It is hard to define “web3” as it encompasses very different concepts and movements. For the sake of clarity in this state-of-the-art, we’ve decomposed the different underlying movements into various sub-movements, each of them analyzed in their own subsection. This specific subsection will solely focus on blockchain-based solutions. While web3 fundamentally means way more than cryptocurrencies, it is often limited to this application (“freedom of money”) by many of its community members. Below is a slide summary of the variety of the real values of web3:
Similarly to the slide of Juan Benet, the blog article from Vitalik Buterin, founder of Ethereum, also clearly explains that, unlike the popular culture of “number goes up” would want us to believe, web3 and the “crypto” movement go way beyond cryptocurrencies.
Taking its roots from the cypherpunk movement, which is close to the libertarian ideology, the web3 community attaches particular importance to the idea of “freedom” in general, and “censorship-resistance,” both against state actors or private companies/individuals.
The underlying dream of web3 is to provide a neutral & borderless infrastructure for every citizen of the world, with the ultimate goal to eliminate the need for any centralized human governance and its associated potentially corrupted bureaucracy while maximizing the wealth distributed to the world’s individuals based on personal merits and without discrimination.
As a result, web3 is fundamentally disruptive in its approach. It aims to replace and create alternative digital infrastructures, instead of gradually improving the existing ones. Compromise on any form of loose centralized governance is rare and often criticized and heavily debated.
Advantages
- Speculation in cryptocurrency is a feature, not a bug. And it’s arguably the most genius aspect of crypto. Bitcoin has bootstrapped hard money entirely out of speculation, leveraging the science of game theory and the knowledge of the prisoner’s dilemma. If done right, crypto-incentives can align personal greed with the creation of a public good. For example, Bitcoin secures its network by individuals running a node, and running a node also earns money for those individuals, maximizing their personal interest.
- Tokenization has been a way to expand on these game theory principles. By rewarding participants with the project’s token (be it using ERC-20 or ERC-721 standards, for example), participants feel a sense of attachment to their project, and the speculative dream that the project token could spike in value is psychologically more motivating than earning a fixed amount of dollars/bitcoin/ETH. Tokenization is a powerful tool to create borderless and permissionless online communities around a common goal. (More on this in this article.)
- The speculative nature of crypto has attracted an enormous amount of investments, accelerating the development of a lot of fundamental infrastructure technologies, including ZKP.
Here is a non-exhaustive list of breakthroughs that “crypto” has created:
- Neutral, immutable, verifiable, permissionless, and even private (thanks to zero-knowledge proofs) digital money, potentially banking the unbanked.
- Neutral, immutable, verifiable, and permissionless computation (smart contracts).
- New financial incentives to fund public goods.
- Credibly neutral & transparent infrastructure for open banking.
- Decentralized Autonomous Organizations (DAOs) as attempts to reinvent human organizations.
Limitations
- The blockchain trilemma makes it difficult for blockchains to scale. However, it is generally unnecessary to do “everything on-chain,” so this problem can be largely mitigated by sensible design. Scaling is still of utmost importance for pure financial applications.
- Web3 has a strong sub-culture of siding with scammers and considering victims as noobs who deserve it. “Not your keys, not your coins,” “Code is law”: it’s the entire responsibility of the victims to protect against scams. This ideology is deeply rooted in crypto-anarchism, ingrained in the core community that first created and embraced web3. Crypto-anarchists have deep distrust in any human organization and its potentially corrupted bureaucracy and prefer leaving decisions to a “neutral” machine, even at the expense of what ethics would dictate.
- Because of its speculative nature, the web3 space can be particularly toxic, creating cult-like behaviors around major cryptocurrencies and the personalities that surround them, even despite their will.
- Blockchains are by design openly transparent and immutable, which impacts privacy and also incurs a cost. Yet in the web3 community, there is a culture of doing everything on-chain for the higher principle of “decentralization,” leaving decisions to the “credibly neutral” machines, even when this decentralization is an anti-feature from an end-user perspective. There’s also the belief that “if I don’t incorporate a blockchain, I am not web3.” Because of the cult-like environment surrounding certain web3 communities, this fear is critical as it defines whether one is accepted by the community and sometimes even whether a project is funded! This is often counterproductive from a product and end-user perspective. We believe that this mentality is one of the core reasons why many web3 products only succeed among the niche “crypto-natives” community and fail to reach mass adoption outside of this bubble. However, we see this trend weakening, and we are optimistic about the future.
- On one side, web3 attracts some of the most brilliant and idealistic people (“chaotic good”), and on the other side, web3 attracts the worst capitalist sharks the world has ever seen (“chaotic bad”), marketing large-scale pump-and-dump and Ponzi schemes as legitimate ventures (the latest debunked one being FTX).
Could it be useful for our requirements?
- Smart contracts as permissionless, immutable, transparent, and verifiable computation can be a very useful building block. It addresses a problem that no other technologies can solve. However, because of its cost, it must be used with parsimony.
- Cryptocurrencies are fundamentally a way of funding public goods, and as the project we are carrying is fundamentally a public good, these mechanisms are particularly interesting to explore.