What’s the downside with Web3? Web3 was presupposed to be the subsequent nice leap after the cell period—a decentralized digital revolution the place customers would personal their knowledge, bypass middlemen, and take part immediately within the monetary and artistic techniques of the web. For some time, it felt like we have been heading in the right direction. DeFi protocols have been booming, tens of millions have been onboarding into crypto, and the dream of an open, user-governed internet appeared inside attain.
However someplace alongside the way in which, the revolution derailed. The improvements on the coronary heart of crypto and DeFi have been suffocated by hype, unhealthy design, centralizing forces, and regulatory whiplash. As an alternative of doubling down on decentralization and person empowerment, the tech business scattered—chasing half-baked metaverse concepts, fashionable AI instruments, and VC-fueled experiments that didn’t stay as much as their guarantees.
So why is Web3 not standard at present? And is there nonetheless hope for Web3’s unique mission? How Web3 failed to ship on its guarantees is a query that also lingers, because the imaginative and prescient of a very decentralized web continues to wrestle in opposition to centralized forces.
A Recap of What Made Crypto and DeFi Revolutionary
Let’s rewind to the golden years.
Bitcoin, launched in 2009, emerged as a direct response to the 2008 monetary disaster — a daring try and reimagine belief in finance. In contrast to conventional currencies backed by central banks and governments, Bitcoin launched a decentralized, peer-to-peer system constructed on a hard and fast provide and immutable code. It shifted the inspiration of belief from human establishments to cryptographic proof, providing a monetary system the place transparency and predictability changed opacity and management.
The subsequent seismic shift got here with Ethereum in 2015. Extra than simply digital cash, Ethereum launched sensible contracts — self-executing code that might automate complicated agreements with out the necessity for intermediaries. This innovation didn’t simply improve the blockchain; it opened the door to a totally decentralized monetary ecosystem. Often known as DeFi, or Decentralized Finance, this house enabled anybody with an web connection to lend, borrow, commerce, and earn curiosity — all with out banks or conventional brokers.
By 2021, DeFi reached a fever pitch. Complete Worth Locked (TVL) skyrocketed previous $170 billion, as customers all over the world started to take part on this new monetary frontier.
It felt like greater than a development — it was the rebirth of finance: open to all, permissionless by design, and really international in scope.
Key Vulnerabilities Uncovered Through the Web3 Growth
As crypto entered the mainstream, the idea of Web3 rapidly advanced from a grassroots motion into a world development, attracting the eye of tech enterprise capitalists, celebrities, and main firms. Why is Web3 not standard regardless of its promising beginnings?
What started as a imaginative and prescient for a decentralized, user-empowered web quickly grew to become a playground for hypothesis and hype. NFT costs soared, not due to their utility or cultural significance, however attributable to movie star endorsements and the phantasm of shortage. Tasks like Pixelmon raised tens of tens of millions—$70 million, in that case, solely to ship underwhelming outcomes that uncovered the shortage of actual innovation behind many initiatives.
The foundational precept of Web3—decentralization—was quickly undermined. A big variety of so-called Web3 platforms have been nonetheless reliant on centralized infrastructure, managed by opaque governance fashions, and sustained by enterprise capital funding that prioritized revenue over neighborhood empowerment. In principle, DAOs have been meant to democratize decision-making, however in observe, they typically devolved into plutocracies, the place voting energy was concentrated within the palms of token-rich whales somewhat than the broader neighborhood.
Whereas the rhetoric of a decentralized future continued, the truth painted a special image. Huge VC injections, company rebrands and superficial movie star affiliations turned Web3 into extra of a advertising buzzword than a revolutionary shift. The irony was laborious to disregard—Web3, which had promised to wrest energy from centralized authorities, had as a substitute develop into a software for them to additional entrench their dominance.
The Stress Between Decentralization and Centralized Affect
Web3 was championed because the antidote to centralized energy—an period the place customers would reclaim management over their knowledge, belongings, and digital lives. Evangelists promised a decentralized web ruled by communities, not firms. However in actuality, the imaginative and prescient fell quick. As an alternative of dismantling conventional energy constructions, Web3 typically ended up reinforcing them underneath a brand new banner.
Regardless of being constructed on decentralized infrastructure, many main Web3 platforms continued to depend on legacy gatekeeping mechanisms. Enterprise capital corporations, like Andreessen Horowitz (a16z), poured huge sums into early-stage tasks, securing vital affect by way of preferential token allocations. Within the case of Uniswap, as an illustration, a16z reportedly holds not less than 55 million UNI tokens — a large share of the overall provide.
Non-public token gross sales to insiders grew to become the norm, sidelining the very customers Web3 claimed to empower. What was framed as a decentralized utopia started to look eerily acquainted: a market dominated by a choose few, whereas retail traders drawn in by guarantees of fairness and possession have been typically the final to comprehend they held the weakest hand.
Maybe essentially the most unsettling half was how the language of decentralization was co-opted as a branding software. Behind the scenes, centralization quietly reasserted itself, leaving many to query…is Web3 lifeless?
How poor UX, scalability points, and safety gaps took maintain
The promise of Web3 was daring and visionary—a decentralized, user-empowered web. However in observe, it typically delivered an expertise that was clunky, complicated, and dangerous. The Web3 person expertise, particularly, remained caught in what felt just like the Stone Age. Take crypto wallets, as an illustration. For newcomers, opening a pockets might really feel like stepping right into a high-tech command heart and not using a guide. Initially designed by and for builders throughout the early days of DeFi, these instruments haven’t advanced a lot within the years since. Their interfaces typically resemble relics from 2016, full with awkward design selections, poor navigation, and little to no person steering. Whereas seasoned customers might need discovered to work round these flaws, learners are left fumbling by way of unfamiliar jargon, inclined to creating simply avoidable errors. Even skilled customers aren’t spared—gradual load instances, buggy interfaces, and irritating transaction failures are nonetheless a part of the expertise. Worse but, dropping a seed phrase might imply dropping all the things, with no recourse.
Scalability wasn’t significantly better. Main blockchains like Ethereum constantly buckled underneath excessive demand. Throughout peak durations, gasoline charges grew to become prohibitively costly, generally topping $100 for a single transaction. This successfully priced out the typical person, notably these Web3 was presupposed to empower.
Then got here the safety gaps — persistent, pricey, and confidence-shattering. Hacks, exploits, and protocol failures grew to become nearly routine. In 2024, stolen funds totalled $2.2 billion, up 21% from the earlier 12 months, whereas the variety of incidents rose from 282 in 2023 to 303 in 2024.
These breaches not solely drained person funds but in addition eroded public belief, reinforcing the notion that Web3 was too harmful for on a regular basis use.
For all its grand discuss constructing a “higher web,” the Web3 business neglected primary parts of usability, affordability, and security. This neglect alienated mainstream customers and gave regulators and sceptics all of the ammunition they wanted to label the house as chaotic, immature, and unready for mass adoption.
Regulatory challenges worsened by an absence of give attention to fundamentals
As DeFi and Web3 started to assemble actual momentum, regulatory challenges swiftly emerged—much less like a cautious scalpel and extra like a sledgehammer. The U.S. Securities and Trade Fee (SEC) launched a wave of aggressive enforcement actions, classifying quite a few tokens as unregistered securities and sending a chilling message throughout the business. The collapse of Terra’s UST stablecoin, which many had lengthy seen as a ticking time bomb attributable to its unsustainable yield mannequin, solely intensified international scrutiny and eroded public belief.
Then got here the implosion of FTX—a centralized change that falsely branded itself as a part of the decentralized Web3 motion. Although FTX had nothing to do with DeFi, its high-profile failure handed regulators the proper excuse to clamp down broadly on your entire crypto ecosystem. Quite than participating with innovators to craft considerate, future-proof insurance policies, many regulators opted for reactionary crackdowns, discouraging accountable builders and driving promising tasks offshore.
Amid this wave of exterior stress, the Web3 neighborhood struggled with its personal inside shortcomings. An absence of robust self-regulation and public training left the house weak to criticism and incapable of successfully defending its legitimacy. Consequently, the give attention to innovation was overshadowed by authorized uncertainty, stalling progress at an important time.
Reviving and strengthening the core: what’s nonetheless doable
Regardless of the chaos and setbacks, not all is misplaced on this planet of Web3. Beneath the layers of hypothesis and hype, the unique beliefs that made crypto and DeFi so revolutionary nonetheless maintain robust—and in some ways, they’re extra related than ever. Decentralized infrastructure will not be solely functioning however actively bettering. Networks like Ethereum, Solana, and Layer 2 options equivalent to Arbitrum and Optimism proceed to scale and evolve, pushing the boundaries of what’s doable.
Improvements like zero-knowledge proofs and modular blockchains, with tasks like Celestia main the cost, are remodeling how we take into consideration privateness, scalability, and transparency—all coexisting with out compromise. In the meantime, real-world asset tokenization is not a distant imaginative and prescient. Main establishments, together with BlackRock, are actually exploring on-chain monetary merchandise, signalling a rising institutional curiosity in blockchain’s sensible utility.
Even in social media, the tide is popping. Group-led efforts like Lens Protocol and Farcaster are reimagining digital platforms, transferring away from surveillance capitalism and towards user-owned, decentralized networks.
To really revive and strengthen Web3’s core mission, the business should refocus on its foundational values. Meaning prioritizing real decentralization over flashy tokenomics, designing for on a regular basis customers as a substitute of simply crypto-native insiders, and adopting a security-first mindset with open-source protocols and rigorous audits. It additionally requires participating with regulators, to not give up the imaginative and prescient, however to advocate for readability and equity with out compromising core beliefs. There’s nonetheless a path ahead—if the house is keen to return to its roots and construct with goal.
Disclaimer: This piece is meant solely for informational functions and shouldn’t be thought-about buying and selling or funding recommendation. Nothing herein needs to be construed as monetary, authorized, or tax recommendation. Buying and selling or investing in cryptocurrencies carries a substantial danger of monetary loss. At all times conduct due diligence.
If you want to learn extra articles like this, go to DeFi Planet and observe us on Twitter, LinkedIn, Fb, Instagram, and CoinMarketCap Group.
Take management of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics instruments.”
