Behind Vitalik's Endorsement of Railgun: The Limitations of Web3 Fundamentalism and the Future Direction of Web3
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Behind Vitalik's Endorsement of Railgun: The Limitations of Web3 Fundamentalism and the Future Direction of Web3
In designing their business models, Web3 companies still need to retain a stable and ongoing operating revenue stream, which could bring longer-term and sustainable development for Web3.
Navigating Web3 tides with focused insightsAuthor: @Web3Mario
Introduction
Yesterday, Vitalik indirectly boosted Railgun by participating in and commenting on it, causing its token price to surge over 190%. For context, Railgun is one of Tornado's competitors, using cryptographic techniques such as zero-knowledge proofs to protect on-chain privacy. Compared to Tornado, Railgun offers stronger composability and better integration with DeFi products. At a time when Tornado faces significant regulatory pressure, supporting an alternative competitor appears to be the underlying motivation behind Vitalik’s actions.
This once again highlights his immense influence. Yet at the same time, this incident has sparked deeper reflection.
In this "crypto emperor’s" ideology, resistance to censorship and preference for privacy protection are clearly evident. But is this truly essential for Web3? Or under this ideological guidance, will Web3 actually become better? I cannot fully agree. Therefore, I’d like to use this event as a starting point to discuss where Web3 might be headed—and ultimately, we must first clarify what Web3 really is.
What Is Web3?
To understand Web3’s future, we need a clear and precise definition of what Web3 is today. Explaining this isn’t easy. In fact, one major criticism of Web3 lies precisely in its conceptual vagueness. While this ambiguity may offer infinite rhetorical flexibility when facing skepticism, it also severely constrains further development—because a loose, fuzzy vision lacks persuasive power and cannot effectively inspire collective cohesion or motivation.
After reviewing various materials, I found an article published in the Harvard Business Review that provides a thorough and objective explanation of Web3’s definition and evolution—one that seems to bring us closer to an answer. And indeed, this concept is not unfamiliar to practitioners:
Web3 uses a range of blockchain-related technologies, offers a read/write/own version of the web, in which users have a financial stake in and more control over the web communities they belong to.
A key feature emerges here: in the Web3 world, digital asset ownership is returned to users. Take the classic Web2 company Twitter as an example. The data generated by users is owned by the platform, which then profits from it through an advertising-driven revenue model. Yet strictly speaking, this data was created by users and should rightfully belong to them—so the resulting benefits should also accrue to users. This forms a common narrative used by Web3 advocates to critique Web2.
Within this narrative logic, a consensus gradually formed around current Web3 design principles—documented on Ethereum’s official website and seemingly elevated to scripture among practitioners:
Web3 is decentralized: instead of large swathes of the internet controlled and owned by centralized entities, ownership gets distributed amongst its builders and users.
Web3 is permissionless: everyone has equal access to participate in Web3, and no one gets excluded.
Web3 has native payments: it uses cryptocurrency for spending and sending money online instead of relying on the outdated infrastructure of banks and payment processors.
Web3 is trustless: it operates using incentives and economic mechanisms instead of relying on trusted third-parties.
However, considering the current state of the Web3 market, I believe some of these principles have begun to constrain further development. It’s time to re-examine the cause we hold dear.
Current Problems in Web3
Although Web3 hasn't existed for long, it has developed rapidly—raising increasing amounts of capital and achieving notable growth in market cap. Everything seems rosy—but there are also strong criticisms. Current critiques of Web3 can be summarized as follows:
(1) A dangerous playground filled with fraud and manipulation: Numerous negative incidents support this view—endless rug pulls, hacking attacks, fake trading around tokens, and widespread phishing sites—all pose serious threats to ordinary users’ assets. According to FTC reports, since early 2021, crypto scams have caused over 46,000 people to lose more than $1 billion. Behind this heartbreaking number are many families plunged into debt. Yet any attempt to regulate Web3 companies triggers strong resistance within the community, while decentralization and anonymity technically complicate oversight;
(2) Business models are highly volatile and unsustainable, with most enterprises having short lifespans: Undeniably, token-based business models are central to Web3’s success and have become standard across Web3 startups. Unlike traditional models, Web3 companies primarily derive value from token price appreciation. But in practice, this profit model often proves unsustainable;
(3) Blockchain technology underlying Web3 is expensive and environmentally damaging due to excessive energy consumption: Critics argue public blockchains are costly technologies—users typically pay high transaction fees (gas), which contradicts typical technological progress trajectories. Moreover, Proof-of-Work consensus relies on brute-force computation, consuming vast energy. Bitcoin alone wastes more electricity annually than the entire country of the Netherlands.
We must acknowledge these criticisms reflect real issues. So where exactly did things go wrong, leading to such negative perceptions of Web3?
(1) Over-pursuit of permissionlessness has turned Web3 into children’s secret hideout:
A permissionless peer-to-peer electronic cash system was the origin story. Decentralization and anonymity gave blockchain-based Web3 projects their permissionless nature—meaning neither launching services nor user participation requires third-party approval. This sounds ideal: for the first time in human history, technology triumphs over authority, offering protection to the masses and enabling “absolute fairness” via code. But reality often diverges from intent. This very feature exposes most people to great risk.
Why such a gap between intention and outcome? The root lies in our overemphasis on permissionlessness, turning “anti-censorship” into political correctness in Web3. Any regulator becomes an enemy. Our pursuit of absolute fairness risks turning this grand endeavor into a children’s clubhouse—where “anti-censorship” absolves anyone of responsibility for their actions.
In truth, the so-called “absolute fairness” enabled by blockchain is conditional—it assumes participants possess roughly equivalent understanding of the technology and associated business models. This condition may have held during early “tech forum” days, but as Web3 grows and more ordinary users join, the knowledge gap between experts and newcomers widens dramatically. Combined with resistance to regulation, Web3 lacks both effective safeguards for regular users and deterrents against malicious actors—severely limiting industry growth, as most people’s interests remain inadequately protected.
(2) Excessive focus on incentives and economic models at the expense of product experience weakens Web3 firms’ ability to build stable, sustainable revenue models, drastically reducing their market resilience:
In nearly every Web3 project’s whitepaper, elaborate descriptions of economic models dominate. Most Web3 ventures rely on complex token-incentivized economies. Repeated tales of overnight wealth once led many to believe this innovation could reshape the internet’s business model. But as global markets cool, market caps fluctuate wildly, and more Web3 projects collapse, this belief faces mounting challenges.
The root cause, I suspect, is that this high-capital-efficiency model leads many Web3 teams to overemphasize incentive and economic design. We’ve grown accustomed to creating artificial demand for tokens through clever mechanisms, driving up valuations via continuous buying pressure—while actual operational businesses are neglected or reduced to footnotes in our narratives, since product R&D and optimization require substantial time and investment. The direct consequence is a bubble economy, spawning countless “house of cards” enterprises. High valuations without competitive underlying operations are inherently unstable, leaving companies extremely vulnerable to risk.
(3) Web3 projects rely too heavily on blockchain’s decentralization for trust-building, making it difficult to match Web2 user experiences in the short term:
Because Web3 applications are built on blockchains, the performance limits of blockchain directly cap the technical ceiling of Web3 apps. For a long time, constrained by blockchain development, high energy use, high costs, and high latency defined Web3—hindering its broader adoption. Fortunately, we now see promising solutions focused on scalability—PoS, Layer2, Sharding, etc.—a welcome trend. I believe these stereotypes will soon be overturned.
Yet there remains persistent skepticism toward these solutions—rooted in concerns that they sacrifice decentralization to some degree, thus undermining trustworthiness. These critiques usually come from “right-wing tech purists,” who claim only Bitcoin’s PoW can deliver ultimate trust. While conservative, this view reflects a deeper issue: current Web3 projects overly depend on technology alone to establish trust—an approach that limits Web3’s future potential. Thus, finding additional trust-building mechanisms beyond pure tech is another critical challenge we must address.
The Future Direction of Web3
Let us reassess the Web3 industry objectively and rationally. Solutions to the above problems now seem clearer:
(1) Define a clear, concrete Web3 vision—identify and amplify its most valuable characteristics
The Web3 industry is still in its infancy—a child needing meaningful, proper guidance to grow healthily. To provide better direction, we need a more comprehensive and specific articulation of Web3’s vision.
Previously, people widely believed Web3’s vision was to create a fairer, better internet. But such a vague vision fails to define what “better” or “fair” means, or how to achieve it—leading many to equate decentralization and anonymity directly with fairness and goodness. This is narrow-minded.
I believe Web3 should not be narrowly interpreted as attempting to fully replace existing mainstream internet architectures with decentralization and anonymity. Those are merely technical features commonly adopted in Web3 via blockchain—but they shouldn’t become shackles limiting our imagination. It’s time to rethink what true value Web3 brings. The following aspects appear more representative:
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Low-cost trust formation: Observing successful Web3 use cases reveals a pattern—whether currency or finance, these were previously monopolized by states or mega-corporations because they required strong trust backstops. Web3 entered these fields quickly and achieved notable results because it leveraged technology to create a new paradigm for establishing trust, drastically lowering the cost of trust initiation. This enables broader innovation by democratizing access to high-barrier domains—the foundational value of Web3.
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Verifiable interaction experience: Once we grasp Web3’s foundational value, we must ask: what is its core competitive advantage over other products? This shapes product design and marketing strategies. I believe Web3’s edge lies in offering users verifiable interactions. Blockchain ensures all data and operations within the system are immutable and transparent—allowing Web3 products to prove (or giving users reason to believe) that every action and outcome can be verified. Thus, in scenarios requiring “proving innocence” amid high suspicion, Web3 products hold a distinct advantage.
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Innovative and flexible business models: Whether token-based incentive economies or DAO governance, Web3 demonstrates remarkable extensibility in business modeling. Built upon verifiability, we gain the ability to enable orderly collaboration among diverse stakeholders. As A16Z partner Chris Dixon put it, Web3.0 offers a new way for all participants to contribute at different stages while safeguarding their own interests.
Returning to our original question, a clear Web3 vision begins to emerge:
Web3 leverages a suite of blockchain-related technologies to create a new business design paradigm characterized by “low-cost trust formation, verifiable user experiences, and innovative, flexible business models,” serving as a complement to existing web applications.
(2) Explore multidimensional trust-building approaches to expand application scope and drive renewed growth
While reducing trust costs lies at the heart of Web3 narratives, today’s sole reliance on technology as a trust source paradoxically raises trust costs compared to traditional centralized systems—mainly because the cognitive burden of this trust model is too high for average users, who represent Web3’s next growth frontier. Hence, we must seek additional, non-technical dimensions of trust formation—protecting ordinary users’ rights to broaden applications and achieve lasting breakthroughs.
With this conclusion in mind, we can adopt a more open and pragmatic stance toward approaches that may seem to violate “decentralization” dogma. For Web3’s long-term advancement, we should moderately let go of technocratic idealism. Take regulation: rather than trying to evade it, we should engage in shaping its boundaries to benefit Web3’s development. In this process, clarifying our vision becomes crucial. I believe that so long as innovations and user protections don’t compromise the three core features outlined above, they can fuel a new wave of growth for Web3.
(3) Stable operational revenue may help establish more efficient and sustainable Web3 business models
I believe we must accept that for the foreseeable future, corporate organizations will remain the primary drivers of Web3 development. Currently, DAO-based governance lags far behind centralized institutions in decision-making and execution efficiency. Thus, we face an unavoidable question: how do we build more efficient and sustainable models for利益 distribution and management among Web3 companies, users, and stakeholders? This will determine the ceiling of Web3’s future growth.
Currently, there’s broad consensus that most Web3 companies derive income from locked tokens that unlock over time. But this model shows clear limitations—evident in Web3 financial statements, which typically show very high non-operating gains and minimal operating revenue. We’ve grown accustomed to sacrificing operating income, redirecting those funds to boost token valuation and sustain high non-operating returns.
This may be the root problem. Overreliance on non-operating gains causes companies to hyper-focus on token price manipulation, neglecting product iteration—making them highly vulnerable to market volatility. Meanwhile, as tokens gradually release into the community, ownership shifts away from founding teams, easily trapping product planning in short-termism due to lack of sustained incentives.
Therefore, I believe Web3 companies should retain stable, ongoing operational revenue streams in their business designs—this may pave the way for longer-term, sustainable development.
Conclusion
We stand at a crossroads full of transformation and opportunity. By stepping back, regaining clarity, and re-examining the cause we love, we will find our path to glory.
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@web3_mario
