Hype may bring developers and entrepreneurs to Web3, but they often end up staying to build during bear markets because of Web3’s potential to change the world. So, what’s special about Web3, and why should you be optimistic about its future? Let’s find out.
The Hype Cycle of New Technology
To understand Web3’s growth trajectory, you need context. Let’s start with Gartner’s Hype Cycle—a graphical representation of the life cycle stages of a technology or innovation—to describe the adoption and maturity of new technology.
Gartner’s hype cycle has five parts:
- The Innovation Trigger is the first stage of the hype cycle, where a new technology or innovation enters the market for the first time and starts to generate interest and excitement.
- The Peak of Inflated Expectations is a period of intense hype and optimism surrounding a new technology or innovation. People become overly optimistic about the potential of the technology and its ability to solve problems.
- The Trough of Disillusionment is a stage of disappointment and skepticism about a new technology or innovation. This disillusionment occurs as a result of the technology being unable to deliver on the promises and expectations of the previous stage—the technology is too new and needs more time to mature.
- The Slope of Enlightenment is when people start to gain a more realistic understanding of the new technology and how it can be used. Builders begin to unlock the tech’s potential, and use cases see mainstream adoption.
- The Plateau of Productivity is the stage where the technology has matured and become widely adopted. It is a time of relative stability: the innovation this tech enables has saturated the market, and while new businesses and applications continue to emerge and the overall market continues to grow, that growth is more modest than what came before.
How Web3 Maps Onto Gartner’s Hype Cycle
We are still in the early days of Web3. Cryptocurrency is only about 14 years old, and smart contracts roughly 8. In contrast, the internet is 40 years old, but popular internet companies like Google, Facebook, and Youtube are only 24, 19, and 18 years old respectively. Point being, it can take a long time for mainstream applications to be built on new technology.
The typical innovation profiled in Gartner’s Hype Cycle progresses from an innovation trigger to the final plateau of productivity. However, innovation doesn’t happen in a vacuum, and it can be helpful to think of Gartner’s Hype Cycle as a continuous one, one in which each cycle leads into the next—one plateau of productivity leads into a new innovation trigger, and a new cycle, with overall growth continuing on an upward trajectory.
Through that lens, you can map three hype cycles onto Web3’s history to date, since Bitcoin first launched in 2009, and you may be able to guess when those cycles occurred, based on a chart of Bitcoin’s price over time.
Web3 Hype Cycle 1
The first Web3 hype cycle started with Bitcoin’s launch in 2009, just after the 2007/2008 global financial crisis. The innovation trigger was Bitcoin itself, a currency introduced as a financial innovation that exists beyond the control of governments and free from the influence of central banks.
The first Bitcoin transaction, in which someone used 10,000 BTC to buy pizza, validated Bitcoin as a means of exchange and store of value. Unsurprisingly, hype has a high correlation to price. So soon after, the hype cycle kicked off to take Bitcoin’s price up to $1,200+ before crashing back down to $600+ as activity mellowed out in a trough of disillusionment. There wasn’t enough people could do with Bitcoin yet. More infrastructure was needed.
Web3 Hype Cycle 2
The second hype cycle coincided with Ethereum’s launch in 2015. The innovation trigger of this cycle was the introduction of smart contracts and decentralized applications (dApps).
Many entrepreneurs and developers started experimenting with building blockchain applications. There was an Initial Coin Offering (ICO) boom in 2016-2017 that funded the development of many different blockchains and apps, all in the hopes of unlocking mainstream adoption for Web3.
However, the blockchain trilemma was still a significant problem, and most projects couldn’t deliver on the promises in their whitepapers. Many who raised funds from ICOs didn’t follow through on building, leading to shitcoins and scams. As the hype peaked, Bitcoin hit $19,000, then crashed down to $6,000 in the following trough of disillusionment. Crowd fervor and funding outpaced the reality: building decentralized applications takes years, particularly in the early days where code libraries and tooling were still in their infancy.
Web3 Hype Cycle 3
The third hype cycle started with the introduction of 3rd-generation blockchains and the rise of DeFi and NFTs. New chains like Stacks and Solana helped scale Web3 and introduce new functionality, and DeFi and NFTs unlocked the first mainstream use cases of decentralized technology.
During this cycle, there was also increased institutional adoption, and a sovereign nation (El Salvador) even recognized Bitcoin as a legal tender. At its peak, Bitcoin’s price skyrocketed to almost $69,000, and the total market cap of all cryptocurrencies surged from around $195 billion in January 2020 to more than $2.7 trillion by November 2021.
However, like all hype cycles, this one ended in another trough of disillusionment with the failure of big Web3 projects like Luna and FTX. Bitcoin’s price crashed to $18,000, and the market cap of the entire crypto industry dropped to less than $900 million, as the mercurial Web3 space once again swung back into a bear market.
What’s Next in the Web3 Hype Cycle?
As is clear from the three hype cycles profiled above, Web3 grows in ebbs and flows. New innovations in Web3 trigger a wave of hype and a bull run that later collapses into a bear market as the limitations of those innovations are discovered. Then during that period of quiet, entrepreneurs keep building, creating the infrastructure, use cases, and new innovations that will spark the next cycle.
We are currently in one of those periods of quiet, a “crypto winter”, a trough of disillusionment. But broadly speaking we are not even close to approaching a plateau of enlightenment. In time, the next innovation trigger will set off another spike of growth and adoption
How To Unlock Web3’s Next Hype Cycle
In the coming months and years, Web3 builders will unlock another innovation trigger, bringing about the next hype cycle and an influx of new users and use cases. The question is what will that innovation trigger be? Below are some challenges that present opportunities for unlocking the next hype cycle.
Simplify the Complexity of Web3
Blockchains are really complex. The underlying technologies that power Web3—blockchain, cryptography, and smart contracts—are technically complicated, which can make it difficult for developers to build on.
One way to unlock the next hype cycle is to make it easier for developers to innovate and build new Web3 apps. That’s where companies like Hiro, Alchemy, Indexer, and more come in. Among other things, they simplify Web3 development and abstract away the blockchain, empowering developers to quickly build Web3 apps with easy-to-use tools and infrastructure.
Similarly, developers need to focus on creating better user experiences for consumers. Today, UX in Web3 is bad: opening and funding a wallet requires a lot of steps (and time), and interacting with smart contracts often provides zero context clues to users as to what will happen (as you can imagine, this leads to many hacks). To onboard the next million users, better UX has to be a priority for the space as a whole.
Address Scalability Challenges
The infrastructure that supports the Web3 industry still isn’t fully developed and is mostly fragmented. As blockchain adoption increases, the limited infrastructure often leads to issues with scalability—which slow the adoption of Web3 apps.
In 2017, the number of unconfirmed transactions stuck in Bitcoin’s mempool climbed to an all-time high of more than 180K. Many people who make Bitcoin transactions during periods of high mempool transaction count often have to wait hours and sometimes days for transactions to go through. As part of that congestion, blockchain fees can vary wildly, which in turn causes a poor user experience. Users are used to low fees and instant processing; paying $50 in transaction fees and waiting hours for a transaction to go through is simply not good enough.
The development of Layer 2 solutions, rollups, and other scalability solutions across different blockchain ecosystems could help trigger the next hype cycle for Web3 by enabling larger influxes of people.
Make Interoperability a Priority
Web3 is still in its early stages of development, so there aren’t standardized protocols and infrastructure across different ecosystems. Each Web3 ecosystem has its own blockchain protocol, Web3 programming language, and community of users.
This limited interoperability often locks users within a blockchain ecosystem or forces them to create multiple profiles across different ecosystems—which contributes to the overall complexity of Web3.
To address this challenge, developers can contribute to open-source projects to develop interoperability standards and bridges to connect various Web3 ecosystems together. Better interoperability would enable users to more easily move assets between various Web3 apps and ecosystems and encourage the creation of specialized blockchains designed for specific use cases.
Dive Into Web3 Now; We Are Still in the Earliest Days
We’ve only begun to scratch the surface of blockchain adoption. Web3 has the potential to disrupt every industry, which means there are plenty of opportunities for Web3 entrepreneurs.
If you are interested in building Web3 applications that will unlock the next hype cycle but aren’t quite sure how to get started, check out our comprehensive guide to Web3 development. It includes everything you need to know about building Web3 apps, including Web3 programming languages and developer tools.