Chang Hao: Everything is UTXO, transfer is trading

On the afternoon of September 21st, the "Fire Coin Industry Fire Contest: The Industry's Deep Way", Babbitt, the founder of the original chain, delivered a keynote speech "The Landing Direction of the Next Generation Public Chain."


Babbitt, longer than the founder of the original chain

Chang Yu believes that the digitization of assets (ie, asset chaining) and the assetization of numbers are two directions and trends in the development of blockchain. Assets can be defined in three dimensions: trustworthiness, interchangeability, and severability, and can be divided into bit assets, atomic assets, trans-special assets, and quantum assets based on interchangeability and severability.

He proposed that a single public chain is actually difficult to solve the binary paradox of decentralization efficiency . Bystack uses two chains than the original chain, the main chain covers security and decentralization, and the side chain covers security and efficiency, so that the combination of two triangles can deal with the triangle problem of the blockchain in a balanced manner. At the same time, the accounting model has natural limitations, and the Bitcoin UTXO model has a strong advantage. UTXO is essentially a kind of vector. It is innovatively proposed BUTXO, that is, extended UTXO, than the original chain. From the past processing of bitcoin assets to processing multiple assets, the vector becomes a matrix, and the nature of the transaction The above is the addition and subtraction of a matrix. Expanding with BUTXO will reveal that the transaction is actually a transfer, which is also a very important idea.

He said that it is not enough to have transactions and transfers, and a new concept, the magnetic contract , is proposed than the original chain. There may be countless orders or smart contracts in the same time and space, the exchange calls the order, and the chain is called the smart contract. A magnetic contract is a matching strategy that allows smart contracts to automatically match, just like having a magnetic force, looking for an order that matches it, and then closing. The two simplest matching rules for a magnetic contract are the balance of the spread and the balance of the assets.

Finally, Chang Hao said that the biggest value of the chain is to reduce transaction costs. Any chain with the core of lowering transaction costs is likely to succeed. Alibaba in the blockchain world may be ten times bigger than the current Alibaba .

The following is the full text of the speech by Changchun:

Good afternoon everyone, indeed, like Mr. Yuan said, I have been retreating for a long time, and I haven’t been out for a long time. I haven’t given a speech to the trade union that we are owning, but why did you come here this time? On the one hand, we have a very long-term strategic partnership with Firecoin. On the one hand, we are the earliest blockchain companies in the industry. I am also an old friend with Mr. Li for many years.

In fact, our Babbitt and Firecoin have a lot of cooperation in the ecology. For example, our nodes, several brands of the Firecoin, such as the Firecoin Mine, are our super nodes. At the same time, we may open the federal node in the next step, which is the so-called cross-chain gateway. This piece is also about some brands of our fire coins or participate in the construction of our ecology.

On the other hand, we have been doing research and development of the public chain for more than three years. From 2017 to the present, it is indeed time to make some achievements. So we have accumulated some thoughts or research on the blockchain, especially the public chain, and then share it with everyone.

Just now Li Lin always talked about it from a philosophical level. It is very high. I may talk more about some practical considerations from the perspective of public chain research and development. First of all, I would like to mention the two directions and two trends of the blockchain.

The first one is the digitization of assets . This is actually the so-called asset chaining. Whether it is the mineral chain of virtual assets or the chain of real assets, it is essentially the digitization of assets. First of all, we define the assets, and the things of the value attributes need not be said. Assets and numbers are two commensurate things. Value attributes are often non-replicable or atomic, a bit like the physical world, and competitive. In fact, these words are about the difference between the value of things and digital things, digital things are reproducible.

The direction we are also paying attention to is symmetrical with the assetization of numbers . In the past, there were some information attribute things or online behavior data privacy. It can also be used to determine the rights and trade through the blockchain. This is also a very big direction.

A few days ago, I saw the view of Ma Zhitao of Weizhong Bank. He supported the digitization of assets, but he opposed digital assetization. Why do you say this? In fact, there is a current background, because the current data resources are very sensitive, and everyone can see the industry reports, so more is in the position indicated by the industry environment, but these two trends do exist at the same time.

Next we talk about asset chaining, we must first define the assets. I define assets from three dimensions:

First, trustworthiness . It cuts the first knife like a cut cake, and divides assets into chain assets and chain assets. Why do you have trust in assets once they are on the chain? We know that blockchain, another word, does not require a trusted third party, is an infrastructure that can trade assets, and does not require a trusted third party to establish trust. With a trusted third party, we will be worried about the risk, there may be data leakage, and there may be funds to be rolled up, so this is the value of the blockchain, which gives us trust, then we are mainly concerned. It is still a classification after the natural chain.

Second, interchangeability is the value of the confidence attribute and the number attribute I just talked about. The most essential difference between things is interchangeability, so many assets on the chain are some non-homogenous assets, but the blockchains like the account model and the UTXO model architecture are still different. The account model still understands assets as homogeneous assets, so it proposes some agreements such as ERC721 to achieve this non-homogeneous asset attribute.

Third, severability . This is very well understood. We will mainly consider the latter two dimensions. We can get a four-quadrant map. We can name it bit assets, atomic assets, trans-special assets, and quantum assets. Then we have such a dimension. In the future, almost all assets in reality can be put into the quadrant.


For example, the red envelope, the red envelope is obviously inseparable, but it is a digital attribute, that is, it can be digitized. There is no essential difference between each red envelope except the amount. But if both are red envelopes of 100 dollars, it is interchangeable, there is no essential difference, so it is a kind of quantum assets, then like property collections, commodity security codes are obviously a possibility of mutual Change the assets that are not divisible, so I think we have a definition of the assets first, and then we can know that the blockchain can handle some assets.

Next, I will summarize some of the problems that exist in the public chain.

Article 1: A single public chain is actually difficult to solve the binary paradox of decentralization efficiency . In fact, in our white paper, I have painted an impossible triangle. The impossible triangle is proposed by me, but the picture feels like the Fire Coin Research Institute, because I did see the picture in the report of the fire coin researcher. .

Our Bystack actually uses two chains, one for coverage security and decentralization, and the other for coverage security and efficiency, so that you can handle this impossible triangle problem more harmoniously with two triangles. So this is why Vitalik has proposed to welcome external teams to develop a Layer 2 network to do his data layer, and he is aware of such a problem.

Layer one I think he should pursue decentralization, which is based on the POW mechanism. In addition, it is a common pool without access, anyone can issue assets on it, but its shortcoming is that the efficiency is not high enough, so you only have one chain based on the POW mechanism, then the second layer network you can use some more efficient The common pool mechanism, but at the expense of decentralization to pursue some efficiency, I think this is ok. If the first chain is already a high-speed network that pursues efficiency, and the second chain is a public chain that seeks to decentralize, it is as if some of your underlying infrastructure is built on top of the superstructure.

Article 2: The accounting model has natural limitations. I will talk about the advantages of the Bitcoin UTXO model. At present, more and more drawbacks have been discovered, because it needs a global state, and it is not a mechanism for parallel assistance, so there may be some problems in its future innovation.

Why am I so optimistic about UTXO? In fact, its full name is called "unexpended transaction output", this is the original creation of Nakamoto. Some people say that Bitcoin has three technologies:

First, peer-to-peer network.

Second, asymmetric encryption.

Third, the workload proof mechanism.

None of the three technologies was invented by Nakamoto. Why is Nakamoto still so great? In fact, Ignore, UTXO is the original creation of Nakamoto. In fact, when I see that UTXO is essentially a vector, we can innovatively propose a UTXO called BUTXO, which is an extended type. From dealing with an asset in Bitcoin in the past to dealing with multiple assets, the vector becomes a matrix. What is a transaction? The transaction is essentially a matrix addition and subtraction.

This is the typical BUTXO transaction. The essence of the transaction is actually performing a matrix addition and subtraction operation. What kind of new concept will you find with BUTXO? This is a small detail I have to insert. I once wrote an article in a columnist in Babbitt. The title is very good. He said that Wu Jihan translated the transaction in the Bitcoin white paper into a transaction is an epic bug. He is very right at this point, the intention of the transaction should be the transfer. I told him at the time that the transaction was actually a transfer, but the transfer in the past was just an asset. You can't see it as a transaction process. After I expanded it into a multi-dimensional UTXO, this is a typical transaction process.

The address is, for example, A. It has the asset ABC. It gives some assets AC to address 2, the address may be another person, and address 2 transfers its asset D to address one. This is a typical transaction process. But it is also a transfer. So trading is a very important idea.

It is not enough to have transactions and transfers. We have also proposed a new concept, which is the concept of a magnetic contract. There may be countless orders or smart contracts in the same time and space, the exchange calls the order, and the chain is called the smart contract. A magnetic contract is a matching strategy that allows smart contracts to automatically match, just like having a magnetic force, looking for an order that matches it, and then closing.

The simplest of the two matching rules for a magnetic contract is the balance of the spread . For example, A has 1 bitcoin, wants to change 100 Ethereum, B has 101 Ethereum, he wants to change 1 bitcoin, apparently because of information asymmetry, they form a price difference. The general rule smart contract can't be matched, because there is a price difference, the transaction is essentially a proof and needs to be balanced. That blockchain should let the system automatically trade, C is the node, automatically create a contract is 1 Ethereum, then transferred to him, because he combined the deal, so he got the difference in the spread. Because the nodes automatically do the matching on the chain, I feel that the value gains obtained are normal, so I should deal with them.

The second is called the balance of assets , taking advantage of the characteristics of BUTX. A has assets A, B has B, C has assets C, but A wants to change B, B wants to change C, C wants to use C for A, then we should let him automatically trade. In the past, there was no way to make a deal, because it involved three parties, and it could be completely sold here. Because BUTXO is a multi-input and output, it does not care about the three parties, the seven parties can, this is the magnetic contract.

There are many people who say that the public chain is now landing or innovation is some second-generation three-generation chain. What is innovation everywhere? Did not see success. I personally think that the time and window left for the public chain are not much, maybe one or two years, but there are still a lot of innovations that can be done. Now the market has done cross-chain and privacy transactions. 20%, at least 80% of innovations are not done.

Let me give you a few directions:

The first one is that if the magnetic contract I just mentioned is implemented, it is equivalent to achieving the chain, what will be the consequences? It is the chain of predictors . Our current prophecy machines are all taking data from outside the exchange. Obviously this process is risky.

If this data is taken on the chain, and the blockchain data is irreversible, if you verify, then how much can you do based on the chain predictor? For example, stable currency, it needs to have a benchmark price, for example, mortgage or borrowing is the need to introduce the data on the chain.

In fact, there are still a lot of innovations that I will not introduce one by one.

Finally, I made a prediction, what will happen to the blockchain. I think the essence of the blockchain is that we have to think about what value the chain has created . I think the biggest value of the chain is to reduce the transaction cost. Lowering the transaction cost as the core chain, I think it is possible to succeed.

An economist divides transaction costs into three, one is the cost of the price, the other is the transfer cost, and the other is the cost of trust. The economist does not understand the blockchain and does not engage in the blockchain, but he The three attributes are divided into three dimensions of the blockchain that I just mentioned, namely, trustworthiness, interchangeability, and severability. Therefore, the blockchain just solves the core of transaction costs. In fact, we say why there is a company like Alibaba that uses Internet technology to reduce the cost of our shopping. The Internet era has reduced this transaction cost to others. It is low, but the blockchain will lower the transaction cost lower, so there is such a conclusion. This conclusion is also based on the Coase Theorem.

What is the Coase Theorem? He believes that the reduction in transaction costs may reduce the size of the company, but he is the conclusion of a traditional Ford production company. Because the transaction costs are reduced, these production companies can be outsourced, designed to be outsourced, and can be outsourced, so his company size can be reduced. But he did not consider another point, that is, service companies, service companies are companies that reduce transaction costs as the core business logic. He is the opposite of traditional production companies, so production companies may become smaller, service companies. Will grow into a giant, behemoth, so there will be a company like Alibaba.

I think Alibaba in the blockchain world may be ten times bigger than the current Alibaba , so I think there is such an opportunity for the fire coin. This is not a compliment. I think all the entrepreneurs who are engaged in the blockchain are present. Or the builders of the surrounding ecology have such an opportunity, I share it here, thank you all.