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New opportunities for Web3.0 applications

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A particularly big opportunity for using emerging blockchain technology to support Web 3.0 applications is that there is now another technology for developing Web 3.0 applications or decentralized applications, called application chains.

Original source: Octopus Network

This post is from Liu Yi, founder of Octopus.com, who delivered a keynote speech at the Near2021 Shanghai trip.

Web 3.0 is an inevitable trend

Web 3.0 is the inevitable trend. If you are the first to participate, you will be able to share in the benefits and benefits of the trend. If I make Web3.0 clear, then people believe that this is the trend, even if you don't participate, it's going to happen, more people will participate, and Web3.0 will come faster, kind of like the self-emergence of finance.

Start with what Web 3.0 is, and then why you think it's going to happen. The term Web 3.0 is based on the term Web2.0, which is a huge economic phenomenon. There are many, many Internet giants. Internet giants are an economic model, which we call a platform.

So what is a platform? A platform is an Internet service that creates value by promoting interactions and transactions between different participants. We call it a platform, also called a bilateral platform or a multilateral platform, or a bilateral market or a multilateral market, which is the same thing.

So what's the magic of the platform? It's the network effect. Let's say we're in a place that is itself flat, and now we're building houses and making a market. And then we said let's trade here, it's a very promising market. The more merchants in the market, the more buyers will be attracted. After the buyers are concentrated in this place, the merchants are also willing to do business here. That is to say, it creates value by the transaction and interaction between the buyers and sellers. And the more buyers and sellers there are, the more valuable the platform will be. In fact, the market of our human society, the city and so on are all happening like this. This is a very, very good business model, WeChat, Taobao, Meituan, Didi...... It's all platforms. We use various Internet platforms every day.

But what's the problem with platforms? Each of these Web 2.0 platforms is run by a company, and there are two problems with a company running an Internet platform. The first is that the company's mission is to maximise shareholder value. The model of the Internet is that you start with a startup team, you get VC funding, and then the team develops the platform for free for everyone to use. Not only is it free, but it also gives money and subsidies. Why did I send you money? Because when you get here, you become attached to the network. Take a taxi, for example, you can't leave Didi, because online taxi is on Didi; Online ride-hailing is also inseparable from Didi, because passengers use it. At this time, its nature is exposed, and the platform will try to extract as much revenue as possible from your economic transactions. Because as a company, it is about creating returns for shareholders, not creating returns for users, or creating returns for merchants. There were people driving cars, people riding cars, providing a platform to make deals. The economic bargain itself is good. However, because the platform has a monopoly position, it will constantly extract the value-added part of this economic transaction to its hands, which is called rent-seeking in economics. His contribution to economic transactions or production remains the same, but because of his special status or some special rights, he constantly expands his own income and reduces the income of other participants, which is rent-seeking. As Internet users, or as businesses, or as drivers, we certainly do not want the platform to seek rent. Another problem is inequality. Because the platform has such great value, there is such a good network effect, because everyone to participate in the creation of. When the platform grows up, it will not only not give you money, but also make more and more money from you, which is not fair.

We're asking for a different way of playing. What's the new way? Web 3.0. Web 3.0 is about a decentralized community, a group of unspecific people creating markets. Of course, the first thing to do is to have a team of entrepreneurs, who use technology to build the market. Now there are no buyers and no sellers in this market. What can we do? Turn market ownership into stock. Whoever trades here issues shares, and the profits of the market will be distributed according to the shares in the future. The shares are the token. In the decentralized e-commerce platform, few people may buy here at the beginning, but you gave me the token. For the sake of money, let me come here. After the seller comes, he will even be willing to provide services at a lower price than the market price because of the subsidy of the token. Then the buyers will be attracted to follow, and gradually the network effect will be established. When the network is finally put together, it is not controlled by any single person or a small group of people, it is the community of stakeholders who control the network protocol or the encrypted network, and the encrypted network belongs to the token holder.

Why is this an inevitable trend? Because of Web 2.0, no matter how good it is, it will not give out shares to users. Web 3.0 is to Token the largest platform value and then distribute it to market participants, so it is a dimensionality reduction blow to Web 2.0. Web 2.0 can't resist Web 3.0 in the end. The difference is just who's going to beat these giants, who's going to launch these markets, who's going to design this agreement to be fair, to distribute the benefits, to get people involved, to replace these Web 2.0 platforms. Blockchain entrepreneurs have the tools to redistribute the value of the platform. However, there is not a single Web 3.0 app that has entered the mainstream of the Internet except for the specs. There is not a single Web 3.0 app that has reached the millions of active users, let alone the hundreds of millions of active users on Google and BBB platforms, which are several orders of magnitude behind. Why is that? Because blockchain practitioners learn smart contract development, learn the programming of blockchain, then take a hammer to see everything is a nail. When we make the blockchain application, we say you can use it, I am decentralized, when you come, we will distribute the value to you and so on.

It turns out that this is not feasible. Why? Because the first thing users need is a good Internet application, that is to say, the application itself, users should be willing to use it. Whether it's a social network chain, a music platform chain, a taxi-hailing chain, etc., users have to love the app first. For example, it is more convenient for users to use the taxi-hailing chain than Didi, and then they find that they have got a lot of tokens and can sell money on the exchange of the token. Of course, users will be very happy. So don't use decentralization as a selling point, use it as a value added to users.

Does anyone do that? Some people do that. Audius is a decentralized music platform with lots of great songs on it. There are a lot of musicians on the platform, there are various styles of works, listening to music is free, do not need any wallet can be used. A few days ago, the Audius app announced that it had reached 4 million users per month. Since 3 million users per month, it has only been 20 days. This means that the platform has broken through critical scale and is on its way to spontaneous and rapid growth. This is the first major Web 3.0 application that I know of. But when it was promoted, it was never Web3.0, it was Blockchain. It's a great Internet application in itself, with the same user experience as Web 2.0, but it also gives the benefits of the platform to these value creators, who in Audius are musicians and avid fans. User experience is similar to iTunes It's the same thing, you can earn the token, users will definitely come.

For Web 3.0 to hit the ground running, it should be good Internet applications first. And it's decentralized, co-owned by a group of people, and requires a good Trustless Incentive Structure. First, the incentive model needs to be designed, and then it needs to be realized through blockchain technology. Blockchain should be cheap, very fast, have a good user experience, Large Capacity/TPS, and Low Latency. Don't talk about TPS every day. TPS is just one of the many factors that will bring Web 3.0 to the market as soon as possible. Right now the whole circle, especially the technology circle, is not focusing on the right things. But I think Near is right. Near is the public chain that is most focused on the user experience, and it is the one that is most likely to support a successful Web 3.0 app with the same experience as a Web 2.0 app. More or less, because whenever decentralized bookkeeping is introduced, there is always some loss in user experience.

What was the biggest loss? It's upgradability. When we were developing Internet services, we were iterating fast, releasing a new version every week, but the bookkeeping rules were written on the blockchain, it was decentralized, and nobody could change it if they wanted to. So there's got to be legitimacy, there's got to be a way to bring the community together and get them to agree, and then there's going to be an upgrade, otherwise it's going to be up to the individual or the team. Upgradability with Legitimacy is a challenge in blockchain technology.

Application Chain, a new opportunity for Web 3.0 applications

There is a particularly big opportunity to use emerging blockchain technology to support Web 3.0 applications. But now there is another technique for developing Web 3.0 applications or decentralized applications, called application chains.

Going back to before Ethereum, to do any decentralized application was basically to fork the Bitcoin code and make a chain out of it. Ethereum has become a universal virtual machine, in which APP development and smart contract development can be carried out, which has greatly reduced the difficulty of development and spawned a lot of innovation. It's great. But the vast majority of apps, with the exception of those related to crypto asset trading, have failed to launch. Why is that? The main reason is that the user experience is terrible. To install MetaMask first, Chinese users who can't get over the wall won't even be able to install MetaMask. You need to have ETH after installation, otherwise you can't send transactions, because you need GAS. How can a new user have ETH? If the user is in the US, he can open an account in Coinbase, transfer US dollars to buy ETH, and then the ETH into the wallet, finally can be used. The whole process takes a few days, and ninety or ninety-five percent of the users are gone. This process is not determined by smart contracts, it is determined by Ethereum, and as long as you develop decentralized applications based on Ethereum, you can only use Ethereum's specifications.

So what's a better way? A better approach is to make the application a separate chain, completely customizable from top to bottom, you can change the network layer, you can change the execution environment, you can also customize the application layer. You can let users submit transactions without paying Gas, you can let users pay Gas in stablecoins, or you can let app developers or other third parties pay Gas for users, it's up to you.

Within a chain is a very complex technical system, there are hundreds of parameters, all can be customized. If you develop a chain specifically for your application, you can optimize the user experience in a decentralized way.

Why hasn't anyone done this before? Because it's too hard. Do a chain out, to understand the P2P network, to understand the consensus agreement, need to understand K/V data storage, very troublesome. But things have changed. In 2017, the Cosmos SDK came along. The bottom layer is Tendermint, and the top layer is in Go, and you can write a chain. In October 2018, at the Web3 Summit, Dr. Gavin Wood launched a chain in Substrate 15 minutes, heralding the arrival of app chains.

So now to do Web3.0 applications, unless it's a DeFi/ asset trading application, it needs to be added to the liquidity network. Otherwise, the preferred application chain should be Substrate or COSMOS SDK.

Anyone who does development knows that a good development tool is one that does simple things directly, and one that can do complex things. So that's the nice thing about app chains, is that if you just want to do the application layer, it's also very easy. But if you want to be very complicated and want to implement something special, you can do it.

For example, the Polymath project is dedicated to STO. It was originally developed on Ethereum, but Ethereum just couldn't meet the needs of STO. For example, in the regulated securities market, air drops are not allowed. If you give me securities, you must get my approval before you give them to me. Why is that? Because after you give it to me, I have to pay taxes on it. If you put the securities into my account without my permission, you might get me into a lot of trouble. However, if you want to transfer tokens to others on Ethereum, they must agree, which is not compatible with Ethernet ERC20. Polymath has done a lot of experimenting with Eip1400 on Ethereum. However, after a long period of exploration, they came to the conclusion that they could not make good STO application on the common public chain, so they chose Substrate to make STO application chain from scratch.

This STO application chain is called Polymesh and has been in the works for two years and is fully compliant. It does not fork, because in a proper capital market, a fork is unthinkable. One asset becomes two. Which one is real? In addition, the German Electronic Securities Law has clearly stated that securities trading on distributed ledger, that is, blockchain, must have transaction finality, which is difficult to obtain on the general public chain. There are many more such examples. When you're serious about creating a great user experience app, you want to be able to adjust a lot of parameters and have as much design space as possible.

Octopus Network & NBSP;

The Cosmos SDK and Substrate solve the problem of app chain development, but once the app chain is developed, you need a lot more to get it going.

You need Security. Because at the beginning, the token of the application chain has no value. If you have to run POS, who will do the node for you? Make the nodes yourself, that's too centralized. What should I do? You need a lot of money, in the industry to get a reputation, people think you are reliable, and then there are some professional nodes to participate. Without millions of dollars, it's unthinkable.

You also need Interoperability across chains. For example, payment needs to be made within the application chain, but neither USDT nor USDC will be issued on this chain. If you want users to transfer the USDT on Ethereum to make payment, then cross-chain with Ethereum is needed.

In addition, to run a chain, in addition to nodes, a lot of Infrastructure is needed, such as Blockchain Browser and RPC Gateway, which are similar to Infrua. Without ConsenSys' support without any investment, the team can only deploy these Infrastructure by itself. Most of all, you need Community. What is community? As a chain of applications, whether it's a music platform or a decentralized blog, you particularly need Web3.0 enthusiasts and early adopters who are willing to experiment with any new Web3.0 protocol. But where do you find these people? You need a community that cares, supports, and actively participates in the Web3.0 protocol.

Polkadot provides shared security. You plug in a slot and you get tens of billions of dollars of security. It's cool, but it's not without a cost, tens of millions of dollars a year in rent. The parallel chain will issue its own token to pay the rent. It's cost-effective for a platform chain that can host thousands of applications. But for the app chain, you have to think about whether the cost benefit is justified.

Octopus Network welcomes all app chains, and you can decide how much security you need and bear the cost. If it's a small app to start with, maybe $1 million in security is enough. Then the application chain will issue additional tokens of $100,000 to the node every year, or pay rent of $100,000, and someone will pledge $1 million of OCT to provide security. Over time, the chain is likely to have stronger network effects, with more economic activity and token prices rising. Although the number of tokens awarded to nodes remains the same, the increase in the revenue of corresponding fiat currency will lead to more people pledging, and the security of the chain will become higher and higher. If you don't need so much security, you want to reduce the cost of security. No problem, you can decide to reduce the additional issue reward of the node by on-chain governance of the application chain and voting with the token of the application chain. The application chain is autonomous, and octopus network rental security is a service that provides a choice to the application chain.

The Relay of octopus network runs on Near, and all the application chains of octopus network can interoperate with Near. Near has rainbow Bridges through which application chains can interoperate with Ethereum. In the future Near and Cosmos, Polkadot will also be connected together. Octopus web application chain can interoperate with various chains through these Bridges. In addition, through our development of the Substrate IBC module, the application chain and all COSMOS SDK chains can be directly connected.

In addition, RPC Gateway, Indexer and other costs are covered by Octopus Network and provided to App Chain for free use. Investors in OctopoNet, who have OCT tokens, are willing to mine app chains, or be angels, or offer collateral and security when an app is linked to OctopoNet, a community of Web 3.0 developers, investors, and evangelists.

Octopus Network's mission is to lower the barriers to innovation in the Web3.0 application chain from millions of dollars to tens of thousands of dollars. After the Octopus network mainnet, the cost of application chain innovation can be reduced by an order of magnitude. The long-term goal is to reduce it by two orders of magnitude. What can be achieved by lowering it by an order of magnitude? When you have $100 million invested in Web3.0, if it's a multi-million dollar capital expenditure, $100 million can only support 20 projects. But if you take it down an order of magnitude, you can support 200 projects. If you lower it by two orders of magnitude, you can support 2,000 projects. Web 3.0 landing, there is no other way, is to rely on a variety of innovation, everyone in a variety of directions to try. What we've done is we've lowered the bar for Web 3.0 innovation.