3 Reasons Why Web3 Needs Protocols, Not Service Providers

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A considerable amount of hype has developed around what is known as “Web3”. Web3 is essentially based on distributed ledger technology and many companies use Web3 as an umbrella term to describe utilities and alternative markets built on an underlying blockchain.

Decentralized protocols have many advantages, but there is only one problem. These protocols aren’t going to stick, and there’s little incentive for new entrepreneurs to build a business that will inevitably slip away from them one day. As a service provider, you reap the benefits in perpetuity. In a decentralized network, rewards are distributed. Even so, these permissionless protocols will become the foundation of Web3, and the benefits of a token launch can be overwhelmingly compelling. In a world that is changing faster and faster, it might not be such a bad idea to create something great and then move on to the next thing. We don’t always have to keep our babies forever.

Related: Web 3.0 is coming, and here’s what it really means for you

Here are three reasons why Web3 requires protocols instead of service providers.

1. Centralization should be avoided

This one is pretty obvious. The backbone of Web3 is made up of decentralized protocols that can be used by all parties, instead of centralized service providers who can choose who they deal with. In Web2, sites like Facebook, Google, Twitter, UpWork, and LinkedIn monopolize large chunks of the market and force their users to toe the line. In most cases, this isn’t always a huge problem. But with this power, they set their own terms and ignore any calls for change that threaten their comfort or their pocketbooks.

These were groundbreaking innovations that undoubtedly served to improve the quality of life of users around the world. At the same time, they are known for their rampant data collection and can influence events like elections. The power they have to skew public opinion is frightening, especially Google and its subsidiary YouTube.

There is no reason to suggest that it will be any different if we have a centralized company marketing itself as Web3. A great example here would be Facebook, now known as “Meta”. The idea of ​​the world’s largest social media platform launching its own Libra cryptocurrency and monopolizing the VR environment isn’t exactly heartwarming. It’s Web3 in name but not in essence.

Upwork, meanwhile, has suspended freelancers in Russia and Belarus to work to help Ukraine. It’s perhaps safe to say that it’s ultimately for the best, but due to the nature of the platform, it’s also possible that only innocent, struggling freelancers were affected. It is not up to individual companies to make these kinds of decisions. Additionally, Upwork does not offer cryptocurrency payments, and the gig industry as a whole is about to be disrupted to give freelancers a voice. the H3RO3S project has already targeted this industry.

2. Digital sovereignty must be maintained

Data is the new currency. In fact, data has always been the real currency, but most were unaware of how their data was tracked, monitored and sold to third parties. Part of the reason for the proliferation of blockchains was rampant hacks and scandals.

Related: the

Centralized databases (including major credit agencies like Experian and government websites) were hacked and sensitive information leaked. At other times, companies such as Facebook have sold user data to political parties like Cambridge Analytica for treatment.

Web3 relies on a secure digital identity to verify your transactions. You don’t want your digital identity tied to a corporate database – it’s the identity you’ll use to buy homes and property and to access your multiple Metaverse VR accounts. You certainly don’t want this information leaked because a company forgot to patch a security hole. It will be related to everything.

The bottom line is that your basic digital identity in a web3 environment cannot be stored in a centralized database (unless we get to a point where it’s combined with retina scanning or fingerprinting ). Even with 2FA, the information is too sensitive for centralized storage. This has been proven over and over again with all the scandals.

3. Protocols are cheaper

Service providers exist to make a profit. Protocols are public services that people can use to supplement their own capabilities. If you can use the underlying protocol without relying on a service provider, you’re bound to save money. BOUTIQUEX will allow brands to connect their inventories to the blockchain and create brand-NFTs in order to access Web3 e-commerce. Amazon charges over 25% commission, but blockchain protocols like this will cost next to nothing.

Another would be banks and their SWIFT messaging protocol. Accessing this international bank transfer would be easy and inexpensive without having to go through a bank, the service provider. There are also online service providers that can perform this function, but it is still expensive and you have to give up your sensitive information to use this protocol.

Through the use of blockchains, you can send an equivalent amount of currency (in the form of cryptocurrency) anywhere in the world for minimal cost. This is the most direct and obvious use case – it’s extremely fast, extremely cheap, private and secure. And you don’t need to upload any sensitive details.

Related: Build New Wealth By Bypassing Old Money

The Need for Distributed Service Providers

As centralized service providers become obsolete, we still need distributed service providers to offer a suite of protocols. Service providers will simply play a different role by facilitating transactions over specific protocols. They will be a necessary interface to allow residents of Web3 to become familiar with certain protocols. A better name might be protocol providers as opposed to service providers.

We also need web3 providers to maintain the servers (which people don’t want to do, despite all the rhetoric) and for their effectiveness. Decentralized protocols are very difficult to modify and run slower than centralized service providers. WhatsApp went from unencrypted to E2EE in a single year. Yet it is now owned by Meta, a major Web2 platform.

So it’s a compromise. But even though centralized platforms are faster and more convenient in some ways, the cost is too high and we need to become more digitally sovereign through protocols.

But there are options that allow the best of both worlds. Anchor is a decentralized web3 infrastructure that makes it easy to integrate DeFi on your dapp, gain yield and of course, access a decentralized multi-chain blockchain infrastructure. Simple tools make it easy for anyone to participate. Anyone looking to dive deeper into blockchain technology will have the ability to deploy staking nodes as well as development nodes in minutes. Over 50 protocols have been integrated into the ecosystem, including Binance and Polygon, with more features added regularly for a fully democratized protocol. Instead of becoming a node provider for a specific blockchain, you simply add your node to the protocol along with other node providers, creating a highly decentralized pool of nodes that blockchains can access as a whole.

Although Ankr now realizes its position as a service provider technically, Ankr DAO is on the roadmap to change that. Until then, they are offering new projects an extremely low one-year subscription for an extra month.

Old versus new service providers

Historically, each user would be assigned a username/account number for identification. All of their activity on a given platform could be traced and cross-referenced with their information and subscription plan. This is not the case with distributed providers. You are simply handed a set of tools/protocols to work with, along with some help docs and some supporting features.

A major advantage of distributed providers is that there is no user ID and no central database to store them. For example, when you create a Web3 wallet with Metamask, you simply get a tool that facilitates token storage and decentralized exchange purchases. The support team is available on Reddit (sort of, they’re usually overwhelmed) but you don’t really have an “account” to access. Your information cannot be hacked because no one owns it.

The downside is that if you lose your wallet keys, you lose your wallet, but this is Web3 – you can’t have sovereignty without risk, a fact that modern citizens will have to accept.


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