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It’s 2023, and it’s about time we start speaking of crypto and web3 as of any other technology. However, for some reason we still can’t 🤌
The amount of confusion, misconceptions, and ignorance about the crypto space abound, and the recent Bitcoin rally has once again propelled them to the headlines.
Beyond the extreme cases of bad faith, however, lies a very common misconception – only one : people’s inability to dissociate the technology from the value it conveys.
To understand the crypto industry, one must understand this crucial point, set straight the definitions (how is crypto different from tokens? what’s web3?..), and only then discover crypto’s real problems.
Let’s start with some key definitions.
Blockchain is a shared distributed database run by independent nodes.
To motivate these nodes to maintain the blockchain, it issues a native coin – a cryptocurrency.
Many blockchains allow users to issue their own cryptocurrencies and more broadly – cryptoassets. These are known as tokens, either fungible (like a stablecoin), or non-fungible (an NFT).
For example, $ETH is a native coin of the Ethereum blockchain, while Tether, a company, can issue/burn fungible tokens that it engages to redeem for $1 – the stablecoins. A university can issue diplomas in form of NFT. Anyone can create tokens and assign them the value they wish, but the native coins and their value depend only on the blockchain.
Many traditional services use cryptoassets in one way or another, but a growing sector re-imagines its operations and products by putting the blockchain at their core. This sector is called web3.
Why “web3”? The name reflects the evolution of the Internet:
The term was coined in 2014 by Gavin Wood, Ethereum co-founder, who described web3 as a “decentralized online system based on blockchain”.
Crypto investor Packy McCormick has given a more romantic definition, calling web3 “the internet owned by the builders and users, orchestrated with tokens.”
This is how we see these notions related:
The notion of web3 is still very young, and it is often difficult to draw a line between web2 using crypto and web3. What degree of decentralization does a service need to be considered a web3? There’s no clear answer yet.
The understanding evolves together with the industry and its use cases. Let’s look at a couple of examples to get a better idea.
💰 Web2 finance: Kraken, a centralized exchange that keeps users’ crypto and is managed by its board of directors.
💰 Web3 finance: Uniswap, a decentralized exchange that does not keep users’ crypto and is managed by its DAO – a decentralized autonomous organization with tokens that carry voting rights.
👯 Web2 social media: Twitter that has a special avatar shape for verified NFTs.
👯 Web3 social media: Lens protocol that allows users to own their data and connections and to carry them across social platforms.
🎮 Web2 gaming: Ubisoft releasing additional gear for its Tom Clancy game as NFTs.
🎮 Web3 gaming: Axie Infinity, where all characters are upgradeable and tradeable NFTs, a community governance system is underway.
Here’s the above graph with examples, to give you more perspective:
Understanding the difference between web3 and web2 is crucial for fighting the crypto FUD: for example, that the FTX fall was caused by its managers’ fraud, and not by any crypto’s fault. But there is still a major misconception to dispel.
Yes, the words “crypto” and “NFT” still have a negative vibe. Worthless, scam, bubble, illicit… you know the motive.
🛑 In our opinion, this mostly comes from people’s inability to dissociate the technology from the value it conveys. That makes people believe that if one crypto is a scam, the other one must be too 🤷
Last week, National Geographic received a massive hate because of its NFT drop featuring the works of its most renowned photographers. So, its social media followers are totally OK with the magazine selling paper photographs, but when the same photographs are release in an NFT form, they call it a scam 🤐
Crypto is widely called worthless, without regard to the value its creators have put into it. A gold-backed stablecoin would force even Jamie Dimon to admit to its value, and Bitcoin is used as money (hence assigned value) by hundreds of millions of people.
This misunderstanding problem can have two solutions: rebranding (replace “crypto” with a new word, not associated with scams) or education. We favour the second one, but oh it’s difficult…
It would be unreasonable to think that the crypto industry is perfect as it is.
☠️ Hacks and scams are omnipresent, and the space still needs to work hard on security and user safety.
💁♂️Bitcoin maximalists regularly attack the web3 for being insufficiently decentralized, technologically unsound, too dependent on VCs, and even useless. We think that such critics help the sector to evolve, but in the meantime, the flaws can be real.
😤 The crypto community is a motivated and talented one, but it has a toxic side, presented by the “crypto bros” stereotype – an arrogant white male, often condescending towards non-crypto people with a HFSP (“have fun staying poor”) attitude. This is the group that many – us included – do not want to be associated with, but the new image of a crypto enthusiast is yet to take form.
All in all, these problems are curable, and the new crypto cycle could surprise us with fresh solutions.
And of course, if you think that nothing beats personal attention, we’re happy to arrange a training or a consulting session 😘