Author: @Web3Mario
Introduction: Yesterday, by chance, I learned from a friend that he had received a significant investment return in the field of Bitcoin script, which deeply stirred up my sense of missing out. I have been feeling anxious for the past two days, and it is truly embarrassing. Looking back to when the Ordinals technology architecture was just released, I studied the related documents as a developer. However, I was quite skeptical about this technology path. At that time, my judgment was that it was a step back in encryption technology. The design concept seemed similar to a distant altcoin project called Color Coin, which focused on issuing independent tokens using BTC’s technology architecture. However, unlike Color Coin, Ordinals did not develop a new chain but chose to reuse the widely accepted BTC network. Compared to the proposal of on-chain virtual machines (such as EVM or other WASMs), this architecture has proven to be somewhat crude and lacking scalability. It is limited by the fact that BTC does not have a Turing-complete execution environment, making the development of related application layers relatively difficult and expensive. Even after the so-called orthodox Runes technology was released, I was also quite skeptical after reading the relevant documents. It only established some standards to make the so-called BRC-20 tokens look less rudimentary. However, these are hardly worth mentioning in the on-chain virtual machine solutions because designing an ERC-20 token is something that a novice web3 developer can easily accomplish… However, in the face of tangible wealth effects, these judgments seem pale and laughable. After calming down, I have some related thoughts to share with you and explore the core value of web3.
The tangible fact at the root of all our thought distinctions, however subtle, is that there is no one of them so fine as to consist in anything but a possible difference of practice. To attain perfect clearness in our thoughts of an object, then, we need only consider what conceivable effects of a practical kind the object may involve—what sensations we are to expect from it, and what reactions we must prepare.
—-William James
Anarchism in the Post-Snowden Era of Web3
Many of my friends are amazed by the emergence of Bitcoin, as if it were a nonconventional, inexplicable genius product from the Golden Age of Ancient Greece. However, I do not agree with this view. I believe that the invention of Bitcoin was not accidental; it was a necessary result in the network environment of that time.
In the previous introduction, we reviewed the history of the development of the web. In the era of classical liberal internet, the design principles of open, inclusive, global, and neutral protocols gradually formed. However, with the emergence of numerous web applications, there has been a significant change in the composition of internet users. The subculture group of users, who were previously coders, has become a mainstream cultural group encompassing various demographics. The utilitarianism that prioritizes efficiency and low costs has taken the lead.
But this does not mean that the principles of open protocols have completely disappeared. Unlike political revolutions, the evolution of technology is nonviolent, so the corresponding ideological evolution is a gentle process of integration. In fact, a group of developers, whom we can call classical liberal remnants, have been adhering to the principles of open protocols in their technical research and concept promotion work. We can easily find them, such as the Free Software Foundation, Electronic Frontier Foundation, Wikimedia Foundation, and other organizations. They have continuously funded and promoted many interesting technological solutions, such as Tor, VPN, SSH, etc. They were also among the earliest users of Bitcoin, using it for fundraising. Therefore, there is reason to believe that the design of Bitcoin must have come from this group of people. Its initial purpose was to develop an unregulated, anonymous electronic cash system for payments.
With the huge success of Bitcoin, it has attracted the interest of some computer experts. I believe that Vitalik and Gavin Wood are both part of this group of people. They used Bitcoin’s most important original technology, the Proof-of-Work (PoW) consensus algorithm, to establish a decentralized, anonymous computer system, completely changing the classical client-server web development paradigm into a possibility.
With the explosive Prism event, the credibility of both technical authorities and political authorities has greatly diminished. This provides an excellent opportunity for the promotion of new concepts. Therefore, we can see the emergence of Web3 with the latest semantics. This is Gavin Wood’s Web3, and I believe it is necessary to quote his classic description again:
“Web 3.0, or as might be termed the ‘post-Snowden’ web, is a re-imagination of the sorts of things we already use the web for, but with a fundamentally different model for the interactions between parties. Information that we assume to be public, we publish. Information we assume to be agreed upon, we place on a consensus ledger. Information that we assume to be private, we keep secret and never reveal. Communication always takes place over encrypted channels and only with pseudonymous identities as endpoints; never with anything traceable (such as IP addresses).”
The core vision of this version of Web3 is to establish a decentralized, uncensored network world that fully protects personal privacy. This can be seen as a classic interpretation of anarchism in the online world. Therefore, I am willing to call it Anarchist Web3. It is worth noting that the significance of making such a clear distinction lies in understanding what principles should guide our application design in order to achieve the ultimate vision and build the network that best suits our needs.
Under the guidance of this ideological direction, the extreme pursuit of decentralization and privacy has given birth to a series of interesting Web3 projects. Successful cases in this category are usually focused on underlying infrastructure. Let’s recall those exquisite cryptography and consensus algorithms without giving specific examples since there are many well-known projects. However, when it comes to the application layer and protocol layer, there are not many, except perhaps ENS.
The Hyper-Financialized Capitalist Web3
Since 2013, when MasterCoin designed the ICO crowdfunding model, the crowdfunding financing model using cryptocurrencies as targets has gradually become popular. With the improvement of protocols such as ERC20, it has greatly reduced the barriers to issuance and participation. In 2017, the development of ICO reached its peak.
Let us review that period of history. Tokens, which are commodities or assets, have evolved into different types. The most representative ones are utility tokens and ownership tokens. The former is similar to admission tickets, where only holders of these tokens have the right to use the target project. In fact, in the early stages of ICO development, most tokens issued by projects belonged to this type. Representative examples include Mastercoin, NextCoin, and even Ethereum (which did not include a POS plan in its early design).
The emergence and rapid development of ownership tokens, in my opinion, cannot be separated from two key factors. The first is the geek named Sunny King who proposed Proof-of-Stake (POS) in 2012 and developed Peercoin. I believe the biggest contribution of this concept is that it was the first time someone proposed a paradigm design in which tokens carry exclusive network ownership (although in this case, tokens carry more of a dividend right). This paradigm design around network ownership became a hot topic. With the advent of 2018, EOS’s ICO reached its peak. However, excessive development bubbles and the delayed explosion of applications that failed to materialize have caused the development to stagnate.
The second development opportunity for ownership tokens, I believe, can be traced back to the launch of Compound’s Comp token. This completely opened the era of hyper-financialized capitalist Web3. Before this, for a long time, the development of ownership tokens was limited to the dividend model. Compound’s innovation allowed tokens to represent assets with financial attributes and enabled them to participate in various financial activities. This opened up a new world of possibilities for Web3. It can be said that it marked the transformation of Web3 from a purely technological concept to a practical application that touches people’s lives.
Conclusion:
Web3 has evolved from the classical liberal internet era to a new era driven by the principles of decentralization, privacy, and financialization. It has brought about significant changes in technology, ideology, and application design. The emergence of Bitcoin was not accidental, but rather a necessary result in the network environment of its time. The post-Snowden Web3 represents a re-imagination of the web with a fundamentally different model for interactions between parties, emphasizing decentralization, anonymity, and the protection of personal privacy. The hyper-financialized capitalist Web3 has witnessed the rise of ownership tokens and the transformation of Web3 from a purely technological concept to a practical application that touches people’s lives. With these developments, it is important to consider the principles that guide our application design in order to achieve the ultimate vision of Web3 and build a network that best suits our needs.The focus of this article is on the distribution of ownership of the underlying network, while the application layer seems to have not responded. In fact, the birth of some well-known Dapp projects was very early, when “administrator governance” + “pay-per-use” was basically the mainstream model. It was not until the emergence of Comp that the Dapp development model, which relies on tokens to carry application ownership and achieve “community governance” + “mining incentives” around the key use of Dapps, gradually gained widespread recognition and developed rapidly. Due to the generous financial returns, smooth exit mechanisms, and a free market environment, investors of all sizes entered Web3 with a large amount of capital. Similar to the transition of classical liberalism networks, the industry once again undergoes changes in its main user composition, and the meaning of Web3 has also undergone a great transformation. Let’s recall Chris Dixon’s definition:
Web3 is the internet owned by the builders and users, orchestrated with tokens. In web3, ownership and control is decentralized. Users and builders can own pieces of internet services by owning tokens, both non-fungible (NFTs) and fungible.
The difference is now very obvious. Web3 has gradually shifted from the pursuit of authority and personal privacy to the redistribution of network resources through the use of digital assets as carriers of network ownership. In this vision, the private ownership of digital assets and an absolutely free market are the ultimate goals, while the pursuit of authority and personal privacy has degraded into means of ensuring the above two goals. This is an important change, which is basically equivalent to the political pursuit of free capitalism (in fact, in political philosophy, free capitalism is basically equivalent to a specific form of anarchism).
Guided by such ideology, the innovation of the value categories and ownership distribution methods carried by digital assets has become the main evolutionary direction in the Web3 industry, basically, before the recent intense wave of deleveraging, the main innovations in the Web3 industry were concentrated in this area. We need to be very clear about the differences between the two, as they will bring completely different evaluation criteria. Some Web3 projects may be excellent in the eyes of Web3 supporters who advocate anarchism, but they may seem meaningless to Web3 supporters who advocate free capitalism, and vice versa. Ultimately, it is because of ideological differences.
Innovation around digital asset carriers will continue to be the core driving force of Web3
After understanding the difference between these two claims, I hope to explore what might be the core driving force behind the rapid development of the next wave of Web3. Personally, I tend to agree with some of the pragmatist viewpoints. In my opinion, the significance of judging an idea or concept lies in the effect it has on human behavior and the value it produces. Relying on metaphysical top-down thinking is usually not conducive to social development. From this perspective, I also agree with socialism.
Under such ideological guidance, I believe that the development of the online world will likely follow a compromise and low-friction path. Do you remember the network ideology graph we mentioned in the previous article? In general, we can categorize classical liberalism networks, anarchism Web3, and free capitalism Web3 into the same area, which is a relative part of technological authoritarianism. The ideology of the future network world will burst with greater energy in the blue shadow area. The driving force behind this development lies in whether new and more universal value propositions will be discovered. Based on some existing achievements, I believe that digital assets basically have this ability, or rather, innovation around digital assets will continue to be the core driving force of Web3.
First of all, I need to declare that I do not deny the value of work related to decentralization and privacy protection. On the contrary, I believe that the relevant achievements are usually enlightening. However, based on the current actual situation, these two goals are usually premised on the evolution of cryptographic technology. Constrained by the development of related technologies, most products supported by this concept do not perform well in terms of performance, or compared to some mature computer network technologies, these products still have a lot of room for improvement. Moreover, cryptography, as a basic discipline, requires large investments and has long output cycles, which does not match the current development status of Web3 enterprises. And I don’t think this situation will change in the short term.
However, the discussion on digital assets will be different. So far, I am still impressed by the sophistication of the design of ownership of digital assets (or encrypted assets) in the Web3 world. The most direct impact includes three aspects: a method of confirming ownership that only relies on technical guarantees, a method of ensuring the exclusivity of the owner’s control over digital assets in physical form, and a method of transferring digital assets based on the network.
It is not an exaggeration to say that any previous technical solution or specific product for implementing digital assets is not as perfect as the Web3 solution. This has brought more practical value to digital assets in Web3, namely high liquidity and low-cost trust guidance, injecting new vitality into the development of the online world. Therefore, I believe that the core driving force behind the rapid development of the next wave of Web3 will continue to be innovation around digital assets. Simply put, innovation may be carried out in the following aspects:
– Paradigm innovation: The introduction of each new paradigm of digital assets, such as FT and NFT, injects unprecedented development momentum into Web3 because the introduction of new paradigms provides innovative specific boundaries and has guiding significance. On the surface, fungible and non-fungible, this pair of opposing categories seems to cover all types, but I want to express that this is not the case. Imagine gender. For a long time, we believed in the binary theory of gender, but look at the achievements we have made now. In fact, I think it is interesting to propose some token paradigms that have different characteristics under specific conditions, and fungibility is just one dimension. More dimensions will be discovered, and of course, the premise of innovation is to propose specific application scenarios for the corresponding paradigm to be valuable. Just recently, the introduction of new digital asset carriers such as Runes is a very good start.
– Value innovation: By combining existing FT and NFT paradigms with certain economic models or application designs, carrying new types of value. This is also a very meaningful direction of innovation. Taking FT as an example, I think the value currently carried by FT can be abstracted into the following types: utility value, growth value, dividend rights value, and governance value. In the following articles, I will analyze the differences between these four value types in detail. Based on the current development of the industry, I believe that credit value is very likely to be the fifth dimension and should be supplemented accordingly.
– Business innovation: This type of innovation usually takes specific businesses as breakthroughs, attempting to solve old problems with new methods in order to achieve better results. Here, I believe there are two potential paths for innovation. The first is the transformation of traditional internet businesses, using certain characteristics of digital assets to partially optimize or transform existing business models and create new competitiveness. The second is the optimization and transformation of existing usage patterns combined with digital assets, or it can be called innovation in the token model. This type of innovation usually acts as a catalyst for industry development. Yield Farming, X-To-Earn, and similar concepts all belong to this category.
In summary, although protocols like Runes may seem like a step back from a technical perspective, as a new digital asset carrier, its value is still worth recognizing. What the future development of Web3 will look like remains to be seen.
