The New Data Economy — Part 1/2

Photo by Francois Hoang on Unsplash

Introducing Concepts

Before diving in, let’s cover some of the basics to get everybody onto the same page. At its heart, Protocol Labs is creating a distributed permanent web as part of its governing vision to drive breakthroughs that will push humanity forward. Protocol Labs was founded in 2014, employing just less than 200 people. However, that doesn’t make their impact any smaller as their projects touch millions across the distinct communities they collaborate with. They offer a whole range of technologies and concepts, two of which will get mentioned here are IPFS and Filecoin.

IPFS, Interplanetary File System, is best compared to HTTP — it is an evolution in data transfer protocols, it addresses data and moves it.

Filecoin is a cryptocurrency-operated file storage network. An open-source, public cryptocurrency and digital payment system. Filecoin additionally provides a unique service — it is a medium for cooperative digital storage. It allows users to rent unused hard drive space from each other.

What glues the new data economy together is the economics. Filecoin’s network will store data, but what incentives align the network’s long-term, global purposes with each user’s short-term, self-interested goals? Introducing the cryptocurrency element and incentive structures inherent to Web3 may build that framework while encouraging and enforcing proper behavior to create a robust storage network.

This article will explore the technological trends and frameworks that underpin these developments, how Web3 differs from the Web that we know today, the transition from where we are, and what are some deferences of Web3 from the Cloud that we can already see among businesses and consumers. We’ll also introduce new markets and service models that may arise from these innovations.

The Cloud and Web3

We all use cloud services, and if not, we’re not more than a click from a service that does. The Web, as a network, inherently has some element of decentralization. Many of the services and platforms businesses are using today can already be used in a relatively decentralized way.

However, the unavoidable dependency on our cloud providers holds us back from true decentralization.

Those decentralized services and platforms have no centralized party overarching control over what users can do. However, even with this being the case, I could argue that the protocols are, even though the network infrastructure might not be fully decentralized. The vital element is that their network can model interactions between participants and that they are all verifiable. Different solutions to total verifiability have been implemented with varying success.

The real challenge of fully decentralized services is to have this transition while maintaining the level of performance that we have come to expect of our browsers, their capabilities, and the capabilities of the CDN networks that is the hill we have yet to traverse.

Another aspect of the challenge is the conflicts with the interests of the companies that hold major data monopolies. However, it is a progression, and as long as the systems’ verifiability and proper mechanisms lean towards substantial decentralization, the evolution in the web frameworks and protocols will continue.

Consider IPFS as a direct replacement to HTTP. It would always struggle for adoption. I could scarcely imagine dropping one while adopting the other overnight, so instead, the IPFS gateway is used (specifically, the HDP2 IFPS gateway). This tool is the adapter interface that allows browsers without any protocols to interact with the IPFS network natively. It proxies the HTTP requests generated by the browser to the IPFS network.

It is the model for how the new web stack consists of — connectors, adapters, and interfaces that bridge the gap between how the current network and cloud infrastructures work and the brave new world that Web3 is offering — until we can match the computational efficiency of the existing Cloud.

It is a severe challenge to surmount, considering current developer experience with current cloud platforms, being able to ship and run Docker containers, deploy Kubernetes clusters, and so on. Challenging the existing framework would require an experience entirely native to Web3, and the main difficulty is developing from within a new framework with novel concepts and processes.

Without drastically improving the efficiency of computing systems in Web3, we will not be able to achieve the vision of fully decentralized services and applications running on fully decentralized and verifiable platforms.

Forging Ahead — Developing the Future

I am optimistic, and that optimism is backed by the growth trends we’re currently seeing in Web3. Beginning six years ago, that’s roughly a tenfold increase annually. No, it’s not the same as social networks, but put it into perspective and maintain growth at that order of magnitude — it won’t take long before we see significant adoption of Web3 services. Of course, there are scalability challenges such as those mentioned above to maintaining that growth rate, such as those noted above, but it’s not that these challenges are insurmountable. The teams and projects that we are seeing are also highly adaptable.

We will often see a team begin work on one project to deliver a service or application to a group of customers, only to get drawn into other projects on their quest to resolve their technical problems. Typically, it ends with new development in constructing a financial infrastructure that turns out to be very useful, highly impactful, and valuable to the whole.

But unfortunately, these solutions get pigeon-holed among the same user groups, so scaling out to more users enticing more users, possibly with a network effect, is holding us back from the mainstream.

Some of these developments are rapid, and swapping into the mainstream can happen in what seems like an instant — look at the NFT ecosystem. What began as a semi-important implementation detail in the Ethereum community forums to become a worldwide phenomenon is only a matter of a few community applications and projects and people just trying things out.

It was impressive that this global meteoric success erupted from a platform that was not in widespread public use, and it was the incentive structure that was vital to encouraging more people to participate that fueled its growth.

It is all about getting incentives to align and continuing to progress towards a fully verifiable computing platform. But, of course, there’s still a long road to that, and different project elements are often more complicated than others. For example, decentralizing storage is complex but easy compared to fully decentralized computing. With computing, you need to solve additional computational privacy and efficiency problems. We will need to make compromises between total verifiability, total privacy, and efficiency. Some systems can achieve that, but they haven’t yet been wrapped together into a structure or framework that can give a proper fight to the frameworks used in the current web development space. We might see it in the next two, maybe three years.

This approach, and thinking of it this way, builds out another perspective — the Cloud as we know it today is a by-product of a successful Web2 platform.

Web3 applications will be a use case that drives the infrastructure supporting it in a way that achieves the evolution of the Cloud and cloud-based services as we know them today.

Let me expand on that idea.

The Inflection Point

Going back to the origins of the modern Cloud Infrastructure, it was initially built to support Google’s expansion before other providers began to develop systems that could store and support social networks. Then, between 2000 and the 2010s, each company developed its own version of the Cloud. Finally, they began to offer that infrastructure and capabilities as a service to the rest of the world.

The catch for the next evolution of the Web is that matching that level of development, infrastructure, and power is very difficult and scaling with any efficiency is practically impossible.So the route forward is to have a platform that surpasses Web2 in terms of ease of development. I think we’re well on our way towards that. People’s capabilities, toolkits, and ease of development have dramatically improved in the past few years.

There have been blind spots, areas that have been given less thought, such as high-quality software deployment pathways that consider the end-users and developers using the product. But once solutions begin to emerge that address this and scaling issues, there will be an inflection point where it makes sense for people to swap over, and they will. I remain optimistic because start-ups are already solving some of these problems.

These are not such complex challenges — they’re the kinds of challenges that people with the right combination of service systems, cloud infrastructure, and blockchain knowledge could quickly solve without a lot of code while creating a solid proof-of-concept that can be leveraged and refined into an actual product.

This type of challenge leads to the unique proposition that Filecoin presents and how the workings of Filecoin set it apart from other cryptocurrencies and blockchain services.

We’ve looked at the current state of web development, what that ecosystem looks like, and where we are heading. In the next part, we will take a deep dive into Filecoin and the specific example of commoditizing storage while developing a fully decentralized, verifiable, Internet Native content storage and delivery solution.

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Itay Katz

Itay Katz

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