Composability refers to creating reusable software combinations that can be used to create new applications.
The origin of composability can be traced back to open-source technology, and it is believed to be a very important factor in the early growth of the internet. Alongside web 2.0, web 3.0 or the third generation of the web also requires composability to create value and innovation. In this article, we will explore the concept, benefits, and applications of composability in web 3.0.
What is meant by composability in web 3.0?
In the context of app development, interoperability in web 3.0 refers to the “ability to combine existing components and use them to produce new products.” In an interoperable structure, each component has a specific use. Developers can create new applications by combining these components and adding new features. In this case, the developer does not have to create the entire program structure from scratch. As previously mentioned, interoperability is one of the key features of open source technology. Developers can use open source software created by others in their products without fear of legal issues or copyright infringement.
The early developments of the internet were based on this idea of widespread access to technology, but large companies and tech giants have minimized the use of interoperability to protect their own interests. Companies like Google, Facebook, and Amazon protect their software through various methods. They use patents and designs, protect their data, or intentionally use incompatible technologies in their products. In addition, web 2.0 companies tie users to their platforms and do not allow them to use competing platforms by charging high fees. The result is a disjointed system whose components cannot be combined and work together to create greater value.
The importance of interoperability in Web 3.0 and blockchain
The explosive growth of decentralized technology or the third generation of the internet has drawn people’s attention to the concept of interoperability in Web 3.0. Similar to open-source technologies, blockchain applications are highly collaborative and can create new experiences for users by using existing databases. In the realm of Web 3.0, interoperability refers to the ability of blockchain applications to communicate and collaborate with each other. Decentralized exchanges (DEX), decentralized applications (DApps), and independent decentralized organizations (DAO) are examples of blockchain applications.
Interoperability in Web 3.0 in blockchain technology means that developers can freely use the codes of other programs in their own products. For this reason, smart contracts that control the functions of applications are open-source and publicly available for use.
Composability in Web 3.0 technology reduces the development cycle required for decentralized application development in blockchain. Previously, developers had to build each feature of an application from scratch. Composability enables developers to use existing code from other programs to create new applications and minimize the time spent on writing lengthy code.
One area of blockchain technology that utilizes composable software is decentralized finance or DeFi. For example, SushiSwap, a decentralized exchange, created its own decentralized exchange by copying the codebase of Uniswap and adding new features such as governance tokens and liquidity mining.
The application of interoperability in Web 3.0
When different elements of a system can be combined, interoperability in Web 3.0 can create a cohesive interactive system. Blockchain technology components such as DApps, DEX, and DAO are inherently combinable and can be replicated, copied or integrated. Blockchain interoperability is usually done at the project or smart contract level. In this case, developers can design new powerful programs by combining powerful components and provide more functionality to users.
- Structural interoperability: Structural interoperability means that different components can be placed together in a way that their combination leads to the creation of entirely new systems.
- Modularity: In an interoperable structure, each component must solve a particular problem well. Developers can combine different modular components in a product in a way that each component has its own specific task.
- Autonomy or self-directedness: Combinable components of a structure should be able to work independently of each other, and their performance should not depend on other components. With this feature, each element can be changed without affecting the overall structure.
- Discoverability: Interoperability in Web 3 allows developers to reuse software frameworks and databases. Of course, these frameworks and foundations must be discoverable and usable by others. In fact, the codes must be open source so that they can be used or modified without any restrictions.
One of the best examples of structural compatibility in blockchain technology is Ethereum. Ethereum’s smart contracts are like components that anyone can use repeatedly; meaning developers can reuse the code of the basic contract to build the main infrastructure of DApps.
In the Ethereum ecosystem, smart contracts are like building blocks that developers can use to add complexity to their structures and programs. Examples like Sushi Swap and Uni Swap mentioned before show how different projects can use one code for various purposes.
Syntactic compatibility is also used in other blockchain applications. For example, building a customized management system for DAO can be expensive and time-consuming. However, this decentralized organization can easily use existing governance tools like Aragon client to create a governance system.
What is atomic composability?
Being atomic in blockchain means creating a single transaction from the combination of multiple different operations. This transaction can be a token exchange or communication with other smart contracts. Based on the principle of irreversibility, each operation in the transaction must be correct for the transaction to be executed properly. If any part of the transaction fails, the transaction will not be completed.
Therefore, atomic composability, which is a combination of the concepts of indivisibility and composability, means that a transaction can be related to several different smart contracts. An error in any part of the transaction will cause the transaction to stop. In fact, the transaction is either entirely feasible or not.
In addition, atomic composability only occurs when all parts of the transaction are executed on a single layer platform. Performing a complex transaction using different decentralized blockchain programs (such as Ethereum, which is layer 1, and Polygon, which is layer 2) may be impossible.
The best examples of atomic composability can be seen in the DeFi ecosystem.
Below we examine some examples of using atomic composability:
Instant Loans: For those who are not familiar with digital currencies and DeFi, the concept of instant or fast loans may seem somewhat illogical or unlikely, but due to atomic composability, instant credit has a pattern and simple functionality. The idea of instant loans is very simple. You receive a loan and pay it back in a single transaction. Fast loans work according to the rules of indivisibility. That is, if the transaction fails, lenders get their money back. In this case, there is no need for collateral to borrow because users cannot repay the loan.
Automated market maker: (AMM) is a platform that enables trustless and atomic digital currency transactions. AMMs can be considered as “portfolio managers” that analyze market conditions and make investment decisions based on those conditions.
Yearn Protocol is one of the most popular creators of automated markets in the DeFi space. Yearn’s automated market maker can automatically scan various DeFi platforms and transfer your digital currencies to the most profitable platform (e.g., in terms of transaction rewards).
The Yearn Protocol operates based on the following two principles:
- The protocol can access token price information on various DeFi platforms. If a platform protects its pricing data, Yearn can no longer compare prices.
- Different elements of the DeFi ecosystem quickly combine in a trade. For example, Yearn’s trading robot can use Ethereum as collateral to borrow DAI stablecoins from MakerDAO, use these stablecoins on the Curve platform to receive CRV tokens, sell CRV tokens, buy Ethereum, and finally use Ethereum as a payable security to MakerDAO.
Interoperability in Web 3.0 and Decentralized Identity
Another use case of interoperability in Web 3.0 is identity management. Currently, since each platform needs to design and implement its own system for collecting and managing user identities, identity frameworks do not combine well with each other.
One of the biggest advances in interoperability in Web 3.0 is that users can transfer their identity between decentralized applications. Users can store their identity in decentralized wallets and allow DApp identity verification systems to only read that identity. This means that the user does not have to remember long passwords or repeatedly enter the same information in different applications.
Composability in Web 3.0 refers to the ability to seamlessly combine different decentralized applications and protocols to create new, more complex systems. This concept is fundamental to the development of decentralized finance and other Web 3.0 use cases. With composability, users can build and interact with decentralized systems in new and innovative ways, unlocking the potential for greater creativity and collaboration in the blockchain ecosystem.