The golden age of Web3 protocol unlocking the potential of the future economy

Golden age of Web3 protocol unlocking future economy potential

Translator’s Note:

With the rapid development of the Internet, centralized platforms have gradually dominated the entire network, forming a pattern controlled by a few giants. Although this model has indeed brought a series of conveniences, it has also led to problems such as data privacy, opaque decision-making, and algorithm manipulation.

In this context, blockchain and cryptocurrencies represent a return to open and transparent protocol movements. As the original blockchain, the Bitcoin protocol not only achieves decentralization in technology, but also explores innovation in economic and governance design. Its built-in token incentives give it almost unstoppable vitality. As Ralph Merkle said, Bitcoin has survived because it pays people to maintain its life; because it provides a useful service that people are willing to pay for.

Building a decentralized and power-distributed network (Web3) based on open, transparent, and especially decentralized tokenized protocols is seen as a key direction to reshape the Internet landscape. This model is expected to reduce reliance on centralized platforms and stimulate innovation and competition, but it also requires overcoming a series of challenges, including scalability, regulatory compliance, and continuous improvement in user experience.

• Decentralization and protocolization of the whole-chain game
• Introducing zkUniswap The First zkAMM
• Exploring the Opportunities of Layer2

USV (Union Square Ventures) currently has the following investment philosophy:

By fully utilizing networks, platforms, and protocols, support trusted brands to expand opportunities for people to access knowledge, capital, and well-being.

The term “protocol” in the last sentence, although significant, unfortunately has a lower level of understanding compared to the other terms in the sentence.

Protocols have always existed as normative guidelines that people adhere to in their interactions.‍‍‍‍‍‍‍

In computer science, protocols are also similar, they are a type of behavioral guidelines.

I like the definition of computer protocols on the Cloudflare website:

Standard protocols are like a common language that computers can use, similar to two people from different parts of the world who may not understand each other’s native languages but can communicate using a common third language. If one computer uses the Internet Protocol (IP), and the second computer also uses the same protocol, they will be able to communicate – just like the United Nations relies on its six official languages to communicate with representatives from all over the world. But if one computer uses IP and the other does not understand this protocol, they will not be able to communicate.

https://www.cloudflare.com/learning/network-layer/what-is-a-protocol/

Protocols have existed for just as long as computers, but we are at the beginning of a golden age of protocols that I call “Web3”.

Until recently, protocols were mostly free and not monetized. We use the HTTP protocol every day to access web pages. We use the SMTP protocol every day to send emails. But these protocols are all free to use and do not generate revenue for any company, project, or individual.

With the emergence of Bitcoin in January 2009, we got a protocol with built-in monetization mechanism.

Since then, computer scientists have been creating Web3 protocols for various things, most of which include tokens for monetizing the protocols.

Monetization is not just for the benefit of the protocol creators, it is also used to incentivize the use and operation of the protocols. In the Bitcoin protocol, this includes running mining computers to maintain the security of the Bitcoin network. In the Helium protocol, this includes operating hotspots to connect to the network. In the Ethereum protocol, this includes staking tokens to ensure the security of the network. In the Filecoin protocol, this includes operating storage systems to provide decentralized storage. These measures encourage active use and smooth operation of the protocols.

It is through monetization that these protocols are sustained and provide reliable use and building foundations for others.

With sustainable and trusted protocols, we will usher in a new service architecture that will be more interoperable.

Let’s take mobile messaging as an example. Most of my friends and family use iPhones, while I use Android. However, the messaging between iPhone and Android phones is not ideal. Many people around the world use WhatsApp for mobile messaging, but WhatsApp cannot communicate with iPhone’s messaging app, nor can Signal, and Signal cannot communicate with WhatsApp, and so on.

If every mobile messaging app is built on a protocol that can be monetized, these protocols can benefit individuals and companies by operating them, and developers will have incentives to build them to earn revenue, then the situation will be completely different. All our mobile messaging apps will be able to communicate with each other.

In the next few decades, as Web3 protocols are designed, built, released, and widely applied, every field of computing will go through similar scenarios. Although we are still in the early stage of the golden age of protocols, there have already been many outstanding protocols in the decentralized infrastructure and decentralized finance fields.

What makes me uneasy is that protocols have such great potential, but their understanding is so limited in the media, mainstream society, and governments.

Recently, the White House released a document claiming that “crypto assets currently do not contribute to broad economic interests,” which seems to indicate that the economic impact of Web3 on the United States is not important. Although the economic benefits of Web3 are not widely spread today, their potential is enormous and will eventually have an impact on every economy and market. However, taking a negative attitude towards their development will not make them disappear, which is a fortunate fact.

Original text: What is a protocol and why does it matter?

Cover: Unsplash@Joshua Sortino

Original text reference links:

1/https://www.usv.com/#thesis-3-0

2/https://www.cloudflare.com/zh-cn/learning/network-layer/what-is-a-protocol/

3/https://www.cloudflare.com/zh-cn/learning/network-layer/internet-protocol/

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