Web3 Sceptics

We’ve been here before – Just because we’re in a bear market, doesn’t mean Web3 is any less significant. It’s amazing how much negative sentiment there is currently about Web3. There’s little doubt that the cryptocurrency markets have entered a bear market phase due to the value they have shed during the past couple of months. Negative Sentiment on Web3

This downward trend has caused many people to emerge from the woodwork throwing negative terms around about Web3, labelling projects Ponzi schemes, failed experiments and questioning the real-world value of what’s being created here. We know that the cryptocurrency markets are highly volatile, and as much as people try to lead others to believe, they are correlated with the wider financial markets. What bothers me here is how many people believe that the price of cryptocurrencies reflects the broader Web3 landscape.

We’ve seen tech stocks collapse, but people are not questioning the viability of many of the businesses that compose the NASDAQ index, yet for some reason, the value shed from the cryptocurrency markets is perceived as proof that Web3 offers no real value.

It astounds me that those who are happy to give their names to these narratives include leading computer scientists and quality business publications. The fact that folk like these are willing to be outspoken critics of blockchain networks, cryptocurrencies and NFTs in my mind demonstrates just how far we have come this past few years, with respect to these innovations truly entering the mainstream consciousness.

Tokens are Ponzi Schemes

However, there are certain criticism that I do tire of hearing, that appear to come up time and time again, which are important to debunk Bitcoin/Ethereum/etc is just a Ponzi scheme. Ponzi schemes rely on existing investors being paid from funds by new investors. When you purchase tokens or cryptocurrencies you pay for them what the market prices them at. You are free to hold or sell these tokens. The value of these tokens is underpinned by the perceived value of the underlying blockchain protocol they support.

This is not a Ponzi scheme, this is more akin to an equity stake in a company. Those who had the conviction to invest early in the life of the company or protocol are likely to see the largest rewards from their stakes, but how is this different from any equity investment?

There was nothing to stop people from mining bitcoin, or investing in the Ethereum crowd-sale when they were launched. Most people chose not to, however. Yes, with the launch of some protocols there was a degree of privileged access to their earlier funding rounds, but this is no different to any business that convinces individuals to take on the high degrees of risk to invest in them in the early stages. We all know the bigger the risk, the higher the potential reward.

‘NFTs Scam’ Narrative

Another criticism levied is NFTs are nothing more than a scam. Whilst I personally don’t believe the value that some NFTs change hands for to be justified, at the end of the day, people are free to choose to buy whatever NFTs they like. Yes, some of them are massively overpriced, but some aren’t. Just like with creating a piece of art, the barriers to entry for creating NFTs are low, hence it’s a very competitive market to stand out in and it’s only going to get harder.

If you’re purchasing an NFT to profit from it, as with any financial speculation, you need to be prepared to get burnt. I would consider many overpriced for what they are worth, but as it’s such a recent innovation, there is a high degree of speculation premium baked into their price. If people are willing to pay these prices, then why shouldn’t the creators charge them? Additionally the creators receive royalties for the lifetime of the NFT which is fairer than the traditional art market.