While there are many potential benefits to Web3, there are also some potential challenges and concerns to consider. In this post I’d like to break down some of the main challenges and concerns in an effort to help you enter Web3 prepared for anything.
I’m going to be aiming this post at those of you that are currently Web2 natives looking to implement Web3 tools in your business or personal life.
It’s important to note that while these are potential drawbacks, many people believe that Web3 has the potential to revolutionise the way we interact with the internet and each other. I am one of those people.
As with any emerging technology, it’s important to approach it with a critical eye and evaluate both the potential benefits and drawbacks.
Here are some of the commonly mentioned drawbacks of Web3:
- Complexity: Web3 technologies are complex and require significant technical knowledge to understand and implement.
- Scalability: Web3 technologies are still in their early stages, and scalability remains a major challenge. This means that the current infrastructure may not be able to handle large numbers of users or transactions.
- Energy consumption: Some Web3 technologies, such as proof-of-work blockchain networks, require significant amounts of energy to operate. This has raised concerns about the environmental impact of Web3.
- User experience: Web3 applications can be difficult for the average user to navigate and use. This can limit their adoption and impact.
- Regulation: The decentralized nature of Web3 makes it challenging to regulate and enforce laws. This can create legal and ethical challenges, particularly around issues like fraud, money laundering, and terrorism financing.
- Security: Web3 technologies are vulnerable to hacks and cyber attacks, which can compromise user data and financial assets.
Let’s tackle the top 6 drawbacks one by one:
- Complexity: While it’s somewhat true on the surface Web3 technologies can seem daunting at first glance, we have come along long way since even 3 years ago. While, as with any software project, it would be wise to consult and if possible employ an experienced Web3 developer to build your solution. Today there exists a smorgasbord of platforms and open source tools that can be experimented with for practically free – that includes writing directly to a blockchain, something which used to be prohibitively costly to many. When it comes to understanding Web3 technologies, as with the Web2 Internet, most users don’t care or need to know how it works. Only that it does work, preferably in a secure manner.
- Scalability: This drawback was a hot topic of conversation over recent years, but assuming you are not in the habit of being drawn into a specific “one crypto cult to rule them all”, and do not mind which blockchain you utilise, scalability is no longer a frequented topic of conversation, depending on how well-cooked you like your blockchain.
- Energy consumption: While it is true proof of work blockchains do consume a significant amount of energy, many widely adopted blockchains typically make use of a proof of stake consensus mechanism. This makes the entire process of confirming and producing blocks significantly cheaper however, proof of stake blockchains do have their own drawbacks namely the lack of effort or “work” required to produce secure token value. It’s not clear how this will play out in the long term but I have my theories. See the discussion around Ethereums recent move to proof of stake for more on that conversation.
- User experience: Once again, things have changed a lot in just the past few years. Today interacting and even building with various Web3 applications such as smart contracts and other DeFi applications has never been more accessible. What does remain a challenge is understanding when you are interacting as a self-custody wallet or a custody wallet. Learn the important difference between the two in order to not lose primary control of your assets.
- Regulation: This continues to be a hot topic, and has been throughout the history of Cryptocurrencies, just know that regulating Web3 will likely be handled in much the same way as we have seen attempts to regulate Web2. Mainly by putting a bunch of laws in place on companies operating the front end of Web3 services. If service providers don’t choose to regulate themselves via KYC or other means, governments will begin efforts to do so for them.
- Security: while it is true Web3 applications are vulnerable to hacks and scams etc, it’s largely nothing dissimilar to what we experience in Web2. Usually people get hacked or scammed, not software, and while it arguably appears more prevalent within Web3, we likely do not hear about all the terrible things that go on in Web2 because it’s just so much of a larger ecosystem.
Some drawbacks not mentioned on this list that I have discovered through my ongoing participation and observations in Web3 are those of questionable human behaviour. If we think of Web3 as just a new way for humans to cooperate above and beyond whats available in Web2, then we start to see what the true drawbacks are beyond the technology itself.
- Anonymity: It’s no secret that online no body knows you’re a dog, and that 90% of women online are actually men. This appears to be exacerbated in Web3.
- LARPing (Live Action Role Playing): traditionally speaking is a type of interactive game or performance where participants physically act out the roles of characters in a fictional setting. Applied in Web3, it is used to create ongoing narratives around a projects main agenda, which is usually to onboard the next million people to their platform, coin or token. While not strictly speaking a drawback, it can be used to hoodwink otherwise unknowing persons into a fantasy land that doesn’t actually exist. See my previous article on Alternate Reality Games to get a better idea.
- FOMO & FUD: Both “Fear Of Missing Out” and “Fear Uncertainty Doubt” can have an impact on the behaviour of Web3 users and the performance of markets. It’s important for you as a new Web3 user to be aware of these phenomena and to make decisions based on solid research and analysis rather than emotional reactions.
- Centralization: While the first principle of blockchain technology is decentralization, without which non of the other principles realistically stand a chance. Most Web3 services today are centralized, and thats because decentralizing a front end from the get go is extremely difficult. It takes time to transition to a fully decentralized service managed by its asset owners in a fair way. There are always so called Whales (those participants that hold the majority or a large stake of a necessary asset) Learn all about these Whales and whether you trust them or not. Also understand that most of you will interact with Web3 via centralized front ends, typically owned and managed by a regular corporation, most likely banked by a regular bank like i dunno? Silicon Valley Bank for example.
- Cults: Utilising LARPing, FOMO, FUD and Anonymity most Web3 services will go on endlessly about the importance of community. What they are actually referring to is their cult members, those individuals that have become enthralled (most likely through acquiring to much of the native asset) and so are beholden to the whims of diminishing returns, or they were one of the founding members, and so parked a significant portion for themselves and early adopters.
Web3 is not very different form Web2, it is simply a more efficient suite of tools, more accessible more powerful than previous tools that were available. People will still use them just the same as they do in Web2, the major differences outside of what I have highlighted above is the velocity in which this new more efficient tool set can be deployed globally and affordably.
If you are having trouble grasping the very basics of Web3 for your business or personally, don’t hesitate to reach out to me at email@example.com
I wont make you rich, but I can probably help you avoid loosing what you already have.