Response and Cai Tou: What Problems Can Web3 Solve

Author: Chen Da, TokenPocket CTO

Source: WeChat Official Account "Programmer's Dilemma"

I have been unsure about how to popularize Web3.0 (abbreviated as Web3) until I saw the following three questions mentioned by He Cai Tou in the article "Three Questions about Web 3" a few days ago:

• What scenarios can be completed in Web 3 that cannot be completed in Web 2?
• If there are such scenarios, how many people need Web 3 products in that context?
• In this scenario, will Web 3 products solve problems more efficiently?

In summary, it boils down to "What problems does Web3 solve?" Therefore, I think by answering this question, we can give everyone a preliminary understanding of what Web3 is.

What Problems Does Web3 Solve in Different Fields?

‍1. Finance‍

The Web3-related products and concepts that you may have heard of, such as NFTs, GameFi, DeFi, X-to-Earn, digital currencies, digital collectibles, etc., are almost all related to finance. Since they are closely tied to money, the emergence of Web3 has attracted more attention compared to Web2.

For most of us, the financial products we encounter are nothing more than bank deposits, Yu'e Bao, wealth management products, and stocks. Existing financial products have two main issues:

Trust/Security Issues: From the P2P lending scandals a few years ago to the recent bank runs at certain banks, I believe this is what most users care about: where can I safely put my money?

Yield Issues: Besides asset safety, yield is the second most important factor. If I deposit 100,000 yuan in Alipay and get a 1.7% interest rate, what is the interest rate for loans on Alipay? What is the asset utilization rate? How much does Alipay earn? Such information is unimaginable in the traditional internet; even if there is publicly available information, it is often difficult to verify its authenticity.

Web3.0-based financial products can effectively solve the above problems. With blockchain technology, you can clearly see how much money users have deposited, how much has been borrowed by whom at what interest rate, and the value of the collateral provided by borrowers, as well as the asset utilization rate, thus reflecting the overall health of the system. The yield from loans is fairly distributed to depositors through code. By reasonably restricting through code, as long as the value of the collateral is guaranteed, it is almost impossible to steal money from the system. Such lending agreements have been operating stably in the blockchain world for several years and have proven to be quite reliable.

In addition to the above lending agreements, Web3's decentralized exchanges (DEX) and yield (investment return) protocols are also quite mature, which I won't elaborate on here.

Of course, this does not mean you should put all your money into Web3 financial products right now. Web3 is fundamentally implemented through program code, and the risk of bugs in the code still exists. It will take more time to mature, and perhaps in the future, introducing regulations or real-name strategies may not be a bad thing.

2. Gaming

Gaming may not be the second most important area, but as a seasoned gaming enthusiast, I still want to discuss it first.

NFTization of Items, On-chain In-game Currency, On-chain Game Logic

This is a relatively mature application of Web3, commonly referred to as GameFi. NFTization can be understood as abstracting an item into a standard digital asset on the blockchain that can be owned. It is no longer limited to its original environment and can implement functions such as asset transfer and trading through code.

For example, epic cards in card games, orange weapons dropped in MMORPGs, purchased rare pets, limited-time skins, virtual land, etc. By putting these items on-chain, not only can the authenticity of their rarity be verified on-chain, but NFTization also facilitates trading across different universal platforms. There is no need for game developers to build separate trading platforms, which improves efficiency and provides users with more ways to earn money. In-game currencies, similar to gold coins/diamonds, can also be easily traded and monetized on-chain.

Moreover, trust-related logic in the system, such as opening card packs and forging upgrades, can be implemented through blockchain technology to ensure that drop rates/success rates are trustworthy.

NFTization of Game Ownership

One concern I have is what happens if Steam shuts down one day. What will happen to the games I bought on Steam? Can I play them on Epic or WeGame? Therefore, game distribution based on Web3 should be like this: when you buy a game on Steam or any platform, you are actually purchasing an NFT that represents ownership of the game. As long as I hold this NFT, I can play it on any platform, while the platform can earn a portion of the revenue from game sales, but more importantly, charge for additional services such as achievements, cloud save progress, and built-in NFT trading platforms. This way, game ownership based on on-chain NFTs can easily provide a better gaming experience across different platforms, rather than having to buy a copy for PC, another for mobile, and yet another for Xbox.

New Game Types

This is also an exciting part for me. One of the biggest features of blockchain/Web3 is openness, allowing all games to achieve data interoperability. Imagine this: you can take your max-level undead mage from World of Warcraft, wielding a lightsaber from Star Wars, and race against your friend wearing a Master Chief helmet in the setting of Red Dead Redemption. In the end, you lose to your friend, who levels up and wins a Gundam armor. Perhaps next time when you team up to slay a dragon, you can wear it. Does this remind you of the OASIS from "Ready Player One"? So, we can call this new game type "metaverse games."

3. Registration/Login/Usage Methods

First, take a look at this image:

Existing registration/login/usage methods have some issues:

4. Security Issues

In the Web1 era, account passwords were often reused by many users. As the number of registered products increased, the risk of password leaks grew. In 2020, news reports indicated that at least 15 billion account passwords had been leaked.

Web2 introduced single sign-on methods like Google and WeChat, which no longer require users to expose their passwords to every product, but security still relies on the safety of these major platforms.

What about Web3's wallet connection? I use a metaphor to explain: a wallet can randomly generate a pair of keys and locks in an offline state. The lock is public, while the key is kept completely confidential by you. When you register for a Web3 product, you provide the lock and the username you want to register to the app. The next time you log in, to prove you are the owner of this username/lock, the website will put a piece of confidential content in a box, lock it with your lock, and send it to you, saying that if you are the owner of this lock, you should unlock it and tell me what is in the box. At this point, we use the key in the wallet to unlock it and tell the website that the content in the box is "ABCD." The website confirms that you are the owner of this account/lock and allows you to log in.

In this process, each lock's name is the wallet address. The key is the private key stored in your decentralized wallet. This login verification process is a zero-knowledge proof, meaning the website does not need to know what your key looks like, but can confirm that you have this key.

5. Information Not Shared/Efficiency Issues

In Web1, after registration/login, the account is a blank slate for the website, and users need to provide various information starting from personal details. Web2, based on Google and WeChat login, can access some basic information about the account, such as profile pictures, nicknames, or email and phone numbers.

In Web3, since it uses universal account addresses or decentralized identities (DID) for login, these identities or addresses carry a wealth of information, including your asset information and friend relationships. As Web3 content becomes richer, addresses can almost contain all information about you, including your hobbies, profession, habits, etc. Therefore, Web3.0 is more user-friendly for new products, as it can quickly understand and find users suitable for its products without needing to purchase user data from other products. The saved money can be directly given to users through airdrops to achieve direct promotion and attract users to use the product, benefiting users in the process.

6. Social

From the early QQ Space and Xiaonei to Weibo, WeChat, and Twitter, every transition between social platforms results in the loss of most content from the old platform, including friend relationships and various content posted on the platform. This is one of the biggest issues with Web2 social media: the content and relationships posted on social platforms do not belong to you and will be lost with the disappearance of the platform. At the same time, the platform has the highest authority to dispose of this content: banning accounts, deleting posts, restricting logins, etc.

Returning social relationships and generated content to users is what Web3 social aims to achieve. There are already many Web3 social products/protocols that can store users' social relationships and content on-chain or in other decentralized storage, meaning users can share this data across different platforms. For example, being able to see your WeChat friends and Steam friends in World of Warcraft, or seeing your posts or pictures from Twitter and Instagram in Weibo.

Additionally, with the openness of various information, it will be easier to facilitate social interactions in various vertical fields, such as fan clubs for niche singers, guilds for specific games, or car clubs for certain vehicles. In existing Web2 products, this is generally done through forums, Douban, or WeChat groups, but this method is inefficient and cannot verify identities.

After logging in with Web3, you can quickly and accurately find communities that truly match your interests based on the NFTs, POAPs (Proof of Attendance Protocol), SBTs (Soulbound Tokens), etc., that you hold. For example, groups with Bored Ape Yacht Club NFTs, groups for those who participated in a certain event or concert and received corresponding POAPs, and any brand purchases might come with a corresponding NFT. Web3 social platforms can automatically obtain the group information corresponding to these NFTs through your wallet address, making it easier for you to join.

7. Music/Film/Entertainment, etc.

Although platforms like NetEase Cloud Music and QQ Music make listening to music very convenient, due to copyright issues, I cannot listen to Jay Chou's songs on NetEase Cloud Music and do not want to switch to QQ Music. This makes me nostalgic for the days when I bought Jay Chou's cassette tapes, which remain a memory of my youth even years later.

Therefore, similar to the NFTization of game ownership discussed above, music, films, and e-books should also provide NFT sales methods. Let NFTs serve as carriers for these assets, allowing users to truly own them. Users can listen to/watch/read the music, films, and books they own on any platform.

Moreover, having these NFTs enriches the social content in the vertical fields of Web3, helping to find genuine fan circles.

8. Creation/Copyright

Although many short video, long video, and article creation platforms recognize that high-quality creators are the core competitiveness of the platform, creators can receive very good treatment. However, internet products ultimately tend toward monopoly and power shifts. For example, in the ride-hailing competition a few years ago, the number of drivers from a particular company somewhat determined the user experience. Initially, when competition was fierce, drivers benefited the most. But as Didi defeated Uber and became dominant, complaints from drivers gradually increased. This is the nature of Web2 internet dynamics. Creation platforms will also follow this pattern in the future; your works and fan information on a particular platform are controlled by the platform, and migrating them is much more challenging than a driver switching to a different ride-hailing app.

Decentralized storage through Web3 can effectively solve the issue of ownership of works. By decentralizing, my works belong to me and can be easily displayed on different platforms. This allows creators to focus more on content, while putting works on-chain to some extent resolves the issue of rights confirmation, making it clear who created what and when. At the same time, fans are also bound to your universal decentralized identity.

9. Evaluation/Reputation

Currently, whether shopping on Taobao or JD.com, or using platforms like Dianping for food delivery, the review systems seem to be on a strange path, filled with either a large number of bot-generated reviews that lack meaningful reference or malicious negative reviews. For instance, on food delivery platforms, there are often reports of delivery personnel being threatened with negative reviews to meet unreasonable demands. Additionally, platforms charge for deleting negative reviews or promoting positive ones.

The core reason for these issues is that the evaluation system lacks transparency.

If we could know whether the person giving a 5-star review is a real user, whether they actually purchased the product, and whether any of my friends have previously bought it, malicious reviewers could be identified by those around them. If all evaluations are tied to personal credibility, I believe this evaluation system would be more authentic and reliable. The universal identity in Web3 can easily achieve the above functions, ultimately building a truly trustworthy personal reputation system.

This sounds a bit like the scenario described in the "Nosedive" episode of Black Mirror's third season. If you're interested, you can check it out.

10. Companies/Organizations DAO

The emergence of DAOs (Decentralized Autonomous Organizations) not only addresses some existing trust issues within companies/organizations but also offers infinite possibilities in terms of functionality and scale due to their code-based decentralization. They can be decision-making DAOs among a few founders or election DAOs for a country. Some mature functionalities include DAOs for parameter adjustments or profit distribution within DeFi systems, such as CurveDAO and MakerDAO, as well as DAOs for collective investment management, like ConstitutionDAO and THE DAO. There are many types of DAOs, serving as a supplement to traditional corporate organizations.

Among existing organizations, I believe the Red Cross, which requires trust and is closely related to money, should be a prime candidate for DAO implementation. How much money is raised, who can participate in decision-making, and where the donations ultimately go can be made transparent and trustworthy through Web3 DAOs.

11. Others

There are also some potentially interesting directions, such as:

Dating/Job Seeking: By logging in with your wallet address on corresponding dating or job-seeking websites, you can automatically match with compatible partners/companies.

Sports/Outdoors: You can turn competitions or activities you participate in, outdoor summit certificates, etc., into NFTs (SBTs). For example, participating in cycling the Sichuan-Tibet line in 2019, completing the Beijing Marathon in 2022, attending a frisbee event in Shenzhen on April 1, 2022, or summiting Mount Everest in 2018. Many of these activities currently have image certificates or physical medals, but I believe NFTs (SBTs) are more meaningful and environmentally friendly. They also facilitate big data analysis, providing you with more personalized services, such as matching you with a soulmate who shares your love for sports on the aforementioned dating app.

Any asset, product, or information you find valuable can undergo Web3 transformation: medical information, sleep patterns, dietary habits, travel commutes, etc. It seems that there are many opportunities in almost any field to make things more efficient and trustworthy through reasonable decentralization.

II. My Thoughts on Web3

What is Web3?

Web3.0 is about decentralizing valuable data or assets. First, everyone should understand that achieving decentralization is inherently inefficient; it is akin to synchronizing your information to all nodes' servers on the blockchain, which incurs higher costs than centralized storage. Therefore, the content that needs to be decentralized must be valuable; it is impossible to put all information on-chain. As for what is considered valuable, everyone has different perspectives; it could be a song you purchased, a video you posted on Douyin, or our friendships. Decentralization means using blockchain technology to synchronize information and assets originally stored on major internet platforms to the blockchain, leveraging the openness, programmability (smart contracts), and a series of standard protocols of blockchain technology to make the circulation of data and assets safer and more efficient.

"Exchanging the inefficiency and high cost of storage for the security and efficiency of data and assets" can be seen as the essence of Web3.

How Can One Experience Web3?

All information and assets of users on Web3 are stored on the blockchain, but users need a wallet to manage their private keys and addresses, as well as all assets associated with their addresses.

Therefore, many digital collections in China, in a sense, do not truly experience Web3, as you do not genuinely own those assets.

How to experience Web3? First, you need to have a decentralized digital wallet, and then gradually explore decentralized logins, DeFi, NFTs, etc.

Current Status and Issues of Web3

The development of Web3 requires not only updates in technology and products but also a change in people's understanding of assets and ownership. This part is relatively abstract and may require a catalyst or a widely accepted Web3 product. Of course, it also relies on the improvement of policies and regulations. At the same time, the openness and programmability of blockchain/Web3 will bring many issues, such as privacy, program vulnerabilities, and lack of relevant laws. Therefore, Web3 is still in a very early and chaotic stage. Everyone needs to be vigilant and learn more.

An Immature Thought

In 2019, a product emerged that encouraged users to upload e-books to IPFS (decentralized storage) for sharing. Since IPFS is a decentralized network, these books technically cannot be completely deleted. Although they are pirated, I think if school textbooks could be obtained for free in this way, it might be a good thing for children who cannot afford education. If paired with free videos, children could read at home as long as they have internet access and an electronic device. After all, e-books and teaching videos are not like physical books and classroom teaching; the cost for 10 million people is not much different from that for 10 people. However, it is meaningful for the development of society and the improvement of the average education level. Therefore, I wonder if a model where basic knowledge e-books are available for free online, while those who want to collect them can purchase an NFT to place on their virtual bookshelf, is feasible? If you were an author, would you accept it?

Finally, I want to say that the transformation of Web3 will not happen quietly like Web2; even with numerous challenges, we must "make Web3 happen in China."