Written by: Ryan Sean Adams, founder of cryptocurrency investment fund Mythos Capital, and editor-in-chief of Bankless
Compile: Zhan Juan
Source: Chain News
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When I was young, I liked turn-based strategy games, such as "Civilization". Have you ever played?
You can start from the Stone Age hunting and gathering society. Your goal is to use resources and time to upgrade your society according to the technology tree shown in the picture below:
(In order to protect your cervical spine, it is recommended to read the picture below with a horizontal screen mobile phone)
Learning the alphabet can help you unlock writing, math, and legal skills. With law and writing skills, you can open the door to literature, learn about philosophy, and finally build a new form of government—the Republic. And so on.
Your civilization cannot jump directly to flight and nuclear fission! Do you know how much technology is needed to achieve this? To accumulate the value of countless times! It takes 20 rounds to wait until the Renaissance and rebirth of science, and another 10 rounds to wait for the Industrial Revolution and obtain the necessary machines, and you have not even entered the Bronze Age!
These techniques are like branches on a tree, and each branch depends on many other branches. Some branches look like dead ends, but in reality they are just waiting for the right mix of technologies to keep growing. Sometimes all you need is time; sometimes you need an investment catalyst.
Have you noticed that the Ethereum economy works the same way as the tech tree?
Here, let's go through this "tree": we start with Ethereum, which is the economic network of the Stone Age. There is not much to do but transmit ETH or speculate.
After a few rounds. Oh, what is this? We have unlocked the token ERC20 standard, which is to give the fund +30 points. Tokens have a positive by-product, which is to increase the currency of ETH, but there are also negative by-products, which give +25 points to fraud.
Several more rounds passed. It turns out that ICOs are not the only ERC20 tokens that are unlocked. Combining ETH as a reserve asset token, we can unlock Maker, which is an agreement that gives us a loan (+20 points) and generates DAI. Our first victory!
We have unlocked the world's first license-free stablecoin! Without ETH and tokens, this goal would not be possible.
Now that we have DAI (a stablecoin for ETH), what are the next possibilities?
We can unlock the DAI Savings Rate (DSR). Our Economic Savings Agreement is capable of +25 points. DSR opens the door to feature-rich smart contract wallets such as Argent (availability +20 points). DAI promotes liquidity in Compound (loan +20 points) and dYdX (margin +15 points) and helps set the bank's stablecoin DeFi loan interest rate.
See how Ethereum's economic technology tree works?
Without Uniswap, you would not get a highly fluid Synthetix. Without ETH liquidity trading pairs, you would not have Uniswap.
Do you want to unlock the following assets?
- Tokenize Bitcoin like tBTC? You first need ETH + ERC20;
- Casting synthetic assets? You first need ETH + ERC20 + Uniswap;
- Anonymous stablecoin? You first need ETH + ERC20 + DAI + AZTEC.
Sometimes we are lucky to be able to unlock a major economic breakthrough, such as Uniswap, which is destined to be a root branch of our tree, just like the alphabet or wheels, it is a prerequisite for hundreds of other branches. Other times, a certain technology seems to stagnate like Augur now, but maybe Augur is only temporarily dormant, waiting for a stable coin to flourish. (Augur will introduce DAI in a few months.)
We cannot predict the technology tree of Ethereum in advance, it is full of surprises. Even the best cryptocurrency investors may only see one or two branches ahead. This is normal. When you can buy ETH and bet on the whole tree, why bother on a single branch?
However, based on their current status, it is wrong to dismiss ETH and DeFi as "non-institutional level" or "too primitive" or "can only compare with themselves".
Who would have expected a group of cavemen to send humans to the moon?
Who would have thought that a low-throughput "magic coin" network would someday become a globally open financial system?
Maybe this is because we know the compounding power of the technology tree.
Maybe Wall Street and banks should launch a "Civilization III" game to avoid losing the opportunity.