Ethereum: Tree of Trust
Editor's Note: This article comes fromGolden Finance, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Golden Finance
Golden Finance
, reprinted by Odaily with authorization.
First look at an NFT:
life
Life is a bottom-up phenomenon. It emerges from the mechanism of order out of chaos. "Life" is able to harness the energy of the outside world, the product of an organic algorithm that infuses life with the energy of the outside world and produces order. Once the initial foundation of order is established, life will realize progress and development by continuously adding more layers of order to its original foundation.
This is how life evolved from single-celled organisms to multi-cellular organisms to complex coordinated organs, body systems, hormones, brains, and consciousness. It started as a tiny cell, added structures to itself, and evolved over millions of years to form the vastly diverse and complex forms of life we know today.
What matters is that each iteration of the evolution of life comes from the impetus of each individual unit. Richard Dawkins' The Selfish Gene discusses how each gene of an organism becomes the smallest unit of life, introducing the inherent selfishness of each gene in preserving and replicating itself, which provides The basic pattern on which all life depends.
Genes will survive the fittest. Genes that are combined with others perform better than those that are alone because group collaboration allows them to survive more efficiently.
Charlie Munger's famous quote "Give me a reward and I'll reward you" applies equally to life. Life is born with the motivation of "survival", which gives life an unremitting drive for progress. Life is the combination of the desire to survive and the tools needed to survive.
Given enough time, we can predict that eventually a thriving Odaily will be born, filled with all forms of life, as the drive to perpetuate and prosper fills all gaps and niches with new life forms.
Nature hates a vacuum, so life springs up from all corners of spacetime. Given the underlying conditions and tools to make life strong enough, life can exist in even the emptiest places in space-time.
Life in a Cryptocurrency Economic System
Cryptoeconomic systems like Bitcoin and Ethereum represent life forms in a whole new realm. They are life forms native to the Internet, and what makes them so unique is that they exist only in the virtual world.
Bitcoin and Ethereum were not the first "organisms" to appear in the Internet space. Computer viruses are basically as old as the Internet. As evolution continues, highly replicable simple life forms first emerge, followed by bodies that work in harmony, with complex structures that produce something greater than the sum of its parts.
My favorite research in this area comes from Brandon Quittem, who has been called "the man who compared Bitcoin to a fungus" because of his research showing that there are similarities between Bitcoin and mycelium, which is An underground network of fungi that grow above ground, like mushrooms.
The best thing about the cryptocurrency industry is that it is related to all fields of knowledge, specifically, the connection between cryptocurrency economics and biology is the most fascinating, but it is rarely noticed.
A comprehensive understanding of cryptocurrency economic systems like Bitcoin and Ethereum must start from a biological perspective while also integrating concepts of complexity and complex adaptive systems.
When we discuss Ethereum and Ethereum-related applications or concepts, the analysis angle is either too detailed or too grand to look at the system from a holistic perspective. When you analyze Ethereum from a macro perspective and see it as a coherent system, biology will become the best analysis angle.
For example, we often use "node count" to measure the health of these cryptocurrency systems, that is, how many nodes each system can replicate itself. Good cryptoeconomic systems are easy to replicate, "downloading the entire blockchain" can be easy like Bitcoin, or hard like Ripple and EOS. If a system is easy to replicate, the system is antifragile and more likely to survive.
This is why cryptocurrency systems such as Bitcoin and Ethereum are so popular. Creating nodes will always be faster than eliminating nodes, and no amount of collaboration is likely to change that.
Bitcoin and Ethereum want to survive. They have their own raw drives, and unique strategies for achieving their goals. Like all life, they are trying to achieve some kind of system, want to survive in the long run, to achieve prosperity.
Humans have evolved the ability to walk on two legs, opposable thumbs, and the prefrontal cortex, structures through which we can realize our goals and ideas. Similarly, Ethereum has developed the currency Lego, through different combinations, it produces a structure with various functions and can perceive changes, which is its competitive advantage.Ethereum。
My previous "Ethereum is an emergent structure" is based on this point of view. The main points of this article are as follows:
The basis of the entire DeFi collective structure is a variety of DeFi applications called currency LEGO.
This overall structure, made up of many various individual parts, is the so-called
Ethereum
Various applications on Ethereum provide new layers to develop other applications. MakerDAO, Uniswap, Compound, etc. are all representatives of Ethereum applications. These applications eliminate chaos, generate order, and create a stable environment for other programs to use.
These order-creating applications grow linearly, and domains with stable environments grow exponentially for use.
Various possible combinations exist for various applications, and the number of permutations of combinations grows dramatically, approaching infinity, and complex adaptive systems begin to dominate.
Ethereum is the tree that generates trust
Many plants in the world can push humans to carry out their commands. During the agricultural revolution, plants produced food that was beneficial to humans. Plants that can obtain external energy allowed humans to put down bows and spears, maintain power at all times, and serve the survival of plants.
Plants produce what humans want, and humans give up other tasks in order to grow plants, because the survival and abundance of crops bring life and prosperity to farmers.
Wheat, coffee, tobacco, corn, any crop is an organism that produces something that makes the crop very valuable. Because this crop is so precious, humans have worked so hard to provide the perfect conditions for the plant to thrive. We want to make sure it gets enough water (not too much), enough sun (not overheated!) and enough nutrients (not over fertilized). We have invented insecticides that do not harm plants. We buy more land, plant more plants on it, then find ways to increase the crop yield per unit area, and repeat the process.
From the perspective of evolutionary success, plants that can meet human needs are the most successful organisms in the world.
These plants outsource the duties of replication and dispersal to humans. Plants, while lacking brains, have enabled generations of humans to use their intellect to figure out how best to make them grow and reproduce.
Plants don't have to do any work to spread and replicate their DNA because humans do it for them. It has to be said that this is a very clever strategy for plants to produce things that are valuable to humans and give humans the motivation to complete the reproduction and spread of species.
Wheat produces carbohydrates. Coffee produces caffeine. Sugar cane produces sugar. Tobacco produces nicotine.
Ethereum can generate trust
The essence of the cryptocurrency economic system is to generate a trustless infrastructure and coordinate the work of all parties as the basis for establishing trust between two or more parties.
Trust is the fruit of the Ethereum tree, and we need it badly.
Food and economic crops allow humans to focus on maintaining their survival. Ethereum is like these crops, which are slowly attracting all human beings, helping it develop, and protecting it, because the fruits of trust borne by the Ethereum tree are so precious.
The agricultural revolution resulted in explosive population growth, and the ability to specialize in labor has been greatly improved. Likewise, the trust revolution will bring equally unimaginable improvements in human health and proliferation.
The trust revolution begins with nurturing the Ethereum tree that yields the fruits of trust.
tree of trust
All the preceding foreshadowing is to explain how Ethereum has developed into an ecosystem.
After the early original foundation is completed, new branches will be derived as time goes by. If the branch develops well, the system is kept, otherwise it is neglected and phased out.
The ERC20 standard protocol is based on the first protocol of Ethereum, which has become an unbreakable key structural support for almost the entire Ethereum.
In 2017, Ethereum ushered in the ICO boom, and this emerging platform gave birth to thousands of new tokens. That year, Ethereum had various resources, so these projects were able to develop. Ethereum is like a tree, which has obtained unlimited sunlight, water and nutrients, and generated 1000 new leaves (new tokens) from the ERC20 protocol.
In 2018, all kinds of resources were exhausted, and 95% of the token projects born in 2017 failed. Ethereum has not built a stable enough foundation to host all these new projects, and many projects are not developed enough to give enough value back to Ethereum.
In this case, "creatures" with antifragility like Ethereum will play to their full advantage.
Ethereum reduces resource consumption and prepares for the cold winter.
2018 and 2019 have been a long winter for Ethereum. In the past two years, almost no resources have entered this ecosystem, forcing Ethereum to reduce resource consumption and use resources for core operations. When the human body has no energy, it will appear
Hypothermia, too, is when plants are deprived of energy and divert resources to maintaining core functions. In the case of insufficient resources for a long time, the "creature" of Ethereum will integrate resources and improve efficiency.
The impact of the bear market has rippled through every project. Even high-quality programs like Nexus Mutual were underfunded and nearly failed. If the necessary resources cannot be absorbed, the plants with the strongest survivability will also wither. Therefore, the creatures will continue to reduce the consumption of resources and wait for the emergence of new resources. This situation will continue until they die.
In the summer of 2020, DeFi brought a wave of new resources to the Ethereum system, and the Ethereum tree also ushered in a long period of new additions. After the inflow of capital, new projects were established one after another.
Most importantly, those projects that survived the 2018-2019 bear market became the foundation to support this new growth. Under resource-scarce conditions, these projects have found ways to evolve to become very lean, unified, and efficient, able to maximize the value of new resources injected into the Ethereum ecosystem.
Uniswap, which first appeared in 2018, is one of the few projects that can develop during the bear market period of 2018-19. In times of difficulty and lack of new resources, if a new project can still achieve development, it will have great potential for development during the bull market.
In the case of Ethereum's lack of resources, the transaction volume of Uniswap has surpassed that of Coinbase.
As infrastructure, Uniswap underpins the new growth of ERC 20 standard tokens. It is one of the most efficient projects on Ethereum because it creates ample room for further growth. Soon, Uniswap became a thriving and stable part of Ethereum's internal circulation system, providing the basis for the emergence of many new projects.
The birth of Uniswap relied on the stable structure of ERC 20 tokens, and produced its own stable and reliable structure, which now maintains the development of many new projects in the Ethereum ecosystem.
Modular structure
There are numerous applications in the DeFi ecosystem, each with its own weaknesses, strengths, and security.
Uniswap, MakerDAO, Compound, Aave, Curve, Synthestix, Balancer, and Yearn all provide varying degrees of foundation upon which other projects can build.
It is worth noting that many people are following the development of MakerDAO. The assets behind DAI are increasingly centralized, making the MakerDAO project potentially more fragile than ideal.
If MakerDAO fails, other projects based on MakerDAO will also fail. If the foundations fall, everything falls apart. This is of course bad for Ethereum. However, even the most rudimentary gardener knows that plants can repair themselves over time.
This is demonstrated with Aave and Compound—two redundant copies of similar scaffolding. We already see this with Aave and Compound—two redundant copies of similar scaffolding. ). While MakerDAO continues to dominate the decentralized stablecoin space, a new crop of startups are building their own decentralized stablecoins to underpin Ethereum: RAI, Empty Set Dollar, and Dynamic Set Dollar.
I don't know if you still remember the following table:
Anti-fragile redundancy is at the core of all life, and multiple DeFi applications with the same function have produced a diverse ecosystem, providing a healthy network in which products are both interdependent and to a certain extent independent of each other.
Ethereum is growing into a whole mesh network like a branch, developing steadily on the root of the plant. The denser the mesh network, the stronger and more stable it is, and the easier it is for DeFi to support the development of the world economy.
Ethereum is the root, DeFi is the leaf
Chinese bamboo is one of the fastest growing trees in the world and can grow up to 80 feet in just six weeks!
How is this possible? The answer is that these 6 weeks are just a period of externalization of the plant's growth process, which is actually only a small part of the bamboo's overall growth process. In fact, the roots of bamboo need to develop in the ground for 5 years to have such amazing growth ability.
During a five-year "dormant" period, plants continue to develop their nutrient collection and recycling systems. Then, when conditions are right, the plant grows 80 feet tall in just six weeks, making up for a five-year gap in growth.
2017-2018 has been dubbed the “Cryptocurrency Winter”, and there is a reason behind it. This cold winter started in 2018 and ended in early 2020, which is very long. During these 30 months, the cryptocurrency economic system has integrated resources and reduced waste in order to maintain its survival.
Miners leave, funds go bankrupt, and projects shut down.
But one thing has been going on all the time: new developments in Eth2 and structural improvements in Eth1x. During the cryptocurrency winter, Ethereum's roots seemed unaffected by resource shortages, and instead grew into a massive network capable of parallel development, growing continuously. (see Vitalik roadmap).
With the launch and launch of Phase 0, the arrival of EIP1559, the Rollup ecosystem is taking its final shape, and the foundations of Ethereum's economic foundation seem to be as anti-fragile and reliable as we have expected before.
At the same time, the overall environment of the cryptocurrency economy has begun to improve, and the public has also generated new interest in Ethereum, which is injecting new resources into the ecosystem at an unprecedented speed.
Ethereum is entering its growth phase. Judging from the current situation, the conditions are very favorable. The pace of development of new DeFi projects on Ethereum is mind-boggling.
The root of the Ethereum tree lies in its value
Ethereum is designed around a specific set of values, and importantly, it does not accept any concessions in terms of value expression, and maximizes these values.
The value of Ethereum is the same as that explained by the Protocol Sink theory:
1. Permissionless, open
2. Censorship Resistance
3. Credit neutral
4. Decentralization
These values distinguish private products from public goods. The fundamental reason for the existence of the cryptocurrency industry is to produce currency and financial public goods for the whole world to share.
The development of the industry can be described by a formula:
Censorship resistance + openness + neutrality + decentralization + [App] = extremely valuable global public goods
For ease of understanding, the formula can also be simplified to:
No need to trust + [App] = ?
The following are the public goods currently produced by this formula
If you develop a trustless application, then this program is very consistent with the concept of Protocol Sink and the value of Ethereum.
Synergies arise when applications on Ethereum are able to align with the design philosophy of Ethereum itself.
When an Ethereum application is located at the bottom of the Protocol Sink, similar to the Ethereum protocol, this application will naturally be well compatible and supported by other programs in the Ethereum ecosystem. In this case, the trustless application will be at the core of the Ethereum tree and will have priority access to various resources of Ethereum. The closer an application is to the core of Ethereum, the easier it is to develop. This is a very understandable truth.
If an application can do without trust, it can easily obtain Ethereum resources.
Ethereum users will look at the app and ask "Can I get my money back the way I want?"
For trustless applications, the answer is always yes. Such programs tend to receive large amounts of funds deposited into the contract.
It is this type of program that drives the development of the Ethereum tree.
Ethereum scales out its own application layer with trustless applications.
Uniswap is at the application layer of Ethereum, but is very similar to Ethereum itself. This similarity between Uniswap and Ethereum is the reason why Uniswap can thrive in the cold winter of cryptocurrency, and it also explains why Uniswap can quickly branch from the Ethereum tree in the early days to achieve stable development. Uniswap is like a ground branch growing from the core of the Ethereum tree.
Ethereum hopes to express its own value through the application layer, and to show value in the real world by fully realizing trustless applications. After all, Eth2 developers have spent years perfecting Ethereum 2.0's unrestricted, trustless features. The reason this is so important is that for applications, the degree to which trustlessness can be achieved is limited by the Ethereum base layer.
DeFi is a single superstructure composed of many financial applications. DeFi applications are "money Lego", and all applications have an inseparable appeal. What's the point of these standalone "currency LEGOs"?
Ethereum developers seem to be particularly interested in the following two areas:
1. Develop new applications.
2. Combine different applications together. (but this is actually subordinate to the first aspect)
Therefore, all DeFi applications are developing towards a single application super structure, which is called "Ethereum".
When an application such as Uniswap is added to the super structure, it can trust other programs in the structure. After an application like Uniswap exists, it will help other applications to enhance trustlessness, because if they need exchange functions, they can simply add Uniswap to it.
The number of trustless applications on Ethereum continues to grow, and it is getting easier to build more trustless applications because more trustless tools are available to developers.
To use the metaphor of a plant to describe this, trustless is the wooden structure of the Ethereum tree. After the Ethereum superstructure becomes more trustless, the Ethereum tree will become stronger, the trunk will become longer, and its wooden structure will grow more efficiently, which can accommodate more DeFi projects.
The cold winter of the cryptocurrency economy has finally passed, and Ethereum has formed a circular structure. With this structure, DeFi projects can be generated and maintained, and through these projects, Ethereum can obtain new resources.
The full spectrum of value in Ethereum
Any type of financial activity can be carried out on Ethereum, which is the biggest advantage of Ethereum. The Ethereum protocol itself is designed to support all activities to the greatest extent, so various activities are possible to implement in the protocol.
Some people want to create products on Ethereum that don't require maximum trust. For example, tokenized securities, real-world assets, permissioned walled gardens.
Whether it requires trust or not, these products are very useful.
Although we believe that this product does not comply with the Protocol Sink theory, there is no rule that requires programs developed on Ethereum to comply with this theory. The theory simply suggests that applications that can build trust are easier to develop in the Ethereum ecosystem, and projects of all kinds tend to be attracted to the base layer of the protocol.
With this in mind, even if the Protocol Sink theory exists, it is possible to find great value beyond the base layer.
Just like a tree, the wood structure is more stable closer to the roots, but on the branches of the tree, there are green leaves that absorb sunlight, both of which are essential for the healthy growth of the tree.
3. Rarible
4. dYdx
Ethereum is like a wooden base, capable of absorbing resources, and DeFi projects are like green leaves on a tree branch, creating value. Centralized projects on Ethereum are easier to develop than trustless projects, but from an Ethereum perspective, growth in the number of projects can bring benefits. Many centralized products only need the support of a few decentralized projects. In general, centralized products can bring the most extensive application layer to Ethereum in the future.
Some Ethereum applications, although centralized products that require permission, capture huge value for the entire ecosystem, such as:
1. Circle’s USDC
5. Monolith's Visa bank card
establish trust
All of these are centralized products and services brought about by Ethereum applications, introducing various economic activities. These products and services are capturing value for the entire ecosystem, and users can freely choose not to use them and return to trustless applications in the Ethereum ecosystem.
Centralized products and services have the ability to self-reinforce over time, as it is a good development strategy to combine with trustless applications, to resist attacks, or to build trust in Protocol Sink theory when the former becomes more popular , increasing the number while maintaining a certain degree of centralization.
The Ethereum tree is going in many directions!
establish trust
Today, trust in institutions is at an all-time low, and people have recently discovered that the product that Ethereum produces is trust.
According to the Fourth Turning Theory, we are in an environment of low order maintenance and a high need for order today.
Summarize
You may be as pessimistic as I am about the ability of American democracy to create a better future through "elections", because the wave trend shown in the graph above does not seem to provide strong proof. I am personally more optimistic that the need for order can be met by establishing alternative institutions to the current normal functioning human governance system.
But what other institutions can help humans better establish order and maintain stability? Big corporations in Silicon Valley? It seems like a dystopian idea.
How will the market meet our need for order in real life in the future? What will fill this need in the future?
Summarize
Ethereum is a cryptocurrency economic system, and the outcome is trust. The more Ethereum is developed and utilized, the more it creates trust in the world.
