For Web3 to be widely adopted, it must go beyond blockchain

Author: Meng Yan's Thoughts on Blockchain

A couple of days ago, I published my outlook on the development of Web3 in 2024, in which I proposed the idea of moving away from "fundamentalist decentralization." Since "decentralization" is a widely propagated banner of blockchain, saying we should move away from decentralization means transcending blockchain. This viewpoint, coming from a long-time evangelist of the blockchain industry like me, indeed left some people astonished. In that article, due to space limitations, I did not elaborate, but some friends have asked me to explain it further in the past couple of days. This issue is not complex, so I can elaborate on it.

My stance is certainly not to abandon blockchain or revert to centralization, but rather to let them return to their rightful places. Blockchain is just one tool in the Web3 toolbox, and decentralization is merely a feasible approach to solving a certain type of problem; neither of them constitutes the entirety of Web3 but are specific tools for addressing specific issues. Treating blockchain and decentralization as "two absolutes" has actually constrained the innovation and large-scale application of Web3.

1. Web3 is a Trustworthy Internet Based on Autonomy

The core value proposition of Web1 is interconnected sharing, that of Web2 is user experience, and that of Web3 is trustworthiness.

The vision of Web3 is to create a trustworthy value internet, or a trustworthy digital economy. What does trustworthy mean? It means that in this network, any two people in the world interact according to rules and contracts, whether in economic or social behaviors, everything is conducted properly, and no one can go back on their word or act capriciously. In the sense of contracts, people are equal; no one can breach contracts or bully others. Everyone can confidently do business with someone they just met a second ago.

Web3 emphasizes security and trustworthiness, but that does not mean that Web2 is inherently insecure or untrustworthy. In fact, Web2 has worked hard for over thirty years, and security and trustworthiness are also important goals for it. Therefore, although the core value proposition of Web3 is security and trustworthiness, Web2 can also improve its levels of security and trustworthiness. What truly distinguishes Web3 from Web2 is the premise.

Web2 is custodial, while Web3 is autonomous.

The premise of Web3 is autonomy, allowing you to own and control your own accounts, assets, social relationships, and data. The security and trustworthiness of Web3 are based on this premise, which is fundamentally different from Web2.

Web2 can also be used to manage and transfer value and will pursue security and trustworthiness. Alipay, WeChat, and various online banking systems are all based on the internet to manage value, continuously improving their levels of security and trustworthiness. The internet industry has spent two to three decades making this system very mature, with an excellent user experience. However, none of them are custodial. By using these internet systems, you are essentially entrusting your money, your data, your social relationships, and even your accounts and identities to others. Some proponents of Web3 argue that because custody is in someone else's hands, it is insecure, which is not entirely accurate. Objectively speaking, for most people, in most cases, putting money in a bank is safer than managing it personally.

However, the custodial architecture of Web2 inherently allows, encourages, tempts, or even forces the stronger party to breach contracts, act dishonestly, bully, or deceive the weaker party. The stronger party must work very hard, exercise great restraint, and be extraordinarily disciplined to avoid breaching contracts, acting dishonestly, deceiving, or bullying the weaker party. The weaker party must be extraordinarily lucky, extraordinarily lucky, extraordinarily lucky, and extraordinarily lucky to avoid being breached against, deceived, or bullied. The repeated use of "extraordinarily lucky" is not a typo; it reflects the inherent structure of Web2, where the weaker party can do nothing but hope for luck to avoid being breached against, deceived, or bullied.

In contrast, the technical architecture of Web3 inherently protects the rights of both parties in a contract equally. Users' legal rights in Web3 are protected not by the goodwill or self-discipline of one party but by the natural determination of the entire technical architecture, which no one can refuse to accept. This is ultimately determined by cryptography, by mathematics, and is a gift from nature, requiring no reliance on anyone's goodwill or self-discipline.

What does the autonomy of Web3 really mean? It means true freedom in the digital world. We know that in modern value systems, freedom precedes all other values. If a person emphasizes security without considering freedom, then locking oneself in a basement forever is the safest option. If a society emphasizes security without considering freedom, then imprisoning all citizens is the safest option. This is clearly absurd. In modern society, without freedom, everything else loses its meaning.

The precondition of Web3 is to guarantee each user's freedom under the contract through digital autonomy. This freedom primarily refers to the right to control one's digital assets (identity, accounts, property, social relationships, data, etc.) based on fair contracts. This right of control is something Web2 cannot provide; it is determined by the technical architecture, human nature, the environment, and the need for centralized platforms to reduce operational costs and commercial competition. Can Web2 not achieve the highest standards of user freedom and rights through custodial means while respecting user sovereignty and being highly trustworthy? Ideally, it could, but it would require the Web2 platform to uphold principles, suppress personal desires, possess superlative technology, flawless security capabilities, be well-versed in various economic theories and cultural customs of different regions and religions, have unlimited operational resources, maintain high moral character, resist external pressures, punish internal betrayal, stand up to authority, and treat everyone fairly. Such a platform does not exist. Therefore, in the real world, all Web2 platforms either force users to sign a contract of servitude or engage in various forms of breach and bullying, or more commonly, they have already made you sign a contract of servitude and continue to breach the terms of that contract to bully you.

Because classical internet platforms cannot provide users with autonomy, Web3 must start anew, not out of boredom or a desire to be different.

2. The Core Technology of Web3 is Modern Cryptography

To achieve security and trustworthiness based on autonomy, there must be technical support. The core technical support point of Web3 is modern cryptography. Here, modern cryptography refers to the entire system of cryptography that follows asymmetric cryptography.

The reason people think of Web3 is due to the advent of asymmetric cryptography. Without this technology, everyone would remain asleep in digital slavery.

When cryptography is mentioned, people often think of scenes from spy dramas featuring Liu Yunglong. However, the cryptography in those spy dramas is symmetric cryptography, where a single key is held by multiple parties. This type of cryptography can only be used for communication encryption. Ordinary people do not understand modern cryptography, so they are unaware that its applications have long surpassed communication encryption; its most important and far-reaching application is as an identity authentication and authorization mechanism in the digital world.

In the asymmetric cryptographic system, we require each person to safeguard their own private key, which they never need to show or share with others. This makes the private key a tool for identifying personal identity, akin to fingerprints, irises, or DNA. Web3 can establish an autonomy system precisely because of this utility of the private key. What Web3 discusses is how to achieve secure computation, trustworthy value management, and, based on this, better user experiences, higher performance, scalability, and other goals within this autonomy digital system based on asymmetric cryptography.

Understanding this point makes it clear that the core technology of Web3 is cryptography, not blockchain. As long as it is based on modern cryptographic mechanisms, using private keys to identify and prove identity, and using private keys to control accounts, property, data, and other digital assets, it can guarantee users' autonomy. On this premise, constructing secure and trustworthy application systems qualifies as Web3.

3. Blockchain is a Necessary Component of Web3, but Not Everything

If the core of Web3 is cryptography, what role does blockchain play in Web3?

Blockchain is an essential basic component of Web3, representing an important paradigm of Web3 applications with the following characteristics:

• The core system operates on computing nodes controlled by multiple equal entities, with each node running identical instances that synchronize and back up each other, achieving state consistency on a macro level.

• Through the highest degree of redundancy and tamper-proof mechanisms, it ensures permanent trustworthy data storage.

• All information is globally public, extremely transparent, and highly symmetrical.

• All nodes form consensus based on the same knowledge and information through equal voting.

• Within a certain scope, any third party can audit and supervise based on public information.

This paradigm is suitable for application scenarios with the following characteristics:

• High data value density, justifying high storage and management costs.

• Significant temptation of interests, requiring extreme transparency and open supervision to ensure no one cheats.

• All parties involved can accept the setting of equal rights and symmetrical information.

• The entire system software is not too large, with low performance requirements, able to sacrifice efficiency for safety and fairness.

The global blockchain industry has searched for ten years and tried for ten years, only to find that there are not many application scenarios with the above characteristics; only systems managing high-value digital assets like financial assets, identities, accounts, and key social relationships are suitable for blockchain.

This may sound discouraging, but in reality, it is precisely this type of system that is ubiquitous in Web3. Web3 is largely a value internet, and all Web3 applications have, to varying degrees, elements of value creation, transfer, and derivation. In other words, managing high-value digital assets is actually a protocol layer of Web3. Blockchain does not need to do anything else; as long as it effectively manages high-value digital assets, it has already become one of the essential pillar components of Web3 and a groundbreaking innovation in the entire history of computing technology.

However, blockchain is not everything in Web3. Other cryptographic technology components that meet Web3 characteristics include ZK (which is also related to blockchain), VC, DID, etc. These components can collaborate with blockchain or centralized systems to solve security and trustworthy computing issues under the premise of autonomy.

4. Web3 Must Go Beyond Blockchain for Large-Scale Application

Blockchain is only suitable for solving the problem of managing high-value digital assets. Although this has granted it a brilliant status, it cannot solve all problems. Most issues in the real world do not fall within this category and are not suitable for blockchain solutions. Moreover, this unsuitability is not because the real world is too backward or modern people's concepts are too conservative. It is not suitable now, nor will it be suitable in the future, even in the age of AI and robots.

Why do I say this?

First, in most cases in the real world, information is not evenly distributed; it is not only not evenly distributed, but it cannot be evenly distributed. Regarding a particular matter, some people will know more, some will know less, some will need to conduct in-depth research to form conclusions or even make decisions, while others only need a simple understanding. If everyone were to share information equally, there would be no division of labor, no cooperation, and no exchange, leading to no modern economy. The idea that everyone must know the same amount of information and vote together, as in blockchain, does not align with how most matters are handled in the world.

Second, in most cases in the real world, there exists private information. Private information differs from the previously mentioned asymmetrical distribution of information. Asymmetrical distribution means that information does not need to be known by everyone, while private information means that information cannot be known by everyone. A market economy is built on competition, which is based on each entity's right to protect its private information from being indiscriminately disseminated. If all information must be publicly disclosed, as in blockchain, competition would be eliminated. This does not reflect the reality of the world.

Third, in most cases in the real world, not everyone is equal; there are authorities, and absolute fairness and security must be sacrificed for efficiency. Therefore, people establish order, create divisions of labor, acknowledge authority, and empower certain individuals to make decisions involving multiple interests within their contractual boundaries and take action, rather than consulting everyone for every step. If everything requires voting, as in blockchain, then the real world would be paralyzed, and nothing could be accomplished.

Fourth, in most cases in the real world, the value density of data is low; it does not require permanent storage, does not need to ensure immutability, and most data is discarded after use. If everything were redundantly stored hundreds or thousands of times permanently, as in blockchain, the costs would be prohibitive for anyone to bear.

Thus, blockchain is indeed not suitable for solving most problems in this world. This is also the fundamental reason why blockchain has not been successful in real-world applications over the past decade. Blockchain is a diamond drill, but most work in this world is not delicate porcelain work; it is about driving various nails. If Web3 insists on using this diamond drill to drive nails, it will only damage the drill.

Over the past decade, many blockchain projects, facing the contradiction between the real world and the blockchain paradigm, have essentially engaged in shoehorning, dogmatically proclaiming that the rules of blockchain are a "more advanced" "future digital economic paradigm," and that your inability to accept it is due to your outdated thinking. In reality, this is nonsense. This set of paradigm rules only applies to the field of high-value digital asset management. For issues outside this domain, as long as the basic rules of the economy still apply, as long as humans (and AI) still need division of labor and cooperation, it has not been suitable for blockchain solutions in the past, is not suitable now, and will not be suitable in the future.

If the Web3 toolbox only contains blockchain as its diamond drill, then it would be game over; Web3 could never achieve large-scale application in the real world. Fortunately, Web3 has other tools, such as ZK, VC, DID, and in the future, there will be more tools (MPC? FHE?). These tools can be applied to a broader range of scenarios, solving many real-world problems, and can serve as a bridge to connect real-world applications with the value layer of Web3 governed by blockchain. By combining these tools with blockchain, many real-world problems can be addressed.

Therefore, for Web3 to achieve large-scale application, relying solely on blockchain is absolutely insufficient. Researchers in cryptography must continuously add new tools to the Web3 toolbox, and innovators in Web3 must constantly combine these new tools to solve various real-world problems.

Our confidence that Web3 will inevitably surpass Web2 also comes from this. Because tools are rapidly developing, the problems that can be solved are increasing, and the value that can be demonstrated is becoming more and more concrete. We have already seen and preliminarily proven this in our innovative practice of ERC-3525 semi-fungible tokens (SFT), which is why we are particularly optimistic.

Currently, most governments, academia, and people from the classical internet indeed look down on Web3, thinking it is just a group of people speculating on coins, with no practical application. This is regrettable, but it is also a good thing. The ultimate rise of Web3, if it does not provoke a chorus of "invisible, contemptible, incomprehensible, and too late," would lack excitement.

Now, let’s continue with the advertisement.

SFT Labs will hold the first SFT Innovation Forum on January 12, introducing the latest developments in SFT technology, showcasing the latest advancements in SFT applications in the Web3 field, and inviting founders and experts from various fields such as DeFi, GameFi, RWA, and SocialFi to share project experiences and innovative ideas.

SFT Labs is a global virtual organization for SFT technology innovation and ecological incubation, established in November 2022, gathering experts and projects at the forefront of SFT innovation and application.

In the face of the explosive emergence of the crypto market and Web3 innovation, I am willing to recommend SFT. My confidence comes from the recent explosive growth and breakthroughs in the SFT field over the past few months. In the DeFi sector, decentralized funds and asset management projects with SFT have emerged, issuing assets worth hundreds of millions of dollars; in the RWA field, SFT has integrated with VC/DID/ZK technologies, becoming a ticket expression technology supported by multiple central banks; in the GameFi sector, several innovative game projects and solutions based on SFT have appeared; in the SocialFi field, social credit card products based on SFT are on the horizon; additionally, innovations such as SFT + inscriptions, SFT + big data, and SFT + AI are also beginning to emerge. We will comprehensively showcase these achievements at this forum.

I will also further elaborate on some key innovative ideas of Web3 based on our experiences in SFT innovation during the meeting.

Registration Link

You can also scan the code to register.