How to bring Web3 to a billion people

Many Web3 founders approach their work with missionary zeal. Not only do they want to build products and make money, they want to rewire and improve the economic power grid and the old order of human affairs. For them, Web3 is not just a technology toolset, but a grand social and economic experiment that runs in real time.

But as their vision grows closer to reality, Web3 faces a new challenge: how to scale this technology to meet the needs of enterprises and onboard the next billion users without sacrificing the very thing that makes blockchains one powerful tool – its decentralized, trusted, immutable nature. (This tension will be a key theme at the upcoming event hosted by the Blockchain Research Institute, W3B and Blockchain World, where builders will showcase how they plan to disrupt a variety of industries.)

Decentralization has been a cornerstone of Web3 from the start. In a 2019 interview for my book financial services revolution, Rune Christensen, co-founder of MakerDAO, described what he saw as the core characteristics of a DeFi application: it must be tamper-proof (difficult to shut down), run on a blockchain, and be trusted, which means that you, the user, cannot rely on it a central party or platform. This essentially describes how decentralized applications should theoretically work.

In practice, full decentralization has been difficult to achieve and even has some disadvantages. If you do not rely on a central party to complete a transaction, you cannot rely on them to resolve a dispute or reverse a fraudulent transaction. You cannot claim damages because no central party is at fault.

This issue became relevant again recently with the Binance Bridge hack, which resulted in the theft of nearly $600 million in BNB, the chain’s native token, before halting the network and reversing much of the theft, thanks to the highly centralized Binance. Some would say that any blockchain that can be paused and undone isn’t a blockchain at all – just another centralized system – while others thought the pause made sense given the potential loss. Binance is not alone. Even MakerDao, which has been heralded as a successfully decentralized organization, is becoming more centralized, recently announcing the purchase of $500 million worth of government bonds and bonds as collateral for the DAI stablecoin.

These moves by Binance and MakerDAO are reminiscent of an observation made by business legend Peter Drucker: “Innovation and entrepreneurship are not ‘root and branch’, but ‘one step at a time’. They are pragmatic rather than dogmatic and humble rather than grandiose.”

While all missionaries – including startup founders – are dogmatic, some are more pragmatic. The Jesuit missionaries in North America were strictly dogmatic, but they were also flexible when it suited them, adapting their teachings to existing native customs, languages, and narratives. The Bible and the Lord’s Prayer were translated into the local language Wendat. The story of Jesus told in the Wendat Huron Carol restates the Nativity from the Huron perspective: “In a hut of broken bark was found the tender baby, a torn robe of rabbit skin, enfolded in his beauty.” No Bethlehem in this manger.

Web3 missionaries would do well to take a similarly pragmatic approach—one that adapts the dogma of decentralization to circumstances.

For now, some centralization is probably inevitable until the technology scales. For example, many Web3 applications run on Amazon Web Services. Eventually they will run on decentralized clouds, but we’re a long way from that, so why not start with a centralized cloud? Metadata for NFTs resides on centralized servers at OpenSea. Eventually when Ethereum can handle it, maybe via Layer 2 which will improve throughput, this data should be on the chain.

Meanwhile, there are other Web3 applications that may always have some degree of centralization. For example, rendering a real metaverse is not possible in a centralized cloud like AWS and may never be possible in a decentralized cloud. At the same time, companies are used to and typically prefer centralization, which means they are likely to adopt so-called Web3 toolkits that allow them to develop new products and services without needing a full Web3 stack. Eventually, most internet services will be decentralized. But at least today, some centralization is a necessary expedient.

To learn more about business leaders doing groundbreaking things for Web3, check out the nominees for the upcoming 2022 W3B Awards.

Alex Tapscott is co-founder of the Blockchain Research Institute, host of W3B and blockchain worldToronto, Aug. 8-9 November.

The opinions expressed in Comments represent solely the views of their authors and do not reflect the opinions or beliefs of wealth.

Leave a Reply

Your email address will not be published. Required fields are marked *