by Valentina Drofa
Just about everyone in the crypto industry seems to be talking about Web 3.0 right now. The reason behind the massive hype is that it promises to solve the problems related to the current Web 2.0 version of the internet. These problems include, among other things, censorship issues, data privacy scandals, fraudulent activity, as well as the spread of disinformation by fake profiles and internet trolls. By decentralizing the internet, most of these matters could be tackled.
However, despite its potential to make the digital world a better place, it still remains a question of how anything the technology promises will actually be applied in practice.
Valentina Drofa, the Founder and CEO of Drofa Comms, a consultancy with over 12 years of experience in working with financial and fintech companies across the world, has shared with City AM her thoughts on the subject of Web 3.0, and what potential place it may hold in the world of tomorrow.
Web 3.0 or ICO craze 2.0?
Fintech is an industry that is developing at a very fast pace, and over the past several years, as cryptocurrencies and blockchain stepped on the global stage, we have observed many new trends forming around them, with the hype of Web 3.0 and metaverse being the latest in line.
To my mind, however, Web 3.0 currently feels more like a buzzword for crypto developers to raise huge sums than an actual movement that yields tangible results.
It’s enough to go back five years in time for a warning sign. In 2017, Initial Coin Offerings (ICOs) presented an alternative method for crypto developers to raise money for their projects.
It was during that period when the crypto industry truly began to pick up the pace. And it was also when Drofa Comms started noting the growing presence of this market, so we chose to involve ourselves with its development.
Back then new projects emerged practically every day and generated a lot of noise in the market. It didn’t take much for them to gain the interest of investors – all they needed was to show an attractive landing page with their main idea, a semi-ready (and often buggy) MVP, and make a pretty speech about how great the complete product would look in the future. That was usually enough for a project to run an ICO and raise some good money.
Today, five years later, hardly any of those projects remain. And the main reason for that is that more often than not, they did not put the necessary forethought into the long-term viability of their products.
And ever since those days, people have been continuously thinking up one novelty or the other to raise more money. But what happens to those ideas next? Where and how do they actually get applied? With new crypto market trends coming and going, it feels like not a single idea is being worked on thoroughly and to the end.
So far, even blockchain technology has not fully taken root on the global scale, despite a lot of talk about how it can transform just about any and every industry. While there are predictions about the blockchain market growing from 2017’s less than a $1 billion size to nearly $163 billion by 2027, present adoption of the technology outside crypto has been going slow.
Based on the findings of an APQC report, only 12% of the surveyed supply chain companies were actively utilizing distributed ledger tech in 2020. At the same time, the majority of the respondents stated that their organizations had no plans for blockchain (34%) or were only in the research phase (26%).
And yet, despite not even seeing the idea of blockchain adoption through, the market is already shifting focus to something new.
So far, Web 3.0 looks like something that is still in the very conceptual stages. I’ve heard criticism that it is “too much noise without enough real cases”, and I am inclined to agree with that assessment.
At present, similarly to 2017’s ICO craze, it seems like developers are drawing up pretty concepts but have yet to properly consider the actual implementation and application of the technology. And nobody wants another extreme “Crypto Winter” that followed the market crash in early 2018.
The metaverse hype
While we’re on the topic of trending concepts without actual implementations, the metaverse should also be mentioned.
Even outside the crypto space, the idea of virtual worlds has been used by numerous startups in an attempt to capitalize on the massive hype Facebook generated around the sector after its rebranding to Meta.
Like the Web 3.0 market, investors are pouring a tremendous amount of money into the metaverse. Just take a look at all the activities around buying virtual land in digital realms like Decentraland, the Sandbox, Axie Infinity, as well as many other projects within the sector.
Since 2021, metaverse projects have received massive amounts of funding from investors. While Axie Infinity creator Sky Mavis raised $152 million at a nearly $3 billion valuation in October, the Sandbox collected $93 million in November. In March 2022, Bored Ape Yacht Club creator Yuga Labs closed a whopping $450 million funding round to build the Yugaverse virtual world.
At the same time, virtual land was sold for $500 million last year, with analysts expecting this number to grow up to $1 billion in 2022, expanding at a compound annual growth rate of 31% by 2028. Moreover, digital real estate prices surged by 700% throughout 2021.
But, again, what use does owning assets in the metaverse have beyond purely speculative value, especially on platforms like Axie Infinity where virtual land-related functionality hasn’t even been rolled out?
In addition to that, there is a social factor to consider. Some argue that the idea behind the metaverse is that people will be able to move pretty much all of their activities to the digital world. Sounds like something out of a futuristic sci-fi movie, like The Fifth Element or The Matrix.
But people are social creatures; they seek to interact directly and talk face-to-face. So what would it take for a scenario like that to become a reality, to have people spending all their time online?
As far as I can tell, the answer here is that they would have to lose many of the freedoms and opportunities to move around and spend time together in the real world. That would mean that a significant global shift has to happen, with things taking a turn for the worse and countries limiting avenues of communication with each other, if not stopping it altogether. This would represent a movement of society towards a dystopic and very sad direction.
Ideally, to avoid such a negative scenario, the main objective of the metaverse should be to complement real-world activities instead of replacing them.
While direct, face-to-face interactions between humans should be preserved, and we should incentivize people to spend more time together, the metaverse could be leveraged to enhance social activities that generally take place in the online world.
Since 2020, the COVID-19 pandemic that limited the ability of people to interact with each other has highlighted the importance of digital technology for social communication. However, without further drastic societal shifts taking place, I do not believe that the metaverse would (and should) ever truly replace offline activities, certainly not within the nearest several decades.
Developers should take greater care
The crypto market has no shortage of new developments that seem fantastic in theory but don’t have enough practical value.
As it was for most ICOs during 2017, this statement is especially true for Web 3.0 projects and also the metaverse space.
It falls to developers to take into greater consideration what value Web 3.0, virtual worlds, and other emerging technologies can realistically bring to the world at large. Otherwise, it is likely to end up as yet another bubble, bursting and betraying expectations that were placed on it.
Valentina Drofa, founder and CEO of Drofa Comms