Analyze the composability of the Web3 world

What is composability?

Analyze the composability of the Web3 world

Composability is the general ability to reassemble the components of a system into a larger structure and use the output of one as the input of the other. Simply put, the best example is Lego. Every part of Lego can be connected to other parts.

In encryption, composability is the ability of decentralized applications (dApps) and DAOs to effectively clone and integrate each other (syntactic composability), and to make software components such as tokens and messages interoperable between them (form Composability).

Syntactic composability

Ethereum has achieved syntactic composability well: every smart contract on the protocol is public and can be called by anyone else, which means that any software logic only needs to be formulated once, and it can be reused by the entire ecosystem . In practice, this means that any Ethereum dApp can use Uniswap’s contract to manage token exchanges, or organizations can use Aragon’s client-side contracts for on-chain governance.

Being able to reuse open source components is a superpower that makes building in Web3 extremely efficient. The team can use a lot of existing, reliable code, and only focus on building the missing components of the project. This exponentially increases the speed of experimentation and innovation. There is no need to reinvent the wheel every time you establish a business (or worry about being sued by regulators and patent trolls), which makes Web3 more efficient than Web2 in allocating resources. It also invokes the magic of compound:

Analyze the composability of the Web3 world

Atomic composability

Analyze the composability of the Web3 world

Importantly, Ethereum’s Layer 1 (L1) allows “atomic” composability, where multiple operations across multiple dApps can be bundled into a single transaction and executed together. If one of the operations fails, the entire transaction will fail. This makes it possible to split a transaction into multiple exchanges, or vote on multiple DAO proposals at once, without the risk of partial failure.

Atomic composability is essential for decentralized finance (DeFi) because it allows innovation, such as “flash loans,” which means borrowing, investing, and repaying assets in a single transaction.

Form composability

Although the architecture of Ethereum aims to promote composability, it does not guarantee that the internal forms of dApps, such as functions and interfaces, will automatically be compatible with each other. This requires cooperation. To this end, many application-level standards have been reached on elements such as tokens, name registration, and wallet formats, called Ethereum Request for Comments (ERC). The most famous of these is ERC20, which defines the characteristics of fungible tokens in Ethereum.

From the perspective of Web2, the meaning of form composability is exciting: DAO token holders may already vote on Snapshot and use Zodiac Reality to trigger a transaction from DAO’s vault to obtain loans from MakerDAO. Out of $DAI, concentrate $DAI on Curve, and then deposit the generated LP tokens into Convex to earn transaction fees and $CRV and $CVX tokens. Due to the interoperability of tools and the standardized definition of tokens, such composability is possible.

Web3 composability

Analyze the composability of the Web3 world

Snapshot voting → Zodiac Reality → Borrow $DAI @ MakerDAO → Pool $DAI @ Curve → Deposit Curve LP tokens @ Convex → Earn transaction fees + $CRV + $CRX

In addition to finance, characters or movable assets from Web3 games such as Axie Infinity or Guild of Guardians are examples of non-fungible tokens (NFT)-unique digital assets, standardized in ERC721. Because they are actually owned by users, they can be freely transferred between different games, sold on the secondary market, and even used as collateral for loans.

Achieving equivalence in Web2 means to persuade Nintendo to share the database with Sony and Microsoft in some way; let eTrade execute transactions on Robinhood. The probability of this happening is basically zero: even if Web2 companies are not all competing with each other, they are built on incompatible technology stacks, which will prevent them from reusing each other’s software.

In addition to digital assets, Web3 also allows users to transfer their identity and reputation between dApps. Instead of logging in with a username and password, users use their Web3 wallet to provide selective read-only access to their ERC20 address, which serves as a unique identifier and reputation indicator. A verifiable “resume” with token transaction records, dApp interactions and DAO membership has produced “Degen(erate) scores” as a ranking of Web3 literacy, but this has been included in Web3 job applications by sincere applicants. In this way, identity and reputation can be viewed as currency supported by Web3 activities. As with any currency, on-chain identities can be exchanged and traded (with all the chaos that it brings), as well as forming part of an abstract social network that will form digital communities, working groups, and a new type of “country.”

DAO Morphology

Analyze the composability of the Web3 world

Currently, there is no ERC to standardize the structure, function and interface of DAO, but the industry is moving in this direction. DAOstar One is a roundtable meeting dedicated to standardizing the definition and minimum parameters of DAO. The team’s current focus is on experimentation-and therefore does not limit innovation-but once implemented, ERC will bring Lego composability to the DAO ecosystem, which means that Aragon’s financial dApp can be used with Moloch v2, or the Openzeppelin governance contract It can be integrated with Gnosis safe and contract with Compound governance.

Even before the ERC reached an agreement, Gnosis was developing a modular DAO tool system based on the Zodiac open standard. Any DAO platform that implements its Iavatar interface can access more and more Zodiac compatible tools, such as oracle modules that can trigger on-chain execution or bridge modules that support cross-chain control of Gnosis Safe.

Other practices, such as DAOhaus’ Boost Foundry (itself built on Moloch v2) are part of the growth trend of DAO’s dAppstores, with DeFi protocol plug-ins and additional DAO functions, such as the use of Superfluid’s automatic payment flow or the use of Mintgate’s gated function.

In addition to these examples, Web3 software can be open source and forkable, but this in itself does not guarantee compatibility with other projects. But the hope is that because the user’s conversion costs are so low and the benefits of interoperability are so high, the industry’s motivation and desire are in place to align with a set of shared standards as soon as possible.

The last point is worth emphasizing. The Web2 company is notorious for establishing a competitive “moat” to isolate itself from the competition. These can take the form of favorable regulation, active patent enforcement, high switching costs, data hoarding, and many other self-protection strategies. However, these strategies are meaningless in the open source, permissionless, and transparent Web3 world. Instead, organizations must build on the assumption that their code will be reused by others and turn it into the vanguard of their growth strategy; composability transforms the tail risks in Web2 into core assumptions and strategic goals in Web3. In such an environment, organizations must become experts in collaboration and symbiosis, which is why initiatives like DAOstar One and Global Hackathon DAO have attracted so many participants to pursue the composability of DAO.

DAO tools

Analyze the composability of the Web3 world

The standard practice in Web2 is that companies use each other’s software for publishing and graphic design. DAOs are similar in that they use proprietary software such as Discord to manage their communities. In addition, the Web3 infrastructure enables these tools to be integrated to such an extent that they become components of DAO governance, capable of arranging and executing transactions. This is achieved through a third-party network called oracles, which is able to verify external data and embed it in smart contracts on the chain. It is already possible to use Witnet’s decentralized oracle network to trigger on-chain execution on Aragon from emoji voting on Discord, and as mentioned earlier, the Reality module of Gnosis Zodiac integrates reality.eth as an oracle to trigger secure transactions. Respond to Snapshot proposals, Discord polls, or any other compatible data. For a more in-depth understanding of DAO tools, check out DAO and Incentive Design and Tools for Organizing Lego Bricks: The State of DAO Tools.

Integrating real-world data into smart contracts opens up the world of data composability in Web3. This article cannot cover this, but it is discussed in 77 smart contract use cases supported by the first-party Oracle and Chainlink with API3.

Web3 is speaking

Monolithic architecture is meaningful in a few areas: supranational political structures tend to break over time; the success of the Internet is attributed to many nodes communicating through common protocols; even the human brain is a modular system.

Over time, the computing architecture has evolved from a single stack to the proliferation of microservices, which can be combined, upgraded, and swapped out as needed. Although Web2 is built on such a backend, the composable design is not reflected in the Web2 company itself: giant monopolies such as Amazon, Facebook, and Google have little incentive to decompose themselves into composable microservices. But in the end, this may be imposed on them by Web3: If you want to believe in the testimony of technology and nature, the logic of composability is destiny.

Before reaching this fate, there are several obstacles along the way

The first is a single, Web2 way of thinking. Adopting a paradigm that downgrades the importance of the individual to just a component requires belief and shareholder voting. However, there are signs that composability is attractive enough in Web3 to sell its advantages to the broader technology industry. We of course have seen this in the speed and indicators of adoption of various protocols, such as assets under management (AUM). Web2 doesn’t want to give up this kind of growth for a long time, in order to participate, they must be composable.

The second obstacle is scale. Composability is theoretically effective, but the high fees we have recently seen on Ethereum are fatal for complex operations across multiple dApps. The bridge between Ethereum and the new chain breaks the atomic composability, and the proliferation of the new chain will dilute security and liquidity resources until the industry finds a feasible solution. This is a topic that needs to be discussed in depth, and will be discussed in more depth in an upcoming article.

Syntax and morphology are concepts proposed from the field of linguistics, which is by no means accidental. They apply here because software is a language, and Web3 (as an expression of software) fits into the language framework. The next analysis after the grammar is semantics: does the expression make sense; the most important is linguistics: does it make sense in the context. There is no doubt that tokens can be used between dApps today without practical use or purpose. Likewise, many of the touted combinations don’t make much sense in the broader financial or social context, especially considering the expansion of Ethereum. However, these are the first words in a new language that is more expressive than any language we have seen before, and through the magic of composability, Web3 will find its place.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/analyze-the-composability-of-the-web3-world/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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