5 min read · Mar 29, 2024
The evolution of the internet, the next generation internet and several other terms were assigned to describe the assertion of Web3 space. During the year 2021, entrepreneurs, investors and founders embarked on the term “Web3” like nothing else will matter in future.
The hype created around this new innovation drove billions into this sector and then what happened? Where are the Web3 applications that were to replace Twitter, gmail, Amazon and other “Web2” companies?
Let’s refresh the memory and find out what really Web3 was and where has it reached after nearly 3 years of development.
For the sake of this article, we exclude DeFi applications from Web3 and focus on blockchain-based utility-centric applications.
Web3 Hype of 2021
The early months of 2021 sparked hype around Web3 space as the launch of several decentralized applications set trends in the tech sector. These innovative applications were setting the stage for an upcoming version of internet which is described as decentralized, permissionless and privacy enabled. At this initial phase, Web3 was praised by numerous enthusiasts while comparing it with the current iteration of internet (Web2).
Several drawbacks of web2 — such as personal data protection, unwanted advertisem*nts, and discrete credentials — were addressed to be solved by Web3 and it was put forward with the blockchain, cryptocurrency, and NFTs as core elements.
According to data from Crunchbase, web3 startups had total investment of $34.1 billion in 2021 and $28 billion in 2021. Those whopping investments were made in projects such as metaverse, blockchain-gaming, NFT platforms, high-throughput blockchain networks, and other Web3 applications.
While every tech-enthusiasts were convinced of the Web3 and its future, this anticipation and expectation for it seems somehow loosen now. All the hype created during the late 2020 and early 2021 currently shows buried deep down is the wild west. The investments into web3 industry fell over 75% with merely reaching $6.9 billion in 2023. This sharp decrease has come despite significantly increased inflows into crypto products in the same year.
Is Web3 an evolution or just another catalyst to “sell the news?”
While it has been just two years, the term Web3 has seemed erased from everyone’s mind and especially those investors who poured millions of dollars in the domain. The vision it showed us where users will have control of their own data and distributed ownerships have not yet become a reality.
During the hype, we also witnessed several leading brands collaborating with blockchain companies to launch NFTs and digital collectibles. When looked now, it all turns out nothing but just marketing campaigns that merely entertained the audience. Several artists and high-profile social media influencers also did the same while ending up in legal conflicts in defrauding investors.
According to Google Trends data, the search interest for the term “Web3” started to rise and peaked throughout 2021. The search interest volume is indicating that people have shown lessen interest after 2021 and it has decreased since. Although the recent buzz around crypto bullrun 2024 has ignited a slight spike.
All these proves that Web3 was rather a catalyst than what it was framed as the next phase of the internet. The cryptocurrency and blockchain landscape often adapts new catalyst every 2 years or even a shorter time. Once the sufficient market takes place around one, other catalysts are introduced into this space which shifts all the capital allocation and development from one to another.
Is Web3 Really Dead?
We can not say that “Web3 is dead” but it has surely failed to deliver the promises it made. Each innovative idea presented in the form of renovated web version has turned into complete dust unless it has something to do with the native cryptocurrency token. All the developments and projects introduced in the Web3 hype are majorly underperforming.
Following could be the potential reasons why Web3 space has not reach widespread adoption;
- People are finding it hard to catch up with the web3 tools like managing wallets with seed-phrases.
- The unnecessary tokens and financialization of applications make it hard for users to cope up.
- Most of the web3 applications were complex to understand that needed to have simplified user experience.
Web3 Vs Decentralized Finance
While both Web3 space and the Decentralized Finance (DeFi) shares similarity, it differs from each other on the basis of applicability. DeFi is referred to the domain where various financial applications functions on the blockchain and fundamental values of permissionlessness. Web3 on the other hand, is the field where different applications were built on top of blockchain.
Web3 Projects and Their Growth
The growth and developments could be better understood via traction. Most of the DeFi projects are still in use — such as Curve, Aave and others — but the previously hyped Web3 projects are nowhere to be found. Web3 applications like Livepeer, Audius and Lens protocol has failed to gain userbase even among cryptocurrency enthusiasts that were supposed to drive Web3 adoption further. Some of the Web3 applications did not even sustain months into the domain. Although some web2 alternatives like Brave browser managed to stay ahead of this curve but it still has limited user base.
Has AI Taken Over Web3?
The emergence of AI seem to be taken over the internet. The blockchain space is also introduced with several AI projects where potential intersection is researched. If looked closely, the recent era of AI also feels same as the initial days of Web3. We can also see that AI is at the center of recent innovations and investment which closely aligns with the early phase of Web3 developments. This assures that the spotlight is now towards AI and it has taken place of Web3 as a latest innovations. Now the next couple of years will tell us if AI is going to stay here for longer than Web3 or it will be also replaced by other primitives such as robotics or quantum computing.
Its the upcoming time that will prove if Web3 was really the next version of internet or it was just a fancy term created by capitalists. It is currently inaccurate to come to conclusion that Web3 is dead as several blockchain applications are still functional outside the DeFi. But again, majority of development efforts are now sidelined and focused towards different sectors. Let’s hope we will actually see Web3 coming back to track in near time.
