Understanding the Tree of Life in Ethereum
Editor's Note: This article comes fromChain news (ID: chainnewscom)Chain news (ID: chainnewscom)
This article first appeared in Bankless, an English paid e-magazine focusing on open finance. Bankless and Lianwen jointly released the Chinese version of this article. The subscription address of Bankless is: bankless.substack.com
Chain news (ID: chainnewscom)
, Author: Ryan Sean Adams, founder of cryptocurrency investment fund Mythos Capital, editor-in-chief of electronic magazine Bankless, compiled by Zhan Juan, reproduced by Odaily with authorization.
This article first appeared in Bankless, an English paid e-magazine focusing on open finance. Bankless and Lianwen jointly released the Chinese version of this article. The subscription address of Bankless is: bankless.substack.com
As a kid I loved turn-based strategy games like Civilization. Have you ever played?
You can start with a stone age hunter-gatherer society. Your goal is to use resources and time to upgrade your society according to the technology tree shown in the picture below:
(In order to protect your cervical spine, it is recommended to read the picture below with a horizontal screen mobile phone😊)
Learning the alphabet can help you unlock writing, math and legal skills. Armed with law and writing skills, you can open the door to literature, to philosophy, and ultimately to a new form of government—the Republic. and so on.
Your civilization cannot jump directly to flight and nuclear fission! Do you know how much technology is required to achieve this goal? To accumulate the value of countless eras! It takes 20 turns to wait for the Renaissance, the rebirth of science, and another 10 turns for the Industrial Revolution, to get the necessary machinery, and you haven't even entered the Bronze Age yet!
These technologies are like branches on a tree, each branch depends on many other branches. Some branches look like dead ends, but in reality they are just waiting for the right mix of technologies to keep growing. Sometimes, all you need is time; sometimes, an investment catalyst is needed.
Did you notice that the Ethereum economy works like a tech tree?
Come on, let's go through this "tree" carefully: we start with Ethereum, which is the economic network of the stone age. There isn't much to do other than transfer ETH or speculate.
After a few rounds. oh what is this We have unlocked the token ERC20 standard, which is to give funds +30 points. The token has a positive by-product, which is to increase the currency of ETH, but also a negative by-product, which gives +25 points to scams.
A few more rounds passed. As it turns out, the ICO wasn't the only ERC20 token being unlocked. Combined with ETH as a reserve asset token, we can unlock Maker, a protocol that grants us loans (+20 points), and generates DAI. Our first big win!
We have unlocked the world's first permissionless stablecoin! This goal would not have been possible without ETH and tokens.
Now that we have DAI (a stablecoin for ETH), what's next?
We can unlock the Dai Savings Rate (DSR). Our Economic Savings Agreement is capable of +25 points. DSR opens the door for feature-rich smart contract wallets like Argent (+20 points for usability). DAI spawns liquidity in Compound (loans +20 cents) and dYdX (margin +15 cents) and helps set DeFi lending rates for bank stablecoins.
Can you see how the economic technology tree of Ethereum works?
You can't get highly liquid Synthetix without Uniswap. You wouldn't have Uniswap without ETH liquid trading pairs.
Do you want to unlock the following assets?
Tokenize Bitcoin like tBTC? You first need ETH + ERC20;
Minting synthetic assets? You first need ETH + ERC20 + Uniswap;
Anonymous stablecoins? You first need ETH + ERC20 + DAI + AZTEC.
Sometimes, we get lucky and are able to unlock a major economic breakthrough, like Uniswap, which is destined to become a root branch of our tree, like the alphabet or the wheel, which is a prerequisite for hundreds of other branches. Other times, a technology seems to be stagnant like Augur is now, but maybe Augur is just dormant, waiting for a stablecoin to flourish. (Augur will introduce DAI in a few months.)
We cannot predict the technology tree of Ethereum in advance, it is full of surprises. Even the best cryptocurrency investors may only see a branch or two ahead. This is normal. Why bet on individual branches when you can buy ETH and bet on the whole tree?
However, based on its current state, it would be a big mistake to dismiss ETH and DeFi as "non-institutional level" or "too primitive" or "only compare yourself to yourself".
Who would have guessed that a group of cavemen would send humans to the moon?
Who would have thought that a low-throughput "magic currency" network would one day become a global open financial system?
