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Transcript

Felde: I’m going to start with this slide and ask you all if you’re able to guess what we’re looking at here. This is a share price of a particular company that we are looking at over the last few years. You can tell it’s been going well, it’s been growing. Since peak, we have had a dramatic fall. The company we’re looking at here, the share price we’re looking at here is the share price of Meta, previously known as Facebook. Renamed and refocused. Since peak, since the maximum share price had dropped by 40%, which is pretty dramatic for a big, well-established company like Meta. There’s a few reasons for why this is happening. The first reason is users are leaving. The second reason is investors don’t believe Meta or Facebook are able to change enough to maintain the growth that they’ve had. Investors are doubting that they’re able to continue to grow their Web2 model. It’s not just the users and the investors, even the employees are unhappy. A lot of them have stock options and it doesn’t seem like even they are confident that they’re going to be able to recover the share price in these stock options. They’re in a pretty bad place. I’ve titled this talk, “Don’t Fall into the Platform Trap.” As we know, Facebook is a platform. The subtitle is about this, how to think about Web3 architecture. As we go through we’ll see how these things relate to each other. My name is Christian. I work at Web3 Labs.

Is this Web3?

First of all, here’s a question. You can think about this as we go through the slides and learn about Web3 architecture. Is this Web3? This is the Oculus VR headset owned by Meta. As we know, Meta have gone big on the Metaverse and the Oculus VR headset is a way to access this Metaverse VR world. Is it Web3 though? We’re going to return to this and have another think about that after going through the next few slides, because it’s difficult to answer such a question before we learn something about the Web3 architecture.

Key Points

There’s three broad main topics I would like to convey, three key points that you can keep in mind that we’re going to cover next. These three are that Web3 is a shift in information flow. It’s a change in the control structure. Finally, that Web3 is a challenge to the traditional gatekeeper models, because of what it’s introducing.

A Shift in Information Flow

Let’s start with the first one, a shift in information flow. The shift is that you now want to keep the user in the center of everything that’s happening. Let’s look at the old Web2 model, the model that we’re all familiar with and that we used to think about and develop solutions based upon. In the old world, the user isn’t in the center. In the old world, it’s the platform that sits in the center. These platforms like Facebook, they have the luxury of being gatekeepers, basically. They can choose who’s allowed to sign up to and use their platform. If you compare a popular growing platform to like the hottest club in town, if you don’t want to play by their rules, security isn’t going to let you in. If you’re a user of one of these platforms, and say you want to communicate with another user, you would send your message to the platform. It would be stored on the platform, and the other user can then come to the same platform and read the message. Data stays within the platform. If you don’t own the platform, you won’t have access to the message.

In the new world, things have changed. In the Web3 world, as I said previously, the user is put in the center of everything. There is no platform as such anymore. Instead, the user has the option to pick and choose from many different services that are made available to the user. These services are likely operated by many different entities. When the user does something with a service, we can consider them as micro-transactions, with little concern for loyalty. They might use a service only once. They might use it multiple times. It depends on what the user wants to do, at any point in time. The ability to use services in this way, we’ve had web services and those types of things for a very long time. The change here, the things that have been introduced to allow us to use services in this manner, is based on blockchains, peer-to-peer systems, and decentralized identity. In addition to technology, those types of technologies playing a role in this new structure, there’s also regulatory and law changes like GDPR that encourages this structure instead of the old one. Because in the old one, with the platform in the center, the data you collected was very much viewed as an asset, something you can run queries on big data. Platforms were created by companies like Facebook, and so on to mine all the data they managed to collect from all these different users they had. By doing that, they could take the data as an asset and create a profile, sell the data, sell advertisements, and so on, based on who you are. GDPR changes the landscape a bit and other similar rules, and changes data to become less than assets and more of liabilities. There’s both a technology play and a legal play, working together to push the Web3 architecture forward.

I said previously that one of the key points of this talk was around Web3 presenting a different type of information flow compared to Web2 model. That’s what we’re seeing here. We’re seeing on the left side, that we have a user communicating with another user, and through the platform the information flows. Without the platform in the middle, the information couldn’t reach the other end user from the first user. In the Web3 model, the user is in the center, and a user can choose to use one of these services, obtain some data from this service, and then pass it on to another service if they so choose. Many different structures we can imagine here. We can imagine that the user is using multiple services, getting data from multiple services, keeping that data with themselves. We’re combining that data before maybe using it in a third service, and so on. If you look at the history of Web1, Web2, Web3, Web2 is very much attributed with the ability to both read and write data so you can participate in these platforms. The social media platforms is a typical example here. You have your read and your write access. That was the thing about Web2. In Web3, not only do you have your read and your write access, but you also have your ownership. You own the data. You get the data and keep this with you locally.

Web2 Flow Example: Passport

I’m going to make it a little bit more concrete, because that typically helps explain these things. I’m going to use a passport as an example. We’re going to go through the Web2 way of doing a digital passport. Then we’re going to look at the Web3 way of doing it after this. Imagine you were tasked with a project to create a digital passport system, you have your Web2, your architecture hat on, your first thought would very likely be to create some passport platform where users can come and request a passport to be created for them. The passport would then be stored with the platform. Then other users can come to the platform to look up details about this particular passport. That’s what we’re looking at here. We’re looking at three different steps in the user journey of this imagined platform. Step one is user starts using the platform and sends a request to the platform saying, can you please issue me a digital passport? The platform will do whatever it needs to do to verify the identity and integrity of information provided by a user. If the platform operator, the routines, everything is good, and I was happy, a digital passport is created. This digital passport is of course stored within this passport platform. The response given back to the user isn’t the actual passport itself, but instead some sort of reference to the passport, some ID or link or something like that. Imagine then that I’m going to travel, leaving the country I’m based in going to another country and I end up at the border control. That’s me at the border control. On the other side, we have the agent too that’s going to be there to inspect my passport. When I do that, I wouldn’t share my actual passport like this, so I have my physical passport, and I’ll give the person my physical passport. In a Web2 type architecture, what I would provide to the agent over here, the user over here is the reference to the passport, to my passport. In return, they would access the platform, the same passport platform to look up the details on my passport, and then from that they could do the checks they need to do.

We can see that in this structure, both myself and the other user, the person checking our passport, both of us are required to be members of this one passport platform. We know there’s a lot of countries in the world, and it’s very unlikely that they all would be able to agree on a single platform. If someone were to create a digital passport platform, there would probably be many of them. It would require all these different checkpoints to sign up to all these different platforms, which makes it a very tough sell. You wouldn’t be able to necessarily get them all to sign up to all the different platforms that would come with this, which is maybe one of the reasons why we haven’t maybe seen a digital passport in this form because of the overheads.

Web3 Flow Example: Passport

Moving on to the Web3 example, same passport example. In a Web3 architecture, the user is in the center and the user is in control. The first step would be for me to use a passport issuing service, and the service would be operated by the country I’m based in. I will send them a request to issue me a digital passport. Much like the starting step on the previous slide, they would do all the checks that they need to do and then if they’re happy, they would issue me a passport. If this is the first step, I’m issuing the request to get a passport. The difference is that in step two, when they’ve issued the passport, this is not given to me as a digital passport, as a file, as a piece of data that represents the passport as a digital passport. I’m holding on to this. I have a copy of that data on my device, be that a phone or a laptop or something else. I have a copy of the actual data on that device. When I go traveling again, I end up at the border control, I can now, to a different service, to a passport verification service, share a copy of my actual passport. It’s not a reference or a link to a passport stored on a platform, instead, I’m actually giving them the data that represents my digital passport. This is very comparable to the physical passport. Initially, someone to issue me a physical passport, I keep it with me, I carry it around. When I go to the passport control checkpoint, I hand them my physical passport and they can look at the details and do whatever background checks they need to do. In this Web3 architecture example, in this flow, that’s very comparable, because I’m being given a piece of data which represents my passport. I can then choose to share that with someone. The operators of this service is likely not going to be the same as the operators of the issuing service, because it’s two different countries, but because they’re just two separate services that are sending some data initially and then receiving some data afterwards, they don’t have to be on the same platform. There is no platform in this picture. That’s the biggest key change here between the Web2 and the Web3 architecture.

Changing Control Structures

Moving on to the next point, then, and this is about how the control structure changes. Because we want to keep the user in the center, but we also have to ensure that the data that is being passed around is valid and that the integrity of this data remains correct. This is what we looked at previously. We have an issuing service. We have the passport that I hold on to, the digital passport. Then there’s a verification service. How do we verify that this passport is valid, because I could create my own digital passport file locally? I could hack something together, make sure it’s valid, follow some schema of some kind, and pretend that this is a legit passport. How do we ensure that it is actually a passport issued by these guys over here that the verification service can trust to be valid? In the Web3 architecture, a public-private key pair plays a key role. Through those public-private keys, we’re able to sign the passport data in this example. There’s two stamps on this. The first of these two stamps come from the issuing service. When they issue the passport data, they would sign that data with their private key. When I receive the passport in my possession, I can do something similar, I can sign the data with my private key because that validates that I’ve been involved in this process. When I share this passport data with the verification service on the right side, they can then use the public keys to verify that the data hasn’t been tampered with. That’s it been issued by those that claim it’s been issued by. There’s a challenge here. For these guys on the right, for the verification service to be able to verify the signatures and integrity of this data signed with the private keys, they need access to the public keys. Where do we store the public keys?

In a Web2 world, we would typically suggest that we somehow introduce a shared public key registry somewhere. The thing is that this then becomes another platform. The passport issuing service would upload their public key to this shared central registry platform, and I will do the same with my public key here so that when the passport data which I’m still in possession of, and then I share that with the verification service. The verification service would access this platform to download these two public keys and use that to verify the data. That’s great in itself, but it then reintroduces this platform dependency. Then everyone would need to somehow agree to use the same platform for storing these public keys, which takes us back to the original challenge of all these different platforms and the challenge of agreeing to use any one particular platform.

There are many drawbacks with such a central registry. As I said, everyone needs to agree on which one they should use. There’s also the centralization risk of vendor lock-in or whatever we want to call it with too many eggs in one basket. What happens if they change the terms and conditions and it goes down? Those questions needs to be answered. There’s also a challenge around user activity being tracked. Because we can see when someone’s trying to download a public key from the central registry, and that could indicate that the operators of the platform would be able to work out that I’m traveling, for example, and that I’ve shared my passport with the passport control in a different country, for example. Those are challenges that becomes easily solved for in the Web2 approach. There’s another thing to keep in mind here, when you store all these types of data in one central location, what you’re doing is you’re introducing a very juicy target, a place with a lot of valuable information that bold hackers would be interested in breaching and gaining access to. It’s in no way ideal to try and store all these things in a central location.

I did mention blockchain previously as a key enabler for the Web3 architecture. The Web3 approach is to not store the public keys in a central registry, but instead store the public keys in a public permissionless blockchain. A place that is tamper proof. A place that is always accessible. A place where there’s no ability to track anything, because everyone’s got a copy of all the data basically. The flow is still very much comparable to what we saw on the Web2 slides. The passport issuing service would upload their public key to this blockchain system, and so would I. I would upload my public key here. The passport verification service can then easily access this shared resource to download these public keys and run the verification or the signatures. A public permissionless blockchain is a network on those that can’t block your access, that is immutable and tamper proof. It’s always available on a pay as you go model, so you don’t need to sign up to complex agreements. You can just start using it. It doesn’t know who’s pushing data in or who’s reading it out, because if you want to know you have a copy of all the data essentially.

Taking a step back, and looking at the Web3 architecture on one slide, we can look at the picture on the right side here and summarize what this implies. The Web3 architecture consists of decentralized services. These are very likely operated by many separate entities and organizations. There’s no federated user access, or local signing in or signing up. Instead, if you want to provide a Web3 service, instead of asking potential users to sign up and register as a user with a password and so on, you let them bring their own key pair. Through their public key, you’re able to verify that they’re in possession of the private key. Through that you can give them access. It doesn’t stop you from asking them to agree to some terms and conditions of course, but you don’t ask them to create yet another profile, and to remember yet another password. The public keys are stored in a blockchain, and this is to avoid any platform or vendor lock-in risks. A public permissionless blockchain is always available to anyone. That’s why it’s a good candidate for storing these public keys and other such public data. Finally, the key thing is that data moves through the user and keeps the user in control, the user is the owner of this data when they’re holding on to it. Through that we can share in our example, a digital passport. It can be received and used in much the same way as you would use a fiscal passport. If you want to compare it to something, it’s often good to think of it like that. It’s a physical passport you hold on to, and then you can share with anyone you want to. Same way, with the Web3 architecture. You get the data. You hold on to it. You’re in control of it. Then you can choose to share with other services.

Challenge to Traditional Gatekeeper Models

Final key points of this talk is that the Web3 architecture, this way of doing it, like we saw on the previous slide, is a challenge to the traditional gatekeeper models. If you want to build Web3 architecture based services, you need to stop thinking about how you can lock people in. Just to recap on what we saw earlier in the Web2 world on the left side here, platform is in the center. A user would share information through the platform, and the information is stored as data on the platform. You can own the platform, you can’t participate. In the new world, on the right side, the user is in the center. The user can choose to use one or many services, obtain data from these services, and can then choose to share data with other services.

How can it be a challenge to the gatekeeper role or platforms in general? Can we build a blockchain platform as a way to maintain this platform thinking and platform dominance model? Instead of a shared federated central registry platform on the left, can we somehow choose to run nodes in such a way that the blockchain network isn’t really public or open, where instead it’s a tightly controlled environment where only the select few are allowed to do the operations and read data? It’s helpful to have a little bit of a background in the evolution of the thinking here of blockchain. As you probably are aware of, a blockchain network is a bunch of nodes, software running in hardware, through a shared protocol, can agree on what’s allowed to happen, and what’s allowed to take place. It’s a so-called shared ledger.

When you set up such a network, there’s a few questions you can ask yourself around the configuration of this, and also there are questions about who’s allowed to join a network and who’s allowed to execute transactions on the network. Depending on how you answer those questions, you get a different structure. In the beginning, when many thought about blockchain as some sort of decentralized or distributed database, especially in the enterprise blockchain world, the outcome of answering these questions were very much about building a private permission system. You would have a few nodes operated by your selected partners, and through shared governance, you would keep it private and permissioned. Only those you choose can connect to a node to execute transactions or read data, as a private permissioned blockchain network. These things come with a lot of overheads and they’re very complex to run, because not only do you have a software you have to manage and run, you also have the complexity of agreeing with your partners on how to operate it. That adds a lot of overhead. Also, makes it quite difficult to keep data private, because suddenly someone’s allowing someone to join, which maybe others wouldn’t agree with. Through that you’re leaking data. Over time we’ve learned to think about these things as public things, a public place to store data, so we only store data which is public.

The thinking of maintaining control is still very much there, especially if you’re trying to build a platform, which means that our public permission model is dominating the discussion. A public permissioned network is one which it’s possible to read the data, but maybe not possible to run a node or to run transactions. Again, this type of model comes with a lot of governance overhead, and cost, and complexity. Which means that as we understand more how to use options in that we want to store public data there anyway, we might as well start using what’s known as public permissionless blockchains. Those are your Ethereum type networks that are just there and are available. You don’t need to sign up to anyone’s particular network to use them. It’s easier to get going. It’s moving to the left is what this is trying to say. In the beginning, we focused on private permissions, now it’s moving to public permission, and now people are getting comfortable with the public permissionless networks as well. All of this is an argument against trying to build a blockchain platform. Instead, we should just look at these blockchains as a public utility, something for everyone to use. As we understand how to use them, just jump on and use the permissionless ones, the public permissionless ones that are available to everyone.

It doesn’t remove some of the enterprise requirements that exist. It doesn’t really make sense to talk about an enterprise blockchain system. I think it makes more sense to think about it as different layers. The point is that, an enterprise and many other use cases have requirements around privacy, for example. What’s referred to as a layer 2 solution is better suited to cater to those needs than to try and cram them into a layer 1 solution. There is a link between the layer 1 and the layer 2. It’s a bit like the internet. You use the public internet, where you add like a VPN on top to be able to communicate securely. We’re seeing something similar in the blockchain world. If you’re tasked with evaluating an enterprise blockchain, start looking into what’s known as layer 2 solutions, instead of building yet another private permissioned blockchain network.

Summary

Web3 is about services, not platforms. If you want to operate in the Web3 sphere, in the Web3 domain, think about building valuable services to users. Be prepared to give them ownership of the data returned by these services. Also, let users bring their own ID through their locally generated public-private keys. Don’t force them to sign up to yet another platform and create yet another password. Finally, blockchains, and specifically, public permissionless blockchains are the key enablers to allow this to happen securely, because that’s the place we can store these public keys that allow us to have integrity and certainty around the data that flows point to point between these different services and users.

Back to this Oculus VR headset, is this Web3? It’s just a tool to access a virtual world. If we look at how Meta is forcing us to use it, they’re forcing us to be a member of the Facebook platform, how we use it there. They use this user to sign into the Metaverse. When we’re in this virtual world, any items or digital items that we acquire in our world is locked to their platform. It’s not Web3 as it’s been executed. This is one of these classical innovator’s dilemma type challenges where a new technology or a new way of doing things enter this way, and people are struggling to think about how to use them correctly because they come with null mindset. It’s going to take a bit of time before we also get it, before these big established companies get it, and before they’re able to transition fully into such a world. It also comes with a big challenge for a platform, because if you can’t gather the data and you can’t mine the data, and you can’t sell the data, you’re not going to make as much money as you used to, maybe.

I’ve been working on Web3 strategy and Web3 implementations for a good while at Web3 Labs, where I’m head of services. We also have a book called “The Blockchain Innovator’s Handbook,” which is something we can give you to help you around how to think about these types of projects and architectures.

Questions and Answers

Couriol: You talked about Facebook as an example of Web2 platform. When you said that, I was wondering, what would the Web3 equivalent of Facebook look like? Would that be running on a public permissionless blockchain or public permissioned one, or something entirely different? I’m asking this because I was wondering, how would you go about moderating messages in a permissionless context? Because in my mind moderation is something that involves some level of centralization. I was wondering, how would that work in a decentralized way?

Felde: That’s a very interesting question, because there’s a lot of services tied to Facebook. If, for example, we’re talking about sending messages from one user to another, that there’s many ways of passing these messages around so we could imagine some service that delivers the message, and it’s a private message between two parties. Of course the benefit of that is that it’s encrypted, and there’s no Facebook in the middle who can intercept and view that private message. If we’re talking about something like the feeds, or a Twitter feed or something like that, which is essentially a public place, a forum, yes, there probably would need to be some moderators, or some algorithms in place to avoid spam and abusive behavior and those things. There is no nothing stopping someone from making a service that anyone can choose to use, where the point of the service is for me to publish a message for everyone to see. Maybe what would be different is your moderation system. If you’re publishing messages to a shared place without the traditional operator or gatekeeper in the middle, maybe you could have the public messages as just a big dataset, and then you select who you would delegate the moderation to, so to speak. Much like you have politicians and other entities and people speaking in the public domain, and you have newspapers moderating that by putting a certain angle on it. You could maybe imagine something similar in the Web3 space as well. At the end of the day, if you do want to share messages publicly then you will have to come to some place, a forum of some kind where you would publish them.

Couriol: If I summarize, you say that it could be moderation services made by someone and you would choose whether or not you want to subscribe to the services. You would have the choice whether you want to have your message moderated or not?

Felde: It’s not your choice if it’s moderated or not, that’s up to the forum operator.

Couriol: If you don’t want to use this moderation?

Felde: I think the key thing though with Web3 is that you’re in control of the data. You’re put in the center. You can choose where you want to pass the data on to, which is different than sending a message from me to you on Facebook, because then it would be at their platform. If you’re not a Facebook user, I couldn’t send you a message. If you can seamlessly connect to any service out there, and I can use a service as a intermediary for delivering a message, and that message is just an encrypted blob of data for the intermediary, it gives us freedom to choose which service to pass a message through, if that makes sense.

Couriol: Facebook ensures a good user experience by means of infrastructure and software that they developed, essentially. They do that in a way that when I post a message to a given audience, to a given group, this audience receive the message relatively immediately. It enables interactive communication. Is it possible to achieve that same level of user experience, at least, in a decentralized Web3 architecture? Who would ensure that same level of user experience?

Felde: Someone is still operating these services. If they are not doing a good job of running these services, then they wouldn’t work. Hopefully they are. If they’re interested in continuing to offer a service, they will hopefully spend the time and the resources required to make sure the services are running. There is no difference there. If Facebook is not running a good service, then it’s not going to be available. If someone else isn’t running a good service, it’s not going to be available. When I connect to a service, if it’s down and stuff, there’s nothing I can do with that. The difference is I’m in possession of my identity, for example. When I use this service, it doesn’t come with the whole platform experience as well. I don’t have to sign up to your platform to use the service.

Couriol: There was a question at the beginning about, to understand better the example of the passport that you gave. Is it analogous to the Web3 equivalent of a platform checking a service? Is that analogous to keeping my physical passport in my house rather than in a safe deposit box at a bank and only accessing it when I need to travel? I think the question probably comes from trying to understand how it would work with the public key, private key.

Felde: I think it’s a very good analogy to compare it to like a physical passport. If I want to travel, I pick up a passport and I keep it with me and I walk around with it and I give it to someone. When I’m not traveling and when I don’t need my passport I keep it at home safely stored somewhere I know where it is. Others might want to choose to store it in a safer place like in a bank vault or in a bank box. Probably not for a passport, but for some other things you might want to do that.

I think with regards to an analogy between physical and digital, I think they’re very comparable. Because if you carry something around you can share it and you can choose who to share it with. It’s the same in a Web3 architecture, you have some data that you have on your device, say your phone. When I walk up to the border control in the past, for example, I can give that passport to the machine or to the person sitting there. It doesn’t matter if it’s a digital one or a physical one, because I am in possession of both of them, basically.

I don’t know if it’s related to the public keys in any way, or the private keys. The public key is public and I want to distribute that as widely as possible. You want to store it somewhere where anyone can access it and easily find it. We want to have guarantees around the integrity of that public key. We want to make sure no one’s been able to tamper with it, and no one’s been able to replace it with another public key, for example. That’s where blockchains are very good storage locations, because they’re immutable and tamper proof, and they’re public infrastructure, they’re a utility that anyone can use. We want to store the public keys that way. We don’t want to store the data in any blockchain. That’s the last thing we want to do. We don’t want to store my passport details on a blockchain, because then it’s public. I don’t want my passport details to be public. Just like I don’t want my driver’s license details to be stored on a blockchain because I don’t want that to be public. I want to be in control of it. We don’t want to store any private data on any blockchain at all because it’s immutable or public, and it’s there forever. Only the public key is something you want to store on the blockchain.

Couriol: I understand the idea of concentrated risk of having everything stored somewhere, but is Web3 putting all of the security requirements onto individuals, there is safety from keeping my money in the bank rather than under my mattress.

Felde: I think the way you should think about it is, if I have some private data on my driver’s license, in my passport, which is, could be used to forge my identity or create a bank account somewhere, or do something really which I don’t want to. The thing is, if I take my passport and 10,000 other people take their passport and they put it in a central location, that location becomes a very attractive target. It’s worth the effort for hackers and attackers to go to that central location and try and get access to those 10,000 passports. Where if those 10,000 passports are spread across 10,000 different people, it becomes very prohibitively cost inefficient. It’s basically impractical, impossible for the hacker to obtain the same amount of information. They can’t find those 10,000 passports because they’re spread across 10,000 people. What might end up happening is if I was a rich person, if I was a high net-worth individual, I might become a target. If I’m a rich person, I could probably also afford to pay for some security measures. If I’m a less wealthy person, an average poor, I’m not an interesting target anyway, so I don’t need to spend as much effort or money on security because I’m not a juicy target. That’s what I mean by concentrating these valuable pieces of information in one central location is essentially bad practice. If you spread it out, you derisk the overall picture.

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