What happened to Web3?

Bernardo Montes de Oca

A year ago, Web3 was the latest craze, but a lot can change in a startup-world year. Crypto and blockchain technologies evolve at blistering speeds, and everything can change in the blink of an eye. Such is the case with Web3. In 2021, this sector raised over $30 billion in funding, and 2022 began with the same momentum. Even if we didn’t understand it, Web3 gave us unprecedented hype. After all, it promised to change our lives, yet here we are, one year later, and we seem to have forgotten all about it. Many factors led to this amnesic episode, and some are changing.  

It’s not easy to define what Web3 is unless you're a hardcore crypto and blockchain fan, but, in reality, the definition is simple: Web3 is the current generation of the World Wide Web. Its main idea is that it is disruptive, more open to users, and, most importantly, decentralized. Think of it as no permission needed. There's no central authority, and this motivates people in this day and age. Also, since it's more open, it's easier to track who developed the code that goes into the apps we'll use for everything. In short, Web3 could be a trustless, permissionless decentralized internet. That's exciting!

Startups were an important driving force for Web3's rise in popularity. When we look back at it, it's the perfect combination. Startups, by nature, are disruptive; they take tradition and revolutionize it with new technology. So, Web3 fits in perfectly, especially when we look at how we handle data currently. 80% of the world's cloud storage belongs to five companies. These companies, including Amazon, Microsoft, Google, Alibaba, and Huawei, have had their fair share of social and political hiccups in recent years. So, as we stand now, data is both restricted and frail. Yet, as the cloud services market has grown more than 25% yearly, the need for alternative cloud storage is there. 

At the same time, Web3's nature is to allow more openness in data. Thanks to Web3 being a great equalizer, Startups can now access data that has been restricted for decades. So, it's only natural that, from the start of Web3, we needed to rethink data storage. 

Startups in this sector are pouncing at the opportunity to create the next best solution for decentralized data storage, but it takes work to break tradition. To accomplish their goals, they need money, and here's where a vicious cycle begins. Space and Time is a startup that provides a platform for Web3 data storage, where security revolves around their proprietary proof. Their idea is promising, as it aims to help customers shift their data from a centralized database into independent storage. In mid-2022, they were the talk of the town and ended up nabbing $12 million from Microsoft. Isn’t it ironic that one of the biggest centralized data providers was working hand in hand with a new, up-and-comer, taints the basic idea of decentralization? At the same time, it shows one thing: everyone wants to be on Web3, but they want to overcome a series of challenges hampering its growth. 

Besides the battle between centralized and decentralized powers, Web3 faces one big challenge that must be solved immediately. Ultimately, consumers need to understand some of it to feel comfortable enough to use it. Without consumers, there's no potential. So, startups are racing to make Web3 easy to understand. This includes everything from messaging to sending money to your friends. Usability is another crucial aspect of Web3. Thanks to Google, Facebook, and Microsoft, users are used to easy interfaces. However, Web3 has yet to become friendly, even to developers. Arcana Network wants to achieve that with its safe and private stack for Web3 apps. There are many out there striving to make this complex world simple. 

Polygon founder Sandeep Nailwal believes that the future is set for Web3 startups. He's so invested in the idea that he created the Beacon Web3 accelerator. His goals are ambitious, but to him and others, cryptocurrencies and Web3 will resurge. Others are looking to Web3 for a solution to art and royalties, which could be a cornerstone in the future. And, for those who say that Web3 is dead, it isn't. It's only bound to reinvent itself, trying to shed its negative connotation. 

Another significant hurdle that Web3 needs to overcome is the negative connotation that cryptocurrency inherited during 2022. Web3 needs cryptocurrency and vice versa. So, when Bitcoin lost 60% of its value in 2022, fear set in. Plus, the entire sector saw losses of over $2 trillion, thanks partly to rug pulls, scams, and frauds. With such a downturn, investors backed off. 

2021 saw $30 billion in funding, but 2022 was an entirely different story. In total, Web3 funding reached only $17.7 billion. By Q3 22, funding had dropped to $3.3 billion per quarter, half the past year's. Deals had also slowed down, marking the lowest amount since 2020 by less than half. So, it's easy to think that Web3 is dying, but the opposite is true. 

For Web3’s success, there needs to be, ironically, a sense of unification. Think about it: if countries, companies and governments don't align, then they will get in the way, for better or worse, of Web3, but don't think that total deregulation is the way to go. In fact, there needs to be a change in mindset. Web3 can change our lives, but without trust, there's little purpose.

Bernardo Montes de Oca
Content creator in love with writing in all its forms, from scripts to short stories to investigative journalism, and about almost every topic imaginable.
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