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As published in Forbes
Hype cycles move fast in Silicon Valley. The past few years have felt like an all-time high of boom and bust cycles, from cryptocurrency to NFTs to Web3 and now—perhaps most hyped of all—AI. It can feel like Silicon Valley and the media ecosystem around it have a collective case of ADD, quickly entranced by the next shiny thing and bored of the previous flavor of the month.
Web3—that decentralized vision for the internet’s future, which would be made possible by blockchain technology—has certainly been upstaged by AI mania in 2023. But AI and Web3 remain exciting technologies, so it’s worth it for agencies to consider a world where both technologies coexist side by side—and maybe lead to even more exciting solutions. Many of my agency’s clients are doing a lot of work in the AI and Web3 space, and I imagine other agencies’ might be too.
While it might feel like a while ago now, Web3 was the talk of the town in 2022. Just last year venture capital heavyweight Andreessen Horowitz raised $4.5 billion for a fund that bet big on Web3’s future. But fast forward a little over a year and Web3 funding declined for the seventh straight quarter. At this point, VC funding in Web3 startups is in free fall.
To be clear, these valuations are still in the billions. But it is becoming clear that the tide has turned and AI has started eating Web3’s lunch. Enough that some in the Silicon Valley-adjacent press are asking, “Is AI stealing Web3’s thunder?” The crazy part? That question was being asked a month before the release of OpenAI’s GPT-3.5—which swiftly put AI hype into overdrive.
Now AI’s valuation is—to use crypto parlance—“to the moon.” McKinsey thinks AI has the chance to unlock “trillions of dollars in value” across different sectors. OpenAI and Midjourney have skyrocketing valuations as well, thanks to actual profitability from their paid plans, which Wall Street is always on the lookout for. Not to mention the massive financial hauls for the chipmakers who make these large language models possible.
With so much money going to AI, is there any room for Web3?
Microsoft (which my agency has worked with), amid its full-throated embrace of OpenAI and its myriad possibilities, recently closed a deal with Aptos Labs, a layer-1 blockchain founded by former Meta employees. The partnership “allows Microsoft’s AI models to be trained using Aptos’ verified blockchain information”—and could signal an interesting path forward where AI and blockchain technologies work together to solve their respective industries’ problems.
And problems abound. For every couple of articles about how AI is going to solve all issues known to man, there’s an article about the potential copyright disaster zone that AI will unleash. Not to mention the concerns around AI safety and the general unpredictability of the technology. Plus, LLMs trained on other LLMs tend to stop working. Meanwhile, metaverse technology, which is a key element of Web3’s promise, has been underwhelming to say the least. Look no further than the criticism of Meta’s first forays into the metaverse.
But Microsoft’s partnership signals there might be a path forward for AI and Web3 to work together.
It’s clear: Both technologies have issues right now. But Web3 and AI have some clear overlap. AI is able to generate content quickly and impressively—and blockchain can add useful guardrails. Tech founder Jack O’Holleran imagines AI as a tool that will help us create our most ambitious Web3 apps, build the virtual worlds and online communities, and then moderate these Web3 spaces and make them safer.
Perhaps. But the bottom line is that real applications for AI and Web3 together are still years off. The technology is moving fast—and ChatGPT’s development and adoption surely went faster than anyone expected—but we’ll need to be patient and iron out these technologies’ attendant issues before we get too excited.
And of course, it wouldn’t hurt for Silicon Valley to take it a bit slower and not immediately throw money at the latest much-hyped solution. The tech coming down the pike is undeniably inspiring—but it will still take years of unglamorous thought and work before the AI-powered virtual worlds of Web3 become a massive, money-making reality.
It might be easy for agencies to turn their backs on Web3 clients and go all in on AI—but it’s better to remain flexible and avoid investing all your resources in one place. After all, technological adoption is rarely a straight line, so it’s worth staying open-minded about the future of Web3 even as shiny new toys emerge.
Staying up to date on the latest news in this sector will ensure you’re prepared for that moment when Web3 really does take off. Stay aware of the major players in the scene and have a sense of the latest research breakthroughs—because oftentimes the most interesting news is happening in the research realm rather than on the VC circuit.
Also, make sure you’re educating your teams. Employees who understand Web3 at a high level—and how it might align with other emerging technologies like AI—will be poised to deliver once these transformative technologies truly deliver on the hype.