In the past few years in the encryption industry, we have often encountered a situation where bystanders really cannot understand "Why are everyone so enthusiastic about Web3?"
Although the rise of blockchain technology, DeFi, and even the upsurge of NFT has flooded the major media, and everyone is no longer unfamiliar with these terms as they were at the beginning, there is still no way to understand the enthusiasm of industry people for these industries. where.
It's not that they don't understand the technologies themselves or what's going on, but that Web3 is regarded by insiders as "the next wave of revolution with a far-reaching impact than the Internet", but for outsiders, they can't see its significance. Where is the potential, or what kind of problem is actually solved.
Often discussed for a long time, insiders are regarded as "lonely self-admired", while outsiders are regarded as "playing the piano with cows". After the author's in-depth thinking, the inference problem may come from not discussing too much the core issue of "why do we need Web3".
This article will try to answer this difficult question, that is, "How can Web3 make human society better? What problems does it solve?"
Just like the emergence of an emerging product, if the problem the product aims to solve is not people’s pain points, then the product is doomed to fail; and as a challenger, if the solution is not as good as the existing solution, users will never be willing adoption.
Next, let's discuss from this perspective, let's take a look at the emergence of Web3, what problems it solves, and the future prospects.
Web3: a blue-green, extremely efficient large-scale collaboration system
Let me talk about the conclusion first. The author believes that the emergence of Web3 solves the oldest problem in the history of human development: "how to make human cooperation more efficient." The so-called progress of civilization is actually a history of human beings gradually improving the efficiency of cooperation.
More efficient cooperation will bring more advanced technology, a more prosperous society and a better life to mankind.
The emergence of Web3 has constructed a human collaboration model that is more efficient than existing solutions, but where should we start?
This starts with the history of Bitcoin: At the time of the subprime mortgage crisis in 2008, a series of global financial problems caused by centralized enterprises (investment banks and commercial banks) caused financial market crashes and global financial panic. The government had to come to the rescue, and everyone was dragged into the water...
The founder of Bitcoin, Satoshi Nakamoto, created blockchain technology in view of the corruption of centralized power. He wanted to build a decentralized and trustless system to remove the risk of centralized entities doing evil.
Today, the most amazing thing about Web3 lies in the two aspects: the successful construction of a decentralized and trustless large-scale collaboration system. Decentralization avoids the risk of doing evil in the concentration of centralized power; de-trusting and only writing operating rules in "contracts" improves the efficiency of overall collaboration.
Throughout the history of human development, large-scale collaboration has always been limited by technical limitations and has to rely on the coordination of a centralized system:
Human beings have developed from hunting, to farming tribal society, and then gradually developed into a country, and even the current globalization, which can be regarded as a history of "cooperative" relationship. In the history of this "cooperation", the main body that holds the key to power has always been a centralized institution.
The advantage of centralization is that the adjustment speed is faster and the response is more immediate, but at the same time, excessive power also provides an incentive to do evil, and even develop the risk of a global crisis like the 2008. Centralization can be said to be a "helpless" element in the process of human development.
Now let's talk about the importance of "de-trust" and "contractualization". Cooperative efficiency has advanced human history, but interspecies cooperation is not a product unique to humans. In terms of chimpanzees whose evolutionary genes are closest to humans, there is also an obvious cooperative model in their society, but the basis of cooperation is "mutual trust." .
Chimpanzees can only deeply know more than 100 other chimpanzees in their lifetime. For them, this is the object they can trust and cooperate with. Human beings are different. The system and civilization developed by human beings make us even if we do not know each other. , Do not trust each other, but also because they believe in the same set of system concepts, they can complete large-scale collaboration.
Chimpanzee cooperation is based on the "identity" relationship. Only when you know who you are can you have a relationship of trust and then cooperate; human cooperation is based on the "contract" relationship. Even if you don't know each other, as long as you believe in the same contract system and system rules, we can cooperate with each other.
That's the amazing thing about Web3. The vision of the Bitcoin blockchain in 2008 has achieved its original intention in DeFi at this time; through decentralized wallets, people can interact with smart contracts and perform various transactions using only "wallet addresses" that cannot represent identities. Complex transactions, financial activities and even the current diversified NFT applications and operations.
The brilliance of Web3 lies in the invention of a system that enables large-scale cooperation without trust, and the construction of decentralization, trustlessness, and contractualization has emerged in today's ecology.
Back to the core question that this article wants to answer: "How can Web3 help human society become better? And do it better than the current existing solutions?" The answer is "created a more efficient collaboration system" .
The de-trusting of Web3 and the introduction of smart contracts are actually a step closer to the current degree of global cooperation, no longer limited by when, where, or even who. "Contract" rules, people can use Web3 to complete more efficient cooperation and co-create output.
Compared with Web2, Web3 not only does not have the risk of centralized evil, but also has smart contracts to ensure the execution of the contract through programmatic control. Cooperating instead of piling up the competitive moat with each other greatly increases the efficiency and potential of cooperation.
Web3 status quo: an imperfect copy of the real world
However, in fact, the emerging "collaboration system" of Web3 is still not perfect, because it can only replicate some commercial applications in the real world. To put it simply, because Web3 only covers "contract" identities, but lacks "relationship" identities, it has inherent limitations in commercial applications. The over-financial applications currently seen (it seems that the most successful case is only DeFi) are derived from From here.
As mentioned above, the current Web3 is decentralized and trustless, and naturally there is no system covering "relational" identities.
"Relational" identity, simply speaking, follow the example of the chimpanzee above, because knowing who you are, where you know you, what interaction you have had with you, how you are, etc. Decide whether to interact with you.
Compared with "contract" which only talks about rules, "relationship" involves personal characteristics and also covers subjective judgments. However, the current Web3 field only includes the former and lacks the latter.
So what problem does the lack of "relationship" identity create? Here we will introduce another simplified financial system model, see the following for details:
We can roughly divide the business models in the financial system into two categories, one is "computational" and the other is "creditable". If it does not conform to the former specification, human subjective cognitive judgment is added.
For example, the most extreme form of computational finance is programmed trading. Regardless of whether the target is futures, stocks or bonds, as long as it is pre-agreed with a specific program, what will be done in any situation, that is the representative of "computational" . The most common cross-border remittances and transaction payments in the financial field are also computational financial behaviors with "repeatable processes and verifiable results".
The most classic representative of credit finance is unsecured loans such as "credit loans", which are different from secured mortgage loans such as housing loans and car loans. (Overcollateralization in the cryptocurrency world, because it can be liquidated in advance when the price falls, ensures that the lender will not suffer losses. It is the same logic as car loans and mortgages, which are logically classified as calculation rather than credit)
But when it comes to credit loans, the decision to borrow or not is purely based on the subjective judgment made by the lender's "personal credit"; and how does "personal credit" come from? From your "relationship" identity.
When the bank decides to issue a loan, it will have a set of risk algorithms, which will determine the degree of risk based on factors such as who you are, how much income you have, how much you have saved, and your past dealings with the bank;
However, the risks calculated by these "personal credit" can only roughly infer the individual's repayment ability, and the individual's repayment willingness is actually completely unpredictable. Therefore, the bank's subjective judgment is involved in the approval of credit loans: how much to issue, how high is the risk of non-repayment, how high is the given interest rate, and so on.
This kind of "credibility" finance that involves subjective judgments, in the absence of "relational" data, cannot use the current smart contract method to pre-write a set of logic to handle the process of issuing credit.
It can be deduced from this that the current Web3, blockchain, and cryptocurrency are only "partial" copies of the real world, because they only include "contract" identities, but cannot cover "relationship" identities. Therefore, in the current on-chain DeFi, It can only handle "computational" transactions, but has nothing to do with "credit" transactions.
SBT (Soul Binding): Perfecting the last piece of the Web3 puzzle?
The SBT concept (Soulbond Token, which can be simply regarded as a non-transferable NFT) proposed by Vitalik, the co-founder of Ethereum, may complement the weakness of Web3's long-standing lack of "relationship" identity.
In simple terms, SBT is a non-transferable token used to constitute a commitment, certificate or affiliation representing social relationships on Web3, marking the countless characteristics and achievements of a person or entity in the form of a blockchain . (eg: educational credentials, employment history, proof of attendance, even proof of their artwork)
Regardless of whether it is an individual or a business, it can issue SBT and be a recipient of SBT.
As mentioned above, the current problem of Web3 is that it only has contract elements and lacks relational identity. Therefore, it cannot fully replicate the financial model of the real society, and can only deal with "computational" financial activities.
But the essence of SBT is to complement the "relationship" identity on the chain. For example, if you really want to carry out an on-chain credit, even if you don’t know the information of the “person” behind the wallet address, you can still use the SBT properties owned by the other party, such as previous repayment records, total assets in the bank, etc. , Where to work, etc., to judge. The various characteristics of the "relationship" identity can exist in the form of SBT, making credit possible.
After all, in theory, as long as SBT can perfect the same investigation of personal identity "characteristics" as banks do before providing credit, on-chain finance can step into "credibility" finance.
So far, Web3 covers the three pillars of information, contract and identity relationship, and will be able to perfectly replicate the financial system developed by human society under the chain; even the decentralized social relationship of SocialFi can be perfectly replicated on the chain The social graph provides another picture of improving collaboration efficiency on a large scale.
Of course, the thought experiment in this article simplifies many factors and ignores many considerations. The application and development of technology in the future may not be so smooth, but we only deduce it step by step and answer "What problem does Web3 solve?"
In short, the conclusion is that "Web3 will be a more efficient system for human collaboration after refining relational identity using SBT".
Although this article only analyzes from the perspective of financial activities, in the long run, the potential of Web3 should be that the economic behavior and institutional rules of the off-chain world can be copied and run on the chain, providing a more efficient collaboration system.
In the future, where will the "relationship" identity be introduced into SBT, and even whether the "relationship" identity will be implemented in the form of Layer 2 or other technical practices, remains to be continuously explored by the industry.