Moving from Web2 to Web3: What Technical Improvements Are Needed?
Web1, Web2, Web3: What Are The Differences?
Web1 served as the internet of the 1990s and early 2000s. At that time, the internet was a read-only directory of static HTML pages. User-to-user interaction was limited.
The era of Web2, also known as the read-write web, began around 2004 and remains the most relevant generation of the internet in 2019. It is comprised of social media sites, blogs, and online communities that allow end-users to interact and collaborate with each other at any time and in real-time.
Web3, compared to Web2, is more difficult to define. In large part, this is because the era of Web3 is still in its infancy. Ethereum, the leading blockchain network of Web3, only launched in 2015. In 2019, many of the technologies that go into making the Web3 experience practical for end-users are still being developed or improved. Nonetheless, a few key attributes are commonly regarded as belonging to this new era of the internet. For instance, Web3 aims to provide a more user-centric experience in an unmediated read-write web. Technology enables individuals to control data privacy and data ownership by default. Web3 also introduces the decentralized internet, where rent-seeking third parties have less control over user interaction and value transfers. In essence, Web3 technologies provide the foundation for P2P (peer-to-peer) communication, payments, services, and marketplaces. Blockchain technology and cryptocurrency play an important role in shaping the current development of Web3 and the decentralized movement.
State of Web3 Adoption in 2019
Since Bitcoin launched the world’s first blockchain in 2009, blockchain technology has improved in several key areas. As of mid-2019, Ethereum has produced the best results of any blockchain ecosystem to date — the most developers (250,000 to 350,000), decentralized applications (over 2,200), and monthly active users (~140,000). Despite this success, the adoption of Web3 applications is still far behind Web2. The goal of Web3 to become the de facto global standard for the internet remains an elusive goal for Ethereum as well as other blockchain communities.
For the Ethereum blockchain ecosystem, what technical challenges are most prominent in 2019? What solutions can be implemented to drive user adoption of Web3 forward? Below are three major areas to consider.
Lack of scalability is one of the biggest limitations the Ethereum blockchain faces in 2019. Whenever the Ethereum blockchain receives more traffic, the associated costs (gas fees) and time to complete transactions both increase substantially. Ultimately, this deters mainstream adoption. As of August 2019, the Ethereum mainnet is only capable of handling 15 to 25 transactions per second (tps). There are other blockchains that can handle significantly more transactions, but this often comes at a cost (i.e. sacrificing decentralization or security of the network). Most blockchains being used today still can’t reach the level of scalability offered by Web2/ fiat database technologies. For instance, Visa consistently achieves 1,700 tps and claims to be able to handle up to 56,000 tps. For Ethereum, the near-term goal is to reach at least 100,000 tps.
Even though some Ethereum scalability solutions have already been implemented on mainnet, most are either in the research phase or in the process of development and testing on various testnets.
Layer 2 scaling makes it possible to move transactions off-chain. In sum, this brings the benefits of blockchains (security, immutability, decentralization) while reducing the costs (slow confirmation times, volatile/high gas costs). Child chains and state channels have been the two most prominent Layer 2 scaling solutions being developed and implemented among the Ethereum community in recent years.
Sharding, another scalability solution, is a type of database partitioning that separates larger databases into smaller, faster, more easily managed parts called data shards. In the era of Web2, sharding can be quite simple. One example would be placing information related to various customers on different servers based on each user’s geographic location.
Implementation of sharding in blockchains, however, is a far more complex process. Traditional blockchains require all nodes to carry all transactional data history of a given blockchain. While this makes blockchains slow, it also makes transactions more secure and eliminates the double-spend problem. Alternatively, sharding would allow nodes to securely process transactions with only a portion of the blockchain’s transactional data history, speeding up transaction completion times. Shard chains are expected to be usable on the Ethereum mainnet at some point in 2020 with Phase 1 of Serenity (Ethereum 2.0). However, shard chains won’t necessarily serve as an immediate scalability solution during the initial release of Phase 1.
Outside of Ethereum, sharding has already been implemented. When Zilliqa launched its mainnet in January 2019, it became the first project to launch an operational sharded blockchain. Currently, the Zilliqa blockchain is capable of handling around 2,828 transactions per second.
Beacon Chain is expected to launch sometime in late 2019 and marks the Ethereum mainnet’s move from Proof of Work (PoW) to Proof of Stake (PoS) as the means of validating transactions. With PoW, approximately 90 to 95% of processing power goes into generating hashes (random numbers). Once the numbers are generated, they have no other utility. This not only makes PoW wasteful from a computational point of view but also has led to other issues like higher transaction validation costs for cryptocurrency miners that don’t successfully mine and significant environmental pollution caused by energy-intensive hardware mining rigs.
Several major blockchain projects (EOS, Tezos, Tron, Lisk, and others) have already implemented PoS. Compared to PoW blockchains, PoS blockchains average a higher number of transaction per second. Ethereum’s switch to PoS can immediately provide greater scalability for the Ethereum blockchain and the Web3 applications that run on it. Research on Casper CBC, Ethereum’s PoS solution, has been led by Vlad Zamfir since 2014. PoS (Phase 0), along with sharding (Phase 1), are integral features in the roadmap to Serenity.
Addressing Data Privacy
While the era of Web2 continues to be plagued with data privacy issues due to large-scale hacks or business models that rely upon selling sensitive user data, Web3 has already shown its ability to improve data security. Nonetheless, new challenges have emerged. Because data stored on public blockchains is publically viewable on block explorers, it’s much more difficult for it to be commoditized by a centralized entity as happens frequently in the era of Web2. However, the fact that transactional data history and total asset values can easily be viewed by anyone in real-time simply by knowing another person’s public address leads to new privacy concerns. In the world of traditional banking, for example, this is isn’t even a possibility. Yes, public blockchains are capable of supporting private transactions while also maintaining regulatory compliance. However, for the vast majority of options, private transactions aren’t the default standard. On the Ethereum blockchain, for example, private transactions typically come with significantly higher gas fees than public ones.
AZTEC Protocol is a project that provides a means for financial institutions to conduct private Ethereum transactions. AZTEC Protocol’s zero-knowledge privacy protocol is already on the Ethereum mainnet. It enables the logic of transactions to be validated while also keeping the values encrypted by combining homomorphic encryption and range proofs. Homomorphic encryption allows arithmetic checks on encrypted numbers as if they weren’t encrypted. Range proofs ensure that negative numbers (which in a finite field are large positive numbers) cannot subvert the double-spend check. A standard transaction with AZTEC costs 800,000–900,000 gas. Although this is within the average gas fee per ETH transaction (500,000–100,000 gas), private transactions can become even cheaper with future updates to the Ethereum blockchain. For example, if EIP 1108 is implemented, gas costs for private transactions powered by AZTEC may reduce to 300,000 gas or lower.
In addition to AZTEC, there are other competing private solutions on Ethereum. One example is Zether, a fully-decentralized, confidential payment mechanism developed by a group of researchers at Stanford University. Another is EY Ops Chain Public Edition, which has been developed by Ernst & Young (EY).
Besides a more interactive internet, Web2 has generally given the world vastly improved user interfaces and user experiences. Gone are the days of highly pixelated screens and difficult-to-use technologies of Web1. With that being said, Web3 interfaces are generally not as accessible to non-technical users as Web2 options.
Using and storing private keys to access funds stored in cryptocurrency wallets presents a new learning curve for those used to simple passwords of Web2. Additionally, if funds are stolen or lost, there are few effective recovery methods. Even sending (and losing) funds by entering the wrong hexadecimal 0x… wallet address can be an easy mistake for those that are experienced with blockchain technology. The question of how can the Web3 mobile experience catch up to the Web3 experience offered by web browsers still remains largely unanswered. These are just a few of the many obstacles end-users must be aware of when using Web3. Compared to scalability and data privacy issues, the number of possible UI/UX friction points is much higher. Additionally, the standard for whether a Web3 application is easy or difficult to use is quite subjective and based on the opinions of each individual user. This makes determining the ‘x-factor’ needed for mainstream adoption more difficult to pinpoint.
Several effective technologies already exist for solving many of the UI/UX challenges of Web3. MetaMask, for example, simplifies the process of storing funds securely (private keys stored in browser) and improves accessibility (dApps connect to MetaMask). Human-readable wallet addresses are now possible through Ethereum Name Service (ENS). This not only makes it easier to remember one’s own address for receiving funds but also reduces the likelihood of sending funds to the wrong 0x address. Still, Web3 lacks many of the user protection features and mobile accessibility that is prominent in Web2. Even if these changes are quite small in reality, many people who are new to blockchain and Web3 are hesitant to onboard to an internet experience that appears (at least on the surface) to be much different than what they are accustomed to. Nonetheless, through continuous improvements to UI/UX, Web3 applications are becoming more accessible for new, non-technical users.
What’s Next for Web3?
With a number of existing real-world use cases for blockchain technology and specifically for Ethereum, it’s evident that the era of Web3 isn’t theoretical. The internet, the global economy, and governments have yet to fully realize the vision of Web3. Still, in 2019, the paradigm shift is already well underway. With significant progress already being made to address the above-mentioned technical challenges with innovative solutions, the vision of Web3 as a true competitor to Web2 is moving closer to realization.