The promise of Web 3.0 was decentralization. The idea was to take power away from banks and big tech and put it on the blockchain, tokenize it or let people control it themselves in some other way –a more-democratic internet.
It was a powerful idea that attracted hundreds of billions of dollars in investment. The results so far have fallen far short of they hype. The use cases of crypto have been limited, NFTs are a joke and scams are rampant.
The Web 3.0 hype along with ultra-low interest rates kicked off a Web 1.0-style dot-com bubble. For months, every press release referred to blockchain, crypto or some other kind of revolutionary way of doing things that aren’t particularly hard to do today.
Two major conduits for the flow of money from investors into Web 3.0 were Silvergate Bank for crypto and Silicon Valley Bank for tech startups. Both banks failed this week and I can’t help but think of that as the tombstone for an era.
That certainly doesn’t mean the end of crypto, defi or tech venture capital but it’s a sign of which way the wind is blowing. These are all expensive projects and the money is gone. It took a decade for tech to recover from the dot-com bust and this will be no different.
That’s not to say bitcoin prices will crash. Bitcoin has separated itself from many of the rug pulls and scams. It’s been volatile but functional but beyond that it’s a short list. Who would want to invest in a space where money isn’t flowing and regulators are cracking down.
In tech, it’s now widely recognized as a bubble and venture capital investors no longer have an off-ramp into capital markets. Moreover, cheap borrowing rates are done. The failure of Silicon Valley Bank will mean that companies can’t make payroll text week and, presumably, will be laying off workers in short order. There were $200 billion in deposits held there and only accounts up to $250,000 were insured. In the company’s last 10K it said that uninsured deposits were $151.5 billion. Much — hopefully all — of that money will be recovered but it will take time to sell the corresponding assets.
It’s the kind of mess that will slowly starve the industry of capital.
In summary, we all knew there were bubbles in crypto and tech venture capital. The poetry of the two flagship banks in those areas failing in the same week
From the ashes
The good news is that Web 4.0 is already here.
Artificial intelligence is capturing imaginations and delivering incredible results. Much of the remaining money in Web 3.0 is quickly pivoting to AI and while some of that is the usual theme-chasing, there will be results.
It’s a good thing too because that’s a lifeline for technology more broadly and will transform the world before the decade is done.
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