Opinion: The Two Faces of Ethereum

Editor's Note: This article is from:Ethereum enthusiasts (ID: ethfans)Editor's Note: This article is from:

Ethereum enthusiasts (ID: ethfans)

Ethereum enthusiasts (ID: ethfans)

, Author: David Hoffman, translation: A Jian, reprinted by Odaily with authorization.

"We always imagined that in sci-fi movies there would be something that looked like a human being, and would take off the mask to prove that it was a robot...in reality, it was the other way around. We took off the mask of the robot and confirmed that it was actually a robot. one person……"

— Eric Weinstein's metaphor when explaining The DAO fork

A Controversy in the Chain

It is often debated whether cryptoeconomic systems (blockchains; or Bitcoin and Ethereum) are a function of social contracts, or automated/unattended code.

What is driving all this? Is it a human or a computer? The Bitcoin side hypothesis is that we should eliminate human intervention wherever possible. The idea is that the interpersonal trust system cannot be as scalable as the human-machine trust system. Therefore, any human participation in a blockchain protocol cannot be easily trusted and should be treated with caution. Humans screw things up all the time; computers always do what they're programmed to do.

In my opinion, the ecology of Ethereum does not pay enough attention to this point of view. This is also related to people's ultimate concern about the DeFi ecosystem, that is, DeFi is not completely decentralized, and there are still humans involved.

two angles

eliminate human intervention

A core assumption of blockchains and cryptocurrencies is that we can delegate financial tasks and transactions to fully autonomous code. We no longer need humans to manage the value we have, computers can do it. And it can actually be done even more beautifully.

But what active participation can be stripped out of such a system? Can we be 100% free from human participation》

Hasufl thinks not. Bitcoin is a completely automated system, and it seems that all human intervention has been completely eliminated. But as Hasu explains, this by no means means that the social contract doesn't matter in the system.

Bittheism might argue that the social contract itself is something that needs to be eliminated. PoW's incentive structure and fixed-supply assets can powerfully transform human beings into brainless, Satoshi-crazed zombies, serving this chain forever.

full human control

This model is a bit like my company RealT. We tokenize real estate and calculate rent by the day, and sign up in minutes! Buy RealToken today and receive rent tomorrow! That’s right, it’s also available to non-US citizens! We can also take back the token in your hand. Long live centralization!

MakerDAO

One of the cool things about Ethereum is that it allows companies like RealT to exist. We don't need a blockchain to deliver our product, but we do need Ethereum and its DeFi ecosystem to give us a competitive advantage over our peers who work with paper and ink.

• This leads to the core point of this article:

• There is a spectrum corresponding to all possible human-machine trust protocols, and Bitcoin and RealT are the two ends of this spectrum.

• MakerDAO is often criticized for the concentration of their MAK tokens in the hands of large players. MKR represents governance authority over the MakerDAO system and thus needs to be widely distributed in order for governance to be "decentralized". However, there are three points to point out:

MakerDAO itself is not a blockchain, it does not require the highest degree of decentralization.

There are now 16351 addresses holding MAK. This level of decentralization is orders of magnitude greater than the number of shareholders voting in a company (more importantly, holding MKR is permissionless).

Like all tokens, MKR increases entropy. Time brings decentralization.

99% of activities on MakerDAO do not require human supervision or intervention. MakerDAO is a protocol. It is automated (like Bitcoin, not like RealT) in the sense of "not requiring a human to process all transaction requests from consumers". There is only one scenario that requires human involvement, and that is protocol changes/upgrades. Call it a software upgrade, if you prefer.

But there is also a difference between the two: Bitcoin is a plug-and-play system that does not require humans to make choices (from the moment the decision is made to plug and play). Maker requires the subjective opinions of economic agents and expects that the mass psychology underlying the efficient market hypothesis will also create a secure MakerDAO system.

The logic is the same after all: the more distributed and voting activity MKR is, the more brainless MKR zombies trying to maintain MakerDAO. The distribution and voting activity of MKR, along with the engineered security of the MakerDAO protocol, will give MakerDAO the same underpinning force as Bitcoin: automated antifragile software with minimal human involvement (see: On Antifragility in MakerDAO) .

However, the human involvement required to maintain MakerDAO will always be higher than Bitcoin because it requires human initiative.

secondary title

big problem

Uniswap

Has MakerDAO stripped away human participation enough to make itself socially scalable?

Is the more stripped of human involvement necessarily better? Or is it too late?

Uniswap (decentralized exchange) is another good example. Vitalik Buterin often says that Uniswap is his favorite Ethereum application because it is simple and completely eliminates all human involvement. You see, Vitalik is also a Bitcoiner at this point!

I recently wrote a tweet proposing that Uniswap could convert their liquidity provider tokens (tokens that represent liquidity providers' claim rights to assets in Uniswap pools) into governance tokens. In this way, they can adjust the standard of fees they charge. We can let Uniswap LP token holders manage their capital pools, just like how MKR governs MakerDAO.

Uniswap founder Hayden Adams responded to me why Uniswap should take the route of complete automation and stripping human participation:

image description

- Hyden: "As long as it is possible to achieve, automation is better than governance, and I believe that the fee standard can also be automated." -

My theory is: LP token holders will select the most appropriate fee standard for their trading pool to ensure the best match to the supply/demand situation in the market.

Hayden's theory is that if a protocol can perform a complete function with fully automated code, then it should.

You see, this is what I said above, the core assumption of blockchains and cryptocurrencies.

Hayden asserts that if a token has governance functions, you actually create two different sets of incentives. These two sets of incentives are not necessarily compatible.

For MakerDAO, the risk of a black swan event is determined by the degree of incompatibility between the interests of MKR holders and DAI holders. If you think this is too much of a risk, you're a Bitcoiner. If you think this risk is manageable, you're an Ethereumist.

If you are a developer and are developing applications on Ethereum, please remember that it is not a problem that applications require human participation. Bitcoin factions will definitely yell at you and say mean things, but you can ignore them. What is available on Ethereum is your world. However, if your application can run without human intervention, maybe you should default to this model, because Bitcoiners have a reason to say these things.

The world of automation code

Ethereum's white paper captures the imagination because it combines non-stopping code with a Turing-complete programming language. When early investors imagined the future of Ethereum, they did not imagine RealT. They imagined Uniswap.

But there are many futures for Ethereum. One of them is a world made up entirely of automated, always-on applications. Uniswap is part of this world (maybe Augur is too).

Others come close, but not as thoroughly as Uniswap. Again, this is the power of Ethereum: it’s no big deal to need human participation. There are so many applications on Ethereum, spread all over the "human-machine protocol spectrum" shown above, most of them are working very well so far. Most are still standing, with new shoots popping up every day.

Those Ethereum applications in human skin have not been devastated by the storm so far. Although, as some Bitcoiners fear, winter is coming. But, who knows? Perhaps Ethereum will experience some nation-state friction, some regulatory resistance, and move into the future. Maybe Ethereum will be popular with those in power. Maybe Yang Anze will win the election and form a working group to support cryptocurrency. Or, maybe Joe Biden will win the election, and he believes that Bitcoin is used to buy drugs.

I really don't think we can accurately predict how the powerful will treat these systems.

Hydra Ethereum

Ethereum is a hydra with many faces.

EtherDelta was killed by the SEC because it was too human-operated and too easy to target.

Ironically, this fallen Ethereum application was soon completely replaced by its fully automated counterpart, Uniswap. It only takes one transaction to exchange tokens on Uniswap, but 8 transactions on EtherDelta, so Uniswap is much more user-friendly and easier to combine with other applications.

After the head of EtherDelta was cut off, Ethereum quickly grew a new head of Uniswap, which does not require active human intervention, and objectively speaking, it is also a better product.

While I said it was pointless to speculate on how national authorities would view activity on Ethereum, there is another point.

Imagine that there are many Ethereum applications doing illegal things in the eyes of various countries. But according to Hasu, that's the main purpose of cryptocurrencies.

My opinion: Hasu is right, for now. The future development of the chain circle will add many compliant businesses. But for now, non-compliant, illegal apps will come first because they won't face external competition.

a thought experiment

Suppose more than half of Ethereum applications are doing illegal things, and countries are ready to join forces to stop these illegal activities.

In this case, who will they attack? Is it for Ethereum, or for applications that engage in illegal activities?

I don't think they will target "Ethereum" because it's not Ethereum doing those things.

• - Ethereum will become the air we breathe. Image via ultraviol.eth -

• Attacking Ethereum costs money. This is the greatest deterrent.

While attacking Ethereum applications, then:

Either the same cost as attacking Ethereum (eg Uniswap, Augur)

Either the cost is less, because there are some groups that manage the application (eg MakerDAO, Compound)

It's worth mentioning that apps like PoolTogether have human parts that can be easily patched out. It's too easy to write a PoolTogether that doesn't require human intervention. These apps don't do this now because manual entry makes it easier to maintain, iterate, and scale their products. (Translator's Note: PoolTogether is a lottery application. The funds invested by users will be pooled and placed on the Compound lending market to lend and collect interest. The interest is used for the lottery. Users who do not win the lottery can get back all their funds (but no income ).)

Darwin's Field

A core feature of Ethereum is Turing completeness. Without Turing-complete code, it would be impossible for Ethereum to host applications controlled by humans.

This freedom gave Ethereum a Cambrian explosion of interoperable applications in 2018/19. This freedom means that all possible applications, products and services can be developed on Ethereum.

But this freedom is also a double-edged sword, which can bring great risks. We’ve seen things like get hacked (The DAO), get shut down by regulators (EtherDelta), and see growth rates that Silicon Valley startups can only dream of.

Apps like MakerDAO and Uniswap have clearly "adapted" to Ethereum.

I often say that Ethereum is a "Landscape", but what I seldom say is that Ethereum's EVM is a 3D world of digital value applications. The infinite space of Ethereum is the space of all possible applications developed on Ethereum. Applications can fill all the gaps in the Ethereum world, forming an infinitely diverse spectrum. The "human-machine mutual trust" spectrum is one of the most important spectra on Ethereum.

• code = DNA

• Every app on Ethereum has its own DNA. Each application is unique and fills a gap in the Ethereum world. Every app has its own nutritional base (users, value), and some apps will be more useful than others. Although the Ethereum space allows all possible applications to grow, there is not necessarily room for them all to grow at the same time. Therefore, Ethereum applications are also in a struggle for the survival of the fittest.

Ethereum means two things:

This space where all apps live

A collection of all applications grown in this space

This space is the battlefield where Ethereum applications are located. Applications compete for users, value, and liquidity. Applications and competitors outside of Ethereum also compete for users, value, and liquidity. They are fighting for every inch of land.

EtherDELTA is not suitable for survival. It took advantage of a very prosperous market upswing and had no competitors, but quickly died out. Even if the SEC doesn't kill EtherDELTA, Uniswap's great user experience will kill it.

Ethereum development will fill the void

Products that can adapt to Ethereum will naturally fill in the gaps.

The range of blank space is determined by the following two:

• User needs/desires—that is, how fertile the world is

• Ability/motivation for external forces to intervene – i.e. how dangerous the world is

Application growth for the next 10 years will follow this pattern:

Provide products that meet user needs

• See if it can survive the harsh environment

• As time goes by, applications will continue to be updated and bound to Ethereum. And the struggle for the survival of the fittest will tune Ethereum applications to fill the most fertile parts of the Ethereum universe.

• cake size

Number of contenders for the cake

Apps at risk while eating their cake

image description

- Thanks to idecentralized for this metaphor. Image via ultraviol.eth -

Hydra Ethereum

As Ethereum survives longer and longer, it will eventually become a space inhabited by a group of applications that can pass the Darwinian test.

One of my favorite metaphors comes from Kenny Rowe, who refers to these cryptoeconomic blockchain protocols, the likes of Bitcoin and Ethereum, as young organisms in a growth phase.

Kenny compared Bitcoin to a street boy who can survive on his own; while Ethereum may be too young to survive on its own.