Recommended Reading: Blockchain & Web3
Title: Blockchain and Web3: Building the Cryptocurrency, Privacy and Security Foundations of the Metaverse
Who:
- Winston Ma, an investor, attorney, author, and adjunct professor in the global digital economy. He is one of a small number of native Chinese who have worked as investment professionals and practicing capital markets attorneys in both the United States and China.
- Ken Huang, CEO of DistributedApps and chair of Blockchain Security Working Group for Cloud Security Alliance in the Great China Region (CSA GCR).
Published: 2022
Why:
Ma and Huang offer a comprehensive view of how blockchain and Web3 technologies are involved in creating the “Metaverse” — defining it as “whatever is coming next for the internet”. They articulate key concepts for the underlying technology without excessive technical jargon. They use simple illustrations and visuals from a variety of sources to support salient points from their thesis, in language that is easy to follow.
This is relatively recent publication, as such, it offers insights and observations on a variety of contemporary use cases, particularly what is unfolding in China and the US. There is something here for everyone: from understanding the underlying the technology stack, to insights and issues about blockchain gaming, privacy and digital IDs, smart contracts, governance in DAOs, NFTs and generative art, creator economy, CBDCs and regulatory efforts. They offer a balanced approach — describing the challenges along with the promise of what is to come.
What:
Firstly, the authors acknowledge the variety of definitions associated with the term “metaverse”, and conclude “it is best understood as the broad term to cover whatever is coming next for the internet” — including the convergence of blockchain technology with the following elements: 5G, internet-of-things (IoT), artificial intelligence and machine learning (AI/ML), cloud computing, augmented and virtual reality (AR/VR), decentralized storage, big data, peer-to-peer (P2P) networks, and quantum computing. They stress that the promise of the technology will not (and should not) be solely realized by the BigTech companies, noting that there are many open-source projects aimed at ensuring this does not happen.
The book is organized in three parts — (i) convergence of digital technology into the metaverse, (ii) how blockchain enables the salient features of a digital economy, and (iii) the competing forces between an open metaverse, Big Tech corporations and government-backed blockchain networks.
Part I: In describing the convergence of technology and business models, they begin by illustrating how technologies are stacked to build a better internet for the creator economy. These technologies are shaping our user experience, informing how content is being generated and consumed on the internet, and driving the economic implications in a creator economy in decentralized communities — where users control aspects of privacy, security and value.
Four salient features of blockchain, namely smart contracts, public keys, consensus algorithms, and Peer-to-Peer (P2P) networking are explained. This prefaces the discussion on how blockchain converging with “cloud”, AI, security, IoT and storage in a manner that makes the case for why blockchain is essential ingredient for a Web3 / creator economy.
In Part II, the authors introduce features of cryptocurrencies and tokenomics — elements that facilitate blockchain-based transactions in a digital economy. This is followed by a explanation of decentralized finance (referencing contemporary applications) and how it compare to centralized finance. The authors offer their perspectives regarding the challenges to adoption. The subsequent chapter explores the opportunities and challenges concerning the use of NFTs and their role in the creator economy. The authors acknowledge the relationship between gaming and technical innovation and subsequently explore gaming in the Metaverse. It follows with an essential and informative discussion about big tech, security and privacy — and the solutions offered by web3 and blockchain technology (e.g. zero-knowledge proofs, sovereign ids) — that address how BigTech exploit users through maximum extracted value (MEV) in the surveillance economy.
A variety of contemporary uses cases are discussed in Part III. They illustrate the “competition” between BigTech, government-backed blockchain initiatives and open-source projects. Cases include CBDCs (particularly China’s push for e-CNY at the 2022 winter Olympics while simultaneously cracking down on crypto market), crypto regulation, stable coins, and community-based currencies. This follows with a discussion about DAOs and governance, guilds and organizational structures in the Metaverse, that prefaces an exploration of challenges of interoperability, State-backed initiatives in the Metaverse (BSN in particular), and the next “BigTech”. The book closes with thoughts on the evolution of the decentralized web where “value” is shifts in the emerging creator economy.
Sampling of Quotes:
Offering an alternative in how we look at money: We see that the textbook definition has an important drawback — it does not state the boundaries, does not define the environment for which it should apply.
The Creator Economy: We believe that the next wave of computing innovation — along with entirely new sectors of the economy — will be built on decentralized technology. This is Web3 — a group of technologies that encompasses digital assets, decentralized finance (DeFi), blockchains, smart contracts, tokens, decentralized autonomous organizations (DAOs), and more to come … the actual promises of Metaverse, in our view, will not (and should not) be solely realized by Big Tech companies.
Self-sovereign identity (SSI): With SSI, the security focus can be changed from centralized platform to wallet security, SSI security, and Access Control using smart contracts for data access.
Data security: … the protection from private keys is not enough; wallet security, secure data storage, and secure decentralized identity communication will need to be in place to enhance data protection in the Web3 realm.
Cryptocurrency as a default currency for the Metaverse: The crypto ecosystem must fight a currency war on two fronts. On one hand … the financial establishment of governments, including the national CDBCs, which competes with cryptocurrencies for transactions in the Metaverse, and crypto regulations that limits the usage and trading of crypto assets.
DeFi v CeFi and the “bumpy road to mass adoption”: While many believe that DeFi will be the foundation of future financial systems … there are also many challenges to widespread DeFi adoption. For most people, DeFi is too technical, too volatile, and too “geeky” to understand and use.
Metaverse outlook: Since 2021, the metaverse community has witnessed the emergence of different crypto sectors, each with different value drivers. In this new era, crypto use cases — various “utility tokens” — unrelated to bitcoin’s have finally been validated and achieved meaningful adoption.
Legal responsibility of DAOs: While corporations have the CEO and board chairman, from a legal perspective DAO basically means “all of its participants.” For that reason, it’s not clear who should represent the DAO in a judicial proceeding and file a tax return for purposes of tax law.
Interoperability of blockchains: The vision of interoperable blockchains thereby rests on several functionalities and abilities including integration with existing systems, transactions across multiple chains, and empowering apps and making it easy to switch one underlying platform for another.
Other media:
BSN Base: Winston Ma speaking to Leyla Gulen about a variety of topics. Here are Winston’s views on the book “Blockchain and Web3”
CGTN America, Feb 2022: Future of Technology with Winston Ma (at NYU) — discussion on AI, Blockchain, and the book on “Digital War”. The discussion on blockchain explores topics about digital and crypto currencies.
Harvard: Fairbank Center for Chinese Studies, Nov 2022 — Blockchain Technology, Crypto Regulation, and US-China Competition for Digital Currency Supremacy. This is the segment on blockchain technology in China
Constantine Kogan interviewing Winston on the subject The Impact of Web 3.0 and Metaverse — the discussion covers topics including Web3 economy, gaming, salient points of the metaverse and “red flags”.
Fintech.tv Digital Asset Report (Vince Molinari host) Jan 2021: Discussion about how Sovereign Funds are reshaping investment in the Digital Economy and how China’s tech power reshapes the Future of AI, Blockchain, and Cyberspace. Including insights on Ma’s book, the “The Digital War”.
