Ryan Baird

Translator: iguanas

Translation agency: WhaleDao

Web3 is undoubtedly one of the hottest and most controversial terms at present. Talk to encryption enthusiasts, and you will hear that Web3 is the future of the Internet, which will free us from the shackles of monopoly technology companies and tyrannical governments. Talk to cynics, and you will hear that Web3 is a huge scam led by swindlers, which has no other value except cheating, stealing and financing criminal activities. Talk to technical experts and you will hear about decentralization, network knowledge, Byzantine generals and resistance to witch attacks.

So, what kind of Web3 should we trust and understand?

What is Web3?

Before we begin to debate, we need to define it, even if it is difficult to define it. The term "Web3" was put forward by Gavin Wood, the co-founder of Ethereum, on 20 14, but the community has not reached a consensus on the definition. A simple search shows that there are various definitions of it at present, but the same themes are user ownership, freedom, privacy, blockchain, smart contract and decentralization.

I am a pragmatist. In this paper, we will avoid lofty philosophical definitions, but describe the current situation of Web3 from a technical point of view.

Whether you like it or hate it, today's Web3 is actually a well-known network, only adding smart contracts based on blockchain technology.

Yes, according to principles, philosophy, politics, utopian dreams, there are many other definitions. I don't agree with or object to these definitions, but here we try to keep it simple and intuitive. We will make the following assumptions about Web3:

1.Web3 wallets can be allowed to identify, log in to applications, prove ownership and authorize transactions. You can make your wallet anonymous (actually an alias) if you like. The important thing is that you, and only you, can manage your wallet well, which is called "being left unattended";

You can use Web3 without permission. You just need a Web3 wallet and make sure there is enough money in it to pay for what you want to do. This is often referred to as Web3 "license-free".

3. The blockchain is trustworthy. You can trust a good smart contract based on a good blockchain without trusting a person or a company. Smart contracts are called "distrust" because you can do business with each other through smart contracts without trusting each other. If used properly, you just need to trust the blockchain.

The last point (3) is controversial. Web3 keyboard players may be enthusiastic about how ridiculous I am. You can't trust anything on Web3 because it's a big scam. However, I am not saying that you can trust any blockchain or any Web3 application, nor that you can trust other Web3 users.

Generally speaking, you can trust the tried and tested blockchain like Bitcoin and Ethereum (and possibly other chains) instead of trusting individuals or companies. These blockchains have reasonable theory, transparency and auditing, and have stood the test of time and are trustworthy. Please note that I said that I can trust the blockchain, but I don't have to trust the applications running on it. These need to be verified.

The word Web3 is misleading. Many people think that "3" in Web3 is a product version, and that it completely replaces Web2, making Web2 obsolete, just like a new iPhone model replaces the last one. In fact, it is more like the next important ecological layer on the network. Web3 is built on Web2, just as Web2 is built on the original network (World Wide Web). We are still using the original network today. Web3 will not replace Web2. Web3 will enhance Web2 by adding smart contracts.

Why join Web3?

Now that we have the definition of Web3, the question is why do we need it? Similarly, according to your values and goals, there are many potential answers. But among all the viewpoints I know, there is a unified theme, and everyone's understanding is the same.

Web3 is important because it enables individuals (or entities) to do business and exchange value directly on the Internet without a trusted intermediary.

On the basis of this concept, there are countless proposed use cases and countless grand ideas. Let's consider each of the assumptions about Web3 listed above.

1. An unmanaged Web3 wallet is your identity. In Web2, your identity is managed (and effectively owned) by the organization that stores your data. You may legally have your bank account, but the bank will keep your money and decide whether and when you can use it. In Web3, you can get rid of this middleman (bank) and you can be completely responsible for your own money.

As an unauthorized network, you will not be blocked or censored. In Web2, everything you do, say or share goes through a central host, which has the power to freeze, stop and cancel your actions. In the world of Web3, this middleman has been removed, and you are free to participate in anything you want.

3. As an untrusted computing platform, you will not be deceived by smart contracts (within a reasonable range). In Web2, every transaction you make is dominated by one or more trusted intermediaries, such as markets, payment networks or trading platforms, and you must trust them to operate honestly. In the world of Web3, these middlemen can be removed, and you can rely on smart contracts to do things according to programmed procedures.

Similarly, point (3) is controversial, and I will explain the risks and responsibilities brought by trusting smart contracts later. Importantly, all these key issues of Web3 can be summed up in deleting trusted intermediaries, so that you can do business directly with untrusted rivals on the Internet without any risk.

Why eliminate middlemen?

Eliminating middlemen sounds intuitive, but why should we do it? Are middlemen bad people? Not necessarily, middlemen are also valuable, otherwise they are not part of the equation in the first place.

However, we often see that some industries have developed into an inefficient, outdated and unnecessary state of middlemen. Social movements directly facing consumers have provided countless examples of eliminating middlemen and benefiting consumers. Many top technology companies have created their own business empires by using technology superior to middlemen to replace outdated and inefficient middlemen and provide better services to customers.

If smart contracts can replace a layer of middlemen and better serve customers, it is an opportunity for entrepreneurs to eliminate waste, improve people's lives and create value. We usually think these are ideal results.

Does this mean that all middlemen should be replaced by smart contracts? Don't! This will only happen if it provides enough benefits to consumers. But as it turns out, many big industries have considerable opportunities.

In an industry, the composition of middlemen is not always obvious. Sometimes, after market development or the introduction of breakthrough technology, seemingly core services may eventually be regarded as unnecessary middlemen. By eliminating middlemen, consumers may benefit more than they seem.

On the other hand, the elimination of middlemen can also make manufacturers contact customers more effectively, thus benefiting them. Can improve sales and profit margins, so that manufacturers facing competition can improve quality or reduce prices for customers.

When existing middlemen are organized to benefit market leaders, eliminating the need for trusted middlemen can even help start-ups create a level playing field, which benefits consumers by increasing competition among producers.

Why not choose Web3?

If Web3 is so good, why isn't everyone already using it? It has developed rapidly, but it is far from being used by everyone. Perhaps surprisingly, my answer to this question comes from people who believe in Web3.

Web3 is not the only option. Web3 is a technical design, which provides some benefits, but at the same time it has to pay a certain price. This is an engineering trade-off, and its optimization method is different from Web2, at the expense of some advantages.

The application of Web3 also has costs, and typical examples are as follows:

1. Blockchain is optimized for security guarantee based on redundancy and * * * knowledge, thus realizing computing distrust. However, they are not optimized for performance. Compared with Web2 applications, smart contracts and Web3 applications have poor computing performance, slow running speed and poor user experience.

2. Compared with the Web2 computing environment, the running cost of blockchain is higher, and the same reason is that they are slower. I mean the real operating cost, not how much the company may charge you. Running applications on a single server is much cheaper than running applications on multiple servers at the same time and realizing network awareness. These costs will appear in the form of transaction costs of using the network. A large number of frequently used decentralized blockchains will generate high transaction costs.

3. Taking care of your identity and assets is an authorization, but it is also a great responsibility. If you make a mistake, no custodian can cancel and repair the account for you.

Web3 enables people to communicate with each other safely without trusting intermediaries, but it is slower, more expensive and puts the burden of responsibility on their shoulders.

Web3 enthusiasts tend to think that the benefits of removing middlemen far outweigh the costs, or that the costs will be eliminated quickly through technological improvement, so they will ignore or deny this. In my opinion, even as a believer in Web3, it is foolish to ignore these costs. They do exist.

On the other hand, Web3 fans often hold extremely opposite views. They believe that the computing platform based on blockchain and without trust has no practical benefits, or the cost always exceeds the income, which is not worth wasting energy.

The reality lies between the views of Web3 enthusiasts and fans. Web3 is valuable and important, but it is not everything.

When is it worth spending money on Web3?

In front of us, we have the following knowledge:

1.Web3 is built on the basis of Web2 and extends the smart contract, but it will not replace it.

2. The main advantage of 2.Web 3 is that it eliminates the trusted middleman and enables people to do business with each other directly.

3. Compared with Web2, Web3 has some disadvantages, such as lower performance, higher cost and greater responsibility of users.

So when does it make sense to use Web3 instead of just Web2?

A middleman who needs to make a profit

Where middlemen are needed, there are middlemen. But other things being equal, the existence of middlemen will increase the cost, so it is necessary to increase enough income to prove that its cost is reasonable. When there is a profitable and profitable middleman, it provides potential opportunities for Web3 applications, and Web3 has application prospects in these applications or industries.

Another way of thinking is that the purpose of Web3 is to replace middlemen. The existence of a profitable middleman means that there may be trust problems between the two parties to the transaction, so the middleman appears as a reliable intermediary. This is a clue that the industry may be mature enough to be subverted and may need alternatives based on Web3.

In the process of replacing the middleman with the application based on smart contract, the decentralized application becomes the new middleman. It is a more trustworthy, verifiable and efficient middleman.

Full of danger

Web3 applications should facilitate valuable transactions. Web3 is optimized for security. If the application has no value, it is difficult to justify the cost of Web3. Why pay for unnecessary security?

At present, there are many cases of high-risk applications running through trusted intermediaries on Web2.

Feasibility of input and output

One of the most difficult problems with smart contracts is that they are isolated in the blockchain. They can't easily interact with other people in the world, even other people on the Internet. There are two options for the input and output of Web3 applications.

1. only interacts with what already exists in the blockchain. This is how Bitcoin works as a currency, and why it is an ideal Web3 application. When you send bitcoin to another wallet, what you need is either already on the chain (your bitcoin) or you provide it yourself (the amount and the recipient). This is easy, but it severely limits the use cases that can be supported. Applications other than basic fund transfer usually depend on things under the chain.

2. Use the predictor. Oracle connects smart contracts on the chain with data and services outside the chain. Most distributed financial applications use Oracle to obtain off-chain data, such as the current price of tokens, stocks or commodities.

Since the option (1) is strictly restricted, we will assume that option (2)-Oracle is used.

The problem is that the trusted data and services provided by Oracle are also quite limited in Web3.

Take life insurance as an example. Claims decision-making and compensation can be easily completed through smart contracts, but it is not so easy to know when the insured dies reliably. If the input of the smart contract is unreliable, then the application is also unreliable. Nobody wants unreliable life insurance.

Oracle technology is progressing, and projects such as API3 are providing more off-chain data and services for smart contracts. Interestingly, one of the main reasons for the existence of API3 and Airnode is to eliminate the middleman of Web3 Oracle, which is similar to the purpose of smart contract itself.

But for today's Web3 applications, it is important that the input and output it needs can now be used for smart contracts. Otherwise, when you try to build an application, it will become an obstacle.

This problem can be solved by narrowing the scope of the smart contract part of the Web3 application. Executing executable operations in smart contracts only partially relies on intermediaries outside the chain. A simple example is to send a short message to someone with an application when an event occurs. Smart contracts can't send messages by themselves, but you can make the decision-making part without trusting smart contracts, and then let them call SMS API (an external chain service) to send messages.

Web3 may be the best choice for today's applications under the following circumstances:

1. There are very profitable middlemen.

This is a high-risk application.

3. Input and output can be completed through smart contracts.

Is Web3 an innovation, a revolution or a scam?

The answer to this question should be obvious by now. Today, Web3 can't solve all our problems, nor is it a huge scam. It is a breakthrough technology based on Web2, which increases the ability to replace industry intermediaries with reliable (also known as untrusted) smart contracts based on blockchain. It enables entrepreneurs to create new and subversive competitors for middlemen in high-risk industries. In these industries, middlemen exist and are inefficient, outdated and protected by regulated or centralized market forces.

Is Web3 a revolution? I don't know, maybe. This is beyond the scope of this article. Our focus now and in the short term is Web3. Many people think that Web3 is a great political or ideological revolution. You are welcome to read their articles.

Is Web3 a scam?

Do scammers use Web3? Yes, I'm sure. Web3 is a high-risk, unregulated and immature space, which is produced by game-changing technologies such as blockchain and smart contracts. Of course, it also attracts fraudsters, many of whom. At present, this is not a field suitable for naive or gullible people, and they are likely to be used. This is what we call the "Wild West" in America.

There are not only individual fraudsters on Web3, but also bigger gangs to be wary of. Some scammers even set up applications, tokens and protocols to try to sell them to you. A common cryptocurrency scam is that scammers create an air currency, actively promote it, convince buyers that it is a good investment, and then sell all their tokens when the price is high. Don't trust people, applications, tokens or protocols on Web3, because you can't prove that they are trustworthy.

The transparency (code can be read) and invariance (unchangeable) of blockchain are the reasons why smart contracts are trustworthy. You can read the code to verify whether it meets your expectations, and you can be sure that it will not change after reading it. But not many users have enough knowledge and ability to verify smart contracts. Most users will have to rely on the reputation and collective wisdom of the application to decide which smart contracts they will trust. Facts have proved that this is a good method. If you insist on using widely used and multi-person verified Web3 applications (and they don't look like Ponzi schemes), then you are basically quite safe. You should have good judgment.

Some cynics think that Web3 is a failed technology because it has not kept pace with Moore's Law. But this statement is completely wrong. Moore's law is about computing performance, which is not the goal of smart contracts. As I explained above, smart contracts are optimized for the security of untrusted computing, not the performance. This is like arguing that semi-finished trucks fail to follow the same performance trajectory as racing cars. Of course not. They are designed for transportation, not for racing cars.

Is Web3 worth a try?

I agree with the cynic that the scope of application of Web3 is narrower than what fanatics make you believe. Not everything should be on Web3, and it will not replace Web2. It is not optimized for performance. Today's Web3 is more meaningful for applications that meet the above standards.

I don't agree with cynics that Web3 is a failed technology or scam. Everything is relative. The global economy is huge. Web3 doesn't have to occupy the whole Internet, even if it is a part of the global economy, it is also a huge market. Web3 has begun to subvert large industries, such as banking, payment and financial services.

We are still in the early stage of this great Internet revolution. It still has a long way to go. Web3 will continue to subvert industries worth trillions of dollars, replacing inefficient, deep-rooted and sometimes corrupt middlemen with smart contracts. This is in the best interests of consumers and is totally worth a try.

To sum up:

-Web 3 enhances Web2 through smart contracts, but it will not replace it.

-Use an unmanaged wallet, or you are not a real member of the Web3 world.

-Web 3 is a computing platform without permission and trust.

-Web 3 enables applications to replace trusted intermediaries, and that's what it's all about!

-Web 3 has a cost, because it needs to be proved by its revenue.

-Web3 is suitable for high-risk industries with profitable middlemen when input/output can be completed through smart contracts.

-Web 3 is not a scam, although scammers do use it. Please be careful.

-Web 3 is a breakthrough technology that can subvert the middleman-industry.

The positioning of Web 3 is a big part of subverting the global economy.

This article reflects my own observations and opinions. Whether you agree or not, you can comment or send me a message to participate in the discussion!