Web 3 is nothing new

The idea of a decentralized web has been in the minds of many for around 20 years, but when you read much of the press about it today, you’d be forgiven for believing it was a brand new concept.

The concept is a response to the domination of Web 2.0 by the Big Tech companies, Facebook and Google in particular, explains Michael J. Casey, and their “data-driven economics.” Most of us understand by now exactly how those two companies in particular exploited the web and us, even as at the same time they reunited us with old friends, helped us grow businesses and made searching so more intuitive. After all, who remembers using search engines in the era Before Google? It was much slower and you really needed to know how to search.

However there is quite some debate raging around the concept of Web 3. On the one hand, as Casey reports, there is Chris Dixon who is a fervent Web 3 supporter and a believer that Web 3 projects are creating real value, and on the other, Jack Dorsey, who claims the “term is just a buzzword exploited by venture capitalists to boost their equity and token investment.” Casey says in response to this, “That smart people – including two famous “Tims” – have been exploring an exit from Web 2.0 for so long suggests Web 3 projects have worthy ambitions and that there will be public benefits and business payoffs if they succeed.” But he concedes, “this long history reminds us that solving a very big problem is hard and that investors would be wise to take grandiose promises with a grain of salt.”

It is possible not to side with either Chris or Jack, and instead focus on the core structural issues with Web 2.0 and why there’s a need to change them. The fundamental problem with Web 2.0 is the misalignment between the interests of the giant companies that dominate the Internet and those of the general public. Casey says that whilst blockchain is a solution, it is not the only one. As Casey says, “We need a mix of technologies (both decentralized and centralized), regulation and economic rationale to enable business models that bring those competing private and public interests together.”

Let’s not forget that Tim Berners-Lee, the father of the Internet, said in 2006 that the web needed an overhaul. He allegedly coined the term Web 3.0, in reference to the evolution of universal data formats and artificial intelligence removing the need for intermediation by third parties to allow a true “machine-to-machine” communication network.

Currently, Web 3.0 is primarily associated with blockchain, cryptocurrency and NFTs, and the debate is still ongoing about what Web 3.0 could potentially be in the end, but as Casey remarks, there is still a long way to go before we can escape The Matrix!

Solana boosted by Bank of America

Alkesh Shah, a digital asset strategist at Bank of America, is sweet on Solana. This week in a research note he claimed that Solana, widely seen as a competitor to Ethereum, could become the “Visa of the digital asset ecosystem.”

Solana only launched in 2020, and since then has become the fifth largest cryptocurrency with a market cap of $47 billion. Its impressive growth spurt has outperformed that of Ethereum, and it has been used to settle over 50 billion transactions. It has also minted some 5.7 million NFTs.

Despite this performance, it still has its critics, and they argue that the speed at which it settles transactions comes at the cost of decentralization and reliability. Shah doesn’t buy this. He believes the benefits outweigh the drawbacks: Its ability to provide high throughput, low cost and ease of use creates a blockchain optimized for consumer use cases like micropayments, DeFi, NFTs, decentralized networks (Web3) and gaming.”

In his note, Shah also pointed out that he believes Solana will take market share from Ethereum, simply because it offers lower fees, is easier to use and has greater scalability. He told Business Insider, “Ethereum prioritizes decentralization and security, but at the expense of scalability, which has led to periods of network congestion and transaction fees that are occasionally larger than the value of the transaction being sent.”

Ultimately he thinks Solana may take over the transaction settlement side of the market, while Ethereum focuses on “high-value transaction and identity, storage and supply chain use cases.”

But perhaps the most surprising element of Shah’s note is the comparison of Solana with Visa. Visa processes an average of 1,700 transactions per second (TPS), although if pushed to the max it could do 24,000 TPS. By contrast Solana has an upper limit of 65,000 TPS. Ethereum handles about 12 TPS. The difference is striking.

However, as Solana followers will know, the network has suffered a number of problems recently, something that Shah acknowledges. Already in 2022 there have been withdrawal issues on both Binance and Coinbase and an alleged DDoS attack on 5th January, something the network denies. And in December of last year there was a DDoS attack, as well as reports of network congestion. This does not seem to have deterred investors this week. After several rough days, Solana (SOL) has bounced back to $151, an increase of 8.56% from a 52-week low of $130, although it has some way to go before it reaches its former ATH of $260.  But if Shah is right, and Solana becomes the “Visa of the digital asset ecosystem” who knows how high its price may go.

Money in 2022

This coming year might see many changes in the financial world, especially in money itself. It’s difficult to predict how things might play out, although there have been predictions in the MSM that Bitcoin and crypto generally will crash and burn, but that seems unlikely for those of us that are more immersed in cryptocurrencies than MSM journalists and their readers.

One scenario revolves around central bank digital currencies (CBDCs). Will they be more influential this year as governments look to control digital currencies? Or will the stablecoins, such as Tether, issued by private companies rule the roost? Then there are the decentralised currencies, such as Bitcoin. Will they become the dominant force in finance?

Various factors are driving the debate around money. For example, China is rolling out its Digital Currency Electronic Payments (DCEP) project during the Winter Olympics in February. And the USA is developing regulations targeted at private issuers of stablecoins, whilst adoption of decentralized cryptocurrencies for payments continues to grow around the world.

The Regulations debate

In 2021, the US government debated crypto tax provisions in the infrastructure bill and the approval of a futures-based Bitcoin exchange-traded fund (ETF.) This year it is likely that the U.S. Securities and Exchange Commission will find ways to clarify its position on whether tokens are unregistered securities. At the same time, DeFi tokens may find themselves being included in this debate, which would be unwelcome.

The future of Ethereum

Although Ethereum still dominates DeFi, will its high gas fees for NFTs and other transactions become too expensive? It depends on the success of Ethereum 2.0. There are many big moves to be made before the full 2.0 project can be deemed a success. It has to merge its mainnet with the Beacon chain and that could disrupt token economics for miners and validators. And there are challenging upgrades within Eth 2.0, including sharding. The future of the dominant smart contracts platform depends on these going well.

Crypto and the climate

As climate change continues, crypto needs to shift the conversation away from how bad it is for the environment and towards one about mining-integrated energy systems that create incentives not only for miners to use renewable energy.

Web 3.0

Finally, there will be many discussions about Web 3. Jack Dorsey has been leading at least one discussion about its future, in which people will have greater control over their data and content. So far Web 3 is not really well defined, but there is a need to adjust our systems for managing digital property and for establishing users’ rights in this new era. We can expect this year to bring more clarity on Web 3 might be like and to get a better idea of the projects that will form part of it.

How to buy DeFi tokens in 2022

How to buy DeFi tokens in 2022

DeFi offers multiple investment opportunities, but as with all crypto there are risks. Jordan Finneseth offers us three ways to analyse the DeFi tokens on offer, together with their protocols.

As he says, “There’s more to investing than just technical analysis and gut feelings.” Since decentralised finance projects burst onto the scene, we have seen some blockchain analysis platforms appear with the aim of providing better insights into the “fundamentals supporting a cryptocurrency project” and these offer us three ways to evaluate them.

  1. Check the community and developer activity

Looking at this is one of the most basic ways to begin your evaluation. Many of the top protocols in the space offer analytics that track the growth in active users over time. For example, you should look for the average number of active wallets on a daily, weekly and monthly basis. Investors should also look at the number of transactions and volumes transacted on the protocol, as well as sentiment about the project on social media channels, such as Twitter. Information about developer activity is available on GitHub.

  • Look for increases in total value locked (TVL)

The overall strength of a project may be revealed in the sum of all assets deposited on the protocol, otherwise known as the total value locked (TVL). Growth in the TVL shows that momentum and interest in the project are increasing. Tools you can use to look at this are DeFi Llama and DappRadar, which allow users to dive deeper into the data and look at the statistics for different blockchain networks, such as Ethereum, and on individual projects.

  • Identify the majority token holders

Another factor to consider are the benefits given to a project’s token holders for their activity. Finneseth says, “Investors should also look into the manner in which the token was launched and who the dominant token holders currently are.” He also warns, “caution is warranted when excessive yields are offered for low liquidity, anonymously-run protocols with little community activity because this can be the perfect setup for catastrophic losses.” This is what is referred to as a ‘rug pull’ in DeFi speak. Also, look at the number of tokens allocated to the developers and founders vs. the tokens held by the community as this could be an indicator of a platform that could fall victim to a rug pull.

And that is a basic guide to buying DeFi tokens. Season’s Greetings to my readers, and wishing you all a healthy, happy and prosperous 2022.