Proposal

Forget HTTP: Ethereum has a new URL standard that can’t be blocked

Under a newly rolled out Ethereum standard, DApps and NFTs can be accessed by internet users without the worry of centralized censorship.

Web3 URLs — enabled with the launch of ERC-4804 — have made it onto Ethereum, allowing internet users to access Ethereum applications and nonfungible tokens (NFTs) without worrying about centralized censorship.

The new Ethereum standard, titled “Web3 URL to EVM Call Message Translation,” was first proposed on Feb. 14, 2022, and was co-authored by ETHStorage founder Qi Zhou, Ethereum researcher Sam Wilson, and Chao Pi.

It described the proposal as an “HTTP-style” URL to directly access on-chain Web3 content, such as decentralized applications (DApps) front-ends and NFTs. More than a year later, ERC-4804 was approved and finalized on the mainnet on March 1.

Anthurine Xiang, a spokesperson for layer-2 storage protocol ETHStorage, explained that in many cases, the ecosystem still relies on centralized web servers to access “decentralized” apps. 

“Right now, all the DApps like Uniswap […] claim to be decentralized apps,” Xiang explained, adding: “But how [do] we get on the webpage? You have to go through the DNS. You have to go through GoDaddy. […] All those are centralized servers.”

Graphic explaining how the new model compares to Web2. Source: w3eth.io

Today, most users access the internet via “Hypertext Transfer Protocol,” widely known as HTTP. 

When an internet user clicks a link or types in a website address, the computer uses HTTP to ask another computer to retrieve the information, such as a website or pictures.

Under ERC-4804, internet users have the option to type in “web3://” (as opposed to “http://”) in their browsers to bring up DApps such as Uniswap or on-chain NFTs directly. This is because the standard allows users to directly run a query to the Ethereum Virtual Machine (EVM).

Flow chart explaining how Web3 URL standard works with Uniswap. Source: w3eth.io

Entire websites can theoretically be accessed by these means as long as their content is stored on the Ethereum blockchain or a compatible layer-2 protocol. However, the costs of doing this are still very prohibitive, according to ETHStorage founder Qi Zhou.

“The critical issue here is that the storage cost on Ethereum is super, super expensive on mainnet,” Zhou said in a recent presentation at ETHDenver.

“For example, 1 Gigabyte of on-chain data will cost roughly $10 million. […] That is unacceptable for a lot of Web2 applications and even a lot of NFTs,” Zhou added, noting that layer-2 storage solutions could help mitigate some of the costs.

Xiang suggested that, given the costs, the new URL standard makes sense only for specific applications. 

“Not everything needs to go decentralized. If you are running a pretty good Web2 business and you don’t have to worry too much about centralized censorship. […] You can just go for that.”

On the other hand, the new standard would be useful for DApps or websites at risk of censorship, with Tornado Cash as an example.

“For example, for Tornado Cash, a lot of people can’t get to them through their website because there’s censorship,” Xiang explained.

“If you’re a DApp and you’ve already been decentralized, why are you still using a centralized website for people to get access to you?”

Example of websites that are able to be accessed via web3:// URL. Source: w3eth.io

Asked whether the new standard could be leveraged by bad actors to partake in illicit activity, Xiang said:

“This is really hard to say just like how Bitcoin was founded. I think Bitcoin was not born for evil, but still, in the beginning, people [were] doing shady things like the Silk Road, they had been using Bitcoin.”

Instead, Xiang believes, like Bitcoin, they’re just giving people a decentralized option they may not have otherwise. 

The new Ethereum standard is the first of its kind for the blockchain, noted Xiang, though it’s not the first solution to decentralized web hosting. 

Related: How to host a decentralized website

The InterPlanetary File System (IPFS) is an example of a network created to do through decentralized means, what centralized cloud servers currently provide. However, Xiang noted that an IPFS URL can only link to static content, which can’t be amended or changed.

ERC-4804 will allow for “dynamic data,” such as allowing people to leave likes and comments and interact with content on a website, explained Xiang. Being Ethereum native, the standard is also expected to be able to interact with other blockchains much easier, Xiang added.

SEC to target crypto firms operating as ‘qualified custodians’ — Report

If a majority of the five-member SEC panel votes in favor of the draft proposal, it will proceed to the next stage, which will be reviewed by other members of the SEC.

The United States Securities and Exchange Commission (SEC) is reportedly planning to propose new rule changes this week that could impact what services crypto firms can offer their clients. 

According to a Feb. 14 report from Bloomberg citing “people familiar with the matter,” the securities regulator is working on a draft proposal that would make it difficult for crypto firms to hold digital assets on their client’s behalf as “qualified custodians.”

This may, in turn, affect the many hedge funds, private equity firms and pension funds that work alongside such crypto firms.

According to those cited, a five-member SEC panel will vote on Feb. 15 on whether the proposal proceeds to the next stage.

A majority vote — three out of five — will be needed for the rest of the SEC to vote on the proposal officially. If approved, the proposal will be amended with feedback where necessary.

While the SEC has deliberated on what should be required to be a qualified custodian of cryptocurrencies since March 2019, people familiar with the matter said it isn’t clear what specific changes the U.S. financial watchdog is seeking.

If finalized, Bloomberg explained that some crypto firms might have to move their customer’s digital asset holdings elsewhere.

The report added that these financial institutions might be subject to “surprise audits” related to their custodial relationships or other ramifications.

Related: SEC chair issues warning to crypto firms after action on Kraken staking

The news of Wednesday’s vote proposal comes after a Jan. 26 report from Reuters suggesting the SEC would soon pursue Wall Street investment advisers over how they’ve offered crypto custody to their clients.

In recent days, the SEC has had its hands full with Paxos Trust — the issuer of the Binance USD (BUSD) stablecoin — which they believe in having issued as an unregistered security.

Paxos said they would be prepared to “vigorously litigate” if necessary.