Web3 Protocol Design: From Tokenomics to Protocol Design

Recently, a16z has been focusing on topics that go beyond tokenomics. Following the "Token Design" and the book "Tokenology: Beyond Tokenomics", a16z has launched a course on "Protocol Design". As the speaker, Eddy Lazzarin, CTO of a16z crypto, emphasized that protocol design is key to going beyond tokenomics, while token design is merely an auxiliary tool. This article summarizes the main content of the course and provides insights and inspiration for entrepreneurs on protocol design.

The Internal Laws of Protocol Evolution

Internet protocol: the bond of interaction

The internet is a network composed of various protocols, including simple HTTP state diagrams and complex Maker protocol interaction diagrams. The commonality among these protocols is that they are all formalized interaction systems that facilitate complex collective behavior. The power of internet protocols lies in the fact that they connect not only interactions between people but also interactions with software.

Evolution of the protocol: Web1 - Web2 - Web3

Web1 protocols are decentralized but lack a clear economic model, such as NNTP, IRC, SMTP, and RSS. Web2 protocols are centralized and have a clear economic model, such as Reddit, WhatsApp, and Gmail. Web3 protocols aim to establish a clear economic model on the basis of decentralization.

Web1 protocol faces failure or change, mainly due to a lack of specific features and difficulties in securing funding. Web2 addresses the limitations of Web1 but is entirely controlled by its owners. Web3 leverages encryption and blockchain technology to provide openness, interoperability, and a clear economic model.

Web3 Protocol Design Case

Taking "Unstable Confusion" as an example, this discusses the process of converting the Web2 protocol "Stable Horde" into a Web3 protocol. Key points include:

1. Verification mechanism: Use methods such as game theory and cryptography to ensure reasoning accuracy.
2. Pricing Strategy: Consider on-chain order books, on-chain verification of computational resource agent metrics, etc.
3. Storage Mechanism: Weigh the pros and cons of on-chain storage, dedicated storage networks, and off-chain storage.
4. Task Allocation Strategy: Discuss methods such as worker self-selection, protocol allocation, and user choice.

Key Points of Decentralized Protocol Design

1. Identify and address the 7 key design elements that may lead to centralization.
2. Reduce switching costs and promote interoperability between systems.
3. Make full use of Web3 technology to create decentralized systems.
4. Conduct in-depth research in all aspects and choose the best solution.

Following these principles can help build systems with long-term robustness and decentralized characteristics, laying the foundation for the development of the Web3 ecosystem.