[Column] Xiao Feng: The 10 principles of Web3

What is Web3? Web3 is essentially the other side of the coin in relation to blockchain technology. When we talk about blockchain, we are also talking about Web3 to a considerable extent, and vice versa.

Web3 is a distributed network, and blockchain is a distributed ledger, and the two are inseparable. Both are technically distributed, and both are decentralized in terms of governance.

On 15 September 2022, Ethereum made a ground-breaking technology upgrade: The Ethereum Merge. Some thought the merge is for improving the throughput and network performance of Ethereum. To their surprise, the throughput of Ethereum would remain at 15 to 20 transaction per second (TPS). Instead, sharding technology and layer-2 protocol solutions will drive the performance improvement of the Ethereum network. As a distributed network (Web 3.0), Ethereum focuses on the security and robustness of the network. And as a distributed ledger (blockchain), Ethereum tackles the final settlement of data and value transfers. The development focus of the Ethereum network sheds some light on the big question. Here are the 10 key principles and features that Web3 is defined by.

Web3 is an autonomous network

It has the characteristics of autonomous construction, self-management and free migration. You set your own digital identity; you control your own identity data. For your Web3 account and the relevant data of the account, the ownership belongs to you. You can carry your data and migrate freely between different platforms to maximize its value.

Web3 is a transparent network

It adopts asymmetric public-private key encryption technology, the private key is confidential, but the public key is open to the whole network. You can think of the public key as the mailbox which anyone can see and deliver something inside without permission. Meanwhile, the private key is the key to open the mailbox; whoever has the key can open the mailbox and get the things inside. Only a transparent network can achieve comprehensive, true and timely information disclosure.

Web3 is a permissionless network

You don’t need permission to join, use, develop, and exit the network. It is open source and inclusive; plug-and-play and unplug-and-go. Web3 overturns the traditional form of business organization and work employment model. It empowers anyone to experiment with various creative, innovative concepts on the platform at will.

Web3 is a network that cannot do evil

A distributed ledger is non-tamperable, irrevocable, indelible, traceable, depositable and auditable, with randomly selected, independent third-party bookkeeping. All these core elements make Web3 from ‘Don't be evil’ to ‘Can't be evil’. A robust Web3 network can significantly reduce the transaction cost, making the economic friction coefficient drop to zero.

Web3 is a trust-free network

In Web3, a smart contract is a computer program that ensures that relevant parties execute the transaction. It is open-source code, and everyone can view, yet no one can revoke and modify. Web3 truly adopts implements promise of “code is law” in its technology design.

Web3 is a decentralized network

People have a huge misunderstanding of "decentralization". Decentralization is not about resistance to regulation, censorship, or compliance. In Web3, "decentralization" is an economic governance mechanism. In a business scenario, if you view efficiency as the top priority in your organization, you may use a centralized governance structure. Meanwhile, if you prioritize fairness, you need to have in your organization a consultation and consensus mechanism for a wider audience. When we talk about the network structure, a decentralised structure empowers the network with no single point of failure-secure and robust.

Web3 is a network for anyone collaborating on a large scale

Web3, as a digital space, is inter-temporal, covering everywhere around the globe. Web3 includes an escrow mechanism in smart contracts, NFTs as the digital proof from self-issuance, and a cross-currency digital currency payment system. These elements enable, for the first time, any ‘strangers’ to collaborate on a large scale in a "plug and play, unplug and go" model.

Web3 is a digital asset network 

Web1 is an information network: People can only use the internet in one direction-browsing information. Later, Web2 emerged as a data network. It relies on user profiling and algorithm recommendation at its core. Now, Web3 validates valuable data and turn validated data into assets, making it a network for digital assets.

Web3 is a right-to-use network

Both data and software have the characteristics of high fixed cost and low marginal cost, and the more their usage, the greater their value. Therefore, any method that can expand usage is the optimal solution to maximize the value of data and software. Web3 has a built-in right-to-use token system to capture value. Anyone who holds a right-to-use token can use the data and software, pay for how many times they use it. In Web3, the holder of the data can capture the value well and easily, even if they give up ownership.

Web3 is a stakeholder network

The right-to-use network of Web3 stems from the capitalist system for stakeholders. It differs from the ownership network, which comes from the capitalist system for shareholders.  In the ownership network, we need a corporate system to allocate ownership, and people owning shares form the stock market.  Under the stakeholder capitalist system of the right-to-use network, we can use a DAO to allocate the usage rights. And people holding shares of usage right forms the token market.

These are the 10 key Web3 features you need to know. We have seen how the internet changed society and economy tremendously. Now, we expect Web3 network to be the backbone of the next-generation internet. Beyond the current internet technology, Web3 will bring greater, wider benefits to the whole of human society!   

Xiao Feng is the Chairman of HashKey Group and the Chairman and CEO of Wanxiang Blockchain, China