Deeptech/Blockchain/Opinion/

Don’t believe the hype: Web3 is not going to change the world

Web3 is just a new spin on the same blockchain tech that we've been discussing for the last decade.

Dr Ewan Kirk

By Dr Ewan Kirk

Unless you’ve been living under a rock for the past few months, you will have undoubtedly heard of Web3. According to some VCs and founders, this radically updated internet will unlock a new era of human co-operation and creativity, and so on.     

The Web3 hype is just another reminder of how short-term the tech industry’s memory is. As someone that was mining bitcoins as far back as 2012, it’s clear that Web3 is just a new spin on the same blockchain tech that we’ve been discussing for the last decade. 

Web3 enthusiasts want to add a blockchain layer to our internet infrastructure and radically decentralise the net — or so the argument goes. Rather than online services and data being delivered from centralised servers owned by the likes of Amazon, Google and Facebook, it will be delivered from the blockchain, beyond the control of any single organisation or person. So, what’s the problem?

Crypto, drugs and blackmail

We need to look at blockchain technology. Blockchains are generally defined as distributed, public, immutable, trustless databases. And if you need exactly that, they’re very useful. But unless you’re trying to create a cryptocurrency, buy drugs or blackmail a company using ransomware there aren’t really any sensible use cases for a blockchain — and Web3 doesn’t change that. But let’s take each of these descriptors in turn.

Firstly, distribution poses a challenge to scalability. The cost of distributing a database is that each copy needs to be correct. This is an incredibly expensive thing to ensure. Think of all the copies of the bitcoin blockchain around the world. All of them have to be kept in sync. Back in the old days, every node might have had its own copy, but now it’s nearly 400 gigabytes. So most people who use the bitcoin blockchain don’t actually have their own copy. As such, it’s not widely distributed. And anyway, who needs every user of a database to have their own copy?

“Unless you’re trying to create a cryptocurrency, buy drugs or blackmail a company using ransomware there aren’t really any use cases for a blockchain”

Second, public databases can be a great thing, but not always. The web is really a giant public database. But if you’re wanting to store your invoices, customer lists or financial data, having a public database is a very bad idea indeed. You could, of course, have a private blockchain. But then what’s the point? You might as well have a private SQL database.

Third, immutability has its downsides. Blocks in the blockchain are for all intents and purposes completely fixed. This means that a transaction that happened erroneously or illegally can never be changed. Or bad data can never be changed. Imagine if you move house and the gas company says: “There is literally no way to change your address in our database.”

Finally, trust is an important aspect of all transactions. Apart from crypto assets, there is no activity that operates in a trust-free environment. I trust my bank not to steal my money, I trust the gas company to bill me correctly, I trust my friends to pay me money they owe me. The ironic thing is that despite the crypto-punk-libertarian propaganda about not trusting the government, most crypto enthusiasts put their trust in incredibly dodgy exchanges and blatantly fraudulent crypto assets.

So where is the digital utopia?

And this is without getting to the damage that blockchains are causing the environment. The bitcoin blockchain manages just under three transactions per second, which requires incredible amounts of electricity to run. There is an argument that the blockchain is increasingly using electricity from renewable sources, but that’s a red herring. If bitcoin is using that renewable power, then somebody else is having to use coal and gas to power their house.

No doubt others will say their own favourite blockchain is more efficient and is the future of Web3. But all blockchains are much more inefficient than literally any alternative. For example, ethereum, the current go-to blockchain for Web3, uses the same amount of energy as the Netherlands. Bitcoin produces nothing. It just destroys the environment as huge computing farms play “Numberwang” with each other more than 150,000,000,000bn times a second.

But while Web3 and blockchain might not pave the way to some much-promised digital utopia, there is still reason to be optimistic: we’re now living in an age where the cost of data storage and bandwidth is trending ever closer towards zero. In a world where data storage and bandwidth are no longer scarce goods, new business models and opportunities are bound to arise. And if there’s something that we can definitely be sure of it’s that innovation is only getting started.

Dr Ewan Kirk is a technology entrepreneur, early-stage investor and founder of Cantab Capital Partners. 

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Natoshi Sakamoto
Natoshi Sakamoto

The guy is right. For 10 years people try to change the world by finding problems to a solution, the blockchain. There is only one single killer app that had an impact, Bitcoin. The rest are s*** coins, ponzi schemes, nonsense NFTs and other speculative get rich quick bulls***. No real value for anybody. People who don’t understand technology are buying into it and invest in those cheap start ups that could just use a SQL database to implement their software 10000x more efficient. People have lost their minds about a distributed linked list with a consensus model. Ridiculous. There… Read more »

Vicky
Vicky

Well, thanks, but I believe that Web 3 and decentralization are necessary in the modern world. Moreover, I believe that there are projects that deserve special attention. For example, a decentralized Utopia p2p https://u.is/ ecosystem based on blockchain. This ecosystem owns secure browser, mssngr, two cryptocurrencies, an internal anonymous NO KYC exchange, where promising exchange pairs are added. In general, this project guarantees complete anonymity and data security in any case.

Tobi
Tobi

Pls

Johhn
Johhn

Who cares about this dude’s opinion? Is it really a research piece or a clickbait article to establish some kind of pseudo thought leadership? Completely empty paper.
What you have done so far seems legit… Get yourself together and please work harder next time Dr.

TK Mata
TK Mata

The analogy about moving to a new address and the gas company won’t be able to update it due to immutability of blockchain is outright false. What blockchain does is actually ensures that changes made can be tracked and historically can be reviewed. It is obvious you’re conflating crypto projects and blockchain solutions.

Matt
Matt

totally wrong, try using your email address to create an account on an exchange and then delete your account, your email address cant be used again if you open a new account on the same exchange, reply from tech support: it’s on the blockhain and we can’t change or uncouple it once you close your account.
hence, he is totally right, there might be serious troubles.

Jeff T.
Jeff T.

Yes, somewhat embarrassing article on numerous fronts, presumably just some headline clickbait to get his 5min of fame 🙂 Indeed as per the comments below! thank you for making this clear:

-Crypto is one (arguably) smaller use case of blockchain technologies,
-PoS (proof of stake) and other validation methodologies are used, especially on the alt. coins.
-and yes ESG and money laundering arguments when sitting on the board of a weapons manufacturing company, get real!

Soheel
Soheel

“For example, ethereum, the current go-to blockchain for Web3, uses the same amount of energy as the Netherlands.”

Ethereum is moving to a proof of work to proof of stake, which will reduce energy usage by 99.95% (see https://blog.ethereum.org/2021/05/18/country-power-no-more/) . I am rather surprised that this article does not even mention proof of stake. Proof of work incentivises miners to be honest by paying them a reward to offset their energy bills and hardware costs. Proof of stake incentivises miners by asking them to stake digital currency instead of the large energy bills.

JustThat
JustThat

Ethereum has been “going to PoS” for nearly a year and, from what I’ve been reading, most of the network doesn’t want to. So can we please stop saying that is happening?

As for proof-of-stake, the only thing a forger will be staking is their own coin on the network they invest in. What’s the punishment for acting badly? They lose their coin on that network. There isn’t an external incentive, then.

Ed 1
Ed 1

Hmm. It appears the author has confused cryptocurrency and blockchain. He’s right about crypto, but to say there are no real world uses for blockchain is untrue. There are plenty of commercialised blockchain products out there as examples.

The author also- rightly- points to Bitcoin and Ethereum’s poor environmental credentials. However, a quick search reveals that the author works for an weapons manufacturer. This does somewhat call into question the author’s genuine concerns for ESG matters and leaves one wondering whether the environmental footprint he eludes to is simply a convenient piece of supporting narrative.

RealIT
RealIT

I concur! This “Dr” is clearly unknowledgeable about the full blockchain innovations and upcoming industry moves to utilize it! Why do people insist that if they have “some” technical knowledge they are able to make large scale opinions about things they don’t fully understand? This should never have made a headline! Come on… Drugs, Ransomeware! What’s next total anarchy because of Web3? Author needs to get back to reality and leave this tech in the hands of us innovators!

Winstone Carlin
Winstone Carlin

Whataboutism. Why is the author’s occupation related to the entirely reasonable points they make about this?
Bollockchain also always requires either proof of work or a central authority to sign transactions, so any use of it is environmentally catastrophic or just pointless. And it’s “alludes” in this context.

Peanut Butter
Peanut Butter

Every major industry will undergo revolution by way of NFTs on the blockchain. Its here with NBA, Nike, UFC, and the entire gaming industry which will be close to 1 trillion dollars by 2030. It’s happening in the art world today, next it’s music, then movies. Wake up bud.

Reasonable
Reasonable

Your lack of understanding of crypto is astounding. You think crypto is a good currency for illegal activity? Anyone can access anyone else’s public address and view every transaction coming and going out of their wallet. The Bitcoin Blockchain is viewable by anyone. I would like to point the most widely used currency for criminal activity that every crypto critic somehow doesn’t see…..CASH.

Reasonable
Reasonable

Case in point. Do you know how this agent was indicted for money laundering 1,500 Bitcoin? By the investigators simply looking at the transactions on the Bitcoin Blockchain

https://www.justice.gov/usao-ndca/pr/former-secret-service-agent-sentenced-scheme-related-silk-road-investigation

Raiden
Raiden

“I would like to point the most widely used currency for criminal activity that every crypto critic somehow doesn’t see…..CASH.”

That’s kind of like saying the most widely used transportation that causes death is CARS, so we should get rid of it and everyone will use planes and trains instead.

Love how crypto addicts get so defensive over the slightest of scrutiny. You guys clearly have buttload invested in this, and are always out to chew down anyone who advises otherwise because it will threaten your profits.

Jack
Jack

What’s that expression about ‘senior’ scientists saying something isn’t possible?

Luna
Luna

Thank you so much for this article! Finally the hype gets called out for what it is, an environmentally catastrophic scam providing with no use!

lxc
lxc

The hype is true, it’s said that mining is illegal in China now and many bitcoin farms has been destroyed.

Joe James
Joe James

A whole lot of ignorance in this piece.

Cage gate
Cage gate

Care to elaborate?

RarrBee
RarrBee

Let me guess. You own crypto.

Matt
Matt

typical reply from a crypto “investor”, those “projects” are so solid you even need to safeguard their reputation because they simply can’t do it by themselves