May 27, 2022

Will Web3 Follow in the Footsteps of the AI Hype Cycle?

For many, the global financial crisis of 2008 marked a turning point for trust in established institutions. It is unsurprising that during this same historical time period, Bitcoin, a decentralized cryptocurrency that aspired to operate independent from state manipulation, began gaining traction. Since the birth of Bitcoin, other decentralized technologies have been introduced that enable a broader range of functionalities including decentralized finance (DeFi), non-fungible tokens (NFTs), a wide range of other cryptocurrencies, and decentralized autonomous organizations (DAOs). 

These types of technologies constitute what is sometimes referred to as “web3.” In contrast to web2, our current version of the web, which relies heavily on centralized platforms and corporate intermediaries–think Facebook’s social network or Amazon’s webshop–web3 promises to redistribute power and agency back into the hands of users through decentralized peer-to-peer technology. Although web3 has garnered fervent support and equally fervent critique, it is undeniable that cryptocurrencies and other decentralized technologies have captured the mainstream imagination. 

What is less clear is whether the goals and practices of emerging businesses in the web3 sector align with, or stand in conflict with, the ideologies of web3’s most enthusiastic supporters. Organizational sociology has long established that organizations’ external rhetoric, which is shaped by a field’s perception of what is culturally and socially legitimate, may not fully align with their internal rhetoric or day-to-day practices. Continuing in this tradition, in a recent study, my colleague at Princeton’s Center for Information Technology Policy, researcher Elizabeth Watkins, and I sought to understand how people working at artificial intelligence (AI) startups think about, build, and publicly discuss their technology. We conducted interviews with 23 individuals working at early-stage AI startups across a variety of industry domains including healthcare, agriculture, business intelligence, and others. We asked them about how their AI works as well as about the pressures they face as they try to grow their companies.

In our interviews, the most prevalent theme we observed was that startup founders and employees felt they needed to hype up their AI to potential investors and clients. Widespread narratives about the transformative potential of AI have led non-AI savvy stakeholders to have unrealistic expectations about what AI can do– expectations that AI startups must contend with to gain market adoption. Some, for instance, have resorted to presenting artificially inflated estimates of their models’ performance to satisfy the demands of investors or clients that don’t really understand how models work or how they should be evaluated. From the perspective of the startup entrepreneurs we interviewed, if other AI startups promise the moon, it is difficult for their companies to compete if all they promise is a moon-shaped rock, especially if potential clients and investors cannot tell the difference. At the same time, these startup entrepreneurs did not actually buy into the hype themselves. Afterall, as AI practitioners, they know as well as any other tech skeptic what the limitations of AI are. 

In our AI startups study, several participants likened the hype surrounding AI to the hype that also surrounds blockchain, the backbone that undergirds decentralized technology. Yet unlike AI companies who hope to disrupt existing modes of performing tasks, hardline web3 evangelists see decentralized technology as a mechanism for disrupting the existing social, political, and economic order. That kind of disruption would take place on an entirely different scale than AI companies attempting to make tedious or boring tasks a little more automatic. But are web3 businesses actually hoping to effect the same kind of wide sweeping societal change web3 evangelists are hoping for?

In a study I’m kicking off with Johannes Lenhard, an anthropologist at the University of Cambridge who studies venture capital investors, we aim to understand where the ideological rubber of web3 meets the often unforgiving road to commercial success. We will interview entrepreneurs working at web3 businesses and investors working at investment firms with a focus on web3. Through these interviews, we aim to understand what their ideological visions of web3 are and the extent to which they have been able to realize those visions into real-world technology and business practices. 

As a preliminary glimpse into these questions, I did a quick and dirty analysis* of content from the blogs that Andreessen Horowitz (a16z), a prominent venture capital firm, posted about the companies in their web3 portfolio (top image). In order to get insight into the rhetoric of the companies themselves, I also looked at content from the landing pages of several of a16z’s web3 portfolio companies (bottom image). Visualization of the most frequently used terms of both data sources are below where bigger words are those that are used more frequently.

Word cloud from a16z’s blog posts

Word cloud from portfolio companies’ landing pages

Although this analysis is by no means scientific, it suggests that whereas companies’ external rhetoric emphasizes technical components, investors’ external rhetoric emphasizes vision. 

We don’t yet know whether we will observe these kinds of trends in our new study, but we hope to gain deeper empirical insights into both the public facing discourse of web3 stakeholder groups as well as into the rhetoric they use internally to shape their own self-perception and practices. Will blockchain shepherd in a newer, more democratic version of the web? A borderless society? Decentralized governance by algorithms? Or will it instead deliver only a few interesting widgets and business as usual? We’ll report back when we find out!

Interested in hearing more about the study or participating? Send me an email at .

*analysis performed on March 9th, 2022