What is Smart Layer? How to integrate Web3 with real-life scenarios?

Since 2018, the infrastructure Smart Layer has been focusing on enhancing the scalability of token functionalities. By utilizing Smart Tokens, it integrates existing Web3 with real-world use cases, bringing the composability of tokens into the final stage of the real world. This article references the official documentation and whitepaper.

This article does not constitute investment advice.

What problem does Smart Layer aim to solve?

Traditional Web2 integration limited to three

Although it may seem that most integration in Web 2 has been completed, in reality, most websites still rely on three main types of integration: login, social media sharing, and checkout functions. The most common tools for these three functions are Google ID, Twitter, and Apple Pay.

While integration is known to be a basic function of the internet, existing websites or applications often struggle to integrate more than these three functions. This phenomenon is known as the Limit of 3 problem, for which there is currently no good solution.

Businesses aim to create better user experiences and improve operational efficiency. However, the complex integration and data sharing regulations in existing Web2 hinder such developments.

Insufficient infrastructure for real-world applications in Web3 integration

Web3 itself is characterized by its composability and should be able to solve the problems of Web2 mentioned above. This is what many Web3 supporters advocate, but it has not yet become mainstream. Why is that?

The ICO craze of 2017 and the NFT bull market of 2021 both treated tokens as speculative assets. Neither of these waves provided mainstream use cases beyond DeFi and digital collectibles, resulting in a lack of killer applications.

Tokens can exhibit high composability and applications when combined with smart contracts. The market also expects future integration of more real-world applications and problem scenarios. However, the infrastructure to achieve the latter is currently severely lacking.

Although it is known to integrate real-world scenarios, there is still no perfect way for general websites or applications to access on-chain data. The on-chain logic of tokens is also not suitable for extending to external services, leading to existing tokens merely existing as proof of assets.

Blockchain currently only provides trust guarantees and does not allow tokens to be directly used on any off-chain websites.

Goal: Tokens highly integrated with usage scenarios

If Web3 can be highly integrated with daily life, the following scenarios could be imagined, using airline tickets as an example.

In the future, airline tickets could be tokenized, exhibiting value within their issuing platform, a capability already present in existing Web3. However, envision this ticket being able to integrate across different systems; this ticket could update a user's travel status on social media, integrate with Google Maps to guide passengers to their boarding gate, or automatically communicate flight changes to the hotel or car reservation system the user has booked with.

These simple applications should have existed long ago, but due to the isolated nature of the internet, they have not been realized, with centralized points only providing fragmented solutions.

Smart Layer Solution

The Smart Layer team specifically introduces two components to bring the scalability of Web3 tokens into the real world:

• Introducing a new token standard, Smart Tokens: The current token functionality is limited by smart contracts. Smart Layer addresses the issue of expanding token functionality by introducing a new token standard, EIP-5169, through TokenScript. This allows tokens to offer more functions beyond just representing assets, providing more composable business services.
• Smart Layer middleware between Web2 and Web3: For Web2 services that need to integrate token functionality, direct integration with underlying smart contracts is required, but the lack of relevant infrastructure leads to low scalability. Smart Layer acts as middleware, enabling Web2 services to embed advanced token functions into existing products.

The following sections elaborate:

Smart Tokens

Smart Tokens are a key component of Smart Layer, aimed at facilitating interactions between applications across multiple platforms. Smart Tokens are not just valuable digital assets but also enhance token functionality and support applications of external applications.

For example, a smart token for a car can be used across different applications and merchants, seamlessly connecting car owners with various vehicle services and features. It can authorize short-term access keys for customers on car rental websites or report its latest location on an insurance website to receive immediate roadside assistance. This level of integration and utility sets smart tokens and Smart Layer apart from traditional tokens or NFTs.

Specifically, smart tokens add a layer of TokenScript XML format to existing token contracts, providing operational logic for tokens beyond the contract layer. This allows traditional service providers and applications to read or operate specific token logic.

TokenScript adds a layer of code that transforms tokens into programmable objects that can provide services to the outside world, a capability that smart contracts themselves cannot achieve. While smart contracts set rules, they do not provide services based on these rules.

Smart Layer is the final step in bringing the composability of tokens into the real world.

Smart Layer Middleware Architecture

For the middleware layer linking Web2 and Web3, a centralized network design is introduced:

• Blockchain: Provides an environment for smart contract execution and token transaction rules, while maintaining snapshots of token operations for verification. Smart Layer can operate within any blockchain that can provide the mentioned functions.
• Anchoring Nodes: Responsible for network governance security. These nodes are operated by reputable organizations elected by the Smart Layer DAO, maintaining network stability and security, verifying that service nodes perform their tasks properly, and issuing proofs. Well-performing nodes can receive mining rewards.
• Service Nodes: Responsible for providing TokenAPI to achieve service integration. In addition to mining rewards, service nodes can earn fees by providing services, meaning they get paid when websites, applications, and token issuers request data services.

These components work together to create a dynamic, secure, and efficient network forming Smart Layer, providing the data and operational logic required for highly integrated solutions.

Success Stories

Smart Token Labs, a project team, introduced a new marketing concept for the Open Loyalty loyalty program at EDCON 2023 last year.

The URL sent to attendees was a ticket proof, used not only to prove ticket ownership but also stored in users' browsers through Smart Layer, allowing holders to verify ownership without opening a wallet or signing transactions, simply by using the URL in the browser.

This successful enhancement improves user experience for users and eliminates the need for brand owners to invest in building loyalty program systems.

Visa launches Web3 loyalty solution to tap into the digital integrated marketing market

Smart Layer provides Web3 integration solutions for small businesses

Web3 integration is the prerogative of large companies

In fact, the market is not lacking in cases of Web2 integrating with Web3. Major brands, including Starbucks, Visa, Nike, traditional financial institutions like JPMorgan Chase, and HSBC, have all tried incorporating blockchain applications into their products and marketing activities.

JPMorgan's digital asset platform Onyx will test tokenized wealth management services with Avalanche

However, most existing cases are limited to specific use cases, such as Starbucks' loyalty program or specific blockchain networks that have already been integrated, like JPMorgan's blockchain integration platform based on the Quorum network. Currently, there is no comprehensive solution in the market that meets all needs, making such demands crucial for small companies without resources.

Starbucks launches Web3 project Starbucks Odyssey, collecting NFTs for exclusive experiences

Smart Layer fills the gap in integration needs for small companies

Large companies have taken the lead in trying due to financial advantages, most of which have achieved good results. Small companies currently lack the opportunity to try. Smart Layer addresses the missing layer in connecting existing Web2 services to Web3, providing a complete and cost-effective solution that allows anyone to try.

Smart Layer supports most blockchains and can be used in any scenario as long as the code can be written. Its generality and scalability are the advantages of Smart Layer entering the market of small and medium enterprises.

This article is not investment advice.