Analyst firm Forrester Research has had a look at Web3 – the buzzword describing blockchain-powered decentralized metaverse-y stuff – and decided there’s not a lot to like.
The firm this week issued a pair of documents assessing Web3.
The first, titled “Web3 And Web 3.0 Are Synonymous Today – But This Wasn’t Always True”, points out that the term “Web 3.0” was first used in the mid-2000s, when it was used interchangeably with Sir Tim Berners-Lee’s vision of a “semantic web”. The term re-emerged in 2014 when Ethereum cofounder Gavin Wood suggested the Ethereum blockchain become the foundation for a decentralized web.
The term then disappeared again until 2021 when venture capital firm Andreessen Horowitz declared, “We are now at the beginning of the Web3 era,” and “Web3 is the internet owned by the builders and users, orchestrated with tokens.”
We’re already seeing the same trends Web3 enthusiasts blame for tainting the existing web
Forrester thinks many “now use ‘Web3’ as a catchall for all things blockchain, metaverse, or NFT-related,” with the result that “Almost overnight, ‘blockchain projects’ and ‘non-fungible token (NFT) initiatives’ were magically rechristened Web3 projects.”
Forrester’s second document, titled “Web3 Promises A Better Online Future But Contains The Seeds Of A Dystopian Nightmare”, defines nine key tenets of Web3, then smacks them all down.
Here’s a summary of what the firm says are Web3’s visions, and realities:
- Decentralization Impossible to achieve, as shown by current crypto projects centering around certain (usually large) actors;
- Trust in code, not companies: the belief that a community’s smart contracts encode and enforce its rules We should all trust unknown developers why, exactly?
- Always using open and transparent code Doesn’t stop monopolies forming, and relies on a small pool of people capable of assessing code;
- Crypto-economic principles designed so that systems benefit all participants Favour the wealthy and grow monopolies;
- Users own and control the data and content they create Concept of ‘ownership’ is vague and most users are not willing or able to make constant decisions about their data;
- Users manage their own identity and credentials Not many will bother, partly because it is hard;
- Users control the apps and networks they use Forrester can’t see that happening beyond a few tech-savvy types, and reminds readers that lots of online communities have soured or become fractious. If those community problems emerge as disputes among those who run apps and networks people have trusted to do stuff like manage their finances, we get the dystopian scenario in the document’s title;
- Decentralized autonomous organizations, entities that exist as a collection of smart contracts Have no legal basis and work on a utopian assumption that all possibilities can be coded;
- Decentralized finance (DeFi) Nice idea, shame it lacks consumer protection, while risk management requires the code inspection that few can perform.
The document also warns that Web3 is currently “dominated by speculators in cryptocurrencies and other digital assets like NFTs; it’s an unregulated environment in which the actions of scammers and fraudsters derail the best of intentions.”
Money is another concern the document addresses, by pointing out that venture capital firms are currently “pouring billions of dollars” into Web3.
“Until the financiers turn off this cash spigot, Web3 hype will continue and get-rich-quick schemes will crowd out worthier developments,” Forrester’s document warns. “We’re already seeing the same trends of monopoly building, exploitation, and value extraction that Web3 enthusiasts blame for tainting the existing World Wide Web.”
Forrester therefore advises “extreme caution” when considering Web3 projects, advising execs to make sure they understand exactly who profits from a project, and in what currency, and to consider the governance and privacy issues created by sharing customer info on a blockchain.
Another matter to consider is not signing up to become a feudal overlord, only to be reviled in the modern world.
“In many play-to-earn games like Axie Infinity, a token-wealthy individual can bestow gaming rights on a player who would otherwise lack the funds to buy in; the wealthy person then takes a cut of the tokens that player earns, which is, essentially, digital sharecropping.”
Hang on … The Register sees an opportunity here to create a blockchain of Modern Slavery Statements, so you can prove your Web3 efforts aren’t creating digital serfs. Can anyone connect us with a good venture capitalist? ®