Cross-chain is one of the hottest topics in the industry and the most misunderstood topic (no one). Some people think that cross-chain has long been realized, and each exchange has spanned dozens of hundreds of chains. Some people say that exchanges are centralized, so that BTC/ETH/LTC/… transactions without trust are cross-chain. Some people say that it is wrong. It is a cross-chain atomic exchange or decentralized exchange. It is an old concept. Polkadot/Cosmos is much more than that. In addition, some people believe that the assets of the side chain and the main chain can be anchored in both directions, so it is also a cross-chain…
Although everyone has a Hamlet in their hearts, they can go hand in hand. But the industry lacks a clear consensus on important concepts, and it only brings chaos and drowning (we are also cross-chain…). Polkadot/Cosmos's starting point is not to connect existing public chains, but first to support developers to develop new blockchains quickly and cost-effectively. The new blockchain can be an application platform (supporting smart contracts), but more new blockchains will be decentralized applications, such as decentralized forecasting markets, TCRs, stable currencies, lending markets, in the form of independent blockchains, Exchanges and so on, we might as well call it the application chain. Polkadot/Cosmos not only provides tools for developing application chains (Substrate/Cosmos SDK), but also provides an infrastructure for trusted interoperability between application chains (Polkadot Relay/Cosmos Hub). It can be seen that the core of the Polkadot/Cosmos chain lies in the new form of DApp – the application chain and the trusted interoperability between the application chains.
So what is the meaning of cross-chain? First of all, compared with the world computer (platform public chain), the consensus participation of the application chain has been greatly reduced, and the performance and cost issues have been solved. The application chain developed by Substrate/Cosmos SDK can easily reach more than 1000tps, and the cost is very low, which can meet the needs of most DApps. Another change is DApp governance. Governance is not as obvious as performance issues, but it is a big bottleneck in the development of DApp. The theme of this article is expressed in a radical way: smart contracts confuse the two different concepts of decentralization and verifiability, misleading developers, and making DApp almost in place for four years. Polkadot/Cosmos (especially Polkadot) gives the DApp chain governance capabilities. By removing the two development bottlenecks of performance and governance, cross-chain technology is expected to release the potential of DApp innovation, triggering the third wave of decentralized applications.
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Part 1: What is Web3 and Polkadot?
In order to understand the topic of this article, you need to understand the concepts of Web3 and DApp. The guy on the left side of the picture above is Dr. Gavin Wood, the former CTO, EVM and Solidity language of Ethereum, and the founder of Parity, the Web3 Foundation and the Polkadot project. In the project documents such as the Web3 Foundation and Polkadot, the textual representation of the Web3 vision is not consistent. But they all have two meanings. The first layer: Web3 is a serverless, decentralized Internet. Serverless serverless is also decentralized, because in the network computing architecture of web3憧憬, the participants or nodes are equal, there is no difference between server and client, all nodes participate in the formation and recording of network consensus more or less. . What is the use of the decentralized Internet? It is the second meaning of Web3: everyone can control their identity, assets and data. Mastering your identity means that no one else or organization is required to give identity, and no other person or organization can use, deprive or freeze identity. Mastering your own assets means not being deprived of assets and being free to dispose of assets. Mastering your own data means that everyone can generate, save, conceal, and destroy personal data as they wish, and no organization can use their personal data without his permission. In the digital age, people who have mastered their identity, assets, and data have mastered their own destiny. The Web3 vision is not unique to the Web3 Foundation or the Polkadot project. Many blockchain projects, including Bitcoin and Ethereum, have similar visions. The names vary, including open networks, next-generation Internet, and more.
To achieve the Web3 vision, the world needs a decentralized Internet application, DApp. From the user's point of view, decentralization can be easily understood as not being controlled by individual or a small number of participants, so trustworthy application attributes. Specifically, decentralization means three important attributes to the user: trust minimal, permissionless, and censorship resistant, that is, trust minimization, no license, and anti-censorship. The three attributes are in line with the web3 vision. With numerous decentralized applications, Internet users can control their digital identity, assets, and data to achieve the Web3 vision. The blockchain is the mainstream technology for implementing DApp, or the blockchain is the infrastructure of DApp. The blockchain mentioned in this article refers to the public chain if it is not specifically stated. In addition, this article focuses on the realization of the Web3 vision, and other uses of the blockchain (such as enterprise applications) are beyond the scope of discussion.
There are already tens of thousands of DApps on the Ethereum/EOS/Wavefield three major smart contract public links. But with a few short-lived spinach games and funding slots, users are few and very active. Some people have even questioned: Is decentralized application a pseudo-concept? I think the problem is not a decentralized application, but a smart contract platform. It can be said that the development of decentralized applications on the smart contract platform has entered a dead end. There are two reasons, the first is performance and transaction execution cost limits. Low performance and high transaction execution costs are two sides of a coin. For example, the Ethereum network has only 15tps of processing power. In order to guarantee fairness and resist witch attacks, it can only be a transaction fee bid. What the user experiences is that the DApp is very slow and costs money when used. The industry has been paying attention to the performance of the public chain for a long time, and many teams are exploring the expansion of the three ideas of representative system, layering and sharding. The work "The 4D long text says Polkadot architecture" organizes the technical route of expansion, problems and solutions encountered, as well as major project implementations, and puts Polkadot/Cosmos into fragment expansion. In short, cross-chain technology achieves capacity expansion while maintaining interoperability through a divide-and-conquer approach. This article will still briefly describe this part of the content, readers who have read the article "Tell through" can skip the next three sections.
Performance/cost is not the only limit for smart contracts to DApp. EOS has been able to achieve thousands of tps of processing power through a representative system, which is two orders of magnitude better than the performance of Ethereum 1.0, and the transaction execution cost is borne by the developer, which makes DApp take off the slow and expensive hat. However, the EOS main online line has been doing a lot of useful explorations in the field of public chain governance for a year, but it has not caused innovation in the application layer. This can not help but make people doubt that when Ethereum 2.0 is fully implemented (about 1-2 years), will the spring of DApp really come? After a long period of rethinking, I think that in addition to performance/cost constraints, DApp also faces the second important limitation of the smart contract platform: decentralized governance is absent, and in order to protect the verifiability of the contract, it hinders decentralization. The realization of governance. Cross-chain technology (especially Polkadot) provides a technical basis and template paradigm for effective decentralized governance while achieving capacity expansion.
Polkadot is a Web3 technology solution proposed by Gavin Wood and the Web3 Foundation. Both pictures are from the Chinese version of the Polkadot white paper translated by Yue Lipeng. Looking at the big picture on the right, the basic network structure of Polkadot is star-shaped, or called spoke type. At the center of the star is the Polkadot Relay relay chain, surrounded by numerous Parachain parallel chains. Looking at the small image on the left, participants in the Polkadot network have four roles: Validator certifier, Nominator nominee, Collator collector or checker, Fisherman angler or fisherman. A DApp can be a smart contract deployed on a parallel chain, or the entire parallel chain is a DApp. The user initiates a transaction in the parallel chain, and the transaction is collected by the collector, packaged into blocks, and submitted to a group of verifiers for verification. This set of certifiers is not from the parallel chain, but from the pool of certifiers managed by the relay chain, assigned to the parallel chain by random grouping. Each parallel chain has an exit queue and an entry queue. If the user initiates a cross-chain transaction, the transaction will be placed in the import and export queue. It is then placed in the entrance queue by the collector of the target parallel chain. The collector of the target parallel chain executes the transaction, generates a block, and is finalized by the verifier group. Polkadot uses a hybrid consensus protocol that separates the block process from the finalization process.
In addition to parallel chains, there are transfer bridges that link existing, non-directly linked blocks into the relay chain, such as Ethereum and Bitcoin. We have already introduced the role of collectors and verifiers in the system. So what do the nominees and fishermen do? The nominee is the holder of the Polkadot Basic Pass DOT and he hopes to pledge DOT to gain. But either because of the small number of DOTs or the lack of expertise in running maintenance and verification certifier nodes. Therefore, the system provides another way to participate, that is, the holder of the money chooses the certifier he trusts, pledges his DOT through the certifier, and shares the certifier's income. The advantage of this is to increase the overall pledge ratio, improve system security, and also make income distribution more fair. Fishermen are the role of monitoring and reporting illegal transactions and earning bonuses. In the Polkadot network, the parallel chains each undertake transaction execution and data storage, and parallel chains can interoperate to achieve a very similar goal to fragment expansion.
Part II: What is Cosmos?
After talking about Polkadot, introduce Cosmos. In the upper left of the figure, A and B are the two chains which are side chains. That is, the A chain contains the SPV light client of the B chain, so that the A chain can verify the B chain transaction. In turn, the B chain also contains the SPV light client of the A chain, so that the B chain can verify the transaction of the A chain. As a result of the sidechains, the certificates issued on the A and B chains can be interchanged. If you extend from two chains to multiple chains, A and B become A/B/C/D/E/F. An extrapolation idea is to still use the two sideways sidechains to form the lower left. The structure of the square. However, there are a lot of problems in doing this. Each chain has built-in light clients of all other chains, and synchronizes the block headers of all other chains, which is of course a big burden. And every time you add a chain, you need to make changes on all other chains. As the number of blockchains increases, the complexity grows exponentially with n*(n-1)/2, which is obviously not feasible.
The solution is to change the structure shown in the upper right of the above figure, put a Hub in the middle, Hub is also a blockchain, which is sidechain with all other chains. That is to say, the pass on each chain can be transferred to the Hub, and then transferred to other chains through the Hub. The complexity of the network interconnection is linear with the number of blockchains. This is the architecture chosen by Cosmos. In the definition of Cosmos, the chain that accesses the Hub is called the Zone partition. Two conditions are required for the partition to access the Hub. The first is to comply with the Cosmos standard protocol, which is the IBC inter-chain communication protocol. The second is to require Zone to have immediate endurance (preferably using the Tendermint consensus) to ensure cross-chain consistency. And Cosmos can support the interconnection of multiple Hubs. For the existing public chain, Cosmos Hub can be accessed through protocol adaptation. Cosmos refers to the protocol adaptation gateway as the Peg Zone anchor partition. The resulting structure is the bottom right image showing the Cosmos architecture.
The Cosmos Hub and other partitions developed with the Cosmos SDK use the Tentermint consensus protocol. The block-out and finalization process is one-of-a-kind. As long as the block is generated, it is verified by more than 2/3 of the certifier's signature. The advantage of this is that it is simple and fast, and the block time can reach seconds or even sub-seconds, and it has instant finalism. However, in the case of network partitioning or large-scale downtime of the verifier, the Tentermint consensus may suspend the block.
We compare Serenity to Ethereum 2.0, Polkadot and Cosmos. All three are important DApp platforms for the next few years. First of all, the DApp development method, the three chains support smart contracts. Serenity is also a smart contract platform, and the Polkadot/Cosmos network will have parallel chains and partition chains that support smart contracts. In addition, Polkadot and Cosmos bring a new approach to DApp development, which is to develop blockchains for specific applications. Cosmos's tool for the application chain is the Cosmos SDK, which currently supports Go language development. Polkadot's tool for the application chain is Substrate, which currently supports Rust language development. Substrate is a complete application chain development tool with a complete application chain framework. Gavin Wood demonstrated a 15-minute application chain with Substrate on a brand new computer. In addition, all Substrate modules can be customized or replaced, powerful and flexible. In comparison, the Cosmos SDK is a bit thinner. It mainly provides core modules such as the Tendermint consensus engine, IBC link communication protocol and pass, and most of the superstructure needs to be developed by itself.
Regarding performance, Serenity is about 100tps per shard, and it is still a priority for deals with high gas prices. Polkadot Hub should be able to reach thousands of tps, parallel chains can determine consensus algorithms, hardware and networks themselves, without strict performance limits. Both Cosmos Hub and partitions use Tendermint, which can reach thousands of tps.
About interoperability. Serenity is the same as Ethereum 1.0, and smart contracts can call each other. The Polkadot parallel chain interoperates with other parallel chains via Relay and interoperates with other chains via Bridge. The Cosmos partition can exchange certificates through the Hub, and through the anchor partition and other chains. IBC messages also have data fields, just like attachments to emails. By extending data fields, arbitrary data can be passed between partition chains.
The access method Serenity is the same as Ethereum 1.0, and developers deploy smart contracts themselves. Polkadot Relay accesses the auction slot and pledges a large number of DOTs. Similar to Polkadot, Cosmos is eligible for pledge Atom auction access.
Then security, Serenity's shards are like standard containers, DApps are put in, and security is guaranteed by the system. In contrast, Cosmos, the application chain, whether it is connected to the Hub, is self-safe. The application chain developed by Substrate is two options, either to access the Relay as a parallel chain, to be secured by Polkadot, or to operate independently and to be secure.
Finally, the DApp upgrade is closely related to the decentralized governance that will be highlighted later. Here we simply summarize that Serenity does not support DApp upgrades, and Polkadot supports DApp security upgrades. Cosmos's partitioning chain is scalable, but the Cosmos SDK does not have built-in support for upgrades and requires DApp developers to implement the upgrade themselves.
Polkadot/Cosmos's biggest innovation is to provide a new way to develop DApps, which is to support the development of application blockchain. Application chains can interoperate through cross-chain protocols, and each application chain can enjoy more than 1000tps of processing power, and DApp performance bottlenecks are removed. The following focuses on how Polkadot/Cosmos solves decentralized governance issues. Before that, we must first explain the role of decentralized governance, why decentralized governance is another major bottleneck in DApp innovation beyond performance.
Part III: What is the source of trust for smart contracts?
At the beginning of 2013, when I first came into contact with BTC, the most popular explosion game in the Bitcoin circle was Nakamoto Satoshi. At the time, more than half of the BTC network's trading volume occurred on this spinach game. Nakamoto's gameplay is very simple, no registration is required, and there is no need to install a client. Satoshidice.com publishes multiple betting addresses for different odds. Just transfer to Bitcoin and you can participate in the game. If the dealer loses, the bonus will be transferred back to the player's sending address. If the player loses, there will be a small amount of btc sent back, which is equivalent to telling the result. The real innovation of Nakamoto Satoshi is that players don't have to worry about the banker cheating, or that the gambling can be self-certifying. The method of proof is shown in the figure above. Simply put, the server pre-generates a random number and publishes the hash value of the random number. Each round of gambling server uses random numbers to decide whether to win or lose. After the results of the gambling are announced, random numbers are also announced. The player can verify the correspondence between the random number and the hash value to confirm that the random number is pre-generated. The founder of Nakamoto Satoshi is Eric Voorhees, who was also the founder and CEO of the later cryptographic currency exchange service shapeshift. At that time, Eric anonymously operated the website of Nakamoto Sakamoto, but even though he was a real name, he was not a famous person at the time. Therefore, the player of Xunzi does not believe in the application because he believes the operator, but because he can verify the fairness by himself. The coin chain has a famous saying – Don't trust, Verify! That is: don't trust, to verify! The emphasis is on verifiable. The In math we trust proposed by Mr. Zhang Shouqi also has the same effect. Verifiable applications use cryptography to create Provable Fairness, or Truest, so some people say that blockchain is a machine for generating trust.
The blockchain smart contract pioneered by Ethereum is a technology for developing verifiable applications. The internal state of the smart contract is publicly visible, and the platform does not support stealing data. I call it state verifiable. In addition, smart contracts should expose the code. The code disclosure is not only open source, but also corresponds to the platform protection contract source code and execution code. The user can view the contract code to verify that the developer's claimed processing logic is consistent with the actual implementation, ie the processing logic is verifiable. Moreover, smart contracts cannot call random numbers, current system time, or directly access the data under the chain, thus ensuring the certainty of execution (Determinism). Thus, smart contracts are a versatile technology for developing verifiable applications. The descendants of Nakamoto Sakako are also shining on the three smart contract platforms.
To protect the processing logic from verifiable, the platform typically does not allow smart contracts to be upgraded because the developer's unilateral modification of the smart contract can undermine verifiable fairness. But not upgrades can cause great difficulties for application development. It is almost impossible for an application to guarantee that there are no defects. Smart contracts run on public-chain platforms, and anyone can access them anonymously without permission. Coupled with smart contracts often used to process encrypted asset transactions, any minor flaws can be exploited by hackers. Smart contracts such as TheDAO, Parity multi-signature wallet, and the US chain 1CO have caused huge economic losses due to minor program defects. On the other hand, Internet applications and mobile applications often iterate quickly, adapting to user needs, enhancing functionality, and improving the experience. If the blockchain application can only be "changed invariably", it is difficult to win in the competition.
In order to break through the limitations of smart contracts that cannot be upgraded. Developers use methods such as delegateCall to bypass the platform and implement a smart contract upgradeable design pattern, as shown in the figure above. An upgradeable smart contract usually consists of three parts: an agent contract, a status contract, and a processing logic contract. The status contract stores all the data that needs to be persisted. The proxy contract is responsible for forwarding external service requests to the processing logic contract. The proxy contract holds the address pointer that handles the logical contract. Processing logic upgrades can be implemented by deploying a new version of the processing logic contract and modifying the address pointer of the proxy contract.
The scalable design model makes smart contracts scalable, at the cost of disrupting the processing logic of smart contracts. Developers can modify smart contracts without the user's consent or even without the user's knowledge. So can users still trust smart contracts? The answer is a case study. Under the premise of variable agreement, whether the credibility depends on whether the controller of the agreement is credible. For example, the compliance stable currency such as Paxo/GUSD, we know that the operating entity of Paxo/GUSD is a compliant enterprise regulated by the New York Financial Bureau, and its stable currency reserves have regular regular audits. Although operators of these stable currencies can upgrade (modify) smart contracts at any time, users will not be suspicious. However, everyone should note that the trust of compliance credits is not created by the blockchain, but extends the trust outside the chain to the chain. For example, eher issues the USDT through the blockchain, using only the accessibility and fast clearing capabilities of blockchain technology. The USDT credit is not made by the blockchain, but by Tether.
In another case, it is not the individual or the enterprise that masters the right to upgrade the smart contract, but also the decentralized anonymous organization (DAO), such as MakerDAO, Aragon, etc. They pass the decentralized governance process (usually also with smart contracts), and the stakeholders decide to modify the rules by voting. In this case, the credibility of the smart contract depends on the credibility of the DAO. We will continue to extend this topic later.
Summarize the contents of this section. Smart contracts are the technology for developing verifiable applications, state verifiable + processing logic can be verified to create provable fairness, and the popularity of smart contract spinach is largely due to this. Verifiable and scalable are a pair of contradictions. Scalable smart contracts undermine verifiability, and the source of credit is the subject of the contract.
Part IV: The Trust Source of Bitcoin
Let us look at the source of trust in Bitcoin. The bite of bitcoin prices in March 2013 is widely believed to be related to the banking crisis in Cyprus. The left side of the above picture is an excerpt from the news headlines of the major financial media at the time. Like Iceland and Ireland, Cyprus is an emerging offshore financial center that attracts large capital inflows due to low tax rates and regulatory easing. Cyprus has 70 billion euros in bank deposits, and 30 billion from Russia. The Greek debt crisis caused the banks in Cyprus to suffer heavy losses. Banks were insolvent and faced bankruptcy. The final solution is for depositors to pay their bills, and accounts for more than 100,000 euros are almost in vain. For the first time, the Cypriot banking crisis clearly reminded people that there is money in the bank, even in banks in developed European countries. At the same time, Bitcoin has entered the field of vision as a non-sovereign, value-independent means of financial intermediation. Since then, whenever a country has a currency crisis, including Argentina, India, Venezuela, South Africa, Turkey, and Iran, there has been a significant increase in bitcoin trading volume. This series of facts proves that Bitcoin is a super-sovereign value storage currency that has been recognized. Even in areas where inflation is not serious, more and more people use Bitcoin to preserve their personal wealth. Value storage is vital to people's survival and reproduction. Why is Bitcoin so burdened?
We compare the way Bitcoin generates trust with Ethereum smart contracts, and we can see that Bitcoin's credibility is neither due to code verifiable nor because Bitcoin core developers have credit. Most of Bitcoin, including me, have not seen the code of the Bitcoin node, nor the code, and the Bitcoin protocol can be modified (forked). For the decision on who decided to upgrade the Bitcoin agreement, Nakamoto's initial idea was to count the power. The reason is that computing power is unforgeable, and miners are the main stakeholder group of Bitcoin. However, it is very likely that Nakamoto did not foresee the emergence of a dedicated ASIC mining machine, completely extruding the personal computer from the mining competition, and formed the status quo of several large pools of monopoly computing power. There are four main stakeholder groups in Bitcoin: miners, developers, users, and businesses (exchanges, wallet vendors, blockchain browsers, communities, media, etc.). They have consistent interests and conflicting interests. For example, almost all participants benefit from the long-term price increase of Bitcoin. But users want the lower the transaction fee, the better, and the miners hope that the higher the transaction fee, the better. Due to conflicts of interest, the parties will have different opinions on the evolution of the Bitcoin protocol, and all four parties have the ability and means to influence the research of the agreement. Based on the history of the bitcoin fork game, it is generally believed that the biggest impact on the evolution of the protocol is the bitcoin core (developer), not the miner. So, do we trust Bitcoin because we trust the Bitcoin core?
Recently, the big man of the mine circle claimed that the Bitcoin core will cancel the issue limit of Bitcoin 21 million sooner or later. Should I be worried about being one of the users of btc for long-term value storage? To be honest, I am not worried, not because of the logic of the amnesty (I didn't even spend time studying his logic), nor because I trust the Bitcoin core. I don't even know that the current bitcoin core is made up of several people, who are they. But from the first purchase of btc to more than six years now, I know that there are a lot of Bitcoin users who are consistent with my interests. We all consider BTC as an asset that we can fully grasp (remember the Web3 vision?), which is the most reliable value store. Assuming that the bitcoin core is at some point to sacrifice the scarcity of bitcoin, it must be implemented by hard forks. I only need to keep the BTC with a scarcity guarantee and sell a forked coin with no scarcity guarantee (perhaps called Bitcoin Uncapped?). That is to use my currency to support who does not support who vote. I believe that the Bitcoin community will have thousands of people (not necessarily all) who will make the same choices as me. And there must be developers who maintain scarce bitcoin code (constituting a new core?). After some tossing, apart from the fact that the original bitcoin core was marginalized, I don't see any other possible outcomes.
So my trust in Bitcoin stems from the power of the evolution of the Bitcoin protocol, and because the blockchain can be forked, groups of different interests can part ways, and then the majority of Bitcoin users choose to support/disallow. / Which fork is supported at the same time. Therefore, the source of trust in Bitcoin is the governance and divisibility of broad participation, which is very different from smart contracts. This is the decentralized governance mentioned in this article.
Part IV: In-depth discussion of decentralized governance issues
Summarize the conclusions of the previous section: In addition to the provable fairness, the source of blockchain application to create trust is decentralized governance. And only the application that generates trust through decentralized governance is the real decentralized application. In this section we introduce the general process and development status of decentralized governance.
In the case of Bitcoin, the basis of governance is the extensive participation of discussions, in the bitcointalk, reddit network community, large and small meetings, numerous media, opinions, discussions and even debates. Researchers will conduct research on specific topics, such as privacy, performance or more general signature schemes, P2P communication protocols, etc., and publish research results. Suggestions for improvements to the Bitcoin protocol are presented in the form of BIP (Bitcoin Improvement Proposal Bitcoin Improvement Proposal). The important BIP will raise the attention of the Bitcoin community and trigger a broader discussion. The developer (not necessarily Core, not necessarily the sponsor of the proposal) can implement a BIP. Currently Bitcoin does not have a formal process for funding developers. Dash/Monero and other cryptocurrency communities have standard processes to determine whether and how to fund developers. After the implementation of the protocol improvements, it comes to the most critical step in decentralized governance: who and how to decide to deploy the BIP to become part of the Bitcoin protocol.
Bitcoin governance is very ambiguous at this critical point, and can be described as a core developer's decision on whether to go online BIP based on the broad community consensus that has been reached. What is the broad consensus? Has a broad consensus been reached? There are no clear criteria, which is particularly evident in the controversy surrounding the large block vs. segregation testimony that lasted for nearly three years. The governance process of Ethereum is very similar to Bitcoin. Perhaps the only important difference is that V God's great influence in the Ethereum community makes it easier to reach consensus on the protocol improvements supported by V God. Since the final result of this type of governance process is the implementation of the agreement fork, it may be called fork management. Although the fork management achieves the goal of decentralization of governance, it has obvious defects. The biggest problem is that the governance process is ambiguous, so it is inefficient, difficult to improve, and easily controversial. For example, the lengthy soap opera around Ethereum around ProgPoW is the inevitable result of chaotic and disorderly governance. Without a clear governance process, similar soap operas will be repeated.
Decred pioneered chain governance for the flaws in fork management. That is, the holder of the Decred Pass will vote on the proposal through the chain transaction, and the proposal passed by the vote can be deployed online. EOS and Tezos have also done a lot of useful explorations on chain governance. The quadrant on the right side of the above picture for the decentralized governance status. Bitcoin and Ethereum use fork management. The EOS and Tezos blockchains use chain governance. But as far as I know, EOS and Tezos don't provide governance support for smart contracts running on the platform, so there is still no problem with DApp governance. Decred is probably the only decentralized application with full chain governance. But Decre's governance also has obvious flaws. First, Decred is a mixed consensus of PoS+PoW. The holders of the certificate and the PoW miners are the stakeholders of the network, but the PoW miners cannot directly participate in the chain governance, and their interests are ignored. In addition, Decred's proposal is to vote directly by the holders, which is equivalent to a referendum for each decision. This is very inefficient, and the most obvious problem is that the actual turnout rate is very low. Although some proposals have dozens of passes to participate in the voting, but the participation rate of the holding currency address is low. These two problems are well solved in some pure PoS chains. The foundation of PoS governance is Staking. Staking represents a long-term benefit binding. The purpose of governance is to make the encryption protocol progress and maximize long-term benefits. Therefore, it is very appropriate to participate in the governance of Staking's holders. In addition, a new batch of PoS implements some kind of proxy mechanism, DPoS/BPoS/NPoS, which is equivalent to realizing the representative system. Daily governance can be carried out by elected verifiers, who are equivalent to parliament. Credentials often have a huge common interest with encrypted networks, and they have the incentive to invest resources in governance. In addition, major votes, especially those in which the interests of the verifier and the client conflict, can still and should be handed over to the holder.
Part 5: Polkaadot's governance mechanism
Polkadot's governance is an unprecedented process chain governance, based on cutting-edge blockchain technology. The proposal being voted is not only a description of the modification of the agreement, but also the new protocol itself, that is, an executable program compiled as wasm blob. After the vote on the chain, the new program is distributed to the authenticator node via the blockchain and is automatically enabled. There will be no forks during the upgrade process. Based on breathtaking technology, Polkadot is arguably a leader in chain management and is undergoing extensive innovation and exploration.
Polkadot governance is still in rapid evolution. A few days ago (May 24th) Polkadot just announced that PolkaDAO was on the line, and PolkaDAO moved the decision-making process to fund the proposal to the chain (currently Ethereum, which should move into Polkadot in the future). I think that evolution will not slow down until the main online line, and even after a period of time after the main online line. Because Polkadot's advantage is not that it has found an effective way to govern, but that it has established processes and technologies that can support rapid evolution. According to my observations, developers still have control of Polkadot in the period before and after the main online line. They will take full advantage of this right and push Polkadot to a self-consistent state, then retreat behind the scenes and hand over governance to the community. This is also what Block.One did for EOS. Polkadot has two years of industry development experience (later advantage) and has developed better chain management techniques. There is reason to believe that Polkadot developers can do better. So now to discuss the governance of Polkadot, you don't have to pay too much attention to the details, because they may all change. What needs to be paid attention to is: What can be done with fully programmable chain management, and what can be done? And the Polkadot governance code is part of an open source project, and DApp developers can use Polkadot governance as a template paradigm to customize the governance process to match their project's situation and needs.
The word Polkadot has different meanings (scopes) in different contexts. Sometimes we use it to represent the entire Web3 ecosystem initiated by W3F, sometimes representing the Polkadot project (including Substrate), and sometimes the specificity of Polkadot Relay. Blockchain. The Polkadot governance referred to in this section is the governance of the Polkadot Relay blockchain, and in particular the chain management achieved by the Polcadot Relay PoC-3 stage.
The entire governance process revolves around proposals and voting. Proposals can be made by ordinary money holders or by the board of directors. The board of directors is elected by the holder of the currency, and the holder of the currency can vote for any number of director candidates. The champion of each election cycle enters the board of directors, replacing the longest-serving director, the runner-up votes are retained, and the other candidates' votes are cleared. Each director has a veto on the board's proposal, but it cannot be used continuously. The Council passed the proposal to enter a referendum and will be rejected only if it is majority. The proposal of the ordinary holders enters the queue and waits for the support of other holders. Every once in a while, the proposal with the highest number of supports enters a referendum. However, the proposal of the ordinary holder of the currency must be approved by the majority. In a full referendum vote, the holder can choose the lock factor, ranging from 1-6, and the number of votes cast is the number of DOT held * the lock factor. If the result of the vote is consistent with the voter's choice (pass/reject), then the voter's DOT will be locked, lock time = constant * lock factor. If the voting result is contrary to the voter's choice, there is no need to lock the position. Such a method of counting votes helps to give greater weight to long-term holders (future rather than past).
Part VI: The Future of Decentralized Applications
All of the above can be summed up as three waves of decentralized applications. The first was a wave of innovation in decentralized e-cash (cryptocurrency) triggered by Bitcoin, which was launched around the theme of “better cryptocurrencies” in three main directions: privacy, governance and payment. These three directions are also aimed at the "deficiency" of Bitcoin. Zcash/Monero/Dash strives to consolidate the interchangeability and privacy of cryptocurrencies; Decred/Dash explores mixed consensus and more standardized and more effective governance; Litecoin/XRP/BCH is committed to better payment/transfer encryption currency. As you know, in 2012-2015, the main way to develop DApp is to fork the bitcoin code, make custom modifications, and then run a separate blockchain. Then later, I directly forked the Bitcoin blockchain and borrowed the network effect of Bitcoin. This round of innovation is an open-minded test that opens the door to decentralized applications, enabling everyone to claim their own digital identity (private key/address) without being granted. And to achieve the most commonly used assets – the decentralization of the currency. But apart from maximists or people who don't know anything about modern finance, I'm afraid no one would think that a decentralized currency would support the ideal building of web3. However, due to the single technology of developing decentralized applications at the time, it was derived from Bitcoin. The lack of scalability in the design of Bitcoin makes it difficult to develop non-monetary applications. And there was no cross-chain technology at the time. DApps were independent blockchains, and they could not interoperate and could not form a DApp ecosystem. This wave of innovation left only a few unique, but independent, cryptocurrencies in the industry.
It is feasible to implement the issuance and trading of other assets on the Bitcoin blockchain (such as early attempts by ColorCoin/MasterCoin), but is severely limited by the Bitcoin blockchain. It is from this that V God set out and led the realization of Ethereum. Ethereum is an open innovation platform. It introduces Turing's complete virtual machine EVM, launches smart contract development language such as Solidity, and supports smart contract mutual calling (interoperability), which greatly reduces the threshold for blockchain application development. , triggered a second wave of innovation. However, as mentioned above, due to the limitations of the Ethereum infrastructure, the application performance is poor, the cost is high, and the user experience is poor. Moreover, smart contracts are essentially verifiable application development technologies, and do not support the decentralized governance that DApps must have. Even the protection of verifiability limits application upgrades, which makes it difficult for DApp to evolve. Due to these restrictions, although the Ethereum main online line has been more than four years, there are hundreds of thousands of smart contract developers around the world. But there is no decentralized application on the Ethereum that really landed (a million active users). Of course, the second wave of innovation was not without gain, during which a large number of verifiable applications were generated, including verifiable asset issuance and transfer, verifiable spinach and more. In addition, hundreds of DApps have tried on the smart contract platform to develop MVP. After the bottlenecks of performance, governance, etc., these project teams have the best chance to develop a real DApp.
Cross-chain technology such as Polkadot/Cosmos is a replacement for smart contract platforms such as Ethereum. They inherited the advantages of Ethereum Turing complete, standardized application development and interoperability support, and removed the two bottlenecks of performance and governance of decentralized applications, which will trigger the third wave of DApp innovation. We highlighted the governance of Polkadot. Then the application chain developed with the Cosmos SDK can also implement chain management similar to Cosmos Hub and Tezos. What are the limitations of cross-chain technology? I dare not say that I have seen it now, but there are some doubts that I have to give time to verify. In the third wave of innovation, we have reason to expect a large number of DApp innovations, including decentralized anonymous organization DAO, decentralized exchange DEX, and numerous Defi decentralized applications. The best batch of DApps is likely to get hundreds of millions of users, compete with the centralized Internet service without falling, and push the Internet to a big step towards the realization of the Web3 vision.
Part 7: The Reality of Polkadot
Talked about the great prospects of DApp innovation, and then talk about the difficulties of reality. The first is that the Polkadot/Cosmos cross-chain technology will take some time. Polkadot's current development is that PoC4 has been running steadily for nearly two months. However, PoC4 does not include cross-chain protocols. The cross-chain protocol ICMP will be included in PoC5. The current target time of the Polkadot main online line is the end of this year. But this is expected in the case of all the smooth. Students who have developed complex software projects know that everything goes well and usually only exists in fantasy. Although the capabilities of the Polkadot development team are obvious to all, if Polkadot is on schedule, I will be more surprised. Although Cosmos is already online, the IBC cross-chain agreement has not yet been implemented and is expected to be realized by the end of this year. Considering that Cosmos's various jump tickets are commonplace, if the Cosmos Hub began to accept the partition link at the end of the year, it was a big surprise for me. But I hope everyone understands that DApp does not have to rely on cross-chain. DApps in the application chain form can form a closed loop of their own business and provide a similar user experience as a centralized Internet application. Therefore, I appeal to entrepreneurs in the blockchain industry to stop waiting and see or continue to hit the South Wall on the smart contract platform. From now on, seriously consider and actively prepare to implement DApp innovation through application chain. When the cross-chain technology comes to the ground, connect to Polkadot/Cosmos and integrate into the DApp ecosystem.
The second real obstacle is the lack of developers in the application chain. Since Substrate and Cosmos SDK are new technologies that appeared not long ago, and Substrate developed a relatively small Rust language, there are very few application chain technical teams with practical experience in China. The current domestic team that has developed products with Substrate, as far as I know, is only the ChainX family. And application chain development also faces a big problem, which one should Substrate and Cosmos SDK choose? The development languages of the two development tools are different, and they have relatively high learning costs, and the future corresponds to two different DApp ecosystems. Once selected and replaced, it will result in significant losses in resource inputs and project schedules. I have compared two development tools, and Substrate is more complete and powerful than the Cosmos SDK. So the best solution is that Substrate is compatible with Cosmos, that is, Substrate can be used to develop the Cosmos partition chain to form a unified Substrate development tool ecosystem independent of Polkadot. Substrate is open source software with a modular design that encapsulates Tendermint/IBC into protocol components that can be used by Substrate, which is technically feasible. I am working on this issue with a few friends who are doing development, and I welcome students who are interested in it. Substrate is the tool of choice for application chain development. In order to promote Substrate among domestic developers, a chain of learning communities has created the world's first Substrate online development course. The speaker is Bryan Chen Xiliang, and Bryan is a senior architect at Centrality, a ambassador for Polkadot, a Substrate and a contributor to the Polkadot code. Gavin Wood's recommendation for the course is: Bryan is a Top Contributor of Substrate. I recommend Chinese blockchain developers to participate in his courses and learn to use Substrate to develop blockchain projects. The first course starts on June 2nd and the tuition fee is 1299 yuan. All students who complete their homework on time will receive half of the tuition refund. The top 3 students of the course evaluation will be refunded in full, and there will be additional rewards. The course is not profitable. This is not much to say. People who understand it naturally understand. I will be obligated to serve as a teaching assistant for the first course and I look forward to learning from you.
There is no best practice for DApp governance. The governance practices such as Decred and the problems encountered are also introduced. It is very likely that after five years, DApp entrepreneurs will be able to find many successful examples and lessons learned from failure. But now, everything is just beginning. Only a few basic principles are clear. The first is that DApps must be successful in the long run and need to design a long-term incentive-compatible mechanism. The long-term interests of developers (projectors), verifiers, service providers, users and investors are consistent, and can constrain the parties to pursue their own short-term interests and sacrifice the overall long-term interests.
Developers should delve into technology and commerce, build and maintain communities, and profit from long-term currency increases and technology service revenues. For the certifier, he should first choose the DApp that really has the advantage of transaction cost. Because the certifier is the longest-term investor, he not only has to pay the money, but also pays high labor costs to participate in DApp governance. Therefore, falling into a Ponzi scheme or a fund disk is the first thing a professional verifier must avoid. After deciding to participate in the DApp economy, the verifier should actively participate in governance, avoid complicity, and profit from long-term currency increases and gains. Investors of cryptocurrency, here long-term value investors, excluding short-term speculators, quantitative or trend investors, should thoroughly study the fundamentals of DApp, entrust the pass to the certifiers with governance capabilities, and continue to pay attention, Profit through long-term currency increases and Saking. In addition, DApp protocol service providers and users are very likely to participate as an investor or even a certifier in DDe decentralized governance.
My investment institution, Random Capital, is a DApp startup project incubation fund. We hope to make long-term investments and grow together with decentralized applications for the Chinese market. We also hope to promote DApps with DApp platform-type public chain projects, other investment institutions, professional node operators, wallets, media and communities. The ecology is prospering.