Assessing the Viability of Web3 Applications.

• Position: SPECIAL SECTION: WEB3 AND BLOCKCHAIN

While we have explored many potential applications of Web3 technologies to municipal revenue-raising, the utility of most existing Web3 applications remains unclear, (1) and the application of Web3 to local government revenue thus remains largely speculative. Present contributions should therefore focus on ways of evaluating such applications. The questions below can help assess the viability of potential Web3 revenue applications.

To what extent does the application rely on speculative bubble dynamics versus real-world value?

Bubble dynamics mean that asset prices exceed real-world value. Speculation drives bubble growth, as investors assume that prices will continue to increase. Speculation is fundamental to the current value attached to Web3 "digital goods," demonstrated by the 2022 crypto asset crash. (2) Potential local government applications should therefore have their reliance on speculative value questioned. Mining cryptocurrency relies heavily on speculative valuations. The value of mined cryptocurrency depends on investor perceptions, and the same seems true of CityCoins and selling NFTs of public art.

When considering any Web3 revenueraising proposal, a local government should make sure it understands what it is that grounds a Web3 application's earning potential. If the answer seems to come down to the value perceived by others rather than solid underlying social or economic value, the application may rely on bubble dynamics.

What real-world problem does Web3 solve that existing technology cannot?

Specifically, the question should be, "What problem does Web3 solve that more established technologies can't?" To start, we may consider the efficacy of existing "analogues" to a Web3 innovation. The closest analogue in our CityCoins example appears to be a lottery. In general, lotteries work well enough as they are--which should call the need for technological innovation around them into question.

In many areas, innovative technology can add significant value. The next step should interrogate the merit of blockchain technology, specifically, over other possibilities. Many technologists have observed that existing technologies are often already perfectly capable of delivering some of the same benefits that blockchain is purported to provide. For example, leading computer scientist Professor Jorge Stolfi has commented: (3) "It [blockchain] promises a decentralized ledger where multiple organizations can contribute input data and...