Developer shortage stands in the way of decentralized, blockchain-centric internet bliss.
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Advocates of Web3, a catch-all term widely used to incorporate concepts of decentralized networks, cryptocurrencies and other blockchain-powered applications, have a grand vision for the future of the Internet and global finance.
One thing that stands in the way: a lack of people to make it happen.
At the end of last year, when bitcoin and a handful of other cryptocurrencies reached their highest values, about 18,500 developers each month were contributing to open-source Web3 projects, according to a report published by crypto-focused investment firm Electric Capital.
Electric Capital
That number is “at an all-time high and growing faster than ever”—with roughly 60% of Web3 developers entering the industry in 2021—writes Electric Capital partner Maria Shen, but it is a speck of the global total of software engineers, which stood at 31.1 million in the first quarter of 2022, according to developer analytics company SlashData.
Facebook, Amazon.com and Google—the largest companies of today’s internet, dubbed Web2 by cryptophiles,— have over 20,000 software developers each, according to various estimates. But they’re outnumbered by the staff at companies like JPMorgan and Citigroup, both of which say they employ over 30,000 on projects for their financial-services businesses.
Crypto insiders might shrug at this juxtaposition, replying “we are still early”–one of the industry’s favorite refrains–but some see this chasm as a major impediment to the realization of Web3’s promises.
“When Citigroup reportedly employs 30,000 developers, but there are only several thousand active monthly blockchain developers, this developer gap feels insurmountable,” says Jay McCarthy, cofounder and chief technology officer at blockchain development firm Reach.
“Blockchain has extreme potential, but if we don’t get more developers building out their dreams, that potential will never be realized,” echoes Chris Swenor, CEO of Reach and McCarthy’s cofounder.
They identified a high barrier to entry as a primary reason for the shortage. Not only does blockchain development often require knowledge of specialized programming languages like Solidity or Rust, used for implementing smart contracts on Ethereum and Solana, but fundamentally “it’s a brand new technology that requires behavioral change,” says Swenor.
He and McCarthy founded Reach in 2019, out of their Boston homes, for that very reason. The company, backed by creators of the Algorand blockchain, provides developers with a toolkit that helps them cut up to 85% of costs and time spent on the development of applications including decentralized autonomous organizations (DAOs) and nonfungible tokens (NFTs), two key building blocks for most visions of Web3. “We are trying to lower that barrier and simultaneously increase the ceiling of what is possible because people are willing to have more ambition and try to take on more if they have the support,” McCarthy explains.
At a first glance, the gap between the demand and supply of programmers needed for an internet overhaul is apparent. It’s hardly possible to name a Web3 or blockchain company that is not actively seeking developers. Just last month, popular employment website Indeed listed over 600 software engineer, software architect, full-stack and back-end developer jobs that had the words “cryptocurrency,” “blockchain,” “bitcoin” and “ethereum” in their descriptions. TrueUp, the tech jobs analytics platform, estimated 9,715 open crypto jobs at the beginning of summer—a third of them for software-engineering positions.
However, blockchain heavy hitters say they are faced with a different set of challenges.
Protocol Labs, an open-source research and development laboratory known for decentralized data storage projects such as InterPlanetary File System and Filecoin, is looking to hire about 50 software engineers but is not short on applicants, according to Dietrich Ayala, its ecosystem lead of browsers and platforms.
“I think a better question would be, is there actually a shortage of developers or is there a shortage of developers who are able to think about what the next generation of internet will look like? And that’s a more challenging task from a recruiting standpoint,” says Ayala, who had previously spent over a decade at web pioneer Mozilla.
The mindset is especially important for companies working on the core technology of Web3—blockchains that underpin applications like NFTs and decentralized marketplaces. “There’s definitely a shortage of developers in general,” according to John Wu, president of Ava Labs, the New York-based creator of the Avalanche blockchain, “but we have to consider quality. The space is growing so fast, things are changing so quickly. What developers are doing today may not be what we need them to do six months from now.”
Competitors agree. “If you throw 100 engineers at a project versus 10, it doesn’t mean that the project is going to grow 10 times faster,” says Austin Federa, head of communications at Solana Labs, the company behind the Solana blockchain. “Some Web3 organizations have the financial backing to scale to a thousand people if they wanted to, but we don’t hire a ton of developers just because we can,” he states. “In Web3, people hire more developers when they have new problems for them to solve.”
Backed by the likes of billionaire Sam Bankman-Fried, venture capitalists Andreessen Horowitz and algorithmic investor Jump Trading, the 70-person company lacks neither resources nor developer interest. Solana’s flagship Hacker Houses—six-day gatherings for developers building blockchain-based applications—have attracted more than 11,000 attendees in 18 cities this year. According to Federa, one of the goals of these events is to help the so-called Web2 developers who are interested in transitioning understand whether they are ready for the challenge. “It’s seen as riskier to go into Web3, I think, by a lot of developers. It’s definitely a less cushy type of job to have.”
Declining cryptocurrency prices, multi-billion dollar bankruptcies of some of the most trusted players–including Singapore-based hedge fund Three Arrows Capital and crypto brokerage Voyager Digital–and a wave of layoffs at established crypto firms, among them exchanges Coinbase and Gemini, have only added to the industry’s woes.
In Ayala’s experience of interviewing candidates, their biggest concern often boils down to industry risk: Will crypto as a whole succeed or fail? How bad are the recent levels of currency volatility?
It is no secret that Web3 firms are willing to pay handsome rewards for risk-taking. Crypto startups flush with cash from the latest bull market—a record $25 billion in venture capital funding in 2021, data from CB Insights shows,— are offering average annual salaries of $150,000 for junior Solidity developers. The more experienced ones can rake in $400,000 or more, CoinDesk reported, whereas the national salary average for software engineers is roughly $97,000, according to Glassdoor. “You will see salaries that make Web2 salaries look low, quite frankly,” agrees Federa.
More than 60% of those working in Web3 take at least part of their salary in cryptocurrencies, according to a report by crypto tracking platform CoinMarketCap. Those already-hefty sums could quickly turn into fortunes with the next big price rally but can just as easily dissipate in a market downturn.
The good news is that the industry has historically managed to retain workers even through bear markets. Electric Capital estimates the number of monthly active blockchain developers has stayed flat at around 11,000 even as crypto prices fell more than 80% from their peak in 2018-2019.
But corporations like Google, Microsoft and Amazon are increasingly competing for the same talent pool: 81 of the top 100 public companies were using blockchain technology in the fall of 2021, according to Blockcdata. Among Forbes’ Blockchain 50 list’s latest members, billion-dollar enterprises seriously implementing the technology, are Depository Trust & Clearing Corporation, the largest post-trade services organization in the world, auction house Sotheby’s, Boeing and Walmart, to name a few.
Ava Labs’ Wu is optimistic: “not every Web2 company has figured out how Web3 can help them,” he says. “Recent news may have slightly decreased the inflow of new developers to Web3, but whoever has made the decision to come over, I don’t really see them going back.”
