Discover more from The Blockchain Sector With James Bachini
Web2 vs Web3
The Blockchain Sector @ 2022-11-03
The Blockchain Sector provides information relating to emerging financial technologies. It should not be considered financial advice. Disclaimer below.
Web2 architecture is what we know and love. We use a web browser or mobile app to connect to a server and that distributes content with data backed up to a cloud-based server somewhere.
We access accounts with usernames, passwords and social logins for credentials. It’s quite rare to see any form of programmable money or value distribution in web2 ecosystems.
Web3 is an emerging technology built around blockchains but it's much more than just cryptocurrency. The idea is instead of a server client model, you have content being served from a decentralized P2P network.
Rather than Facebook monetizing your user data, your data is stored within a token which you control. The users have the ability to delete, modify and hold ownership over their own data.
Front ends can be built on local devices by running up decentralized applications (dApps). Credentials aren’t linked to your email address but to a digital wallet address which can sign transactions and log you in to a user account.
There is real cutting edge technology being worked on here as well with things like zero knowledge proofs. There is no equivalent of this in web2 architecture where you can prove that a user is part of a group without identifying that user. So the user can go to a third party system and prove something about their credentials without giving away their identity information.
If you imagine a database on a web2 server, you'd have a user ID, then you maybe have an array of different group IDs which the user belongs to. To find out if the user is in the group you would need the user ID. Whereas with ZK proofs you have a level of account abstraction where you can prove something about the user without giving up the account or identifying data.
Problems With Web3
Make no mistake, web3 is still in its infancy. It's not as developed or complete a system as web2 architecture. For production level applications you can't just have a “sign in with Ethereum” type system on its own because not everyone has a Metamask wallet. Not all users are security conscious enough to manage their own private keys and digital funds.
Where web3 excels is the tokenization of value in an internal economy and interoperability between systems. Web3 systems, much like DeFi, are intermingled and one protocol is built on top of another.
If someone comes up with an open-source web3 game, different developers can take that open source code, then build on top of it and create new levels, worlds or metaverses within that game.
The metaverse is a subject for a newsletter of its own. Perhaps it has more of a connection to virtual reality than to blockchain. We are waiting on virtual reality technology and VR goggles to be good enough to create an addictive interaction with a virtual world. Once we get to a stage where the graphics and UX is on point it could attract that tipping point of users.
I have no doubt that this is coming but in my opinion, unfortunately I think it will be Meta (formerly Facebook) that has the market advantage here. The blockchain native projects like Decentraland and Sandbox are going to struggle to compete because they don't own hardware or have access to the billions of dollars that Meta and Zuckerberg are currently spending within the space.
Where Web3 Is Going
Web3 may eventually become a standard tool within mainstream web developers toolboxes that they can use to build out general applications when data becomes fast enough and cheap enough to store on-chain. Then we can use blockchains in much the way we use cloud services today.
One of the earliest visions of this was the Vitalik co-authored white paper on SBT’s (soulbound tokens). A SBT is a data store for an individual user. There has been different concept designs for how this could work ranging from a non-transferable NFT through to some stuff that I put together on GitHub which does look more like a personalized data store that third parties can interact with.
Companies like Google, Amazon and Apple are so dominant, they essentially have a monopoly or duopoly over the market and can restrict developers by enforcing what they can and can't do.
The utopian vision is that we won't have to rely on these corporations, not only for their cloud infrastructure but also for their app stores and gatekeeper marketplaces.
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Disclaimer: Not a financial advisor, not financial advice. The content I create is to document my journey and for educational and entertainment purposes only. It is not under any circumstances investment advice. I am not an investment or trading professional and am learning myself while still making plenty of mistakes along the way. Any code published is experimental and not production ready to be used for financial transactions. Do your own research and do not play with funds you do not want to lose.