Web3 is Lemons — Go Make Lemonade
It would be a mistake to write off web3 as merely a ploy to sell companies and the public on crypto and NFTs. While digital currencies and (wannabe) art market disruptors have kept much of the media preoccupied, there is a more fundamental and lasting evolution taking place that’s going to affect how — and for what — individuals and organizations use the internet.
Not every organization will like everything web3 is bringing to the digital realm — but everyone can prepare to make the adjustments necessary to maintain and create business advantage while also empowering individual users.
This blog post introduces blockchain-based technologies and approaches that every data leader should be aware of when formulating their organization’s web3 transition strategy.
Web3 = web2+1
Web3 is merely an extension of the current internet which will be powered by blockchain technology and decentralized applications. It will provide an environment in which everyone can own their proprietary data, control who they share it with and benefit from its use. There is great momentum behind this technological direction, and it presents innovators with a range of openings for disruption. The question that the current major players need to answer, then, is how to adjust their services and the value propositions at the core of those services to adapt to this technological shift.
To better explain the significance of the web3 transition, it’s necessary to consider how applications have been built since the dawn of the internet.
Traditional client-server applications tend to rely on the three-tier software architecture, which consists of the following components:
- Consumption layer: responsible for displaying data to the user and accepting input from them. It also handles the formatting, presentation and navigation of data.
- Compute layer: contains all the business logic for the application and performs operations on data retrieved from the database.
- Data storage layer: stores all the persistent data for an application. The database can be relational or nonrelational depending on how it’s used.
In the web3 world, we’ll continue to rely on the same three layers, but with different technologies becoming prominent — let’s see some specific examples.
Consumption layer:
Augmented and virtual reality (AR and VR, respectively) are slowly catching up as the primary gateway for humans to access the immersive web. The means range from AR glasses and haptic wearables to autonomous vehicles — such as unmanned drones for package delivery — and beyond.
Computation layer:
Artificial intelligence and machine learning (ML) are fundamental for web3, as they will serve as the engine for contextual and personalized experiences. Meanwhile, the increasing amount of data being collected and contextualized information being transited to the consumer will require immense amounts of processing power and extremely fast network connectivity. Edge computing helps reduce the distance between the device and processing power, while 5G satisfies the need for high network speeds.
With these elements in place, we already have the base infrastructure requirements for the computational layer nailed down for web3.
Data layer:
Data privacy and the power that centralized organizations have over it have been a critical concern flagged by critics of the current web. As an increased number of devices around us get sensorized, the concern around privacy will continue to surface. Distributed ledger technology restricts a single entity to owning the data and helps users to monetize their own data if desired, maintaining anonymity and giving greater control to the individual user.
The path to Web3 maturity
Web3 products, like those in any era and environment, need to solve real problems for people and make them convenient and easy to use. Functionality should always take precedence for a product to be considered market-fit. Current web3 applications are yet to break this boundary in a truly disruptive way.
A prominent example of a not-quite-there-yet application is DTube, a decentralized video sharing platform that looks and feels very similar to YouTube. DTube enables users to own the rights to their videos and rewards them with DTube Coin. This is unlike YouTube, where Alphabet directly rewards creators with Fiat money wired to their account — after taking a large cut of up to 45% from their revenue. However, for DTube users/owners to access the money they’ve received, they need to take additional steps to sell their tokens on a decentralized finance (DeFi) platform. This additional step can be a strong disincentive for content owners considering publishing primarily or exclusively on DTube over YouTube.
The first step on the road to future market-fitness is to engineer a more mature web3 system by using existing technologies. Currently, there are only a handful of these technologies, but the list is growing, producing an increasingly diverse range of solutions. Some companies are developing solutions to provide better security and privacy for their users, like the Brave browser, which blocks ads and trackers. Brave is a good example of the balancing act that major platform holders might soon be forced to undertake: it gives users greater control over their data but also asks them for greater input to personalize the user experience via a reward system based primarily on actively opting in for ads.
Fig 2. shows a few more web3 alternatives to currently prevalent products and technologies:
The second step towards a market-fit web3 is to make the internet more decentralized and open by creating data packages and marketplaces that enable users to exercise greater control in how they share and monetize their data. This would go a long way towards solving common problems with privacy, security and identity management.
Rather than fight the looming change towards decentralization and user empowerment — and risk antagonizing users (further and rightfully) — established web2 businesses should reevaluate not just their technology stacks but their business practices as well. Greater user control over personal data does not automatically mean an unwillingness to enable other parties to access and use that data, but it does introduce a significant change to the currently prevalent practice of handing it over wholesale upon acceptance of a platform’s terms of service. Corporations shouldn’t be expected to cut their dependence on user data, but they might soon be faced with the necessity of providing users with greater choice in what information they hand over, as well as greater rewards for it.
While the approaches may vary by industry segments, the core concepts will remain. Below are four cornerstones of a future-fit web3 strategy.
- Build with the future in mind.
Technologies and use cases tend to be disconnected from each other and focus on singular problems. Have a complete end-state in mind with an unobstructed vision of the business goal. For example, inventory management companies can have cameras installed in their warehouses and visualize physical objects as 3D assets to enable remote workers to walk around inside the warehouse — and even create a digital twin of their entire warehouse to streamline operations.
2. Experiment with IoT.
Prepare to handle the volume of data coming from the increasing variety of sensors and plan how you will benefit from the insights they generate. A realistic use case is for long-distance logistics companies to have trackers on the vehicles of their delivery partners to collect telemetry data to help predict time of delivery and measure driver efficiency.
3. Ensure interoperability.
Build an ecosystem that unifies the technologies internal and external to the organization so they can act as a single entity. Whether modeling large facilities, having a digital twin or optimizing planning, it’s especially important to bring all the information that matters for the business under one umbrella. Using digital techniques to monitor and optimize will help ensure the quality of every product and streamline production. This best practice has applied to every iteration of the web, but it’s worth emphasizing again for web3 due especially to the proliferation of IoT solutions.
4. Define privacy and security standards.
Observing the privacy of customers and the security of their assets involves being careful about what kind of information you collect, what you do with it and who has access to it. And with web3 standards still highly malleable, there’s considerable room for experimentation and innovation. Decisions about privacy and security policies will have far-reaching technological implications as well, as they may informs such fundamental questions as whether a service will run on a public, private or hybrid blockchain.
In addition, while blockchain-enabled anonymity promotes privacy, it also makes it more difficult to provide the kind of protections we’ve become accustomed to from third parties such as banks. In industries where, for example, quick and reliable fraud resolution has been an established feature, — businesses will need to think about how to offer the same protections in a decentralized way.
Conclusion
Web3 will disrupt industries, create new opportunities and digitally empower people in ways yet to be seen. A future-fit web3 strategy isn’t about how new and more effective technology can streamline existing business practices; instead, it redefines those practices to change how we interact and transact with each other — and what the objects of those transactions can be. Criticisms of blockchain technology being overhyped often conflate questionable crypto practices with unrelated use cases that hold great potential for empowering the average user. All signs indicate that that the blockchain is here to stay — and it’s largely up to businesses to define how it can and should be used to improve on web2 practices.
About the author
Anjan Banerjee is the Field CTO of Starschema. He works with cloud technologies and data warehouses and has extensive experience in building data orchestration pipelines, designing multiple cloud-native solutions and solving business-critical problems for many multinational companies.
Connect with Anjan on LinkedIn.
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