I feel I need to start these articles with a disclaimer… I believe that technologies like blockchain will have a big impact on the way the internet works. I believe that technology can be disruptive and change the status quo and the balance of power in markets.
Now that is out of the way, it’s time to call out some of the slogans being chanted by Web3 cheerleaders who have read a couple of crypto whitepapers without understanding basic market economics.
Web3 is not a monolithic system. It is a set of technologies that can be combined to fix some of the perceived problems with the current ecosystem. I say perceived problems, because the change is coming from crypto acolytes, not from consumers – the vast majority of whom have no issues with Web2.x
Decentralisation – The Most Misused Argument for Web3.
The internet is, and has always been a decentralised system. It was invented that way, for that specific purpose so that if single nodes were shut down or destroyed, the network would continue to function. Web 0.9 was more centralised, as it linked computers in large institutions like universities – there were no ISPs. The current version of a decentralised Web3 feels like dialling up to a bulletin board with a 28.8K modem circa 1992!
Most of the Web3 fanboys confuse centralisation with market concentration and the value chain. There is a laundry list of conflated complaints about privacy and data and ‘rent seeking’ platforms and unfair compensation for content creators and censorship and it goes on…
It is really important not to see the internet as a single thing. Each market and user case may or may not benefit from blockchain and may or may not need to be decentralised.
Defi – The Decentralisation Poster Child.
The banking and finance sector is one of the most antiquated industries there is and one of the last to hold out against the disruptive forces of technology. There is a high amount of regulation, friction, switching costs and an imbalance of power between institutions and consumers.
Bitcoin, the original cryptocurrency was designed to be a technology based solution to some of the structural problems with the banking and finance market. By building trust into the solution, there is no need for an intermediary.
Subsequent blockchains have added other features like smart contracts which could further reduce the need for a ‘bank’ as we know it and change the experience for the customer. Why should I have to wait 4 days for a payment to clear?
Decentralised finance (Defi) has real utility for customers, which is why the fintech ecosystem is growing so fast… but just because removing the intermediaries in this market provides value, doesn’t mean it works everywhere.
Up next – Personal Data as an Asset and changing business models for content..
Want to speak about the issues in this article? I am currently looking for guests for my new podcast covering digital and disruption and more… book an introductory meeting here.