Web3 Is Useless If It’s Not User-Friendly

(Bloomberg Markets) -- Seemingly out of nowhere, web3 has become one of the biggest technology trends of 2022. It’s captivated investors, the technorati, and Paris Hilton. But the number of people who’ve heard of it well outnumber those who understand what it really is: essentially just a rebrand of blockchain, the software at its heart.

Blockchain was an ultra-hot investment sector that started to lose momentum with venture capital investors about three years ago. Then, last year, the idea of “decentralized ledger technology” soared back into popularity under a new name, claiming to be the next chapter of the entire internet. But concerns about how blockchain technology works under the hood, which bogged down investors’ interest before, remain real and aren’t going away.

Web3 enthusiasts posit that the internet of websites and blogs dominated by a handful of trillion-dollar technology companies is the past: web2. The future is a far more decentralized and equitable internet underpinned by cryptocurrencies and tokens. How far away is that future? Much farther than is justified by the investment being made in web3 assets and companies today; venture capitalists put $18 billion into web3 startups in 2021 alone, according to Crunchbase, a research firm that tracks the technology industry.

A web3 internet may never find mainstream adoption, because so far it’s been unable to host apps and services that are user-friendly and developer-friendly. In short, web3 is clunky. Attempts to popularize decentralized apps, or dapps—software applications that run on blockchain-enabled smart contracts instead of on the internet’s current protocols—have struggled to gain traction.

One example is a Twitter clone called Peepeth, a dapp that picked up a few thousand users when it launched in 2018. Posting a “peep” (instead of a tweet) required paying a fraction of a cent in Ether—the cryptocurrency that underpins Ethereum—by using a cryptocurrency wallet and browser plugin such as MetaMask. (Plugins or dedicated browsers, including Brave and Opera, are the primary means for interacting with web3.) A few months after Peepeth was launched, the controversial American podcast host Joe Rogan talked about the app on his show, praising it as a censorship-proof tool because data on the blockchain can’t be altered. Analysts that year also said mainstream adoption of dapps was just a year or two away.

Despite the fanfare, San Francisco-based Peepeth and other distributed apps struggled to attract a big audience. Active user numbers languished in the thousands or even the hundreds. One reason: The services were hard to use. It took about a day to post a single peep, for instance, compared to a split second with Twitter, and buying and spending tokens with MetaMask was cumbersome. Peepeth creator Bevan Barton didn’t respond to a request for comment.

In 2018 the most popular dapps on Ethereum enabled speculative trading of crypto assets. CryptoKitties, for instance, allowed you to collect and “breed” digital cats on the blockchain, sometimes at a cost of thousands of dollars. The number of dapps has grown from 1,500 in 2018 to almost 10,000 today–but the most popular services are still limited to financing and trading, with some games dotted into the mix. The most popular dapps are marketplaces for nonfungible tokens (NFTs) with names such as OpenSea and PancakeSwap, according to DappRadar UAB, a Lithuania-based online store for dapps.

Web3’s other challenge is actually living up to its decentralized ideals. So far, it’s not very distributed.

With his dreadlocks and freewheeling sailor’s lifestyle, Moxie Marlinspike is among the world’s best-known cryptographers. Marlinspike, who once led Twitter’s security team, created the encrypted messaging app Signal and co-authored the encryption protocol that underpins WhatsApp, Facebook Messenger, Google Messages, and Skype. Marlinspike caused a stir when he wrote in a January blog post that web3’s fundamental principles have fallen by the wayside in practice. Web3 has, for a start, surprisingly little cryptography for a technology that’s supposedly “built on ‘crypto,’ ” Marlinspike wrote. In fact, popular web3 services, such as the NFT marketplaces, still rely on web2-style processes to link to blockchains, he wrote.

APIs, or application programming interfaces, are a cornerstone of web2. They connect different software programs, allowing online businesses to communicate with one another. Amazon.com Inc., for instance, charges customers of its cloud-computing business, Amazon Web Services, by tallying up the number of times they “call” its APIs.

Marlinspike noted that popular web3 services such as OpenSea and MetaMask, the browser plugin for accessing web3 apps, are using APIs to access the Ethereum blockchain through a third party. That means people utilizing these services aren’t accessing the blockchain directly either. Marlinspike, by way of example, created an NFT on Ethereum, which was stored in his MetaMask crypto wallet and displayed on the OpenSea marketplace. But when OpenSea took his NFT down from its marketplace, it also disappeared from his crypto wallet.

Imagine uploading a photo to Facebook and then discovering the image has been deleted from your computer hard drive after being removed from the social network. That’s similar to what happened to Marlinspike’s NFT. In theory it should have continued to appear in his MetaMask crypto wallet, but MetaMask couldn’t interact with the blockchain directly. It had to make API calls to at least one other company, essentially acting as a gatekeeper, to show the NFT. It didn’t matter that Marlinspike’s NFT was indelibly on the blockchain, because his crypto wallet needed to use OpenSea’s API to display it. MetaMask was acting more like a window than a wallet. (Dan Finlay, MetaMask’s co-founder, confirms that his service relies on the OpenSea API to display NFTs in users’ MetaMask wallets. “We know that hitting a centralized index for your possessions is a flawed strategy and have ways of moving off it,” he adds.)

The ideals of distributed and transparent data are moot when individuals with mobile phones and computers aren’t able to plug directly into a blockchain, because those networks are connected by servers, powerful computers that are generally controlled by companies. As it consolidates around platforms, web3 is taking on the centralized look of web2, and far from disrupting the power of gatekeepers, web3 is cultivating them.

It’s easy to take for granted the standardization that underpins the internet today, built on 30 years of experimentation, implementation, and slow-moving steps to achieve consensus by organizations such as the World Wide Web Consortium or WC3 (not to be confused with web3). So well-oiled and interoperable is today’s infrastructure that we almost never notice it. The exception might be when, for instance, an Android phone can play a high-quality video but an iPhone cannot because its browser hasn’t implemented a new standard.

The traditional web works on a mass, global scale because almost all sites and services use TCP/IP (transmission control protocol/internet protocol), an architecture that stemmed from research conducted by the U.S.’s Defense Advanced Research Projects Agency in the late 1960s. It also relies on HTTP (hypertext transfer protocol), another critical set of rules for transferring files including text, images, and video. If the internet is a landscape that we’re all traversing, TCP/IP is a series of roads, and HTTP is a particular kind of truck on those roads. There are other protocols that act like HTTP–different cars and trucks–but HTTP “trucks” are the most popular and all drive on the same roads.

Blockchains like Bitcoin and Ethereum lack a unified “road system” and a similar series of “trucks” to handle data. Without unifying standards and with no obvious contenders in the pipeline, web3 is still a disjointed series of networks. As a result services remain difficult to build, scale up, and interact with.

“It’s complicated for the developer, and it’s complicated for the user,” says Dan Hughes, founder of Radix Tokens Ltd., a British company building its own decentralized networking technology. Hughes started designing his own distributed ledger system a decade ago, a few years after Bitcoin creator Satoshi Nakamoto published the famous white paper. He has also been researching the possibility of designing a single protocol to host distributed finance, or DeFi services, to help solve the fragmentation problem. Hughes doesn’t know how long it will take to build a workable web3 infrastructure, though he does believe the technology will achieve mainstream adoption within the next 10 years.

“If there is no possible way for a single protocol to handle all this data and transactions, [web3] will take longer to mature,” he says. Without standardized protocols, the system is vulnerable to hacks and bugs. “Normal users will say, ‘This is too complicated,’ ” he adds.

Blockchain already has a reputation for befuddling even experienced technologists. The web3 rebrand has helped people outside the world of crypto to grasp the ramifications of distributed technology for the internet. But if its disjointed infrastructure continues to hamper developers and users, the primary beneficiaries will be a few big companies that have jumped in as early gatekeepers. For everyone else, web3 will be a faded promise.

Olson is a Bloomberg Opinion columnist in London covering technology. This column doesn’t necessarily reflect the opinion of Bloomberg LP and its owners.

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