Web3’s dilemma and off-chain data solutions
As a general-purpose Web3 computing platform, modern blockchain faces high costs and slow speeds. Current successful systems are using real-time off-chain data to find market fit.
Challenges facing Web3
Web3 is going through a difficult period, not only due to high-profile malicious incidents that have cast a shadow over the blockchain ecosystem, but also facing several fundamental challenges:
On-chain storage and write operations are expensive: Compared to Web 2.0, on-chain operations are too expensive.
On-chain storage and write operations are slow: To ensure the security of the blockchain system, more than 51% of the nodes need to agree to write new data, which leads to performance degradation.
Blockchain ledger length grows significantly: As usage increases, ledger length increases significantly, upsetting the balance of most existing database infrastructure.
Distributed ledgers and traditional database confusion
Operational databases, analytical databases, and distributed ledgers are all valid but different database management systems. However, different blockchain networks are more than just “databases”, many also act as “servers” for hosting decentralized applications (dApps).
The problem of overgeneralization of technology
New technologies often go through a phase of overgeneralization until they find the right product or market. Blockchain technology is no exception. Using a distributed ledger as an operational or analytical database, especially in a dApp, is an unsuitable combination.
Innovative solutions for the blockchain community
The blockchain community is working to find ways to address performance issues without compromising security. Ethereum, for example, has already made some changes in this regard. However, trust still needs to be placed somewhere. Blockchain shifts trust away from the traditional Web 2.0 model, but does not completely eliminate the need.
The way forward for off-chain real-time data
Off-chain real-time data provides an immediately viable path for Web3. Although this approach places the trust of the dApp’s operational/analytic data on the Web 2.0 system, many successful dApps have already adopted this trade-off approach, leveraging the best of each technology.
What’s driving the future of Web3?
Blockchain is not limited to cryptocurrencies. Cryptocurrency is an application of blockchain technology. The same applies to NFTs and wider Web3 concepts. The core concept of blockchain - an immutable public record of transactions, location and ownership - differs significantly from current financial systems, where these ledgers are stored in private databases and can only be accessed in accordance with the rules of governing bodies and the laws of regulators to access.
Real-world use cases for blockchain
According to a McKinsey report, the largest Web3 lending platform issued $200 billion in loans in 2021. Effective use cases are already established for loans, deposits, remittances, asset swaps, trade finance and insurance. Other areas such as peer-to-peer, gaming, social and online media also showed significant activity.
Private blockchain system
Private blockchain systems, such as Hyperledger Fabric, may not have been originally envisioned, but have a wide range of use cases in specific industries and institutions. NFTs, as unique, indivisible and immutable tokens, have commercial value in representing both real-world and online-only assets digitally.
Investment, Development and Institutional Interest
Despite significant problems, blockchain development is driven by trends attracting investment, developer and institutional interest. As core technology improves, more Web3 value will be created and new opportunities will emerge, driving interest in addressing regulatory, legal, data privacy, and improving developer and end-user experiences.
The importance of real-time data
The application of real-time data is not limited to blockchain, but has a wide impact on multiple fields. Innovations over the years have proven the importance of real-time data in modern data architecture. Although we look forward to new innovations in quantum cryptographic services, the popularization of atomic clocks, and distributed consensus algorithms, real-time data has been implemented in today's cost structure and will remain at the core of future blockchain implementations.
in conclusion
Real-time data is not only a critical part of current blockchain implementations, but will continue to play a core role in any blockchain implementation in the future. Years of innovation in real-time data have demonstrated its importance in modern data architectures. While we look forward to new technological advances, real-time data is already implemented in today's cost structure and will continue to remain core to future blockchain implementations.