Web3: The next generation of internet use

Web3 is quite an elusive term to define beyond “you know it when you see it”.

For me, it’s the glue between the web as we know it and the emerging permaweb (read as Ethereum); allowing us to use our crypto with every smart contract in existence with the click of a button.

It’s the UI you use to open a CDP with MakerDAO to create DAI, the way you login to p2p social networks like Satellite, use DeFi, and even to register your name on the internet for eternity 999 years.

And now, Web3 is coming to Web2 sites like Twitter & Facebook with a new Chromium extension called MaskBook, which offers encrypted messaging, truly private images, and even native Web3 ecommerce embeds!

With Web3, you can:

  • Login to an application without them storing (and losing) your person information
  • Send a private message on any platform that only your recipient can read
  • Send money anywhere without permission from your government and bank in seconds
  • Donate money directly to a cause without a middleman directly from your Twitter feed
  • Establish the foundation of your self-sovereign digital identity

Let’s dive in and learn about some of the cool projects building out Web3 for the rest of us to enjoy.

It starts with Wallets

Web3 starts with a wallet (I recommend the Meta Mask extension).

Web3 wallets like MetaMask hold your money – obviously – but more importantly they make Web3 available on every webpage you visit. You bring Web3 with you as you browse; it’s just a matter of each site using it, too!

When you use a Web3 native website like Zapper Fi, it can ask your wallet for permission to submit transactions to smart contracts, transfer crypto, or sign messages using your private key (more on signing below – spoiler alert, it’s cool).

Because you are in complete control of your wallet & transactions, these site’s can’t do anything without your express permission. In fact, Web3 sites are analogous to speed dial for smart contracts: they offer easy buttons or forms that let you interface with the blockchain on your own.

When you visit websites that don’t support Web3 like Twitter, nothing happens – unless you add your own Web3 functionality to them…

Introducing Maskbook!

Web3 on Twitter with MaskBook

What if you could tweet something that only your followers could read.

Imagine sending a “private” DM to your partner that Twitter itself couldn’t decipher (or leak).

What if you could contribute to a GitCoin fund straight from your Twitter feed.

Imagine purchasing an NFT directly from your DMs.

MaskBook is a very interesting piece of tech that injects Web3 into websites as you browse (with permission) and edits the page (DOM) to create integrated experiences in context. For example:

Through MaskBook, I create a GitCoin Web3 link and tweet it. On Web2, nobody is the wiser: it looks like a regular link

Maskbook fallback

But with MaskBook’s Web3 lens, you would see the embed come alive directly in your feed.

Maskbook progressive enhanced Gitcoin embed
Amazing!

Clicking the button opens a dialog to execute a Web3 transaction (currently using a native wallet implementation, adding Meta Mask soon).

Boom – Web3 p2p ecommerce within your Twitter feed.

Pair a decent UI & capture for shipping/download info and you could sell any product with a single link.

Here’s how it works:

Maskbook uses a loophole in Twitter’s character-limit logic: they don’t count links as characters. So, Maskbook can build a super long link with the details and extract/interpret it in the DOM as anything imaginable. 

For me, the most beautiful part of it is the progressive enhancement from the simple fallback link.

One more thing

But what if they fix the character loophole? Easy: Maskbook can encode text into images and interpret – like a QR code, but cool.

Maskbook also integrates the same features into Facebook and has no limit on how it could blend Web3 into any existing Web2 property.

What could you do with Web3 on Amazon? Reddit? Netflix?

Sign in on the dotted line

As I mentioned above, Web3 wallets aren’t just useful for operating smart contracts and transferring funds: they can be used to completely replace email/password login.

That’s right, no more passwords (at least, no more website passwords – please use a secure wallet password).

Because wallets contain your private key, the address is only usable by you! Typically, this means only allowing you to execute transactions, but recently MetaMask has added the ability to sign messages as the address as well. This is a simple operation that proves you have the private key without revealing it.

In practice, signing a message to the website allows them to confirm that you own the address and let you log into the site!

Satellite offers a great example of this process:

  1. Register your username & address (on-chain)
  2. Sign a message proving you own the address
  3. Tada, logged in!

Satellite also forces you to sign all of your content and stashes it all in torrents over IPFS, which is an interesting concept that we’ll visit another time.

Register your name for 999 years

Enter ENS. 

ENS is quickly becoming the preferred naming tool for Ethereum (and otherwise). Compared to its counterparts Unstoppable Domains and Handshake, ENS’s focus on address resolution instead of IPFS or root certificates has really given it a mass-adoption head start. 

But ENS is so much more than address resolution (and email); I peg it for the foundation of digital identity as we know it.

Check this out (and forgive me for skipping its IPFS and DNS functionality):

First, ENS is a shortcut.

When I need to use my ETH address, I can type in jameswmontgomery.eth instead of the whole gambit. Any of the growing number of web applications that support it can simply translate that into my actual ETH address (or BTC and other chains as well).

This feature is what most people use ENS for right now.

Second, ENS allows for custom key value text pairs.

Beyond adding all my coin addresses, I can add my website url, my twitter handle, or even an entire pgp public key – any key/value pair I can think up, linked forever to an account I alone control.

With ENS, I can connect all the pieces of my public identity into one place on the blockchain. Imagine not filling out the social links section of a profile (or any piece of a profile) ever again.

On top of that, I can give someone my ENS name and they’ll be able to lookup all my public profiles in one shot. A modern business card.

Now that I have my info added to my ENS name, let’s use it to “login”.

Then, I can “login” to applications.

Using just my ENS domain, I can pre-load any website with all my public profile info. Any transactions would be Web3 protected by my actual wallet (or signed by my key), but the publicly readable content could easily be pulled into an application.

Take a look at Zapper Fi again; you can plug in jameswmontgomery.eth and watch/review my transactions (or anybody at all) without logging in at all. This is just a taste of Web3 applications to come: simply inputting an ENS name to start using the public portion of the application, while gating real transactions with the wallet.

DeFi, NFTs, social networks, and anything on the blockchain are as easily accessible as plugging in your digital name.

It’s a healthy reminder to maintain compartmentalized pseudo-anonymity as well.

Lastly, I connect with my network.

What is identity if not in relation to other people?

Since my address might touch others, I can construct a contact list of other ENS names & profiles that I have known – whether through web applications, ETH transactions, or even Web2 applications like Twitter.

I could delegate my credit to a friend or even “stake” the information of my friends’ ENS profile as correct.

Consider how you could tie yourself publicly to other ENS names, contracts, and addresses – or inversely how you could publicly dissociate/discredit others as well.


So, ENS ties together a username that: 

  1. Easily resolves to any crypto address
  2. Preloads public data about you into any web app
  3. Allows only you to “sign in” or execute transactions
  4. Can touch every other ETH contract & contact

And you can rent it for 999 years on-chain for $5k – or, you could just grab 1 year for $5 like a normal person (or control a free subdomain, hmu). 

ENS connects the dots for an even smoother Web3 experience and I can’t wait to see how we use it for digital identity in the future. 

Web3 is dope

These are just a couple of cool projects I’m keeping my eye on. 

Web3 is constantly being built up and, in my opinion, is one of the biggest web development opportunities of the next 10 years.

So start getting used to using your wallet (and try not to get wrecked by gas fees)!

What cool Web3 projects are you into?

Review: Linus High Yield DeFi Platform

DeFi is quickly becoming one of the most impactful use cases that public blockchain networks are offering. Atomic transactions, smart contracts, and automation are driving costs down, democratizing finance, and surfacing very alluring yields on deposits.

With products like BlockFi and Compound, it takes a bit of technical know-how to participate in the space. For most in the cryptocurrency space, maintaining a wallet and working with exchanges is quite easy – but there’s a gap in participation for those that are not technically savvy.

If you want a no-fuss onramp to cryptocurrency DeFi gains, check out Linus!

What is Linus DeFi?

Linus is a simple Financial Service Provider (FSP) that accepts USD transfers and returns a high interest rate on that account. No settings, no bells, no whistles.

Behind the scenes, Linus takes the USD, exchanges it for USDC, and loads it onto Compound Finance to take advantage of their DeFi lending pool’s APY. 

In short, they handle the “techiness” on behalf of their depositors. Linus democratizes DeFi for those who don’t or can’t use DeFi themselves.

Linus has just launched out of private beta and is open for new account creation. Here’s the overview of what they have to offer.

Pros

No fees

Linus currently has no fees, at all.

They profit directly from the APY differential between their rates and Compound. 

Extremely easy

Linus only allows two actions: deposit and withdraw. You don’t need to understand cryptocurrency to take advantage of its power.

Better rates

Linus’ APY puts savings accounts and other investment products to shame. Their current (variable) APY is a monster 3.5% – topping both the 2.3% inflation rate and Marcus’s 2.05% 12mo CD.

No term limits

No need to lock up your capital in CD to get this rate – or suffer a penalty for early withdrawal. Deposit or withdraw at any time.

Instant accrual

Due to the instantaneous nature of DeFi, Linus accounts accrue interest every second – you don’t need to wait 30 days (or years) to get your interest.

USDC stability

Compared to Dai, USDC is an audited 1:1 backed stablecoin. This allows for a large liquid safety net for withdrawal needs.

Cons

No insurance

High risk, high reward. Linus does not offer insurance on their products at this time. If the underlying assets are lost, there is no recourse (as is the case when using any DeFi products). 

However, they are pursuing adding insurance policies through on-chain insurers (like Nexus and Onyx) and off-chain as well.

Variable APY

DeFi rates will go down over time. Though common investment products suffer the same variable APY, products like CDs do offer stability in the face of flux.

Unlike some competitors who adjust APY live, Linus only does this monthly.

Lower APY

USDC interest rates are typically lower than other cryptocurrencies.

Dharma, a similar product, leverages the same technique using Dai and offers nearly a 7% APY at present (skyrocketing to upwards of 20% during Black Thursday chaos, but then falling to 3% in the aftermath). 

Comparatively, putting GUSD directly on Compound gets you 8.6% (without the easy account, though).

USD only

At present, there are no options to deposit any other Fiat or crypto currencies. This tracks with their positioning towards the non-crypto userbase, but it does leave something to be desired for those like me (especially when Dharma allows for Dai deposits).

Compound only

Though they are actively pursuing diversification, Linus currently leverages Compound Finance singularly. This leaves a single point of failure open for DeFi protocol abuse – if Compound fails, Linus fails.

On top of that, by only using a single platform, Linus’s APY is essentially tracked to Compound. As they diversify, we’ll see this rate become a bit more stable.

No transparency

Compared to Compound’s public transactions and USDC’s audit trail, Linus does not offer any audits or transparency reports (similar to any bank and how they use your money).

Though on-chain transaction monitoring is in consideration, you must be able to reconcile that investment businesses set up without transparency could model ponzi schemes. 


Ultimately, I’m a fan of Linus. I spent some time talking with their founder Matthew Nemer and believe they have strong, intelligent leadership to guide them through a highly competitive DeFi landscape.

Check out Linus for yourself! [referral link]

Experimenting with DeFi: BlockFi and Smart Contract Lending

Heads up, I will be using affiliate links in the article. These do not impact my views on the company or products herein.

Close your eyes and picture a bank. It’s got columns, doesn’t it.

Now, let’s consider banks at a high level. Primarily, they store your currency and offer you a modest return on investment for the handful of products that store it (checking, savings, CD, etc).

Obviously, the bank has to be making money somehow in order to pay your interest rate. The simplest mechanism they have available to them is lending money and gaining interest on those loans.

Simple: Bank issues a loan with 10% interest, pays you 2% interest on your money, and keeps the rest for profit and expenses.

DeFi lending is the same pattern.

  1. You store your currency with an institution like BlockFi.
  2. BlockFi gives you an APY (interest rate) with monthly accruals.
  3. BlockFi uses your money to lend out to borrowers in order to gain interest on their loans.

It’s honestly as simple as that (but obviously, let’s get into the details).

I don’t trust it, but let’s experiment anyway

In all likelihood, if I send Bank of America $20, I can be pretty confident that they won’t lose it. Between institutional standards and the FDIC insurance, I have faith and trust in my account with them – despite absolute garbage savings account interest rates (literally, 0.03% interest – it should be illegal).

Now, if I send that same $20 to my BlockFi account, there’s a greater chance of that money vanishing at some point – whether through a hack, management theft, or general crypto fuckery. It is not FDIC insured, I do not own the keys, and crypto is an evolving industry.

So, the fundamental crypto strategy must be applied: only spend what you can lose!

$20, here we go!

How it actually works

After passing through standard account creation (username, password), I logged in to a completely disabled BlockFi dashboard that prompted me to continue account setup with identity verification.

See, despite how the media might portray crypto, most companies in the space try their best to abide by KYC/AML laws.

SSN, pictures of my ID, address, etc later, I had an activated account available for experimentation within 10 minutes of signup.

At this point, the only thing left to do was deposit some crypto. No application, no negotiation, no wait.

I clicked on “deposit” (one of three possible actions) and was prompted with a deposit address.

Feel free to deposit ETH into my BlockFi account I guess

From there, I sent $20 worth of ETH from one of my other accounts and 30 seconds later my balance was updated!

Protip: technically, that "wallet address" they prompted was actually a smart contract address that controls the account!
3.6% APY on its way!

Time will tell what the actual value of this changes to over time – and specifically what the accrual of eth looks like.

Though the UI showcases my account balance in USD, all payouts and APY are denominated in currency of the account. For example, 6% APY (hypothetical APY) on 10 ETH would yield 0.05 ETH after one month (10 ETH x 6% / 12 months), regardless of the USD:ETH price.

For this reason, we’ll be monitoring the actual ETH numbers for this experiment, not the USD value.

One more thing

BlockFi accepts other currencies beyond ether – and each currency has it’s own APY.

For instance, right now I am getting 3.6% on ETH, but I can get a whopping 8.6% on GUSD (I’m assuming stablecoins offer less risk for loans, so the share is greater)!

On top of that, you can actually trade and take out loans from the platform as well (more on this later).


Check back in later for updates on how this experiment went! Hopefully I’ll have time to monitor and keep track of my $20 🙂

Join BlockFi and try it yourself! Just remember, only use what you can lose.