The Paradox of Growing Web3 to Web2 Scale - TOKEN2049 London 2022

okay so we're gonna talk about today about the Paradox of growing web3 to web 2 scale my name is Tao I'm the co-founder of orbs.com orbs is an L3 blockchain infrastructure provider running on top of evm and con I'm also a mentor in the defy.org accelerator and a contributor to the open network one of the most exciting L1 blockchains available today and I live here in London so what exactly is the new internet what it exactly is web3 so let's compare web 3 to web 2 the internet as we know it today web 2 the internet as we know it is being run by corporations corporations are the major stakeholder in the network and in web 3 we're seeing a shift toward users we're making users a significant stakeholder in the network users are no longer just a product users are encouraged to participate in running the infrastructure users are encouraged to participate in governing the infrastructure and the apps running on top web 2 is naturally centralized what does centralization mean centralization means that the creator of a system is inherently not equal to the participants in that system for example let's take Google search let's say that Google search they own the search platform so it's okay for them to promote their own products artificially on the in the search results now if I were to create a decentralized version of Google Google search running on web3 then the creator of the system is inherently equal to the participants so I will not be able to promote my own products artificially on the search results web 2 is permissioned that means that in order to participate in web 2 I need to ask for permission from the people running the network for example if I'm using Gmail and I want to send a mail and Google regard my mail as spam they can decide not to send it forward in web 3 everything is permissionless when somebody sends a transaction in web 3 nobody can stop that transaction permissionlessness means something else in web3 as well and that is who can participate in running the network in web 3 anyone can participate and this role is not limited only to a select View let's talk a little bit about custody and the ownership model of web2 and web 2 users don't own anything by themselves they use custodians to hold data for them for example let's say that I'm running my email system on Gmail then Google is going to hold all of my emails for me and if I breach their terms of agreement they can decide to take my emails away from me now this ownership model in web 3 is changed and now in web 3 I really own the data and even more the assets that I hold and you can see this with money for example in web 3 if I hold a token or an asset that is worth money I'm holding it by myself and nobody can take it away from me we can see that everything in web 2 is trust driven you can't really know anything and you need to trust somebody that is operating the network for you for example we took Google as an example here then if I want to know if Google is manipulating Source results for example I can ask them they would tell me no and I would have to take their word for it in web3 we have verifiability meaning that any participant in the network can verify and make sure and prove that what anyone else is claiming is indeed true web 2 is censorable web3 is not web 2 revolves around local payments in web 3 I can pay anyone across Border in the same smoothness that I can pay my babysitter writer in London so web 2 is quite successful the internet as we know it it has 5 billion users now web3 sounds great it has so many benefits for users but how many users are actually using it and the number is quite disappointing only 20 million users so maybe we're just in the beginning maybe this number is going to grow so let's look a bit about growth of web3 so this graph shows the ethereum monthly active users since 2017. and we can see that this this isn't a growth graph it is growing but very slowly it's stagnating so what is the sort of growth graph that we expect to see now this is a growth graph but unfortunately it does not belong to web3 it belongs to somebody else this is a social network telegram monthly active users since 2014 and you can see that when something is growing it is growing by 40 every year now this is the goal the growth graph that we want to see for web 3 and we're not seeing it today so this brings a very interesting question why if web3 is so great why isn't nobody using it so let's start with answers that people have been giving and the first answer was giving around 2018 and people said don't worry web3 is coming but the technology the blockchain infrastructure is so complex and expensive that the infrastructure doesn't scale now this answer is no longer true we have blockchains today that can scale pretty much indefinitely so let's take one of these examples is the tone blockchain I meant I mentioned before and the tone blockchain is inspired by telegram's own architecture now telegram is processing today over 15 billion messages per day now this is global internet scale now we measure the ability to scale systems one of the great tools to do that is using sharding now first generation uh blockchains like ethereum Had A Single Shard ethereum 2 64 shards the Next Generation blockchains like Dawn have a practically infinite number of shards okay every user account every smart contract can effectively run on its own chart in parallel and this architecture lets them scale pretty much indefinitely now tone has another very interesting property that it can dynamically split these shards when the load in the system is hide and it can automatically merge these charts together when the load is lower now to write contracts for these new architectures is a bit more tricky you can't just use solidity solidity is not built for these things so now we need to use new smart contract languages like fancy that send messages in a synchronous way but there is a fruit for this because these new blockchains can support today millions of transactions per second okay the scale is pretty much indefinite and and this is not a dream or something that we can see in a few years the mainnet is available today it's running in production since May 21. so the infrastructure is not what's holding web3 back it must be something else so let's look for more answers and the answer given in 2020 was this for a project to really push web3 to mass adoption it requires an existing user base it requires an existing critical mass of users a project like ethereum that started with a zero user base does not have the critical mass to push it to mass adoption so ethereum will never be able to do it so who will so our eyes were set towards Big players in the market that already have these users that have the critical mass in existence today and they could push their existing user base towards web3 and we saw two big projects of this sort one of them is telegram telegram have a 700 million user base and in 2018 they announced the telegram open network it's a blockchain with its gram token but unfortunately unfortunately it couldn't find a regulatory path forward and it had to seize in 2020.

a different player was Facebook Facebook have even bigger user base 3 billion and they set their eyes on web3 with Facebook DM this is another blockchain project that they announced in 2019 with the Libra token all of you have probably heard about it but again has to seize in 2022 so maybe these projects did not succeed but there are others taking their place so again I will use the example of tone because this example is live today so what happened is that in 2020 after telegram pulled out of ton of the telegram open network the open source Community took the code it was open source and took it over and created the open network called Newton now in may 2021 this has become an official mainnet and Newton even received the tone.org website in December 2021 even after telegram pulled out of the project and is no longer involved in running it the telegram CEO recognized Newton as the true successor to the original Dawn and now telegram is building things on top of Don I don't know if you saw in the news I think from last week or two telegram or auctioning telegram usernames on the ton blockchain which you can pay for tone coins okay generating millions of dollars in Revenue so I think we can overcome these two hurdles the hurdle of uh the infrastructure not being able to carry web3 and the hurdle of having a critical mass of users that will be introduced to web3 now is this gonna be enough and the point of this talk if you have one takeaway from this keynote is that I don't believe that this will be enough we still have a major obstacle that we need to come across and this obstacle is that in its current form regular users can't really benefit from web3 let's take a look at this from an example perspective okay now we're all used to seeing smart contracts and automatically believing that anything running on on the on the blockchain is automatically part of web3 but this isn't the case you have many projects running on blockchain that don't adhere to web3 principles and I want to show you an example so let's take a look at usdc usdc is one of the most popular stable coins I'm pretty sure all of you are familiar with it and usdc is a smart contract running on many blockchains one of them is ethereum mainnet you can see the contract address there now people would suppose it's a stable coin running as a smart contract then it must be a web 3 project but if you look closely and let's look at all the criteria we've seen before that categorize web3 and see if usdc meets these criteria so first of all is this user-centric so no um usdc is run by a corporation called Circle is this decentralized so if you look closely you see that there are domain roles that are not equal the creator of the system had to be equal to the participants but we can see a domain roles with privileges that only the Creator can do only Circle can do one of these things that they can do is they can freeze assets and Blacklist users so it's not decentralized is it permissionless and it appears that it's not you need to ask permission to participate in usdc because if they decide that you cannot participate they can take their your assets away from you what is the ownership model of usdc do you own so you may think that you own the token and you see it in your wallet address but your asset can be frozen by somebody else that is far away from you so you don't really own anything um verifiability yes let's give him this much okay you can really see all the transactions on chain and verify so I would say this is true what about censorship no um you can censor usdc and is it a good global payment system I would say yes you can really transact smoothly across borders so this part is good so you can see that even though it's running on blockchain it doesn't adhere to the majority of the web 3 principles so how would a user know something like that so I'm going to give you an example from my own team we have a lot a strong engineering team that we spend a lot of time teaching and training on blockchain and web3 and this engineering team does due diligence for every protocol and every app before we participate in it okay for example on usdc so what this due diligence process looks like first of all they would go to etherscan and see if the source code of the contract is verified meaning the source code matches the byte code on chain then they would ask themselves they would dig in the source code and see can anyone change the smart contract because if a smart contract can be changed it's not really a contract it would change tomorrow and I don't know how it will happen who can upgrade this smart contract if if it can be upgraded are there any time locks does it have a special admin role in the code you have to look in the code you will see the answer there what can this admin role do in usdc's case this admin role can put you in a blacklist list is the supply of this token fixed who can mint more tokens the person who can mint more tokens has a lot of power and he will not be equal to the other users so this violates the decentralization principle is there any big stakeholders are they vested so these questions are complicated but web3 is built in a way that you can answer these questions by yourself you don't need to ask anyone else you go on chain you read the code and you know the answer but is this feasible for users so I'm going to show you a study created by the oecd for ages 16 to 65 to measure Tech literacy and this is a study for 200 000 people across the world we can see that around ten percent of them couldn't really even operate a computer well enough that they even felt uh confident or participate in the study around five percent struggled with basic skills like scrolling around 15 the most they could do is an action simple action like deleting an email okay the next group 31 they could maybe even search for a lost email okay A bit more next group level two they could complete an unfamiliar checkout form in an e-commerce website and the strongest group of all only five percent they could even answer a complicated question like what percentage of emails John sent last month about Honduras now we saw the complexity that what really requires for you to learn how many of these users will be able to do this and this presents us with a paradox the web 3 scale paradox the more people we approach the more people we bring from the general population into web 3 the more dependent they are on trust these people are not able to participate in the trustless system and verify and participate in the ownership model by themselves this is inherently impossible and I think that this is the May the next major thing that's going to block the growth of web3 and US builders on this ecosystem need to resolve this and this is exactly what we're doing today and I want to talk a little bit about orbs so orbs is a decentralized infrastructure for protocols and dabs it's running over evm Anton and it has dozens of validators from with hundreds of millions of dollars taked the mainnet is running since 2019 and it's operating in layer three so one of the projects we're building in the tone ecosystem I don't know if you're renting a house here in London but you've probably seen the energy ratings okay your house comes with a very simple rating a your house is energy efficient if your house is very energy inefficient makes very easy for users to understand and participate what we're building is a decentralized protocol for scoring trustlessness you will see protocol like usdc and see a letter from a to F in usdc's case the letter would be for example F and you would see this protocol does not adhere to the web 3 principles you would click on it and it will tell you why for example it would say the creator of this protocol can take your tokens away from you be aware so this is a shift of education and making this now developing this product is not easy because it has to be decentralized or elsewhere dependent on trust and the area users are going to meet this product is immediately before making a transaction so imagine that you're using metamask or imagine that you're using tonecoin wallet and you're about to approve a transaction that interacts with usdc this would pop in and you would see the trustlessness score thank you so much