The Decentralization Dilemma: From the Banning of Tornado Cash to the Future and Development of Web3 Infrastructure - Part 2

The Decentralization Dilemma: From the Banning of Tornado Cash to the Future and Development of Web3 Infrastructure - Part 2

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Not long ago, the Office of Foreign Assets Control of the US Department of the Treasury announced that it would impose sanctions on the decentralized mixer Tornado Cash, including the ban on its website as well as some Ethereum wallet addresses.

Subsequently, companies such as Alchemy, Infura, and GitHub also said that they would suspend Tornado-related businesses.

Chainbase organized a talk and invited speakers working on infrastructure, smart contract wallet, hardware wallet, incubator DAO, and crypto investment, trying to observe this turmoil from their perspectives and see what thoughts it triggers in the Chinese crypto world.

Speakers:

zhixian | UniPass

Hello everyone, I'm zhixian. Our project is UniPass, which is an infrastructure for Web3 developers and Web2 developers who want to develop in Web3 to more easily obtain Web2 users. The current form is a fully EVM-compatible smart contract wallet solution, and we are in integration with the latest ERC-437. UniPass is characterized by the fact that users can forget the mnemonic phrase, forget gas fees, and take full control of wallets through on-chain email social recovery. It sounds very centralized, but it is actually a very decentralized solution.

jason_chen | Buidler DAO

Hello everyone, my name is Jason and I am currently contributing to Buidler DAO. Buidler DAO is a DAO that focuses on blockchain talent training and Web3 project incubation and has gathered a lot of amazing developers and friends who are willing to contribute to Web3. Buidler DAO has six projects in incubation, two of which have been launched, and we will soon release a new product, a tool for DAO governance. Stay tuned about Buidler DAO, everyone is welcome to join and build more Web3 projects together.

Chelsea | Foresight Ventures

Hello, my name is Chelsea and I am currently investing at Foresight Ventures. Foresight Ventures is a research-driven investment institution. We have a dedicated research team that conducts research on industries and projects. I am currently interested in chains and on-chain data. I recently learned about the infrastructure project Chainbase, (and was invited to speak here). I really want to learn and exchange ideas with you all.

Lixin Liu | Keystone

Hello, my name is Liu Lixin. I am the CEO of Keystone Hardware Wallet. Because I am in Dali(大理), my life has been a bit casual these days. I am sorry that I may not be able to participate 100% in the event, but I will listen to everyone's speeches here.

Mogu | Chainbase

Hello everyone, I'm Mogu, the founder of Chainbase. Chainbase is a Web3 interaction layer infrastructure. By providing a large number of open APIs, we enable developers to quickly utilize the blockchain network, query and index on-chain data, and quickly build Web3 applications. In essence, we are a performance tool for developers. At present, the product has been open for registration. We welcome all to sign up for a free account at the official website and experience it.

Here is the full text of the conversation:

The Decentralization Dilemma:

From the Banning of Tornado Cash to the Future and Development of Web3 Infrastructure - Part 2

6. Complete Centralization?

Masterdai (Host)

When we talk about decentralization in projects, there are two aspects: the IT architecture design and the governance. I would like to ask speakers, does a fully decentralized DAO/protocol exist?

Zhixian | UniPass

I was chatting with my friend the day before yesterday. He always used centralization/decentralization to give a definition. I asked: "Is it an absolution or relative definition?" When talking about the ability to avoid censorship and freely exchange information, we should consider: what is the bottom layer in the OSI seven-layer model or TCP/IP five-layer model, and can we control that layer? Applications are built on infrastructures, which are monopolized by the state in most countries. Even for privately-funded infrastructures like Elon Musk's Starlink - it is controlled by the centralized person Musk. We should set the scope of centralization/decentralization before talking about it. For example, for a project to realize the decentralization vision, we need to consider which layer(s) should the ban be applied.

I read an article several days ago. It said that to understand Web3, one needs to understand DeWeb first. Think about it, we didn't have the concept Web3 before, people use crypto or blockchain instead. What is DeWeb? It turns the network from a centralized structure to a distributed structure (in which blockchain technology is not necessarily required). Torrent file, Magnet URI scheme, Onion network, etc. are all applications of the distributed network.

Earlier, I made a serverless web page based on Web RPC when I was in college. It employed GS and ran a local RTC. As long as there're enough online servers, people can share a large-sized picture, and they can download this picture immediately after opening the web page. The picture is not from a particular server. Even if it is from particular servers, they are multiple gateway servers or servers with location capability.

In the case mentioned above (where publicly available data is involved), blockchain technology is particularly suitable to be used for better applicability. Then you can use P2P network for searching, cryptography for encryption, and related technology for signing. If you don't consider the physical layer, problems on the upper layers are relatively easier to solve - you should put efforts into enhancing the user experience for the general public. As for related prototypes developed and used with the geek community, I believe there have been countless cases since the last century.

Mogu | Chainbase

Mentioning the Onion network, I had a feeling. I've been involved in the cybersecurity space for multiple years. Technologies such as the Onion network were played by a small group of hackers and could solve some problems. But it was hard for them to become universal tools.

The ways to access the internet (or blockchain, as we talk about today), can be understood and used by ordinary users only when they are packed by technical people and become upper-layer components. As a result, ordinary people can enter the Crypto world without knowing the technical specifics. Convenience and ease of use are the ultimate expressions of a product. Listeners today may have heard about the Onion network, with which users can skip three layers of proxies and it will be hard to track the original source. But maybe no one here has ever used it - because one needs to have the technical ability to use and there are not many of them. From the user experience perspective, this technology is destined to be impossible for the general public to use.

So I've been wondering if the core topic of Web3 should be choosing between centralization and decentralization. When Web3 was first proposed, the core was to decentralize the ownership of data. In other words, instead of giving Web2 monopolies control over our data, we put all the data in a globe-scale computation and storage center where everyone can use the data freely. Blockchain is a means, and decentralization is also a means. What really matters is what we want it to be so that more and more people are able to experience the self-sovereignty of data.

Chelsea | Foresight Ventures

From the perspectives of market, capital, and users, Bitcoin is a case of complete decentralization. It combines protocols and tokens and tokens function as incentives for contribution. At first, people (mostly hackers) started to mine out of interest, then the capitalists got involved, then there were races between mining companies, and then there was specialization of labor.

Ethereum was also a protocol layer at the beginning. Not driven by profits, miners would take the initiative to work. After the involvement of capital, whether it is PoW or PoS, it's a matter of costs and profits. Bitcoin should be a case of complete decentralization, but it also becomes more and more centralized because of capital gain issues, miners' specialization of labor problems, etc. Though the technology itself is decentralized, will it turn out to be centralized in the end?

jason_chen | Buidler DAO

I agree with what Mogu said. Decentralization is a means and we should pay attention to the ultimate goal. My observation is that many people take Web3's decentralization as a belief, which will cause some problems.

For example, polarized opinions can be seen on Douyin (Chinese TikTok) and Weibo recently e.g. Either you're a patriot or you're not. It is similar to what we talk about Web3, either centralized or decentralized. If people keep labeling, they'll forget the original purpose.

Apart from being the spiritual belief of among a small group of people, decentralization will bring prosperity to the ecosystem. In a setting where there're fewer constraints, many ideas will emerge and many practices can be realized.

The "data ownership" we just mentioned, its existence is vague, it is difficult to tell whether it is there or not, how will the things we face change in the past two or three years. When we are entrepreneurs in an industry, you may judge that a project is not decentralized enough, as if it is not decentralized, it is not the same. But what should actually be considered is what purpose the project itself has. For projects, you should consider what clear benefits centralization can bring, what is the difference if it is not decentralized, and the project should follow the purpose.

We don't really know if "data ownership" actually exists or not. We don't know what will happen in the next two to three years. Decentralization is not a matter of right or wrong. As the project owner, you should consider what the purpose is and how decentralization can serve this purpose. After all, decentralization is just a means.

7. How Ordinary People Get Involved with Web3?

Masterdai (Host)

Today, we cover not only Tornado Cash but also decentralization and DAO governance. From the perspective of developers, projects, and investors, can we talk about future applications and use scenarios, so that more people are able to enter Web3?

Chelsea | Foresight Ventures

As an investment institution, we've been covering Music NFTs, Social, and DIDs. In my opinion, it's hard to find social/content that is separate from data. Once there's data, there's content. When there's content, there will be products or social scenarios for people to get involved with Web3. The Web3 we refer to today is limited to (mostly) DeFi protocols. The fact is that, for ordinary people, a majority of their time is still spent on Web2 applications like Twitter, WeChat, TikTok, etc. - because they are the major platforms for obtaining information and socializing, and content is generated and stays on them. If Web3 wants to grow, data must be generated on chains from the beginning.

When we talk about dApp, Infra, and SQL, the foundation layer should be built first. For instance, I covered lots of storage projects. From storage to dynamic storage to data analytics to upper layers, only when I look upward layer by layer, can I reach the application layer facing the end C users. Whether it's ToB or ToC, there're many opportunities. For example, Chainbase focuses on the data infrastructure and is quite experienced in this area. From the developer's perspective, cloud-based APIs help reduce a lot of development burdens.

jason_chen | Buidler DAO

I want to talk about our expectations of Web3. There was a hot topic a month ago: what things can be done in Web3 but not in Web2? This is more of a layman's question, we can do a lot of things like DeFi. But why did this question cause such a heated discussion? It is because Web3 is far from our daily lives. If you showcase a Web3 product to people who have no knowledge about Web3, can they get started quickly? Is the product closely related to their daily lives? Can they differentiate it from the Web2 products they're using now? The answer is no.

In terms of application scenarios, Web2 and Web3 are still very separated. Web2 represents the vast majority of ordinary users. The things that can be done in Web3 but not in Web2 are too far away from people's work and life.

What expectations should we have for Web3? Or, generally speaking, where is the opportunity for the next generation of the Internet? StepN is controversial, but it breaks the boundary and makes many Web2 users realize that Web3 is fun and easy to get started with. It provides a use scenario where Web3 can be integrated into daily lives, rather than being a solely play-to-earn game. I hope there will be more innovative products on the application layer that non-Web3 people can easily understand, get started with, and apply to common work and life scenarios. It will be the next opportunity for experimentation.

For Buidler DAO, the reason why we care so much about security is that we believe there will be security issues when a majority of people rush into Web3 after the explosive usage of applications. People are used to the secure and regulated environment in Web2, and it is highly possible that they will be targeted and "slaughtered" after entering the Web3 Dark Forest. Everyone in the industry knows the consequences of being hacked, and I think a majority of people can't stand such a loss. Personally, I am optimistic about security, although I can't think of a specific product that will bring everyone into Web3. At least we should be prepared, and ensure safety while participating in the space.

Zhixian | UniPass

I agree with most of jason's ideas. In fact, it is two parts, one part is what I hope to achieve as a practitioner or a person of faith; the other part is as a practitioner, our goal is to find the next Web3 product to enter the scene of life and work, and to provide these infrastructure products.

I agree with most of Jason's ideas. There are actually two parts. One is what we hope to achieve as a Web3 practitioner/believer; the other is that our goal is to find the next entry point for Web3 products (and their supported infrastructures) to enter work and life scenarios.

In my opinion, crypto games (whether they're more or less related to the blockchain) are most likely to break through.

Games have vitality (ecosystem and sustainability). The externality of StepN is a healthy lifestyle, but what games give to people is more on the spiritual side. I was in the gaming industry before, and I know this industry is quite big and one can make a lot of money. For listeners, you can research games with complete business systems such as Fantasy Westward Journey and WOW, in which you can feel the virtual design of a whole universe - they have a strong vitality.

Good games can live long and generate money by themselves, and they are nearly a must for one's spiritual life. It is natural to combine crypto with the concept of ownership - gaming items have specific owners, and related gaming communities/platforms can be formed. We once replicated 9YOU BBS (a Chinese mobile game community), in which ownership-related content was popular. I think Web3 social will start from the community of blockchain-based games - connect the in-game level with social media accounts, and gaming badges and assets can be seen in the community - like 9YOU BBS, which was very successful at that time.

"Crypto for Web3" makes the space for secret manipulation smaller, because one can't grant people a title or mint a gaming item for them without being seen. The whole game becomes more transparent and its business operation more healthy. BTW, the major target client of UniPass is blockchain game companies (domestic and overseas). People who are interested or have relevant resources, please chat with me anytime.

Mogu | Chainbase

Recently, I've changed my views towards the stages of Web3 as well as how to understand data. I would love to share them with you, and look forward to a paradigm shift in the data field.

Decades ago, the data center was like this: a self-built machine room; several self-bought servers; systems were also installed and maintained by self. Every data center was in the form of a self-built machine room, and all the user data was stored in the self-operated servers.

In the second stage, around 2009-2010, cloud computing began to popularize in China. At that time, the look on people's faces when they saw cloud services was similar to that when they see blockchain now. "To put data centers on clouds" was hard to imagine decades ago - how could the data be put on others' servers? However, as more and more companies (especially small to mid-sized startups) began to provide cloud computing services, people could feel that it was super convenient - it could be flexibly scaled, expanded at will, and turned on and off at any time. It may also be able to guarantee my security.

So things have changed in the past ten to fifteen years. From centralized storage to storage built on cloud computing, most data centers are cloudized. Over ten years have gone by, AWS, Alibaba Cloud, etc. have become trillion-dollar businesses, and everyone is used to putting data on clouds.

But changes are still happening, especially after Ethereum came out. People started to realize that a globe-scale computation platform/data center is in formation - everyone can use it but no one owns it. This is the third large-scale migration of data centers in which data will be migrated from cloud computing platforms to chains. Our imagination is limited, so the on-chain data we see now is mostly transaction data. Similar to Chelsea's opinion, I think that a large amount of data on chains now is not comparable with that in private databases of Web2 companies, in terms of quality, dimensions, etc. Based on the on-chain data now, one cannot build products with rich features.

On-chain data will have more dimensions and higher qualities, and many developers will use the data to build applications that truly change the world. The blockchain network is a global computation cluster and distributed ledger where a large amount of data is stored in the form of hashes. Therefore, the on-chain data is not directly readable. How to help developers quickly find and use the data? This is where Chainbase comes in. We will clear and organize the data and provide it to them in the form of cloud-based APIs. We want them to put more energy into creating really good applications instead of dealing with infrastructure-level issues.

Chainbase doesn't need to bring billions of ordinary users into Web3, we just need to bring tens of millions of developers into this world. We believe they can build a future for billions of people.

Surprise Time~

Spiral Alternating of Decentralization and Centralization

Listener A

Thanks for sharing. I would like to ask a metaphysical question. We know that Web1 was actually very decentralized. In the beginning, the TCP/IP protocol and SMTP protocol were open-source and used for information exchange. Later, to ensure a better user experience, custodial services like Gmail came into being, which led the Internet to be more and more centralized. Now, facing some regulatory issues, new demands for decentralization have emerged. So the question is: is the need for decentralization/centralization in an alternating spiral? Or decentralization is a definite and irreversible direction.

Zhixian | UniPass

This problem needs to be dismantled bit by bit. Let's talk about email first. UniPass products will use the email protocol, and sometimes centralization will be questioned. In fact, email is very decentralized, because it is a protocol, and the difference between Protocol and Product is very large. For example, WeChat is not a protocol. Today I write a third-party client side, and it follows the WeChat gameplay. It is impossible for me to log in to the WeChat account in my client side. WeChat client side itself is not an open thing, it is closed, very strong control, absolute.

Let's talk about email first. UniPass uses the email protocol and sometimes is questioned for centralization. In fact, email is very decentralized, because it is a protocol, not a product. WeChat is a product. It is not open and has strong control over its ecosystem, and third-party applications are hard to get into. But email is different, you only need to use software that conforms to protocols like SMTP, POP3, etc. As long as the standard is met, you can send emails that can be received by any email service provider. This is the original usage of email: everyone builds their own server and sends emails to other servers. Even if you are banned by Gmail, you can use your own server to send emails. This is a true protocol, which is similar to what the blockchain (or at least Bitcoin) community advocates: to use Bitcoin, you need to have a full-node wallet. Everyone only trusts their own full nodes, not other RPCs.

Now blockchain projects heavily rely on infrastructures like Infura, and people no longer talk about whether the infrastructure is centralized or not. But you have the right to choose. You can't enjoy the convenience of Gmail and stay in a decentralized status at the same time. In later stages of an industry, protocols/standards will be more open, but that doesn't mean people will choose the approach that is more in line with the spirit of protocols (decentralization). Even in the blockchain world, not all projects are using decentralized node providers. People tend to use default RPC nodes without checking if they are decentralized or if they have issues.

Going back to Gmail, a lot of its functions have become fixed standards. If you like it, continue using it. If you don't, just quit Gmail and use other email service providers. I don't think the pursuit of decentralization is spiral-like. The current state is a result of compromise or complementary. We should look into the core. As long as the protocol/infrastructure stays, you always have a choice. Products like WeChat may kick you out but protocols like the email protocol can never do so.

There are similar communication protocols like the federated social network used by Elon Musk and some others. It can be understood as decentralized Twitter/YouTube/Instagram, etc. These platforms are interconnected in terms of users and content - one can even follow and like across the platforms. The federated social network is as open as the email protocol. The fundamental logic is that everyone has a server and the communication between servers is not controlled by a centralized party e.g. We are not in the same "domain" but that doesn't bother our communication.

The federated social network has already gained millions of users. These users have entered Web3 spiritually, but they're still using Web2 applications, which may have certain risks like being banned by the server administrator of the site. We think of a solution that will make the user the owner by connecting Web3 DIDs to Web2 social accounts, which will disable the server's ability to control the account so that social relations and data will not be lost. This is a scenario that quite aligns with Web3 ethos.

Ethereum: Anti-Censorship in Progress?

No. 2 Audience

In this conversation, I can feel that people are not particularly resistant to censorship or regulation. Based on what Vitalik said about the potential blockade of stakers executing censorship on Ethereum according to the consensus (in other words, his attitude is anti-censorship), what would be your views on it? Will Ethereum conduct internal reviews due to regulatory requirements in the future? If it does not obey, will it cause Ethereum to be shut down, or become a chain functioning the same as Dark Web?

Zhixian | UniPass

The topic is relatively new. Personally, I like PoW. Maybe many people don't realize that PoS has a problem: in theory, the more staked tokens you have, the more you will have a say over the chain's operation. If you suddenly get rich and buy 50% of the tokens, become the biggest consensus node and want to produce a block at your will, can you do it successfully?

It's super hard. First, it's very likely that you can't buy 50% of the tokens. Even if you manage to buy them, the current consensus nodes can exclude you from being a new consensus node, because this action is still a "transaction" that should be reviewed by all existing PoS nodes. This means, that even if you have the most tokens, you may not become the node that produces blocks - this is PoS's problem.

PoW does not have the problem. Vitalik is actually making a statement that encourages everyone to choose a side. If someone betrays the consensus, all nodes together will remove them. But the reality is, that the biggest player on Ethereum is exchanges. They have the most tokens because they took the tokens from retailers and staked them. Exchanges can be regulated by the U.S. Government in terms of taxes, customer information, operation venues, etc. Exchanges must comply with the laws and this is bound to happen.

I think one of the charms of blockchain is that it assumes everyone is selfish. It is designed in a way that as long as people are doing things out of self-interest, it is good for the network as well. It doesn't require you (as miners or nodes) to have a sense of morality. In a traditional system, everyone needs to "perform" morality, but in blockchain, it is not needed. As long as people are selfish, the blockchain is secure - unless you are not a rational person (as defined in Economics) and you just want to execute a 51% attack no matter the cost. However, even if you do so, the damage that a 51% attack can cause is limited.

This touches on the fundamental values of crypto. The number of major players of PoS is limited, and they are all verified. The U.S. Government can easily sanction them - then what's the point of involving blockchain? People are indignant about Tornado's ban and the freezing of related USDCs. However, USDC is anchored to USD (and essentially is USD) so it should function as a compliant stablecoin. You can't force PoS to perform a high level of censorship- resistance because it is limited by the initial design. The regulation now is within a normal scope, which does not involve internet service providers (e.g. AWS does not do a KYC on who's running the nodes). If that happens, there's no point for us to talk about the ethos of crypto.

I think PoW is better at anti-censorship. Bitcoin has existed for many years. It has good intentions, but it is often used for some sensitive things like Dark Web, hacking, or even terrorism. Maybe someone wants to block Bitcoin, but this is much more difficult than blocking a PoS network. Even if you ban all the big mining pools, as long as you have an idle device (let's say an Android phone), you can mine Bitcoin by yourself. After all, the collective computing power of all Android phones around the world cannot be underestimated.

No. 2 Audience

Thanks for the answer. A follow-up question: how to view the Merge? Will it fail?

Zhixian | UniPass

The biggest problem is that there are only a few major players. Now Ethereum is filled with DeFis. Apart from DeFis, there're NFTs, mostly in the form of PFP. PFP NFTs do not matter that much. But DeFis are complicated and interdependent. Vitalik also said that which chain will be THE Ethereum may depend on how several large issuers of stablecoins choose. It's sad to think about it, but it's the reality. Whether the Merge will succeed depends on whether the giants reach a consensus on which chain will be the "orthodox" Ethereum. However, when "orthodoxy" enters everyone's discussion and becomes a wider consensus (so-called social consensus), it looks like crypto is revolutionizing itself and returning the rights back to the traditional system. This is not a good sign, as if it is saying that something is deprived of being orthodox because it violates the public order - which is absurd.

Chelsea | Foresight Ventures

I'm curious. I heard opposite opinions towards PoW and PoS. While people in China think PoW is more centralized and PoS is more likely to cause capital concentration and right distribution issues, capitals and KOLs overseas highly support PoS and say it will help retailers gain profits. What would be your thoughts on that?

Zhixian | UniPass

People have been arguing about PoW v.s. PoS for a while. If you are a mining pool, you'll support PoW, and if you're a big token holder, you'll be by PoS's side. Whether at home or abroad, people who hold a large amount of ETHs will definitely support PoS.

ETC-1159 has been proven to have no effect other than deflation. It is taking miners' income to subsidize token holders. It is so obvious and it is still passed and implemented - it is self-evident who is behind this. You need to identify which side one is taking. For me, I can only look at this matter from a technical performance point of view. When it comes to decentralization and anti-censorship, PoW definitely wins. In terms of the token price increase, the control over token price by big token holders, stability of the chain's operation, the cross-chain convenience, etc. PoS will offer a lower-cost solution. Especially the cross-chain functionality, it will take a lot of computation power for PoW to enable.

When it comes to which one is better, it can't be generalized. You should consider the context. PoS is better suited for investment and increasing token prices. When it comes to the pursuit of decentralization, anti-censorship, availability, and longevity, PoW is better than PoS.

Chelsea | Foresight Ventures

I understand, this is actually a matter of position and angle.

(The End)

About Chainbase

Chainbase is a leading Web3 blockchain interaction layer infrastructure. By providing cloud-based API services, it helps developers quickly access and utilize blockchain networks and easily build Web3 applications.

Chainbase makes blockchain interaction and data query/index on chains simple and easy to operate. Anyone can use, build and publish open APIs, which allows developers to focus on application-level innovation instead of solving the back-end hassles.

Chainbase currently supports Ethereum, Polygon, BSC, Fantom, Avalanche, Arbitrum, and other chains. This allows projects of all sizes to quickly reduce development time and costs, no matter which chains they are building on!

Want to learn more about Chainbase? Visit our website: chainbase.online Sign up for a free account. and Check out our documentation

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Extended Reading

  1. Chainbase Provides Global Customers with Stable and Secure Web3 Infrastructure on AWS
  2. Chainbase Integrates with Avalanche to Power Developer Ecosystem
  3. Is Token Economy a Necessity for Web3 Applications? Part 2

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