Why does Web3.0 need blockchain

Preface

This article is the second in the “Web3.0 Explorer” series, the first is: “Combating the Concept of Web3.0”. This article will continue to discuss the concept of the previous article. Due to the limited level of the author and the current industry is still in the enlightenment stage of development, many parts of this article are only briefly mentioned, not in-depth.

Let us briefly review the core ideas of the previous article:

• Web3.0 is an open protocol cluster. Based on an open agreement, it can stimulate the strong innovation capabilities of all parties.
• The core problem solved by Web3.0 is the distribution of platform benefits. Break the monopoly of large intermediary platforms caused by Web2.0, and allow the smooth distribution of value from the platform to each value creator in the platform. There will still be a (big) platform for Web3.0, but this platform is owned by the community.

The Web2.0 platform is owned by the company, and the Web3.0 platform is owned by the community.

The detailed drawing of this concept is as follows:

Web2.0 Platform Illustration

Web3.0 Platform Illustration

Compared with the Web2.0 platform, the core part of the Web3.0 platform has the following parties:

• Community Validators/Nodes: maintainers of the platform network, operators of the underlying blockchain nodes, and validators. Used to provide service security.
• Community Contributors: Contains community developers, promoters, etc. Have a direct contribution to the project.
• All other value contributors: including but not limited to platform content contributors. Value contributors also cover end consumers.

In other words, for the Web3.0 platform, for the Web2.0 platform, the platform is no longer owned by a company, it has an evolution of organizational form.

Organizational evolution

For the platform, the evolution of the organizational form is comprehensive: there is the evolution of both the internal organizational form and the evolution of the external relationship. The words we mentioned below: project, platform, application, Web3.0 App, these words, unless otherwise specified, all express the same meaning by default.

Let me talk about the evolution of the internal organization of the project.

The project will maintain a streamlined team size, including only the most necessary components:

• Core management team
• Core R&D personnel
• Core developer community operations staff
• Core marketing staff
• Core designer
• Necessary other staff

Except for the above-mentioned core personnel, all positions can be opened to the community. In other words, the community can participate in the promotion of the project together. such as:

• Because it is open source code, community developers can contribute code, fix bugs, etc. For these developers, bounty support can be appropriate.
• Community developers can participate in the application and realize the whole function. The project team can use the form of issuing an issue and hand it over to community developers for development in the form of grant.
• Some community KOLs can be established outside the core team to help operate the entire community. There can be some incentive measures as appropriate.
• All node parties participating in the validator can voluntarily help the project to promote it. The Validator itself has incentives, and there is no need for additional incentives.

Using this form of collaboration with the community can change the traditional corporate R&D and marketing methods. In other words, the form of the company system may be impacted.

We did some analysis on the cost of the project:

• Retaining only the core team can greatly reduce the cost of human resources.
• Even if you don’t need a centralized office, or you only need to keep a small office, you can save costs.
• With the active participation of the community in the early stage of the project, the needs of more people can be collected, better product designs can be made, and design costs can be reduced.
• Strong collaboration with the community can greatly save the cost of marketing and the cost of public testing in the early stage of the project.
• Strong collaboration and good interaction with the community can improve the iterative efficiency of product bug fixes and function upgrades, and reduce R&D costs.
• As long as the product meets or is close to the expected goal, a strong sense of community participation will allow each user to spread spontaneously, which will easily form a positive network effect and reduce marketing costs.

These saved costs can be allocated to the true value creators on the platform.

Then talk about the changes in the relationship between the project and the user:

• In the Web3.0 platform, users contribute content or data on the platform, creating value for the platform. As for how much this value is, a quantitative indicator evaluation can be done (but it is impossible to be completely accurate). Generally speaking, this evaluation will not be real-time or preset. The benefits generated by this value will eventually be distributed to users in some form.
• Such quantitative indicators and supporting calculation methods will be clearly and accurately recorded in a completely open form, and executed in a reliable and credible form.
• The platform and users are truly integrated. Users are willing to create value for the platform, and the platform clearly and reliably returns revenue to users.

Then talk about the changes in the relationship between the project and the capital side:

• The traditional angel round, seed round, and ABCDEFG IPO route will no longer be effective on the Web3.0 platform. Generally speaking, it is sufficient for the new project format to achieve B rounds at most.
• The proportion of investors in the project will not be too large. Items with different specific values ​​will be different.
• The proportion of core team shares in the project will not be too large. Items with different specific values ​​will be different.
• The benefit distribution ratio of the project will be distributed as much as possible to the value creators in the platform.

In other words, after the platform has reached a stable and mature stage, the primary service object of the platform itself is the value creator of the platform, rather than the major shareholder of investors in Web2.0. In the end, only impact investment can survive.

See  “Thin Heads and Fat Tails: Understanding the Crypto Reinvention of Capitalism” .

There is a problem to pay attention to here. The community we are talking about here is not about breaking up the team completely, and completely using the community to carry out the decentralized operation and maintenance of the project. The founding team’s share of shares does not need to be too much, but the role is still very important. The comprehensive ability of the founding team is still the primary factor for the success of a Web3.0 project. In the development process of the entire project, it plays the role of core promotion and core decision-making. Fully decentralized on-chain governance is undesirable and extremely inefficient. We cannot jump from one extreme to another. If human society can use voting to solve all problems, then human society will not be so complicated.

We can even call this form of organizational governance weakly centralized governance .

We mentioned earlier that the organization of Web3.0 projects (compared to Web2.0 projects) will undergo some changes. The distribution of benefits is closely related to the form of organization. Are there any tools that can support this new organizational structure? The new model calls for new solutions.

Blockchain debut

Blockchain actually provides two core capabilities:

• A fairer and more open way of participation is the openness of the organization.
• Assets are settled according to the contract and circulate reliably and without obstacles.

These two capabilities are based on various basic features of the blockchain, because we are talking about higher-level concepts here, and the basic features will not be repeated.

In other words, using the blockchain as a bottom-level benefit distribution system, on top of the blockchain, you can

1. Support the openness of organizational forms.
2. Let the participating parties unconditionally trust the distribution method and reach a consensus on the distribution method.
3. It can ensure the reliable execution of benefit distribution.

Let’s talk about these three points separately below.

Support the openness of the organizational form

The blockchain itself is open.

• Whether it is a PoW consensus protocol or a consensus protocol such as PoS, the underlying design is open, not exclusive.
• The open source software development model allows people in the entire community to have the opportunity to participate in the project’s contribution at low cost.
• The open source software development model allows the project content/algorithm to be open to the audit and verification of various agencies.
• The open source software development model allows project decisions to be publicly reviewed and participated by everyone.

Therefore, the Web3.0 system based on blockchain embraces openness at the genetic level. On top of the blockchain system, an effective new type of open organization form adapted to the characteristics of Web3.0 can be established.

Let the participating parties unconditionally trust the distribution method and reach a consensus on the distribution method

Due to the openness of the agreement (code), the content of the agreement can be unconditionally verified by all parties. The distribution method is part of the overall agreement, so it is unconditionally trusted by all parties. The content of the agreement can be changed after governance, and every change will be openly and clearly presented in the agreement. The distribution method will remain stable for a certain period of time, and changes will not be particularly frequent. All parties trusted the agreement and reached a consensus.

Can guarantee the reliable execution of benefit distribution

Once the distribution rules are clearly defined, they will be implemented in the on-chain code. The basic characteristics of the blockchain ensure the safe and reliable execution of the code on the chain at each node. If there is a change in the distribution rules, it will also be updated on the chain. Each node upgrades the agreement, and the consensus agreement between the nodes ensures the safe and reliable execution of the new upgrade.

In summary, the blockchain is very important to Web3.0, and it is an essential infrastructure for Web3.0 applications.

It should be noted that the blockchain technology itself may have other uses in other fields, but these are not the objects of this discussion.

Token system of Web3.0

As discussed earlier, the blockchain is the organizational form of the Web3.0 application platform and the infrastructure for benefit distribution, which actually implies two basic elements:

• Account system
• Token system

The account is used to distinguish the participants, and the Web3.0 App Token is the traditional option/stock mapping. As a means to encourage community participation, each Web3.0 App blockchain can have its own Token. Especially for the verification node participants, obtaining the Native Token of the Web3.0 App is almost a necessary incentive measure.

Under the open agreement, to attract other nodes to do verification and provide security services, itself has a cost for these node participants. There must be some kind of mechanism to incentivize it, and a certain profit can be guaranteed, so that this open system can run smoothly. In this sense, local Token is necessary for Web3.0 App.

Similar to the traditional sovereign currency, there is exchange rate conversion, and there is also exchange rate conversion between different Web3 App Tokens. Generally speaking, the exchange rate can be converted on the basis of a stable U.S. dollar.

Similar to the salary plus option form of traditional Web2.0 companies, the local Token of Web3.0 corresponds to options, and accordingly there should be a kind of stable coin for the daily operating income and expenditure of the project. This kind of Stable Coin should be the USDT, USDC and other stable coins commonly used in the industry, rather than the Native Stable Coin issued by the project itself. The project party should not issue stable coins that cannot be used universally.

The Stable Coin in the Web3.0 App project can only be obtained through one of the following forms:

• Investor investment
• Donor donation
• Borrow
• Income from foreign economic activities of the project

The expenditure of Stable Coin in the project includes but is not limited to the following forms:

• Project research and development expenditure
• Project promotion expenses
• Project operating expenses
• Project source material supplier expenses
• Community project support expenses
• …

Every Web3.0 App should design its own economic system (this sentence is a bit redundant, in fact, every Web2.0 App also needs to design its own economic system, commonly known as a business model. Power generation with love is not sustainable after all). In other words, the economic system is part of the underlying mechanism of a project. Web3.0 App, which uses blockchain as the infrastructure, can design its own economic system more flexibly and inspire more innovation in this field.

However, blockchain is not a panacea.

Limitations of blockchain

Blockchain, from the beginning of its birth, has another name-distributed ledger. The so-called ledger is a book that records information about transactions (economic activities). That being said, is it possible to give such a statement: Blockchain should only deal with affairs related to economic activities.

Throughout the history of blockchain development (from 2008), you will find that almost all effective innovations belong to the economic and financial fields. There are many attempts to extend the blockchain to other fields, but the results Lacklustre. You can think carefully about whether there is an inherent logic behind it.

Applying blockchain to other fields will encounter some theoretical limitations.

One of the limitations: multi-node repetitive calculations have low computational efficiency (energy consumption ratio), and multi-node storage redundancy is extremely high

Suppose our blockchain has 100 nodes. Compared with traditional centralized services, each logical calculation requires 100 calculations, which consumes 100 times (above) energy than centralized services. If there are more nodes, it consumes more energy. There will be more energy. The same is true for storage. For traditional centralized databases, plus disaster recovery and backup services, 5 copies are counted as duplicates. As for the storage of the blockchain, 100 nodes are 100 copies, which is 20 times as much as the storage of traditional centralized databases. If more nodes participate, this multiple is greater.

Limitation 2: The storage space is not efficient.

Due to encryption and requirements for Proof, blockchain state storage uses a structure such as MPT, which occupies a relatively large storage space and is not economically efficient.

Limitation 3: The query efficiency is not high, or even weak.

Transactions are stored in a chain in the form of blocks, and the state is stored in the form of a KV database with an MPT structure. Unlike traditional SQL databases, the storage method of blockchain has weak query capabilities and low efficiency. Traditional SQL databases have done a lot of work for the optimization of structured data storage and query. The development of decades has reached a very mature stage. The new progress is also making a lot of innovations in the fields of distributed expansion and so on. While seamless expansion, the simplicity, consistency, and efficiency of the query are guaranteed. The RPC interface generally provided by the blockchain by default can only realize the simplest query function.

Due to the above limitations, the intention to use the blockchain as a distributed database in a general sense is impractical.

Analyze from another angle. In addition to economic affairs, the world’s information has various levels of information. For example, a cup. Its shape, size, color, weight, whether it is transparent, whether it has a lid, the ratio of the lid to the cup body, the capacity of the cup, the material of the cup, whether it is glass, stainless steel, or plastic. Can it withstand high temperature, if it is stainless steel, is it 304? How much impurities, what is the production date of the cup, where it is sent from, which courier company sends it, and when is it received. What is the printing process on the cup, what characters are printed, what color patterns, and who is the designer. What is the material of the rubber pad between the cup body and the lid, and how long is the expiration date? Is it for home use, office use, or car use. Mainly used for drinking water, or coffee or tea. Whether the cup is easy to wash and whether it is easy to deposit tea stains when drinking tea. What is the thermal conductivity of the cup and whether it is equipped with an insulation pad. Is it one of the cups in a set? If it is, is there any difference between his brother’s cup and it? If one breaks, is there any replacement measures? What is the expansion rate of the cup after adding hot water? Not to mention, the molecular kinematics data in the wall of the cup after adding hot water. And so on, and so on and so on. Expanded by one thing, information is endless at all levels.

This information is the inherent attributes of things, or internal attributes. They have nothing to do with economic affairs, but are the information of things themselves. Economy is an external attribute, or social attribute. Economy is the product of society.

Several major limitations of the blockchain make it impossible to store the inherent attribute data of these endless things, but should only be used to store data related to economic affairs. This also echoes the initial name of the distributed ledger.

Web3.0 App system architecture

If the complete information cannot be stored in the blockchain, where does it exist? The industry also has a lot of exploration in this area. For example, the IPFS project, the goal is distributed storage; for example, the Arweave project, the goal is permanent storage. They can all cooperate with the blockchain. Store the hash value of an external data blob in the account and transaction data related objects of the blockchain to realize data association and relationship binding. This model has been adopted by a large number of projects. Hereinafter, we will collectively refer to this type of infrastructure for storing large amounts of data as distributed storage or Distributed Storage (DS).

But this model still has many detailed issues to face:

• Be stable and lasting. Since the Hash method is used for association, it must be ensured that the Hash value is fixed and always valid. Therefore, relatively high requirements are put forward for these DS projects, requiring the data to be permanently valid, the Hash value is fixed, and there is no conflict Hash.
• The access efficiency should be high. These DS projects should be able to better support the efficiency of data storage and access, and the delay should not be too high.
• Access fees cannot be too high. The cost of data storage and access cannot be too high, otherwise it cannot be truly popularized.
• Access should be convenient. Easy access will allow various projects to be quickly connected and quickly establish a DS service ecosystem.

Many projects in the industry are working hard to explore these aspects, and I believe this is a reasonable direction.

This separation of data will bring about changes in the software architecture. Blockchain storage and on-chain logic processing should only be responsible for economic affairs-related businesses, and other data and businesses should be processed off-chain. The reasons are as follows:

• Both storing and retrieving data to DS are network operations and an asynchronous request. The return time of this kind of request has a considerable degree of uncertainty. Compared with the local request, there may be a difference of at most 2, 3 orders of magnitude. Therefore, this kind of operation is not suitable to be put on the chain, but should be taken off the chain for processing.
• The calculation and processing of a large amount of non-economic transaction data may take a lot of time. Such processing should be performed off-chain.

If the result of off-chain processing is related to economic affairs, it should be submitted to on-chain for subsequent processing. If it has nothing to do with economic affairs, you should access DS directly.

Therefore, there are now two logical processing engines: one on the chain and one off the chain. How the two engines can work together, maintain, and upgrade perfectly is actually quite a big problem. We see that the industry has also begun to have corresponding solutions. For example, the Off-Chain Worker (OCW) in Substrate aims to solve this integration and maintainability problem.

In the entire system, in order to improve the efficiency and stability of system execution, components such as load balancing and caching layer may also be required.

Below, we compare the system architecture of Web2.0 App and the system architecture of Web3.0 App to help readers understand more clearly.

Web2.0 App architecture, centered on the database. The operation process is as follows:

• User access service address. DNS or IP locates to the gateway;
• After the request passes through the gateway, enter the service logic;
• The service logic interacts with the database, saves, retrieves or updates data;
• The service logic returns the processing result to the gateway;
• The gateway returns the result to the user;
• In addition, directly based on the original data of the DB, there can be another branch process, that is, big data analysis, mining, AI training, etc.

Web3.0 App system architecture, centered on Blockchain and Distributed Storage. The operation process is as follows:

• User access service address. Distributed DNS (such as IPNS of IPFS, DNS Gateway of Arweave, etc.) locates the gateway;
• After the request passes through the gateway, it enters the service logic (Off-Chain Worker and indexing service);
• The service logic interacts with DS, deposits, retrieves, or updates data. When necessary, deal with the blockchain, send transactions, update status, and obtain results;
• The service logic returns the processing result to the gateway;
• The gateway returns the result to the user;
• In addition, directly based on the original data of distributed storage, there can be another set of branch processes, that is, big data analysis, mining, AI training, etc. In the context of Web3.0, this analysis can be processed more professionally by third-party big data AI services to achieve more professional analysis.

Here, we clearly give a system architecture of Web3.0 App. It can be found that this architecture is similar to the system architecture of Web2.0 App to a certain extent. It does not rule out that Web3.0 App can also have other architecture patterns and computing paradigms.

Competition between Web3.0 and Web2.0

As an emerging thing, Web3.0 will definitely compete with the existing solid Web2.0 ecology. In different industries, the speed of development will vary. Here is a brief analysis of how Web3.0 competes with Web2.0.

The competition between Web3.0 and Web2.0 must first be consistent or similar in user experience. This is the starting point of the competition.

Merely relying on so-called distributed, decentralized, safer, privacy protection, and open slogans are not enough to impress consumers. In the choice between security, privacy and user experience, the vast majority of users will choose user experience first (the picture is convenient). Therefore, Web3.0 applications should also put a lot of effort into the user experience, and try to be consistent with the user habits of Web2.0 applications, so as to smoothly transition to a new and better comprehensive experience. But we can’t give up the most basic requirement of Web3.0-security for the sake of user experience. In general, the requirements for application development are higher.

After reaching a similar starting point for competition, Web3.0 has the following competitive advantages compared to the Web2.0 platform:

• The traditional business model of Web2.0, such as advertising, membership, games, etc., can all be used in Web3.0, and there may be some evolution in form. In these respects, Web3.0 will not lag behind Web2.0.
• Value contributors can get a clear return on the Web3.0 platform, which will encourage users to be willing to use the new platform instead of the old platform.
• User behavior under the new platform is safer and privacy protection is better, which will promote users to use the new platform with greater confidence.
• More user usage means more data precipitation, which will eventually form the ultimate unfair competitive advantage of data. The article “Thin Heads and Fat Tails: Understanding the Crypto Reinvention of Capitalism” believes that the ultimate unfair competitive advantage is that over time, the accumulation of data on open platforms and the big data mining and AI training on top of it will make It is impossible for traditional closed Web 2.0 companies to compete with it.
• Web3.0 has the characteristics of privacy protection and open access at the data level. As a raw data open platform, on top of it, endless innovations can be stimulated: data processing, big data analysis, AI training, etc. And some of the benefits brought by these innovations can be fed back to the data provider-the user. In the end, a huge, rich and stable Web3.0 open data ecosystem will be formed.

But in the early stage, there will be some issues that need to be studied, such as:

• Open data is used by companies with closed property rights and is no longer reverse open. For a period of time, the product quality of large enterprises is still ahead of Web3.0 App.
• The closed camp will not sit still, and will the open product form prompt companies with closed property rights to allocate part of their resources to join the open camp. What does this mean for the open camp and the closed camp?
• In which areas will Web3.0 take the lead in challenging the Web2.0 platform?
• Ultimately, what areas will Web3.0 cover, and which areas are not suitable for the survival of Web3.0?

The rent-seeking problem of the Web3.0 platform

If the Web3.0 platform is as we analyzed, it is indeed very competitive. Then it may eventually develop into a monopoly platform (in a certain field). In theory, an organization in a monopoly position must have rent-seeking motivation. So, can the Web3.0 platform meet this inherent challenge?

The bifurcability and legitimacy requirements of the blockchain help solve this problem.

In the previous article, we gave the system architecture of Web3.0 App. Now combined with the bifurcation of the blockchain, we actually have one more requirement: the openness of the DS component. That is to say, this data storage component cannot be bound to a unique blockchain, but should allow all forks of this blockchain to have 100% functional access. This requirement should exist as a preset strategy at the beginning of the Web3.0 system design. This strategy, in itself, is a deterrent, used to limit the evil motives of the governance bodies of the Web3.0 system.

There should be some very interesting results in the exploration in this field.

Conclusion

This article discusses that blockchain, as the core carrier that carries the evolution of Web3.0 application organization and the distribution of benefits, is an indispensable part of Web3.0 applications, and Web3.0 requires blockchain.

This article also briefly discusses the Web3.0 App system architecture, the competitive advantages of Web3.0, and the rent-seeking issues of the Web3.0 platform.