The Technologies of Web3Many builders in this space were initially attracted to the early ideologies—privacy, decentralization, and self-sovereignty—and many have mistaken them for value propositions (myself included). However, the average end-user does not adopt technology for these reasons. Instead, the most powerful feature of Web3 is that it can scale and advance by incremental composability—talented builders improving the state of things, and more talented builders improving on top.While there are a vast and bewildering array of technologies, frameworks, and chain implementations that fall under the Web3 umbrella, the following are the core technologies enabling this:
- Cryptographic keys and decentralized identifiers (DIDs) enable direct data management, allowing anyone to sign, transact, and participate in decentralized networks.
- Smart contracts ensure that economic activity is open, transparent, and rule-based in executable code.
- Data composability allows peer-to-peer networks to freely share and interact with code, data, and contracts. Networks that were closed are becoming open.
- Distributed storage systems can split data across multiple servers and be retrieved based on the content rather than its physical location.
- Crypto assets help eliminate the need for Web2 middleware by economically incentivizing people to run an open protocol and remain aligned to the interests of the network.
Web3 protocols are built on open and interoperable data, and projects like The Graph help developers query blockchain data in an accessible way by indexing off-chain data. The Ceramic Network is a decentralized data network for managing information without databases or servers; Arweave enables permanent data storage through economic incentives; IDX is an identity protocol that replaces centralized user tables with a unified digital identity. Outside of data services, Web3 protocols can provide other backend functions such as file storage, computation, authentication, governance, and content distribution. These technologies enable a Web3 that is far more fluid and interactive than today's web because many apps can operate on the same data. If our data is tied to us instead of being scattered across application-specific silos, we'll be able to take our whole, authentic selves across cyberspace. More specifically, users can carry their data from app to app, and applications can use the data associated with the user. Instead of a company having to choose X or Y for their productivity suite, imagine each person being able to select different tools and still collaborate on the documents.
The Web3 data stack
Prerequisite concept: Social GraphsMost discussions about “Big Tech monopolies” miss the critical distinction: between the platform and the graph.The social graph is the connections between members of a social network. This is not the property of any company. And yet, you can't freely move this information between different platforms, which means that the platforms effectively own it. Meta has my friends; Twitter has my followers; Amazon has my shopping history. If you leave the platform, you are forced to reconstruct your graph manually somewhere else. This creates high switching costs for users and gives the platform significant leverage.In the early Web2 era, there were isolated social graphs for each social application, but people quickly got tired of registering and re-adding friends on every site. Thus, the optimal solution was to consolidate all the relationships onto one app, i.e., Meta (formerly known as Facebook). As soon as Facebook gained mass adoption and realized the value of the social graph it owned, the company swiftly embraced self-preservation strategies and shut down its API to isolate itself from competition.Meanwhile, data has become the most valuable resource in the world. Big data is already a $274 billion industry—3% of the world GDP.
Decentralized social graphs change the power imbalance between the user and the platform. Although applications can be proprietary and fragmented, the data that populate them can be shared across protocols. No longer shackled to data monopolies, power shifts from the platforms to the user, and the web becomes competitive again.
User-centric social graph
Re-decentralizationAt the heart of the Web3 vision is "composable data." Instead of being trapped in application-specific silos, the information that powers our online experiences can be read, remixed, and built on by applications across the web. Data composability is a paradigm shift because not only does it change how applications are built—but what an application is. What it means: Integrated and customized experiences across the Internet, taking all your information and assets along with you. You get the benefits of diversity without the costs of fragmentation.While Web2 may be built on such a backend, composability is not reflected in Web2 companies themselves. For example, the Internet itself is decentralized, so the U.S. cannot disable China's Internet. Effective monopolies like Facebook, Amazon, and Google are centralized solutions built on a decentralized network and have little incentive to break themselves into composable services. But in the presence of shared network effects, these incentives change.What isn't immediately obvious, however, is that decentralization presents its own challenges. One of the stumbling blocks of composability is the high fees that we have seen on Ethereum as the network gets popular and more congested. Add to that the inherent complexity of bridging between blockchains—which in its current state will dilute security and liquidity resources—and it makes for a challenging environment for complex operations across multiple dApps. The transition from Web2 to Web3 is underway, but the process will require patience and innovative solutions.