In October 2022, a coalition of metaverse and Web3 infrastructure companies united to form the Open Metaverse Alliance for Web3. Composed of Animoca, Decentraland, Sandbox, and others, OMA3 took the shape of a decentralised autonomous organisation (DAO) that is guided by inclusivity, transparency, and Web3 principles. The alliance aims to address “significant” challenges within the emerging metaverse by safeguarding user ownership and freedom of information.
When Gavin Wood coined the term in 2014, “Web3” was eulogised as the next phase of the internet, blending decentralisation, blockchain, and token-based economics that prioritises user ownership and control of data and digital assets.
Seven years later, Web3 rode the waves of the crypto craze to become the new sensation. In stark contrast, the established Web2 paradigm is characterised by centralised platforms and services controlled by a handful of entities. This stodgy “Big Tech” dominance continues to be the focal point of Web3 ire and resistance.
On paper, the metaverse and Web3 matrimony make sense: there will be widespread demand to virtualise the world, and Web3 can theoretically offer the infrastructure to support it. However, it is unlikely — and by extension, the Web3 crusade may be more trouble than it is worth.
Needless atomising of decentralisation
To breach the dominance of big tech, Web3 aims to push the limits of decentralisation by entrusting control to individual builders and users. While empowering in theory, this vision breaks down in practice in the wider metaverse arena.
For instance, the underlying architecture would require each participant to self-host and store a splinter of the metaverse on cordoned sectors of their hard drives, leading to an ongoing necessity to transfer ever-expanding mountains of data to maintain even a semblance of persistence. Beyond posing a significant logistical challenge, the energy demands of this untenable mega-operation would be a blaring nonstarter for environmentalists and developing nations.
This is not to imply that decentralisation is a flawed concept. On the contrary, it plays a vital role in fostering a free-market manifestation of the metaverse. The concern lies in the Web3 interpretation in regards to being a slippery slope toward a communist model of collective ownership. Whether by intention or oversight, Web3 advocates refrain from questioning whether decentralisation even requires this degree of hair-splitting granularity.
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This narrow definition reeks of the “No True Scotsman” parochialism that obscures the middle path—where inter-organisational networking, load sharing, and redundancy are elements of decentralisation in their own right. A likewise middle-out approach would also safeguard the individual interests of digitised customers and stakeholders.
A real-world example of this meso-level decentralisation exists in the management of Domain Name System, or DNS for short. When you enter an internet address in your browser, a DNS lookup sweeps the globally dispersed root servers managed by 13 entities, including ICANN, the University of Maryland, and Verisign. This redundant decentralised structure, numbering over 600 servers, ensures that no single entity can control them all.
While technological advancements may eventually make grassroots decentralisation a possibility, the question is whether we can or should wait for that to happen. Redundancy of this sort is inherently wasteful since the purported benefits of Web3 can already be integrated into existing capitalistic models using run-of-the-mill technologies and methodologies.
These are the same steadfast infrastructures supported by resourceful tech and media giants that have moulded our Web2 conventions. The only missing piece is the concerted willpower of businesses and consumers to make that happen.
Paranoia transforms trustless to distruss
The advocates of Web3 and the cryptocurrency community have overwhelmingly converged on the push for decentralisation and the trustless architecture that is thought to underpin it. Rallying around the misgivings of centralised authority — and human nature in general — their guiding mantra of “Don’t trust, verify” is a mockery of the timeless Russian proverb, “Trust, but verify”.
Paradoxically, the metaverse thrives on the very thing the radicalised, trustless crowd is sceptical of. According to science fiction writer Neal Stephenson, who coined the term, the metaverse will eventually resemble the internet in networking the entire world. Likewise, it must be constructed upon a web of trust among diverse entities, each autonomously making its own decisions. Which incidentally raises the prospect that the internet will likely evolve into the metaverse.
As a thought experiment, the aforementioned scenario would represent the most optimistic future for the metaverse. An alternative paints a dystopian picture where the oppressed are compelled to accept a centralised metaverse enforced by despotic or authoritarian regimes. The third option, leaning towards Web3 anti-establishment radicalism, would risk devolving into chaos, causing the social experiment to stagnate or crumble entirely.
In essence, the dividing lines center on semantics. Within the trustless movement, libertarian extremism has infiltrated the mindset of its proponents, deeming governments, institutions, and power brokers as inherently untrustworthy. That interpretation has veered from its original intent.
At the outset, trustlessness was actually conceived as a system that enables transactions or interactions without relying on the arbitration of a central authority or any particular party. Essentially, it involves a completely neutral intermediary (possibly a distributed ledger) to handle credentials and transactions between undisclosed entities. The concept was not borne of paranoid distrust; rather, it welcomes a decentralised and reliable environment for transactions among trustworthy participants.
Looking at the big picture, the benefits of trustlessness are less definitive, particularly when it raises more questions than answers around regulatory challenges, scalability, and security risks. Perhaps certain trustless innovations, such as zero-knowledge proof for data safekeeping, will find niche applications.
Crypto buffoonery turns lethal
In May of 2022, a 29-year-old man leapt thirteen floors to his death. Twelve days earlier, his US$2 million investment in the cryptocurrency Luna had crashed to a measly US$1 thousand. In the leadup to this tragedy, Bitcoin peaked at a US$1.3 trillion market cap, touching shy of US$70 thousand per coin, making it one of the best-performing asset classes of modern times. This had a ripple effect on the entire crypto market, propping up the meteoric rise of altcoins like Luna.
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The vicariously innumerate crypto community — on Twitter in particular — were of the opinion that “numbers only go up”. Mirroring the tribalistic fervour of the Trump cult of personality, they rallied around similarly dubious claims encapsulated in clichéd catchphrases.
At the core of the phenomenon was a widespread psychosis fueled by generational crackpot life coaches and inspirational speakers, asserting that unwavering positivity can materialise limitless windfalls.
The vastly outnumbered sceptics were rebuffed at every attempt to challenge the mass hysteria, often flippantly told to “have fun staying poor” — yet another hackneyed phrase catapulted to meme status. This groupthink would transpire in waves of boom and bust, with each cycle looming larger than before. Unlike past manias, many stakeholders eventually found themselves on the brink of financial ruin.
As the cryptocurrency market spiralled into a runaway casino, retail security underwent a libertarian breakdown toward a survivalist hellscape. The situation deteriorated so thoroughly that victims of fraud and hacks were callously dismissed as merely careless or uninformed. To warrant such blame would imply investors stood a chance.
However, the battlefront between retail and crime was no impasse; it was a one-sided slaughter. Oblivious investors proceeded to haemorrhage US$8 billion in 2021 and an additional US$3.95 billion in 2022 due to illicit activities.
Knee-jerk legislation was a foregone conclusion, and the heavy hand of government intervention came crashing down on the crypto market, sending shockwaves through the system. The Web3 reliance on cryptocurrencies to transact with decentralised finance and non-fungible tokens has turned out to be a Faustian bargain with harsh lessons in volatility.
In the wake of this turmoil, the crypto market still remained tenacious. Its market cap has hovered above US$1 trillion for much of 2023, representing one-third of its historical peak. While the recovery outlook is optimistic, transformation into an economic pillar will take time and regulatory commitment. Time will tell if subsequent market normalisation can instil confidence in cryptocurrency and greenlight big finance.
Before this transformation materialises, up-and-coming metaverse projects should cautiously remain on the sidelines of crypto adoption. On the other hand, metaverse customers and merchants need to be aware of the extreme volatility inherent in crypto transactions and take precautions against catastrophic losses.
Sidestepping Web3 landmines
Just four months prior to OMA3’s formation, tech giants preemptively forged a strategic alliance called the Metaverse Standards Forum (MSF), representing the interests of Meta, Microsoft, Alibaba, Sony, and others. It is no coincidence that OMA3 is counterposed as a challenge to this organisation. To fight the status quo, they placed their bets on the widespread adoption of newfangled Web3 technologies.
Also Read: How regulatory clarity can support Web3 innovation in Asia
To side with the MSF standard is to believe that big tech can deliver top-notch metaverse experiences on the promise of interoperability and openness. To side with the OMA3 standard is to believe in the newcomer’s capacity to serve users more effectively and equitably than their Web2 counterparts.
Typically, this split would denote a healthy equilibrium between two competing standards. However, the liaison agreement struck between MSF and OMA3 in July 2023 signals a perplexing sidetrack that suggests otherwise. The shift towards a deeper collaboration among their respective members not only erodes the distinctions between Web3 and big tech but also represents a departure from market competition.
Concurrent developments highlight a head-scratcher: the “Web3 company” oxymoron. Essentially, this circular reasoning posits that Web3 companies, being intermediary businesses themselves, are responsible for dismantling other intermediaries in the metaverse to ultimately give way to user ownership and control. To task profit-seeking enterprises with the role of undermining their own profit motive is a big ask.
Ricocheting in the conflicting interests of its own making, Web3 betrays many contradictions that manifest as in-group pipedreams and deceptive marketing. Furthermore, if Web3 companies and big tech continue bridging partnerships, the Web3 alternative would only amount to more of the same in a different guise.
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