A Glimpse of Web3

From Web2 to Web3

There have been two trends in the history of Internet development: “centralization” and “decentralization.” The Internet has gone through Web1 decentralization, Web2 centralization, and then finally Web3 decentralization because of the mysterious person who lit the fire more than ten years ago.

Bitcoin, a blockchain-based application, was created in 2009, and in its genesis block was quoted a front-page headline from The Times: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It burned out the “coin circle” and “chain circle”.

The decentralized blockchain technology that drives Bitcoin inspired Vitalik Buterin to found Ethereum. The birth of Ethereum then led to the rise of blockchains with computational power (whereas Bitcoin was an application based on a blockchain that could only keep track of accounts), and programmable (EVM) chains opened the door to Web3.

Before the birth of the Internet, information flowed slowly and inefficiently. It was Web1 that allowed information to flow, but few people participated. With the development of the Internet, more and more people became involved, until Web2 finally allowed all that information to interact with each other. But whether Web1 or Web2, there’s no essential difference, it’s still information that is involved in flow and calculation. Web3 makes the value flow up.

To understand how to get value flowing, it’s important to first understand something about Ether. Ether’s EVM gives the chain computing power, and the naturally decentralized nature makes it a super-distributed computer. This computer is different from the cloud in Web2, which is a centralized supercomputer. In Web2, users' data (aka their value) is not in the hands of users, but in the hands of an oligarchic company with cloud computing, such as AWS or Facebook. To make the value flow, it needs to be changed from belonging to a few oligopolistic companies to being subordinate to every participant in the network. Digital cryptocurrencies have the natural ability to solve this problem. When a currency can calculate, it naturally can make value flow.

Human society has evolved because we are a collaborative species; most animals don’t collaborate. And the ability to collaborate is because we can establish a cooperative relationship with others by creating one contract after another. Before Web3, the proper fulfillment of any contract, whether offline or online, relied on the power of the country machine, and we all knew the penalties for breach of contract.

How can we solve the problem of proper contract performance without relying on external forces? One workable way is to make the contract codified and give itself the power of automatic execution. The computing power of Ether is reflected in the Smart Contract, which is one of its innovations. The blockchain itself has Ether’s EVM automatically execute the ability to record the value (distributed ledger), and Smart Contract to ensure the contract’s correct performance.

The execution of smart contracts relies on gas in Ether, which can be understood as the same as electricity in the real world. All our appliances need electricity to work, and we need to pay these bills regularly. In the world of Ethereum, everyone has a wallet where our digital assets such as BTC and ETH are stored.

With smart contracts, we can create Web3 applications based on this, also known as DApp (decentralized application). DApp gives ordinary users access to the world of Ether. DApps can be understood as various kinds of apps in Web2, and these apps provide various kinds of services on the Internet.

Imagine what we’ve gotten from these technologies so far. What essential components are still missing to build Web3? As we all know, the superstructure rests on an economic foundation. To build Web3, we need many organizations to recruit engineers that will work together to build a new ecosystem. How to build this new type of organization? How to raise funds? The traditional centralized organizational form (company) and IPO are no longer suitable for Web3. To completely decentralize, we need to create a new economic system.

In the next part, we’ll expand on how exactly Web3 solves these difficult problems.

What Web3 solves

The previous part described the development process from Web 2 to Web 3. This part introduces the core technologies in Web3 that solve the pain points of Web2.

Let’s first review the economic system under Web2. In Web2, Internet companies raised funds through angel investment, then made money through online advertising, paid online memberships, or by issuing shares on the stock exchange and going public (IPO).

These are the problems that Web3 needed to solve:

  • Formation of a company
  • Angel investment
  • Building a Web3 product
  • IPO

A token can be created on Ether for a certain Gas fee without any other dependence. This token can represent anything, such as equity, physical assets, or characters in a virtual game. For example, USDT, which builds a bridge between the US dollar and cryptocurrency currency, is a token (also known as a stable coin cause its price is anchored to the US dollar). If you hold dollars and want to get Bitcoin (BTC) or Ether (ETH), you can exchange them directly on a centralized exchange or with other traders (C2C), in addition to mining.

With tokens, you can solve many Web2 problems. For example, imagine you have a brilliant idea but can’t afford to recruit talent. With Web3, you can directly issue a token (without value at this point). If you want money quickly, you can do an ICO (Initial Coin Offering) Once this token is accepted by others (this is also called consensus), it has value. As the issuer, you potentially get a lot of money.

It takes many people to form a consensus to make coins valuable. Just like gold, its value is determined by consensus. Consider diamonds, the reason for their value is gone now that they can be created in labs, but because the consensus on their value is so strong, their market price has remained firm.

To form a consensus you need to let people have the coin first. People will promote this coin for their gain. A common way to distribute coins in the cryptocurrency world is airdrop. To make airdrop valuable, you need to screen coin users. For example, our Web3 product is a social media product that will be Web3 Twitter, so the best targets are Twitter users. You can set rules in the smart contract to set coins in proportion to the number of Twitter followers.

Now that you have tokens, you don’t even need angel investment to start building a team, or a company. In Web3, a company is a DAO (Decentralized autonomous organization), which is characterized by a smart contract that establishes the organization’s charter, rather than the company’s charter in Web2. People who hold tokens can be part of the DAO and even influence the company’s decisions.

After airdropping 50% of the coins to Twitter users, you set aside 20% for the DAO, 20% for the team members, and leave 10%. We don’t have a product yet but have already solved many of the problems that Web2 had.

The next step is to build a Web3 product. What’s the characteristic of a Web3 product? Value flow! How do you get the value flowing? Through the wallet login! Think of wallets as analogous to the username/password combination in Web1 and single sign-on in Web2, where the user is identified through the wallet. Blockchain could record additional information since Bitcoin’s Genesis block, which wasn’t just a distributed ledger, but also a distributed database that can store additional information.

One of the main attractions of Web3 compared to Web2 is that users are no longer products to be sold, but network participants who are rewarded for their positive contributions. Of course, a blockchain-based Web3 is just one possible direction for the future. Web3 isn’t a replacement for Web2, it just enhances some of its aspects.

But will Web3 gradually evolve from decentralized to centralized? Considering that the majority of Bitcoin’s computing power is currently in the hands of a few mining pool companies and that even the most advanced algorithms cannot resist the pursuit of profit, users cannot even want privacy for convenience, and won’t give up the convenience of centralization for the sake of decentralized technology, Web3 is destined to have a long and difficult road to decentralization.

The future of Web3?

The future of Web3?

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