Businesses and investors are eager to jump on the Web3 bandwagon, which is being touted as the next evolutionary stage of the internet. Alphabet, Facebook-owned Meta, and Microsoft are establishing their place in the new blockchain-based economy; some non-fungible token companies are now worth billions of dollars, and cryptocurrency trading platforms are growing at a breakneck pace.
To break through the excitement, CBS MoneyWatch spoke with Tim O’Reilly, a computer legend who is best known for publishing the world’s first website and coining the term Web 2.0, among other accomplishments. Web3 was brought up, and O’Reilly was queried about its future prospects.
“The metaverse itself is full of bubble hype,” he answered. “The Meta Quest2 [the VR headset previously called Oculus], they’re selling a bunch of ’em, but the technology is a long way from prime time,” he said.
While O’Reilly acknowledges that the cryptocurrency and NFT industries are thriving, he feels that their expansion is unsustainable: “… I believe that it really is a pretty serious speculative bubble on a very small foundation,” he said.
Over the last year, the NFT market, in particular, has surged. According to data from DappRadar, NFTs tokens that signify ownership over digital assets sold for more than $25 billion in 2021. NFTs accounted for less than $100 million in sales the previous year. As a result, businesses such as OpenSea, the most popular marketplace for buying and selling NFTs, have been able to raise millions of dollars from investors.
Following a $300 million Series C fundraising round, OpenSea was valued at $13.3 billion last month. It also experienced its highest month in terms of trading volume, with sales exceeding $5 billion. However, according to O’Reilly, the exchange only has 600,000 overall users, which conforms to Dune Analytics’ monthly estimates.
“We won’t know what Web3 is until after the current bubble pops—because we’re in the middle of a bubble, just like the dot-com bubble, where there are all kinds of crazy startups getting outrageous valuations, with less to show for it,” O’Reilly told CBS Moneywatch.
While the IT guru warned that the Web3 market should “be ready for the crash,” he also expressed optimism for what comes next: “… Once you get those bubble valuations, it does attract a lot of capital and talent—and people may start really building something on top of it.”