With Web3 presented as followsfrom the internet, businesses and investors are eagerly jumping on the bandwagon. Technical giants including Alphabet, Facebook owner Meta and Microsoft are making their claim in the some non-fungible sign companies are already valued in the billions, and cryptocurrency trading platforms are experiencing hockey-stick-like growth.
To cut through the hype, CBS MoneyWatch spoke with technical luminary Tim O’Reilly, who among other things in his long career is known for publishing the world. first site and creating the term Web 2.0. Although he thinks the technology behind Web3 is promising, “It’s a long way from peak time,” he said.
“It’s very hard to convince someone of an issue when financial gains depend on what they believe in,” says a technical luminary. @TimOREillythe publisher who created the phrase Web 2.0, from web3 products like cryptocurrency and NFTs pic.twitter.com/i2pXR303hP
– Dan Patterson (@DanPatterson) February 7, 2022
Indeed, the turmoil around cryptocurrency, NFTs and the metaverse, including sky-high ratings for start-ups, has a familiar ring to O’Reilly, who sees echoes of the point-and-click boom and boom in the breathless strengthening around a blockchain.
“Get ready for the crash,” he said bluntly of the grandest claims made for Web3. The interview is lightly edited for clarity and conciseness.
Where do you put web3 in a development timeline, in relation to historical computing successes?
Tim O’Reilly: As a metaphor, I personally put web three in about 1983. That’s been my impression for a while. In many ways, before the explosion of dot com in the days when we had FTP and Telenet before the network was actually introduced, we had this incredible rating bubble on technology that really isn’t ready for peak time. With the dot com bust, the network arrived and it really exploded. Things really became possible that were not possible before. Before ’95 you were, you’ve seen really significant innovations in media and you’re starting to see yourself innovating in e-commerce with Amazon. The skills you could already see developing were quite large.
In the case of a blockchain, it is so obscured by the speculative value of cryptocurrencies that they are just essentially a speculative asset.
Is all the money pouring into a blockchain and Web3 a bubble?
Tim O’Reilly: I think there’s a lot of interesting about the blockchain, in theory. But when you really scratch, a lot of technical people said, “Hey, there’s not much there.”
Now, that was also a response that many people had to the global network. To existing programmers of the day, it seemed trivial. So although the technology is slow and very expensive, and it is difficult to use distributed databases, there is a lot of investment in space, and people are trying to figure out real things that could actually be useful. And I think that’s certainly possible.
Web3 is attributed to the idea that there will be a new decentralized website based on cryptography and the blockchain. I defined this term “Network 2.0” 17 years ago, and my whole point was that Web 2.0 was the second arrival of the network after the semicolon bus – that’s how I defined it.
When people ask me about Web3, I say the same thing: We won’t know what Web3 is until after the current bubble bursts – because we’re in the middle of a bubble, just like the dot bubble, where everything is. kinds of crazy startups getting outrageous ratings, with less to show for it.
What is the difference between blockchain technology, cryptocurrency and NFTs?
In the case of a blockchain, it is thus obscured by the speculative value of cryptocurrencies, which are only essentially a speculative asset. They are not internally valuable or useful. And then you get a little bit of this layer of NFTs, which is that – just more. They don’t even have a technical foundation not even fully part of the blockchain. You are watching OpenSea
the largest NFT marketplace, and it has 600,000 users.
When the site reached these kinds of ratings, we talked about hundreds of millions of users. So I think it’s really a pretty serious speculative bubble on a very small foundation. That said, once you get those bubble ratings, it does attract a lot of capital and talent – and people can really start building something on it.
With crypto currency you just have to think of it as a game of chance. You’re at the racetrack and there’s some horse you think will come in first. Sometimes you are right and you may make a lot of money. But you don’t really think of it as an investment.
What is your advice to the most ardent champions of cryptocurrency and NFT – the true believers?
There are two categories of true believers in my mind. There are those who, for example, are building a new decentralized user empowerment financial system. And to them, history teaches us that there will always be new ways for power to be centralized. In fact, the entire history of the computer industry has been a radical openness, which has led to a lot of innovation, which later led to its closure.
For example, IBM released the computer specifications. Everyone could build a computer. Michael Dell was a college student and started Dell from his bedroom, which was a radical decentralization. And then Microsoft figured out how to refocus on software. Next, we have the internet and open source software. And guess what? Companies like Amazon, Google, Microsoft and Facebook are coming together. They figure out how to centralize on top of that foundation.
So even if you are a true believer in blockchain technology as a powerhouse for decentralization, you should look for the following vectors of recentralization.
We already see them. Blockchain turned out to be the fastest recent decentralization of decentralized technology I’ve seen in my life. It took a decade to recentralize in the case of the computer. It lasted a decade in the case of the network. But it took only a few years with bitcoin before the majority of the value was held by a very small group of people.
It’s like a pyramid scheme. So I believe that if you are a true believer in technology, look for ways that your faith will be undermined.
There is a second class of a true believer, and that is really the crypt. You know, a believer in crypto valuations. If they diversified, maybe they diversified Dogecoin into some other currency that they hope will appear in the same way.
Whatever you do, don’t borrow against the value of your cryptocurrencies. If you do, you will be seriously underwater. Not only will you lose your imaginary fortune, you will go bankrupt in the real world. The financial innovation of being able to lend against your crypto, boy, that’s really bad, bad, bad, bad thing for a lot of people.
How long until the metaverse – which as it is currently predicted is essentially a massive virtual reality social network – ready for prime time?
The metaverse itself is full of a bubble. The Meta Quest2, yes, they sell a lot of them, but the technology is far from peak. If you compare this to where the network was before it became super useful, we are a long way from that. I think metaverse is probably a decade or so away from being really useful. And even then how much time will people spend in this VR online space? I don’t really know. Financial, cultural and political norms are changing.
I could be wrong about all this. We are in a period of great fluidity around standards. We see this in politics where things that were previously unthinkable are now widely practiced. And I think we see the same thing in investing. With cryptocurrency, what we would have previously called stock manipulation is in a sense becoming part of a cycle of exaltation. As a society, we are trying to find new standards.