The debate on where blockchain technology is heading is endless. The latest hype landed at a blurry and vague term of web3. In this article, I do not wish to explain if web3 really has the value it claims or if it is a total BS, rather, I would like to focus on what blockchain, the backbone under all these applications, is meant to do, and what is its current limitation.
Blockchain — What people had heard about it
Every time, I tell my friends that I am working at a blockchain company, they will ask me if I am crypto rich or if am I on the way to becoming crypto rich. I am glad that all my friends are wishing me rich, but this is probably the most common stereotype that people hold for blockchain technology. Due to the high entry barrier on the technical side of blockchain and the lack of diverse applications, People typically interpret or even explain blockchain technology only as cryptocurrencies and similar appliances. What people had heard about blockchain?
- People heard the story that Bitcoin went from 0.01 USD to its peak of 60k USD, and someone got super rich because of crypto trading.
- People heard that cryptocurrencies are realizing Friedrich Hayek’s theory on the Denationalization of Money.
- People heard that blockchain technology is going to free us from the control and centralization that big tech companies now had implemented on us.
The words that are passing around, describing blockchain technology, are trying to give blockchain a glorious cover of disruptive, rebellious, and easy to get rich. But is it really the case? Can blockchain really be this good and do what people heard of it can do?
Blockchain — What it really is
- The core principles of blockchain are decentralization and immutability.
- The primary benefit of blockchain is traceability.
- The physical representation of any blockchain is simply a database.
So, in short, it is an immutable decentralized easily look-upped database system. Ah, and the cryptograph part comes in due to the lack of centralized security, so data must be cryptographically encrypted to ensure your data in the database is not an open book to others. There is one point that we have to emphasize the carrier of the technology is a database and whoever holds the ownership of the database would be the actual owner of any of the utilization of the blockchain. So, what would a database like this be good for?
There are quite a few applications of blockchain technology other than, of course, cryptocurrencies.
- The agriculture industry has been experimenting with recording the agri-data of crops on the blockchain, so information is immutable and easily traceable across the entire supply chain of the crops.
- The legal industry has been experimenting with recording auditing documents on blockchain to achieve the same result.
- The global logistics industry is also adopting the technology to reduce the time to sync information on global cargo shipping. Ports and customs are experimenting with innovative data-sharing systems to reduce the cost of custom clearing.
- The traditional financial industry now has the most utilization of blockchain technology because financial business is all about transactions. Having an immutable and easily traceable ledge will significantly reduce the operation cost for basically every business line in the financial industry.
Wait a minute, you might be wondering how come we don’t hear these stories often? You are right. Most of the blockchain use cases that landed in real life are with the 2B business. Coming back to the point that I emphasized, blockchain is all about databases. And who is most likely running the database on a daily bases? Enterprises! Plus, the performance of public blockchain projects fails to meet the high TPS requirement of these enterprises, so there are a few companies like R3, focusing on developing enterprise blockchain just to help these real-world use cases go live.
Once again, blockchain is an innovative database and data storing business. And from that, we need to keep in mind that whoever owns the database owns the utilization of the service.
NFT- Non-fungible Tokens
Enough of the boring tech talk, let’s look at what has been hot for a while — the NFTs. NFT stands for non-fungible tokens, it is a digital representation of a non-fungible asset. In the blockchain world, it typically represents ownership or liabilities of the asset.
It is not a new idea, and in fact, our company had developed the code base for issuance, transacting, and all other related operations for tokens all the way back in 2019. NFT is simply a small branch of tokenization and the digital token economy.
People bought into the idea that individual creativity can be traded in a secondary market. It is very much true for the case of NFTs, it is digitalizing some illiquid assets and making them tradeable on a secondary market.
But let’s be religious about the execution, we learned from the above that blockchain is all about databases. In terms of digital creations such as NFTs, a true NFT platform would require the buyer to hold their blockchain databases. Just keep that question in your mind when you are about to buy an NFT: Will you actually own the bits and bytes of it?
Coming to Web3
Recently, the concept of web3 suddenly hit the street. People are fascinated by the idea of a decentralized internet for which FAANG will no longer hold the data on behalf of its customers. And the value generated from the data can and will be distributed to the data creators, i.e., people like you and me.
In order to comprehend the ideology of web3, we do need to have a little bit of history throwback to web 1.0 and web 2.0. When the internet first started picking up adoption outside of military use, communication was point-to-point. People would need to set up their own servers to host services in order to populate communications or share data with one another. So that was web 1.0. Then, starting from the late 2000s and into the 2010s, as the big tech companies started to root deeper and deeper into people’s everyday life and offer more and more convenient services from every angle of our life, people start blindly giving out our data to these companies. Back then, we did not know how valuable these data are. With the digital era coming close to our eyes, people start to realize the data they generate is not only valuable but also sometimes being sold to other companies and even end up used to against them. People start to look for solutions to counter the overpowered big techs. Hence, the idea of web3.0 emerged. A totally decentralized internet where people can hold on to their own data and distribute it only with their consent. Sounds very promising right?
What is missing in the Web3 story?
Again, coming back to the boring tech talk, the database talk. Can you own all the data generated by you? In what methods are you going to hold possession of all the data you generate? The current setup for hosting a truly decentralized blockchain node (either private or public) requires at least a few steps:
- A public/private key pair (A wallet that can be frozen by its provider is NOT a true blockchain wallet): to connect with other people
- A computer + some database: to run the blockchain protocol and store the ledger.
- Some computer knowledge: to perform the above execution.
And now, with the above minimum requirements, the ideology of web3.0 then can be delivered. But we are far from seeing that happening in real life. it is not only because every step costs money, but also because every step of the execution requires technical knowledge. Plus, you need to have a group of people to form a community, otherwise, it is just yourself hanging out there. The ROI of getting into total web3 is really low at the moment. It is a question of trade-off.
Final thoughts
I personally am fond of the philosophy of web 3.0. I indeed would like to have a share of all the data generated by me that went on to a shelf for sale. I would like to see my help in generating traffic forecast on Highway101 by my use of Google Maps commuting to work every day turn into a can of ice soda by the end of the day. Yet, we are “technically” not there yet. Therefore, I would like to invite all of your attention back to what blockchain can deliver today in real-life use cases. And let’s develop together through the web 2.5 age.
