Why we’re still not ready for a decentralized web
It’s not difficult to be swept up by the promise of Web 3.0. When Web 2.0 is all but defined by the power of social media companies and their control over everyone’s data, the appeal of a decentralized web is undeniable. Its mission — open protocols and codes, user-owned data, and user-managed identities — is downright utopic compared to the current state of affairs.
However, while that all sounds good in theory, in practice, Web 3.0 in its current form is a long way away from being a utopia. Experts believe myriad crucial elements must be resolved before widespread adoption can happen.
Privacy concerns
One of the main points of contention with Web 3.0 is privacy or lack thereof. Central to Web 3.0 is the idea of individual control and self-regulation. Many people associate blockchain technology with digital currency, but the idea is to have the entire Internet built on blockchain eventually. This is because blockchain keeps every user’s action visible to everyone on the chain. Forever. This keeps everything transparent for good and for ill.
While traditional online databases require bypassing numerous security protocols to access them, with blockchain, this typically isn’t the case. The only thing protecting your real identity is a username. If someone discovers your identity, they can view everything related to your on-chain history, from payments and account holdings to on-chain voting records.
In a tweet thread, Kenny Li, co-founder of privacy-focused blockchain technology Manta Network, discussed the importance of addressing proper privacy while laying the foundations of Web 3.0. As he explained,
“Pseudonymous wallet addresses are not enough. It just means that every user is one dox away from any attacker gaining access to their identity and full on-chain history.”
He also argued that complete transparency isn’t required for blockchain, as technology has evolved beyond the need for a publicly transparent ledger being the solution for trustless verifiability.
Regarding wallets, security protections are also a concern. According to VP and Principal Analyst Martha Bennett:
“The vast majority of wallets are completely open, so if I have your address, I can send you something with nasty stuff in it. And because of the way public blockchains operate, once something is out there, you can’t undo it.”
Until wallets are locked down, they will continue to discourage some from adopting Web 3.0 technologies.
Lack of oversight
While governance by social media companies seeking to profit off of every semblance of user behavior is not ideal, neither is no governance at all. Because there is little infrastructure for consumer protection and personal safety, it’s hard to know who to turn to when things go wrong. For example, if large sums of cryptocurrency are lost or stolen, or a smart contract malfunctions, there isn’t much users can do about it. According to the IEEE Computer Society, this is because there is limited regulation focused on Web 3.0 technologies across the globe, “which can create ambiguity and uncertainty for businesses and users.”
While the EU has taken steps towards creating laws regarding tracing crypto-asset transfers, preventing money laundering, and customer protection, the US Securities and Exchange Commission (SEC) focuses on utilizing existing rules to oversee the space.
Sangeetha Raghunathan, a financial technology regulatory and corporate partner at law firm Gunderson Dettmer, says there needs to be increased due diligence regarding the operation of Web 3.0 companies, particularly after the fall of FTX in 2022. Regarding implementing existing SEC rules for Web 3.0, Raghunathan told TechTarget:
“There may be updates to those rules and regulations because as technology evolves, the language that might’ve been written a few decades ago would need to be modified to capture new tech, but the underlying consumer protections and investor protections that are built into so many of these rules means there’s no real difference whether it be cryptocurrency or fiat [paper money].”
Financial protections aren’t the only concern when it comes to lack of oversight on a decentralized web. Wired reports that some worry that decentralized social networks and lack of content moderation may lead to a rise in conspiratorial thinking.
Where to go from here
Although Web 3.0 is an exciting and promising concept, there are still wrinkles to be ironed out. Before it can progress, it’s clear that issues with privacy, security, and user protection must be addressed.
