Written by Chen Li, Jims Young, Li Gong, and Ivo Entchev from Youbi Capital

1）The Dilemma of Web2

We use various apps in our daily lives: we chat with friends on Whatsapp, search restaurants in review apps, explore different lifestyles on TikTok, and spend and transact money on Paypal. Our lives are captured by these apps and stored in their respective databases.

Moreover, as the complexity of our work and leisure lives grows, we tend to divide our attention across ever more specialized apps. For example, we might transition from a general video app to video apps that stream long, short, or medium-length content; or we might prefer tweets, long-form articles, and image-text platforms to general blogs. These increasingly refined user demands create more precise app categories, but also cause user data to become fragmented across a wide array of apps.

This proliferation of specialized apps and their lack of data interoperability has led to “data silos,” where we have to repeatedly register accounts and create content across different apps, and must publish it multiple times in order to achieve “cross-platform synchronization.”

Now imagine if a video we post on TikTok could be seamlessly and synchronously published on Instagram, and similarly, if a comment we leave for a video on Youtube could be synced to other platforms. When apps can share a user’s data, data is no longer trapped in silos, and users can leverage more open platforms to contribute and distribute their creative content. This is also the ultimate Web3 experience — an application matrix that can interoperate.

This trend has led to a dilemma for Web2: companies must face trade-offs between strict adherence to their business model, which relies on their monetization of trapped data, and delivering the interoperable experience demanded by their users, which requires data to be free.

Assuming that the trend towards specialized applications continues, it must be asked how Web2 platforms designed as data islands might adapt and what role Web3 will play in crafting a solution. That is the question we want to discuss here.

2) Why Web3?

Web3 world includes concepts like blockchain, cryptography, and decentralized economic models. Representative products include the cross-sovereign currency Bitcoin, decentralized finance based on smart contracts, and distributed computing and storage networks.

Taking decentralized finance as an example, the main feature of Web3 applications is the trustless management and transaction in digital assets, with user data stored in a public database, i.e., the public blockchain. There is no data isolation between applications and completely permissionless interoperability between applications on most chains. This degree of data freedom far exceeds that of Web2 platforms, leading to a massive explosion in decentralized finance applications. The number of applications within the EVM system grew a staggering 1,000 times between 2020 and 2022.

However, Web3 has encountered obstacles in consumer applications. The data storage capacity of public chains is very limited and its price is extremely high (the storage cost of Ethereum is one million times than that of AWS), The public chain can manage the size of data generated by decentralized financial applications but is unable to accommodate large-scale data required by typical consumer-end applications such as content and user behavior tracking data. The solution of this Web3 obstacle is to meet such storage needs off-chain and provide these resources to developers using cryptography. We will discuss the specific implementation later on.

Those off-chain storage solutions, such as Filecoin and Arweave, store data in a distributed manner on various servers in their networks by segmenting and encrypting the data, and the cost is lower than centralized storage. Unlike completely open public chains, the data stored in off-chain solutions require user authorization to be called and retrieved.

Here, we need to mention a major early concept of Web3 applications. That is, the forefront breakthrough platforms must permit users, not the platforms, own their data, and users should also be able to own an interest in the application platform itself. Only in this way can the platform maximize the value of data and share those benefits with its users.

When users own data, the data isolation between applications can be bridged through user authorization. The data center of Web3 must be user-centric. We will describe how to combine the Web3 technology layer, account management, storage, execution, etc. into a technology stack that is user-centric and most convenient for developers to use.

3）Web3’s Technology Stack — Starting from Defi

Compared to traditional C-end applications, Defi applications are relatively slow, and a transaction usually takes several seconds or even longer to complete. Applications based on IPFS may take at least a minute or even several hours to synchronize an update. The speed of these applications is determined by the speed of their backend databases.

The speed of Defi is based on the consensus of the layer1 chain, which is limited by the degree of the network’s decentralization. For non-financial applications, content generally exists on only one or a few nodes. IPFS synchronizes address information, and the higher the decentralization degree of the nodes, the longer the synchronization time.

To solve the speed problem, different blockchains have developed their own Layer2 to store and update data that can be processed more quickly and then frequently transfer it to the public blockchain. Similar things have also happened on IPFS, which is what Ceramic does. Ceramic nodes can be used like a centralized cloud, to record events that occur on one application and then update the results to IPFS after a period of time. It can be seen as the layer2 of IPFS.

With this layer2, the dapp experience can be very similar to a normal app. In addition to validating dynamic data storage, Ceramics also proposes the concept of data models that establish data storage standards between applications to enable cross-application data interoperability.

Dataverse-OS has built further resource abstraction and isolation on top of Ceramic, creating a kernel that manages storage resources and identities, similar to an operating system kernel. Applications and users can use their public keys for identity authentication to access resources without infringing on other’s data. In this way, all applications can run on the same kernel, rather than being separate systems. Applications or firms can apply for permission to access any data table through the kernel, with authorization from the user’s private key, without the need to contact other firms.

From the perspective of data interoperability, Dataverse-OS plays the role of a cloud-based operating system, enabling large-scale data interoperability between applications. It serves as a prototype or MVP for future Web3 data middleware. There are several other projects with similar visions in this field, but we will not list them all here.

4) Outlook and Challenges

Since the birth of Web3, allowing data to flow freely between applications has been one of the visions. With the development of these technology stacks, we are finally almost there.

For users, this is the first time that data interoperability can be achieved across all categories of Web3 applications. We can share comments between various video platforms and discuss topics with netizens from around the world all at once without platform restrictions. Personal assets can be used for payment on various platforms, and social credits and reputations will be recognized by all apps. We can even manage our own data freely, allowing it to flow between applications and users, and achieve more breakthroughs in composability.

For developers, the threshold of promotion and exposure traffic gets much lower since user information can be easily obtained and used. Data is no longer a barrier for competition between applications, indeed good products are. Moreover, the development threshold has been further decreased due to the increasing popularity of no-code tools. The front-end threshold is constantly decreasing and can be easily integrated into Web3’s backend, and an application can be easily created within one figure print.

In Web2.0, cloud-based operating systems have become the stickiest user entry point, with more and more functions being integrated into cloud operating systems and more and more user experiences being migrated to the cloud. This is an unstoppable trend. User-centric cloud services must compete with centralized platforms for developers and users, and we believe that user-centric cloud service platforms have undeniable advantages in content and social applications.

Dataverse-OS is designed to be simple yet powerful, providing developers with all the core functionalities they need to achieve data interoperability. We highly recommend their SDK for all d-app developers. However, we encountered a challenge that users are the primary factor that attracts developers to the platform, and the biggest challenge is how to attract early developers through a win-win cooperation. Our answer is a project called Glitter, which focuses on building a public data center. We will provide a detailed introduction to this project in the next article, “Glitter: The Engine of Web3 Traffic.”