Meng Yan: Reflections on Ten Years of "Chain Circle"

Written by: Meng Yan

In November 2013, Vitalik Buterin published the first version of the Ethereum white paper. Afterwards, people often regarded this as a sign of the beginning of the "Blockchain 2.0" era, but at that time, it was actually the emergence of Ethereum that separated "Blockchain" as a separate technology from "Digital Currency". In other words, Bitcoin as "Blockchain 1.0" was blocked after the fact. Blockchain is truly an independent field and should be counted from November 2013, which is exactly ten years now.

Blockchain and digital currency should be considered two different industries because their goals and value propositions are very different. The digital currency industry, or commonly known as the "currency circle", has created a unique parallel world, and then created virtual digital assets in this world, built a free financial market, and made profits by trading in it. Because its rules and value system are incompatible with the real world, the currency circle has little or no consideration for exerting influence on the real world or the real economy. The blockchain industry is completely different. It aims to transform the real economy and influence the real world. Therefore, people in this industry call themselves "chain circles" to distinguish themselves.

Blockchain was once regarded as a disruptive technology on par with AI and had high hopes. However, to be honest, over the past ten years, the results have been disappointing. It can be said to be a typical trend of rising high and falling low. Not only did it fail to make any achievements that shocked the world, but some projects that had high hopes, such as the supply chain management system jointly developed by IBM and Maersk and the on-chain stock trading system of the Australian Securities Exchange ASX, ended in miserably. Some well-known projects that originally focused on blockchain have also given up on blockchain and returned to traditional architecture. These failures have undoubtedly severely damaged people’s confidence in the blockchain.

where is the problem? Does blockchain still have a future? What’s the next step?

I started learning and researching blockchain in 2015. When I started, I was a standard blockchain person. Since the end of 2017, I have gradually focused on digital assets. But personally, I agree more with the value proposition of the chain circle, and I hope to see the new technology of blockchain have an impact on the broader real world, create value that is visible to the naked eye, and gain recognition from more ordinary people. So on the occasion of ten years since the emergence of blockchain as a field, I will briefly talk about some of my views.

Let me be considerate first. Blockchain is indeed still in a very early stage. Many people compare blockchain with AI, electric vehicles, and cloud computing. They were all technologies that were in the spotlight ten years ago. If you look at how much others have achieved, look at your blockchain, and you’ve done nothing. come out. But this comparison is really unfair, because those fields are actually old trees and new flowers, and blockchain is really a new field that has just sprouted. Specifically, blockchain is actually an algorithmic solution to a theoretical problem in the field of distributed computing and social collaboration. The conundrum is: How can we generate and spread trust without relying on authority? **This problem has troubled mankind for thousands of years, but it was not until the 2008 Bitcoin white paper that a feasible solution was suddenly given. In other words, the blockchain industry is still in the first dozen years after the theoretical breakthrough. If we look at the most popular technology industries such as chips, the Internet, AI, electric vehicles, and new energy, we will know that their theoretical breakthroughs occurred decades or even hundreds of years ago. They were only in their teens. At that time, you may not even have a product, and you may not even be qualified to draw lessons. In contrast, blockchain has at least done something and at least accumulated some lessons. Therefore, blockchain is indeed still in its infancy, and we still need to be more patient with it.

Despite this, in the development of chain circles in the past ten years, there are still many unsatisfactory places and many detours. If these detours were not taken, it is indeed possible for chain rings to develop better than they are now. Some of these problems are objective and cannot be solved by the chain itself, but there are also many subjective problems that are worth summarizing experience and lessons.

**The first problem is that the chain circle copied the technical tools and ideas of the currency circle, resulting in serious "rejection reaction" when it was implemented. **

There is no doubt that the currency circle has always been at the forefront of blockchain technology applications. However, technologies like Bitcoin and DeFi are extreme means to solve extreme problems. The "cypherpunk" liberal digital jungle environment in which they live is very different from the real world: everyone is anonymous, but In addition, everything is open and transparent, digital identities can be created and discarded at will, code is law, and there is no law outside the code. All these rules are not only incompatible with the real world today, but will not be accepted by mainstream society even in the future. Accept. And these rules and ideas penetrate into all aspects of blockchain technology. When Chain Circle brought these technologies to the real world, there was no serious research and discussion across the industry on which ones could be learned and which ones had to be adjusted. As a result, they encountered serious resistance when they were implemented.

**The second problem is that the value proposition has misplaced the focus, the tone is too high, and the position has not been properly positioned. **

The core ideology of the currency circle is decentralization and consensus. When the chain circle started, it copied this value proposition without examining it and promoted it everywhere, using unrealistic "decentralization" as the main value proposition. Putting on a revolutionary stance of replacing and subverting the traditional architecture, it makes enemies on all sides, and it is difficult to gain the understanding and support of users. The idea of decentralized consensus can only gain widespread resonance if the center does evil and everyone knows it. In the field of digital currency, this condition is partially true, but in most fields, this condition is not true. In other words, the traditional trust mechanism based on a trusted third party does not expose serious problems in most situations. Instead, it is more trusted by users because of its flexibility and maturity. In this case, if you insist on exaggerating the risks of centralized evil, and then try to completely replace the traditional architecture with a new architecture that is not mature enough, users will naturally not pay the price.

In addition to practical considerations, from a theoretical analysis, "decentralization" and "distributed consensus" should not become the core value proposition of blockchain industry applications. As mentioned before, the essence of blockchain is to solve the problem of how to confirm facts, generate and spread trust without relying on an authoritative trusted third party. In digital currency application scenarios, facts are determined through majority voting. However, in most industry applications, facts are either determined through consultation between relevant parties or by authorized agencies. It is almost never the turn of a group of unrelated people to vote. Therefore, the core value proposition of a chain that targets industry applications should not be “decentralization” or “distributed consensus” at all.

**The third problem is that a lot of time is wasted by long-term entanglement on the primary issue of "to have currency or not to have currency". **

For a long time, the chain circle has been debating whether pure blockchain applications must have coins. This is a very meaningless debate, because the conclusion is very obvious and has been discussed long ago: blockchain applications must have coins.

Why do you say that? First, blockchain applications essentially solve trust issues, and in the business field, 99% of application scenarios that need to be related to trust issues have to deal with money. If there is no money on the chain, then there is no trust. The problem needs to be solved, let alone the need to use blockchain. Second, one of the core skills of blockchain is to program payments. With this ability, many application scenarios can immediately add the finishing touch. If this ability is eliminated, the meaning of using blockchain will be greatly reduced. Third, for blockchain to solve the incentive problem, there must also be money on the chain.

These are obvious truths. However, because in some countries and regions, the government and the public are very disgusted with "coin issuance" and other activities, many people in the chain circle are under a tight curse, and they are trying to cater to the pie-in-the-sky idea of the so-called "coinless blockchain" and take the initiative to The blockchain has been reduced to a slow and expensive disabled database. Naturally, the result is that you have been working for a long time and achieved nothing.

In fact, having coins on the chain does not mean "issuing coins". CBDC or compliant stable coins can be introduced, and the value of the blockchain can also be brought into play. Instead of wasting time unrealistically exploring "coinless blockchain", it is better for everyone to work together to fully communicate with the government, regulatory authorities and the public, clarify the interests and harms, and implement compliant digital currencies on the chain as soon as possible.

**The fourth problem is that the potential of “tokens” is not fully explored. **

"Token" is a new word coined by Mr. Yuandao and I in 2017, which corresponds to the "token" in the blockchain. Our observation at that time was that although the blockchain can also do some other things, there is only one thing it is best at and does best, which is the management and programming of tokens. Therefore, the expansion and exploration of blockchain applications are largely reflected in the expansion and exploration of the application potential of tokens. From another perspective, the core value of blockchain is to solve the trust problem, and trust requires a certificate as a carrier. In the real world, certificates, seals, badges, signatures, bills, currencies, and contracts are the carriers of trust, while in the digital world, blockchain tokens are the best carrier of trust under the current technical level. The tokens on the chain have advantages that other trust carriers cannot match in terms of verification, circulation, transaction and programmability, and can well reflect the use value of the blockchain. Therefore, tokens should become the core of blockchain applications.

However, judging from the practice of the chain circle in the past few years, this has not become a broad consensus. Many blockchain projects have a serious lack of understanding and application of tokens, which is reflected in the fact that they only use a few very elementary token standards, such as ERC-20, ERC-721, etc., and then make the business logic very complicated. This reduces the understandability and functionality of the solution.

**The fifth question is that there is no industry practice to solve data privacy issues. **

In the currency circle application, users are anonymous, but all data and behavior history behind each address are open and transparent. This is exactly the opposite of the real world. In the real world, users need to participate in commercial activities under their real names and accept supervision, but their commercial data and business behaviors are private and do not need to be disclosed to the public unless there are special circumstances. As a result, a contradiction arises between the attitude of blockchain technology from the currency circle towards privacy issues and the needs of the real world. How to deal with this contradiction in industry blockchain applications is a fundamental issue related to whether blockchain can be implemented. However, there are some blockchain projects that not only do not face this issue head-on, but also try to persuade users to accept the currency community’s concept of data privacy, which is unreasonable and impossible. Of course, I also know that some projects are dedicated to solving this problem, each with their own methods, but there are no industry-level standard practices, and there are even very few horizontal discussions on this issue. It can be said that if this problem is not solved, there will be absolutely no chance for blockchain to be implemented in the real economy.

There are certainly other reasons why blockchain industry applications cannot be implemented for a long time, but I think the above five are the most worthy of mentioning.

Based on the above analysis, if Chain Circle wants to achieve breakthroughs in the future, I have the following suggestions:

First, consider blockchain as a solution to specific specific problems, rather than as a "blockchain revolution". It must integrate and coexist with traditional architectures, rather than murderously replacing and subverting them. The real needs for trust issues in application scenarios should be analyzed realistically, and the risks of centralized evil should not be exaggerated. Problems that can be solved by centralization do not necessarily have to be on the blockchain. Problems that can be solved using cryptography do not necessarily require blockchain. Letting blockchain play a role in key positions is more conducive to its healthy development than letting it dominate the world.

Second, actively promote central bank digital currencies or compliant stable coins to be put on the chain, which is a key step in the implementation of blockchain applications. Don’t miss the forest for the trees and get entangled in the value debate of CBDC. You must realize that the promotion and application of CBDC will prompt hundreds of millions of users to open and accept autonomous identities, and will promote the integration of regulatory technology and blockchain. This is The most important foundation for the widespread application of blockchain. If this thing is done, everything will be connected. If this thing is not done, the chain will stagnate for a long time.

Third, deepen the understanding and research of tokens and unleash its potential as soon as possible. Domestic blockchain developers need to learn to get rid of the misleading brought about by the word "token" and realize the rich expression ability and programmable potential of tokens as a trust carrier, but at the same time, they must also prevent the trend of "everything is everything". "Tokenizable" extreme.

Fourth, in the short and medium term, we should still focus on finance, trade, and payment-related applications as the core breakthrough point, and regard the expression, circulation, transaction, programming, and supervision of assets as the main value propositions, highlight efficiency advantages, weaken ideology, and strive to achieve success in these aspects. Achieve breakthroughs early. Without breakthroughs in these directions, it will be difficult to implement blockchain applications in other fields.

Fifth, how to solve the problem of privacy information protection should be regarded as one of the most important topics, discuss it throughout the industry, and formulate relevant standard practices and tools.

Sixth, seriously consider how to motivate users to adopt blockchain solutions. Blockchain is a new tool. Compared with current mainstream technologies, the benefits that blockchain solutions bring to users are not obvious at the beginning. They must achieve network effects before they can show huge advantages. For this type of technology, if you want to develop it well, you must think clearly about "who are our friends and who are our enemies" and gain support from as many people as possible, such as learning about the Internet and the currency circle, and considering Subsidies are provided for early users.