Hoo Research ｜What is Web 3.0?
Abstract: Web3.0 has become a hot trend nowadays, and venture capital institutions represented by a16z have extensive layouts on Web3.0. There are also different voices about Web3.0, but Web3.0 is still in rapid development. This article will explain the concept of Web3.0, the application of Web3.0, Web3.0 investment institutions, Web3.0 innovation projects, and the future trend of Web3.0.
1.What is Web3.0
1.1 The birth of Web3.0
The concept of Web3.0 is widely believed to have been proposed in 2014 by Dr. Gavin Wood, co-founder of Ethernet and creator of Polkadot. Dr. Gavin Wood believes that Web3.0 will bring about a new digital era, giving rise to new business models and markets, generating a large number of bottom-up innovations (such as the current DAO), and also solving current problems of data storage, data distribution, etc. on the Web.
1.2 The concept of Web 3.0
Web 3.0 is an Internet open to all users, built on top of open protocols and a transparent blockchain network. The way consumers interact with these protocols may be through hybrid applications that provide an easy way to interact with the underlying technology. With respect to Web 3.0, we can simply understand Web 1: read, Web 2: read, write; Web 3.0: read, write, own, also in the following way.
l Web 1.0 — Host-generated content, host-generated permissions. People who want to publish to the web must run their own servers to host the site. Web sites are primarily read-only, providing little interface for user content creation or interaction.
l Web 2.0 — User-generated content, host-generated permissions. Sites emerged that allowed people to create user accounts so that they did not have to host their own servers to publish to the web. This led to more user-generated interactive content, but these sites have evolved into powerful platforms, and users ultimately have no control over their accounts or content.
l Web 3.0 — user-generated content, user-generated permissions. A model is emerging where people don’t have to host servers or create user accounts in other people’s databases to create content. Servers can choose whether to host someone’s account or content, but they don’t have ultimate access, and the technology that enables this is a “self-authentication protocol” based on cryptographic signatures and hashing.
1.3 The significance of focusing on Web 3.0
In the context of the current global epidemic, big data has played a key role in the prevention and control of the epidemic. The Web 2.0 era has changed human society and life from economic, political and social aspects.
l At the economic level, the Internet era has changed the trend of globalization, and the rise of e-commerce such as Amazon and Alibaba has made it easy for people to shop on the Internet, and the Internet era has also influenced the global economic landscape.
At the political level, algorithms that provide selective news and are designed to “incite rather than unite” have become the norm in Western media. The Internet has influenced political elections around the world, creating a new generation of bureaucrats who are native speakers of the Internet.
l At the social level, Facebook, Google, instagram and Twitter have become the giants of social networking and the leaders of the Web2 era.
Web3.0 may trigger a greater change than the Internet era, the era of Web3.0 is already here, and it is of great significance for us to pay attention to Web3.0.
2. Web3.0 Application App
2.1 Decentralized Autonomous Organization (DAO)
DAO is a community shared by online members and managed by consensus of members rather than centralized leadership. The characteristics are
l Decentralization: rules cannot be changed by a single figure or a centralized party.
l Autonomy: vote counting and decision execution follow the logic written into smart contracts to count votes and execute decisions, without human intervention.
l Organizational characteristics: the organization of the DAO can coordinate activities among distributed community stakeholders in different locations.
Although the concept of DAO sounds more complex, we have real life examples of DAO applications: like Publix (Grocery Stores (community-based grocery stores owned by employees), Green Bay Packer, are examples of public ownership structures without a centralized leader. DAO represents the use of “on-chain governance”, for example, in traditional corporate governance, a company sets out a charter for certain policies and how to elect a board of directors. a DAO can take similar policies and charters and write them in code as a smart contract, extending the concept further into the digital world. A smart contract is a stable computer program that runs on a blockchain network. it is like a legal contract, smart contracts are promises, only they are written into computer code and can be executed automatically and autonomously.
2.2 Decentralized Finance (DeFi)
Decentralized finance or “DeFi” refers to decentralized applications in the field of finance (savings, loans and foreign exchange). Decentralized applications (dApps) are computer applications where the code is written to build smart contracts in the relevant domain. These contracts are often referred to collectively as “protocols (protocols).” dApps are distinguished from ordinary applications in that dApps are usually permanent, existing as long as the blockchain hosting the relevant protocol exists, and cannot be altered or manipulated by malicious actors. aApps are also open, which means that any computer can participate in the network, and access is not limited to a single or predefined group.
Blockchain-based payments enable peer-to-peer digital transactions. Prior to Bitcoin (BTC), digital payments had to rely on centralized record (data) managers, such as banks and credit card companies. Even if a user sent money through a service like PayPal or Venmo, what was actually sent was a “financial claim (IOU)” that relied on the banking infrastructure. Cryptocurrencies are very similar to money: they can be considered as a unit of account, a medium of exchange, and a means of storing value within a system, and can be used to transfer real value digitally without a centralized third party.
2.3 Stable Coins and Central Bank Digital Currencies (CBDCs)
Stablecoins are privately issued cryptocurrencies that maintain a stable value over time relative to the US dollar or euro. Fiat-collateralized stablecoins:Stablecoins pegged to the U.S. dollar, for example, maintain a reserve of fiat assets to match the issue value of each token. Other projects are typically stabilized by pledging digital assets or automatically executing smart contracts with algorithmic holdings. Central bank digital currencies (CBDCs) are digital currencies issued by governments and symbolize national sovereignty and obligations.
Stable coins offer the advantages of cryptocurrencies without the volatility. Cryptocurrencies such as Bitcoin and Ether, for example, can experience huge price fluctuations in a single day; whereas stablecoins are designed to maintain a constant price, which helps them serve as an effective medium of exchange. As a low-volatility asset, stablecoins help enable on-chain transactions, including modernizing global payment systems and unlocking a wider range of financial services. Modernized global payment systems provide access to a wider range of financial services for those who cannot use banking services. They are the basic building blocks for a range of important innovations and the foundation for significant innovations.
CBDCs have many advantages similar to stablecoins: although they raise certain privacy and security concerns, stablecoins and CBDCs can coexist. The choice people make between stablecoins and CBDCs can create competition that drives innovation, brings new features and improves new functionality.
2.4 Privacy and Digital Infrastructure
A limitation of many current blockchain networks is that — by design — they are completely transparent. However, cutting-edge research in new areas of cryptography has made it possible to mathematically prove the validity of information without having to provide the information itself. For example, a user can prove to a website that the website knows the user’s password, and the website does not have to store the user’s password in a database that is vulnerable to attack. Thus, this solution can address both privacy and scalability issues.
Privacy infrastructure is important not only to protect users’ personal data, but also, it fundamentally extends the design space of applications. Given the context of massive data breaches in the Web 2.0 era, data protection must be at the heart of the next wave of technology innovation. The layout of the privacy infrastructure will enable a range of applications with more protective features. Privacy infrastructure will also lead to greater regulatory compliance. In existing systems, users may be reluctant to provide personal information to service providers or apps on the blockchain because the information could be used to view data about historical transactions the user has completed. The privacy layer helps to dispel these concerns by enabling users to disclose certain information to specific subjects: such as regulators, while preventing the information from becoming fully public. This means that regulatory compliance will be easier to achieve without privacy risks.
2.5 Creator Economy
The Creator Economy is an emerging community of creators, such as artists, musicians, game developers, etc., who are directly connected to their supporters (fans) and collaborate without intermediaries, enabling creators to earn an independent source of income.
Fungibility means that one unit of a good is indistinguishable and interchangeable. For example, a $1 bill is interchangeable with any other $1 bill. Also, irreplaceability is a property of unique commodities such as art, collectibles, and real estate. an NFT is a digital asset that cannot be counterfeited and has value due to its uniqueness. For example, an NFT might represent a unique digital artwork, a Mickey Mantle baseball card, or a copy of physical North Carolina real estate, for example. NFTs are exchanged in the same way as any other token, such as Bitcoin.
2.6 Gamefi
is a game built on blockchain technology. A key difference between Chain Games and popular games like Fortnite, Roblox or Minecraft is that the stuff in the game can all be traded for currency and then exchanged for resources in other games. And this is just the beginning: expect blockchain-based games to lead to a whole new digital world and economy.
Note: “Web3.0 Application App” content from a16z, Copyright a16z.
3. Top Venture Capitalists on the Web 3.0 Landscape
According to data provider Venture Intelligence, venture capitalists have raised $511 million in crypto in 2021, and crypto startups have raised $448 million, an increase of nearly 19 times over last year. This is dominated by exchanges, fintech companies and institutional services platforms, with FTX, Celsius, Gemini and Fireblocks being the top companies in terms of share.
For this reason, we examine the investment positions of five top venture capital firms in Web 3.0: A16z, Coinbase Ventures, Pantera Capital, Paradigm Capital, and Sequoia Capital, respectively, and look at the main venture capital firms’ investment areas and the interesting projects they have invested in. We will explain the main venture capital investment areas and their interesting projects.
3.1 a16z
| Major areas of investment.
Data/Privacy/Security Infrastructure (13.2%)
Digital assets, NFT, creator economy (13.2%)
| The most interesting project in the portfolio: MakerDAO
Project Description: A DAO (decentralized autonomous organization) that issues Dai, a stable coin, which effectively promotes the development of a decentralized financial system.
Project features: MakerDAO created Dai, a stable coin pegged to the U.S. dollar, which stabilizes the price fluctuations of cryptocurrencies and enables lending against multiple cryptocurrencies.
3.2 Coinbase Ventures
| Major investment areas.
Data/Privacy/Security Infrastructure (~19%)
Exchanges (12%)
The most interesting project in investing: Goldfinch
Project Description: Goldfinch is an unsecured lending protocol whose vision is to create a decentralized credit platform that allows anyone in the world to become a lender, not just a bank.
Project features: By incorporating a “consensus trust (trust through consensus)” mechanism, Goldfinch creates a way for borrowers to show creditworthiness based on the collective assessment of other participants rather than on their cryptocurrency assets.
3.3 Pantera Capital
| Main areas of investment.
Exchanges (about 20 % of its portfolio).
Blockchain infrastructure ( 12 %).
| The most interesting project in the portfolio: Ampleforth
Project Description: Ampleforth’s native token, AMPL, is a base currency based on an algorithmic reserve and elastic money supply system. It is characterized by the fact that the number of coins you own changes daily, but the total value of your holdings stays the same. This means that theoretically user assets are never diluted by inflation and have a fixed percentage of network ownership.
Project Features: Most cryptocurrencies have chosen to replicate the Bitcoin price model, but this pricing has created extremely high volatility as well as risk correlation. AMPL instead diversifies this risk by increasing or decreasing the supply of tokens to keep the price and overall value stable.
3.4 Paradigm Capital
l Main areas of investment.
Exchanges (17.5%)
Capital Markets (12.5%)
|The most interesting project in the portfolio: Namebase
Project Description: Create true ownership of domain names, which is itself just a trading platform for buying, selling and using Handshake coins. Handshake is a public chain based on the UTXO model, a decentralized DNS system that focuses on decentralized domain name registration, authentication, trading and resolution.
Project Features: Handshake domains offer true ownership, which means no annual lease fees, only one-time purchase fees.
3.5 Sequoia Capital
| Main investment areas.
Digital assets, NFT, creator economy (25%)
| The most interesting project in the portfolio: Fireblocks
Project Description: Fireblocks aims to provide a platform for financial institutions to securely operate their digital asset business, with the main business of storing, transferring and issuing digital assets.
Project features: The founders have made considerable contributions to securing the blockchain using a digital asset security measure called MPC (Multi-Party Computing), leveraging their cybersecurity experience in mobility, cloud computing and critical infrastructure.
4. Web3.0 other innovative projects
In addition, distributed storage, decentralized payment, DAO governance tools, decentralized domain names, etc. deserve our further attention, where some of the web segment projects have taken shape.
l ENS
The total supply of ENS is 100 million ENS and the current market circulation is 0.22 billion ENS.
ENS (Ethereum Name Service) is the Ethernet Domain Name Service, a distributed, open and scalable naming system based on the Ethernet blockchain and a key infrastructure of the Web 3.0.0 network. ENS also supports “reverse resolution”, which makes it possible to associate metadata (such as normalized domain names or interface descriptions) with Ethernet addresses.
The goal of ENS is similar to DNS (Internet Domain Name Service), but the architecture is very different due to the functional characteristics and constraints of the Ethernet blockchain. Like DNS, ENS is a hierarchical domain name system with dots as separators between different hierarchical domains, and we call the names of the hierarchies domains, and the owner of a domain is able to fully control its sub-domains. ENS has also become the big white horse project of Web 3.0.
l Horizen (ZEN)
The total supply of ZEN is 0.21 billion ZEN, and the current market circulation is 0.12 billion ZEN.
Horizen strives to be the Web 3.0.0 privacy platform and is Grayscale’s key investment in the privacy track in Web 3.0. Horizen goes beyond the simple use cases of P2P cryptocurrencies such as Bitcoin and Zcash to unleash the power of privacy technology in an interconnected network of distributed applications, says the official research report on Grayscale. Combining a unique technical architecture, innovative infrastructure, incentives and Bitcoin-like monetary economics, Horizen enables the creation of real-world blockchain applications with optional privacy.
Horizen main and side chains are completely independent from each other, but the main and side chains can address scalability through the original Cross-Chain Transport Protocol (CCTP) for cross-chain transfer of ZEN coins. Horizen sidechain, also known as Zendoo, is infinitely scalable and can be designed infinitely. The sidechain is fully decentralized with independent consensus mechanism, independent cryptographic algorithms, independent logic and data rules. Developers also have access to an open set of standards and common components through the ZEN Sidechain Software Development Kit (SDK), which allows developers to focus less effort on the blockchain itself in terms of complexity, allowing them to build the blockchain without having to start from scratch, which allows more effort to be put around the logic of the application and the data and application build.
l MASK
The total supply of MASK is 100 million MASK and the current market circulation is 0.45 million MASK.
Mask Network [1] aims to be the sum of the bridge between Web 2.0 and Web 3.0 (Web 3.0 sub-domains include DID, NFT, DAO, DeFi, cross-chain, etc.), but it is still at a relatively early stage. The difference with some projects is that Mask Network does not directly try to “disrupt” existing centralized giants, but rather provides tools to give the massive number of users of existing giant platforms (e.g. Twitter, Facebook) an additional choice. In this way, it hopes to smoothly migrate users from Web 2.0 to Web 3.0 era.
Vitalik Buterin, the founder of Ether, also used Mask Network to send his first ETH bonus packet in the 2020 Lunar New Year.
| Mirror
Mirror token $Write is not yet in circulation, but participation in mirror may have retroactive rewards.
Mirror is a content distribution product created by Denis Nazarov, a former partner of a16z crypto. The core innovation of Mirror is to combine the ownership economy model built by DAO, Web3.0 and NFT to provide a set of crowdfunding toolset for content creators, solving the problem that creators “can’t make money and can’t realize the value through their content”. Not only that, early investors can even earn the future revenue of the content through their own keen sense.
| AR
The total supply of AR is 1.5 billion BAT, and the current market circulation is 1.491 billion AR.
The token of Arweave network (which was also previously targeted by Hoo research), Ar’s main role is to pay for the storage of data. Compared to Fil, Arweave features pay once, store forever. The large amount of NFT data on Solana is saved on Arweave, and the hotness of Solana ecology has also driven the recent wave of Ar price increase. Regardless of the development of Web 3.0, decentralized storage will be an inevitable part of the realization that this track is extremely deterministic.
| DOT
The total supply of DOT is 1.152 billion DOT and the current market circulation is 1.07 billion DOT.
The biggest feature of Web3.0 is a decentralized network, but the current blockchain cannot carry a huge network, and the goal of Poca is to form a blockchain network from multiple blockchains, which is in line with the expectation of Web3.0.0, so Poca is also the lowest infrastructure facility of Web3.0.
As the definer of Web3.0, Dr. Gavin also understands best what Web3.0.0 needs, so when designing Poca, he gives the expectations of Web3.0 to Poca, and the blockchain network built by Poca to connect all blockchains can fit the current development of many public chains and alliance chains with a hundred of them, but also meet the needs of Web3.0.0 for decentralized network. Therefore, Poca will be the best expression of consensus engine in Web3.0.0.
| BAT
The total supply of BAT is 1.5 billion BAT and the current market circulation is 1.494 billion BAT.
Basic Attention Token is a new token created by the founders of Javascript for the digital advertising industry. It is used to solve the problem of ad display and user incentive in the browser. The project is based on the Brave browser for decentralized digital advertising business, protecting user privacy through the use of zero-knowledge proofs, while allowing users to be rewarded for their attention.
The BAT token radically improves the efficiency of digital advertising by creating new tokens that can be exchanged between publishers, advertisers and users. This is all happening on the Ether blockchain. The token can be used to access a variety of ads and attention-based services on the BAT platform. The use of the token is based on the user’s attention, indicating that a person is focused on mental engagement.
| LINK
The total supply of LINK is 1 billion LINK and the current market circulation is 467 million LINK
Chainlink is the most extensive decentralized network of prophecy machines providing this much-needed information flow to smart contracts running on various blockchains. Its goal is to make smart contracts a more powerful tool, with each prophecy machine network providing many prophecy machine services independently, enabling them to take advantage of dynamic data input collected from external sources.
As a leading project within the prophecy machine space, the Chainlink platform has partnered with many star projects and data companies, and has over 100 trusted nodes within its platform. chainlink provides services to large enterprises such as Google, Oracle and SWIFT, as well as Polkadot and Substrate, Synthetix, Loopring, Aave, OpenLaw and Conf. Aave, OpenLaw, and Conflux, among other leading smart contract development teams, providing a secure and reliable prophecy machine service.
| The Graph (GRT)
The total supply of GRT is 10 billion GRT and the current market circulation is 5.253 billion GRT.
The Graph, a protocol for indexing and querying data from the blockchain, is designed to empower Internet applications powered entirely by the public infrastructure. Full-stack decentralization gives applications the ability to cope with business failures and rent-seeking, while bringing unprecedented interoperability. Users and developers know that the software they have invested time and money in will not just disappear into thin air.
The Graph Network is the core infrastructure of Web 3.0, providing the necessary components for a user-level experience for decentralized applications. “ dilemma facing DApp developers.
| STORJ
The total supply of STORJ is 425 million STORJ and the current market circulation is 144 million STORJ.
Similar to AR, STORJ is a project in the data storage segment. STORJ coin is a token for the Storj platform, which is a cloud storage platform that strives to be censorship-free, monitoring-free and without downtime. The platform allows users to store data in a secure and decentralized manner by encrypting a series of decentralized applications. It uses block transaction features such as transaction ledgers, public/private key encryption and cryptographic hash functions for security. In addition, it is cheaper, faster and more secure than traditional cloud storage services.
There are three main roles in the Storj ecosystem: the client, the node and the satellite, and Storj’s satellite connects the client to the node. When the client needs to upload a file, the satellite helps the client find the fastest node to upload it, and records the expenses and revenues of the client and the node. Also the uploaded data is encrypted and only the owner has the key, so no one else can decrypt the data.
5. Potential Trends of Web3.0
| Top venture capitalists will invest in Web3.0 to strengthen the trend
Top venture capitalists may use Web3.0 to increase investment, the investment environment will become exceptionally intense, and more full track type funds will join. Investment institutions will pay more attention to the product and content itself, rather than hype and marketing.
| Web2 companies will awaken and try to enter Web3.0
In addition to Facebook, other large web2 companies are likely to gradually join Web3.0 and the meta-universe track.
| DAO 2.0 era
DAO is gradually becoming a new way of working, but DAO will also face new challenges. How to make DAO more efficient execution? How to consider regulatory issues? How to better integrate with Web2 companies, etc. DAO will gradually transform into DAO2.0 while solving these problems.
References:
1、Why We Need Web 3.0：
https://gavofyork.medium.com/why-we-need-web-3-0-5da4f2bf95ab
2、 a16z About Web3.0.0 Reading List：
3、Web3.0 ELI5: What is Web3.0?
https://messari.io/article/Web3.0-eli5-what-is-Web3.0
4、10 Predictions for Web3.0 and the Cryptoeconomy for 2022：
https://blog.coinbase.com/10-predictions-for-Web3.0-and-the-cryptoeconomy-for-2022-745a20a60cd0
5、Web3.0: in a nutshell：
https://eshita.mirror.xyz/H5bNIXATsWUv_QbbEz6lckYcgAa2rhXEPDRkecOlCOI
6、Vitalik Buterin uses Maskbook：
https://twitter.com/VitalikButerin/status/1221355822845874177
7、An Overview Of Web3.0 Venture Capital Activity In 2021：
8、Who Owns Web3.0：
https://pomp.substack.com/p/who-owns-Web3.0
Risk Warning:
All articles of Hoo Research do not constitute any investment suggestions. Investment must take into account individual risk tolerances since it involves high risks. It is strongly recommended to conduct an in-depth investigation of projects and make your own investment decisions carefully.
Reprinting or reproduction is welcomed with the source indication from Hoo Research. (Hoo.com)
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