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So, manifest v3 was all about preventing Google’s competitors from tracking you so that Google could forge ahead.
It was never about privacy, it was supposedly about security, which there is some evidence for. There were a lot of malicious extensions. The sensible thing to do would be to crack down on malicious extensions but I guess that costs too much money and this method also conveniently partially breaks adblockers.
The fewer of your competitors who have the data the more valuable that data is.