Babbitt column | Can the coin push the public chain and the decentralized exchange, can it surpass Ethereum?

According to reports, the currency chain opened on April 23 and switched to the main network. The BNB price ushered in the 11th week, and the market gave positive feedback.

According to channel information such as Zhao Changpeng's founder, the coin chain is based on the Cosmos side chain development, and the block speed is close to 1 second. Various Dapps can be developed. DEX (decentralized trading) is one of the main application directions.

DEX has always been one of the hotspots in the blockchain industry, and it has been highly anticipated with the frequent exposure of various security and operational events at the Centralized Exchange. EtherDelta, Kyber, 0X and Airswap are all decentralized exchanges based on Erc20, but the user experience is not good. Although NEWDEX and WhaleDEX have improved in speed and experience, their use is limited by the EOS ecosystem.

At present, DEX is still in the early stage of exploration. According to statistics, the daily trading volume of various types of DEX in the market is only 0.01% of the centralized exchange.

On the occasion of the opening of the currency Angong chain, we have studied these three issues in a professional perspective:

  • Can the currency Angong chain go online to help decentralized transactions get out of the market?
  • Can the currency security use the public chain to push the blockchain industry to achieve a new round of ecological iteration?
  • What new formats will be generated in the digital asset trading in the new ecology of the blockchain industry?

"Technology + Business" analysis paradigm

Since the birth of Bitcoin, the blockchain industry has experienced about 10 years of development, and the main process of the industry can be based on both technical and commercial perspectives.

According to the evolution path of technology, the blockchain has generally experienced three stages.

The first stage is bitcoin. Based on the blockchain, Bitcoin shows the world how to establish a credible value network by decentralization, but Bitcoin is just a transactional target and cannot be connected to more asset scenarios.

The second stage is Ethereum. Ethereum has achieved a new asset generation function through the combination of smart contracts and distributed networks; based on blockchain, not only can bitcoin be generated, but also equity in many scenarios; but unfortunately, at this time Ethereum's technical performance is too low to support more asset-related scenarios, such as the ability to trade more or rely on centralized trading.

The third stage, multi-chain coexistence, multi-chain interworking stage. It is precisely the constraints of Ethereum's technical performance on the application of blockchain technology. The underlying public chain competition has become the main symbol of this stage, whether it is fragmentation, stratification, or adopting a new consensus algorithm. Blockchain technology performance to increase support for scene computing needs. Although the public chain war can be laughed at the end of the unknown, but the situation of multi-chain coexistence will not be a short-term phenomenon, the competition of the public chain is actually a competition for the underlying technical standards of digital asset identification, pricing and transactions. It can be seen that the blockchain is an important infrastructure for the value of the Internet. Its technological evolution revolves around multiple scenarios covering assets. The support for asset identification, pricing, and trading scenarios constitutes the main vein of the underlying technology evolution of the blockchain.

On the other hand, profitability is the basic principle of general business analysis , and the blockchain industry is no exception.

The prerequisite for achieving profitability is to meet the core needs of the market while achieving optimal cost control. Considering the basic attributes of blockchain value Internet infrastructure, companies that can provide services in core business segments such as asset identification, pricing, and trading , while also achieving economies of scale through cost control, are clearly the most profitable potential.

It is generally believed that the determination of the rights, pricing and transactions around digital assets can divide the industry into three parts: the upper, middle and lower reaches. Among them, the upstream focus on the identification of digital assets, involving mining machinery production, mining pools and other services; the mid-stream focus on the pricing of digital assets, involving exchanges and wallets; downstream focus on digital assets transactions, that is, in various scenarios Digital assets get a service.

Based on the above division, it can be seen that mining can play the role of asset confirmation in the POW mode, so the profitability is very strong, but the POW obviously cannot represent the industry trend; based on the high-performance blockchain, the asset confirmation in each scenario is satisfied. Demand is the main goal of the development of the public chain.

The exchange mainly plays the role of asset pricing, but in fact, the current exchanges are satisfied with the demand of “coin speculation”. If the rights that Token can only be speculated cannot be realized, it will inevitably lead to market ups and downs. Objective valuation. It is the general trend to change from "coin to speculation" to "pry and use".

It can be seen that the confirmation and trading of digital assets is the shortcoming of the industry and the direction of industry breakthroughs. Although the centralized exchanges play the main function of digital asset pricing, their implementation is at the present stage and the assets are determined. The transaction is split.

The high-performance public chain competition is a competition for digital asset identification and the underlying technical standards of trading, and is also a necessary basis for opening up asset pricing and securing and trading links.

Coin Ann Vs Ethereum: Same Dream, Different Paths

Coin's currency traded among the head exchanges. In the second half of 2018, the currency security chain and DEX were frequently exposed, and it became a hot spot in the market.

According to the published news, the coin security chain is based on the Cosmos side chain and has high technical potential. Its two core characteristics, one is cross-chain, and the other is platform attributes. Cosmos was founded by Joe Kwon, the founder of the Tendermint algorithm, to connect through Zone and blockchains of different structures, and to implement cross-chain transactions through Hub. On the other hand, Cosmos provides SDK to help users to generate new ones based on Cosmos. Blockchain. It can be seen that Cosmos not only provides cross-chain support for existing blockchain assets, but also provides a set of tools that are very user-friendly to develop blockchains, enabling “one-click chain”, and these areas The blockchain can be customized for different scenarios to achieve the connection between the blockchain ecology and the real economy.

It is foreseeable that the currency security chain will play an important role in asset pricing, confirmation and trading, and become an important infrastructure for the digital asset ecology led by the currency.

In fact, building a digital asset ecosystem has always been a core goal of many projects in the blockchain domain. The difference is that the same dream can be achieved by different paths. Ethereum first realized the smart contract. With the advantage of technology, it attracted a large number of technical teams to develop based on its bottom layer. In fact, it is taking a road of “starting from asset confirmation and promoting ecological completion”, but so far Ethereum has only increased. The types of assets have not yet proposed a viable solution for asset pricing and trading. The public chain competition has greatly reduced the time left by the market to Ethereum.

For the currency security, it already has a rich user base and project resources. It seems that a “starting from asset pricing and building a digital asset ecosystem based on efficient public chain” has gradually become clear; based on the underlying technology of Cosmos, existing users and traffic will gradually Importing the completion of a new ecological construction seems to be no more difficult than Ethereum.

In fact, under the goal of building a digital asset ecology, not only the currency security, but also the OK and the fire currency of the head exchange are also in a relatively favorable position on this track. OK established the Blockchain Engineering Institute as early as 2018, and is expected to be the main online link of the OK public chain in 2020. Firecoin also held a large-scale coalition leader campaign in 2018, hoping to gather industry resources to create fire coins. Public chain. In addition, Polkadot, led by Given Wood, has similar design features to Cosmos and is also highly competitive.

Therefore, both the head exchange and the high-tech performance public chain have their own advantages in building a digital asset ecology. How to control the pace of advancement will undoubtedly become a key factor in the final victory.

Innovative trading model: asset-precipitated Vs non-asset precipitation

The iteration of the underlying technology will inevitably lead to innovation in business models. The pricing of the digital assets of the exchange plays a central role, and cross-chaining is the technical infrastructure of DEX and will have an important impact on its business form.

According to Eitafang founder Vitalik, cross-chain technology can be roughly divided into three categories:

The first category is the Witness Mechanism , typically represented by Interledge, which is characterized by asset recognition and conversion depending on the individual credit of the witness.

The second type is the sidechain/relay method . The basic idea is that the two chains communicate through the contract and complete the asset replacement. The typical representatives are Polkadot and Cosmos. Generally speaking, the side chain/relay based method can not only realize asset cross-chain but also realize information cross-chain, that is, different blockchains can perform distributed computing while sharing intermediate computing states. It can be seen that a very powerful cross-chain function can be realized based on the sidechain/relay method, but the fly in the ointment is that the sidechain/relay method cannot support BTC related transactions (see note at the end of the article).

The third way is to implement cross-chaining through the HTLC contract . The HTLC is called the hashed time lock contract. The main principle is to confirm the asset exchange by the verification of the hash function within the time limit. The general idea is that the originator of the transaction initiates a contract in the P2P network. The basic logic of the contract is that no matter who enters a value, if its hash value is equal to the value set by the transaction initiator, the asset locked in the contract can be taken, if both parties initiate two such contracts at the same time and at the set time. Cross-chain asset exchange can be achieved by irrevocable internals. The disadvantage of HTLC is that the transaction speed depends on the calculation speed of the original blockchain, but it can support BTC related transactions. In addition, the gradual maturity of lightning network technology actually provides a possibility to accelerate BTC-related cross-chain transactions based on HTLC. After all, lightning network is mainly based on HTLC.

On the basis of the realization of the cross-chain function, according to the business attributes, we can further divide the cross-chain business into asset-precipitated and non-asset-precipitated cross-chains. The standard of division is whether cross-chain transactions are accompanied by the generation of anchored assets. Whether or not to generate anchored assets actually means whether there are new participants in the cross-chain process and what resources are needed to carry out cross-chain business.

According to the classification criteria of the two types of services, the cross-chain based on the sidechain/relay chain is obviously an asset-precipitation cross-chain, and the cross-chain based on HTLC is a non-asset-precipitation cross-chain.

Compared with asset-preserving cross-chain, non-asset-precipitation cross-chain does not need to complete cross-chaining by generating new mapped assets, which is more secure in terms of security. After all, the security of mapped assets mainly depends on generating asset blockchain. The consensus mechanism and node composition, the possibility of node collusion to control asset generation is not without.

In addition, the implementation of asset-precipitation trading requires not only technical feasibility, but in fact, the brand advantage has a greater impact, and the exchange has undoubtedly a clear advantage in this respect, because the centralized exchange has an asset custody business, and the asset is upgraded through asset chaining. The transparency of assets is a credit increase rather than a re-establishment of trust for users. However, asset-precipitation transactions for technical background projects face inherent difficulties. If the underlying technology is based on the Dpos mechanism implemented by a few nodes, it is even more lacking.

The business attributes of asset-precipitated cross-chain and non-asset-precipitated cross-chain are also quite different.

The asset-precipitation cross-chain locks assets on the blockchain that initiated the transaction, and generates new assets on the same sidechain or relay chain such as Cosmos's Zone and Polkadot's Parachain to convert cross-chain transactions into intra-chain transactions. This approach is essentially asset custody and has obvious financial attributes; business with financial attributes must meet regulatory and access requirements, and this requirement does not change because the business model is based on blockchain development.

This problem does not exist in non-asset-precipitation transactions. The transaction process does not need to establish a new blockchain. The asset confirmation of the two parties is confirmed through the original blockchain. The security of the asset will not be essential. Change; assets are always under user control, neither intermediary participation nor asset custody, distributed networks can actually greatly expand the margin of services, thus forming a complementary and cooperative relationship with existing financial services. And can get market space at a lower cost.

Non-asset-precipitation trading has become one of the choices for traditional financial institutions to test digital finance. The Singapore Monetary Authority (MAS) launched the "Ubin" project based on Distributed Book-Based Technology (DLT) to promote the Real-Time Total Settlement System (RTGS). The DLT-based RTGS system reduces daily costs and resource consumption and eliminates central bank action. Single-point-of-failure risk across the financial ecosystem center.

Non-asset deposit trading has also become an option for the entrepreneurial team's innovative trading model, and whether it has a first-mover advantage is a key factor in this track. For example, KOFO has been the first to implement BTC and ETH cross-chain trading based on HTLC since its establishment in March 2018. It has already connected to the mainstream wallets such as Bitpa and TokenPoket to open the public chain ecosystems such as Etherium, Eos, TRON, Bos and Zilliqa; KOFO's intelligence The contract has passed security audits and open source; KOFO is working hard to become an important infrastructure for the digital asset ecosystem by developing the world's first decentralized cross-chain trading network that supports BTC.

In summary,

  • Asset confirmation, pricing and trading are the main lines of blockchain technology iteration and business model innovation;
  • The competition of the public chain is actually the competition for the technical discourse power of the underlying technology of digital assets;
  • Focusing on the core goal of building a digital asset ecology, public chains and exchanges have greater opportunities to enter from different angles, but the sooner they enter the market, the easier it is to form market advantages through brand accumulation;
  • Cross-chain technology is the technical foundation of DEX and also has an important impact on its business attributes;
  • It is more advantageous for exchanges to conduct business through asset-based cross-chaining;
  • Non-asset-precipitation cross-chain integration into existing financial markets is less costly;
  • The combination of asset-precipitation transactions and non-asset-precipitation transactions will become the technological infrastructure of the digital financial ecosystem.

Note: The sidechain/relay mode can generate BTC mapped assets, but cannot convert the mapped assets to BTC in the form of contracts, because the Bitcoin blockchain does not support contract functions.

Author: Caikai Long, Guo rule