When I look at web 3, I see a cool rebellious cousin who shows up at a Sunday family lunch with a formal dress code wearing a hoodie. Deep down the traditional uncles may want to scream at him, but everyone knows that his jokes make the family lunch lively. He has his imperfections but everyone loves him.  This is because web 3 is a land of glorious opportunities where decentralisation is key to every decision. Here, you have the ability to own your data, manage your investments and earn some money, all with a few clicks of a keypad.

One thing I have always loved about web 3 is that you don't have any central bank telling you what you can or cannot do with your money. Central banks cannot influence how much money you can withdraw or move in a day. Web 3 is full of freedoms, adventure, promises of striking digital gold and a risk of losing it all! And with these freedoms comes responsibility, because in one mistake you can lose it all. Let's explore the battle that exists between decentralisation and consumer protection in web 3.

The digital freedom is for everyone not you alone

As I said, the level of decentralisation in web 3 also brings a lot of problems. This is because while there are freedoms, these freedoms and opportunities are for everyone. This includes several undesirable elements of the society.

All day long, there are bandits in dark basements sitting behind computers looking for their digital gold. The only twist to the story is that the digital gold they are looking for is in your wallet, and they will look for opportunities to take it from you at any point. If you by any chance send your life savings to the wrong wallet address, well tough lucky friend, you ain’t getting anything back. And if you by any means click any link promising a free NFT in Trust wallet, well your wallet will be drained faster than you can blink. The same happens if you click on any unknown coins with unknown origins inside your wallet.

All this makes me wonder if it's possible to have all the freedoms that come with decentralisation while protecting the safety of the consumer. The decentralization in web 3 creates a walled off street that is difficult to regulate but easy to walk on. But the question remains, who does the customer report to if they get robbed on that walled off street with no regulation? Your guess is right! They can turn to no one and all their assets will be gone forever!

The digital dream versus reality

When web 3 replaced web 2, the core promise was that it would be powered by blockchain technology and it would be fully decentralised from traditional systems. Now, in web 2.0 if you were playing a game online and you win a rare AK47, the gaming company would own that gun. As a result, they could ban you for using it, delete it or remove it from the game without communication. On the other hand, in web 3 that gun will belong to you, so you can own it, sell it or loan it to friends because it's yours! This was a revolutionary technology, as it took  power from big platforms and redistributed it to the general public.

On the other hand, innovation also brought about its own challenges. Since, web 3 is based on the blockchain, there is no one to police its functioning. This means that the consumers are responsible for their own safety. You remember that NFT gun mentioned above, in web 2, if the platform allowed you to sell it. They would be the intermediaries between you and another player and they would make sure you received whatever you exchanged for. On web 3 on the other hand, I can pretend to be your friend or someone honest and block you without paying soon after you send it to me.

In this decentralised world, if a smart contract has a bug, your wallet will be drained and there will not be any customer service line to call. If you forget your seed phrase, even if there are billions in that wallet, your money will be lost forever. And your digital wallet will not have any forgotten password button, there is no password recovery in this world. 

To make it worse, anyone can develop a project, invite investors and create communities, then rugpull everyone and disappear as soon as they reach their target amount of money. You also have no one to report to, especially if you don't know the developers.

How can we have both, decentralisation and protection for consumers?

So, how can we crack the code and enjoy both? We need to crack this code so that we can have a much safer web 3 where the consumer’s assets have some protection. And I believe it's not logical for us to go back and rebuild the old and tired centralised infrastructures that we are trying to run from. Instead we need the innovation for safety in web 3 to be built around web 3 infrastructure using web 3 tools. 

We can do this through several methods which include:

• Smart contracts and digital inspectors

In web 3 it is important to audit smart contracts. This will provide a deep dive by specialized firms that will inspect the contract. They will check the code for bugs and vulnerabilities before it goes live. While this is no holy grail, it helps weed out the most common problems with smart contracts.

• Decentralised Identity (DID)

On the internet, it's so hard to trust someone you have never seen. A digital identity allows you to prove things about yourself while not revealing your entire life to the public. Founders of the project can prove that their identity is linked to real world entities without doxxing themselves. Users can use reputation scores, which makes them a trustworthy participant. The same concept is used in the Pixels game on the Ronin network. In the game, you cannot undertake some actions like buying and selling on the player market place or perform some actions without a certain amount of reputation points.

• On chain Justice systems

One of the biggest problems in web 3 is that there are no referees when disputes occur. However, the development of decentralised arbitration services can help in creating solutions. These services use a pool of human jurors that are staked with cryptocurrencies. If they vote with the majority, they will be rewarded, if not they will lose their stake. This creates an economic incentive for fair and objective rulings.

• Education

This is the most underrated but useful tool for consumer protection in web 3. There is a growing community emphasis on education as a tool to protect consumers from potential losses. Education helps people to spot phishing links, spot scams, understand risks and remember web 3 rules. To me, this is the best line of defence against web 3 risks on the blockchain.

• Insurance pools and DAO governance

Some web 3 projects are creating community insurance.This is a digital community that pays out when someone has been scammed. An example is the Nexus Mutual DAO which has paid over $20 million in claims since 2019. The funny thing is that they are not even a bank.

What we really need in web 3 and crypto

The goal in solving web 3 safety problems is not to do away with decentralisation but to ensure that we don’t normalise people losing their money.

We need better UX, we cannot be talking about full adoption of web 3 and blockchain technology when a beginner needs a 1 hour tutorial on how to use their wallet. That chases away a certain group of people from web 3, especially those that are not tech savvy.

Web 3 also needs clear liability frameworks. We need to know and specify who is responsible if a smart contract fails. It has to be someone from the DAO, Developers and the person who deployed it.

We also need at least a set of global standards, not different rules for every project. There are too many projects so the standards will help to govern behaviours and actions. What we have now creates chaos not decentralisation.

Conclusion and final thoughts

The web 3 journey is always evolving, and who knows it may lead us to web 4 or something completely new. However, while web 3 has been a very welcome innovation, it has its problems, and it's our duty to weave consumer protection directly into the web 3 decentralised fabric. After all, it would not make sense to bring back the same centralised systems we are running away from to web 3. A safer web 3 is possible, there is nothing wrong with being decentralised and safe at the same time. 

This is just a personal opinion after all, what do you all think?

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