps various investment clubs organize themselves into “decentralized autonomous organizations” governed by “smart contracts,” or rules encoded in software and embedded in the blockchain. Sound.xyz allows musicians to earn money by minting NFTs.

One thing these companies have in common, Dixon explained, is that it is difficult to target customers. Unlike Google and Meta, they don’t control their users’ data. OpenSea (a16z also holds a stake) and Alchemy are just conduits to the blockchain. If their customers are dissatisfied, they can turn to a competitor’s service. Alchemy’s boss, Nikil Viswanathan, said even if he wanted to keep customers, he couldn’t. “As a business, I’d love to have a proprietary tool for the neck. But I don’t have it. We’ve been looking for it.”

The thinking is that this will allow web3 companies to redouble their efforts to meet customer needs and keep innovating.Whether they can do this while still making big bucks is another matter. It’s unclear how big the demand for truly decentralized projects will be. That’s the problem with early web3 products (called “peer-to-peer” or P2P, or “decentralized web” at the time). Services such as social networks Diaspora and Mastodon never really caught on. Their successors may face the same problem. A service like OpenSea would be much faster, cheaper and easier to use “if all the web3 features were removed,” Marinspike said.

A more fundamental problem is that even if web3 runs as smoothly as web2, there is still the potential for centralization.Malinspike believes that lock-in effects tend to occur almost automatically. The history of the Internet has shown that co-developed technology protocols evolve more slowly than technologies developed by a single company. “If something is truly decentralized, it becomes very difficult to change and tends to stagnate,” he wrote. This creates opportunity: “The recipe for quasi-success in the past was to take a protocol that was stagnant in the 1990s, centralize it, and iterate quickly.”

Centralization and lock-in effects bring incredible profits. In fact, as an early investor in Meta, a16z has made billions from Meta; one of the founders of a16z, Marc Andreessen, is still a director of Meta today. VCs at web3 may be counting on something similar to happen again. And to a certain extent, it has already happened. Although web3 is a relatively new phenomenon, it is showing signs of centralization. Due to the complexity of the technology, most people cannot interact with blockchain directly — or find it too tedious. Instead, they rely more on middlemen, such as OpenSea for consumers and Alchemy for developers.

Albert Wenger of Union Square Ventures, a venture capital firm that started investing in web3 a few years ago, pointed to other potential “trigger points for recentralization.” Ownership of the computing power that allows many blockchains to continuously update data is often very concentrated, giving these computing power companies, known as “miners,” too much influence. This even allows them to control an entire blockchain. In other systems, the ownership of tokens is very uneven: in the recently launched web3 projects, three to four percent of the tokens are in the hands of the people who launched those projects.

These dynamics, combined with the recent slump in cryptocurrencies that may have cooled investor crypto enthusiasm, suggest that web3 is not going to drive web2 out of power. Instead, the future may be some kind of hybrid of the two, where web3 will occupy some niche markets. Whether or not people continue to invest heavily in NFTs, such tokens are useful in the Metaverse — they can be used to track ownership of digital items and transfer them from one virtual world to another. web3 may also play a role in another popular concept, the “creator economy.” Jin Liyun of venture capital firm Atelier pointed out that NFTs make it easier for online content creators to make money. Even the web2 juggernauts are seeing ominous signs, at least in this limited respect: On January 20, both Meta and Twitter integrated NFTs into their platforms.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/web3-disrupting-the-internet-or-a-daydream/
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