Web2 Companies Are Facing Heat for Embracing Web3

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Key Takeaways

In the last few months, several big Web2 firms have faced criticism for announcing plans to use blockchain or crypto assets.
Discord, Ubisoft, Kickstarter, and Mozilla have all come under fire.
Critics frequently take issue with the perceived environmental impact of blockchain technology.

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In recent months, several major companies have prompted backlash by announcing their plans to explore Web3. In most cases, the critics complain of the purported environmental impact of Bitcoin mining, NFTs, and other cryptocurrencies. 

Companies Under Fire for Web3 Plans

Crypto is growing fast—and traditional companies want in. However, not everyone is happy with that.

As the concept of a blockchain-based decentralized Internet—a realm crypto enthusiasts refer to as “Web3″—moves into mainstream consciousness, many so-called “Web2” firms that succeeded during the second phase of the Internet have begun to explore ways to join the crypto bandwagon. However, over the last year, several notable Web2 firms have faced heat from users for making efforts to embrace the technology. In some cases, simply discussing blockchain has been enough to incite fierce criticism. 

The loudest crypto critics of today frequently express disapproval over the environmental impact of the sector. The core issue pertains to Proof-of-Work mining, a transaction-validation system used by blockchains like Bitcoin and Ethereum. Proof-of-Work relies on huge computational resources; the Cambridge Centre for Alternative Finance estimates that the Bitcoin network uses more electricity than countries like Norway and Ukraine. While Bitcoin mining is also moving toward using renewable energy, the environmental issue has caused outcry from and become a major barrier to adoption. Several firms looking to adopt the technology have had their hands forced by the topic. 

It’s not only the environmental issue that’s sparked debate. Some Web3 detractors liken the space to a Ponzi scheme, taking shots at the volatile—and often highly speculative—nature of the emergent asset class. In this feature, we review some of the most notable incidents involving large companies announcing moves into crypto, only to prompt an intense blowback from users.

Discord

Discord is the world’s most popular gaming chat service with over 150 million monthly active users. In November, it faced controversy when the firm’s founder and CEO Jason Citron posted a screenshot hinting that the company was planning to integrate Ethereum. This move would allow users to make crypto and NFT transactions directly through the platform. 

Many of Discord’s community members were unhappy with Citron’s update and took to Twitter and Reddit to criticize the move. The critics repeatedly cited claims over Ethereum’s electricity usage and referred to NFTs as an illicit Ponzi scheme. On Discord’s support page, angered users posted comments threatening to cancel their paid membership plans if Discord went ahead with any plans. A few days later, Citron capitulated to the backlash and declared that the firm would put its crypto plans on hold. That wasn’t enough to convince the critics, who continued to make complaints related to NFTs. 

Ubisoft

In December, the French game publisher Ubisoft faced a fallout from fans and employees after announcing a blockchain-based product called Quartz that lets gamers earn NFTs known as “Digits.” 

“Hell no, take this shit, throw it in the trash and never think of this stupid of an idea again,” a streamer posting under the pseudonym BikiniBodhi responded to Ubisoft’s Dec. 7 tweet announcing the new product. Thousands of others joined BikiniBodhi in slamming Ubisoft’s decision to adopt gaming NFTs. Furthermore, a French trade union publicly condemned the plans, describing blockchain as “useless, costly, ecologically mortifying tech.” 

Ubisoft pressed on with rolling out Quartz anyway, explaining that its activities would be energy efficient. Ubisoft has opted to issue NFTs on Tezos, a Proof-of-Stake blockchain with a much smaller carbon footprint compared to both Bitcoin and Ethereum. 

Mozilla

Mozilla Foundation, a non-profit running the popular Firefox web browser, took heat when it announced that it would start accepting cryptocurrency donations in partnership with BitPay. The post pulled staunch criticism from Mozilla’s founding team member Jamie Zawinski, who left the company in 1999.  In a disparaging response to Mozilla’s crypto donation tweet, Zawinski said that the project “should be witheringly ashamed of this decision to partner with planet-incinerating Ponzi grifters.”

The backlash against Mozilla grew as hundreds of social media commentators lambasted Mozilla’s initiative to accept crypto donations, claiming that the firm was contributing to the climate crisis. They complained that embracing crypto was inconsistent with its climate commitments and asked the team to cancel its plans. Under the pressure, Mozilla appeared to backtrack and posted a response that it was “reviewing if and how our current policy on crypto donations fits with [its] climate goals.” It’s taken a pause on crypto donations. 

Kickstarter

The popular crowdfunding platform Kickstarter angered many of its users when it announced that it would build on Celo, a mobile-centric Layer 1 blockchain.  community for choosing to build on Celo, a mobile-centric public blockchain. The Kickstarter team said that it wanted to build a decentralized funding model on Celo. 

The team said a blockchain protocol would remove the need for relying on intermediaries as people raise funds. Users pushed back by claiming that the update was damaging to the environment. In response, Kickstarter went back on its plans. “We won’t make changes to Kickstarter without you,” an announcement read. 

The Future for Companies Embracing Web3

Web3 imagines a major shift away from centralized web applications to more trustless and permissionless models. By employing token-driven incentives, Web3 applications can decentralize their systems and create open-source protocols that are accessible to everyone. However, many Web2 users remain unconvinced about the benefits of Web3, warning of the environmental impact of blockchain technology.  

While environmental concerns surrounding Proof-of-Work blockchains are valid, critics often fail to recognize that Proof-of-Stake blockchains are much more energy efficient. Ethereum is currently the most used blockchain and the home of the NFT space, but it still uses a Proof-of-Work consensus mechanism. The network will soon merge to Proof-of-Stake, which is estimated to make it 99.9% more energy efficient. How the move will be received by crypto critics remains to be seen. 

While crypto is yet to achieve true mass adoption, it has many skeptics. This poses a challenge for traditional companies looking to embrace the technology and onboard new users. However, blockchain isn’t the first technology that was perceived as worthless when it first emerged. Many questioned the value of the Internet when it first gained traction in the 90s, and today companies rely on websites and social media channels to operate. If crypto achieves what it is setting out to do, the same companies will soon need to embrace blockchain and Web3 too.

Disclosure: At the time of writing, the author of this piece owned ETH and other cryptocurrencies.

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