What is Web3 red in the end? Is SBT (Soul Binding) the last mile to large-scale application?

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why we need Web3, For human society, Web3 has built a “more efficient collaboration system”; allowing people to conduct various financial transactions and collaboration relationships with low risk and high efficiency no matter when, where, and whoever.

Information, contracts, and identities are the basis for building Web3, and they are also the core fundamentals for copying the off-chain world to the on-chain; with these three elements, the so-called “Metaverse” can be built: a real and off-chain world There are no different parallel universes.

In the past, Web2 provided messaging, Web3 improved the convenience of asset interoperability, and even created a “contract” change, which is the invention of smart contracts; but because of the lack of “identity”, it has been unable to deal with the part of the world under the chain Related financial applications; however, the concept of SBT (see below) recently proposed by V God is likely to be the last piece of the puzzle before the Web3 explosion.

 

What is Web3 red in the end? What does it have to do with people outside the currency/chain circle?

In the past few years of working in the currency circle, the author often encountered a situation when chatting with outsiders-that is, the bystanders really couldn’t understand “Why are everyone so enthusiastic about Web3?”

Although the upsurge of blockchain technology, ICO speculation, DeFi and even NFT has flooded the mainstream media, and everyone is no longer as unfamiliar with these terms as they were at the beginning, there is still no way to understand what believers think of these industries. Where does the passion come from.

It’s not that they don’t understand these technologies themselves or what’s happening; it’s that although the Web3 field is surging and considered by insiders as “the next wave of revolution with a far-reaching impact than the Internet”, to outsiders However, it is always impossible to see where the potential lies, or what kind of problems are actually solved.

Often discussed for a long time, insiders are regarded as “lonely self-admired”; while outsiders are regarded as “playing the piano with cows”. After thinking deeply, the author deduces that the problem may come from not discussing too much about the core issue of “why we need Web3”.

This article attempts to answer this difficult issue from a higher perspective and challenge; that is, “How can Web3 make human society better? What problems does it solve?”

Just like the emergence of a new product, if the problem the product aims to solve is not people’s pain points, then the product is doomed to fail; and as a challenger, if the ability to solve it is not as good as the existing solution, it will never succeed and let the Users are willing to adopt new approaches.

Next, this article discusses from this perspective, looking at the emergence of Web3 applications, what problems are solved, the problems at the current stage and the future prospects.

 

Web3: a blue-green, extremely efficient large-scale human collaboration system

Let me talk about the conclusion first. I privately think that the emergence of Web3 applications solves the oldest problem in the history of human development: “how to make human cooperation more efficient.” The so-called progress of civilization is actually a history of human beings gradually improving the efficiency of cooperation. .

More efficient cooperation will bring more advanced technology, a more prosperous society, and a better life to mankind.

The emergence of Web3 is to construct a human collaboration model that is more efficient than existing solutions; but where does this start?

This starts with the history of the blockchain: At the time of the subprime mortgage crisis in 2008, a series of global financial problems caused by centralized enterprises (investment banks and commercial banks) caused the market to collapse, and the global financial crisis Panic, the government had to come forward to rescue, and everyone was dragged into the water and blamed…

The founder of the blockchain, Satoshi Nakamoto, created the technology of “blockchain” in view of the corruption of centralized power, and wanted to construct a decentralized, trustless system to remove the risk of centralization of the subject. .

Today, the most amazing thing about Web3 lies in the two aspects: the successful construction of a decentralized and de-identified large-scale collaboration system. Decentralization avoids the evil risk of centralized power concentration, de-identifies and only writes operating rules in “contracts”, and improves the efficiency of overall collaboration.

Looking at the history of human development in the past, in order to achieve large-scale collaboration, it has always been limited by technology and imagination, and had to rely on the coordination of a centralized system. Human beings have developed from gathering, fishing and hunting, to farming and tribal society, and then gradually developed into countries, empires, and even the current globalization. It can be regarded as a history of “cooperative” relationship. In the history of this “cooperation”, the main body that holds the key to power has always been a centralized institution.

The advantage of centralization is that the adjustment speed is faster and the response is more immediate, but at the same time, too much power also provides an incentive to do evil, and even the risk of developing a global crisis like the one in 2008; centralization can be said to be the key to human development. The element of “helplessness” in the process.

Let’s turn to talk about the importance of “de-identification” and “contractualization”. Cooperative efficiency has advanced human history, but interspecies cooperation is not a unique product of humans; as far as chimpanzees are the closest to humans in terms of evolutionary genes, their society also has an obvious cooperative model, but the basis of cooperation is “mutual trust” .

Chimpanzees can only deeply know more than 100 other chimpanzees in their lifetime. For them, this is the object they can trust and cooperate with. Human beings are different. The system and civilization developed by human beings make us even if we don’t know each other. , Do not trust each other, but also because they believe in the same set of system concepts, they can complete large-scale collaboration.

Chimpanzee cooperation is based on the “identity” relationship. Only when you know who you are, can you have a relationship of trust and then cooperate; human cooperation is based on the “contract” relationship. Even if you don’t know each other, as long as you believe in the same contract system and system rules, we can cooperate with each other.

Then go back to the astonishment of the Web3 application just now. Fast-forward to today. The vision of the blockchain in 2008 has been achieved in the DeFi field at this time; Contract interaction, various complex transactions, financial activities and even the current diversified NFT applications and operations.

The brilliance of Web3 lies in the invention of a system that can cooperate on a large scale without trust, and the current ecology is constructed by decentralization, de-identification, and contractualization.

Going back to the question I wanted to answer at the beginning of this article: “How can Web3 technology help human society become better? And do it better than the current existing solutions?” The answer is “created a more Efficient Collaborative System”.

This “trustless” large-scale collaboration system and the introduction of “contract” blockchain technology are actually one step closer to the current degree of global cooperation, and are no longer limited by when, where, or even who , under de-identification, as long as the “contract” rules of the smart contract are met, people can use this emerging system to complete more efficient cooperation and co-create output.

Compared with the Web2 system, Web3 not only does not have the risk of centralization and corruption, but also has smart contracts to ensure the execution of the contracts through program control. Cooperating instead of piling up the competitive moat with each other greatly increases the efficiency and potential of cooperation.

 

Current status of Web3: “imperfect” replication of real society, “computational” and “credible” finance

I have exaggerated so much about Web3, but in fact this emerging “collaboration system” is still not perfect, because it can only “partially” replicate commercial applications in the real world; in simple terms, because Web3 only covers “contract” identities, However, it lacks a “relationship” identity, so it has inherent limitations in commercial applications, and the over-financial applications currently seen (it seems that the most successful cases are limited to DeFi) are derived from this.

As mentioned above, because the current Web3 applications are decentralized and de-identified, there is naturally no system covering “relational” identities.

“Relational” identity, in simple terms, is the example of the above-mentioned chimpanzee, because you know who you are, where you know you, what interaction you have had with you, what kind of person you are, etc.; characteristics, rather than judgments that decide to interact with you.

Compared with “contract” which only talks about rules, “relationship” involves personal characteristics and also covers subjective judgments; and the current application field of Web3 refers to the former but lacks the latter.

So what problem does the lack of “relationship” identity create? Here we will introduce another simplified financial system model, see the following for details:

If we simply divide the business models in the financial system into two categories, one is “computational” and the other is “credibility”. Those that do not conform to the former specification have added human subjective cognitive judgment.

For example, the most extreme computational finance is programmed trading. Regardless of whether the target is futures, options, stocks or bonds, as long as it is pre-written with a specific program, the transaction equation that will be done in any situation, then It is the representative of “computational”; the most common cross-border remittances and transaction payments in the financial field are also computational financial behaviors with “repeatable processes and verifiable results”.

The most classic representative of “credibility” is unsecured loans such as “credit loans”; it is different from secured mortgage loans such as housing loans and car loans. (Overcollateralization in the cryptocurrency world, because it can be liquidated in advance when the price falls, ensures that the lender will not have liability losses. The logic is the same as that of car loans and mortgages, which are logically classified as calculation rather than credit)

But when it comes to credit loans, the decision to borrow or not is purely based on the subjective judgment made by the lender’s “personal credit”; and how does “personal credit” come from? From your “relationship” identity.

When the bank decides to issue a loan, it will have a set of risk formula algorithms, which determine the degree of risk based on who you are, how much income, how much deposits, past dealings with banks, etc.

However, the risks calculated by these “personal credit” can only roughly infer the individual’s “repayment ability”, and the “willingness to repay” is actually completely unpredictable; therefore, the bank’s subjective judgment is involved in the approval of credit loans Of: how much to issue, how much risk of not repaying, how high is the given interest rate, and so on.

This involves subjective judgment of “credibility” finance, and in the absence of “relational” data, it is impossible to pre-write a set of logic to handle the credit approval process through the current smart contract method.

Inference from this paragraph can lead back to the aforementioned theme; the current application of blockchain and cryptocurrency is only a “partial” copy of the real world; because it only covers “contract” identities, but cannot cover “relationship” identities, so in the current In DeFi on the current chain, only “computational” transactions can be processed, but nothing can be done about “credible” transactions.

 

SBT (Soul Binding): The last piece of the puzzle to complete the ecosystem of Web3?

Web3, which lacks the identity of “relationship”, has been developing for a long time, but after the emergence of the SBT concept (Soulbond token, which can be simply regarded as a non-transferable NFT token) proposed by Vitalik Buterin, the co-founder of Ethereum, it may complement the current The only weakness in financial applications.

There have been many elaborations on the definition and application of SBT in the market; here we only briefly mention the simplest definition to facilitate the complete inference of the next article.

To put it simply, SBT is a non-transferable token used to constitute a commitment, certificate or affiliation representing social relationships on the Web3 network, marking the countless characteristics and achievements of a person or entity in the form of a blockchain. (eg: educational credentials, employment history, proof of attendance, even proof of their artwork)

Regardless of whether it is an individual or a business, it can issue SBT and be a recipient of SBT.

As mentioned above, the current problem of Web3 is that there are only elements of information and contracts, but lack of relational identity. Therefore, it is impossible to completely replicate the financial system of the off-chain society; financial activity.

But the essence of SBT is to complement this “identity” relationship on the chain. For example, if you really want to carry out an on-chain credit, even if you don’t know the information about the “person” behind the address, you can still use the SBT properties of the address in the wallet, such as previous repayment records, total balance at the bank, etc. Assets, where to work, etc., although they are still de-identified addresses, the various characteristics of the “relationship” identity can exist in the form of SBT, making credit possible.

After all, in theory, as long as SBT can provide off-chain banks with the investigation of personal identity “characteristics” before KYC (Know your customer) credit to customers, on-chain finance can cover “credibility” finance field.

So far, Web3 covers the three pillars of information, contract and identity relationship, and will be able to perfectly replicate the financial system level of the development of human society under the chain; even the decentralized social relationship of SocialFi can be perfected on the chain Copy, and provide another social imagination that improves collaboration efficiency on a large scale.

Ethereum co-founder Vitalik Buterin, expert E. Glen Weyl and lawyer Puja Ohlhaver published a study on the concept of SBT “Decentralized Society: Finding the Soul of Web3″.

Of course, many factors have been simplified and many considerations have been neglected in the thought experiment of this article. The application and development of future technology may not be so smooth. what is the problem”.

In short, the conclusion is that “Web3 created a more efficient human collaboration system after SBT perfected the identity relationship”.

Although this article only analyzes from the perspective of financial activities, in the long run, the potential of Web3 should be that the economic behaviors, institutions and regulations of the off-chain world can be copied and run on the chain, providing a more efficient collaboration system.

After all, from a first-principle perspective, Web3 has adopted decentralization, de-identification, and contractualization, but at the same time can maintain the characteristics of relational identities. The basic elements for building a perfect social collaboration system are in place.

In the future, where the relationship identity will go after the introduction of SBT, and even whether the “relationship” identity will be implemented in a Layer 2 way or other technical practices, it still needs to continue to explore the consensus in the industry.

Finally, summarize the logical deduction of this article:

  • Why is Web3 technology needed? What problem did it solve?
  • Web3 essentially solves the problem of human collaboration efficiency; because of the characteristics of decentralization, de-identification and contractualization, efficiency is improved
  • However, Web3 currently only includes the perfection of information and contracts, and is a “partial” copy of the real world system
  • The shortcomings of the current situation make Web3 only able to deal with “computational” rather than “credible” transactions in financial activities
  • Only the introduction of “relationship” identity can satisfactorily solve the “credibility” transaction problem, and SBT is the best solution for Web3 to introduce “relationship” identity
  • With SBT technology, the three pillars of Web 3: information, contract and identity have been perfected so far, and the existing system and collaboration relationship under the chain can be replicated in the imagined future to improve efficiency on a large scale

It is hoped that this article will partially explain the reasons for “why we should embrace Web3” technology through such a high-level relationship deduction; I hope that it will provide a good perspective for outsiders to understand the potential of Web3.

 

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