Anatomy: From Web3 Infrastructure to Web3 Framework Architecture

The Internet has fundamentally changed societies, individuals and economies. As a tool to initiate knowledge transfer, it ushered in the information age and became the basic platform for realizing applications, networks and services.

It has evolved over time, and today we are moving from “Web2” to “Web3”, the next evolution of the Internet. Ask 10 people to define Web3, and you’ll get 10 different answers, but the Internet is changing as a result of the maturation, globalization, and social transformation of multiple technologies.

Web3 embodies many principles and promises to be a more decentralized and collaborative internet of data and value. Blockchain and cryptocurrencies are at its core, but they will only be one of many technologies that will underpin this new network.

Explosive experiments with blockchain and cryptocurrencies have demonstrated new structures and business models: strong network effects, more trustless coordination of stakeholders for a common goal, aligning incentives, shifting governance models, defining agreed-upon Ownership of, and perhaps most importantly – linking data to value, all done in a digitally native way.

While blockchain and cryptocurrencies help create new applications and businesses alike, it is important to emphasize that Web3 is an evolution of front-end applications/user experience and back-end technologies. Web3 highlights greater composability and smarter networking in the technology stack. Whether through smart contracts or machine learning-driven decision-making, upgraded computing networks are better suited for automating and managing high-throughput analytics or monitoring technologies (NLP, computer vision, IoT) and data-intensive use cases (AR/VR, autonomous driving) , smart cities). Similar to the explosion of bandwidth supporting the growing internet in 2000, the rollout of 5G and edge computing on the hardware side will form a mesh as processing power (whether through expanded blockchain-powered computing and/or next-generation cloud) Open up new possibilities for applications and services.

Another point to stress is that cultural and societal shifts are integral to the success of new technologies (i.e. instant). A number of trends have emerged over the past few years, accelerated by the COVID-19 pandemic. We have seen significant progress in digital transformation, cashless payments and the shift to cloud computing. As a society, we are increasingly accustomed to transacting and experiencing life digitally. Cryptocurrencies have entered mainstream culture and are gradually being accepted as a true (though still nascent) asset class. After years of saying “when will the agency come”, the agency has now come.

Today’s “Web3” is clunky and full of friction. The next steps are onboarding, better UX/UI, proper governance, and superior or novel use cases. But it would be foolish to bet on a technology as it stands today; there is a lot of groundwork going on, and it all starts with a proper build.

Over the past two years, Web3 has shown a Cambrian-style explosion in innovation — from teams building layer 1 or extending protocols, new applications and projects, and new governance or token models. Wherever talent and innovation go, capital will follow. In 2021, $25 billion has already flowed into blockchain-based projects. And of those projects, those classified as “infrastructure” are some of the most critical.

So why does it matter the infrastructure, not the app?

As Signal founder Moxie pointed out – no one wants to run their own server. As Web3 matures, as with other iterations of the web, the complexity of abstractions is a key driver of growth. Managed services and tools enable teams to leverage their strengths and innovate without devoting significant resources to the backend (security, reliability, scalability). When we put the next billion users on Web3, most people shouldn’t care what blockchain or token standard the protocol uses, or how to jump over hurdles (and fear!) to interact with the application. This is why proper infrastructure, architecture and tools are key. In Web3, the prospects for this are huge, so zooming in, we can use the framework of the Web3 infrastructure as a mental model of what’s going on.

The evolution of the Web and Web3 principles

Before we dive into infrastructure, it might be useful to talk a little more about the principles of Web3 — after all, that’s what all projects are built for.

Digitization: Today, we are in a state of transition from physical information and assets to digital, and Web3 exists in an era of data flow. Physical data can be measured, combined with digital information and executed. Back-end computing will process information from different sources – AR/VR, IoT sensors and autonomous devices to name a few.

Convergence and maturity of emerging technologies: Technology is not rootless, cryptocurrencies and blockchain technology are a key part of architecture and values. But other technologies are maturing — 5G, AI, edge computing, IoT. Combining more efficient and smarter processing of larger datasets, flexible infrastructure and new business models such as tokens will provide the foundation for the next generation of applications.

  • Ownership of data and assets: Web3 will help provide true ownership of data, assets, and work. Blockchain is revolutionary because it can track and prove digital ownership. Digital assets—whether fiat, cryptocurrencies, or NFTs—can be controlled by users through wallets. Traceability allows for the measurement and control of an asset or an individual’s contribution, which is powerful when combined with digital identities.
  • Increased Decentralization of Control and Governance: Cryptocurrencies and blockchains are fundamentally based on issues of decentralization, trust, and coordination. A token represents not just an asset, but often a voting right, or membership card. Centralization has its own benefits, but with the iteration of DAOs, new models of corporate governance, network control, and distributed decision-making are taking shape. More decentralized control will allow the builders, operators and users of the platform to own and have a say in the development of the platform.
  • Composability: Before the Internet, there were walled local area networks. The same seems to be true for a growing number of blockchains, with interoperability a key focus. With open source code, Web3 is built with composability in mind. This means that teams can take an existing project or program and build on it. This allows for faster development and communication (interoperability) across applications.

A more mature Web3 will set the stage for changing data, value, and ownership relationships on the web. Businesses, users and networks can share or interact with data or transfer value more freely. So there’s a lot going on with Web3, and today we’re looking at a growing space, which is why people care about Web3 infrastructure.

So, what is the importance of infrastructure?

Infrastructure is the cornerstone of development. Over the past few years, digital infrastructure has evolved from physical things like cell phone towers or fiber optic networks to “upper layer” technologies such as cloud, data centers, and management network software.

For Web3, we now define infrastructure as the tools, services, and architectures that allow Web3 applications to be deployed, built, and used at scale. After all, both institutions and retail clients must leverage Web3 in a more frictionless and scalable way. There are many varieties of Web3 infrastructure – especially in the scope of decentralization. A large portion of Web3 projects are inherently decentralized, that is, using tokens or community-based governance. However, decentralization is only one scope – there are tradeoffs in funding, user experience, and operational efficiency. Throughout the Web3 infrastructure, many have taken a centralized approach, raising funds through traditional equity.

Web3 infrastructure has some features that are attractive to builders and investors. Things like predictable revenue, similarity to existing platforms/software, more experienced management team, and mission criticality to the ecosystem, which gets them funding from Web3 native/Crypto capital, as well as from traditional financial players Participation. So, starting in 2021, the racetrack for these Web3 infrastructures is already starting to take shape.

Guiding Questions for the Framework

As we examine the infrastructure of Web3, there are several guiding questions that underpin this framework as a way of thinking about the evolving landscape:

  1. What Web3 services and tools (“architecture”) do project teams typically use and what data, storage, or compute (“core infrastructure”) systems support these?
  2. What are the operational challenges for builders or agencies in Web3? What “mission critical” solutions have been developed?
  3. What infrastructure services have been and need to be built for certain use cases (e.g. DeFi, NFTs) to be successful at scale?
  4. What capabilities are existing companies and projects investing in resources—whether through M&A or organically?
  5. How do the components of the Web3 “infrastructure” interact with each other? How well established is each component (i.e. number of projects in the field, common standards, maturity of the solution)?
  6. In Web3, one can think of digital infrastructure in three categories of services and products on top of the underlying computing (blockchain) layer – data, value/liquidity and participant/blockchain enabled services.

Computational Layer (Blockchain and Blockchain-Inspired Technologies): The foundation of Web3 is the Computational Layer. This includes blockchain and blockchain-inspired networks (layer 1, subnets/sidechains and scaling solutions) on which everything else is built. Hence the emergence of cross-chain/full-chain protocols and on-chain messaging projects to allow value and information to be exchanged from one chain to another. It is important that blockchain networks interweave the transfer of data and value between different stakeholders in a more trustless manner. There’s a lot of information about this compute/blockchain layer under development, but it’s arguably where a lot of time has been spent and will continue to be invested.

On top of the base blockchain layer, we can divide services, tools, architecture and infrastructure into three parts:

  1. Data Actors: Provide core infrastructure, architecture and tools for teams to build and operate Web3 projects;
  2. Value and Liquidity Participants: Build blocks for the flow of capital between Web3 applications and participants, reducing friction;
  3. “Interactors” or Blockchain Supporting Infrastructure: Stakeholders who support and maintain a blockchain/computing network.

Data infrastructure: Web3 is an evolution of semantics. This means that machines and computers will need to analyze, pass and compute massive amounts of data.

For data infrastructure, there are more “core” or established data infrastructures and “emerging” services and tools that form the architecture of the development team. The data infrastructure here includes various tools, services, and components that enable blockchain data to be easily leveraged or built upon.

Briefly describe these data-centric building blocks:

  • Core data infrastructure: management of nodes and API providers that interact with the blockchain, decentralized data storage, block explorers to track transactions, and indexing/query services to efficiently access data;
  • Emerging/adjacent data infrastructure: interactive tools and management services for application development, this includes developer environments to assist with code shipping, code auditors, SDKs (e.g. privacy/zero-knowledge toolkits), and digital identity services;
  • Tools and management services to assist with Web3 use cases: NFT-related and DAO/community-operated services. For example, NFT analysis or NFT creation, organizational financial management, voting platforms, and community onboarding tools.

Value and Liquidity Infrastructure: A key innovation of Web3 is connecting information to its most basic value.

For Web3, value is intertwined with the core functions of operating the network, whether through governance, security, or utility token incentives, but value without liquidity is trivial. For all types of capital flowing into Web3, value needs to be secured, turned on/off, distributed, transformed, accessed, and allowed to flow throughout the ecosystem without excessive friction.

So “value or liquidity” is built by a few players.

Today’s “core” value infrastructure includes:

  • wallet. Wallets are the gateway to Web3, the primary interface for users to interact with blockchains, tokens, and applications. We’ve seen wallets evolve to be more “browser” recently, which is a good step.
  • Custodians of (institutional or scattered) capital, exchanges that convert value across the ecosystem and tokens, and fiat in and out of existing payment infrastructure.

Emerging value and liquidity infrastructures include:

  • Dashboards and analytics for portfolio management; Defi or exchange aggregators for enhanced liquidity, and institutional trading infrastructure for efficient markets.
  • Assist with adjoining services in capital operations – primarily tax, compliance, regulatory and cybersecurity services.

Interactors and Blockchain-Enabled Infrastructure: We have emphasized that at the heart of Web3 is the combination of value and data that blockchain technology allows. Therefore, the infrastructure that supports the blockchain computing layer drives the possibility of value and data service success. Interactors and blockchain-enabled infrastructure include:

  • Network Maintenance: Cryptocurrency miners (for PoW networks), staking services and validator services allow for easier network support or maintenance; these facilitate transaction processing, voting (through delegation) and network incentive sharing (e.g. block rewards) .
  • On-chain analytics: These services, common today in compliance or transactional use cases, provide dashboards and tracking of activity at the compute layer. This is very helpful for the numerous hacks or security breaches in cryptocurrency applications today.
  • Emerging Infrastructure: As highlighted at EthCC 5 this summer, there is a growing interest in on-chain communication and messaging protocols, where we can exemplify full-chain protocols or cross-chain bridges.

concluding thoughts

Over the past few years, we’ve embraced a whole new asset class, with some of the brightest minds, biggest companies and massive amounts of capital jumping on board to innovate. But mass adoption requires improvements in regulation, onboarding, new applications (with real revenue), business models, social structures, and technological infrastructure.

We are experiencing the growth of a new industry in real time, and learning as a society interacts in the digital age. Criticism is definitely needed, but as builders tackle every iteration, from privacy to scalability, we’ve seen experimental results in new governance models, digital or physical hybrid businesses, and the power of incentivized networks, Now is the best time to build.

Posted by:CoinYuppie,Reprinted with attribution to:
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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