What the heck is Web3 Continued
Here’s what I could come up with in my research
There is a weak link in the vision of Web3, according to a widely-circulated essay by cryptographer Matthew Rosenfeld, better known as Moxie Marlinspike, creator of encrypted messaging app Signal.
Many activities that make blockchain-based activity on the web possible depend on a handful of private, centralized companies. “So much work, energy, and time have gone into creating a trustless distributed consensus mechanism,” Marlinspike wrote, “but virtually all clients that wish to access it do so by simply trusting the outputs from these two companies without any further verification.”
Marlinspike points to two weaknesses in Web3 infrastructure.
Blockchain-based apps rely heavily on application programming interfaces (APIs), which lets software communicate with other software.
In Web2 sites, for example, APIs allow you to make a profile with a mobile game using your Facebook credentials. In Web3, many decentralized apps (dApps) use APIs to connect to blockchains like Ethereum rather than connect directly themselves.
The market has already consolidated around two providers, alchemy and infura, that power the bulk of dApps on Ethereum, the most popular blockchain for software developers.
Instead of trusting Ethereum, in other words, one has to trust Infura or Alchemy.
But that’s not the only way the crypto industry is consolidated. Crypto exchanges, where users can buy and sell currencies like Bitcoin and Ether, are dominated by Binance, which handles about three times as much trading volume as the next most popular exchange.
MetaMask, owned by Infura parent company Consensys, has also become the dominant crypto wallet for Ethereum — that’s where you can store the NFTs you’ve bought. And OpenSea essentially controls the NFT market, processing 84% of the $2.7 billion spent on peer-to-peer NFT transactions in December 2021.
More than half of all circulating stablecoins, a decentralized finance (DeFi) asset indexed to the value of fiat currency, are Tether (USDT), a coin controlled by the exchange Bitfinex. And crypto companies, many of which are funded by venture capital, are starting to buy up one another at a rapid pace. (Are you thinking what I’m thinking?)
This is not the decentralized Web3 that was originally promised. A few dominant companies are gaining massive market share by building user-friendly platforms to bring the next iteration of the internet to the masses. That sounds a lot like Web2.
Just look at NFTs if you were lucky enough to buy into Ethereum early, you could spend a good amount of money to buy a Bored Ape, with your Bored Ape, you could get early access to buy an Adidas NFT, now you can resell your Adidas NFT for 3x the mint price, adding more money to your bank account entirely because…..power is being centralized toward the already powerful people in the space.
As much as I’m an enthusiast of web3 I’m also a speculator of what web3 will bring to the world.
