The Challenges of Web3 Lie in the Unknown
A lot of Web3 insecurity stems from the unknown. Will the crypto market crash any further? How secure is the blockchain really? Will countries start to regulate cryptocurrencies, and what will that mean for current cryptocurrency investments? And so on. There’s still a lot to be learned about how the Web3 ecosystem will evolve and grow, and that presents several challenges. Not anything that detracts from the absolute value of what the blockchain offers, of course, but questions and concerns that generally cause a curious user or organization to pause when considering Web3 adoption.
We’ve started to address some of these obstacles that Web 3 faces in a previous blog, but there are a few more that require exploration.
The Semantic Web
Something we didn’t touch on in our previous post, is the idea of Web3 as the Semantic Web. The term dates back to a paper written by Internet founder/pioneer Tim Berners-Lee in 2001, in which he describes what he thinks the internet should be. Computers have no reliable or accurate way to process the semantics of language. Most, if not all, of the web’s content is designed for humans to read, not for computers to understand in a meaningful way. Computers can parse layouts, databases, and tags, but don’t understand the context in which a word or phrase is used.
Berners-Lee vision encourages structures that can bring meaning to webpages and facilitate software that would carry out sophisticated tasks for users; something like a smart contract, in fact. Web3 is predicated on a trustless, decentralized, automated environment that can incorporate AI and machine learning to rely on data and algorithms to imitate how humans learn. Via natural language processing, applications have the potential to return more accurate results and faster processing times, something that Web3 and blockchain users can appreciate, while also greatly increasing the application of blockchains to new areas and improving user interaction.
Despite every effort to make Web3 more intuitive and easier to interact with, it’s the uncertainty of what lurks in the dark corners of the web that makes a lot of users hesitant to dive in with both feet.
Further Challenges of Web3
The challenges below stem from the uncertainty that hovers around Web3; namely its security, who’s keeping an eye on the key players, and the stability of digital currency.
No discussion about the challenges of Web3 adoption would be complete without addressing the security factor. Web3 is built on trust—the trust that the data you are accessing is accurate and reliable. However, with so much data being shared across different platforms and networks, it can be difficult to verify the accuracy of this information. Web3 does offer privacy and users can be as anonymous or pseudonymous as they want, but there’s no central authority that can verify that the data that is encoded on the chain is unarguably trustworthy.
This trust model opens up the possibility of malicious actors injecting false or inaccurate data into the system. Whether it’s a DDoS, a DNS hack like the one that Polygon and Fantom encountered earlier this year, a 51% attack, or bad code in a smart contract, this could lead to major problems down the line if left unchecked. Relying on the nature of the decentralized blockchain, and other technologies is one thing, but there is also the human factor to consider.
Not everyone is on the blockchain for altruistic reasons. There’s no benefit to making Web3 easier to use and more intuitive, if a user doesn’t feel safe.
That said, however, data confidentiality and integrity is inherently built into the blockchain. Users require private keys to own and manage datasets, and the data that exists on the blockchain is immutable, transparent, and permanent. Any compromise of security on the chain thus far has been due to factors and gaps that were overlooked at the time. Once the breach was detected, it was addressed and patched. In Web3, innovations in coding and cryptography go hand in hand with blockchain innovation.
The positive outcome of any breach is the ability to learn. This is Web3 that we’re talking about. There is evolution happening daily, and it’s all out in the open. There are initiatives already underway to develop mechanisms to ensure the accuracy and integrity of Web3 data.
The concept of governance in Web3 has been top of mind lately. Web3 is decentralized by design. There is no central authority governing its usage or evolution. This is a key benefit but can also lead to problems when it comes to ensuring compatibility between different systems and preventing abuse or misuse of the platform. While shying away from centralization, Web3 projects, especially DAOs, need governance. There still has to be a series of checks and balances to ensure democracy and consensus, enforced by governance tokens, or a larger authority. This way decisions are coordinated, audited, and enforced on the blockchain.
But not everything adheres to the highest standards of governance. Anybody can add or edit data on Web3. There are no measures that ensure quality control or accuracy. The data recorded on the chain might be incorrect, biased, or obfuscated in some way. This serves as a huge deterrent to a wider adoption of Web3.
One just needs to look at the recent FTX scandal and the ousting of Sam Bankman-Fried as CEO. Without getting too deep into the particulars, no one saw the collapse coming until it was too late. With no one monitoring what FTX was doing with their FTT token, or auditing their financial statements, the exchange didn’t have enough liquidity to pay out their withdrawals. There’s literally no paper trail of what money the company had, or where they put it.
Then, to add more insult to injury, the exchange was hacked.
As unpopular as it sounds, the way to ensure good governance is to prioritize accountability and offer more accessibility. The idea that 1 token = 1 vote can easily be misused. Therefore, a Web3 project, dApp, or DAO should give their community and users the opportunity to weigh in, regardless of their possession of tokens. There should be the ability to compare and contrast accurate options, so that informed choices can be made at every level. Every stakeholder experience should be inclusive of different types of input as well. For example, non-coders and creative-types have valid ideas as well about user experience, or features.
If the needs of the many aren’t being held to account, then there should be measures to keep the leadership and stakeholders accountable.
Every individual involved in a project in Web3 should be able weigh in on the ins-and-outs of governance, ensuring that the majority rules and nothing happens to jeopardize the health of the initiative. Good governance through increased decentralization.
The Dependence on Cryptocurrencies
Any time there is a crash, a hack, a crypto downturn, or a mismanagement of crypto assets, the Web3 naysayers declare that crypto is dead, and Web3 and the blockchain are a failed project. Nothing could be further from the truth, but crypto assets do underpin the entire structure of the blockchain. They represent the form of payment or storage of value on the blockchain, and as such, their failure could mean a threat to the entire ecosystem.
Outside of Bitcoin, which has never been hacked, there are thousands of other cryptocurrencies floating around, each with their own chain. Some are widely popular and have mass adoption (Ethereum, for example), while others have varying levels of quality and security. But cryptocurrencies attract speculation, so the age-old adage of “if you build it, they will come” applies.
The challenge lies not in the volatility of the market - there’s no way that a market crash will destroy the blockchain, but in the perception of crypto, and in access.
On one hand, to surf the web you just need internet access and a browser. You pay your ISP in fiat, and you can go to whatever Web2 site you wish. To access Web3, you need a wallet and funds. As more and more organizations explore Web3 as Nike, Starbucks, Reddit, and Coca-Cola are doing with Polygon, however, there will emerge a “pay-to-play” economy. How is this different from a paywall, or exchanging your personal info for access?
And, outside of serious investors and crypto-enthusiasts, who else is willing to risk converting their fiat to crypto at this time, in the hopes that there’ll be a boom, and we’ll move into a bull market?
There’s no debating that a crypto wallet is vital for Web3 access. What can be addressed is what that wallet gives you access to and the interfaces we use to access Web3. While tokenomics make sense in most circumstances, offering ways to access Web3 without requiring an investment in crypto could help with mass adoption. Maybe instead of loyalty points, companies and retailers can issue NFTs for access to the blockchain.
The bottom line is that there needs to be a clear separation in how we understand cryptocurrencies and the blockchain/Web3. Both are necessary, but it should be made clearer that the health of a coin or token doesn’t impact the value and security of the blockchain.
The Way Forward
As far as we’ve come, it’s obvious that Web3 is still in its infancy. While current infrastructure presents some challenges, there are initiatives underway that are working on developing mechanisms to address these challenges. It’s no different than Web2, with all of its growing pains, and it won’t be too long before we see a fully-fledged Web3 enabled future where blockchain literacy is as widespread as Web2’s.
In the meantime, innovation still continues to happen, and Web3 visionaries are beginning to carve a path by bridging the gap between Web2 and Web3, so that moving between the two and trusting the blockchain will be simplified.