Since the launch of the Bitcoin protocol in 2009, blockchain and decentralized technologies have innovated on new ways for ecosystem participants to benefit from what promises to be the next evolution of The Internet. These innovations include peer-to-peer networking, cryptographic tooling, consensus mechanisms, and new economic models. End-users can claim ownership of network resources as miners or validators, ownership of their own assets through tokenization, and ownership of their interactions with peers through disintermediated financial transactions.

The Promise

Fundamentally, this new wave of technology, commonly categorized as "Web3" or "Decentralized Ledger Technology" (DLT), offered more secure and direct ways for parties to own their presence on the web and independently interact with others. The most common use cases built on this technology include things like non-fungible tokens (NFT) as digital or digital-twin collectibles, decentralized finance (DeFi), or advanced incentive programs like token offerings. We also have real utility develop in the spaces of decentralized autonomous organizations (DAO) which allows participants to directly participate in the governance of an organization based on their participation in the network or economic system.

The Problems

While the promise of Web3 is exciting, the challenges are also clear, some real and some perceived.

Real Problems

  • Latency. Web 3.0 latency is measured in terms of a few seconds to hours, depending on the underlying protocol. Even a few seconds can be prohibitive for most real-world use cases. This is one reason why most use cases focus on asynchronous transactions that don’t impact end-user experience itself.

  • Throughput. The most performant layer 1 and layer 2 blockchains are operating at around 5,000 transactions per second (TPS). Hedera operates at approximately 10,000 TPS. This throughput is shared between all projects built on these public ledgers. Real-world use cases events can require anywhere from 60-2,000 TPS depending on the number of participants, system architecture, and synchronization model. A few serious projects could exhaust the throughput of any single ledger, even if the latency problem was resolved.

  • Cost. Web 3.0 networks depend on balancing utilities with economics, ensuring that all peers in the network are fairly compensated for their contributions to calculating consensus. Some of these costs are directly related to the utility cost, but much of it is speculative and, in some cases, used as a mechanism to disincentive over-utilization of the network. For example, as CryptoKitties got more popular, more players submitted transactions to Ethereum, and Ethereum’s auction-model for pricing led to a spike in the cost per transaction when activity increased. Even with side-chains, layer 2 networks, or private networks, the cost to reach consensus between participants in a system may be prohibitive, both in real currency and in precious computational resources that many systems require.

  • End-user friction. Building systems that rely on cryptography means that cryptographic keys must be managed in a secure way. The current model for Web 3.0 is to either pass the burden of key management on to the end-user or to abstract it in a way that removes the self-sovereign promise of the technology.

Perceived Problems

  • A culture of speculation. Many developers will not entertain the thought of incorporating Web 3.0 technologies because of the speculative nature of cryptocurrency markets. Too many Web 3.0 projects used blockchain technology to raise money from vulnerable and non-accredited investors with the promise of high returns. As the market fluctuated, many investors lost their funds and were harmed. With the news surrounding the legal challenges of projects like Binance and FTX, software developers may choose to keep their distance from the entire Web 3.0 space.

  • Complexity. Integrating Web 3.0 technology may not be any more difficult than building software, but the perceived complexity of managing cryptographic keys, integrating with blockchain nodes, or asynchronously coordinating blockchain and system messages can be overwhelming or unfamiliar.

  • User Experience. Users want to use software. In most cases, users do not want to be bothered with the additional requirements of Web 3.0, including cryptographic key management through wallets, NFT marketplaces outside of the software, or even speculative value of their in-software items. If the added features of Web 3.0 introduce any friction to the experience, users may not use the software.

The Future

The ideal scenario would be that DLT becomes invisible to the end-user. Much like how end-users never think about what database or caching software is powering their favorite applications, they should be able to seamlessly use Web3 tech without any additional friction and in a way that only adds value.

Like the 19th century English surgeon Thomas Inman said, "...either help or do no harm...", we likewise strive to always add value and add no friction. The question is, how do we accomplish this in Web3? How do we apply all of the incredible innovation in a way that only adds value to the mainstream end-user while minimizing or reducing the friction to use?

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