This article continues the series, where we present key analysis and insights, from the latest State of the Developer Nation public report. You can read the previous 3 posts on how generative AI affects developers' work, developer communities and developers working on everyday electronic devices. In this post, we look into Web3.
Web3 has captured imaginations and headlines, offering visions of a decentralised online world. Yet, scepticism lingers: is Web3 genuine innovation, or a bubble waiting to burst? Let's take a first look at what projects Web3 developers are actually working on.
Evangelists of decentralisation have been promising a world devoid of centralised control, where developers and consumers are unhindered to explore, create, and build as they wish. However, after a few years of development, what projects are Web3 developers working on?
Web3 hasn’t lived up to its early hype, with a large proportion of developers stopping their Web3 projects/experimentation
In our latest global developer survey, we asked web and backend developers if they are currently involved in Web3 projects, and, if so, what kind of projects they are working on. The majority of these developers have never been involved in a Web3 project (58%), indicating that Web3 is still a nascent space. While Web3 has associated technical challenges, and it often requires unconventional approaches to monetisation, interest in it continues among some developers, despite plenty of sceptics. Even with this interest from developers and consumers, Web3 has yet to emerge as a space where many developers feel the need to move their projects.
Further to this, of the developers who have been involved in Web3 development, 44% are no longer actively working on such projects, with almost half of these stopping development within the last 12 months. The potential of Web3 is advertised as vast, but its journey to full fruition is anticipated to be a gradual one. However, this attrition rate, which may be expected given the nascent nature of Web3, raises questions about its current trajectory.
Disrupting FinTech
For the 24% of web and cloud developers working on Web3 projects, what are they actually building? The most common type of project is decentralised finance (DeFi) applications, with 31% of Web3 developers working on this. DeFi offers a system and framework for people to participate in financial transactions and investments without needing to go through current financial instruments. This aims to reduce reliance on multiple layers of merchants involved in managing and securing transactions, as well as the regulations and laws that currently exist to protect individuals investing or transacting.
While these systems may appeal to developers, and offer a straightforward way for monetising their projects, current perceptions of DeFi may make widespread adoption difficult. DeFi applications place a large amount of responsibility and risk on the users, rather than the institutions. Further, DeFi is more popular among less experienced developers, as well as developers in the Middle East and Africa (39%) and East Asia (35%). It may be appealing more to regions with histories of unstable currencies or depreciated salaries, where the unstable cryptocurrency market is still more secure than their fiat currency. As such, expanding interest beyond those already committed to the crypto space, whether ideologically or out of practicality, may be challenging, which can be seen with DeFi revenue no longer seeing significant growth.
Other financially-focused projects are also popular among Web3 developers, with 25% working on non-fungible token (NFT) marketplaces and 20% involved in decentralised autonomous organisation (DAO) applications. NFT marketplaces allow users to trade tokens, typically associated with receipts for ownership of an image, with cryptocurrencies where the owner makes a small slice of each transaction or minting of an NFT. DAOs are comparable to financial institutions involved in spending, investing, or holding capital, but focused around cryptocurrencies and smart contracts.
Financial service projects (DeFi, NFTs, and DAOs) are among the most popular projects for Web3 developers
However, the regional popularity of these two projects may indicate the future of these other projects. Similar to DeFi, NFT marketplaces are the most popular among developers in the Middle East and Africa (30%) and East Asia (27%). Similar motivations behind being distrustful of local fiat currencies can lead to an interest in decentralised mechanisms for verifying ownership. On the other hand, interest in DAOs is highest among North American (29%) developers. While DAOs have multiple uses, their ability to act as a collective financial institution may particularly appeal to North American developers who wish to access methods of making passive income that they have otherwise found challenging to access.
The motivations of developers in these regions are likely to define the use cases of these projects, which may limit their growth beyond those with high technology interest within them.
A further example can be seen in the popularity of Web3 gaming applications in East Asia (31%) over all other regions. East Asian game developers and consumers are fans of a particular type of collectable games, gacha, that translates well to play-to-earn and blockchain mechanisms.
However, this type of game has received policy focus from certain governments, criticising it for encouraging gambling or exploitative mechanics. This may lead to Web3 gaming becoming highly regionalised, with certain areas being able to produce popular and well-monetised games, while others struggle with regulations and demonstrating their value and use of Web3 technologies. This can be seen with North American and European gaming communities showing high levels of hostility towards Web3 in general.
Developer’s experience and their projects
Web3 projects are most popular among developers with three to five years (31%) and six to ten years (29%) of experience, and the lowest involvement by both the most and least experienced developers (22% and 13% of developers with less than one year, or more than 16 years of experience, respectively). This suggests that Web3 development is less accessible to less experienced developers. However, the lower adoption of Web3 projects by the most experienced developers points to several possible situations.
More experienced developers possess greater expertise in their respective domains, and as such, are likely focused on complex projects in more traditional development spaces, reducing the proportion moving to Web3. Further, Web3 is still a relatively unproven space, and experienced developers have seen many trends or new paradigms rise and fall without having a lasting impact on the industry. This can lead to them being less interested in engaging with Web3 as early adopters, and instead are waiting for it to prove its value to them or their development projects first.
However, when looking at the specific types of projects developers of different experience levels are involved in, we can see quite a notable divergence in project choices. Web3 projects that are traditionally associated with the cryptocurrency space are most popular among mid-career developers.
DeFi is most popular among developers with between three to ten years of experience (34%), with NFT marketplaces and DAOs being most popular among those with six to ten years of experience (31% and 26%, respectively). Further, DeFi remains the most popular choice for all developers with less than ten years of experience. Until quite recently, cryptocurrency and its associated activities were in highly experiential and unproven stages of development. As such, more experienced developers may have not focused their attention toward it, leaving it as a space where less experienced developers were able to generate their own domain-specific expertise. As they now gain prominence, those who had previously tinkered in this area are now entering the mid-career stage and are positioning themselves to leverage their early interest.
However, projects that are more closely associated with traditional development projects are undertaken in greater proportion by more experienced developers. Identity verification and authentication systems are popular projects for developers with more than 11 years of experience. Similarly, we see decentralised storage solutions and supply chain or logistics solutions shine as some of the most popular for the most experienced developers.
37% of Web3 developers with 11+ years of software development experience are working on identity and verification projects
When looking into Web3 development, we can see that the most experienced developers appear to be focused on tackling traditional solutions with the new technologies that Web3 uniquely allows. On the other hand, developers with less experience are focusing more on new projects that are only able to exist under Web3 technological paradigms. More concretely, more experienced developers are transforming old challenges with new solutions, while less experienced developers are trying to build entirely new technologies.
This article is part of the developer insights offered in the State of the Developer Nation 25th Edition. You can access the full report which covers:
1. Language communities - An update
2. Creating A Sense Of Community - How Developers Interact And Engage With Their Peers
3. How Generative AI Will Affect Developers' Work
4. Web3 Unveiled - Exploring The Diverse Landscape Of Web3 Development Projects
5. From Code To Consumer Magic - The Software Developers Behind Our Everyday Electronic Devices
6. What Are People Building In AR/VR?
Do you want to explore a specifc area or industry? We have a lot more data. Get in touch.