Don't worry, Ethereum is a living, organic system that evolves and expands itself
Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom)Editor's Note: This article comes from
Chain News ChainNews (ID: chainnewscom)
, written by David Hoffman, Crypto host and COO of RealT, translated by Perry Wang, published with permission.
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
Why is Ethereum a powerful "emergent structure"? Come on, let's take Ethereum as a living structure and take a closer look.
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What is emergence?
The various characteristics that emerge are the result of the interaction of individual components and the interaction of the interactions between components.
The individual characteristics that emerge are the combined result of the interactions between the many components of a composite system.
Individual components of a system combine with other components to create various permutations. The greater the number of components in an interconnected system, the more powerful the emergent results.
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brain
Consciousness in the brain is an excellent example of the concept of "emergence". Gestalt psychology refers to the brain as "an organized whole greater than the sum of its parts."
The brain can be divided into different regions, and the function of each region is marked:
Occipital lobe: input and processing of visual stimuli;
Prefrontal cortex: Produces goal-directed behavior based on signals from other parts of the brain.
market
But you can't find the "conscious center" of the brain. Consciousness is an emergent phenomenon, created when you bring together the separate functional structures of the brain. Consciousness is a bi-product composed of separate parts, but it represents the most important feature of the human brain as a whole.
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market
Markets are also emergent phenomena. No one invented "markets"; markets emerged because there was a need for the exchange of goods.
Uniswap is the best example to understand this "emergent structure" of the market:How did Uniswap achieve a 100-fold increase in liquidity when it started as an experimental project?
currency
How did Uniswap achieve a 100-fold increase in liquidity when it started as an experimental project?
currency
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The monetary commodity serves as a basis, and the more people use it, the more useful it becomes. Good currencies have great network effects, and the best currencies have the best network effects. The more a currency is used, the less it is lost in exchange.
Note:
Currency is an emergent phenomenon, which explains why the competition for the status of internet money is so intense, and why the crypto community is thriving. There is only one jurisdiction on the Internet, and therefore only one competing space for currencies. Liquidity begets liquidity, and currency begets currency. Fiat currencies like the euro, yuan, or peso can coexist with the dollar because governments have the power to enforce their currency in their countries and jurisdictions. Whereas on the Internet there is only one zone. Since there is only one space for Internet money to exist, the competition for the title of Internet money is fierce.
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Ethereum is a platform for "emergence"
The inherent characteristics of Ethereum make it a platform for gestation and emergence.
Ethereum is a permissionless platform. Anyone can build on it;
Ethereum is a Turing-complete platform. can build anything;
Ethereum is a composable platform. Anything built on top of it can interoperate with other things.
The rise of the Internet also follows this pattern. The Internet is an emergent system of interconnected users, websites, and traffic. Anyone can build anything on the Internet, and anyone can access it.
The absence of barriers to development on the Internet is what made the Internet rise; anyone can build things on the Internet without permission.
With the development of the Internet, its development speed is also getting faster and faster. As users grow, the incentive to build things on the Internet gets bigger and the barriers get smaller. As time goes by, more and more users flock to the Internet, eventually forcing every business to dare not be absent on the Internet. In addition, the tools used for Internet construction are more robust and easy to use, which also reduces the cost of Internet construction and enables more users to become Internet builders. This positive feedback loop is created; the incentive to be online is getting higher and higher, and the barrier to building things online is getting lower and lower.
Wikipedia: an emergent platform for knowledge
The story of Wikipedia vs. Encyclopedia Britannica is a successful example and a demonstration of the power of the open source and permissionless value creation model.
Wikipedia allows any user to contribute content, which has transformed it from a competitor to Encyclopedia Britannica to a database of all human knowledge.
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Different from the collaborative and centralized nature of Encyclopaedia Britannica, Wikipedia's seemingly chaotic and decentralized content creation methods ultimately create far higher value than the former. At the same time, Wikipedia is an excellent product that does not require labor to be paid. Thousands of authors contribute endless time and energy to produce free content for the platform.
In addition, those who contribute content are usually experts in their fields and are intrinsically driven to share the knowledge they have collected, which allows Wikipedia to organically acquire expert knowledge in every possible field. If an entry is incorrect, it will often be reviewed and corrected by a knowledgeable person. Wikipedia is automatically updated as human knowledge advances.
All of this happens organically.
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Articles:: Websites:: Applications
The Internet, Wikipedia, and Ethereum all represent open technologies with similar paths:
When someone builds something valuable, the platform itself is more valuable;
Things built on the platform exhibit an evolutionary quality; they can be improved, iterated or replaced;
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The story of Ethereum is the story of its application
Ethereum is nothing without applications. Ethereum needs applications to be useful. Ethereum, and its token, Ether, derive utility and value from the applications on it.
All apps are next to each other
When you build applications on Ethereum, you are building in the same space as all other applications. All applications have a surface area that interfaces with other applications. This is the core functionality of Ethereum. The integration of virtual machines in Ethereum is a revolutionary improvement in the development of encrypted economic systems, and the ability to combine applications may be a greater function.
This capability is called composability, and composability breeds emergence.
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In the Ethereum ecosystem, businesses are applications, and when an application is deployed, it generates products and services for others and other applications.
The composability of Ethereum creates surface area. When an application is built, it creates a product. This product represents the surface area for the application.
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DAI
Trees, leaves, veins and arteries, non-bronchial, lightning, broccoli, pine cones, snowflakes, rivers, supply chains, neural networks, social networks... the universe?
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Surface Area of MakerDAO
Dai Deposit Rate (DSR)
Vaults
caretakers
MKR Governance
MKR Auction
The above items are the external-facing functions of the MakerDAO application. It has a lot of surface area. Applications like Compound and Uniswap also have a lot of surface area.
The coolest thing about Uniswap is that it only has surface area. The correct definition of DAO should be: an application with only surface area. The code is on the inside, the people are on the outside.
Every application on Ethereum generates surface area that can be locked up and exploited by others. But as individual apps build on each other, they also create new surface area! This is how Ethereum's structure grows: different components build on top of other components. Currency Lego! The aggregate surface area of all applications is the overall outline of the Ethereum structure. Applications build on and around each other, and the structure grows.
Like a crustacean on the back of a sea turtle, each application increases the surface area and generates new layers for other applications. But, unlike crustaceans, applications can improve the welfare of those beneath them. Applications that build on each other are symbiotic in nature. Applications provide services/customers/value to each other.
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Where does emergence emerge from?A linear increase in application results in a quadratic increase in surface area.）
Every time a new application is added to Ethereum, there will be more permutations and combinations than previous application combinations. In the figure below, K3 yields 2 possible connections, while K12 yields 11 possible connections. The more applications there are on Ethereum, the greater the potential for new applications. The economic pie keeps growing!
Imagine that K1 in the diagram above depicts Ethereum's genesis block. There were no contracts, no applications; the only thing that existed was the native asset Ether: a single one-dimensional point in an empty universe. How do you build things like PoolTogether or DeFiZap in this early universe? you can't do it. You need more fundamental elements to provide the foundation and structure for more advanced applications. (Please re-read this article:
MakerDAO tops the list of ETH locked coins because it creates the most surface area. DAI is the only stable cryptocurrency that creates a vast new base for other Ethereum applications. The size of MakerDAO’s surface area is demonstrated by its never-ending list of DAI derivatives (Chai, cDAI, aDAI, rDAI, LSDAI, PLDAI), and Vault services like CDPSaver. What's more, there is a growing list of DAI markets (dYdX, Uniswap, Oasis, Fulcrum, Curve, Compound).
PoolTogether uses Dai within Compound, coupled with its own application, to generate a no-loss gambling. The PoolTogether app is built on top of the surface area of MakerDAO and Compound. PoolTogether also generates PL-Dai for use by other applications. PL-Dai is the surface area PoolTogether provides for other applications. With the emergence of PL-Dai, it can be easily accessed by Uniswap, so it is easier for other applications to build on PoolTogether!
User Networks of DeFi Protocols 16 Months Ago
User networks of DeFi protocols 10 months ago
User Networks of DeFi Protocols 7 Months Ago
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If the user network of the current DeFi protocol is presented in 3D, then everything will be built on top of MakerDAO, Maker becomes smaller because it is divided into SCD and MCD, and the circulation speed between DAI and Vault is low
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The collection of applications on Ethereum makes up Ethereum. Applications are not a subset of Ethereum, they are Ethereum. There is no such expression as "Ethereum", and each application active in Ethereum is "Ethereum".
The fabric of Ethereum grows and grows as applications are built, deployed, and composed.
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Ethereum builder Austin Griffith
When it comes to Ethereum developers, the term "Buidler" lives up to its name. They build and deploy code, that is, build physical structures on Ethereum. Software engineers are called engineers for a reason, they are responsible for building stable structures for others to use.
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a combined structure
The structures on Ethereum merge with each other. The amount of ETH stored within an application is a measure of the application's weight. The more ETH in an app, the more weight it has and the more gravitational pull it has on others.
The amount of ETH deposited in an app is a measure of how useful the app is to users and other apps. "Useful" means how many other users and applications need the product/service. "Useful" can motivate others to use your app, and it also represents the gravitational force generated by each app.
Everyone needs stability in their financial lives. Likewise, everyone will use the same currency that everyone else is using. Using DAI is 1000x easier than creating your own stablecoin. Why try to solve all the problems that MakerDAO already solves when everyone is using DAI? Just use DAI. The pull Maker has on the rest of the ecosystem is hard to shake off. Surrender. One stablecoin will rule the world.
The traction shown by these ETH-locked apps isn’t just for some apps, it’s for all of them. The gravity of ETH facilitates the convergence of applications, merging from many separate individual structures into a single superstructure. The growth of this superstructure is the growth of Ethereum. Ethereum is the sum of its applications.
This gravity is not limited to the internal ecosystem on Ethereum. Its monetary and economic significance goes beyond the cryptosphere. As long as users are engaged in economic activities, they will be motivated to join this economy and capture some of the value generated in transactions.
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Ethereum is a city
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Cities are efficient structures
Coordination and allocation of resources is easier when people all live in the same location. The public and merchants gather at the same place to enter the same market. Food distribution becomes easier when everyone has access to the same supermarket. Distributors are going to fewer destinations and can distribute more merchandise faster. When many people use public transit, the unit cost of building and maintaining transit decreases. Building a subway in the sparsely populated US state of North Dakota is stupid. In fact, the efficiency of cities increases with size: large cities are more efficient than small ones (mobility begets mobility).
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emergent structures
Living in cities creates a demand for housing and workspace, which incentivizes developers to build residential and office buildings. With more housing and fairs, so does the population, and so does the demand for secondary and tertiary services. Over time, people's hangouts turned into skyscrapers and 1,000-unit apartment buildings. Supermarkets and restaurants provide food for everyone; offices allow people to work together; bars and music venues provide entertainment; kindergartens, schools, hospitals, hotels, stadiums, casinos, parks, clubs, skate parks…
What started out as a place where a few people needed to live, has since emerged as a complex and integrated system that can efficiently allocate and exchange resources.
Ethereum exhibits the same qualities. Every application on Ethereum represents an opportunity for others. Every new application built on Ethereum brings opportunities for new users and more applications. When new users and new applications come to Ethereum, it creates more opportunities for the next wave of users to take advantage of.
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"Structure" builds itself
Following the same pattern, it is easy to understand why Ethereum as a platform has achieved success that other platforms have not: large structures have been built on Ethereum, which provides a large surface area for other applications. The existing products and services on Ethereum make it easier for you to build products/services. Everyone is already living on Ethereum; there are no barriers on the Internet that prevent people from migrating from the countryside to the cities.
However, Ethereum also has another feature that cities, markets, and currencies do not have, and it can achieve self-booting.
This function is ETH.
Applications that leverage ETH will be adopted
At the time of the genesis block, Ethereum was lifeless, and Ether was the only thing in the Ethereum universe. From an inside-Ethereum perspective, Ether is looking for something to do. It's very boring and it demands action. Applications on Ethereum represent the attraction, which is where the interest of Ether lies.
Suppose you participated in the Ethereum presale and bought 10,000 ETH. So, what is an app like Peepeth (decentralized Twitter) good for you? There is a fee of 0.00001 ETH per tweet, even if you send 100,000 tweets, you still have 9,999.9 ETH left, why? Peepeth cannot solve the problem of how to effectively use your ETH.
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In the budding period of DeFi, you can clearly see Maker’s early dominance. It is the first platform that allows you to use ETH as a valuable asset
Applications that can use ETH as a valuable asset provide solutions for how you use ETH.
Aside from the large surface area generated, there's another theory for MakerDAO's early success: it's the first app that lets people generate value from their ETH.
Applications that allow the use of ETH as a valuable asset are automatically selected by ETH holders.
What else can coin holders do... send 10 billion tweets on decentralized Twitter? ETH users are obviously more willing to put this $10 billion into financial applications, because it allows users to use their capital invested in ETH to obtain income.
Applications that make ETH productively useful are automatically popularized.
All Ethereum users have at least one thing in common: they all hold ETH. Since ETH is required to execute a transaction on Ethereum, it is basically guaranteed that all Ethereum users have ETH; they may all hold some amount of ETH.
Applications that create practical uses for ETH create an incentive to deposit ETH into those applications. When an application generates this incentive, it drives people to buy and hold ETH in the first place. They actually provide utility value to ETH.
When "DeFi" became a collection of thousands of different applications, all of which prompted people to deposit ETH, ETH became a universal asset, widely accepted in Ethereum as the main collateral. In other words, ETH is the currency of DeFi.
2.8% of total ETH is locked in DeFi. It’s still early days for Ethereum applications to serve ETH holders, but we can conclude that future applications will be built following a clear pattern.
Create an app with ETH as collateral;
ETH is deposited into the application, proving that the application is useful for ETH holders;
Growth in ETH deposits for the app proves to VC funds that they have found a product/market fit for their app;
The app received venture capital investment;
The team uses the funds to improve the product to generate more ETH deposits.
During the genesis block phase, ETH was overwhelmed. When applications on Ethereum provide methods and services that can leverage the value of ETH, they will automatically be adopted and popularized.
PeePeth: "What would happen if we could make Ethereum useful to people who haven't yet adopted it?"
MakerDAO: "What would happen if we could make Ether more useful?"
MakerDAO gave ETH a path to utility. MakerDAO allows ETH holders to earn returns on their capital. The same goes for Compound, Uniswap, and every other application that has an ETH deposit service. The amount of ETH locked in a DeFi application can reflect how useful it is to ETH and ETH holders.
At the same time, they create mechanisms that make ETH more valuable. When more DeFi applications use ETH as a currency, ETH will really become a currency. If Ethereum and DeFi undertake most of the economic activities of the encrypted system, then ETH is the Internet currency. If they carry most of the world's economic activity, then ETH is a global currency.
This bootstrapping mechanism is how the Ethereum superstructure builds itself. The incentives to build products and services on Ethereum are built into the protocol itself. This also explains why DeFi is on the rise as a use case, while most other Ethereum applications are lackluster and not adopted. DeFi paved the way for ETH to gain value, and ETH holders are incentivized to take this path, because this is how to increase the value of their assets. ETH will establish itself as the currency of the Internet.
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At the heart of Ethereum is Ether
The genesis block of Ethereum is a one-dimensional structure. At that time, Ether was the only and all of Ethereum. All structures are built at this single point. The total weight of all applications rests on Ether. This weight is reflected in the market price of ETH. Where Ethereum is on the scale is the market price of ETH.
The Ethereum economy creates a demand for Ether. MakerDAO needs it, Uniswap needs it, Compound, dYdX, Augur, Aave, Set all need ETH. Apps like PoolTogether require DAI, and 1 DAI requires at least $1.5 worth of ETH in MakerDAO!
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This superstructure is an organism
Organisms are emergent things. The reader, you, is a system of interconnected components that are themselves made of interconnected components. Layer by layer down to trillions of cells, the superstructure of the human body is an orchestration of components of different scales.
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Cells are the smallest unit of overall tissue. Knowing only of its neighboring ecosystem, each cell acts in its own interest to live longer and better.
In a global economic system, cells are individual economic agents; individuals with localized knowledge of the economy of a particular environment.
The cell in Ethereum is the main body that interacts with the application. Every market player is acting in their own interest, chemically reacting with applications they are familiar with and understand.
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organ
The application is the organ. They consist of individuals who use apps to achieve their own goals, and as a result, apps become larger and more useful. Every application on Ethereum provides an output for other parts of the structure to exploit. The output of MakerDAO is DAI, the output of Compound is cTokens, and so on. Each organ in Ethereum plays a specific role within the larger structure.
The aggregate output of all individual agents interacting with an Ethereum application is how an Ethereum application relates to other applications and positions itself.
The organ responsible for eliminating toxins - the liver is adjacent to the digestive tract, where toxins enter the body. The heart is located in the center of the human body, and this position is suitable for it to distribute nutrients most efficiently. These organs exhibit features of chaotic organization. Ethereum applications self-organize in exactly this way. Complementary applications will naturally merge with each other in order to efficiently utilize each other's surface area.
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Body
The body is the end product of chaotic organization. After millions of iterative updates and evolutions of natural selection, the body becomes a streamlined and efficient system through the competition for scarce resources within a single system. The body is like a city; its many individual components are organically choreographed, culminating in an emergent phenomenon.
survival (defense)
boom (offensive)
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The attack of Ethereum comes from the utility and value provided by each Ethereum application. We can use the ETH locked in DeFi to measure its scale. Ethereum apps are the teeth and claws of Ethereum: hunting weapons. These applications are tools for ETH holders and a threat to all competitors except Ethereum.
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Each header is an Ethereum application, and the size of each header is proportional to the amount of ETH locked
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The gravity of the superstructure comes from the currency premium of ETH
All applications that make up this superstructure have a quality measured in Ether. The weight that Ether bears while supporting the superstructure is reflected in the USD price of ETH (vertical force on ETH). The heavier the structure, the greater the load it places on the Ether. It might seem overwhelming with more weight, but I assure you, it's actually pretty cool.
The total weight of the Ethereum superstructure is a measure of how much demand there is for ETH. A superstructure that locks 0 ETH is weightless and meaningless. A superstructure with 3.2 million ETH locked is a system that has attracted 3.2 million ETH from the secondary market, driving market demand and scarcity worth 3.2 million ETH. The current weight of the Ethereum superstructure is 3.2 million ETH.
In order to support the weight of the Ethereum superstructure, the ETH price must rise. The superstructure represents a pull on the ETH supply: the collective incentive for people to deposit ETH into it.
The weight of this superstructure on the market price of ETH creates the monetary premium of ETH. The superstructure is a general structure, and the total weight of Ethereum applications has a generalized positive push on the price of ETH.
Summarize
"Generalized positive price push" is synonymous with "money premium".
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Summarize
Ethereum is a superstructure for composable financial applications. All applications on Ethereum create surface area for new applications to build upon, which in turn creates even greater surface area. The applications built together are not about sucking blood from each other, but creating value for each other. Applications built on top of other applications act as conduits for applications below. Apps that generate large surface areas create their own landscapes that other apps can exploit. The greater the surface area, the greater the usable space.
Ethereum's internal financial ecosystem appears as a chaotic organization. The gravitational pull generated from each application forms a mechanism by which the different independent components can be organized in a high-performance and efficient manner and generate an efficient superstructure.
Each application in this structure has mass and exerts gravity on the applications below it. Lower layer applications are the basis for upper layer applications. They carry the weight and get their share.
ETH is the fundamental particle of the Ethereum universe: the native asset that produces Ethereum quality. The market cap of ETH is the quality of Ethereum: its impact on the outside world. ETH locked in DeFi is a measure of the total quality of the Ethereum superstructure.
