Early investment necessitates thinking about the future. We often hear that the future is already here, but what is it, exactly, and what will it look like? These questions defy easy or straightforward answers.
Disclaimer: This text was contributed by Richard Wang, Managing Director of DraperDragon Fund. The views, thoughts, and opinions expressed in the article are the author's own and do not reflect the opinion of the editorial.
Nevertheless, we must frequently remind ourselves to ponder the future, whether that’s a year, 5 years, or 10 years from now. We must especially pay attention to the possible changes experienced by society, the economy, technological development, business models, the environment, and even our own lives. The future is something investors and entrepreneurs must regularly have on their minds. In the last few years, popular conversation has without doubt revolved around Web3, DAO, meta verse, and other topics of the future. Let’s take a look at a report released by Gartner in July of 2022 predicting the maturation cycle of the various segments of Blockchain’s social and economic environments: from initial operators to industry maturation, meta verse still needs more than 10 years while DAO and Web3 still require around 5-10 years. From the perspective of early investment, now is the time for investors to begin laying out their plans and entrepreneurs to start thinking.
The centralization of various platforms and mechanisms has solved many issues, improved the efficiency, and promoted the development of the Internet as a whole. In particular, centralized platforms utilize the so-called “network effect”to an extreme. But although Web2 resolves certain problems, it simultaneously creates new ones, such as the leakage of user identity, the lack of transparent and voluntary data, the violation of privacy and even the endangerment of property security through data theft. The asymmetrically dominant advantages in centralized platforms, the establishment of industry monopolies, etc—all these undermine the freedom of and trust from users. The new developments of distributed databases, smart contracts, privacy computation, autonomous data identities, and distributed storage are all solutions aimed at improving the Internet. And thus we turn to Web3 which, along with DAO and the metaverse, will construct a new model for the future. These three developments will spur the progress of human civilization by bringing about more innovative infrastructure, dissolving traditional business models, and creating new ways of economic organization, business paradigms and methods. Thus, we characterize Web3 as the basic infrastructure, DAO as the economic organization, and metaverse as the lifestyle of the future.
A lot of projects on the current market call themselves Web3 programs, but most of them have just touched on the concept or only utilized its basic technological infrastructure. While these are part of Web3, they are not all that Web3 is. An apt comparison would be that of a group of blind men trying to find out what an elephant looks like through touch alone. Everybody has their opinion and is familiar with a certain part, but nobody can comprehend the whole. In this case, however, instead of a coherent whole, what we have is constantly evolving change. To this end, there are three fundamental factors spearheading the development of Web3. The first is artificial intelligence and smart contract technology. Speaking of artificial intelligence, some readers might think it old news, but despite being in development for 30 years, its application has always been restricted to certain areas such as video recognition. However, a certain degree of artificial intelligence is a fundamental cornerstone of Web3, exemplified by the Sematic Web or the Spatial Web in the United States and Europe—all made possible by a certain level of artificial intelligence. In actuality, the data in all applications of Web3 more or less use intelligent algorithms; the stronger the artificial intelligence, the better the Web3 experience. The second factor is distributed computing, or edge computing, which encompasses a broader meaning. Since the data in Web3 derive from distributed sources and privacy computing must be conducted on a local basis, the calculation and storage capability of each distributed node must be comprehensive to ensure the effective processing of data in a Web3 system. As such, edge computing is an important cornerstone. The third factor is a distributed data network. The network mentioned here is one that emphasizes the structure of the data itself: it must be based on a blockchain protocol and a certain consensus of mechanism. The source, verification, and confirmation of data relies on the structure of the distributed data network being implemented automatically by code. These three factors comprise the basic elements of Web3. Try to imagine a self-driving car in three years’ time, achieved with the equipment of suitable artificial intelligence. The car itself becomes an independent edge computing node, capable of thoroughly processing and passing on the data sent from other nodes, in addition to the numbers it produces itself. Staring at a windshield remodeled to resemble AR imagery, the owner of the car can immerse themself in their own metaverse.
The basic logic of Web3 is actually very straightforward and direct: it revolves around user autonomy, which is tantamount to decentralization. And so while people characterize Web3 as decentralization, its actual core highlights user autonomy. However, the development of new basic infrastructure is needed to truly realize user autonomy from a technical level. Once the basic infrastructure is complete, the initial Web3 applications can flourish. And so what Web3 needs to accomplish now is complete user autonomy, and from that basis go on to develop new business models, even new business formats. In addition to logic and basic elements, we also have a traditional method similar to Web3: the operating system. On a fundamental level, Web3 comes from distributed ledger technology and distributed data technology, which parallels the documentation (Filing) and I/O system in the operating system, and also the Layer 1 structure in blockchain that processes data. Distributed storage is the same as the documentation (Filing) system in the operating system; the distributed computer is even more directly the CPU in the operating system; distributed data transfer (distributed communication) is the I/O system. CPU, filing system, and I/O are all basic elements in the operating system; thus, we can deduce the fundamental level of Web3 is the same. However, will we have the opportunity in the future to see a unifying consensus in constructing Web3? In the opinion of the author, this is unnecessary. Web3 is essentially a protocolization of independent functional modules. Similar to Legos, as long as you have the individual parts, the different layers can be combined to create a final product.
Aside from the fundamental basic infrastructure mentioned above, Web3 also has two other previously neglected crucial factors. One of them is a decentralized digital identity, the other privacy computing. These two types of middleware are closely connected. Digital identity is no longer a new topic. In the Web3 field, DID (decentralized identity) is a necessary basic requirement. Much like how a person without an ID card is unable to go anywhere or be anything, unrecognized by any person or institution, an ID is a crucial requirement; no ID means no assets of any kind. In the original Web3 network, an ID is usually decided by the wallet location, but obviously the wallet location isn’t the only available ID. A decentralized identity allows for many IDs, which can be taken apart and reassembled. However, the reputation (influence) and credit (reliability) of each ID necessarily comes from the verification of the data it engages in and exchanges. Thus even with multiple IDs, their different permutations and combinations can create distinct application scenarios and business models. Aside from Web3’s native ID, traditional IDs in Web2 must also undergo upgrades with additional layers of privacy protection and privacy computing protection. Way back in 1985, S Goldwasser put forth the technology of zero-knowledge proof for privacy computing. In 1987, Oden Goldreich and others expanded on Tsinghua University professor Yao Qi Zhi’s two-party secure computation by adding multiple ways of secure computing. Add to these homomorphic encryption, federated learning, and other calculation methods all contributing to applying privacy computing in data protection scenarios, and we begin to see commercial cases cropping up in medicine, finance, politics, blockchain, etc, on top of the privacy protection in Web3’s original landscape.
After the basic technical structure of Web3 becomesclear, its future lies in the applications built from these fundamental technologies. Deriving from a distributed data network, the data for these applications gradually become what we know today as NFT, DeFi, metaverse, creator economy, decentralized media, decentralized socializing, decentralized credit rating, among other DApps (Decentralized Applications). In the Web3 ecosystem, another extremely important factor is new forms of organization. DAO currently looks to be a way of developing new organizational forms from a Web3 structure. The core logic in DAO stems from turning the concept of “shareholder” to “stakeholder”— in other words, everyone works for me, and I work for everyone. Through the rules and deployment of smart contract technology, the function and attributes can morph to fit with an organization’s goals. In this situation, the smart contract is similar to the stacking of Legos, added together one by one by the members of the DAO under the rules. Of course, the rights and responsibilities of each member depends on their contribution, credit rating, participation, and other measures, buildingup their soulbound tokens.
In conclusion, in shaping the future, the core logic of Web3 lies in decentralization. In actual scenarios, this plays out in the form of user autonomy. But let’s try to think outside of the box; maybe Web3 is pursuing a previously unknown field. Traditionally, you know what you know as so-called knowledge. You know you can use Web2’s Baidu or Google to search up what you don’t know. Even if you don’t know what you know, Web2’s Amazon or Facebook can utilize artificial intelligence to help you. What comes after, then, is what you don’t know you don’t know. Perhaps this is precisely where the opportunity for Web3 is. I look forward to creating the future together with everybody.