Me: Is decentralized Web3 dead?
ChatGPT: No, decentralized Web3 isn’t dead. It’s still very much alive and evolving.
Well, ChatGPT is definitely not wrong as there are still numerous ongoing projects in the Web3 space. But will Web3 or the blockchain technology dwindle away if artificial intelligence (AI) continues to dominate the tech scene?
Let’s explore some plausible reasons why some Web3 sectors may not be sustainable in the long run. We will also learn why Web3 technologies are so slow to adoption despite having been around for more than a decade.
Potential Threats to Blockchain Technology
We should be realistic on what could happen to the Web3 industry in the long run. Afterall, the decentralized Web that runs through blockchains is resistant to censorship and this feature is never popular with authoritarian governments.
Thus, will we eventually see iron-handed political powers culling the blockchain technology if decentralized systems pose too much threat to centralized financial systems? We already have a ban enforced against all cryptocurrencies in China since 2021, though CoinTelegraph reported that there should be change coming in 2025.
In addition, have you also considered the possibility of quantum computing achieving a significant scientific breakthrough? A momentous breakthrough certainly holds the potential to greatly impact cryptography, the core component of decentralized Web3 security.
Current State of Decentralized Web3
On a positive note, popular cryptocurrencies are still trading with market caps of billions of dollars. Bitcoin is still leading the pack with a market cap of above a trillion dollars. Shockingly, the price of one bitcoin is currently higher than 1 kg of gold! (approx. $84,000)
Bitcoin Calculator
Sadly, apart from the few popular cryptocurrencies and some fads, decentralized Web3 projects are usually plagued with uncertainties and receive lacklustre response from investors and the general public. Even if they do get off the ground, they progress much slower than other more dominant technologies. E.g. artificial intelligence (AI), robotics and large language models (LLMs).
Enthusiasm around Web3 projects also generally do not last and may fluctuate. For example, the metaverse with all its grandeur concepts have been overhyped. Nonetheless, the metaverse concept is not completely dead and may still offer a sliver of opportunities. The Lighting Network also triggered a lot of interest when it emerged. Bitcoiners actually thought people from all over the world will use Bitcoin for everyday payments as much as regular currencies.
Web3 enthusiasts are definitely not giving up just yet though. They are still placing hope on the fundamental principles of decentralization, blockchain, and distributed systems. As such, we are still seeing some developments and innovations within the Web3 industry.
However, expanding decentralized Web3 market share is definitely not an easy feat. Anyone who has tried to launch a Web3 venture faces unprecedented obstacles and challenges.
So below, we are going to take a look into some factors that is causing users to not favor the Web3 space.
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Is Web3 Just Hype and Its Demise Imminent?
Web3 Barriers of Entry
User Experience and Accessibility
Many decentralized applications (dapps) and platforms still lack user-friendly interfaces and seamless experiences. Improving UX/UI design and simplifying processes for non-technical users are crucial for wider adoption.
Scalability
Scalability remains a significant challenge for many blockchain networks. As user bases grow, congestion and high transaction fees hinder usability and drive users away. Level 2 solutions that operate on the Ethereum blockchain is helping to ease traffic congestion and lower transaction fees. However, the adoption rates are still miniscule compared to major payment networks like Visa and Mastercard.
Regulatory Uncertainty
Regulatory frameworks around cryptocurrencies, tokens, and decentralized finance (DeFi) are still evolving in many jurisdictions. Uncertainties regarding compliance and legal requirements can deter the average user and investors from participating in Web3 ecosystems. Although regulations are becoming more extensive in many countries, however, the Web3 space is still quite rife with scams and illegal activities.
Interoperability
Interoperability between different blockchain networks and protocols is essential for seamless interactions and the exchange of assets and data. However, at this point of time, achieving interoperability remains a significant technical and governance challenge within the Web3 space.
Security Concerns
While blockchain technology offers inherent security benefits, dapps and smart contracts are still very much vulnerable to exploits and attacks. Ensuring robust security measures, audits, and best practices is essential to build trust and confidence among users.
Education and Awareness
Many potential users and stakeholders lack awareness and understanding of Web3 technologies and their potential benefits. Education initiatives and community outreach are much needed to onboard new users and drive adoption outside of the tech community.
Infrastructure Development
Building the necessary infrastructure, such as decentralized storage, identity solutions, and oracle networks, is critical for the growth of Web3 ecosystems. Continued investment in infrastructure development is essential to support expanding use cases and user bases.
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Addressing the Web3 barriers of entry stated above requires collaboration among developers, entrepreneurs and regulators. Because of the decentralized nature of Web3, anyone can play a role in expanding the Web3 space. This is true democracy in the digital domain.
First and foremost, we need to make Web3 more accessible to average Internet users. At the moment, even after more than a decade, it seems that it is still mostly only tech enthusiasts who are keen to dabble with Web3 technologies or any of its offerings. This impression of Web3 being a tech geek domain must be erased if we wish to attract average Internet users to enter into the decentralized Web3 space.
Hopefully, as Web3 technologies advance and mature, more of us can collectively foster innovations, improve usability, and build a trustless environment around decentralized Web3 technologies.
Is Web3 Just Hype and Its Demise Imminent?
Web3 Sectors That Look Promising
Despite the rather lackluster response, there remains some optimism with selective sectors within the Web3 space:
Decentralized Finance (DeFi)
DeFi has been a rapidly growing sector within the Web3 ecosystem. There are numerous dapps that offer decentralized alternatives to traditional financial services such as lending, borrowing, trading, and yield farming.
As DeFi platforms continue to improve scalability, usability, and security, they are likely to attract more users and capital. Additionally, the expansion of DeFi into areas like insurance, derivatives, and asset management could further fuel its growth.
Non-Fungible Tokens (NFTs)
The traction of NFTs somewhat fluctuates but its potentials remain far reaching. The technology basically enables unique ownership and provenance of any digital assets that reside on the blockchain. As we advance into an increasingly digitized society, NFTs could be a major vehicle that will ease the many complex processes of transferring assets.
While NFTs have primarily been associated with digital art and collectibles, they hold the potential to be applied across various industries. This could be gaming, entertainment, real estate, intellectual property, etc. Perhaps what the NFT market needs is more creative marketing in order to captivate more creators, brands, and investors to recognize the value of adopting NFTs.
Decentralized Autonomous Organizations (DAOs)
DAOs represent a novel approach to organizational governance and decision-making. The entity allows participants to collectively manage funds, make decisions, and govern protocols or projects in a decentralized manner.
As interest in decentralized governance models grows, DAOs are poised to gain market share across industries. Crypto communities, gaming, decentralized finance (DeFi), and governance of blockchain protocols may from their own DAOs. We are just waiting for improvements to be made into the tools and frameworks for creating and operating DAOs.
Conclusion
Predicting whether the demise of decentralized Web3 will be a fact or not is challenging due to many uncertainties around the potentials and threats of evolving technologies. We can be quite certain though that there will be some projects or technologies within the Web3 space that will fade away, while the broader concepts of decentralization, blockchain, and distributed systems are likely to persist or evolve.
Decentralized Web3 technologies do offer potential solutions to various challenges faced by traditional centralized systems, such as censorship, data privacy, and intermediary control. As such, there is continued interest and investment in exploring and developing these technologies across multiple industries.
However, the success and widespread adoption of decentralized Web3 depend on overcoming significant hurdles. Problems include scalability, usability, regulatory challenges, and interoperability. Additionally, market dynamics, technological advancements, and shifts in user preferences could also influence the trajectory of Web3 over time.
Ultimately, it depends on how these challenges are addressed and how effectively the technology meets the needs of users and businesses in the long term. While there may be fluctuations or setbacks along the way, the fundamental principles driving the decentralization movement are likely to endure.
