Chang Yong: The cryptographic economy from technical trials to social trials

I call on WikiLeaks not to use Bitcoin, because Bitcoin is only a social experiment in the early stages.

——Zhong Bencong

Ten years

I started bitcoin research, popular science and investment from 2013. In the past five years, I have experienced a common world currency dream, the split of the currency circle and the chain circle, the competition after the failure of Bitcoin expansion, and the rational return after the crazy bull market. My life and dreams have been integrated into the cryptocurrency that evolved from bitcoin and blockchain. The expansion of Bitcoin has allowed me to move from following and science to independent thinking and participation in this great historical process, and I am convinced that this is not only a technical test, but also a great social experiment. The core of this experiment is to explore the decentralized economic organization model, which determines that everyone can think independently and participate.

On October 31, 2008, the Bitcoin white paper was published. On January 3, 2009, the Bitcoin system began to operate. Its creator, Nakamoto Satoshi, was convinced that "in 20 years, Bitcoin will have a large trading volume, or not at all. "On December 5, 2010, about two years later, Nakamoto called for "Wikipedia not to use Bitcoin! Bitcoin is only a small-scale community trial in the infant stage." Now, 10 years have passed, has Bitcoin been successful? What kind of experiment did it undergo in this decade? I have the privilege of personally experiencing the second half of these 10 years and talking about my understanding and vision in combination with my own research and practice.

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Today, it seems that Nakamoto's experiment has gone far beyond the scope of "bitcoin", people talk more about "blockchain" rather than "bitcoin." Even the “blockchain” is difficult to cover all the technical and economic phenomena derived from bitcoin, and there are more and more applications that deviate from the “blockchain” but still have certain technical features of Bitcoin, such as DAG. Some of these applications have no "chain" and some have no "coin", but the common cornerstone is the digital identity and signature authorization provided by asymmetric cryptography. To this end, I call the application based on asymmetric cryptography technology "crypto-economic", which makes it easier to understand the various economic phenomena derived from Bitcoin in 10 years and understand this great social experiment.

Money Dream: Born to Freedom

From the beginning of 2007, Nakamoto began designing the Bitcoin system. By the end of 2013, Vitalik proposed Ethereum. The entire crypto-economy has a common dream – Bitcoin must be the freely circulated currency of the world .

Nakamoto's Bitcoin white paper defines Bitcoin as a peer-to-peer electronic cash that does not require financial institution intermediation. It was posted on the Bitcoin Genesis block on January 3, 2009 ^[1] : "At the time, the British Chancellor of the Exchequer Darling Forced to consider re-emphasizing the banking crisis, this includes ridicule of the legal currency financial system and the goal of building a system that rids the intermediary currency of the bank. Based on Nakamoto's goal, early supporters of Bitcoin reached a consensus: Bitcoin is a different currency system than French currency, a decentralized monetary system that transcends national boundaries and becomes a free currency in circulation around the world.

In September 2013, I resigned from the administrative position. With more free time, I encountered the bitcoin boom and spent half an hour with Wikipedia to sort out the basic logic. I have found that this new currency logic is economically viable and has the potential to subvert the global monetary system. Subsequent learning, research, popular science and investment allowed me to quickly integrate into Bitcoin's consensus, and I am convinced that Bitcoin can become a global currency. Not only that, I think it can replace the legal currency system and become the main currency system for global unification. This is the most determined bitcoin dream. Many Bitcoin supporters at the time believed that although Bitcoin could become the world's currency, it could not replace the French currency.

This firm world currency dream has several main logics to support:

1. Bitcoin is a better currency. From the essence of money, money is the medium of exchange, its intrinsic value is not for other purposes, but because it is more convenient to trade, and better currency means more convenient trading ^[2] . From this point of view, the history of human currency is first to find a more convenient exchange of physical objects, so that there is a physical currency from wheat, shells to gold and silver; later found that it is possible to artificially transform the real thing, especially through credit endorsement to make the currency easier to trade. Thus, there are coins and banknotes; finally, the development of bitcoin, which is completely out of physical form, has got rid of the drawbacks of credit endorsement and is more easily exchanged. Therefore, Bitcoin is the latest stage of currency development ^[3] .

2. The currency has a Matthew effect. In 2013, some other cryptocurrencies that mimicked Bitcoin appeared. They were called "cottage coins" at the time, and the more neutral ones were called "competitive coins." Many people question that Bitcoin is open source. How to ensure that Bitcoin is not surpassed by the competition currency? At the time, it seemed that this risk was not large, because in a unified and open market, the more people use the same attributes, the more people will be willing to use it. The legal currency of different countries can coexist because of the sovereignty boundary. Gold, silver and copper coexist because natural attributes are suitable for transactions of different sizes. Competitive currency is exactly the same as Bitcoin. In the case that Bitcoin already has more than 90% market share of cryptocurrency, people are more willing to hold and use Bitcoin. Other currencies have no chance to catch up.

3. The open performance of Bitcoin maintains its competitive edge. It has been suggested that if the coin has a major innovation and is better than Bitcoin, can it be beyond Bitcoin? I thought at the time that Bitcoin is an open system. If a competitive coin can have important innovations and is proved by the market to be more convenient to trade and thus gain more users, then Bitcoin can fully absorb this innovation, in the Matthew effect. With the help of an unsurpassed competitive advantage. Based on this logic, until now, many Bitcoin supporters have used various competitive currencies as a test field for Bitcoin.

4. Bitcoin multi-layer payment system. In 2013, the block capacity of the Bitcoin system was limited to 1M, and the maximum number of transactions that can be processed per second was about 7 (that is, 7 TPS). People have questioned that the processing power of Bitcoin is not qualified for the world currency. The peak transaction of Alipay Double 11 exceeds 250,000 TPS! In this regard, I believe that the development of storage and bandwidth will enable the Bitcoin main chain to handle more transactions. More importantly, Bitcoin, as the base currency, can still develop second and third-tier payment networks, such as sidechains and lightning. Network, third-party payment platforms, etc., based on the bitcoin-based credit system will also be formed ^[4] . Market demand will naturally drive this process ^[5] .

These core logics became the main basis for the dissemination of Bitcoin knowledge and beliefs in my popular science articles and microblogs ^[6] , and also made me one of the strongest supporters of the Chinese community Bitcoin. Although the idea that "bitcoin will replace French currency" is questioned by many Bitcoin supporters, overall, bitcoin supporters (even including competitors) have a common dream during this period – making bitcoin a full The currency of the world . That is a nostalgic era of good consensus, because in the next five years, I experienced three divisions of consensus.

a river, two circles

At least since 2013, Bitcoin supporters have realized that Bitcoin, as a software system for global peer-to-peer network protocols, can not only realize a global currency system, but also further realize more economic functions. In the earliest bitcoin forums of bitcointalk.org and reddit, bitcoin enthusiasts have done a lot of exploration and practice.

An early extension was to mark some bits of bitcoin, called "staining," where colored coins can be given a specific economic meaning, representing an asset, and circulated through the bitcoin system. ^[7] Further, Mastercoin and Counterparty have launched a new layer of protocols on top of the Bitcoin protocol to enable more complex functions such as digital asset issuance and decentralized exchanges. This is the prototype of the later smart contract. Unlike dyed coins, they have their own tokens, MasterCard and contract coins to enable the development and operation of new agreements.

These decentralized explorations beyond the currency category are a great encouragement to Bitcoin supporters because they give people a dream of a free world on the basis of free money. The early pioneers of domestic Bitcoin, Li Wei and Chang Hao, systematically combed various possible application scenarios based on Bitcoin technology in "Bitcoin: An Unreal and Real World". In combination with these developments, I have also expanded my dreams and believe that starting from Bitcoin will expand the free world of centralization. The general route is:

1. Bitcoin becomes the world currency. Money is the hub of the market economy. The decentralized world currency will become the mainstream, which will greatly increase the degree of freedom of the global market economy and greatly improve economic efficiency.

2. Derived from Bitcoin to a centralized development platform. With the global impact of Bitcoin, based on the Bitcoin protocol, there are some development platforms equipped with it, such as Mastercoin, which provides the basis for more decentralized applications.

3. People use the development platform to design applications in various fields. With the decentralized platform such as Mastercoin, practitioners in all economic sectors are free to develop applications that deploy different scenarios. These applications greatly expand the scope of application, improve application efficiency, and have a competitive advantage by means of Bitcoin's value media and decentralized network system.

4. Bitcoin, platforms, and applications constitute a global free market economy. Derived from the bitcoin development platform, the development platform realizes various application scenarios, thus forming a decentralized, more self-organizing global market economy and supporting a free world (see Figure 1).

Figure 1. Bitcoin's dream of building a free world

This expanded dream of the free world is not me alone. At the time, innovations such as Mastercoin were supported by many people. This is the consensus of the Bitcoin community, but everyone understands the scope and extent of its implementation. I think Bitcoin can replace the French currency, and naturally there is a stronger expectation for this free world.

However, soon, the expansion of the dream evolved into the first division of the Bitcoin community.

Some people are opposed to launching new protocols on the Bitcoin system to achieve more functions. They believe that Bitcoin's goal of achieving world currency must be very simple and compact to ensure system security against censorship. They worry that piggybacking the upper layer protocol will increase the storage and transmission burden of Bitcoin, and more data and code will "pollute" the Bitcoin backbone. Importantly, this concern comes from some of the major developers of the Bitcoin system that did not provide the necessary support for these explorations in their development.

With the same dream, in 2013, only 19-year-old Vitalik Buterin, later V God, was inspired by Mastercoin to prepare a smart contract agreement on top of the Bitcoin agreement. This type of expansion is mainly achieved by writing additional information to the blockchain by means of the OP_RETURN of the bitcoin transaction. At the time, the information that each transaction output could carry was only 80 bytes, which limited the development of additional protocols. Vitalik proposed to the core developers that they hope to expand the space of OP_RETURN. But the developers who opposed the expansion not only did not expand the space, but further compressed the 80 bytes to 40 bytes. Vitalik screamed again and launched the Ethereum white paper at the end of 2013, opening a new era.

The rich application that the Ethereum described as a smart contract has attracted many people, but because of another stove, breaking the consensus of the Bitcoin community to establish a free world based on Bitcoin, has been opposed by the majority. Vitalik opened up crowdfunding financing for the development of the Ethereum system, and was also accused by some opponents as a liar, and the community began to split.

The bitcoin bull market in 2013 has a lot to do with the bitcoin dream and its spread, especially in China. However, in 2014, the bursting of the bull market bubble, policy tightening and the collapse of Mt.Gox led to a sharp fall in bitcoin prices and more and more negative publicity. In particular, the nature of Bitcoin's challenge of legal currency has brought enormous policy pressure on the community.

In the context of Bitcoin's frustration, combined with the spread of Ethereum's smart contract vision, some people suggested that Bitcoin should be played down, the challenge to the country's heavy currency should be diluted, and the technology of Bitcoin and its application in other fields should be discussed. The term "blockchain" in a series of techniques for building a bitcoin system was chosen to refer to these techniques of bitcoin. Put forward more "blockchain" and talk less about "bitcoin." ^[8] This has also led to more attention to Ethereum, which is based on smart contracts for more non-monetary applications.

But the strong supporters of Bitcoin, including me, are not willing to give up the dream of Bitcoin. I think that money is the hub of the market economy, and successful decentralized currencies can more effectively promote the application of more fields. My personal expertise is economic analysis, I prefer, and I am better at thinking, researching, and popularizing economic issues related to Bitcoin. Therefore, although I am not against Ethereum, I am not optimistic about Ethereum. ^[9]

At this point, after 2014, the original Bitcoin community split into so-called "coin circles" and "chain circles." The currency circle refers to those who firmly support the priority development of Bitcoin. The chain refers to people who lighten bitcoin and emphasize the application of “blockchain”. Until 2016, the “coin circle” occupied more than half of the community. The “chain circle” was mainly supported by Ethereum and other supporters of smart contract projects promoted by Ethereum, such as small ants (post Renamed NEO).

There is a certain degree of hostility between the "coin circle" and the "chain circle", or mutual contempt. The currency circle believes that the chain ring succumbs to external pressure and breaks away from the dream of Nakamoto. It is the end of the door, and it is suspected of speculation. The chain circle believes that the currency circle is stubborn and obsessive, and the violent weather has limited the application prospect of the blockchain. In general, the “coin circle” dominates the market. I remember that in 2015, the bear market visited Beijing. I had dinner with friends who were still in the cold winter, such as Long Shao, Wu Gang, Super Jun, Lao Mao, and Yi Ke. Only the old cat supported Ethereum, and the Amway was unsuccessful to us.

The expansion of the dispute and the birth of BCH

The split of the currency circle and the chain circle did not shake the foundation of Bitcoin. After all, the chain circle did not give up the world currency dream of Bitcoin, but only hoped to go faster and further. At this time, the greater risk of division is lurking in a "small" problem, fermenting in 2016, and erupting in 2017, breaking the world currency dream of Bitcoin. This is the so-called "expansion of expansion."

In the early days of the Bitcoin system, in order to ensure that everyone can participate, and to prevent the risk of network overload caused by the attack, Nakamoto has a 1M limit on the size of the block, and it is recommended to expand the capacity when the transaction volume is sufficient. Nakamoto was retired at the end of 2010 and entrusted development work to Gavin. In May 2015, the actual capacity of the block reached 400k, and it is still growing rapidly. Gavin began to fully promote the expansion.

The expansion was supposed to be as simple as "the child is growing taller and adding new clothes", but it was resolutely resisted by several other members of the core development team. ^[10] They believe that larger blocks make ordinary people It is difficult for a computer to run a full node, causing the system to be centralized and difficult to resist government review. In May 2016, Gavin publicly supported Craig S. Wright (CSW)'s statement that he was Nakamoto, but Wright failed to produce a signature to prove his identity. Gavin was ruined in the community and quit the core development team. Bitcoin Core, referred to as Core).

Before July 2016, I did not think that I needed to join this debate. I think this is a matter for core developers and big miners. Like most people, I support the core development team and despise Gavin as a fake Nakamoto. I believe that Core can expand in time. However, in July 2016, the 1M block was full, congestion and high fees were incurred. Almost everyone was anxious, and Core did not have the desire to expand. It only designed a more complicated and long-term expansion plan: Isolation Witness + Lightning Network solution. The congestion in the block brought me a major turning point. I began to doubt Core and began to feel that it was necessary to think about the development of Bitcoin independently.

In December 2016, I published the article "The Expansion of Competition: The Political and Economic Prospects of Bitcoin" ^[11] analyzed the expansion of competition from the technical, economic, political, and ideological levels, and believed that the development concept and direction have become fundamental. Sexual differences, which can be resolved by bifurcation (that is, two long-term coexisting chains). Like the evolution of nature and market competition, a decentralized system should evolve through forks. It is impossible to have a consistent decentralized system.

Although the community has reached a New York consensus and Hong Kong consensus to expand block capacity, but under the insistence of Core, Bitcoin ultimately failed to expand. On August 1, 2017, people who insisted on block expansion, including me, forked the bitcoin cash (BCH) of the 8M block before the implementation of Core's segregated testimony. After three months of fluctuations in power calculations, the block difficulty adjustment rules were adjusted on November 1, and BCH stabilized, maintaining the fourth market value in the cryptocurrency. This is the second big split in the Bitcoin community.

In the birth of BCH, in addition to the above article, I should have done three things: First, in mid-July 2017, we recommended that viabtc open BCH futures before the fork, and form an effective market in advance to ensure The basic mining power; second, in early September, coordinated developers, miners, and communities to reach a consensus on the revision of the difficulty adjustment rules; third, in early October to persuade the community to complete the system upgrade of the new difficulty rules adjustment in early November.

Figure 2. Bitcoin's monthly block size median change

The seemingly simple expansion of the dispute not only caused the division of the Bitcoin community, but also fundamentally changed the ecological structure of the crypto-economic.

Qin lost his deer, and his group

In 2017, after three years of bear market, Bitcoin finally ushered in a new round of bull market, and the social heat and transaction scale rose rapidly. The block 1M restriction makes the entire bull market bitcoin in 2017. In the most serious case, the memory pool has a backlog of 200,000 currency transactions, and a transaction costs thousands of dollars in transaction fees and acceleration fees (the pool is preferentially packaged). Can be confirmed as soon as possible, ordinary transactions will take one or two days, or even a week to confirm. To this end, Bitcoin, the dominant player in the crypto economy, quickly lost market.

In order to seize opportunities in an active market, people have switched from Bitcoin to other competitive currencies, especially in exchanges between exchanges. More people have chosen faster and cheaper Ethereum and Litecoin, 2017 3 On the 10th of the month, the Ethereum skyrocketed. On March 28, the Litecoin skyrocketed, while the market share of Bitcoin declined rapidly.

The skyrocketing of the Ethereum and the relative decline of Bitcoin have broken the myth of Bitcoin and changed people's contempt for the chain. It has driven the second wave of the bull market – the soaring of the smart contract public chain, such as the small ants in June. The 15th broke out. Later, some new public links came, and most of the projects could not be developed immediately. Therefore, they used the ERC20 standard of Ethereum to raise funds by ICO. In the bull market tide, ICO myths such as hundred times, thousand times, and ten thousand coins are constantly created.

Stimulated by the ICO mythology, the birth of BCH on August 1, 2017 did not cause the collapse of BTC and BCH as expected. The person who chose to hold BTC before the fork got the extra benefit from BCH (about 10 %). This wealth effect stimulates more forks, but these forked coins have been pre-digging to achieve the benefits of ICO project sponsors, which is fundamentally different from BCH's natural competition, and these forks The root cause of the rapid decline in the late period of the coin.

The wind is coming, the pigs will fly. The 1994 ICO ban and the closure of the China Exchange did not stop the mad cows from running wild. After the forklift boom, funds are looking for new opportunities for profiteering. After the mainstream currency rose, it turned to industry concept coins, such as Internet of Things, cloud storage, games, notarization, insurance, and so on. After the concept currency is a small amount of money of a few cents, the small amount is easy to double, and even do not need to look at the market value! Dad shouted out "always up!" The aunts shouted out: "Don't look at the white paper, don't tell me the value, buy! Buy! Buy!"

At this point, the bull market has come to an end. After the traditional economic elite enters the crypto-economic field, it is no longer easy to buy coins, but instead turns to the currency, from the demand side to the supply side. The public chains and tokens of various names are even faster than the spring, and only Ethereum ERC20 tokens have grown by tens of thousands in a few months (currently 134,000). The outbreak of project listings has brought huge profits to the exchanges, which has spawned tens of thousands of exchanges. In order to expand the impact, the project must be a community and a large number of communities. The construction community must expand publicity and spawn a variety of blockchain media, which has spawned various blockchain conferences… The rise and fall of these formats will be faster, and the first-mover heads will make a big profit, and the follow-up will become more and more Difficult.

After the various chains, various currencies, and various formats have been completed, the bull market is completely over.

Being is reasonable. The big bull market after the bitcoin congestion has a crazy aspect, and there is also a new trend in the development of the crypto economy: the early idea of ​​the development path of Bitcoin is simple but difficult to achieve. At an internal meeting at the end of January 2018, I proposed that since Bitcoin lost its absolute market position before becoming a world currency, the rise of Ethereum and the use of various passwords have spread everywhere, then the crypto-economic route may change. for:

1. Functional password application to explore the landing. The application of passwords explores experiments in various economic fields, and some enterprises have succeeded in forming an industry public password consensus platform and industry tokens within the industry.

2. Functional applications drive a number of password consensus platforms. Functional applications The cost of building a decentralized public chain platform is high, and it is more efficient to build and maintain on existing cryptographic consensus platforms such as Ethereum or EOS platforms.

3. The password token needs to be anchored to the universal password currency. Whether it is an industrial password application or a password application development platform, its endogenous token has specific requirements. The industry token has industrial characteristics. For example, the password application functions of games and cloud storage are different. The development platform token also needs to be based on its own network resources. The application development status regulates the issuance, distribution, and circulation of endogenous tokens. Therefore, a stable, universal public currency is required between the tokens of different applications and platforms, and bitcoin (or bitcoin cash) will assume such a function.

Thus, the picture of Bitcoin's free world before it becomes:

Figure 3. A new picture from industry application to universal password currency

Return to rationality

In the autumn of 2018, people began to generally agree that the bear market winter is coming. Although the funds and the pyramid money of the blockchain chain are still spread in the private sector, the exchange has almost no trading volume. The password economy industry has begun to defend rights, lay off employees and Closed tide. The community is full of negative news and satirical blockchain segments. Two views have become popular: one view is that all blockchain projects are scammers, and one believes that except for bitcoin, all blockchains are scammers.

In October 2017, under the encouragement of the currency friends, I started my business and successfully held the first blockchain innovation seminar at the end of January 2018. At the same time, I am also paying close attention to the market. The market enthusiasm made me predict the arrival of the bear market. In early March, I summarized and predicted the development stage of the blockchain. I believe that after the market frenzy, the virtual currency and blockchain in 2018 will be adjusted in the market, supervision, and cognition to return to rationality. ^[12] In an interview with Lei Feng. I think that “95% of the blockchain projects have no future, and 1% will become the driving force of the future.” ^[13]

The root cause of the bear market is the over-optimistic estimate of the cryptocurrency and blockchain commercial applications. Simply put, the root cause of the bear market is the madness of the bull market. The main reasons why most ICO projects will fail are:

1. Bitcoin has been basically feasible after nearly 10 years. The token is also accepted by the market after more than 5 years of exploration. The application of various blockchains requires at least 3 years of exploration and iteration.

2. The exploration and application of new technologies should be carried out from simple to complex, gradually accumulating application experience, theory and necessary infrastructure. Fully digitized currencies and securities are already the easiest to reach. Other applications related to complex social relationships and physical attributes of the entity, such as notarization, anti-counterfeiting, and object-linked applications, require longer exploration.

3. The start-up projects of new technologies have not gone through the trial and error and learning process from the easy to the difficult market, and they have obtained high valuation financing based on the great business vision, which violates the laws of business and even violates human nature, just like giving three The old child is as dangerous as a dragon slaughter knife.

Based on the judgment of the bear market, I contracted the front line at the beginning of 2018, and reduced the scale of the venture to the smallest, light-weight password currency. However, influenced by friends, there are still a few pits under the temptation of luck and short-term interests. Can not help but feel that the best investment strategy for the bear market should be completely isolated from the market!

Not leaving the market is not a loss. In the market changes, we can really observe the various phenomena of the crypto-economics and constantly think about the nature, structure and development direction of the crypto-economy. In the process of holding the blockchain training class, I need to constantly sort out the internal logic of the reality change, organize the relevant theoretical basis, and then organize the course content in the most popular and concise way, and tell the students to test.

After six sessions and how many times of conference speeches and online sharing, especially in the invitation of the Electronic Industry Press, the book "Blockchain: Principles of Password Consensus, Industry and Applications" was written. My overall understanding of the cryptographic economy known as the “blockchain” has gradually become clear.

I was the first to present a cryptographic economy at the "Cryptographic Currency, Passport and Currency-Free Blockchain Academic Seminar" hosted by the University of Chimi, in conjunction with Babbitt, Bitcoin, Coin, NULS and Meteor Finance. The basic structure ^[14] . Professor Tu Zhijie and my economist Professor Zhu Jiaming gave positive comments on this speech and the works of the Electronic Industry Press, and prefaced the work.

In my work and a series of articles, I reflect on the nature of the "blockchain" and "passport" and related misunderstandings. I believe that the so-called "blockchain" is based on distributed consensus , that is, using simple democracy. Centralized approach to organizing large-scale economic activities. Under the premise that the Internet solves the problem of remote information transmission, asymmetric cryptography provides a key technology for identity-free identity verification and signature authorization. Therefore, the blockchain should be called the “password consensus mechanism”, referred to as “ password consensus ”.

The blockchain generated by hashing dynamic data is only one of the technical aspects of implementing distributed consensus. The entire password consensus mechanism and its application are called "blockchains" and the logic errors are completely biased. This kind of erroneous cognition has set off a wave of “chaining” and “winding up” in the bull market. It also derives the assertion that “blockchain projects are all liar” in the bear market, but the essence of cryptosystem is not fully recognized. .

The cryptographic consensus platform established by the password consensus mechanism can issue cryptocurrencies or build more complex smart contract systems, including issuing tokens. “Certificate is a credit securities issued and circulated by a specific organization or individual through a decentralized cryptographic consensus platform” . ^{[15] The} coin-free blockchain does not need to be decentralized. It can be without coins or even chains. It only needs to apply cryptography and Internet technology to improve various business or government scenarios.

The cryptocurrency, vouchers and currency-free blockchains are all based on cryptographic techniques, and their development promotes each other. People enter the virtual world through asymmetric cryptography, and the economy formed is the crypto-economy .

The global infrastructure of cryptographic economy requires a high degree of security. It is generally established by a decentralized password consensus mechanism. Different specific applications can vary the cryptographic technology to the existing one depending on the scope of services and business scenarios. The combination of centralized economic organization models is realized. The integration of the unified identity and signature authorization capabilities provided by cryptographic technology with the decentralized infrastructure complements the global market economy.

The development of the crypto-economic will drive the cryptography of people's political and social life, and by then we will have a more global and interdependent world of passwords.

Test road

One day in the currency circle, one year in the world. Recalling the original bitcoin dream seems to be a myth of centuries ago. However, looking around, more people are passing on and telling this myth.

The crazy bull market in 2017 has brought many social elites into the wave of bitcoin and blockchain. The bear market has spurred people to reflect on various blockchain projects, but has strengthened their belief in Bitcoin. After several rounds of buffalo baptism, the "old leeks" have long established the belief of "never get off the bus." Known as Australia’s Nakamoto, Dr. CSW’s call for bitcoin is not a social test. Its cornerstone has been established in version 0.1. As long as the block ceiling is removed, bitcoin (cash) can serve 5 billion people and reach the gods. The miracle.

I envy those who insist on the dream of Bitcoin, at least to get peace of mind. The research methods and basic theoretical research that I learned from Teacher Zhi Zhijie made me form a habit of respecting the market and reflecting on myself. I used to dislike others saying that "bitcoin is a great social experiment" because it is a sure future in the dream. It now appears that the logic supporting the dream has been falsified by reality.

Although the password currency advantage is still there, the failure of Bitcoin expansion has caused it to lose the absolute advantage of the Matthew effect, and its development has not shown sufficient openness. Under the control of Core, it has voluntarily abandoned the payment market and became the mainstream investment. Product, deviated from the original intention of "this is a point-to-point cash".

Bitcoin cash, which continues the point-to-point cash direction, has also changed dramatically. One has published more than 1,000 papers, has more than 2,500 patents ^[16] and "one-cart" degree certificates, and uses fake signatures to prove that he is the CSW that Nakamoto is being debunked. Offering white papers and world currency dreams, in a few months, they captured a large number of believers, surrounded by his path to reject the new, self-enclosed, and exclusive, bit-god, ^[17] the third in the bitcoin (cash) community. Secondary division.

After experiencing the battle for Bitcoin expansion and the "civil war" of bitcoin cash, I have to admit that Bitcoin is indeed a great social experiment.

Before 2013, the trial was more like a technical experiment. The community consisted mainly of technology enthusiasts, led by developers. As long as you follow the Nakamoto smart design framework, fix one bug and improve the code, Bitcoin can continue to grow. The decentralization advantage, the Matthew effect, the open system and the economic rationality of people make the world currency dreams clearly visible.

Looking back now, the main innovation of Bitcoin is not technical. The main technology of Bitcoin has long been applied: David Chaum founded digital cash in 1982, Haber and Stornetta proposed time stamps in 1991, Adam Back proposed Hashcash in 1997, and proposed PoW in anti-spam system. In 1998, Dai Wei proposed anonymous distribution. B-money, and so on.

Nakamoto has emphasized that most of his time to create Bitcoin is not in development, but in design. Nakamoto needs to use existing technology to combine and design a monetary system that can operate in a real society. In addition to being technically feasible, this system must be able to achieve economic interest compatibility and political checks and balances. Form a sustainable decentralized social ecology. This is not primarily a technical test, but a social test.

The technical tests and social tests of Bitcoin before 2013 were carried out on a small scale and the test was generally carried out. After 2013, the Bitcoin system was basically technically stable, but the entire system began to enter the mainstream society, which has undergone fundamental changes in the social test environment of the previous geeks and niche, and new problems at the economic, political, and philosophical levels are constantly exposed. come out:

1. Developers lack economic incentives. Bitcoin was developed voluntarily in the early days with the hobbies and dreams of geeks. After entering the mainstream society to carry huge economic benefits, developers pay less economic returns. On the one hand, developers are more personally preferred, and they focus on anti-censorship and deviate from the market. Aspects have led developers to limit the capacity of decentralized backbones, drive transactions to lightning networks and sidechains, and developers and big nodes of lightning networks and sidechains are more likely to realize their own interests.

2. Developer centralization. In the bitcoin ecosystem, developers are theoretically free to enter and exit the system, but the accumulation of development experience, the development of the development process and documentation, and the actual control of the community forum have caused the de facto centralization of the development team. In the dispute of expansion, influenced by the actual control of Core, the expansion development proposal could not enter the development process, and the community forum also banned the expansion speech.

3. The computing power lacks actual checks and balances for developers. Developers are originally one of the bitcoin power balance checks, but the development of centralization makes developers actually get rid of checks and balances, and is no longer restricted by the power (miners). The expansion of Bitcoin has reached the New York Consensus and the Hong Kong Consensus, which are widely supported by the computing power and the community, but have failed to promote the expansion of the Core Developer deployment block. Eventually led to community splits, most of the power turned to support Bitcoin cash.

4. Ideology leads the community to deviate from economic rationality. The design of Bitcoin is based on the economic rationality of people to achieve incentive compatibility. But after entering the mainstream society, the influence of ideology continues to emerge. In the battle for Bitcoin expansion, the anarchist ideology of core developers is one of the important reasons for their refusal to expand. In the BCH civil war, CW's radical rationalism was his main selling point for the believers.

5. Political operations have an important impact on the evolution of the system. In the ongoing BCH civil war, CSW and his support nChain and CoinGeek launched an offensive from the beginning of August, successfully conducting political operations in concept design, message production, social communication, and public opinion orientation, accounting for only 1 in the BCH network. About %, sha256 full network computing power less than 5%, produced a strong momentum. This goes far beyond the original political structure of the Bitcoin system. ^[18]

These new problems have not been discussed in Nakamoto's white paper and his early speeches. These are the serious challenges that Bitcoin has encountered in the mainstream social experiment. We can't expect Nakamoto to plan all the things in the future. His design has been a great achievement in pushing Bitcoin from the geek community experiment to the mainstream society. Later experiments require more technical, economic, political, social, cultural and other elites to join in and explore and advance.

After the hustle and bustle of 2017, the main focus of the crypto-economy is on technology, including TPS in various chains, the involvement of various new technologies, and how to technically address decentralization, security, and performance. Maybe triangle, and so on. Too few people see and pay close attention to the economic, political, and ideological issues of Bitcoin entering the mainstream society.

The current crypto economy is no longer a one-way show for Bitcoin, but bitcoin (including bitcoin cash) is still the longest-tested decentralized system in the crypto-economics. The problems it reflects will also be the problems that other password consensus applications will face. The core of the problem is how to achieve a sustainable endogenous equilibrium social structure in a global political and economic environment.

I hope that in the next decade we will be able to solve this problem. Once solved, the global crypto-economic system will be established, and the new dream of making the human being more free in the world of passwords will not be far behind.

Reference materials:

[1] Nakamoto Satoshi: "Bitcoin White Paper: A Peer-to-Peer Electronic Cash System"

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