Web3 has to start despite the hype

If the Tech movement known as Web3 represents the next large gold mine of the Internet, why do we no longer hear about the really useful applications that are built on this new platform? And why no longer flocks developers to make their assets?

These questions hang uncomfortably on Web3, while the boom on crypto-assets-which allegedly lubricates the wheels of the new applications that will create this movement-rages. About $ 1 trillion has flowed from the crypto bubble since November, but there are still $ 2 trillion. What are the ultimate uses of these digital assets that justify such a large number?

The arguments for web3 are based on the conviction that a blockchain-based technology platform will become the basis for a new class of applications in which digital tokens convey interactions of all kinds in a so-called "trustworthy" online world. There will be no digital gatekeepers who determine the rules or collect the lion's share of the profits. Users will keep control.

So far, however, it is difficult to recognize mainstream applications for this technology. The main applications - non -fungible tokens (NFTS) and decentralized finances - are almost exclusively based on financial speculation and regulatory arbitrage. If the speculators take a bathroom and the regulatory authorities decide that it is time to close the loopholes, what is left?

A truism in Silicon Valley has always been: If you want to know where the next big ideas come from, see where the capital and the clever developers go. In the case of web3, it was certainly not lacking in capital. But relatively few developers have decided to attach their assets to this special train.

According to a current study by Electric Capital, around 18,000 developers acted actively in the Kryptowelt at the end of last year. That may sound like a lot. But as Tomasz Tunguz, a risk capital provider at Redpoint, emphasizes, it is nothing in addition to the 16.4 million developers who work on JavaScript, the most important programming language for the current generation of web applications. Even the number of 18,000 can exaggerate the true picture: the number of people who work on Web3 at least 10 days a month is below 5,000.

An explanation for this is that too few developers master the new languages ​​required to create decentralized applications. That, says Tunguz, limits the speed with which web3 companies can grow, but the problem should decrease, since more tools are developed, the engineers who work in this area make life easier.

This is only part of the more comprehensive upgrade that is necessary to make web3 technologies more practical. Ethereum - previously the dominant blockchain for the operation of decentralized apps - can process a maximum of around 30 transactions per second, a bottleneck that has raised the transaction fees. A large part of the money that has flowed into new crypto ventures in the past few months has been put into the infrastructure that is necessary to create and execute block chain-based apps.

But this revolution has been emerging for years. Ethereum was launched almost seven years ago. The first wave of web3 developers who were interested in Krypto culminated in 2018 when Bitcoin culminated for the first time. Only about a fifth of it is still active in the field. The youngest wave is almost twice as large, but how many of these developers will preserve the faith when another crypto-winter uses?

The delays could be less important if it were clearer what web3 is actually intended for. When the World Wide Web came up in the mid -1990s, one could imagine that activities of all kinds were first moving online, from shopping to filming. And that was even before someone dreamed of huge new internet markets such as searches and social networks.

The arguments for Web3 are less based on the "what" than on the "how". The decentralization itself should be the appeal-the opportunity to reinvent many of today's online activities in a new form.

idealism will probably not last long if the mass of the online users does not see any tangible results, apart from the chance for rampant financial speculation and creating Memen. In addition, today's crypto assets in the hands of relatively few concentrate, which questions the idea that this movement will distribute wealth more evenly.

The financial conditions that have fueled the crypto boom begin to reduce themselves because inflation is moving in and interest rates begin to rise. A similar situation ended the Dotcom bubble and put most of the start-ups in ruins, although a handful of really groundbreaking companies such as Amazon, Yahoo and Ebay on. So far it is difficult to see who will be the survivors of Web3.

richard.waters@ft.com