Why is decentralization significant? Talking about three trends of Web 3

By Josh Stark

Translation DUANNI YI Edit Sonny Sun typography Roy

Source: Encrypted Valley


The Internet has changed again.

Internet-based services have tended to become centralized over the past few decades. Today, a small number of large companies control the platforms we use to search for information, store personal data, manage online identities, and communicate openly and privately.

At the same time, from encrypting information to digital currency, a seemingly unrelated technology is evolving at the edge of the technology industry. In this loose community, "Web 3" has become an all-encompassing term used to describe a new, better Internet. A payment channel and funds are native digital Internet; a "decentralized" Internet that competes with centralized applications; a user who has more control over their identity and data.

However, it is often difficult to explain what it all means. How is "Web 3" different from the previous Internet era? What is “decentralization” and why is it important? How are these new technologies applied in reality? We spent years building infrastructure to make the blockchain more scalable – but who would actually use it? And what is the motivation for people to use them?

This article attempts to clarify the future of Web 3 in a concise manner. We will explore the core ideas behind the Web 3 project and investigate three main trends.

This article is not a prediction of the future. The future is not static: we must make the right choices to have the world we want. The focus of this article is to describe a possible future, a compelling future, a future worth building, a future that is clear enough to let us know where to go.


Web 3 changes

The Internet has experienced several major changes. These shifts extend the performance, features, and scale of the Internet. We moved from plain text sites to streaming video, from static web pages to remote server-backed apps, from mailing lists to global social networks that drive modern political and cultural development.

As the Internet matures, we become increasingly dependent on a few large companies. Google has built the fastest and most convenient search engine, controlling 74% of search traffic; Facebook has built the most popular social network and gained control over the online identity of 2.2 billion people (unfortunately, both in China) Not successful).

Web 3 is different from the previous Internet transformation. The core of Web 3 is not speed, performance or convenience. In fact, at least so far, many Web 3 applications are slower and less convenient than existing products.

Web 3 focuses on ownership. It is about wars who control everyday technology and applications. It breaks the balance that the Internet has shaped over the past decade: the trade-off between convenience and control. We are used to this state, which seems inevitable: using the Internet means being monitored; having a social media account means selling personal data to advertisers. Is there any other method?

Web 3 rejected this premise. We can enjoy the benefits of the Internet without giving up most of the ownership to the oligarchs. The above dynamic balance is not the iron law of the universe, it is only the product of the technology available at the time, and the choices we made during the development process.

"Web 3" is a movement to build different technologies and make better choices. We are not trying to replace the network, but to change what we like while changing its infrastructure. This is a reform, not a revolution .

The projects in Web 3 seem to be unrelated, but all have a common theme. From financial projects (digital assets) to basic communication technologies (end-to-end encrypted messaging), from mass consumer use cases (open social networks and P2P markets) to critical Internet infrastructure (decentralized DNS). Without exception, Web 3 is a technical combination that reorganizes Internet control.

Web 3 includes not only digital assets, blockchains, and other products designed for cryptographic economics. It also covers any technical ideas that help reform the centralized Internet and allow users to regain control of their digital lives. We believe that these technologies are the most important contributors to the current Web 3 movement and are therefore the focus of this article.


Three trends in Web 3

In this article, we investigated three trends and discussed how they will evolve over time:

  • First, money will become a native feature of the Internet.
  • Second, the "decentralized" application will provide users with new features.
  • Third, users will have more control over their digital identities and data.

Keep in mind that these trends are speculative. It's worth noting that Web 3 will include technologies and applications that we can't predict, and the technologies and applications discussed below will look different than we think today.

  • currency

In Web 3, currency is a native feature of the Internet.

In the past, the Internet was just the gateway to the traditional offline financial system. But digital assets are digital in nature, and transactions don't need to interact with offline systems, just send messages over the Internet. We will soon live in a world where "money" is a product of the Internet:

  • Payment or collection is now something that any software can do, and by extension, anyone with a network-connected phone can do it.
  • Digital payments will unlock some new business models that were previously unrealistic. They will fundamentally reduce the cost of certain transactions (such as cross-border remittances), enable new use cases (such as machine payments), and can be used in large-scale new markets (such as those who previously had no access to traditional financial systems).
  • An ecosystem of basic financial primitives (loans, derivatives, exchanges) provides the foundation for more sophisticated financial applications for anyone.
  • As technicians explore the cryptographic economic design space, we will create new types of currencies. We are just beginning to explore these possibilities, such as agreement tokens and irreplaceable digital assets.

Digital assets were made possible because Nakamoto invented a digital asset and payment network without having to hand over control to any centralized company. BTC is decentralized because it is “controlled” by multiple participants, from large mining companies to individual node operators to core protocol developers. They exert influence on the network in different ways and at different degrees, but no single individual has the power to own the network.

"Decentralization" has become a core concept of Web 3. However, it is more of a slogan than an accurate technical description. There are many possibilities for decentralization. If a platform is controlled by 20 entities, is it "decentralized"? If it is 100? Or 10,000 entities? What kind of decentralization are we pursuing?

Decentralization is not a binary state – it is one of a series of possibilities. To say that a system should be "decentralized" is like telling an engineer that a bridge should be built "very big." There is no doubt about this, but it is not a useful piece of information in itself. We also need to know the river that the bridge needs to cross and the load it needs to bear.

The significance of Web 3 is not that all systems must be decentralized as much as possible, but that we can explore more possibilities in this scope. The degree of decentralization that is useful or necessary will depend on the application. BTC is a typical example: its degree of decentralization has reached a certain level, so that payments are difficult to review, and it is difficult to change the basic parameters of digital assets. In other words, it uses a currency mechanism similar to deflation, and the total amount is permanently capped. Other countries are also trying to create similar global digital assets, or use decentralized features to create stable coins like DAI that attempt to resolve volatility.

BTC is the first digital asset to come out, so it is often considered the only viable native design. “Digital assets” have become synonymous with specific political views of the currency.

In fact, it is more important to understand that digital currency has many possible designs and different uses. BTC enthusiasts believe that the purpose of digital assets is to let people choose their favorite monetary policy, its superiority is self-evident. The innovation of digital assets is that people can choose monetary policy autonomously, no matter what it is. All they need is the internet and a mobile phone.

  • Decentralized applications and services

The products and services that make up the Internet today are often produced and controlled by individual companies. If you use an Internet-based application, it is likely to be controlled by a legitimate entity. The company hires professionals to decide which features will be prioritized, how to control the server hosting the application data, and ultimately decide what code to push to the product.

The promise of Web 3 is that there may be other options. Maybe we can build products and services that are not controlled by any single company, but they can still compete with similar products and services that are centralized. Like BTC, these products will be “decentralized,” although the principles of decentralization and the benefits they bring may be very different.

For example, imagine what a “decentralized publishing platform” would look like. This will be a social platform like Twitter or Medium that allows users to share content, comments, and "vote" for content they like. The platform has built-in mechanisms to encourage users to contribute. Users can send micropayments to each other or establish regular payments for the authors they want to support. The best authors can get paid directly from the platform without having to “cash out” the economy of interest. Even though each vote is only a few cents, it is still an improvement over a centralized platform like YouTube. On this decentralized platform, no central entity can extract money from user transactions. The platform can also use inflation funds to create a reward pool that rewards the highest push every day.

The core rules governing decentralized services are defined in open source protocols. Users interact with the protocol using the client software they choose. In other words, there are a variety of applications that are developed by different developers but are connected to the same social network. These clients may offer different features, but all follow the same sharing protocol, just as email clients use the same communication standards.

Users can choose any kind of client, different clients can implement different functions or provide third-party services.

Because this is built on a decentralized protocol, developers don't have to apply for permission from any centralized company, they can focus on building their own products without worrying that their API access will be cancelled one day. Users don't have to wait for Twitter to add new anti-spam or anti-harassment features, they just need to provide a client that has these features. A service ecosystem has evolved on the basis of open protocols, allowing users to do anything, even more, on Twitter.

This illustrates an underestimated benefit of the decentralized platform: a sustainable third-party service ecosystem. Application developers can build useful products on decentralized protocols without worrying that one day their API access will be banned because no company can shut it down. This platform can remain neutral, which means that a larger developer network will invest their time and money to build a business based on it. Chris Dixon's "Why is decentralization significant? "In-depth discussion of this issue.

Of course, we still use products and services created by our centralization company. But these companies will have the potential to limit the type of control they have over the product and give more control to the user. This already exists in encrypted messaging applications, applications like Signal (created by Open WhisperSystems) that don't see or save any client communications. By designing end-to-end encrypted applications, they deliberately limit user control.

According to the latest technology report, Lightning Labs developer Joost Jager is developing an experimental proof of concept, Whatsat, which can be used for private communications. The principle of most encrypted communication applications is to convert information into fields or symbols that are not easily readable by humans, thereby preventing peeping, but still does not eliminate the possibility of central entities intercepting users. As an end-to-end network, Lightning Network has the same anti-censorship as BTC, and anyone can participate. No one has the right to prevent people from conducting private communications.

Compared to the early days of Internet startups' commitment to “doing no evil”, Web 3 companies have higher goals, and they try to ensure that they do not do evil, at least in certain specific ways. Web 3 includes techniques to limit its control over customers by refusing some of the developer's power in advance. We may still need centralized companies, but we can reduce our reliance on them.

  • User control of identification and data

In Web 3, users will have more control over their identity and data.

Today, most of our online identity ownership belongs to others, such as Gmail or Facebook accounts. Web3 is laying the groundwork for returning online identity to individuals.

In a way, this is the result of a digital asset building infrastructure. Holding a digital asset requires a private key, and millions of people's user base ensures network-effect-guaranteed application development. The same technology allows people to manage any blockchain-based data, including personally identifiable information. It's no coincidence that we call these apps "wallets", and in the future they will not only save your money, but also your identity card.

At the same time, Web 3 will enable users to retain control over their data. First, because users can choose to use their own identity rather than the identity provided by a third party, this limits the chances of companies like Facebook accessing user data; secondly, due to the emergence of decentralized services, it means in some cases Next, when you use social media, rent a home, or take a ride home, there won't be a centralized company that can collect, store, and sell your personal data. In general, most of the Internet we use in the future will be through platforms and systems, and they will not collect data about us.

Finally, the new capabilities provided by Web 3 technology, that is, controlling our identity and data, as well as the globally available payment network, will make it easier for individual users to capture value. In the traditional Internet era, these figures are worth billions of dollars. In Web 3, users will get this value. If you want to sell data about your personal browsing habits, you can do it directly, and you are personally rewarded, not Facebook. As we try out new digital asset ownership mechanisms, individual users will actually have the technology they are using every day, an opportunity that only entrepreneurs, venture capitalists and authorized investors have.


to sum up

Web 3 is not necessarily something that happens. The above description of the potential future also faces major obstacles, some of which may never be overcome. Here are some of the issues that Web 3 needs to address:

  • Do entrepreneurs really have the motivation to build decentralized applications? Who will provide them with financial support? Today, the way these applications achieve profitability and risk-scale returns is unclear, while traditional “centralized” business models are more reliable.
  • Will decentralized applications be worse than centralized? Products controlled by a single company may have a more consistent product vision and be able to iterate quickly. Centralized products may always have a better user experience and are easier to operate.
  • Is the cryptographic component of a decentralized application too challenging for most users? How do users manage private keys in a secure, recoverable way? Is this possible if you don't return to some kind of centralized service?
  • Will decentralized applications be more expensive to use? Low-level decentralized systems (such as file storage, distributed computing, and predictive machines) have many "necessary" redundancy to keep them operational. Will these "layers" make decentralized applications too expensive?
  • Does the decentralized application built with Smart Contracts make sense? Is it possible to write "immutable" code to always meet the needs of the application? If we need to upgrade smart contracts, who decides these upgrades, how is it different from centralized applications?
  • How to manage the decentralized system? Will grassroots governance span different political ideologies and cultures? It is easier to establish consensus by a centralized company with full control than between a group of participants with different interests and priorities.
  • Does the target user exist? How many users really care about privacy, who care about their identity and open finance? Is the goal of Web 3 too small?
  • How will governments and regulators respond to Web 3? New technologies have brought new capabilities to people, but they have also brought inevitable contradictions. After all, Web 3 includes techniques to avoid censorship and surveillance, and can be used to circumvent financial regulation and enforcement.
  • Can the underlying blockchain used by Web 3 applications scale to serve millions or billions of users?

Even with a lot of uncertainty, Web 3 still deserves a lot of attention. Blockchain enthusiasts are often criticized because they are only concerned with the idea itself, rather than starting with technology. Digital assets and blockchains are not an end in themselves, they are only valuable when they solve problems. But undoubtedly, it is helpful to reorganize the vision of Web 3, which brings us back to the core of the problem: the Internet has become too central and it needs to be open.

The vision of focusing on Web 3 can also help us get out of partisan politics in the digital assets arena. Web 3 doesn't know who's platform to use, it's about what this technology can do in reality, and what problems people can solve.

Ethereum or BTC may fail, but even if they do fail, the vision of Web 3 will not disappear. We only need to use the application knowledge and encryption economics developed in the past to build new and better system versions, and then continue.

Web 3 is not a utopia. If we have taught us what we have taught for the past 20 years, it is that technology is not a panacea. The problems that humanity has faced still exist on the Internet. Politics, power, and control did not disappear with the invention of the network, they only appeared in different forms. The promise of Web 3 is that, at least this time, restrictions on rights and controls are prerequisites, not after-the-fact remedies. We have a second chance to build the internet, but we don't necessarily get a third chance to let us seize the opportunity.

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