In its 2022 edition, Stack Overflow's sprawling developer survey solicited opinions from more than 70,000 respondents about a new tech category added to the 2022 report: the Web3. The results?
"Developers are torn on blockchain, crypto, and decentralization," Stack Overflow reported. "32 percent are at least favorable, 31 percent are unfavorable and 26 percent are indifferent."
Those percentages come from all respondents, as the report also breaks down responses into those from professional developers and those still learning how to code.
"While those learning to code are more favorable than Professional Developers, more of them are also unsure," the report said. So it was a mixed bag all around for the emerging technology.
Stack Overflow investigated the issue in more detail in an April post titled "New data: Do developers think Web3 will build a better internet?," which reported on a survey that sought information about Web3, blockchain, crypto and whether they are all hype or truly the future of the internet.
"Of the 595 developers surveyed, a sizable portion had no idea what we were talking about: 37 percent responded with 'What's Web3?' Of those in the know, 25 percent think Web3 is the future of the internet, 15 percent think it's a bunch of hype, 14 percent think it's important for crypto and related apps, and 9 percent think it's all a scam”. What does this all mean? That Web3 still generates mixed impressions, and therefore we are going to explore whether it is here just for the hype or to stay for good.
Remember the dot-com bubble, and how it generated a disbelief about the real potential of the Internet and digitalization? Well, it didn’t actually prove right, since digitalization accelerated much more than skeptics imagined, even after the bubble.
What we can say that now is that Web3 is experiencing a very similar moment: the bubble around crypto and NFTs is making people skeptical about the real impact of such technologies on the world and on traditional businesses. At the same time, studying history can prove to be extremely helpful in situations like this. Let us draw some analogies from the dot-com bubble and the post Covid19 digital bubble: Let’s have a look at both eras:
Dot-com Bubble:
The dot-com bubble, also known as the Internet bubble, manifested from speculative investing, an abundance of venture capital funding, and a failure of dot-coms to produce either product or real revenue.
In the midst of capital markets pouring money into the sector, start-ups were in a race to become big quickly and companies without proprietary technology abandoned fiscal responsibility. As a result, the majority of the 457 initial public offerings (IPOs) made by Internet companies between 1999 and 2000 were internet-related. Further on, there were 91 IPOs in the first quarter of 2000 alone.
Eventually, the bubble burst, leaving many investors with steep losses. However, despite the bubble, Amazon, eBay, and Priceline have managed to survive. Furthermore, this laid the foundation for internet applications like Twitter and Facebook which ushered in a new era of communication and technology.
Covid-19 Bubble:
During the Covid-19 lockdowns, narratives changed from centralized communication technology to a focus on decentralized technology for some at the cutting edge of the tech industry.
Like the 2000 tech bubble, the Covid-19 bubble was also accompanied by much speculation for digital assets and an increase in available capital as a result of quantitative easing and stimulus checks.
Bitcoin’s price was $19,000 in November 2020, but by 13 March 2021, it had surpassed $61,000 for the first time as more investments led to an increase in market cap. Cryptocurrencies like Ethereum, Solana, and DogeCoin also rose sharply. Bitcoin and Ethereum peaked at $67,566.83 and $4,812.09, respectively, on November 7, 2021.
Additionally, Coinbase, the much-hyped crypto exchange, went public on NASDAQ on April 14. Its market cap climbed to $85.8 billion as the share price grew by 31% to $328.28 on its first day.
By the end of 2021, the crypto market began to fall along with the rest of the market. During September 2022, Bitcoin fell below the 20k mark, along with other altcoins and NFTs. Then the whole FTX saga went by, which drew even more skepticism on Web3. Despite this, the COVID-19 bubble did have a massive impact on Bitcoin and Ethereum prices. Currently, even after Fed’s recent rate hikes, Bitcoin could be seen as a more stable bet than safer assets like Gold and NASDAQ.
One notable similarity between these two eras is rampant speculation. In the 2000s, intense speculation about dot-coms dominated global discussions. Now, there is growing speculation about Bitcoin, DeFi, meme coins, and NFTs.
Further, amid both the tech bubble and the COVID-19 bubble, VCs kept investing, showing confidence in the future of these industries. But as much as there were similarities in the bubble, there are similarities as well in the opportunity of Web3 to come out stronger than before, as much as digital companies did in the past after the bubble.
The reason Web3 and blockchain in particular hold such promise is that we might be currently at an inflection point broadly similar to the turn-of-the-century dot-com bubble, when a frenzy of investment in internet-enabled startups, harnessing a still-nascent technology, promised to usher in a more egalitarian future in which the balance of power would tilt away from legacy business and the state towards individuals. Of course that dial-up era crashed and burned when its early promise failed to live up to the hype. Yet out of the carnage, revolutionary yet resolutely useful companies such as Amazon, eBay, and Google emerged, as well as, gradually, a viable venture and startup ecosystem.
The parallels with Web3 are clear. The early, wild west years of crypto—which proponents promised would bypass the traditional gatekeepers and central banks to bring about a new internet built on blockchain technology—were marked by incessant hype and furious speculation, Ponzi schemes, and even outright fraud. However, once again, in the wake of crypto’s burst bubble and market volatility, there are clear indications that we are set to enter a new era with opportunities for builders to create a human-centric Web3, where companies are solving practical, real-world problems for individuals and enterprises. What are the main trends?
3 market trends mark this phase
First, though the turmoil will undoubtedly see large numbers of startups in the space fail, as they run out of runway and are unable to raise, the crypto crash has an upside too: bluntly, it is flushing out the froth, the crypto clones, the Web3 wannabes, and the more gimmicky end of the NFT digital art market.
Second, no longer driven by FOMO, VCs have stopped investing sight-unseen and making multiple bets on Web3-tagged companies. While there are still firms with recently closed brimful funds ready to deploy, the bar for cutting checks is higher, due diligence takes longer, and extending the runway for existing portfolio companies is often prioritized over new projects.
Third, we are seeing strong and, crucially, accessible propositions continue to get funded, with opportunities opening up for startups that leverage the unique properties of Web3’s underlying tech. One such company is TransCrypts—a blockchain-powered corporate data verification platform—which graduated from the inaugural 2022 Filecoin Techstars Accelerator class in Seattle in mid-June. Just days later the team closed a pre-seed round of $1.4 million from investors that include Mark Cuban and Protocol Labs. Today TransCrypts already has over 100 enterprise users, including a number of household names in tech, retail, and aviation.
New technologies tend to take two or even three waves to reach maturity. The first wave is usually hype driven, attracts a feeding frenzy, and ends with a decisive crash. In the second wave, as the froth recedes, the truly useful applications come to fore.
Since the crypto crash, some have concluded that Web3 is a spent force. To me this is, fundamentally, a misread situation. It has become abundantly clear that blockchain technology has myriad applications, from carbon marketplaces to personal identity protection, cross-border payments and real estate transaction records (to name but a few). Web3’s first wave is over. Wave two is underway. This is where things start to get interesting.
