Coinbase takes you through a simple division of the Web 3 stack

Original title: “A simple guide to the Web3 stack”

Source: Coinbase Blog

Compilation: Hu Tao

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The industry has come up with many definitions for web3, but at Coinbase we generally think  of Web3 as a trustless, permissionless and decentralized internet utilizing blockchain technology .

The defining characteristic of Web3 is ownership. The first iteration of the commercial internet (Web1) was read-only for most users, while Web2 allowed users to read and write on centralized platforms (Twitter, Facebook, YouTube, etc.) , and Web3 gave users control over their content. Full ownership, data and assets via blockchain. It enables users to read and write autonomously .

Where a third party like Facebook owns your identity and data in Web2, your identity in Web3 can move fluidly between platforms without your data being captured and monetized by the service provider. While Web2 applications are centrally controlled, tokens in Web3 grant users the right to help manage the services they use, representing a form of ownership in the platform itself.

What does the Web3 stack look like given this framework?

Web 3 stack

1642126411634129The Web3 stack is still nascent and fragmented, but with a lot of innovation over the years, it’s starting to come into focus. What follows is neither mutually exclusive nor completely exhaustive. Rather, it’s a framework for thinking about the situation as it evolves.

Let’s start from the bottom up.

Protocol layer

At the bottom of the stack, we have the protocol layer. This consists of the underlying blockchain architecture upon which everything else is built.

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Bitcoin is their granddaddy, and while it doesn’t play a significant role in today’s Web3, it pioneered the ability to give someone a scarce Crypto asset through the use of public-private key cryptography. Following Bitcoin, a series of Layer 1 smart contract platforms emerged, such as Ethereum, Solana, Avalanche, Cosmos, etc., which underlie many Web3 applications currently in production.

Both Bitcoin and Ethereum have additional protocols built on top of them. Bitcoin has networks like Lightning Network (for fast and cheap payments) and Stacks (for smart contracts). To alleviate its capacity constraints, several layer 2 scaling protocols have been built on top of Ethereum.

With the rise of many Layer 1 and Layer 2 networks, bridges need to be built between them. Inputs act as cross-chain bridges on highways, letting users transfer value from one chain to another (useful cross-chain dashboards can be found here and here).

infrastructure layer

The infrastructure layer sits on top of the protocol layer and consists of interoperable building blocks that are very reliable when performing specific tasks.

1642126464786539This is a dense and diverse layer where projects build everything from smart contract audit software, data storage, communication protocols, data analytics platforms, DAO governance tools, identity solutions, financial primitives, and more.

For example, Uniswap  supports the exchange of one asset for another. Arweave enables data to be stored in a decentralized manner. ENS domain names can serve as user identities in the Web3 world. The user can’t do much with each individual application. When combined, however, these category primitives are like Lego blocks that Web3 developers can use to build applications.

use case layer

Above the protocol layer and the infrastructure layer is the use case layer, all of which come together.

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Take a blockchain-based game like Axie Infinity , which uses Ethereum tokens and NFTs that can be bridged to a low-cost/high-throughput sidechain called Ronin. Players often use Uniswap to  exchange ETH  for the tokens they need to play games. Likewise, the decentralized blogging platform Mirror uses the storage protocol Arweave to store data. At the same time, it uses Ethereum to allow publishers to get paid in cryptocurrency, usually by directing tokens to their ENS addresses.

You’ll notice Uniswap appearing in our Infrastructure and Use Cases section. This is because, while Uniswap is just a series of smart contracts at its core, it also provides a front end that users can interact with directly. In other words, it simultaneously serves as a standalone user-facing application as well as the infrastructure for other Web3 applications such as Axie Infinity.

access layer

At the top of the stack is the access layer – the application that acts as the entry point for various Web3 activities.

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Want to play Axie Infinity on Mirror or pay for your content? You first need a wallet, which is the main entry point for most Web3 applications. Users need fiat currency portals like Moonpay, Wyre, or cryptocurrency exchanges like Coinbase to get started.

With some cryptocurrencies in the wallet, users can head to an aggregator like DappRadar to browse and connect to various Web3 applications in one place. Other projects such as Rabbithole help users discover and learn how to use various Web3 applications. There are also aggregators like Zapper, Zerion, and Debank that help users track all their activities and assets across various apps.

Finally, we are approaching a future in which Web2 platforms that have gathered the crypto community, such as Reddit and Twitter, will be the entry points to Web3. Reddit’s long-awaited crypto initiative will tokenize certain communities, rewarding active users with tokens and possibly NFTs. Twitter already has an integration with the Bitcoin Lightning Network, allowing users to tip other people in BTC.

Evolving stack

The protocols, infrastructure, user applications, and access points mentioned above make up the nascent but growing world of Web3: an Internet owned by users. Ownership aside, the power of Web3 is its modularity and interoperability. Essentially, this means that the above stacks can be combined in an infinite number of ways to create new and interesting use cases – a feature we expect will lead to an explosion of new, world-changing applications during the Cambrian period.

While the framework and tiers we highlight are likely to remain the same, we expect the programs and opportunities within them to change dramatically over the next few years.

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