Freedom, Utopia, Bearing
Author: Solaire, YBB Capital
Introduction
In 2014, Ethereum co-founder Gavin Wood proposed a concept from the perspective of decentralization and democratization of the existing internet. In this world, 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 each participant equal power, which he called the next generation internet or Web3.
The blockchain frenzy in 2021 rekindled the concept of Web3, but the definition of Web3 at that time was very vague, like the emperor’s new clothes. Everyone was talking about Web3, but no one knew where Web3 was. Until today in 2023, Web3 is still in the early stages of exploration, but the definition has become clearer, that is, to subvert the data monopoly of traditional internet giants through the characteristics of blockchain. However, there are still major disagreements in the industry on the development categories and forms, and the true form of Web3 has not yet been fully revealed. It may go through many stages and evolutionary processes, and the process to a new form of the internet is quite bumpy. The content of this article discusses the significance of Web3 and how Web3 should develop from my subjective perspective based on the current industry status.
Born Free: Web3
Throughout history, the pursuit of freedom by humans has evolved from the civic rights and political participation of classical antiquity to the exploration of individual rights and religious freedom during the Enlightenment period. It has further developed into modern liberal concepts of free markets and property rights, as well as the socialist ideals of public ownership and classlessness. These ideological differences that emerged from different eras and cultural backgrounds continue to profoundly influence us today. In the ongoing struggle against centralization in certain industries or systems, new avenues are being explored to seek freedom, resulting in the emergence of different ideologies.
In the present day, traditional internet giants such as Google, Facebook, Amazon, and others, largely rely on the control of personal data as 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. Against this backdrop, Gavin Wood’s proposal of the next generation of the internet has given blockchain entrepreneurs a new perspective. By combining the traditional internet with blockchain technology, they aim to create the next generation of the internet — a system that is characterized by individual freedom, democracy, decentralization, and is collectively created and maintained by all participants. This new model also shifts the relationship of interests from traditional internet companies providing services to users and profiting from their data to a model where participants collectively build and distribute the benefits among all participants.
This new internet model is referred to as Web3, and its key features include:
1. Decentralization: Web3 utilizes blockchain technology and decentralized protocols to eliminate single centralized authorities. It achieves more reliable and secure data exchange and storage through a distributed network.
2. User Control and Data Ownership: Web3 grants users direct control over their personal data. Users can choose when to share, store, and manage their own data, ensuring personal privacy and data security.
3. Trustlessness and Transparency: By leveraging blockchain technology, Web3 achieves trustless transactions and contract execution, providing higher levels of transparency and verifiability.
4. Asset Ownership and Exchange: Web3 supports cryptocurrencies and digital assets, enabling users to engage in decentralized value exchange and asset management.
Overall, Web3 aims to establish a more open, free, fair, and democratic internet, allowing individuals to have better control over their digital identities and data while facilitating safer, more private, and trustworthy online interactions.
The grand vision of Web3 seems to be as significant as Bitcoin’s vision of transforming traditional finance. However, contrary to expectations, most Web3 projects have underperformed in non-financial applications. This raises questions about the relevance of using blockchain in non-financial applications and how we should integrate with the traditional internet industry. Should blockchain continue to emphasize its financial attributes? To quote Vitalik Buterin’s perspective in his article “Where to use a blockchain in non-financial applications?,” we should steer clear of both blockchain universalism (“blockchain everywhere”) and blockchain minimalism. From my understanding, this means that the necessity of applying blockchain technology should be assessed for each project. In the following discussion, we will explore these questions in relation to mainstream use cases in non-financial domains.
The Framework Challenges of Web3 Applications
The pursuit of freedom versus practicality is a complex issue. Blockchain was initially designed to address the centralized nature of finance, with its distributed architecture, consensus mechanisms, and data structures. These designs unavoidably make the entire network highly inefficient. Unlike the centralized server model of Web2, blockchain requires transaction verification and ensuring that every node in the network is updated before a result can be established. Despite numerous efforts by blockchain practitioners to increase the potential of blockchain, such as establishing Ethereum and building the Ethereum Virtual Machine (EVM) for running smart contracts, achieving application functionality, scalability remains a challenge. Various approaches, including layer two solutions, sidechains, sharding, or altering consensus mechanisms, have been explored to overcome the limitations associated with the EVM. Practitioners in the blockchain space are constantly striving to address the “impossible triangle” of decentralization, security, and scalability.
I do not deny that these efforts are futile. On the contrary, advancing the scalability of blockchain development is meaningful. However, the current reality is that we must acknowledge a fact: we are still developing within the framework established by Satoshi Nakamoto, and we have not yet achieved the level of application development seen in Web2. The decentralization and security aspects of blockchain have consistently outweighed scalability. Even if the impossible triangle is resolved, the architectural nature of blockchain remains that of a giant linear ledger. This design aims to eliminate counterparty risk and reduce reconciliation costs among peers. Building applications on blockchain today is like constructing an app in Excel — restrictive, inefficient, and detached from the framework. To adhere to the principles of Web3, it is necessary to accept certain inefficiencies and complexities.
Therefore, the current approach for app projects involves a compromise by reconstructing a specific Web2 app, such as a social media or video platform, while incorporating certain aspects on the blockchain. This may involve putting certain assets or user data on the chain while maintaining a basic Web3 product that is crude, inefficient, and lacking in features. For most people, they desire social platforms with abundant resources for browsing and interaction rather than a complex task-oriented platform. Similarly, they expect video platforms to have user-generated content and a rich library of movies and shows. However, existing Web3 video platforms often prioritize token models that bind users instead of focusing on content. These products are built on the underlying logic of “blockchain everywhere,” prioritizing Gavin Wood’s vision for Web3 over user value and efficient productivity. This is an example of placing ideals above practicality. Throughout the history of industrial product development, it has always been a process of finding balance. Products that are overly forward-thinking or invert priorities have invariably failed. Even if they meet the needs of a small group of people, they struggle to develop because market acceptance requires a large user base. Adequate funding and strong user demand enable rapid industry development. This is a positive relationship and a simple principle.
Currently, application projects are somewhat uncertain and lack a clear purpose. They often embrace the idea of putting everything on the chain without a specific goal. In my opinion, at this stage, it is more important to assist or guide traditional gaming and Web2 companies in transitioning to the blockchain. By leveraging their high-quality services and content, we can change the current state of these products. Blockchain can offer them greater economic benefits and possibilities, while the power of Web2 will bring more users and developers to drive the development of Web3 applications. This is a win-win model.
The utopian SSI
Self-Sovereign Identity (SSI) is a concept that advocates for individuals or entities to have complete control and management over their digital identity. The core idea is that everyone should own their identity, just like they own their personal belongings, instead of relying on governments, companies, or any centralized third-party entities to verify or manage their identity.
In this model, individuals can directly own and control their identity data and decide when, how, and with whom to share that data. This data may include various identity information such as name, address, date of birth, passport number, as well as more complex data like educational records, banking records, or medical records.
The concept of self-sovereign identity is closely tied to the use of blockchain technology, where SSI is referred to as a Decentralized Identifier (DID). DID is a new type of identifier that provides a persistent, verifiable, and decentralized means of identity authentication in the digital space. The main goal of DID is to enable entities like individuals, organizations, or devices to have control over their online identities without relying on any centralized registration authorities.
Technically, a DID is a string with a specific format, often associated with a blockchain or other distributed ledger technology (DLT). DIDs allow entities to make identity claims directly on the network without the need for intermediaries (such as social media platforms or email providers) to verify them.
A key feature of DIDs is that they are controlled by the entities themselves, rather than being issued by third parties. Entities can create, update, and revoke their own DIDs without the need for any centralized registration authorities.
DID is a crucial tool for realizing the SSI model, which empowers entities to own and control their identities instead of relying on centralized identity providers.
For example, a DID may look like this: “did:example:123456789abcdefghi”. In this example, “did” is a fixed identifier element indicating that it is a DID. “example” is the so-called DID method, which specifies how the DID is created and managed on a particular blockchain or DLT. “123456789abcdefghi” is the specific identifier portion of the DID, which is unique within the associated blockchain or DLT.
Self-sovereign identity is at the core of Web3 and also carries a strong utopian connotation. “Utopia” is a word derived from Greek, composed of the terms “ou” (no) and “topos” (place), meaning “nowhere.” The word first appeared in Thomas More’s work “Utopia” to describe an ideal and perfect society or community. I believe the terms utopia and DID are well-matched because DID acts as both the hammer that breaks the barrier between Web2 and Web3 and the nonexistent hammer, as mentioned earlier, “the concept of self-sovereign identity, with the application of blockchain technology, has come close to completion.” But why use the term “close to completion”?
Because, like the blockchain trilemma, DIDs also face their own trilemma: privacy, decentralization, and Sybil resistance. For example, Bitcoin, Ethereum, and many other cryptocurrency systems do not centralize the recording of user identities, and users do not need to provide any personal information when creating their digital wallet addresses. However, this approach leads to a problem: projects that treat these addresses as unique identity identifiers are vulnerable to Sybil attacks.
To avoid such attacks, certain crypto projects require additional customer identity verification (KYC) procedures, such as submitting government-issued identification. While this effectively prevents Sybil attacks, it also means that users need to sacrifice some privacy. Moreover, this verification method does not align with the decentralized spirit of blockchain because it relies on other non-decentralized identity verification methods.
Proving that someone is unique in a network while ensuring privacy and decentralization is a challenging task. Currently, the mainstream methods involve confirming through a social graph or using iris scanning via Orb. However, both approaches have logical issues. For example, a social graph only requires updating the relationship network to create a new identity, while Orb’s iris scanning, claimed to only store the iris hash data, relies on a centralized approach that cannot guarantee the absence of human malicious activities within multiple stages. Reality always has some dystopian elements, but I believe the application of blockchain technology in DIDs is necessary. DIDs can also be achieved through a balance between the trilemma points. Perhaps introducing Soul-Binding Tokens (SBTs) or utilizing local biometric identification on mobile devices can find a suitable balance point within the trilemma.
Decentralized Storage as the Carrier of Web3
Currently, the main characteristics of decentralized storage include:
- Distributed: In decentralized storage systems, data is divided into multiple parts and distributed across many different nodes (typically personal computers) globally, rather than being stored on a single central server.
- Security: Since data is distributed among multiple nodes, decentralized storage systems are more secure and less vulnerable to single-point attacks. Additionally, many decentralized storage systems utilize encryption technology to protect data security.
- Fault tolerance: As data is replicated and stored on multiple nodes, even if one node fails, copies of the data on other nodes can still provide access to the data, improving system availability.
- Transparency: Many decentralized storage systems are based on blockchain technology, meaning that all transactions are public and can be viewed by anyone, increasing transparency.
- Anti-censorship: Due to distributed storage and often encryption protection, decentralized storage systems exhibit strong resistance to censorship. Even in cases where governments or other entities attempt to block or censor data, it can still be accessed and retrieved.
- Persistence: With data replicated and stored on nodes globally, decentralized storage systems have high persistence. Even if some nodes fail or disappear, data can still be recovered from other nodes.
Decentralized storage is an earlier track in the development of non-financial applications of blockchain. As a critical container for Web3 data hosting, decentralized storage has faced two key pain points: high barriers and weak performance, which somewhat contradict user value. However, I believe that decentralized storage is in line with the necessity of utilizing blockchain technology. Some projects like ETH Storage and Arweave are continuing to push its limits. Whether for Web3 apps or the future Metaverse, there is a need for a decentralized container capable of hosting data and frontend. I remain optimistic about the future of this technology. The current direction is relatively straightforward, focusing on improving speed, reducing gas fees, upgrading storage capacity, and expanding the range of storable content. I believe the characteristics of decentralized storage will be more appealing than traditional centralized storage.
Bitcoin
In summary, I have presented three key non-financial use cases of Web3. It is evident that the concept of Web3 is still in its early stages, and these use cases have limitations and hurdles that need to be addressed.
When Gavin Wood proposed the idea of the next-generation internet, he did not consider the inefficiency and deviation from business principles that blockchain exhibits. This has led to a peculiar phenomenon where practitioners are building the roof before constructing the building. I share Vitalik Buterin’s viewpoint that blockchain is neither omnipotent nor only suitable for minimalist use. Every application of technology should consider the current situation and have a clear purpose. A restless mentality will only lead to faster failure. If Web3 is to have a spiritual benchmark, Bitcoin may be a good fit. Each line of code designed by Satoshi Nakamoto is not complex but has a clear purpose. Bitcoin doesn’t belong to anyone, yet it belongs to everyone. Its disruption of traditional industries and its inspiration for future practitioners still profoundly impact us 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 will also have my answer. My expectations for it are also to disrupt traditional systems, break monopolies, and belong to the people. No one can stop the surge of this trend. Let us encourage each other as practitioners.
About YBB
YBB is a web3 fund dedicating itself to identify Web3-defining projects with a vision to create a better online habitat for all internet residents. Founded by a group of blockchain believers who have been actively participated in this industry since 2013, YBB is always willing to help early-stage projects to evolve from 0 to 1.We value innovation, self-driven passion, and user-oriented products while recognizing the potential of cryptos and blockchain applications.
