If 2021-2022 was the year the DiNO (Decentralized in Name Only) reigned supreme, 2023 looked like the year web3 let out a collective “enough is enough.” Following the FTX-fueled, crisis-filled saga that was 2022 — and long-awaited actions against the likes of SBF and Binance — these past 12 months have been a much-needed improvement.

Markets have gradually thawed while we’ve experienced growing attention and adoption across privacy-focused technology and sectors built for scale and speed (layer 2s). Things have been looking up — but that doesn’t mean we’re out of the woods quite yet.

Web3 Started Getting Real about L2s in 2023

As we look towards the light of a coming bull run, speed and scale will be key — and most agree that layer 2 rollups will play a significant role in supporting growth. Thus, this past year saw growing attention — and value — across layer 2 ecosystems, with a rise in total value locked (TVL), reaching over $13 billion in November 2023.

Vitalik Buterin predicted that in the future of Ethereum, web3 will see “everyone moving to rollups” to reduce transaction costs alongside widespread market growth and that without this migration, “every product aiming for the mass market inevitably forgets about the chain and adopts centralized workarounds for everything.” This is far from the first time Father Ethereum has stressed the importance of decentralizing Ethereum and layer 2s, which he’s noted rely heavily on backdoors and centralized nodes. These components can run dangerously through centralized web providers like AWS — risking privacy, inefficiency, a lack of user-centricity, and single points of failure.

Vitalik is far from the only one to call out the potential danger of the growing attention and value pouring into layer 2s if things don’t change across their architecture. From the threat of fragmentation to a lack of trust and security that we witnessed web3 leaders from ZK Sync to Arbitrum — and a room of crypto users — agree must change, people started getting real about risk in 2023.

Just look at a real-time chart from L2 Beat to understand how far the layer 2 ecosystem has to go to empower safe and accessible data, state validation, upgradability, and more key tenants of a true web3.

While many projects on the above list might provide an auditing service to combat something like a failed sequencer, a quick (potentially dangerous) fix could occur that ultimately relies on centralized nodes or a multisig to secure a smart contract. As we heard during the layer 2 panel at DevConnect from Polygon’s Jordi Baylina, there’s still a lot of work to do — and if one L2 gets hacked, it’s like all of them got hacked — and are finished.

A Future Free of DiNOS

The only way to bring trust to web3 users and developers is to build a future that delivers on the core web3 tenets of decentralization, permissionlessness, trustlessness, privacy, and self-sovereignty across the entire industry and purge any remnants of anything that doesn't deliver to those expectations. And these expectations expand beyond layer 2s, which require trust if they’re ever going to be adopted for anything beyond short-term trading. A true web3 requires careful attention and architectural improvements across RPCs, oracles, storage, compute, interoperability (which today relies on centralized bridges that get hacked all the time), and expansion to mobile and edge devices, which is how most people connect to the web but is often a breeding ground for DiNOs. Lest we forget traditional data management, which today is centralized and the predominant bridge between web3 and our mobile devices.

2023 was a complicated yet productive year for web3. We experienced gradual market growth alongside institutional adoption inside and outside of web3 (PayPal’s adoption of a stablecoin; ETF approval for BlackRock and VanEck) and major regulatory moves that struck a balance between protecting users and supporting innovation. Heck, even NFTs were up.

As web3 continues to heal from a problematic (and distracting) period, how do we protect ourselves from the dangers of the past to build a better future — and one that returns us to the vision of a true web3? The system needs updating, but that doesn’t mean that dressing up a sheep in wolf’s clothing makes it anything but what it is.

If 2022 was the year of the DiNO and 2023 was the year we started calling them out for what they are, let’s make 2024 a year that genuinely updates the system — and web3 — to what it really can be beneath the good: something different; something better. It is a system that doesn’t stop at blockchains but realizes the full vision of web3 across its many components — from permissionless applications to interoperability free of centralized bridges. This future is possible if we build accordingly.

If you’re looking for a step in the right direction and want to start building for a truly open, private, and decentralized web3, we’re here to show you the way.

Happy New Year, and we’ll see you in 2024

— Source Network