Web3's quiet comeback
Bitcoin is back in business 📈
Today’s newsletter will explore what’s going on with web3. Although a decentralised blockchain was first conceptualised way back in 2008, it only really gained steam during the late 2010s, becoming a major trend during the height of the pandemic in late 2021. Fast forward to 2023, and everything online now focuses on the seemingly-unstoppable AI bandwagon - but the wheels are still turning in the web3 space.
Not so trendy anymore?
For the uninitiated, web3 is not just crypto and NFT, nor are crypto companies all Ponzi schemes (hello, FTX). It has been hailed as the next step of the internet, designed to give users more control over their data and privacy. Built on blockchain technology, it is meant to be a decentralised version of today’s web2 environment which would supposedly be more secure and create more transparency and accountability for organisations.
However, you may have noticed that we haven’t really been hearing much about new breakthroughs in this space. Companies and crypto bros alike seem to have ditched web3 in favour of artificial intelligence, and to a huge extent - with Google mentioning the term ‘AI’ 140 times during its recent I/O developer conference.
So how can we track the decline in popularity of web3? One way is through search trends. According to Google trends, the popularity of web3-related search terms such as ‘crypto’, ‘NFT’ and ‘blockchain’ have been steadily decreasing since their respective peaks in 2021 and 2022. Compare this with the rapid rise of the ‘AI’ search term, and it’s not even remotely close anymore.
This shouldn’t be taken to mean the entire web3 ecosystem is dying, of course. Bitcoin, although nowhere near its all-time high, recently crept back above $30k; companies are still developing and investing in blockchain, with the likes of Mastercard and Nike recently launching programs and platforms of their own.
NFT sales
First came cryptocoins, then came non-fungible tokens (NFTs). Although NFTs are mostly known as being a piece of visual art similar to trading cards, they can actually be anything digital from music to poetry. You can technically upload the contents of your brain as an NFT! Famous examples include HUMAN ONE which sold for $28.985M and the CryptoPunks collection which have sold for tens of millions of dollars each.
Today’s NFT market doesn’t appear to have the same draw as it did in 2022. The 7-day moving total for NFT sales came to just under $40M this week (red line), compared to a peak of over $270M in August 2022, while the number of sales was around 27k this week (green line) compared to a peak of 380k sales in July 2022. This could be a sign that the initial hype surrounding NFTs is starting to wear off, but it’s also possible that it is simply a reflection of the overall bear market that has affected crypto and the stock market alike.
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Web3 funding
The above evidence on the consumer side shows people in general may be slowly losing interest in the popularised quick money-making methods of web3, but what about on the company side? Tracking funding for web3 startups and projects is a good way to gauge interest on the corporate level.
According to Crunchbase, Q1 2023 had less than $2B in funding raised by web3-related companies compared to almost $11B raised in Q4 2021. That’s an 82% decrease in the space of only 1.5 years! Again, this could reflect the overall bearish market as investors are more cautious with their money. That said, funding for generative AI-related companies rebounded in Q1 2023 to almost its Q2 2022 peak, with Microsoft’s huge investment into OpenAI being a large contributor. You can read about this in more detail in one of last month’s newsletters.
While NFTs and cryptocoins might be on their way out, web3 as a whole probably won’t be going away anytime soon. Blockchain technology is a lot more than just minting a picture of an ape! In fact, a new crypto exchange developed by Charles Schwab, Fidelity and Citadel was recently unveiled that is aimed at larger companies as opposed to retail traders.
Dead or not, one of the main problems that web3 is facing so far is that it is not as easily accessible to a wide range of users as generative AI. ChatGPT and other text-based models are easily accessed through websites or already integrated within apps like Photoshop and can access the wider web on their own - but in order to explore the capabilities of web3, many projects require the use of a crypto wallet which is a bit more complicated to set up than simply Googling ChatGPT.
Created by Miguel
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