The history of crypto dying 2020: On the widespread "crypto utopianism"

Author: FYJ

Source: BlockBeats

Editor's Note: The original title was "Encryption Extinction History 2020"

"Everyone is planning A shares."

After hearing this sentence, my mind seemed to be stuck. Two seconds later, I confirmed that my friend was not discussing the crypto market with me.

I looked up and looked around, and the night wind made me shiver.

Many recent things have flown in my head like a slide: the return of the alliance chain, the decline of the public chain, the deliberate low-key of the trading platform, supervision in all directions, increasingly professional secondary markets, people leaving one after the other, cynicism about Sythetix And NFT tokens that seem to be out of the circle.

I suddenly remembered that the prediction market seemed an ancient concept, and DAO was no longer young. Those once ambitious slogans and explorations seemed to be a thing of the past.

Since then, I decided to start again, thinking about the full possibilities of encryption, and trying to find a fulcrum that can convince me.

This article starts with the most basic issues and attempts to criticize a widespread "cryptographic utopism."

Node motivation

Why run a public chain node?

Under the assumption of a rational person, no one would think that it is economical to run a node just for the use value of the token.

Under the fiat currency standard, the cost of node operation can be calculated, but the value of the token cannot be calculated, that is, there is no effective way to measure the practical value of all calculations and all storage on a blockchain platform.

However, if the value of use is simply and rudely equivalent to the real-world server cost of the entire network, we can consider:

Use value = network-wide computing power cost x calculation time + network-wide permanent storage overhead (fiat currency)

The average token revenue of a node = (block reward + handling fee) x node computing power / network computing power

Therefore, under this assumption, that is, in the case where the token does not have a secondary market, the ultimate profit and loss of the node is entirely determined by whether these tokens can exert sufficient use value when the labor income is spent, which directly depends on the network congestion. Earn tokens when the network is congested, and use tokens when the network is idle, you will be able to spend the least fiat currency server cost and use more platform computing resources. This model will make the network join and exit, use and idle always in a dynamic adjustment state, and finally return to the general equilibrium. Needless to say, the assumption of this single token model is actually meaningless due to the fact that the cryptocurrency system is open and objective.

Put another way, under the currency standard, no node operator can also measure the cost of the currency standard of node operation, because no one will collect coins to sell servers and electricity-cryptocurrencies are not compensatory. Because costs cannot be calculated, the benefits of currency-based investments cannot be measured.

In summary, the benefits of the currency standard and the legal currency standard in the closed system are incalculable. Therefore, the expected profit of the node operator must be based on the fiat currency standard in the open system, that is, the speculative value of the secondary market containing tokens.

Therefore, speculative demand is a necessary factor for the public chain economy and the fundamental motivation for node operation.

On the crypto community

In the early days of Bitcoin, curiosity shaped the community. The ancient miners were purely interest-driven, and they did not have any thinking about expected returns; later, the early miners ruled that Bitcoin would one day have a place in the world economy, so the cooperation of the community came from a certain This kind of value investment consensus, while still a large degree of curiosity and idealism. The Bitcoin community in these two stages is a consensus-driven impure interest-driven community.

Later, due to the skyrocketing bitcoin price, the community was divided into two: the price of getting on the bus of the early holders was much lower than that of the later entrants. The former insists on holding, and believes that the value of Bitcoin comes from the "value store" and becomes an "evangelist"; the latter frequently trades, and believes that Bitcoin is just a "non-stop aerial casino."

It is easy to understand that the advocates of "value storage" are almost all vested interests who get into the car at a low position-because the total amount of Bitcoin is limited. The latecomers cannot rely on currency holdings to become rich because of the high starting price, so it is difficult to have a sense of belonging to the "value store".

The same principle applies to Ethereum, but the difference is that the Ethereum community has a stronger idealistic temperament than the consensus on the "anti-inflation speculation" that the Bitcoin community has basically determined. In other words, the cohesion of the Ethereum community still contains a lot of exploration and curiosity, and this part of the motivation makes the community in many cases do not act purely for profit. But as the conclusion of the first part stated, the speculative demand of ETH is the premise for the existence of Ethereum-the Ethereum community is not about the issue of SoV, but has to talk about the issue of SoV.

In the organization, selfish genes make people compete to develop individuals; altruistic genes make people dedicate to develop groups; curiosity makes people tirelessly explore new production methods to expand the boundaries of existence. Communities of any size and intensity are formed in different ways by stimulating one or more of these three genes.

Easy to get, it is impossible for all tokens except Ethereum and Bitcoin to build a sustainable community. The first reason is that after the smart contract, the blockchain is essentially not disruptive and the curiosity-driven community cannot be formed. The cold start cannot be solved, and the ecology can only be generated through foundation sponsorship, which leads to the corporatization of the community, which in turn inhibits it. To the community's innovation and cohesion, and if the money given is not enough, it is the community company's two ends; the second reason, if the use of the interest-bundling method, the price of institutions and large households and retail customers are different, on the blockchain Under the circumstance that technology can only achieve speculative functions, the two groups are fundamentally antagonistic. No matter how the distribution mechanism is designed, they will always tear their faces-unless a new irrational frenzy is created. But in today's market, this can never be done without disruptive innovation.

This is why there are only institutions in the crypto industry and no retail investors are visible. The solution is to abandon the community and go dark on the road to corporatization. But apart from investing and selling coins, such project parties cannot have any profit model.

When we are part of the broader crypto community, we first have to think about where we are and where we are going.

There are roughly three types of people in the crypto industry. The first is that it doesn't matter what the vision is, but just wants to speculate to make money. The second is that no matter what the concept and direction, people who work driven by curiosity often make altruistic contributions in open source communities The third, pretending to be the second, is actually the first.

Based on the conclusions above. The first is that speculation in the rules is necessary, and reasonable business models can be established, such as mining and trading platforms; the third is the industry tumor, creating the "liar" label in the blockchain world in the eyes of outsiders.

The ideas of the second group of people are currently divided into the following categories:

I. Decentralized Finance (Defi)
Protecting privacy
Data confirmation
Fourth, the decentralized Internet

V. New Social Governance Paradigm (DAO)

The following sections will critique dreams including, but not limited to, these five types.

Absolute power

Some of the fundamental misunderstandings in the design of systems in the field of encryption are: treating inaccessibility as an equality, treating absolute freedom as the ultimate way to improve efficiency, and assuming everyone as an extremely rational person.

No access and anti-censorship basically realized the absolute freedom of the blockchain system: the full open use of the fully open system. But absolute freedom means the emergence of absolute power. In the PoW and PoS systems, the former is the resource and the latter is the money. In the design of the entire system, people as individuals have lost their meaning of existence, and people without resources and money have no power.

The designers of the crypto world are trying to achieve an equality in such a system: they believe that "people" are born with an inequality of social rights and talents (which is a persistent disease of any form of social organization), and then they can design A completely new system, its power anchors an evenly distributed social substance, which needs to be more decentralized than the real world severity level.

However, at the moment when life and time can be traded, and at the moment when any unique source of information can be infinitely copied, only human beings are truly equal: each person has only one life, and all forms Neither transactions nor reproductions of ownership can transfer or generate ownership of life.

Any blockchain system that attempts to decentralize by anchoring resources will inevitably move towards centralization, because the unique anchoring of people is lost, and the entire system will become a complete jungle world.

The blockchain world generally believes that a system born of "people" as a unit of governance will inevitably have discrimination and censorship against others, but everyone of "a certain kind of resource" has the power to fight and replace people with power. There will be no discrimination or censorship.

But the truth is: respect the people, this world will be more slowly centralized. In the system of anchoring resources, the gap of resource inequality still cannot be resolved.

On the mining side, ordinary speculators can only go out or entrust the mines of professional agents; on the transaction side, all the liquidity of a decentralized system is concentrated on a centralized platform off the chain, and professional traders rule the battlefield. Bitcoin is proud to resist censorship and can only be used for money laundering and on-chain settlement for off-chain speculation.

What's the problem?

Just because the consensus among Bitcoin holders is: USD is the anchor for Bitcoin . In short, Satoshi's currency vision is to create a decentralized commodity currency and a commodity currency anchor in the gold standard era, making it a means of payment. And a group of evangelists who advocate the currency revolution are speculating on bitcoin in dollar terms, so liquidity must be centralized off-chain , which proves the overall failure of commodity anchors and the overall victory of credit currencies.

In short, bitcoin has lost its value as a disruptive currency experiment after its currency standard failed. Today, the real players of Bitcoin are mining circles and a group of traditional traders. After the failure of the payment method and the choice of commoditization, the use of Bitcoin's anti-censorship feature will leave only illegal crimes.

This fact shows that the centralized currency and the willingness to get censorship are the result of the common choice of all people-and it has nothing to do with the TPS of the blockchain.

Miners in PoW must bear the exposure between the long-term investment cost of the mining machine and the short-term price fluctuations in the secondary market, and ordinary traders face only expected constant selling pressure and can only accept such a small inflation cost, or simply purchase ore Machine switches to the other end of the game. In the current PoS system, a large number of tokens are in the hands of the institution. If it is sold, it will cause stampede. Therefore, Staking when it is idle becomes an inevitable choice. At this time, the income of Staking depends on the secondary market price. Cut the perspective to the secondary market retailer, because the node operation in the current PoS system is still not a simple matter for ordinary people, so most of the holders can only silently endure the slow bear in the secondary market brought by this long-term inflation. Some of them deposit tokens into the current staking service of the centralized trading platform, but the result of this operation can only be carried by the platform while taking a layer of staking spread wool. If the current PoS is more like an alliance chain, then the bleak "retail" is undoubtedly the actual bearer of the chain's operation and maintenance costs.

If the current PoS system can be sufficiently decentralized, then it is essentially the same as PoW's game form, but there is a certain difference in speculation on the node side. This system is like a shell country consisting solely of commercial banks and foreign exchange disks, but ordinary people are not eligible to make deposits and earn risk-free profits. They can only go in and out on foreign exchange disks, and institutions can sacrifice flow To enjoy risk-free currency standard profits. The actual idea is that they can escape one day, but this only depends on how many retail investors will come in.

For all ordinary people, this is the cruel crypto world. The myth of ordinary people can only come from the bones of more ordinary people later, because these tokens are really useless as utility-they don't have any real production requirements .

One possible change is that once the low-threshold client like Ethereum 2.0 evolves further, under ideal assumptions, ordinary people will be able to staking on their own at almost zero cost. At this time, such a sufficiently decentralized PoS will be unprecedented creation. A cryptocurrency that can seamlessly switch between low-level and secondary market games at low cost and free from mining, turning it into a real "air casino."

Essentially, any cryptocurrency that is a "speculative commodity" is completely dependent on the random input of speculators. Looking ahead, after the end of the boom, the "anti-inflation" assets that can be circulated in the negative interest rate era are the only reason to enter the market-any wanton spawning or complicated and ambiguous token issuance will have no value. .

Anchor, vulnerability and pure reason

As long as the US dollar remains the anchor, Defi's essence is an overdesigned and dangerous speculation. It needs to be known that the true liquidity of cryptocurrencies does not exist on the chain, but occurs on a centralized trading platform for legal currency swaps. Therefore, the oracle is the source of information for the dollar anchor .

This design attempts to split the trust process: instead of using various financial instruments directly on the trading platform, Defi transfers the trust implemented by the tool to open source code, and leaves the quotation right to the trading platform without any interest because the trading platform Monopolized the pricing power of fiat currencies. This mechanism of separation of power and responsibility exposes huge system risks both in the quotation and transmission links, so it can only be secretly centralized or introduce some complex redundant mathematical designs. For example, Chainlink's main business is actually a centralized oracle machine. It is a platform business, and anyone who understands the platform economy will find that the source of information on the chain is a high cost to find, but it will inevitably form long-term stability in the end. The field of customer relations cannot constitute a platform economy at all. Conversely, once the introduction of a decentralized oracle machine design, all Defi will be like a building standing on the tip of a needle, which is vulnerable.

Another example is that Maker's mortgage casting model makes it never able to support large-scale use.

There is a metaphysical problem in the field of blockchain design: is mathematical trust really reliable? In math we trust's claim first came from the late well-known physicist Zhang Shoucheng. But in fact, it is not mathematics that supports all blockchain systems, but economics.

Countless historical experiences tell us that economics is not a priori science, but an empirical social discipline. In particular, economics is not always credible.

A myth in the blockchain world is trying to design a decentralized full-stack Internet using purely economic incentives. This is a close combination of financial means and Internet technology. It is true that in the classical computer world, the layer-by-layer stacking of complex protocols will inevitably cause many security vulnerabilities, but due to the mechanical nature of the entire architecture, most things are based on pure rationality and are therefore under control.

But when we introduce economic design into network security, constructing an entire full-stack economic system is bound to bear the uncertainty caused by huge human behavior . Although a lot of experience has been accumulated in the past economy and finance, the lessons of 2008 have taught us that seemingly simple derivative designs will evolve into complex and fragile systems that no one can understand. The protocol should be as simple as possible because humans are not numbers.

Many people don't understand why modern society gave birth to centralized financial institutions: the modern financial world itself is a stacking game similar to building blocks (yes, the Defi building blocks are clichés), this fragile and complex mechanism has evolved to have super The reason for the strong robust complex system lies in the artificial repair of the rigid mechanism of human beings. The low-cost currency creation ability of credit currency and double-entry bookkeeping in commercial banks gives this system super flexibility. In short, centralized risk control, the collapse of helicopters to throw money or pack bad assets.

Some people say it's too big to fail, but what can it do? Modern finance has never been designed to be what it is today, but has grown spontaneously into what it is today. The same goes for Bitcoin.

Most bitcoin veterans from ancient times to now dismiss Defi, just because this kind of catastrophic trickery is simply not a financial innovation of any kind . Finance is a cross-temporal allocation of capital and risk, and issues such as inclusive finance and cross-border financing that Defi advocates try to solve are not technical issues at all. Anyone who knows a little bit about mainstream Defi in the market will be self-defeating: Are these things really Defi, or is it possible to achieve decentralization in the future?

What is an anchor?

Anchors are the management of expectations. Anchor is a kind of trust. Trust brings stability and stability against risks. Only people in the system can live and produce normally. The anchor of the gold standard era is the country's absolute national strength guarantee for the exchange ability of gold round coupons to physical gold, and this mechanism has been replaced by a central bank system based on credit currency due to lower operational flexibility. The anchor under the central bank system is stable inflation expectations, and the Fed's 2% target is such a representative. Regardless of the system, society can normally save, consume, and invest only under the guidance of a stable anchor. The importance of inflation expectations management is a valuable lesson that humans have learned from countless blood and tear lessons.

Countries need fiat currency anchors, and the world needs world anchors. This anchor is the US dollar. It's hard to believe that this world always needs a universal capital, but the end of this universal anchor can only be chronic death. Today, the side effects of the world anchor, namely the hollowing of the industry and the current account deficit caused by the huge deficit, have become social problems that the United States cannot bear, so the role of the dollar as a world anchor can only shrink.

In the decline of negative interest rates around the world, China has the best ability to delay this process, so China's national debt will become a powerful weapon for the internationalization of the RMB. More importantly, as China's demand for commodities gradually dominates, the yuan's anchor property will gradually emerge. In the future, the world of unipolar anchors will develop towards multipolar anchors, and deflationary assets such as crypto assets will run through them.

From this perspective, Libra's ambition to create a stable basket of fiat currencies was to try to cast a traditional combination of virtual currencies into a digital currency, becoming an integrated multi-polar anchor above the country.

Although this matter is also not a technical issue.

Data ownership

In extensive discussions, privacy is always tied to data ownership. We leave our data in free-to-use internet services, so there is no privacy.

The first question that needs to be understood is: Is privacy really an important Internet contradiction?

Many years ago, someone discovered a very simple main contradiction in the vast countryside: farmers have no land, so farmers cannot live. Therefore, the root of China's industrialization lies in mobilizing the largest group of farmers.

At the time, another person believed that the key to the problem was that Chinese industry was not working, so it was necessary to mobilize the main industrial group of employees.

Later results are known to everyone: China has embarked on the urbanization of agricultural enabling industries, and this idea still guides China's pan-urbanization.

Today, the Internet is governed by rivers inside and outside the five rings, and the concept of "sinking the market" was born. But even among the most sophisticated Internet consumer groups, I still don't see violent privacy contradictions. In fact, many Chinese have just started shopping online through Pinduoduo.

In the old society, due to the production characteristics of agriculture relying on the sky to feed, self-employed people lacked the ability to resist risks. Therefore, the landlord took the risk without labor and the peasant worked away from the risk. Like the logic of the employment system of modern enterprises, this system is natural result. In recent history, China ’s grassroots collapse due to years of war has completely dismantled the risk system of rural societies (small societies often have limited ability to resist risks), so they have the necessary conditions to launch the agrarian revolution. As a result, in the reconstruction of society, an absolutely central system took over the autonomy at the grassroots level, so that the risks at the bottom level were spread throughout the society and continue to this day.

The premise of this revolution is that a self-organizing social production can survive. As demonstrated by the previous article, the full-stack decentralized Internet is a logical monster that violates the principles of system design. Moreover, today's centralized Internet brings not only standardized technical resources, but also a complete set of services and offline industries. Blockchain people want to create a "new generation of xx platforms" at any time. This is still a big platform in the era of traffic Internet. It wants to create a big center, harvest big dividends, and raise the banner of righteousness with greed. It is doomed to failure. Therefore, when only centralized large enterprises can provide this service, you have no choice in using or not, unless you do not use it.

On the other hand, most of the requirements for power come from participation in production. In fact, like many NFT tokens that depend on services and cannot be truly decentralized, data depends on services instead of being generated by services. Produced by the user. In other words, the land and production data of the data are in the hands of the service provider, and the user can only be regarded as an indiscriminate labor. Regardless of the vast majority of users in China, the more important question is how to use more basic Internet services instead of satisfying non-existing data confirmation requirements. Even if it is really necessary to regulate data privacy, other methods of struggle need to be adopted: such as national legislation to regulate the Internet giants, or an online organization to boycott evil giants.

Of course, there is another idea, that is, data localization, or the application data encryption is shielded by encryption. Since most Internet applications in China are free to use, this approach directly counters the fundamental interests of service providers. There are only two ways, either all applications are charged, or they will be caught in endless wit and legal disputes with service providers.

It is obviously impossible to lose free.

What to govern?

There is a lot of long talk about DAO. But when you open Aragon and observe, you have a question: what am I doing?

After researching, you will find that the only innovation of DAO is to use the mouse for shareholder voting, and often you don't understand why you vote.

Based on the automation and transparency of blockchain, DAO is considered to expand the scope of governance and improve the transparency of governance. However, first, the Internet today has connected most of the world, so the issue of governance is not a technical issue. Similarly, transparency, why can't the transparency of the real world be 100%? This is also not a technical issue.

First of all, the transparency on the chain can only be the transparency of the data system, and the execution of the business does not guarantee transparency. Secondly, the disclosure party of the information is the producer of the information most of the time. Unless there are mandatory legal requirements, transparency on the chain has no effect on them.

Blockchain is considered to be a tool that can optimize human collaboration, but in essence, it does not have any innovation in the breadth, depth, and mechanism of collaboration: no matter how large the possible boundary, only stakeholders are involved in governance; No matter how deep the collaboration is, there is only one automated script on the chain (a script that cannot be trial and error can also be called governance?); Whether the participants are anonymous or not, the opposition between fairness and freedom cannot be resolved. Furthermore, "can be seen by everyone" and "will be seen by everyone" are two completely different things. The information in this world today is not a question of whether it can be seen, but whether anyone can see it. It is a question of the cost of information push and acquisition. The scary thing is that the public chain has not reduced either of these two costs.

So why do many people think that blockchain has the potential for a new type of governance and organization?

This comes from the fact that Bitcoin can still exist in the case of decentralization. Previously, no software in the world could exist without a centralized server. After abstraction, Bitcoin's code leads to two principles of governance: quantifiable absolute competition and voting with feet . Only the person who calculates the fastest can get the reward. Everyone has the right to claim that their chain is a legal chain, but the transaction price of the holders of coins in the secondary market is to vote on the chain with their feet-because the miners will go to the chain with the highest currency price. Migration, and the formation of a consensus and security collapse: the more miners, the more people recognize, and the more people recognize more chain miners.

The popularity of gold is also the result of voting with feet, so this mechanism is not innovative. The real core of Bitcoin decentralization is that the person with the biggest fist is the only one who is legal . This thorough use of quantifiable violence against absolute power has never appeared in human history. This is indeed an innovation, but anyone with a normal perception would not think that such governance could become mainstream.

The PoS system is most legal in collateral tokens, which is also not about governance innovation. Minorities obey the majority and have been there since ancient times.

Way to both sides

For many years, the poor community in the crypto community fell to Huangquan just to find something that could be written on an immutable stone. Slowly, people are despairing in futility day after day.

A small group of people realized that there is something that is simple and ubiquitous, available and visible to everyone. This kind of thing called "money" is the ultimate fate of this stone.

In years of exploration, another group of people who call themselves "chain of alliances" have found other ways, where they may lead to "enterprise software" and "industrial internet".

As time goes by, when these old encryption guns look back, remembering the experience of always holding a stone and forcing others to write things up, maybe they couldn't help smiling.

Money goes to money, and chain goes to chain.

Maybe this is the 2020 of the blockchain.