About Web3: The Technological Trends I Missed During My Two Years of Retirement
No story is as grand and transformative as Web3, aiming to reconstruct the internet on which we depend, down to the smallest details.Author: Guo Yu
Note: The author Guo Yu is currently 30 years old. After self-studying programming post college entrance examination, he joined Alipay in 2011 as a front-end developer. In 2014, he joined ByteDance and became a senior technical expert. During this period, he achieved a valuation of over 100 million for ByteDance's stock options, attained financial freedom at the age of 28, and now resides in Japan running a hot spring hotel.
01
If you want to hear my story, I would be happy to gather some firewood and start a bonfire, preferably before summer arrives, when the air still carries a hint of coolness, and the time is best in the evening, when the twilight glow decorates the distant mountain ridges. We sit by the lake, with the sounds of children playing in the distance, possibly coming from the opposite shore, where there is a vast black sand beach, with a few tents lit up, and the cool night arrives as expected.
There are various stories about me online, one version here, another version there, all composed of similar elements concerning choices, luck, and wealth. But if I were to tell a version, I would like to start from a much earlier day, a long, long story about an introverted little boy trying to change himself, yet stubbornly choosing a life accompanied by code. In an era where choices are made out of necessity, it is a thoroughly escapist story, long, helpless, and slightly tragic. Compared to the drastic changes happening around us now, it seems both uninteresting and insignificant, yet it is personal, emotional, and reckless.
Thirteen years ago, in a summer, I began learning to write code, and that was my first encounter with the web. Like many others, we had a strong curiosity about the unknown, but could not foresee how much these technologies would change our society thirteen years later. People often use "Make the world a better place" as a self-deprecating motto for programmers, because for many, such an idealistic goal seems unlikely to become reality. However, my thoughts differ slightly; I don't know if we can make the world a better place, but at the beginning of certain cycles, we can make a difference.
In my more than ten years as a programmer, I have felt some things happening and realized that their potential significance far exceeds my imagination. These moments are wonderful. For example, the iPhone, social networks, recommendation systems based on deep learning, etc. Sometimes these moments are small sparks that seem merely to integrate existing technologies, but behind these technologies lie vast and unique stories.
Yet no story is as grand as Web3, which aims to completely reconstruct the internet we rely on.
02
Let's go back to April 2013. While browsing Hacker News, I was captivated by a cryptocurrency algorithm called Bitcoin. At the time of the article's publication, Bitcoin's price had just reached $100. That week, during the weekend sharing session of the Alipay Experience Technology Department that I hosted, I included this news in the PPT. I attempted to download a wallet and spent quite a long time syncing all the ledger records. A few days later, this wallet received a transfer from a friend.
Just six months later, this story happened almost in the same way again, but this time the price exceeded $1,000. Due to the significant time difference in prices between domestic and foreign exchanges, I spent two days writing a simple command-line price query dashboard, published under the name btc on npm. Although it has not been maintained for a long time, this project still exists in the community.
Then came 2017, and this story happened again. We witnessed an astonishing "price bubble" and the chaos of ICOs. That year was also my first attempt at writing smart contracts. Of course, in my other timeline, it was a year filled with difficulties and glimmers of hope, as Douyin achieved tremendous success, which meant my life might face some new possibilities.
If a story happens in the same way three times, it can almost be concluded that it will happen again. We just cannot imagine in what form it will arrive. After I chose to retire in February 2020, many things disrupted my original plans. The ongoing global pandemic forced me to temporarily set aside all plans except for writing and focus on managing my life. For me, it was an incredibly quiet two years, but in the world of Web3, it was a tumultuous two years.
What changed outside the glamorous bubble, possibly leading to transformation?
03
Some of this starts with the DeFi Summer of 2020.
The film "Zeitgeist" once mentioned that the foundation of modern employment relationships lies in how the Federal Reserve "creates" dollars that did not previously exist. This action defines debt and also defines assets. If we cannot prove to the public that ERC-20 tokens have circulation value beyond mere technical existence, merely a castle in the air with a white paper, we cannot inflate this bubble further. DeFi cleverly automates banking affairs through contracts, becoming a de facto "on-chain bank." This change allows stablecoin pools to continuously absorb off-chain assets, and even commercial banks themselves have become users of DeFi.
As the on-chain locked stablecoin pools grow larger, the direction of the story changes. What we originally thought BTC or ETH should accomplish is now being fulfilled by an increasing number of ERC-20 stablecoins. These tokens possess all the attributes of currency: free flow, stable value, and can be "created out of thin air" through "liquidity mining." These trading behaviors flow like water in different systems, converging, merging, diverging, and bidding farewell, naturally forming secondary markets and derivatives markets through flexible combinations.
Meanwhile, due to the consistency of protocols, substantial dollars can flow freely to any parallel network (referring to blockchains and their layer-two solutions) through cross-chain bridges. This means that dollar hegemony is extended to blockchains with the growth of stablecoin scales, extending to the derivatives markets of every parallel network, and being locked in the network for the long term. If investors can earn stable and transparent returns on-chain 24/7, why do we still need banks? DeFi logically narrates such an indestructible story, one that everyone can understand and is eager to comprehend.
I believe this story may have become the foundation for everything that followed.
04
If ERC-20 can represent stable currency, why can't it represent equity? If even complex banking affairs can be automated through contracts, what organization cannot be replaced by smart contracts?
Undoubtedly, DeFi has opened people's imagination regarding this core architecture represented by ETH. And this imagination is even more significant than any changes that have occurred on the internet.
As the rulers of this blue planet, humanity's greatest ability lies in our organizational capacity. We have imaginative and execution-oriented brains that can break down any difficulty into simple and detailed tasks, solving them one by one. By organizing the strongest brains on this planet, we can gain abilities more powerful than any known organism in the world.
DAOs are a product of this imagination. We can understand a DAO as an "on-chain company," whose basic operations rely on some smart contracts that can transparently and automatically execute decisions, compensation, cost expenditures, equity capital, and other affairs. Its assets are stored in several cross-chain wallets, and its members can authenticate through a specific method (whether they hold the DAO's governance token), allowing for autonomous participation and exit. Conversely, due to the consistency of token protocols and the improvement of cross-chain solutions, any publicly traded equity issued by a DAO (its governance token) can be purchased by any investor in parallel networks, meaning that a DAO is essentially a global public company from the moment it is born.
Today, many investment cases in the cryptocurrency field are paid in the form of tokens, which seems to support the idea that the governance token of DAOs has been widely recognized by the market. The value tokens of DAOs form a powerful complement to DeFi: investors can seek stable investment opportunities in the market with large amounts of cash, while also allocating some assets to invest in growing innovative organizations like DAOs for considerable future returns.
05
As the value locked in parallel networks grows, people's economic behaviors will increasingly rely on the network itself. This not only means investment but also transactions and purchases. If we must rely on over-the-counter (OTC) trading or centralized exchanges to convert tokens into fiat currency for purchasing power, all these actions seem meaningless.
The economy of the virtual world has been running for decades alongside the internet, but for parallel networks, the urgent task is to establish the property rights of virtual goods. We create value on the internet not just because we put goods up for sale; the images, texts, videos, and even code we create are essentially goods. In the world of Web2, these goods can hardly obtain copyright protection, not only because our accounts belong to commercial companies but also because the "free" nature of content and the transfer of profit models are significant characteristics of traditional internet products.
NFTs, represented by ERC-721, are the protagonists of this story. In 2021, with the explosive growth of NFT trading volume, almost everyone has heard the growth story of OpenSea. However, even the globally leading OpenSea is only about 1/100 the size of the traditional art auction market. Unlike currency, goods have unique attributes, especially for virtual goods, where this uniqueness surpasses that of rigid consumer goods. I believe the long-tail effect of NFTs may not have fully manifested yet.
Property rights are one of the most important foundations in economic theory. Sometimes, it does not necessarily represent goods but can also represent souvenirs or personal identities. The breadth of NFT applications lies in its ability to tell a vast and imaginative story, just like DAOs. Tickets can be NFTs, and employee badges can also be NFTs. They may not represent a price, but they will possess unique value, which may not be reflected through the ERC-721 protocol but is more likely to be manifested in its extended protocols through its unreplicable metadata system.
06
If property tokens merely technically establish the property rights of virtual goods, that still cannot describe the property revolution brought by Web3. Since DApps are built on unified protocols, registration and login are no longer necessary. All user behavior data is stored on a public network that any product can read, and of course, users' personal assets are offline and secure.
The war of wallets has yet to begin, but Web3 wallets have become the de facto entry point to the network. Commercial companies no longer possess user data tables and have lost this important moat. Conversely, any product can read and understand transaction data in parallel networks, which means DApps can provide services to other products without designing private APIs. Although pure DApps are unlikely to become the mainstream choice of giant platforms for a long time, in the long run, this paradigm can liberate most companies' businesses from non-core affairs and focus on providing quality services to users. Ultimately, such products will win users and market share.
If a company wants to embrace Web3, it must connect to wallets (or create a wallet for users). Ideally, this will create a whole new way to reach users, as people's trading behaviors can better describe a group than other behaviors. This is one of the biggest barriers for giant platforms like Taobao (private user consumption data). I believe commercial companies are unlikely to give up this advantage to embrace new parallel networks, but some new services will grow into new infrastructures with the development of Web3, until these large platforms have to adapt to this change.
Many people think DApps are merely the interaction forms between traditional web interfaces and smart contracts, but the story it implies is that in the world of Web3, different products can combine and cooperate with unprecedented efficiency. Users can seamlessly migrate their identities and assets across different products. No era of the internet has been this smooth; after all, we have never even reached a consensus on email HTML rendering logic.
07
If you've made it this far, you might feel confused, as we've encountered a large number of new concepts in a short time. In some of the stories mentioned above, I tried to avoid mentioning specific companies and products because many excellent engineers are creating dazzling new things, making it hard to focus on thinking about the issues.
I believe that the changes that have occurred in these short two years can no longer be described with the term "bubble." They are similar to the stories of 2011, 2013, and 2017, yet entirely different.
Let's recap the changes happening now: with the formation of a multi-chain landscape and the DeFi boom, a large amount of assets are gradually locked within parallel networks. People earn interest through stable investments, purchase goods and virtual artworks, and create distributed organizations based on smart contracts. These organizations are spread across the globe, with members collaborating online and distributing compensation and equity in the form of tokens, all of which can be accessed through the same Web3 wallet.
It seems like several stories have been combined together like Lego blocks, forming a "closed loop," as Chinese internet people say. I think this is precisely the charm of Web3; these combined stories are not a "closed loop" created by a monopolistic commercial company but a new network created by different products and different DAOs through mutually compatible protocols. This is also why I have always referred to it as a "parallel network."
Unlike the traditional internet, this parallel network itself is a network of value flow. The various protocols that carry this value, inspired by ETH, consist of complex consensus layers, computation layers, storage layers, and application layers, which will support the next generation of the internet. Although their implementation methods differ, they all aim for the same deterministic future:
A more open and free internet, where users enjoy the benefits, a vast and eternal Matrix that is inclusive of all.
08
Recommended References
Here are some projects I have been following and researching over the past few months, for reference only.
DeFi
- Compound provides liquidity pools for borrowing and lending
- MakerDAO created the algorithmic stablecoin DAI
- Uniswap decentralized trading protocol for creating various token trading pairs
- Curve Finance decentralized trading protocol designed for efficient stablecoin trading
DAO
DApp
- ENS ETH domain service
- Wallet Connect SDK supporting multiple Web3 wallet logins
- Thirdweb provides one-click creation of basic contracts and modules for DApps
- OpenZeppelin smart contract SDK and code auditing
- MixBytes/Quantstamp's/Sigmaprime smart contract code auditing
- One Click App one-click packaging of smart contracts into DApps
- Fleek DApp integration solution provider
Various Parallel Network Protocols
