Written by: Mike Tang, Lester Li
foreword
This article is the second article in the "Web3.0 Explorer" series, the first article is: "Carding 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 places in this article are only briefly mentioned, not in-depth.
Let's briefly review the core idea of the previous article:
●Web3.0 is an open protocol cluster. Based on an open protocol, it can stimulate the strong innovation capabilities of all parties
●The core problem that Web3.0 solves is the distribution of benefits on the platform. Break the monopoly of large intermediary platforms caused by Web2.0, and let the value be distributed smoothly from the platform to every value creator in the platform. There will still be a (big) platform in Web3.0, but this platform is jointly owned by the community
Web2.0 platforms are owned by companies, and Web3.0 platforms are owned by communities.
A detailed diagram 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 participants:
●Community Validators/Nodes: The maintainers of the platform network, the operators and verifiers of the underlying blockchain nodes. Used to provide service security
●Community Contributors: including community developers, propagandists, etc. Contribute directly to the project
●All other value contributors: including but not limited to platform content contributors. Value contributors also cover end consumers
That is to say, for the Web3.0 platform, for the Web2.0 platform, the platform is no longer owned by a company, and there is an evolution of organizational form.
evolution of organization
For the platform, the evolution of organizational form is comprehensive: both internal organizational form evolution and external relationship evolution. The words we mentioned below: project, platform, application, Web3.0 App, these words, unless otherwise specified, have the same meaning by default.
First, let’s talk about the evolution of the organizational form within the project.
The project will maintain a lean team size with only the most necessary components:
●Core management team
●Core R&D personnel
●Core developer community operators
●Core marketing staff
●Core designers
●Necessary other staff
In addition to the above-mentioned core personnel, all positions can be opened to the community. That is to say, the community can jointly participate in the advancement of the project. for example:
●Because it is open source code, community developers can contribute code, fix bugs, etc. For these developers, bounty support can be provided appropriately
●Community developers can participate in the application and realize the whole function. The project team can use the form of issue and hand it over to community developers in the form of grant for development
●Some community KOLs can be established around the core team to help operate the entire community. There may be some incentives as appropriate
●All nodes participating in the validator can spontaneously help the project to promote. Validator itself has incentives, no additional incentives are needed
Adopting this form of collaboration with the community can change the traditional way of enterprise R&D and marketing. That is to say, the form of corporate 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 a centralized office is not required, or only a small office needs to be kept. can also save costs
●The active participation of the community in the early stage of the project can collect the needs of more people, make better product designs, and reduce design costs
●Strong cooperation with the community can greatly save the cost of marketing and the cost of public testing in the early stage of the project
●Strong cooperation 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 reaches or is close to the expected goal, a strong sense of community participation will allow each user to spread spontaneously, and it is easy to form a positive network effect. Reduce marketing costs
These saved costs can be allocated to the real 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, quantitative index 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
●This quantitative indicator and supporting calculation method 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 benefits to users
Then talk about the changes in the relationship between the project and the capital side.
●The traditional angel round, seed round, ABCDEFG IPO route will no longer be effective in the Web3.0 platform. Generally speaking, it is enough for a new project form to reach the B round at most.
●The proportion of investors in the project will not be too large. The specific value of different items will be different
●The proportion of core team shares in the project will not be too large. The specific value of different items will be different
●The profit distribution ratio of the project will be distributed to the value creators in the platform as much as possible
That is to say, after the platform reaches a stable and mature stage, the primary service object of the platform itself is the value creator of the platform, rather than the investors and major shareholders in Web2.0. In the end, only impact investing survives, see Thin Heads and Fat Tails: Understanding the Crypto Reinvention of Capitalism.
There is a problem to pay attention to here. The community-owned platform we are talking about here does not mean that the team is completely broken up, and the decentralized operation and maintenance of the project is completely used in the form of the community. The shareholding ratio of the founding team 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. Play the role of core promotion and core decision-making during the entire project development process. Completely decentralized on-chain governance is undesirable and extremely inefficient. We cannot jump from one extreme to another. If human society could solve all problems by voting, then human society would not be so complicated.
We can even call this form of organizational governance weakly centralized governance.
We have mentioned earlier that the organizational form 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? New models call for new solutions.
Blockchain debut
Blockchain actually provides two core capabilities:
●A fairer and more open way of participation, that is, openness in organizational form
●Assets are settled according to the contract and can be circulated reliably and without obstacles
These two capabilities are based on various basic features of the blockchain, because what we are talking about here is a higher-level concept, and the basic features will not be repeated.
That is to say, using the blockchain as an underlying benefit distribution system, on top of the blockchain, you can
1. Support the openness of the organizational form
2. Allow all parties involved to unconditionally trust the distribution method and reach a consensus on the distribution method
3. Can guarantee the reliable execution of profit distribution
Let us discuss these three points separately.
1. Support the openness of the organizational form
Blockchain itself is open.
●Whether it is a PoW consensus protocol or a consensus protocol such as PoS, its underlying design is open and not exclusive
●Open source software development model, so that people in the whole community have the opportunity to participate in the contribution of the project at low cost
●The open source software development model makes the project content/algorithm open to the audit and verification of various organizations
●Open source software development model, so that project decisions can be publicly viewed and participated by all
Therefore, the Web3.0 system based on the blockchain embraces openness at the genetic level. On top of the blockchain system, an effective new open organization form adapted to the characteristics of Web3.0 can be established.
2. Allow all parties involved to 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 and therefore unconditionally trusted by all parties. The content of the agreement can be changed after governance, and each change will be openly and clearly presented in the agreement. The allocation method will remain stable for a certain period of time, and the changes will not be particularly frequent. All parties trust the agreement, and a consensus is reached.
3. Can guarantee the reliable execution of profit distribution
Once the distribution rules are clearly defined, they are implemented on the chaincode. The basic characteristics of the blockchain ensure that the code on the chain is executed safely and reliably at each node. If there is a change in the distribution rules, it will also be updated on the chain, each node upgrades the protocol, and the consensus protocol between nodes ensures that the new upgrade is executed safely and reliably.
Based on the above analysis, the blockchain is crucial to Web3.0 and is the necessary infrastructure for Web3.0 applications.
It should be noted that blockchain technology itself may have other uses in other fields, but these are not the object 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
Accounts are used to distinguish participants, and Web3.0 App Token is the mapping of traditional options/stocks. As a means to encourage community participation, each Web3.0 App blockchain can have its own Token. Especially for verification node participants, obtaining the Native Token of Web3.0 App is almost a necessary incentive.
Under the open protocol, it is costly for these node participants to attract other nodes to verify and provide security services. There must be some kind of mechanism to motivate it and ensure a certain profit, so that this open system can run smoothly. In this sense, local Token is necessary for Web3.0 App.
Similar to traditional sovereign currencies, there are exchange rates, and there are exchange rates between different Web3 App Tokens. Generally speaking, the exchange rate can be converted based on the stable US dollar.
Similar to the form of salary plus options in traditional Web2.0 enterprises, the local Token of Web3.0 corresponds to options, and there should be a Stable Coin accordingly, which is used for the daily operating income and expenditure of the project. This kind of Stable Coin should be stable coins such as USDT and USDC 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
●Lending
●Income from foreign economic activities of the project
The expenditure of Stable Coin in the project includes but not limited to the following forms:
●Project research and development expenditure
●Project promotion expenses
●Project operating expenses
●Project source material supplier expenditure
●Community project support expenditure
●……
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 business model. Power generation with love is not sustainable after all). That is, the economic system is part of the underlying mechanics of a project. The Web3.0 App based on the blockchain can design its own economic system more flexibly, and can stimulate more innovations 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 the book that records transaction (economic activity) information. So, is it possible to give such a statement: the blockchain should only deal with transactions related to economic activities.
Throughout the history of blockchain development (since 2008), you will find that almost all effective innovations belong to the economic and financial fields. There are many attempts to expand blockchain to other fields, but the results lackluster. You can think carefully about whether there is something inherently logical behind it.
Applying blockchain to other fields will encounter some theoretical limitations.
One of the limitations: multi-node repeated computing calculation efficiency (energy consumption ratio) is low, and multi-node storage redundancy is extremely high
Assuming that our blockchain has 100 nodes, compared with traditional centralized services, each logical calculation needs to calculate 100 shares, which is 100 times (more than) higher than the energy consumed by centralized services. If there are more nodes, the consumed There will also be more energy. The same is true for storage. For traditional centralized databases, plus disaster recovery and backup services, it is counted as 5 duplicates. As for the storage of the blockchain, 100 nodes are 100 shares, which is 20 times that of traditional centralized database storage. This multiple is larger if more nodes participate.
The second limitation: the storage space efficiency is not high. Due to encryption and the requirements for Proof, the blockchain state storage adopts a structure such as MPT, which occupies a relatively large storage space and is not economically efficient.
The third limitation: the query efficiency is not high, or even very weak. Transactions are chain-stored in the form of blocks, and states are stored in the form of MPT-structured KV databases. Unlike traditional SQL databases, the storage method of blockchain has weak query ability and low efficiency. The traditional SQL database has done a lot of work on the optimization of structured data storage and query. After decades of development, it has reached a very mature stage. New progress is also making a lot of innovations in the field of distributed expansion. While seamlessly expanding capacity, the simplicity, consistency, and efficiency of queries are guaranteed. The RPC interface generally provided by the blockchain by default can only realize the simplest query function.
Due to the above limitations, it is impractical to use blockchain as a distributed database in a general sense.
Analyze it from another angle. In addition to economic affairs, the information in this world has various levels of information. Like 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? The amount of impurities, the production date of the cup, where it was sent from, which courier company sent it, and when it was received. What is the printing process on the cup, what characters are printed, what color patterns are printed, 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 validity period. Whether you use it at home, in the office, or in the car. 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 a thermal insulation pad. Is it one of a set of cups? If so, is there any difference between his brother's cup and it? If one is broken, is there a replacement measure? What is the expansion rate of the cup after adding hot water. Not to mention, the molecular kinematics data in the cup wall after adding hot water. and so on and so forth. Extended from one thing, the information is endless on all levels.
These information are the inherent attributes of things, or intrinsic attributes. They have nothing to do with economic affairs, but information about things themselves. The economy is an external attribute, or a social attribute. The economy is a product of society.
Several 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 original name of the distributed ledger.
Web3.0 App system architecture
If you can't store complete information in the blockchain, where? The industry also has a lot of exploration in this area. For example, the IPFS project aims at distributed storage; such as the Arweave project, its 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, and realize data association and relationship binding. This model has been adopted by a large number of projects. Below we 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 details to face:
●Be stable and durable. Since the Hash method is used to associate, it is necessary to ensure that the Hash value is fixed and always valid. Therefore, relatively high requirements are put forward for these DS projects, requiring data to be permanently valid, Hash value to be fixed, and Hash without conflict
●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
●The access fee should not be too high. The cost of data storage and access should not be too high, otherwise it will not be truly popular
● Access should be convenient. Easy access will allow various projects to quickly connect 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 changes in the software architecture. The storage and on-chain logical processing of the blockchain should only be responsible for business related to economic affairs, and other data and business should be processed off-chain. The reasons are as follows:
●Saving data to DS and obtaining data are both network operations, which are asynchronous requests. 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 up to 2 or 3 orders of magnitude. Therefore, this kind of operation is not suitable to be placed on the chain, but should be processed off the chain
The calculation and processing of a large amount of non-economic transaction data may take a lot of time, and this processing should be performed off-chain
The results of off-chain processing, if relevant to economic transactions, should be submitted to on-chain for subsequent processing. If it is not related to economic affairs, the DS should be accessed directly.
Thus, there are now two logical processing engines: one on-chain and one off-chain. How to perfectly cooperate, maintain, and upgrade these two engines is actually quite a big problem. We have seen that the industry has begun to have corresponding solutions. For example, the purpose of Off-Chain Worker (OCW) in Substrate is to solve this kind of integration and maintenance problems.
In the whole 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 and draw the system architecture of Web2.0 App and the system architecture of Web3.0 App to help readers understand more clearly.
The Web2.0 App architecture is centered on the database. The operation process is as follows:
●User access service address. DNS or IP location to the gateway;
●After the request passes through the gateway, it enters the service logic;
●The service logic deals with the database, storing, withdrawing or updating 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 raw data of the DB, there can be another set of branch processes, namely the analysis of big data, 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 index service);
● Service logic deals with DS, deposits, retrieves or updates data. Deal with the blockchain when necessary, 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 raw data of distributed storage, there can be another set of branch processes, namely the analysis of big data, mining, AI training and so on. In the Web3.0 scenario, this kind of analysis can be processed more professionally by third-party big data AI services to achieve more professional analysis.
Here, we have clearly given a system architecture of Web3.0 App, and it can be found that this architecture is similar to the system architecture of Web2.0 App to a certain extent. It is not ruled out that Web3.0 App can also have other architectural models and computing paradigms (such as the Turing paper tape computing paradigm proposed by Arweave, see: "Blockchain Storage ARWEAVE: Paper Tape of Turing Machine, New Paradigm of Trusted Computing Turing Paper Tape" and "Consensus Changes, Blockchain Application Paradigm Evolution Journey").
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 be different. Here is a brief analysis of how Web3.0 competes with Web2.0.
The competition between Web3.0 and Web2.0 must firstly be consistent or similar in user experience, which is the starting point of competition.
Just relying on the so-called distributed, decentralized, more secure, privacy protection, openness and other slogans is not enough to impress the majority of consumers. If there is a trade-off between security, privacy and user experience, most users will choose user experience first (pictured for convenience). Therefore, Web3.0 applications should also make great efforts in 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.
In the case of reaching a similar competitive starting point, Web3.0 has the following competitive advantages compared to the Web2.0 platform:
●The traditional business models of Web 2.0, such as advertisements, memberships, games, etc., can all be used in Web 3.0, and there may be some evolution in form. In these aspects, Web3.0 will not lag behind Web2.0
●Value contributors can obtain clear rewards in the Web3.0 platform, which will encourage users to be willing to use the new platform instead of the old one
●Users’ behavior on the new platform is safer and privacy protection is better, which will promote users to use the new platform with confidence
●More users use 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 with the development of time, the data accumulation of the open platform and the big data mining and AI training on it will make It is impossible for traditional closed Web2.0 enterprises to compete with it
●Web3.0 has the characteristics of privacy protection and open access at the data level. As an open platform for raw data, it can stimulate endless innovations: data processing, big data analysis, AI training and so on. And part of the benefits brought by these innovations can be fed back to the data provider-users. In the end, a huge and stable Web3.0 open data ecosystem with rich layers will be formed
But in the early stage, there will also be some issues that need to be studied, such as:
●Open data is used by companies with closed property rights, and is no longer open in reverse. As a result, the product quality of large enterprises is still ahead of Web3.0 App for a period of time
●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 and closed camps?
●Which fields will Web3.0 take the lead in challenging the Web2.0 platform?
●Ultimately, which fields will Web3.0 cover, and which fields are not suitable for the survival of Web3.0?
The rent-seeking problem of Web3.0 platform
If the Web3.0 platform is as we analyzed, it is indeed very competitive. Then it is also possible to develop into a monopoly platform (in a certain field) in the end. Theoretically speaking, an organization in a monopoly position must have the motivation to seek rent. So, can the Web3.0 platform cope with this inherent challenge?
The forkability and legitimacy requirements of the blockchain help to solve this problem. For a detailed discussion on this aspect, see:
"The essence of the encryption protocol is not "decentralization", but the fork of the blockchain", and "Vitalik: Legitimacy is the scarcest resource in the encryption ecosystem". This article will not repeat.
In the previous article, we gave the system architecture of Web3.0 App. Now, combined with the forkability of blockchain, we actually have one more requirement: the openness of DS components. 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 itself is a deterrent force, used to limit the evil motives of the governing bodies of the Web3.0 system.
Explorations in this area should yield some very interesting results.
epilogue
This paper discusses that blockchain, as the core carrier of Web3.0 application organization evolution and benefit distribution, is an indispensable part for Web3.0 applications, and Web3.0 needs blockchain.
This article also makes a brief discussion on the Web3.0 App system architecture, the competitive advantages of Web3.0, and the rent-seeking issues of the Web3.0 platform.
Due to the limited level of the author, if the opinions in the article are questionable, please actively criticize and discuss them. You can reach us via the following emails: [email protected], [email protected].
quote
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