Web3 is under threat from Web2.5 and regulations, exec warns

As Web3 is in its early stages, its ideals and core vision of creating an interoperable financial landscape are under attack, according to Jamie Burke, founder and CEO of Web3 accelerator Outlier Ventures.

In an interview with Cointelegraph, Burke outlined several aspects of Web3 that are currently under threat from concepts such as Web2.5 and regulatory actions. The executive said that while these are “understandable”, it takes Web3 away from its original purpose and hinders its broader vision.

According to the executive, some projects are settling down and settling on limited versions of Web3. In working with startups, Burke said there are founders who are building temporary fixes because of various technical limitations. “Whether it’s an independent app developer or a large enterprise, they’re doing all kinds of deals,” he said. This results in products that are not interoperable. He further stated that:

“They just want to build products that people can use with Web3-like features, but because they’re built in silos, that means they’re not fully interoperable.”

This then becomes a major problem, especially in decentralized finance (DeFi), where liquidity and creativity are essential aspects of the space. Burke argued that when these silos are created, it results in app chains that are not interoperable with other app chains.

And while some argue that these are temporary, the executive highlighted that as business models form within these Web 2.5 paradigms, more people will want to defend them. “And so, Web 2.5 becomes permanent, and we never really realize the full vision,” he said.

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On the other hand, Burke said the industry is also facing regulatory onslaughts from government groups that want to control the industry. According to Burke, both the United States and Europe have expressed in some way that they want central bank digital currencies (CBDCs) to replace stablecoins.

“They can directly control who you do what with, they have full auditability, but they are, by design, owned by the state. So, the state can send it to you, and they can block you,” They said.

Burke believes that as these regulatory challenges allow for greater control for governments, it leads to the “strangulation of innovation” and creates a “problematic version of Web3”. He explained that it would be better to support peer-to-peer markets instead. Burke suggested:

“What I would propose is that when you enable basic economic primitives, such as digital asset rights, such as identity and sovereignty of money, you enable peer-to-peer markets.”

Burke suggested that these would increase the volume of exchange of market value. When this happens, it will result in more tax income for the state.

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