Web3 myths debunked: misconceptions, challenges and what’s next

Web3 is often misunderstood. Some believe it’s just about cryptocurrency, while others think it’s too complex to use, and some even argue it’s unnecessary. In reality, Web3 represents the next phase of the internet where users have greater control over their data, assets and digital identity. Unlike the current web (Web2), which relies on centralised platforms owned by corporations, Web3 is built on blockchain technology and decentralised protocols, enabling peer-to-peer interactions without intermediaries. This shift aims to enhance privacy, security and ownership, allowing users to participate in online ecosystems without being dependent on large tech companies. 

Despite its potential, Web3 has faced criticism and misconceptions. Let’s debunk some of the most common myths and clarify what Web3 is really about.

• Web3 is not just about crypto: While cryptocurrency plays a role, Web3 also includes decentralised applications (dApps), DeFi, NFTs, and decentralised identity.

• Web3 is becoming more user-friendly: Although early adoption was challenging, new tools and interfaces are making decentralised technologies more accessible.

• Web3 solves real problems: The current internet (Web2) is centralised and controlled by large corporations, while Web3 offers a user-controlled alternative.

• Web3 is here to stay:  Governments, institutions, and major tech firms are already adopting blockchain and decentralised technologies.

Debunking the myths

Myth 1: Web3 is only about cryptocurrency

Web3 has been widely promoted by crypto enthusiasts and is often linked to speculative markets and token investments. Because of this, many people associate the entire Web3 movement solely with buying and trading cryptocurrencies. The lack of widely adopted use cases has led some to view it as little more than hype. Concepts like DAOs (Decentralised Autonomous Organisations), DeFi (Decentralised Finance) and NFTs (Non-Fungible Tokens) are presented as transformative, yet critics argue that their benefits over Web2 counterparts are not always obvious or fully realised.

Reality: While cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) are essential components, Web3 encompasses much more. Its broader vision includes dApps (decentralised applications) that run on blockchain infrastructure, smart contracts that automate actions on the blockchain without middlemen, and decentralised identity solutions that give users control over their personal data. At its core, Web3 is about user empowerment and digital ownership.

Want to see how Web3 goes beyond crypto? Watch our video for deeper insights.

Myth 2: Web3 is too complex for the average user

Early blockchain applications required significant technical expertise. Users had to manage private keys, navigate complex smart contracts, and understand blockchain mechanics just to interact with Web3. This led to the perception that Web3 is only for tech-savvy individuals and is not accessible to the average internet user.

Reality: It’s true that early Web3 applications had a steep learning curve, but the industry is rapidly evolving. New developments focus on improving user experience, making Web3 applications as seamless as traditional web services. Wallets and decentralised applications are becoming more intuitive, bridging the gap between technical complexity and mainstream adoption.

As usability improves, platforms like Bitpanda are helping lower the barriers to entry by developing more intuitive tools for exploring and managing Web3 assets. Want to learn more? Explore Bitpanda Web3.

Myth 3: Web3 is unnecessary – the internet is fine as it is 

Web2 platforms like Google, Facebook and Amazon are deeply embedded in our daily lives, offering speed and convenience in exchange for access to our data. For most users, these trade-offs are acceptable – personal data in exchange for free services. This has led to the belief that Web3 offers little value beyond what's already available and that users don’t care enough about data ownership to make the switch.

Reality: Though it may work well on the surface, Web2 built on centralised systems that control user data, monetise user behaviour and can impose censorship. Web3 introduces self-sovereign identity, giving individuals full control over their online identity and data. For example, instead of logging in via Google or Facebook, users can use a decentralised wallet or ID system. As privacy concerns grow and digital literacy increases, Web3 offers a real alternative to the centralised status quo.

Myth 4: Web 3 is just a fad

Just like the dot-com bubble, some believe Web3 is a trend driven by early hype and crypto speculation. With media attention focused on volatile token prices and NFT mania, critics argue that Web3 lacks the depth and durability to become a meaningful part of the internet’s infrastructure.

Reality: While it’s true that the space has seen its fair share of hype, Web3 is increasingly being adopted by major tech companies, institutional investors and governments exploring use cases in digital identity, finance and public services. This includes innovations like blockchain-based ID verification, decentralised voting and open-source finance platforms. What began as a crypto-native movement is now gaining traction across various sectors.

As we’ve seen, many of the myths surrounding Web3 stem from early misconceptions, technical hurdles and its close association with cryptocurrency. But the reality is that Web3 represents a fundamental shift in how the internet could operate, putting users back in control of their data, identity and assets.

Web3’s Challenges

Even with this potential, Web3 isn’t without its challenges. From security concerns and scalability issues to environmental impact, building a better internet comes with its own set of hurdles. Let’s take a closer look at the key issues  the Web3 space needs to address to ensure it can deliver on its promise.

Privacy and Security

Web3 aims to improve online privacy by giving users control over their data and reducing reliance on centralised platforms. However, this shift also means that users take on more responsibility for their own security. Unlike Web2 platforms, where account recovery is often a click away, Web3 tools like wallets require users to manage private keys – unique codes that prove ownership of digital assets. If lost or exposed, these can’t be easily recovered. At the same time, smart contracts can be exploited if they contain bugs or vulnerabilities.

While the tech matures, users can already take steps to stay safe. Enabling two-factor authentication (2FA), using hardware wallets, double-checking contract permissions before approval and staying alert to phishing scams are all essential practices to navigate Web3 securely.

Energy and sustainability

Blockchain networks have faced criticism for their energy consumption, especially early models that relied on proof-of-work where powerful computers compete to validate transactions. This process, while secure, can be highly energy-intensive.

In response, the industry is moving towards more sustainable alternatives. Ethereum’s transition to proof-of-stake, where validators are selected based on the amount of crypto they hold rather than computing power, has significantly reduced its environmental footprint. Likewise, networks like Polygon have been built with energy efficiency in mind from the outset, showing that more sustainable blockchain infrastructure is not only possible but already in progress.

Want to learn more about scaling Web3? Discover how Polygon uses Layer 2 technology to make Ethereum faster, cheaper and more efficient in our blog article.

Scalability and decentralisation

As Web3 grows, one of the biggest challenges is scaling blockchain networks to support millions of users without sacrificing decentralisation. Blockchains are secure and open, but they process fewer transactions per second compared to centralised platforms. This can result in slow speeds and high fees when networks are busy.

To address this, developers are building Layer 2 solutions (technologies built on top of main blockchains), sidechains (connected blockchains that offload activity) and alternative consensus methods. While these can boost performance, they sometimes introduce new risks or increase reliance on centralised elements, which can undermine Web3’s core values. Finding the right balance between speed, security, and decentralisation is essential for scaling Web3 without compromising its principles.

The critics’ perspective

Despite its potential, Web3 faces scepticism from critics who question its feasibility and true impact. While decentralisation is a core principle, some voices argue that centralised structures will still exist on top of a decentralised infrastructure, limiting the extent of real decentralisation. Similarly, the promise of user-owned data is challenged by the fact that many Web3 services still rely on centralised servers.

Beyond structural concerns, some critics see Web3 as inefficient and impractical, suggesting it is more about monetising crypto tokens than revolutionising the internet. Financially, while Web3 aims to reduce intermediaries, transaction costs could increase due to micro-fees on every interaction. Additionally, the space has been marred by hype and fraudulent projects, making it harder to distinguish genuine innovation from opportunistic ventures.

While these critiques highlight important issues, they also serve as a roadmap for improvement, pushing the Web3 space to refine its infrastructure, security and long-term sustainability. It’s a bit like the early days of the automobile: initial infrastructure wasn’t ready, making travel difficult. But the potential was clear. As roads improved, so did the performance and usefulness of cars. Web3 may be on a similar journey.

Looking ahead

Despite the scepticism and ongoing challenges, Web3 is steadily maturing. Tools are becoming more intuitive, security features are improving, and real-world applications like decentralised identity and blockchain-based finance are gaining traction. But this shift won’t happen overnight, and it won’t happen without users who are curious, critical and informed.

Whether you're new to Web3 or already experimenting with dApps, there are practical steps you can take to get involved:

• Try out a Web3 wallet and learn how to manage a private key.

• Explore a decentralised application that interests you, like DeFi, NFTs or social platforms.

• Read up on Layer 2 solutions to see how scalability is evolving.

• Learn how to stay safe by understanding how investment scams, phishing and smart contract risks work.

Explore more on Web3 with Bitpanda Academy

Want to dive deeper into Web3 and how it’s reshaping the internet? Learn more about blockchain technology, decentralised finances (DeFi) and smart contracts and explore expert insights in the Bitpanda Academy to stay ahead of the next big shift in digital technology!