Web3, the Metaverse, and the Lack of Useful Innovation

12.09.2023

Article by: Jeffrey Funk, Lee Vinsel, and Patrick McConnell

In 2022, a deflating technology bubble marked a downturn in formerly high-flying tech companies, leading to significant stock drops. This decline followed a decade of rising market values and came despite substantial investment in innovative technologies. Companies like Peloton, Lyft, Zoom, Meta (Facebook), and Netflix saw their stocks plummet by 60-90%. Despite predictions of AI’s massive economic impact, its market remained relatively small at $51.5 billion in 2021. The decline raised questions about the impact of such bubbles on the broader economy.

This downturn occurred after a period of significant investment in futuristic technologies like quantum computing, nuclear fusion, and synthetic biology. Venture capital firms sought to inflate new bubbles around technologies like the Metaverse and Web3, building on the blockchain excitement. However, the longer-term impact of these efforts remained uncertain. The broader context involves a historical belief in technological progress driving human well-being and economic growth. The 20th century saw major advancements like electricity, mass production, and the telephone. However, technological growth slowed from the 1970s onward, with stubbornly low productivity growth and economic hardships for many. The question arises whether new technologies like the Metaverse, Web3, and blockchain can alter this economic landscape. Skepticism prevails due to Silicon Valley’s pivot towards these technologies in response to previous failures. It’s argued that these technologies may not provide substantial improvements in human welfare or productivity growth.

The article examines Web3 and the Metaverse, highlighting their infrastructure challenges. It compares the current technology bubble’s economic effects to past bubbles, noting that previous ones yielded limited benefits. Changes in America’s research system are explored as potential barriers to new useful ideas emerging from scientific advancements. The need for alternative paths forward in technological and economic development is emphasized, given the perceived failure of the current tech ecosystem.

The Metaverse and Web3 are criticized for their lack of clarity and the potential to mislead with vague terms. Despite significant investment, key components like virtual and augmented reality are still struggling due to technical limitations, causing poor user experiences and low adoption rates. The example of Meta’s low user numbers and struggling virtual real estate trading volumes is cited to support this point. Web3 faces similar issues. The term itself remains undefined, but the constituent technologies such as crypto and NFTs are shown to be underperforming. Cryptocurrencies have experienced collapses, bankruptcies of exchanges, and significant price declines, undermining their perceived value. NFT prices have also plunged, indicating a lack of economic rationale.

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Blockchain technology, initially hyped for its potential, is criticized for its inefficiency and limitations. The review highlights that most implementations must compromise key aspects of the blockchain concept, leading to inefficiencies and undermining the technology’s selling points. The article further discusses how blockchain projects often lack clear rationale, criteria for success, or proper analysis, and fail to benchmark themselves against existing technologies. Real-world examples, including the failed attempt by Facebook to create a global digital currency (Libra), the shortcomings of supply chain blockchain projects by companies like IBM, and the Australian Securities Exchange’s struggles with a blockchain-based project to replace their equities settlement system (Chess), are cited as instances where blockchain implementations fell short of expectations and were reduced to mere namesake blockchains. In conclusion, the article provides a comprehensive critique of the Metaverse, Web3, and blockchain technologies, highlighting their challenges, technical limitations, and underwhelming real-world performance in various sectors.

Reference:

[1] https://americanaffairsjournal.org/2022/11/web3-the-metaverse-and-the-lack-of-useful-innovation/

I am currently working as a Postgraduate Researcher at the University of Leeds, where I am actively involved in research activities. Prior to this, I successfully completed my master's degree through the renowned Erasmus Mundus joint program, specializing in Tribology and Bachelor's degree in Mechanical Engineering from VTU in Belgaum, India. Further I handle the social media pages for Tribonet and I have my youtube channel Tribo Geek.

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