We've been here before - Just because we're in a bear market, doesn't mean Web3 is any less significant. It's amazing how much negative sentiment there is currently about Web3. There's little doubt that the cryptocurrency markets have entered a bear market phase due to the value they have shed during the past couple of months.
Negative Sentiment on Web3
This downward trend has caused many people to emerge from the woodwork throwing negative terms around about Web3, labelling projects Ponzi schemes, failed experiments and questioning the real-world value of what's being created here. We know that the cryptocurrency markets are highly volatile, and as much as people try to lead others to believe, they are correlated with the wider financial markets. What bothers me here is how many people believe that the price of cryptocurrencies reflects the broader Web3 landscape.
We've seen tech stocks collapse, but people are not questioning the viability of many of the businesses that compose the NASDAQ index, yet for some reason, the value shed from the cryptocurrency markets is perceived as proof that Web3 offers no real value.
It astounds me that those who are happy to give their names to these narratives include leading computer scientists and quality business publications. The fact that folk like these are willing to be outspoken critics of blockchain networks, cryptocurrencies and NFTs in my mind demonstrates just how far we have come this past few years, with respect to these innovations truly entering the mainstream consciousness.
Tokens are Ponzi schemes
However, there are certain criticism that I do tire of hearing, that appear to come up time and time again, which are important to debunk 'Bitcoin/Ethereum/etc is just a Ponzi scheme' or 'Crypto is a Ponzi scheme' and lets not forget, 'Crypto is a scam'. Ponzi schemes rely on existing investors being paid from funds by new investors. When you purchase tokens or cryptocurrencies you pay for them what the market prices them at. You are free to hold or sell these tokens. The value of these tokens is underpinned by the perceived value of the underlying blockchain protocol they support.
This is not a Ponzi scheme, this is more akin to an equity stake in a company. Those who had the conviction to invest early in the life of the company or protocol are likely to see the largest rewards from their stakes, but how is this different from any equity investment?
There was nothing to stop people from mining bitcoin, or investing in the Ethereum crowd-sale when they were launched. Most people chose not to, however. Yes, with the launch of some protocols there was a degree of privileged access to their earlier funding rounds, but this is no different to any business that convinces individuals to take on the high degrees of risk to invest in them in the early stages. We all know the bigger the risk, the higher the potential reward.
'NFT Scams' narrative
Another criticism levied is NFTs are nothing more than a scam/fraud. Whilst I personally don't believe the value that some NFTs change hands for to be justified, at the end of the day, people are free to choose to buy whatever NFTs they like. Yes, some of them are massively overpriced, but some aren't. Just like with creating a piece of art, the barriers to entry for creating NFTs are low, hence it's a very competitive market to stand out in and it's only going to get harder.
If you're purchasing an NFT to profit from it, as with any financial speculation, you need to be prepared to get burnt. I would consider many overpriced for what they are worth, but as it's such a recent innovation, there is a high degree of speculation premium baked into their price. If people are willing to pay these prices, then why shouldn't the creators charge them? Additionally the creators receive royalties for the lifetime of the NFT which is fairer than the traditional art market .
The other criticism I wish to debunk is that ' Blockchain has no real-world utility/ blockchain is a scam'. This is incredibly short-sighted. Blockchain networks provide a trust layer for the internet. Prior to the invention of blockchain via the Bitcoin white paper, it simply wasn't possible to transact online with another party without an intermediary.
As a result of this, we saw Google, Facebook, etc. establish themselves as internet titans providing the trust layer of the internet for many users. In return, they harvested data about their online activities turning them into trillion-dollar companies. One cannot underestimate how significant an innovation the trust model provided by blockchain networks is. It is gargantuan, as it enables trust to move from an organisation's or an intermediary's boundaries into a decentralised network. The implications of which I don't believe many quite appreciate the significance of yet.
In addition, this idea of no real-world utility tends to accompany many major innovations. If disruptive innovations were perceived as threats whilst in their infancy, the whole concept of Clayton Christensen's Innovator's Dilemma would not exist . That the status quo dismisses or simply ignores such breakthrough innovations is to their detriment time and time again. Did IBM see Microsoft as a threat? Did the car industry see Tesla as a threat? Even the automobile itself was not seen as a threat to horse drawn carriages when they first emerged. We see this innovation playbook play out time and time again.
The opportunity space for NFTs to be used in creative industries not only as art but also to provide a universal digital format for membership cards, tickets, or any other physical items such as property again, is huge. Even if by some strange turn of fate NFTs only remained relevant for collectables and art, the masses have already demonstrated their appeal.
To those who question the utility of this, I would counter by asking what real-world utility does TikTok have? TikTok is now more widely engaged with by its user base than Facebook ever was and is the world's most widely downloaded app with over 1 billion users.
Not bad for a company that started off life as an app for recording and sharing lip-syncing videos. For all those naysayers about Web3, I would postulate that blockchain and Web3 technology has far greater utility from the get-go than many of the incumbent applications of Web2.
The torrent of disbelief aimed at Web3 is unlikely to be disbanded any time soon, especially whilst we are in the throes of a bear market (or builders market as Web3 proponents refer to it), and it will not be until the next big wave of adoption of Web3 builds that we start to see the fruits of the labour by firms during this period.
Stale Web3 criticism
This being said, it would be nice if the criticisms taking aim at Web3 had some fresh perspectives to them, as it's tiresome to hear the same arguments played out again and again. The belief and resolve I have in Web3 has only gotten stronger since I first immersed myself in it back in 2016, and I look forward to when the debate shifts from questioning the fundamental value of the technology that is being built and instead can be focused on some of the innovative applications being built on it.
There will always be naysayers, but I think it's time that they started focusing their energies higher up the stack, as Web3 is here, it's not going anywhere, and they're wasting their time thinking otherwise.