This article was drafted in March 2021. This paper is the basis of thinking about the chainless system. Published again to help understand the chainless system.
1. Blockchain, where miracles and failures coexist
A January 4, 2021 report: “IBM Blockchain has no blockchain anymore after revenue reduction and layoffs.” In the future, IBM will only retain further tracking of blockchain technology in its business and cancel the specific assessment of the related business. This news was drowned in the torrent of Bitcoin’s surge and did not attract people’s attention. But this is a bombshell that has been detonated in the blockchain industry. It marks cryptocurrency accounting is not reconciled
Generally speaking, partial consensus should be achieved through reconciliation. This method is characterized by fast speed and low accounting cost and is more in line with distributed processing methods. People only need to report valid processing results. For the simplicity of the ledger, Bitcoin is just a balance ledger. And there is no reconciliation step. The current blockchain technology development model and its mainstream technology application model have faced major setbacks. It also shows that although IBM has strong blockchain technology development capabilities, it has no choice but to say one word about the current blockchain: No!
Some people may say, what is IBM? Is IBM representative?
So, let us make another comparison and use data to describe the current status of blockchain development. Let’s take a look at the top 20 blockchain projects by market capitalization:
We chose March 12, 2021, when this article was written, as a time point. Then, according to data released by the cryptocurrency market cap list (Coinmarketcap), the 20th place on the list is VeChain, with a market value of US$4.2 billion.
VeChain said in its 2018 white paper: “We foresee that in the near future, just like the Internet today, use cases and applications based on blockchain technology will change our daily lives.” It has been 4 years since VeChain started in 2016 and this year. How long is his “near future”? Today’s VeChain is like a blockchain engineering company and most of the projects it lists are customized for others. In this case, how much better can his blockchain project be than a centralized project? No one has seen the “distributed business environment” VeChain wants to create until today. It is a pity. However, VeChain involves applications outside the coin circle. It is a blockchain project built by the Chinese. His ability to stand tenaciously in the 20th place has shown that it is not easy to achieve such results after hard work.
Note: VeChain ranked 41st on November 17, 2023, with a market value of US$1.5 billion.
Among the top 20 in the list above, two companies are involved in applications outside the coin circle. Among them, Theta ranks fifteenth with a market value of US$6.7 billion. Theta’s payment project uses blockchain technology, and the underlying layer uses content distribution network (CDN) and peer-to-peer (P2P) transmission technology. Judging from the white paper, he cleverly combines blockchain ledger technology with Internet technology. Customers are both users and distributors of content. The logic is sound. What is the proper caliber of his project? It can only be evaluated after it goes online. However, his concept did not even have a “prototype,” but it was valued at US$6.7 billion. It is obviously a liquidity premium and is definitely a feature unique to blockchain projects. It also indicates that humans always admire innovation.
Note: Theta ranked 54th on November 17, 2023, with a market value of US$980 million.
By the way, stablecoins, after 2017, the most successful innovation in the coin circle is stablecoins. It clarifies the asset attributes and payment stability of digital currency. Digital currency can be divided into two types: asset currency and “air currency.” Assets back asset coins, and Bitcoin is backed by computing power assets. The difference is that all coins endorsed by credit are air coins. However, air coins are not necessarily all air.
Note: USDT ranked third on November 17, 2023, with a market value of US$87.5 billion. Coming from behind. Regarding the stablecoin USDT, please look at” The road of innovation in cryptocurrency third: USDT is not far from the second one (chainless.hk).
Ripple can also be regarded as an application that is out of the circle. Ranked seventh among the top 20 market capitalization companies. However, this ranking is 4 places lower than in 2017, which is not a good sign. Ripple is very similar to IBM’s Hyperledger Fabric. They are both alliance chains. Ripple is mainly used for cross-border settlement. Theoretically, it is faster and cheaper than the centralized interbank transfer system (SWIFT). It should develop rapidly. But why has it grown so slowly? For more information about Ripple, see “The Road to Innovation in Cryptocurrency Part 4: Ripple relies on the wind to fly as a “pig” (chainless.hk).
Note: “Ripple ranked 5th on November 17, 2023, which is still very good.
Except for stablecoins and the above three companies, the remaining digital currencies are not out of the circle. They are all enjoying themselves in the coin circle. Among the top ones, except for Bitcoin, most of their developers and organizers are related to Ethereum and Ripple. Since thoughts determine actions, their mindset has become orthodox and has formed a powerful force in the blockchain industry. Blockchains that are not in this model are unorthodox. However, these companies are just some lucky ones in the blockchain. Their vision and level can’t be said to be first-class. They have restricted the development of the blockchain to some extent.
Back then, Internet applications were developed to improve or replace real-life applications. Starting with the Netscape browser in 1994, one year after Yahoo was founded, the company went public in 1996. After that, in 1998, Google was established, and new applications and creations of various Internet applications emerged one after another. A large number of latecomers took over, creating a star-studded situation! It also made a miracle in the capital market and the capital bubble in 2000, shocking all investors. It only took 8 years for the blockchain bubble to appear, which is very different from the development of the Internet. The blockchain has reached today, 12 years have passed, and the boss is still the boss, and the second child is still the second child. The boss and second child account for nearly 90% of the market value, and no latecomer exists. Isn’t it absurd? Is your jaw dropped, too?
However, the application of Bitcoin as a cryptocurrency has been very successful. It only took 12 years to reach a market value of one trillion U.S. dollars. It has created a miracle, and it will develop even greater miracles. The real reason Bitcoin attracts the public is to buy Bitcoin to fight inflation. After 2019, the government’s rescue method remains the same, so the logic of Bitcoin’s rise has not changed. It is a pain point in the market.
The ideal of blockchain people is to bring humanity into the blockchain era. They hope blockchain will reach thousands of households, like the Internet, and build everything on the chain. But after 12 years, the coin circle is still the coin circle, the hype is still hype, blockchain is still blockchain, and your circle is still your circle, and there is still little progress. After 12 years, what about distributed social networking? What about the promised distributed e-commerce? What do you think about the promised distributed bank? It’s completely invisible because current blockchain technology cannot achieve it. We need new thinking about cryptocurrency to integrate cryptocurrency with the Internet and enter thousands of households. I advise you to consider the problem based on the above “performance.”
Needless to say, the mainstream phenomenon of cryptocurrency now is speculation, which is also one of its biggest features. If we want to go beyond the scope of “insider toys” and allow blockchain to enter the mainstream application field, we still need to analyze blockchain problems carefully.
2. Reflect on the issues of blockchain
Cryptocurrency has developed to this day and has passed its initial stage, but what can you find if you type the words “blockchain problems” on Google? We found that the reflective articles were few and far between. Blockchain has been iterating for 12 years. It may be one-sided to say that it has stayed still, but it has not made much progress. In the field of blockchain, whether in application or technology, there are minor improvements to the blockchain, but there is not a single project that can compete with Bitcoin. It is time to summarize, reflect, and elevate our understanding to theory.
Machine credit and trust in machines are the essence of cryptocurrency
I was once very optimistic about Ethereum and thought it would surpass Bitcoin, but the reality was a slap in the face. It prompted me to delve deeper into why. In 2017, when getting started with cryptocurrency, my thinking was based on past experiences. Bitcoin will no longer run without Satoshi Nakamoto, while Ethereum Vitalik remains. Ethereum must be improved and developed as a new thing, but it will not advance well if no one manages it. Therefore, I was more optimistic about the development of Ethereum at that time. There should be many people who have the same idea as me. At that time, Ethereum moved frequently, and the coin price rose. Later, it was discovered that the logic of the blockchain represented by Bitcoin is actually not what we thought. The principle follows gold: gold remains unchanged, and Bitcoin remains unchanged. With in-depth understanding, we discovered that the Bitcoin system shows people a machine credit system. The logic it expresses is that the credit rating of machines is higher than that of humans. The results must be correct if the system logic and code are correct. The so-called “code is law” actually emphasizes machine credibility. It is a very shining point of view. After the system is designed, it can basically be left alone. Later improvements should only be minor repairs to improve the system.
Moreover, all improvements need to be voted for by the community. It is also a good flash point. People are afraid that designers will keep making mistakes. If the designer’s weight is too large, various uncertainties will be unpredictable. The existence of influential people undermines people’s trust in machines. Therefore, if entrepreneurs and designers are always present, it will indicate that the system will continue to change. The development of Ethereum from 1.0 to 2.0 has fully reflected the uncertainty brought by entrepreneurs or designers to the original system. Bitcoin pursues immutability. Now, it seems that “people” are the biggest risk factor of credit machines. It is correct for “people” to leave the system at the appropriate time and allow it to operate automatically. It will raise the trust level of the project to that of the machine. This view is precisely opposite to the perception outside the coin circle. The cryptocurrency system we implement must run automatically by machines without human intervention. In fact, this is one of the reasons why Satoshi Nakamoto retired from the Bitcoin system.
Iterations cannot produce Satoshi Nakamoto
If you can think about the project well from the beginning and position the functions accurately, this requires an overall design demonstration. Once this goal is determined, the structure of the system can be fixed, and the pain points that the application solves can be determined. After that, people can only make minor repairs but not major changes. That’s the case with Bitcoin. To do this, you need a bit of hardware thinking, so you have Steve Jobs’ or Satoshi Nakamoto’s ability. For more than 20 years, unfortunately, the iterative trend has taken hold. Because iteration mainly targets software, and software changes are too easy. Internet experts have made an excellent summary of the characteristics of the Internet: free, fast, and the wool comes from the pig. Fast means iteration. Blockchain is different from the Internet. The Internet is an owned system, while blockchain advocates an ownerless system. It is due to the need for machines to trust and trust machines. If even the consensus mechanism and system structure can be changed, then the blockchain is poisoned by Internet thinking.
Can you cross the river by feeling the stones? Ethereum has smart contracts, which expands the capabilities of the public blockchain. If Ethereum is like today, it only does the second layer of functions and provides richer smart contract interfaces. At the same time, it reduces the charging level, changes to a stablecoin charging method, does a good job in the public chain, makes minor repairs, and does not make any Ethereum 2.0; the situation of Ethereum may be very different. In 2017, the price of Ethereum was close to $1,500 at its peak, while Bitcoin was close to $20,000. Bitcoin has reached $57,000, but Ethereum is still less than $1,800. This shows that it is better not to toss than to toss. It is the result of the untrustworthiness of “people.” You must think about it initially to do a good job in a blockchain project. If it is constantly changing, how can it be ownerless? All blockchain practitioners would like to thank Satoshi Nakamoto. His vision, projected to be 2140, is matched only by Musk’s vision. They have surpassed our entire era, and the successful rise of Bitcoin has saved a bunch of fellow sufferers, including Ethereum.
Of course, if there are always human factors in the blockchain system, the only way to improve the project’s credibility is through the governance structure. The governance method of blockchain community voting deserves recognition.
When we look at a blockchain project, we must analyze what kind of processing methods we have to solve the problem when “people” bring untrustworthy problems. Bitcoin reveals the true meaning of machine trust, and Ethereum’s smart contracts show the logic of machine contracts, which will automatically execute once triggered. Trusting machines instead of trusting people is the essence of blockchain.
Issuing currency does not necessarily require a single set of blockchains
There is no direct relationship between currency issuance and blockchain. If you want to issue coins, using the Ethereum ERC20 protocol is very simple.
Sometimes, there is no reason to issue coins; it is just the need for speculation. The distributed financial DIFI project Uniswap did not issue coins, but Sushi, which copied its code, issued a coin. Its users grew rapidly, forcing Uniswap to issue coins as well. Someone calculated how much this coin should be worth, but in my opinion, it is just speculation because it has “no top.” Similar to this is the unique certificate (NFT) project. How much is a piece of art worth? It is also “topless”. It all depends on how to operate it. If some people can use all black methods, then their projects are sharp tools for cutting leeks.
Although there is no necessary connection between currency issuance and cryptocurrency projects, the alliance chain is not in line with the spirit of cryptocurrency.
The consensus mechanism does not equal the consensus of the entire network
The consensus mechanism is a fundamental concept in cryptocurrency. The consensus mechanism is regarded as the consensus of the entire network in cryptocurrency and has been widely used. In the general sense of consensus, the consensus mechanism includes the consensus of the whole network and the local consensus, and the smallest consensus is only the consensus between two people. For example, marriage is a consensus between two people to form a family. In ancient times, people broadcast this marriage consensus to relatives and friends through wedding banquets. Today, wedding banquets have lost their meaning of confirming marriage consensus. It is just a custom. The scope of the network-wide consensus is greater than the local consensus. Therefore, in this sense, the marriage certificate of the Civil Affairs Bureau is a kind of “network-wide consensus.” In fact, getting married does not need to be broadcast to the whole world because not everyone cares about someone getting married. But when the marriage certificate becomes untameable, it forms a “network-wide consensus,” that people who enter the marriage hall can use it to travel worldwide. The condition for the emergence of this network-wide consensus is the endorsement of an authoritative organization. Therefore, mining is not necessarily necessary to achieve network-wide consensus. When two people who do not need the consensus of the entire network form a consensus, if you must broadcast this consensus for the whole network, that is redundant.
Bitcoin requires network-wide consensus because everyone involved in mining is a stakeholder, which means the consensus is the consensus of all stakeholders. The transaction is a typical stakeholder consensus. It is essential to distinguish the scope of consensus. If the consensus between two people does not involve a third party, except for the need for Verification, there is no need to expand the scope and let the third party know. There are many ways to retain and disclose verification results.
The blockchain as a whole inherits the consensus view of the entire network. This view is taken for granted, but it wastes resources. For example, a currency issuance party decides how to issue coins; it is like paying you a salary. Does the boss need to ask you? Bitcoin has no coin issuer, so its design method is reasonable.
Another example is the Central Bank of China. Does it need your consent when it issues currency? Another example: Does smart contract coin issuance require the consensus of the entire network? It is a problem that can be solved by partial consensus. Coins will be issued when the preset conditions of the smart contract are met.
Blockchain sounds good, but it cannot be pushed in practice. After careful study, it is found that many of its views and methods are not universal, and it is difficult to adapt to all kinds of strange things with only one model. The consensus of the entire network is undoubtedly a major obstacle that prevents it from being well applied. An excellent blockchain consensus design must consider the scope of the consensus, clearly understand who the stakeholders are, and what purpose is to be achieved. Unrelated parties should not be involved in reaching consensus.
Credible results and credible processes
Bitcoin is unique in terms of security. If 10% of the nodes have problems with their system, the results can still be guaranteed credible. In other words, as long as you are on the chain, your data is safe. Once your data is confirmed, the results are difficult to tamper with. After 12 years of operation, Bitcoin has told people that this system is trustworthy enough. However, how can safety issues be guaranteed if there is off-chain? Many vulnerabilities occur before data, such as mobile wallets, are on the chain. The cryptography used by Bitcoin ensures that the data results entering its system are trustworthy. Data that is not on the chain is not necessarily trustworthy. Some people say blockchain technology can ensure the accuracy and fairness of U.S. elections. However, I can assert that blockchain technology alone cannot guarantee that election projects will not be cheated because the credibility of the data before the election information is uploaded to the chain cannot be guaranteed. Trust is about the trust chain; the blockchain is just one link in the trust chain where the results are trustworthy. There is also the issue of process trust or trusted computing in computer security. It says that the previous step’s trustworthiness determines the next step’s trustworthiness and forms a chain of trust. Such technology can be traced back step by step before it is put on the chain. The Verification before uploading to the chain is usually a consensus between two parties or a three-party consensus, and it does not need to be a consensus across the entire network at every step. People only need to know whether the consensus between the two parties exists, whether it has been tampered with, and whether it is verifiable. These problems are not complex to solve with current blockchain technology.
Regarding the resulting consensus, it is reasonable to adopt the method of network-wide consensus, but before it is put on the chain, the network-wide consensus is firstly impossible and secondly unnecessary. For elections, for example, the data verification before being uploaded to the chain may be related to the Social Security Bureau, etc., and these departments must verify it to ensure it. The recording of graphics and videos cannot be completed by blockchain. I have not seen a pre-processing system using blockchain to process pictures, audio, and video. At most, the blockchain can be the ultimate validator, which can be used to ensure that election results are credible. And the preservation of photos is not the strong point of the blockchain. Immutability alone is not enough to complete a practical large project. For example, in the application of the Internet of Things, your video data cannot be uploaded to the chain. Local consensus is essential now, and the machine must automatically complete it. Therefore, some blockchain projects may seem feasible, but in reality, they are impossible.
I advocate splitting the technical functions of the blockchain into blocks, forming functional modules, combining the current advanced computer and Internet technologies, and then entering mainstream applications to generate available replacements for mainstream applications. In this process, if computer technology is suitable, use computer technology; if Internet technology is suitable, use Internet technology; if blockchain technology is suitable, use blockchain technology. If it can achieve a “credible process + credible results,” it can completely solve the problem of credible elections. But what blockchain alone can do is very limited. Process credibility + result credibility only refers to the credibility after converting electrical signals. How to convert electrical signals when combined with entities is another question. Blockchain players have a belief: Blockchain is a substitute for the Internet. We can only say that having faith is better than having no faith, but what if it is a cult?
Ownerless, owned, and centralization
The characteristic of blockchain is machine credit. The highest level of machine credit is removing human intervention and forming a self-organizing system. Commonly known as ownerless. The community formed around the ownerless project is called the ownerless community. The self-organization of ownerless projects can be compared to primitive society. Primitive societies believed in gods, and Who is the god of blockchain?
We say that the lack of improvement in this world means no evolution. There are too few things in the world that will never change. So, is there anything in the world that remains unchanged for thousands of years? What is it? Gold is, and so are diamonds. Among artificial things, the only things that remain constant are units of measurement, such as scales. If the units of measurement were constantly changing, the world would lose its standards. Currency is a unit of measure. If it keeps changing, it must be wrong. Blockchain is used to make immutable things. It must be noted, and every small change must be made carefully. Then again, there are too few things that remain unchanged now. In the vast world, no change is a minority; difference is absolute, and progress is absolute. The world is changing based on immutable standards. If you want to change, you must have an organization. Only when this organization has leaders can it divide labor, cooperate, and be efficient. There are many things in this world where the owned exists. If we expand on this topic, it will be a long article, so let’s just say it in general:
It is not true that decentralization is better than centralization. It is also wrong that distributed is more advanced than centralized.
Individuals must play a big role when a system is started. When the system becomes more complete later, the main work should only be to improve it. Whether it is a main project or an unowned project, democratic decision-making is required. Blockchain always exaggerates that it is decentralized, which leads to problems of exaggeration, absoluteness, and confusion of conceptual definitions.
Immutability is the essential feature of blockchain; machine credit is the vital feature of blockchain, and decentralization is not the critical feature of blockchain.
When it comes to blockchain, people think it is decentralized, which is not accurate. Each blockchain also has a different degree of centralization. We can judge the degree of centralization of a project from the following aspects, trying to show that it does not mean that centralization is terrible. The following lists the uses of centralization and decentralization in blockchain projects in ten parts, which will help clarify people’s understanding of the concept of centralization:
1) Decision making
Bitcoin has no founder intervention and relies on community governance, which is necessary for mature blockchain projects. The founder of Ethereum still exists in the project, the project is still in progress, and its community governance is not perfect, so Ethereum is not a mature project. —— Decentralize decision-making.
Bitcoin and Ethereum are both autonomous systems and adopt community governance. There is no management agency, and they do not recognize or accept sovereign management. ——Management is decentralized.
Blockchains are all automatic systems; there is no manual intervention once they are set up. ——Control decentralization.
4) System structure
Bitcoin is a distributed structure, as is Ethereum, but DAPP (distributed APP) is not. For example, Unswap (market value of US$15 billion, ranked 8th in the rankings) is a DAPP based on Ethereum. ——Most DAPPs have a central control team. There is a controlling party, but the control has a center.
Ethereum 2.0 is decentralized community development, while Polkadot is team development. The development efficiency of Ethereum is very low, and both have their advantages.
Both Bitcoin and Ethereum calculations are based on the same program code. Like DAPP, it is centralized computing. – Computing is centralized. Note that this judgment is very different from the mainstream view.
Nodes such as Bitcoin and Ethereum are distributed, and algorithms determine their Verification. In some blockchains, project verification and accounting are separated, but they are all distributed. There is no verification for DAPP, and it relies on distributed Verification of the public chain through smart contracts. ——Verify decentralization.
The ledgers of blockchains such as Bitcoin and Ethereum are centralized, and each ledger is a copy that is distributed and stored in different places. ——The ledger is centralized. Note that this judgment is very different from the mainstream view.
The verification results of Bitcoin and Ethereum are recorded on the same centralized ledger. It belongs to multi-party accounting and decentralized accounting.
Blockchain storage is redundant storage, and it is plain text storage, which is a backup technology. It is considered distributed storage. ——Storage is decentralized.
Finding out these differences can further open up your mind. The above mainly discusses some controversial concepts. Cryptocurrency can have a big impact, hitting a big societal pain point. For example, issues of immutability, openness, and data sovereignty. Cryptocurrency has a considerable impact not only on technology but also on fundamental changes in production relations. What should people learn from this? Let’s look down.
3. Enlightenment given by blockchain
The above section is a reflection on blockchain. This section focuses on what we should learn from Satoshi Nakamoto and others.
Bitcoin creates a credit machine system that uses program code to implement the rules of the credit machine. These rules should be followed when constructing a new trust machine. Only by doing so can we achieve the requirements of machine credibility.
Rules and structures are different. Rules are outlines, but structures may be diverse. We have seen that subsequent projects follow this rule to some extent, but there is not much change in structure. They all revolve around the ledger of the blockchain. If we want to enter mainstream applications, everyone will encounter blockchain, which is inefficient and high-cost. The structure of blockchain is a resistance to large-scale development. History has reached a critical point. How should good things be used? First, Let us analyze how machines gain people’s trust: what are the rules?
Bitcoin’s ledger is public, and its procedures are public. It is the first element of trust. You have to do this if you want to gain trust. Disclosure to whom? ——Disclosure to stakeholders. Bitcoin publishes its ledger to anyone worldwide; everyone is a stakeholder, and its advantage is transparency. However, where there is publicity, there is privacy for worldly affairs. How do you grasp the balance between publicity and privacy? Can it be made public to the world while maintaining privacy simultaneously? If you want to solve this problem, you cannot use Bitcoin’s current blockchain ledger. Please pay attention to this statement of mine.
cannot be tampered with
People are untrustworthy, but if people are not allowed to make mistakes, won’t machines also be trustworthy? It is an alternative idea that the machine can trust. Take banks as an example. The possibility of bank account fraud is very high, so auditing is necessary. However, it isn’t easy to conduct audits on basic journals. Auditing companies can only audit the accounts provided by a company, but they cannot know whether their journals have been changed. Using the blockchain’s journal timestamp and block hash value calculation method can ensure that the bank’s journal cannot be tampered with. Then, the bank’s general ledger can be hashed daily, and the hash values of the journal and general ledger can be calculated. The formed certificate is stored on the chain. In this way, the first thing to do when auditing the annual accounts is to check whether the hash certificate is correct. Because the account data uniquely corresponding to each hash value cannot be tampered with. It makes sense to conduct accounting audits based on accurate data.
Take care of your own money
People feel that Bitcoin is stored in their wallet because only they can operate it; they do not rely on any bank. There is a risk of bank failure, but money in your hands is not necessarily safe. It is said that so far, the total number of lost Bitcoins has been about 3 million. Nowadays, various soft wallets cannot reach the security level of banks regarding custody and storage. Hard wallets are electronic, and they can break. Therefore, keeping money in banks in the short term is safer. Although putting money in your hands is correct, the functional substitution effect can only occur when the security level exceeds the bank level.
The combination of openness and security can ensure machine credibility. Publicity makes people believe that security can ensure that the data is error-free. Bitcoin’s application of public and private key technology is unique and worth learning.
In cryptocurrencies, security technologies are characterized by:
Encrypted transmission: Use encryption algorithms to prevent unauthorized information leakage;
Public key and private key authentication: Confirm the ownership of the ledger, the identity of the information sender, and the source of the information on the blockchain through signature or authentication algorithms; confirm that the data has not been tampered with and verify the blockchain through hash and signature algorithms status;
Access control: It can determine who can do what under what conditions, ensuring that the encrypted data on the blockchain can only be used by authorized users.
Multi-signature: An account can be controlled by several private keys to protect its security.
Combined signature: Combining several private keys into one to protect account privacy.
Hash confirmation: Confirm the hash value to ensure the data is correct.
Verifiable: The data of any account can only be viewed, and only the account owner can transfer the data.
The longest chain principle: Bitcoin only recognizes the longest chain to ensure the ledger is correct in a competitive environment.
Irrevocable principle: Bitcoin data cannot be withdrawn after it is sent. Because it is not a centralized system.
Multiple backup principle: The Bitcoin ledger is backed up on all full nodes.
The security of blockchain does not technically exceed current computer technology. The most valuable thing about Bitcoin is the application of cryptography technology and consensus algorithm. In comparison, the application of cryptography technology is of more excellent value. Public keys, private keys, and hash confirmations are essential tools for security.
open and motivating
The Bitcoin system is an open system or, rather, an autonomous system. It has no actual controller. Anyone joining it means recognizing the rules of Bitcoin, that is, this set of codes. The system will run automatically according to the rules.
What are the characteristics of the Bitcoin autonomous system? Let’s compare it with the centralized Internet system. Many Internet systems, such as WeChat, also run automatically according to rules, so automatic operation is not a feature of blockchain autonomous systems. Is it a distributed structure? Which public cloud today does not have a distributed structure? Therefore, the distributed structure is not a characteristic of the blockchain autonomous system.
So, where does Bitcoin’s autonomy lie? Some say it is open, meaning you can come and leave whenever you want. Isn’t it true that YouTube can come and go whenever it wants? What’s the difference?
A. Capital self-organization
Mining equipment is self-organized, that is, capital-free organization. The utilization of idle resources is also consistent with the characteristics of resource investment. It is the biggest difference compared to centralized systems. The amount of my assets invested determines whether I have income. If there is no income, I will pull out. On the Internet, exiting after investing in a company isn’t easy.
The characteristics of autonomous capital investment also include that the ownership belongs to me, but the right to use does not necessarily belong to me. What projects are suitable for issuing coins? Projects with a free capital investment are most suitable for issuing coins.
B. Fair incentives to achieve self-organization
No one will invest without incentives, which is another key to investing in autonomous systems. Therefore, autonomous systems and incentives are closely tied together. Incentives are not accomplished with cash. It is to distribute future benefits cheaply today and form a unified goal among the people involved. If it succeeds, it will make a big profit, but if it fails, the project will return to zero. Here, the currency plays a core and critical role in promoting the project’s success.
There are many ways of incentives. This kind of incentive on the blockchain is called a native incentive, which refers to the currency value the project can generate. Are there any other motivation methods? Regarding mainstream applications, the wool-on-the-pig model will also come into play. Because many Internet projects are not short of money, their incentives can be richer.
Let’s look at another example. The 21 nodes Orange (EOS) selected are not completely self-organizing principles. Why can your 21 nodes be incentivized? Instead of our 21 nodes? Why should we carry the sedan chair for you? Therefore, incentives must be fair so that people will play with you. Once some projects have incentive privileges, they are more likely to fail.
The incentive for airdrop coins can be capitation incentives.
Who should take the big shot?
Let’s look at the current general rules for project benefit distribution: the benefit ratio generally does not exceed 20% for technology transfer in scientific research projects. If it is just an idea and program, then 10% is almost enough. Blockchain is all about ideas plus programming, and its success depends on the subsequent autonomous investment of capital. If the technical team takes the lion’s share, you must do the work yourself. Generally speaking, for projects that require a large portion of autonomous capital investment, it is sufficient for cryptocurrency project parties to account for 10-25% of the overall project. We can see that Satoshi Nakamoto is a technical expert in the Bitcoin project. His proportion is only 5.42%, which may be more than 5.42%. With two machines, it should not exceed 10%. That is A benchmark.
Excellent motivation method
Bitcoin has a halving every four years. The seed round, A round, B round, and C round of venture capital inspire this method. For early seed investors, it is possible for the investment projects they encounter to increase by thousands of times. Another way is to circulate the coins after they are issued, which is incomparable to venture capital. This way, investors can cash out and recoup their capital within one month. What has the greatest appeal in the world? Making money has the greatest appeal. Maybe you don’t believe it, but money can “grow legs.” Advertising is often unnecessary for projects that can make money. Advertisements require precision, and the placement of coins is generally much more precise than the placement of ads. It must be as accurate as possible, coupled with currency lock-in, recommendation rewards, and community mechanisms. The shrinkage of issued coins is an effective profit method to ensure autonomous capital investment. Only when the investment can make a profit can the project have appeal. Sustained profitability will also create sustained attraction. What is the difference between it and Q coins if it is an unlimited coin issuance project?
The moat of blockchain projects
The blockchain code is public. Since there is no patent, it can be easily copied. So what is its moat? –currency. An adequately designed coin and first-mover advantage are keys to the success of this type of project. Uniswap did not issue coins initially, so Sushi, which copied it, took advantage of it. The latter issued a coin, forcing Uniswap to issue a coin. This coin has little value, and at best, it can be considered a governance coin. This currency will also be speculated based on the principle that capital market expectations for future benefits can be cashed out in the current period. But when Uniswap also issued coins, Sushi could no longer catch up. This type of project was originally a small project for ecological support of a large blockchain project. I did not expect a market value of billions of dollars. Since the core of a blockchain project is speculation, when no good concept is launched, it will be its turn to be speculated because it is still innovative. Things that are easy to be hyped by blockchain are those that have no comparable objects. This kind of thing is “uncapped,” so it is suitable for “speculation.” Hype cannot be evaluated.
The Bitcoin system has neither employees nor shareholders; everyone works on their initiative. The currency unites everyone. As long as the money rises, it will be fine. It requires no ideological work or complex judgment. As Bitcoin rises, a “gratifying sight” of cryptocurrencies will fly in unison.
Anonymity and privacy standards
The Bitcoin ledger is public, but no one dares to use it if everyone’s name appears on it. In the Bitcoin ledger, people cannot use a simple method to know who the account is. Therefore, if we develop an application to the extent of Bitcoin, that is acceptable.
Machine credit standards
Bitcoin’s machine credibility is based on a 51% attack, and this probability is acceptable. Obviously, machine credibility is not 100%, but the likelihood of being compromised is minimal. In other words, for the system we designed, the results generated based on machine credit are credible, and even if they are not 100% safe, they are acceptable. In the 12 years since Bitcoin emerged, the fact that no one has broken into the Bitcoin system does not mean it is completely unbreakable. Still, the probability of being hurt is minimal.
Platform, community, and chain
We say that Bitcoin is a community and Ethereum is a platform, so the concept of the Internet also applies here. Let us compare. The Bitcoin system does not have an APP, but there is an APP on Ethereum. I’m afraid I have to disagree with the term distributed APP (DAPP) because many APPs used in blockchain are centralized. Therefore, it is more accurate to call it a smart contract APP. What is a community? A community can be formed by a group of people who share related factors. The Bitcoin community includes mining groups, coin groups, and technology groups. Their common connection is Bitcoin, thus forming different Bitcoin communities. What is a platform? It should not be generalized but instead characterized. The Ethereum system is a ledger platform driven by immutable digital storage and smart contracts. Ethereum calls itself a “next-generation smart contract and distributed application platform,” but it is not a distributed platform at all. It is a unified platform for distributed storage and accounting. Can a platform still be called a platform if it is distributed?
What is the difference between a platform and a chain? The chain must have a blockchain structure, but the platform may not, and its meaning is much broader. Ethereum is an immutable storage platform and accounting implemented with a blockchain structure. The technology of the blockchain structure itself is not advanced. Whether or not it is advanced depends on the project implemented using the blockchain. In the future, people’s expectations for blockchain will weaken because blockchain is just one of many Internet technologies. The blockchain era that completely replaces the Internet does not exist. Blockchain cannot replace the Internet.
Cryptocurrency is a great ideological enlightenment movement, showing the brilliance of the progress of human thought.