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Analyzing the Internal Mechanism and Breakthrough Path of “Web3 Paradox”

DATE POSTED:July 17, 2022

Editor’s note

Mencius said: Fish is what I want; bear paws are what I want. The two cannot be combined.

In the world of Web3: decentralized technology, what the public wants; application value, what the public wants. The two cannot be combined.

This article will try to analyze the gap between the Web3 scene we envision and the actual ecological construction, and on this basis, explore the path of breaking the game. The full text will be divided into the first part, the paradoxand the second part , the breaking of the game , which will be released separately.

In the conceptual frenzy swept by Web3, a series of whimsical DAPPs took root and sprung up like bamboo shoots after the rain, nourished by decentralized ideas.

  • NFT
  • DEX Uniswap
  • Compound、Maker、Ave
  • USDC , DAI
  • Filecoin
  • Lab DAO
  • Toucan
  • Golden
  • Radicle
  • Helium

However, after several years of development, what we have seen is that as soon as CloudFlare collapsed, the oracles stopped reciting, and exchanges were unable to match… Most of the projects collapsed into sand.

Why can’t the decentralized underlying architecture support application scenarios that conform to the habits of the public?

Why can’t the concept of blockchain upgrade be born with top applications such as Twitter and Facebook?

Why can’t a user-privacy-focused crypto world wrap a silky user experience?

Why can’t a Web3 application roll forward with a flywheel effect?

Although there are so many souls torturing, the reality is that almost no one stops to think: what is the gap between the ideal decentralized design and the actual application ecological construction?

Web3 brings us a grand vision of industrial iteration, changing times and even social evolution. As the ideological totem and action plan for the construction of the encrypted world, Web3’s concept of decentralized society is revolutionary – past social changes were often designed from the top down, and brought constant repetition and conflict; under the concept of decentralized society, However, the social practice of Web3 presents a bottom-up “emergence”, similar to the “self-organizing” system of an ant colony or beehive.

However, from a practical point of view, Web3 lacks the executors and promoters of landing practice. Although any major technology related to social change is inseparable from the accumulation and empowerment of market, wealth and interests, the development history of the encrypted world is completely penetrated by the desire for wealth, from project developers , studios, investment Institutions, down to speculators, hodlers and all other major players in the crypto ecosystem.

The industrial iteration, the changes of the times and the social evolution supported by the bottom-up Web3 application ecological construction, and the game with the interests of all parties in the encrypted world currency circle, make all this fall into a “paradox”.

VC: The invisible promoter behind Web3

In the hand of Token, in the name of construction

In the final analysis, the existing Internet industry structure is still a linear relationship of “scale for growth, traffic for valuation”; however, Web 3 does not have a central carrier, and the previous valuation logic cannot be used to evaluate the input-output ratio. All business models and product designs of Web 3 need to be refactored to break the tipping point by a nonlinear relationship and reach a considerable number of users – this model can be analogous to the human brain interconnected through various synapses, Eventually complex thinking arises.

This decentralized reconstruction means that the separation between individuals and enterprises will gradually narrow, and the business value of everyone, every small and micro enterprise, and even any social group can be mined (Token) and transmitted (Web 3 social networking), And the relationship between them can be migrated (social graph) and stored ( IPFS ).

However, there are obvious problems with Web 3.0 at this stage:

1. Lack of real usage demand mining:

Web 3.0 mainly relies on copying the ideas of Web 2.0, and frequently launches decentralized versions of various centralized services, lacking in mining the real needs of users. For example, we don’t want a decentralized version of Twitter, we just want a social protocol that preserves social relationships, NFT-able content, censorship-resistant platforms, and protects our privacy.

2. Users take profit as the first driving force:

Users do not use products for use value and real scenarios, but for profit, which is why X2E and its imitation disk projects emerge in an endless stream. However, this model can only attract gold diggers in the entrepreneurial stage, and will not leave a real user group.

If you want to firmly go long on Web 3, you will not be able to see returns without long-term investment. At least you need to form a business model before you can get the fruit. Only when the national application is born is the time when Web 3 really breaks the game. But the reality we have to accept is that there are about 4 million DeFi users, about 500,000 active NFT users in OpenSea , and less than 10,000 users of the Web 3 social protocol.

Why is the actual user scale of Web 3 so small – because of the Token mechanism promoted by VC.

The logic of VC in Web 2 is: continue to invest, seek a monopoly on a single track, occupy the entire market space, and continue to obtain excess profits.

The logic of VC in Web 3 is: use investment as a bargaining chip, seek early cheap tokens, use the secondary market as a selling place, and use the token exchange as a node to quickly drain the token value.

The Token mechanism of Web 3 becomes a reservoir for institutions and VCs, and they do not take any responsibility.There is a bug mechanism here, allowing traditional institutions to use Token to attack arbitrage.

Why can’t the Token mechanism bring actual user scale? Rational people believe that some behaviors are not spontaneous behaviors under the market mechanism, but are precisely created by human interference.

When users use search engines, they may indeed care about privacy and data security , but the most important thing is to meet the demand for search. This is the fundamental reason why the Web 3 construction path cannot be equal to DeFi and NFT. The use value of a product should be given priority over price mechanism.

For example, when a user uses EthSign to sign a commercial contract, the most important thing is that the contract cannot be tampered with. This is the core advantage of Web 3 products over other tools. Users do not need to understand what the chain and smart contracts mean, but they can know This allows the contract to be permanently archived.

Source: EthSign

As we all know, the market acts on the basis of maximizing personal interests, but the current market dances on the basis of maximizing the interests of others – this cat-friendly stick is called Token. Let us use a picture to see the evolution process under the blessing of this token.

The agency negotiated the share, and the project side conspired to maintain the currency price under the temptation of the internal rate of return (IPR). In the bull market, more users will be obtained to support the value of the Token, but in the bear market due to the lack of core users in the project, the currency price and Double churn of users.

After the tokens are used up, some project parties will choose to sell them together, or have no choice but to maintain operations. For example, after Uniswap acquired the NFT aggregation trading platform Genie, it even used USDC as the retroactive airdrop currency instead of using Uni tokens. Governance can be declared. The de facto death of coins.

In Satoshi Nakamoto ‘s vision, Token is a form of proof of work. However, under the command of VC, the significance of the project is for the price of Token, and the strategy of institutions and projects for Token is the channel for quick exit, not the key to maintaining the operation and development of the project.

Empty Shells: From Infrastructure to Application Scenarios

The hollow structure from infrastructure to application scenarios empties the development spine of Web 3.

When we’re talking about Web 3, we’re talking about the whole concept of the subject – from the social graph and the creator economy to SaaS and collaboration tools, it seems like it’s all there, and Web 3 will quickly take over the online world with just one command. become infrastructure. But in reality there was nothing – as soon as CloudFlare crashed, the oracle stopped chanting, and the exchange couldn’t match…

We suddenly found that under the concept of Web 3, under the support of the underlying public chain , there are still lower-level Internet protocols operating. Under the grand vision of Web3, we can find the gap between ideal and practice at present: Web 3 is just an empty shell.

The bottom layer of Web 3 is still traditional infrastructure

Without the reality of a phenomenal application, the flywheel effect of the Web 3 ecosystem cannot roll. For example, the current social protocol mainly focuses on the concept of SocialFi or social graph, and the popular BBS Network, 50% of its tokens will be distributed to active users. So how to increase activity? Of course, it is to create “high-quality” information. Under this logic, if more traffic is imported, active users of followers and subscribers will reap more benefits. This mechanism comes from the imitation of transaction mining in DeFi, artificially instigating enough bubbles, and finally leaving chicken feathers.

At present, we only have Web 3’s parody of Web 2, but we need to protect privacy, data portability, social migration and other characteristics, and we need the participation of blockchain, DeFi, and NFT. This is the real demand for use. Applications.

The languages ​​used by mainstream developers pouring into exchanges with abundant cash flow are basically Java, Go, Javascript, etc., and Rust, solidity, etc. are only used in the interactive part of the chain. If they don’t realize the greatness of Web 3, the blueprint will never come true. Why do Web 3 applications lack real usage needs? ——The reason is very simple, because the product is not easy to use. Behind this is the extreme scarcity of high-quality developers. On the surface of the Web 3 ecosystem, users are scarce, but based on the current Web 3 users in the order of tens of thousands, there are few exploratory applications, and the construction of more technical and basic development tools is still needed.

When the bear market comes, coinbase and bybit will even make layoffs, and these developers will be lost again, further deteriorating the power of Web 3 development. In the world of blockchain, the driving force of high-quality developers on new tools and new technologies is huge, but the current situation is to squeeze them out of the field of Web 3 infrastructure development. The Web 3 ecosystem can be said to be ready for everything, but lack of talent.

The future: who will bow to enter the game?

We briefly outline the relationship between Web 2/3 – hopefully we can get a glimpse into the future of Web 3.

– The basic hardware is currently the same: still desktop and mobile. Meta’s VR devices are not directly related to blockchain technology or chain games. GameFi is mainly based on web pages and clients and has not been widely connected to VR and other devices. This is a key point that has been ignored intentionally or unintentionally. VR devices are also paving a broader path to usage.

– The underlying protocols are being differentiated: the bottom layer of the network has not completely abandoned protocols such as HTTP, browsers, and TCP/IP, but the UX/UI is changing, regardless of beauty and ugliness, anyway, the main orientation is “cyberpunk”, in other words , the public chain as a communication protocol, and IPFS as a database model have not completely replaced the existing communication protocol and centralized database.

– The current Web 3.0 is based on concepts: Internet + re-evolution –> Web 3.0+, if this is an inevitable story, then it can be considered that the concept of Web 3.0 as marketing itself is an extension to the real world.

– The product is still in the iterative development process: the life cycle of Web 3 products is no longer fixed, and it will enter an era full of liquidity: the service can also be tokenized and NFT-based when it is used up – in essence, the ticket has been used Once it is no longer used, the marketing service can also be used up, as long as the buyer and the seller reach a consensus, it can be called Token as a service.

However, this also requires a process to achieve, and now there are three main types of people talking about Web 3.0:

The first category: practitioners of traditional Internet companies

Now they are eager to try, mainly because the traditional traffic model has come to an end. Among the large factories that are collectively involved, some people are ready to enter a new channel, but if they don’t change their thinking, it will be like Facebook ‘s Libra , or the so-called Libra. The alliance chain technology is the same.

The second category: crypto native

Such people may have started in public chains. For example, Flow began to advertise itself as a Web 3 public chain, or started in DeFi/NFT/ Metaverse project organizations, or jumped out of large factories and institutions to participate in the construction of Web 3. They are the main force at present. Like the Aave team that developed Lens Protocol, everyone must learn to embrace changes.

Category 3: Variations of MLM

The essence of MLM is that the product model is essentially unprofitable, and in practice, it is a financing operation mode that mainly attracts people. Such people will not have a real interest in product construction, but they are often the loudest, hoping to attract the crowd to participate as much as possible. Ordinary people will have the stereotype of “Web 3 = scam” after being deceived.

Only the second group of people will become the main force, and in the future, more different types of people will enter this magical space, give full play to the intelligent brain of human beings, and create truly valuable products, services and usage scenarios.

The adaptation speed of Web 3 is super fast, and it is necessary to trust the iterative speed of new product models. For example, Nansen has cooperated with Google Cloud to provide real-time market data. It’s like joining if you can’t beat it. Web 2 and Web 3 are not isolated, but more like twins. Web 3 has left Web 2 with time to adapt to evolution.

The point of cooperation between the two parties is that, “Nansen said that data will help market makers, hedge fund managers and asset managers train their algorithms to predict market movements, generate reports, indicators, etc.” When new trends take shape, more The mainstream group will participate in it, which is a good start.

We will talk about what the future Web 3 products will look like next – products are the most basic carrier for whether Web 3 can reconstruct the next generation of Internet. Cognition is our soul, and product is our entity. Ultimately, the breakthrough path of the “Web3 Paradox” still begins with developers providing user-available products for the encryption ecosystem.

Please look forward to the next one.