Author: Brook
Compiled by: Sissi & Leia, TEDAO
Foreword: The chaos and lack of innovation in the crypto world make people question: Are we truly making substantial progress towards the ideal future? The Foreword of "The Protocol Revolution and DigiLaw Engineering" explores the essence of the crypto world, the bottlenecks in its development, and the infinite possibilities of future construction from a systematic perspective, providing important insights for understanding the true face of this new planet.
This article is the first in the series of the foreword content, starting from the current state of the crypto market, exploring the essence and future direction of the crypto world. More Chinese translated content will be released in due course.
In September 2023, Matt Huang's article "Casino on Mars" rekindled the long-dormant hope of the crypto bear market at the time. He compared the crypto world to a new planet being colonized, making everyone realize that although the crypto planet currently has various chaotic phenomena, it still cannot conceal its vigorous development and infinite possibilities for future construction. He also rationally analyzed the dual nature of speculative behavior in the crypto casino, objectively acknowledging the existence of fraud, scams, and other malicious acts on the planet. This article was like a shot in the arm at a time when everyone was generally skeptical and depressed, injecting new hope into the crypto world.
In 2024, the crypto world witnessed several important historical moments: the U.S. Securities and Exchange Commission (SEC) successively approved the spot ETFs for BTC and ETH; the U.S. House of Representatives passed the FIT21 Act, formally establishing a regulatory framework for digital assets; BTC underwent its fourth halving, etc. The accumulation of many positive factors led the crypto world to a small wave of upswing as expected.
However, in this small bull market, the market volatility is still intense, speculation in the casino is still rampant, Ponzi schemes and rugs are still emerging endlessly, and hacker attacks and fraud are still occurring one after another. What real innovations have directly addressed the essence? At the very least, we gave birth to DeFi and NFT in the last boom. What about this time? Meme fever? Inscriptions? Why is everyone's sense of value becoming lower and lower, even to the point of "crypto shame"? Are we truly making substantial progress towards the ideal future?
When writing this foreword, it has been nearly a year since the publication of "Casino on Mars", and the market seems to have fallen into a similar period of dormancy again. Péter Szilágyi's recent "self-reflection" tweet also sparked an industry-wide debate on the "meaning of crypto's existence". He bluntly stated: "It's past time this industry creates something genuinely useful that people want to use, or should just close up shop."
Although he also believes that many great things are being created, he has to admit the objective fact that: Looking at the entire crypto planet, we have not yet established a prosperous crypto civilization. If we see blockchain protocols as urban infrastructure and smart contract protocols as a series of city buildings, then it is fair to say that apart from the untapped wilderness, the cities under construction on this planet are also full of ruins and unfinished buildings, and the ones maintaining the normal operation of the city are still the old-fashioned buildings like MakerDAO, AAVE, Compound, and Uniswap. It is undeniable that there are many glamorously packaged and forcefully advancing construction projects, but how many of them can ultimately withstand the test of time, human nature, and market storms, and become landmark buildings of real significance? Why can't we build skyscrapers? What makes us qualified to attract the next billion users? Where are the bottlenecks in our development? Or, more fundamentally, what is the true face of the crypto world we are striving to build?
The SEC's narrow 3:2 vote, the market's ups and downs, and the participants' fluctuating mentality to some extent confirm my current thinking:
The crypto world is not a binary opposition, but a superposition of "endless future", "open casino", and "breeding ground for evil". People standing at different angles and levels see vastly different crypto worlds.
In terms of market capitalization, projects like BTC and ETH contribute more than 80% of the crypto market value, which can be said to be a healthy overall crypto market. The crypto world has evolved from being ignored to surpassing Apple in market capitalization, and is now being recognized by the mainstream financial market. With this development trend, it is very likely to gradually surpass gold and even real estate in the next ten years or so. The rise of Decentralized Finance (DeFi), the popularity of Non-Fungible Tokens (NFTs), the emergence of Decentralized Identities (DIDs) and Decentralized Autonomous Organizations (DAOs), the gradual implementation of regulations, and the gradual recognition of legal status all indicate that the "endless future" of the crypto world is accelerating.
In terms of the number of projects, among the tens of thousands of cryptocurrencies in the crypto market (over hundreds of thousands including memes), perhaps only hundreds of projects have real value, and the vast majority are still primarily about "making money". They are like "open casinos" without the constraints of time and space, where anyone can participate. This new-style casino is "open-ended evolution", where project parties seize the greed in human nature, constantly updating the casino games through technical upgrades, creating endless new gambling games, and continuously attracting a stream of speculators to invest their "chips", further driving technological and business innovation, and the "casino ecosystem" evolves in this cycle after cycle.
In terms of malicious incidents, in areas where regulation has not yet reached, criminals often use cryptocurrencies for money laundering and other criminal activities such as dark web transactions of drugs and weapons, attempting to evade sanctions; frauds, scams, and rug pulls are also rampant in the crypto world; decentralized crypto finance platforms and wallets also frequently become targets of hacker attacks. All of the above are objective facts, mainly because the innovation in the crypto world is relatively free and open, and the evolution of its ecosystem far exceeds the speed of regulatory implementation, so the "blank areas" where regulation has not yet reached naturally become the "breeding ground for evil" for scammers. At the same time, the iteration of crypto technology also requires time, and it is difficult for us to build a "perfect" underlying architecture in the early stage of new things, and "vulnerabilities" are constantly being repaired through trial and error, but this also provides potential attack opportunities for hackers, inevitably becoming a breeding ground for evil acts.
The superposition of these three states makes it undoubtedly difficult for the vast majority of people to unravel the true face of the crypto world. Some people only see the "endless future" and worship it blindly; some people only see the "breeding ground for evil" and fear and avoid it; some people only see the "open casino" and focus on profit-seeking, stop thinking about the true meaning of the crypto world.
In his book "Read Write Own", Chris Dixon points out that blockchain networks can combine the social benefits of protocol networks with the competitive advantages of enterprise networks, ultimately reshaping the Internet into a more open, democratic, and innovative "endless future". This book is concise and easy to understand, and is worth reading for anyone who wants to better understand the true potential of blockchain and Web3.
But perhaps due to the limitation of the length, Chris Dixon only made some brief acknowledgments to the skeptics in the book, without further discussion. To help more people see the true face of the crypto world, I think we still need to clarify the following core issues:
First, what is the essential value of the crypto world?
In "Casino on Mars", Matt Huang pointed out that the crypto world is a new planet worth building, because it provides a blank canvas for us to establish a new property rights system and construct an upgraded financial system and Internet platform. This is from a more macro perspective. If we start from a more micro and first-principle perspective, what is the essential value of the crypto world? What is the fundamental difference between it and the existing world system? What is the unchanging foundation and driving force that guarantees its vigorous development?
Second, why is it that 16 years have passed, and our understanding of the crypto world is still in a state of division?
The birth of emerging technologies is often accompanied by great skepticism and uncertainty, not only because it reshapes our way of life, but also because it challenges our cognition and values. However, the divided perception of the iPhone and Tesla cars was quickly unified. But today, the crypto industry led by Bitcoin has made undeniable progress, why are there still a large number of positive and negative controversies piled up? Why is the public's understanding of the crypto world still full of confusion and conflict, and why are there still many people who cannot see the bright future of the crypto world?
Third, why is the malicious behavior in the crypto world so rampant and persistent?
Why has the crypto world been in chaos and disorder for more than a decade? People often attribute this to "the emergence of any new financial market will be accompanied by all kinds of problems". However, there is a very contradictory point here, which I call the "crypto paradox": the original intention of the crypto world was to use blockchain technology and decentralization concepts to build a new system from "don't be evil" to "can't be evil", but now it has fallen into the absurd predicament of "rampant evil". This inevitably makes people wonder, is there something special about the evil in the crypto world today?
Fourth, how to realize the original intention of the crypto world and maintain a safe and moral development environment?
The crypto world is in the early stage of development, and many orders are still being gradually established. New entrants rush in recklessly and often end up with "losing both people and money". When the existing infrastructure cannot well support the crypto world to realize the original intention of decentralization, can we collaborate with traditional regulatory agencies and the community to establish a mechanism that can spontaneously monitor and compress the space for evil, and build an "immune system" for the crypto world to comprehensively purify the development environment? At the same time, can we also allow the ordinary people trapped in it to gain a global perspective and better understand the overall picture of the development of the crypto world?
However, these questions cannot be answered clearly through a few articles.
Since I first encountered Bitcoin and Ethereum in 2016, I have witnessed two massive bull and bear market cycles in the crypto market, during which I have witnessed the rise and fall of hundreds of crypto projects. Some projects can cross the cycle and still firmly support a corner of the world today; some projects were once the talk of the town in the bull market, but disintegrated in the bear market in the blink of an eye; some projects simply used the banner of Web3 and decentralization to engage in Ponzi schemes and fraud. When we take off the halo of "crypto" and "decentralization", turn off the beauty filter, and turn off the filter, what is the true face of each project? Crypto entrepreneurship? Crypto business? Or crypto money-making? My past experiences have given me a deep understanding of the dangerous and fascinating complexity and chaos of the crypto world, as well as the importance and urgency of in-depth understanding and collaborative response to these challenges at the current stage.
I have always wanted to write a book to gather the rational and profound frontier insights that have been buried in a large amount of information, to explore the underlying laws behind the common problems, and to try to use a more scientifically rigorous systematic logical framework to string together the existing wisdom. I plan to name this book "Protocol Revolution and DigiLaw Engineering", not only to understand the above problems from a more fundamental principle perspective, but also to sort out a comprehensive system of practical methodologies, hoping to reduce the blind and chaotic exploration of participants and reduce unnecessary trial and error costs.
Writing this book does not mean that my answer is correct and profound, but in the early stage of the chaotic development of the crypto world, it is indeed necessary to carry out effective sorting and summarization. So the 1.0 version of this book will be completed by the centralized small team led by me. But this is just the beginning, and I hope it can become an open exchange community in the future, where everyone can discuss and collide together to create the 2.0 version of this book.
It needs to be explained that when describing this field, I tend to use the term "Crypto". Because with the development of the industry, the possibilities built on the blockchain in the next few decades will far exceed the current imagination, and buzzwords like "Web3" and "metaverse" are likely to be replaced by emerging new concepts. The "crypto world" that is currently in consensus usually refers to the new digital ecosystem built on the basis of decentralized public chain technology after the emergence of Bitcoin and blockchain. It also includes the infinite possibilities generated by the combination of some new crypto technologies (such as zk and homomorphic encryption, etc.) and blockchain technology. At least at the current stage, I think it is relatively appropriate to name it the "crypto world".
This book will focus more on exploring and summarizing the universal laws that have been market-tested and can help participants navigate the bull and bear cycles, in order to address longer-term problems and challenges. As for the current phenomenon-level frontier hotspots, I do not intend to discuss them too much, because they may not be able to withstand the test of time. This article will serve as the preface to the book "Protocol Revolution and DigiLaw Engineering", briefly outlining my thoughts on the above four questions and the vision and content overview of the book.
The content of this book aims to be easy to understand and suitable for a wide range of people who want to delve into the crypto world.
For bystanders and newcomers, this book will introduce the complex concepts, technologies and development outlines of the crypto world in a simple and in-depth way through rich cases, so that you can quickly gain a relatively objective and rational understanding of the crypto world at the lowest cost.
For active participants, this book will summarize the industry's past development rules and the characteristics of high-quality projects that have weathered the bull and bear markets, and provide a "trust economy" perspective to help you rationally analyze and screen out truly valuable crypto projects, rather than relying entirely on "luck" and "industry dividends".
For innovative builders, this book will focus on discussing business models, quickly scanning the industry, and sharing a theoretical framework and engineering-based intelligent solutions for the DigiLaw ecosystem, which are "must-learn courses" for every builder on the growth path.
For regulators and policymakers, this book aims to provide a new understanding of the complexity of the crypto world and the rapid evolution mechanism of its ecosystem, hoping that through the analysis of the DigiLaw ecosystem, it can help you find the boundaries of the regulatory scope, and formulate more comprehensive and long-term effective policies, to jointly build a healthy, fair, transparent and innovative digital natural environment.
