Author: Solaire, YBB Capital
introduction
In 2014, Gavin Wood, the co-founder of Ethereum, proposed a concept. He started thinking from the perspective of decentralization and democratization of the existing Internet. Is there a new possibility that the services we use are no longer provided and controlled by a single company, but are jointly maintained and contributed by global users through blockchain technology? This approach gives equal power to each participant, and he calls it the next generation of the Internet, Web3.
In 2021, the blockchain craze reignited the concept of Web3, but the market's definition of Web3 was very vague at the time, just like the emperor's new clothes. At that time, everyone was talking about Web3, but no one knew where Web3 was. As of today in 2023, Web3 is still in the early stages of exploration, but the definition is relatively clear, that is, to subvert the data monopoly of traditional Internet giants through the characteristics of blockchain, but the industry still has great differences in development categories and forms.
At present, the true form of Web3 has not yet been fully revealed. It may go through many stages and evolutions. The process leading to a new Internet form is relatively bumpy. This article discusses the significance of Web3 and how Web3 should develop based on my subjective perspective and the current industry status.
Born from the free Web3
Historically, the pursuit of freedom by human beings started from the civil rights and political participation in the classical era, experienced the exploration of individual rights and religious freedom during the Enlightenment, and developed to the free market and property rights of modern liberalism, as well as the public ownership and classless ideas of socialism. The ideological differences arising from the exploration of freedom in different eras and cultural backgrounds still have a profound impact on us. Even today, in the confrontation with the centralization of some industries or systems, new paths will be created to explore freedom and generate different ideologies.
Today, traditional Internet giants such as Google, Facebook, Amazon, etc., control over personal data largely constitutes their business model. They collect, store and analyze users' personal information to provide more personalized services and generate revenue through advertising and other commercial activities. However, this control over personal data has raised a series of issues, including privacy, data security and data ownership.
Based on this background, the next generation Internet proposed by Gavin Wood has given blockchain entrepreneurs an idea to combine the traditional Internet with blockchain to create the next generation Internet, where personal information is free, democratic, and decentralized, and is jointly created and maintained by all those who participate in its use. At the same time, it also changes the interest relationship from the traditional Internet company providing services to users, and users then providing information to them to generate profits, to a model where participants jointly build and then spread the benefits to all participants.
This new Internet model is called Web3, and its key features are mainly:
Decentralization: Web3 uses blockchain technology and decentralized protocols to eliminate single centralized authority and achieve more reliable and secure data exchange and storage through distributed networks.
User control and data ownership: Web3 gives users direct control over their personal data. Users can choose when to share, store and manage their own data, protecting personal privacy and data security.
Decentralization and transparency: By using blockchain technology, Web3 enables trustless transactions and contract execution, providing greater transparency and verifiability.
Asset confirmation and exchange: Web3 provides support for cryptocurrencies and digital assets, allowing users to conduct decentralized value exchange and asset management.
Overall, Web3 aims to build a more open, free, fair and democratic Internet, enabling individuals to better control their digital identity and data and achieve more secure, private and trustworthy online interactions.
Web3's grand vision seems to be no less than Bitcoin's vision of changing traditional finance. However, contrary to expectations, most Web3 projects currently perform poorly in non-financial applications. This leads to some questions, such as whether it makes sense to use blockchain in non-financial applications? And how should we integrate with the traditional Internet industry? Should blockchain continue to implement financial attributes? Quoting Vitalik Buterin's point of view in the article "Where to use a blockchain in non-financial applications?", stay away from "blockchain everywhere" and "blockchain minimalist". I personally understand this sentence as whether a project has the necessity to use blockchain technology. This article will discuss the above issues from some mainstream use cases in the non-financial field around this point of view.
Framework Problems of Web3 Applications
Pursuing freedom or starting from reality is a complex issue. Blockchain was originally designed to solve the problem of financial centralization. The distributed architecture, consensus mechanism, and data structure inevitably make the entire network very inefficient. Unlike Web2, which is based on a centralized server model, blockchain needs to verify transactions and ensure that every node in the network is updated before a result can be established. Although later blockchain practitioners have made countless efforts to increase the possibilities of blockchain, from establishing Ethereum and building the Ethereum Virtual Machine to allow smart contracts to run on it and achieve the possibility of application operation, to scalability, around the defects of EVM, to build a second layer, side chain, sharding, or change the consensus mechanism to add some innovations to create a new public chain. All public chain-related practitioners are working hard to solve the blockchain impossible triangle, namely decentralization, security, and scalability.
I do not deny that these efforts are useless. On the contrary, it is meaningful to promote the scalability of blockchain. However, under the current circumstances, we must admit the fact that we have been developing in the framework built by Satoshi Nakamoto and have not yet achieved the level of Web2 applications. The decentralization and security of blockchain are always higher than scalability. Even if the impossible triangle is broken, the essence of blockchain in terms of architecture is also a giant linear table. This is the invisible framework of blockchain. The meaning of this design itself is to eliminate the counterparty risk between peers and reduce the cost of reconciliation friction. Today, Web3 applications build programs on blockchain just like building an App in Excel. There are many restrictions and inefficiencies. If you are out of the framework, it does not conform to the meaning of Web3 itself. If you conform to the framework, you have to accept some inevitable inefficiencies and complexities.
Therefore, the current idea of App application projects is to reconstruct a certain type of Web2 App through a compromise approach, such as a social or video application, and combine the application part on the chain or separate the assets and user data and put them on the chain, and finally obtain some simple, inefficient and blank Web3 products.
For most people, they need a social platform with enough resources for browsing and interaction rather than a complicated task platform. They need a video platform with user-generated content and a rich video library for browsing. The current Web3 video platform likes to bundle users through the token model instead of focusing on content. This type of product uses "blockchain everywhere" as the underlying logic and makes achieving Gavin Wood's concept of Web3 the primary goal, and puts this concept above user value and efficient production efficiency. This is an act of putting ideals above reality.
Looking at the history of the development of human industrial products, it is always a process of finding a balance. All products that are ahead of their time or put the cart before the horse have failed without exception. Even if they meet the needs of a small number of people, they are difficult to develop. Because only products with a large enough user base can be favored by the market, and only with enough funds and strong user demand can the industry develop rapidly. This is a positive relationship and a simple truth.
The current situation of application projects is a bit neither fish nor fowl. It can even be said that there is no clear purpose. They are just put on the chain for the sake of being put on the chain. I personally think that at this stage, more should be done to help or guide traditional game companies and Web2 companies to go on the chain, and change the status quo of such products through their high-quality services and content. Blockchain gives them more economic benefits and possibilities, and the power of Web2 will bring more users and developers to promote the construction of Web3 applications. This is a win-win model.
Utopian SSI
Self-Sovereign Identity (SSI) is a concept that advocates that individuals or entities have full control and management of their digital identities. Its core idea is that everyone should own their own identity, just like they own their own personal belongings, rather than relying on the government, company or any centralized third-party entity to confirm or manage their identity.
In this model, individuals directly own and control their identity data and decide when, how and with whom to share it. This data may include a variety of identity information such as name, address, date of birth, passport number, as well as more complex data such as education records, banking records or medical records.
The concept of self-sovereign identity is nearly complete with the use of blockchain technology. In blockchain, we call SSI a decentralized identifier or DID (Decentralized Identifier). This is a new type of identifier used to provide persistent, verifiable, decentralized identity authentication in the digital space. The main goal of DID is to provide entities (such as people, organizations, devices, etc.) with a way to control their own online identity without relying on any centralized registration agency.
Technically, a DID is a string with a specific format, usually associated with a blockchain or other distributed ledger technology (DLT). A DID enables an entity to assert its identity directly on the network without going through an intermediary (for example, a social media platform or email provider) for verification.
A key feature of DIDs is that they are controlled by the entity itself, rather than issued by a third party. Entities can create, update, and revoke their own DIDs without going through any centralized registry.
DIDs are a key tool in enabling the self-sovereign identity (SSI) model, which allows entities to own and control their own identities rather than relying on centralized identity providers.
For example, a DID might look like this: “did:example:123456789abcdefghi”. In this example, “did” is the fixed identifier element that indicates this is a DID. “example” is the so-called DID method, which illustrates how this DID is created and managed on a specific blockchain or DLT. “123456789abcdefghi” is the specific identifier part of the DID that is unique within the blockchain or DLT to which it is associated.
Self-sovereign identity is the core of Web3 and is also a concept with a strong utopian connotation. "Utopia" is a word derived from Greek, which is composed of the two words "ου" (nothing) and "τόπος" (place), meaning "a place that does not exist". This word first appeared in Thomas More's work "Utopia" to describe an ideal, perfect society or community. I think utopia and DID are very matching words. It is both the hammer that breaks the barrier from Web2 to Web3 and a hammer that does not exist. As mentioned above, "the concept of self-sovereign identity has been nearly completed with the application of blockchain technology." Why use the word "nearly completed"?
Because DID, like the blockchain's triangular problem, has its own triangular problem, "privacy", "decentralization" and "Sybil resistance". For example, Bitcoin, Ethereum and many other cryptocurrency systems do not centralize the process of recording user identities, and users do not need to provide any personal information when creating their own digital wallet addresses. However, this practice leads to a problem: projects that treat these addresses as unique identifiers are extremely vulnerable to Sybil attacks.
To avoid such attacks, some Crypto projects require users to undergo additional customer identity verification (KYC) procedures, such as submitting government-issued IDs. This does effectively prevent Sybil attacks, but it also means that users need to sacrifice a certain amount of privacy. At the same time, this verification method is not in line with the decentralized spirit of blockchain because it relies on other non-decentralized identity verification methods.
It is difficult to prove that a person is unique in a network while ensuring privacy and decentralization. The current mainstream method is to confirm through the social graph through the relationship network or through the Orb iris scan, but both methods have logical problems. For example, the social graph only needs to update the relationship network to update a new identity, while Worldcoin's Orb iris scan claims to only save the hash data of the iris, but this centralized method cannot guarantee that there will be no human evil in multiple links. Reality always has some dystopian colors, but I think the application of blockchain technology in DID is necessary, and DID can also be achieved by balancing the three triangles. Perhaps the introduction of SBT (Soul Binding Token) or the local biometrics of mobile devices can find a suitable balance between the three triangles.
Web3's Decentralized Storage
The main features of decentralized storage currently include:
Distributed: In a decentralized storage system, data is split into multiple parts and distributed across many different nodes (usually personal computers) around the world, rather than being stored on a single central server.
Security: Since data is distributed across multiple nodes, decentralized storage systems are more secure and less vulnerable to single-point attacks. At the same time, many decentralized storage systems also use encryption technology to protect data security.
Fault tolerance: Since data is replicated and stored on multiple nodes, even if a node fails, replicas on other nodes can still provide data, thereby improving the availability of the system.
Transparency: Many decentralized storage systems are based on blockchain technology, which means that all transactions are public and can be viewed by anyone, increasing transparency.
Censorship resistance: Because data is distributed and often protected by encryption, decentralized storage systems are highly censorship-resistant, allowing data to be accessed and retrieved even in the face of attempted blockage or censorship by governments or other agencies.
Persistence: Because data is replicated and stored on many nodes around the world, decentralized storage has high persistence. Even if some nodes fail or disappear, data can still be retrieved from other nodes.
Decentralized storage is an early development track in blockchain non-financial applications. As a key container for Web3 data, decentralized storage has always had two most critical pain points: high barriers to entry and weak performance, which are somewhat contrary to user value. However, I believe that decentralized storage is in line with the necessity of using blockchain technology. Currently, there are some projects that continue to raise its upper limit, such as ETH Storage and Arweave.
Whether it is web3 app or the future Metaverse, a sufficient decentralized container is needed to carry data and front-end. I am still optimistic about the future of this technology. The current direction is relatively simple. We will continue to increase the speed and reduce gas fees to upgrade the storage space and storable content to a level that meets user value. I believe that the characteristics of decentralized storage will be more attractive than traditional centralized storage.
Bitcoin
To sum up, I have proposed three key non-financial use cases for Web3. It can be seen that the entire concept of Web3 is still in its early stages. They are all limited by certain issues and inevitably need to go through some detours.
When Gavin Wood proposed the concept of the next generation of the Internet, he did not consider the inefficiency of blockchain and the violation of business principles, which led to the strange phenomenon of practitioners building the roof first and then the building. I share the same view as Vitalik Buterin. Blockchain is not omnipotent and can not only be used in a minimalist way. The application of each technology should consider the current situation and have a clear purpose. An impetuous mentality will only lead to faster failure. If Web3 needs a spiritual benchmark, Bitcoin may be very suitable. Although each code designed by Satoshi Nakamoto is not complicated, it has a clear purpose. Bitcoin does not belong to anyone and belongs to everyone. Its subversion of traditional industries and its enlightenment to subsequent practitioners still have a profound impact on us today, 15 years later.
“Why buy bitcoin” is the slogan of YBB, and the above is my answer. I hope that one day when someone asks me why I’m all in on Web3, I’ll also have my answer. My expectation for it is also to subvert tradition, break the monopoly, and make it a technology for the people. No one can stop the tide, and I hope all practitioners will encourage each other.
