Analyzing the Internal Mechanism and Breakthrough Path of the "Web3 Paradox" (Part 2: Breaking the Impasse)

Author: Spike, ThePrimedia

Editor: Jerry Crypto

Editor's Note
Mencius said: "Fish is what I desire; bear's paw is also what I desire. Both cannot be had at the same time." In the world of Web3: decentralized technology is what the public desires; application value is also what the public desires. Both cannot be had at the same time. This article will attempt to analyze the gap between the Web3 vision we yearn for and the reality of ecological construction, and explore the paths to break the deadlock based on this. The full text will be published in two parts: Part One - Paradox and Part Two - Breaking the Deadlock.
Related Reading: “Analyzing the Internal Mechanism and Breakthrough Path of the 'Web3 Paradox' (Part One - Paradox)”
French sociologist Tarde pointed out in his book "The Law of Imitation" that "in the process of human transformation, there are rarely entirely new inventions; more often, there are transformations and imitations." To break the deadlock in Web3, it is necessary to sort out the currently parallel and actually conflicting logical paradoxes (for details, please refer to Part One) and find breakthrough points from them to explore feasible paths.
Faced with the gradual encroachment of VCs, there are still sparks in the narrow living space. We will expand our territory with faith and technology, gathering all developers to conquer cities until we achieve a counterattack against rent-seekers; facing the barren landscape of scenarios, we have never felt desolate. The social graph, creator economy, and SaaS are already poised for action, ready to eliminate all pseudo-gods that hinder progress and place all new gods on altars for worship; facing the technological divide, the completeness of development kits will allow more technical tools to face users directly, and decentralization will deconstruct the role of platforms at the technical level…
Newton once said: "If I have seen further, it is by standing on the shoulders of giants." This time, starting from the bottom, we will build a nine-story platform together.

Foundation: Reconstructing Faith and Leading with Technology

In the process of building Web3, a reflection on its underlying mechanisms is needed to adapt to new situations.
1. Reconstructing Faith:
Without faith, there is no decentralization. There is a decentralized solution for everything. Uniswap has reconstructed matching through AMM, Bitcoin has objectively represented consensus through PoW, and Web3 has SBT, PoS mechanisms, and the expectations of all users. Consensus has emerged, and actions towards a more diverse DeSoC society are far more important than mere discussions.
All information can be captured by Web3 and generate corresponding value—yes, all information! This value can circulate, inherently carrying value; everything has value.
This is the faith foundation that Web3 relies on for revolutionary application space opportunities. The faith that was once inflated and deflated by the crypto circle has regained trust through development and practice.
For example, the most widely used privacy browser, Brave, has launched the Web3 era search mode, Goggles, attempting to provide more relevant search results without infringing on user privacy. Combined with its own token BAT's advertising service, it has already made a very mature attempt commercially. If further developed, with the backend fully constructed on the blockchain and information stored on IPFS, it could possess the magic to reconstruct the internet interaction interface.

2. Leading with Technology: Gradual Innovation Diffusion

Image Source: Wikipedia
In the innovation diffusion curve, we can see the transition of Web3 from Innovator to Early Adopter. Although this value is still very small in terms of absolute market share, desktop, enterprise-level, and foundational infrastructure are gradually being built, which belongs to the process of gradual technological diffusion.
For instance, the Crypnote note-taking tool is already a highly completed product. Previous note-taking products like Evernote and OneNote faced the issue of data migration, while the Web3 backend is directly structured on a blockchain storage network, which is a redesign based on the characteristics of Web3 technology, and it is continuously upgrading.

What kind of Web3 applications will technological innovation bring us, even if it is just a possibility? This is the significance of exploring the breakthrough under the paradox. Next, let's talk about what Web3 products will actually look like.

Social: From SocialFi to Graph Evolution

Social products are an important cornerstone of Web 3.0, and their strategic significance goes without saying. The social synonym that history bestows upon Web 3.0 will not be the commonly mentioned SocialFi, but rather the upgraded new format—"social graph."
Why can't the currently popular SocialFi bear this heavy responsibility? SocialFi, colloquially known as "social exchange for money," refers to using tokens in Web3 to stimulate user behavior in using products. Taking BBS Network as an example, 50% of its tokens will be distributed to active users—how can activity be "cheated" through tokens? Of course, by creating "high-quality" information to attract more followers and subscribers, regardless of how strict the review mechanism is, as long as there is a mechanism to exchange activity for tokens, there will be space for "data manipulation."
When the turning point of "function > speculation" is reached, what can truly retain users is meeting real needs, and the product cycle will be extended, eventually replaced by an updated mechanism. This is a natural death of "whale fall," followed by the growth of all things. However, the current SocialFi lacks a model design to suppress junk information, and existing governance mechanisms will fail under token stimulation—using Twitter is for gaining knowledge, but using such SocialFi applications is driven by profit motives.
Profit-driven motives are an unavoidable issue. "Social exchange for money" SocialFi will not be the main category of social products in Web3; in the long run, entirely new native social applications will emerge, with "social graphs" being the pioneers dancing with the times. The social graph refers to the "graphing of social relationships," meaning there are no central nodes, and personal social relationships are directly coupled and transmitted through the blockchain network.
When social websites in Web 2 upgrade to "social graphs" in Web 3, what changes will occur?

First, let's look at the information flow method of traditional social websites:

• First, in existing social networks, there is a phenomenon of reverse flow of information and data streams. The information flow between users is bidirectional; I follow you, and you follow me back, allowing us to see each other's content. However, the data behind this content is not synchronized with the information flow but is stored on centralized platforms, such as Twitter and Weibo;

• Second, the information flow between individuals does not flow in a direction of equal weight but tends to lean towards KOLs and institutional accounts, forming various "centralized" nodes of different sizes during dissemination;

• Third, after the data is collected by the platform, it is made into APIs with different permissions and then sold. Therefore, what can truly be monetized is the data flow, not the information flow. For example, subscribing to a membership essentially means the platform sells the content created by users; if the profit from selling data can cover operational expenses, it amounts to the platform's invisible legal "exploitation" of individuals, which is also the true business model of platform traffic.

Now let's look at the information flow method of Web 3 social graphs—simply put: information flow and data flow should move in the same direction, and relationships can be tokenized, with no center and no distinction.

Regarding the centralization trend of content, the cross-chain and interactive nature of social graphs will naturally dissolve this issue. Decentralized social applications should be componentized, allowing me to exist as both a marginal node and a central node in different groups.
Currently, there are products transitioning from Web 2 to Web 3 that have made practical attempts from this perspective, such as TikTok, which, through collaboration with ImmutableX, launched TikTok Moments, turning popular videos into NFTs, with sales revenue primarily directed to content creators and NFT makers. Furthermore, if anyone can turn their social content and relationships into NFTs or even issue tokens, this is the true direction Web 3 social should advance towards.
To summarize: why will SocialFi not be the future, while the concept of social graphs has more potential for success?

First: The junk information brought by token attributes cannot be eliminated;
Second: There still exists a centralization trend of content among top KOLs, institutions, and commercial companies, as ordinary people naturally prefer stars and celebrities with halos.
The social graph is expected to solve these two problems.
The social graph also needs an upgraded privacy system to safeguard it, which is the "on-chain credit system."
Online social interactions do not necessarily require real identities. If it is just ordinary information exchange and one seeks fun, there is no need to care about the other person's role in reality, as Tunlin said, "You can be whatever you want to be." However, if financial transactions are based on addresses, identity verification is essential, making information verification a fundamental infrastructure, as important as ChainLink.
The current labeling function path continuously records activities of a specific address. When its historical data accumulates sufficiently, we can create user profiles based on public information, which is effective for whales and exchange or institutional wallets. But what if Web 3 wallets become widely used by everyone, including the young and old?
"Knowing who you are trading with" is a very real need. If Web 3 algorithms are optimized, it is entirely possible to make accurate judgments based on the credit system without knowing who the other party is. For example, the contact verification tool Go+ Security allows users to verify over 360,000 tokens on the Ethereum chain, including over 180,000 risk addresses and over 20,000 phishing websites.

Creation: From NFT to Content Monetization

The evolution of the creator economy is as follows:

1. In the Web 1.0 era, creation was a natural behavior based on the desire to share, with basically no profit model, a beautiful utopia;

2. In the Web 2.0 era, centralized monopolistic platforms controlled the valves and traffic of information flow, and creators could only receive a small portion of the profits;

3. By the Web 3.0 era, because there are no centralized traffic distribution platforms, creators can take away the vast majority of profits.

For creators, "an internet without a center is a good internet!" From the most basic text creation perspective, the problem with Web 2.0 is that platform monopolization is so prominent that we overlook the fact that the ability to create is the fundamental issue. In the Web 3 world, "creation itself" begins to surface as the core. What truly limits dissemination is the continuous ability to produce content, not so-called channel restrictions. Truly high-quality content cannot be confined to a specific channel; in a fully competitive market environment, if suppressed, it can easily shift to a rival team.
The value of Web 3 lies in the fact that the right to create truly returns to individuals for the first time, with creation itself as the purpose and permanent retention as the value orientation. Such a Web 3 creator economy is indeed worth looking forward to. Imagine a fair, meritocratic creator-friendly economy; Web 3 will be their main stage, promising a more equitable environment for quality creators to realize their value.
It is important to note that Web 3 is not omnipotent—while it truly achieves equality in the threshold for dissemination, individuals will still have differences in content production and dissemination capabilities. The dissemination of a few to the many will still be a historical norm. Taking Planet, produced by V2EX, as an example, it is a blog-like tool for content creation and sharing, completely based on IPFS as the storage backend, but in its default interface, Tunlin is also the default subscription object.

Taking NFTs as an example, the main issue with their development lies in the dominance of OpenSea and the concentration of content in the PFP field.
From OpenSea DAO to LOOKSRARE, and the rise of Magic Eden on Solana, what do we see? One attempt after another, followed by fervor and then calm, the rich variety and first-mover advantages cultivate user habits, making this long battle against the "刺王" (刺王 means "thorn king") likely to continue for a while, waiting for a savior to appear.
From the perspective of the creator economy, we see a high degree of centralization between NFT platforms and creators. Because what users truly want is quality content, they are not so "concerned" about the degree of decentralization. Further observing NFT trading categories, we find even less decentralization, as the leading trading category is PFP. Although other types occasionally top the sales charts, Yuga Labs is the Deep State, occupying the vast majority of the NFT market share, including BAYC, MAYC, Meebtis, Otherside, and even the ERC-20 ApeCoin based on NFTs.

However, there is still hope—such as the new progress of RRS3 Crossbell, which serves as a content monetization platform, primarily aimed at returning data sovereignty of individual creative content to creators. Crossbell is an ownership platform where the information generated by social activities will be the initial form of user data ownership on Crossbell. It changes the game by allowing users to reclaim their data ownership through built-in capital design. At the same time, Crossbell emphasizes information interoperability in its design, meaning that third-party applications can develop based on this foundation.

The broader use cases for NFTs can exist in GameFi, the metaverse, and DeSoc. Only by making NFTs more widespread and entering more application scenarios can the dividends of the creator economy benefit more people. For example, Polygon has released a new NFT Minter that allows users to create NFTs using custom programs without gas fees, boldly encouraging the public to move towards NFT content monetization.
Content monetization is a functional direction that NFTs need to further develop in the Web3 era. Content monetization can be understood as the tokenization of individual value. As humanity begins to enter the Web 3 world more frequently and broadly, any form of creation will be fully guaranteed as a basic "human right."

SaaS: From To B to To C

In the existing online world, SaaS seems to be an exclusive product for enterprises, and To B is a matter of course, such as Jetbrains' development tools, Dassault's industrial design software, and EDA in the chip design field. In the Web 3 world, SaaS will provide a possibility of To Anyone. Besides social graphs and the creator economy, SaaS tools also support the grand blueprint of Web 3.
From To B to To C, it is not just a change in the target users but also a re-upgrading of production relationships. In Web 3, SaaS will become a ubiquitous infrastructure, allowing anyone to build independently and provide integrated applications or API interfaces for various types of users.
The reason is that whether in social or creator economy, products are basically designed around "people and people." To C applications will become the main breakthrough direction for SaaS. If we want the infrastructure to continue entering more service fields, we must move towards deeper L1 expansion or even hardware devices, just like ASIC miners do.
Currently, there is a solution based on secondary services of existing products, the most typical being IPFS, which offers free trials and unlimited capacity. If commercial services can be built on this foundation, it is essentially equivalent to getting something for free.

For example, Skiff's decentralized email + cloud document office suite service can be used for personal daily writing and communication, and can also replace Google Workspace's office suite, completely based on IPFS. If the other party also uses a Skiff account, all records of email communication and cloud document collaboration will be stored on IPFS without going through any centralized servers.
The emergence of such applications indicates that IPFS has preliminarily developed the potential to provide commercial services after years of development. However, on the other hand, we must also see that such products still bear heavy imitative traces and require long-term development to explore new product models.
Taking blockchain market analysis tools as an example, due to the transparency of on-chain information and the frequency of transactions, professional analysis tools have always had a market, but there are also barriers. Although individuals can directly analyze on-chain information, this difficulty clearly requires the technical level of developers, which is not user-friendly for ordinary people. Is there a possibility of breaking the deadlock?
Tools like Dune and Nansen have created a myth of raising $80 million with a valuation of $1 billion, and such tools are easier to be "infrastructured" because they do not need to include trading functions. Even the functional modules can be user-defined, as long as SQL interfaces are opened. Essentially, this is a pipeline device where projects open API interfaces and documentation, allowing users to continuously query and accumulate data. Once user habits are cultivated, the resulting traffic will have commercial value.

The moat of such tools lies in user habits and data accumulation, rather than development difficulty, which is a different design logic from Chainlink—Chainlink is a widely recognized infrastructure because the accuracy of oracle data requires high precision and cannot be easily replaced just because the interface looks better or has more functional modules.
This is the scenario iteration of SaaS from To B to To C and the business opportunities it brings.
The current Web 3.0 is still in its infancy. We need Web 3 to truly transition to an era supported by users and services for profit models, so that it can last long. In conclusion, let me once again review the breakthrough paths of Web 3.0. Under the guidance of reconstructing faith and leading with projects, whether it is moving towards graph-based social products, the content monetization of the creator economy, or the upgrade of SaaS from To B to To C… all declare to the public the arrival of a future lifestyle in a "lonely warrior" posture.
Perhaps Web 3.0 still has various problems, and perhaps practitioners are still confused in the dark, but these analyses peeling back the layers are not denying Web 3.0. Our original intention is to do our utmost to avoid a frenzied over-exploitation, preventing a situation where, once encountering a bubble like the internet bubble of the early century, many will fall into extreme denial and skepticism during a bear market.
Web 3.0 may still be long, may still need multiple iterations, and perhaps the "lonely warriors" who have entered the fray will falter, and projects will vanish into thin air. But it is like a glimmer of light leading to the future world, which will eventually illuminate the starry sky of the future world in a moment. "To the sobs and roars in that dark night, who says those standing in the light are the only heroes…"