Intensive reading and analysis of V God's new book "Proof of Stake" (5)

The first part of the book - pre-miningBook chapter

The first part of the book - pre-mining

abstract

abstract

• Smart contracts can be executed automatically without any human intervention or participation. People form a "decentralized autonomous organization" similar to Skynet, which lives entirely on the cloud, but controls powerful financial resources and can motivate people to do things in the physical world. Very real thing, decentralized "math-based laws", and the seemingly utopian quest to create some kind of completely trustless society.

• The concept of smart contracts has a history of several decades. Taking vending machines as an example, the realization principle of smart contracts is explained from the perspective of software and hardware.

• Intelligent management can be realized in many fields, including building access, car rental, human resources card application, etc.

• The main promise of de facto money (Bitcoin, etc.) lies in its perfect combination with smart contracts, which can be done in a variety of smart ways, and smart contracts are very effective for any type of financial application.

• Translator's point of view

Translator's point of view

• Vitalik mentioned that smart contracts are very effective for any type of financial application. It can be said that the narrative has developed according to the established trajectory. Five years later, the first major innovation appeared, namely DeFi (decentralized finance). This narrative and innovation is far from over, and it is likely to develop in the direction of combining with the real physical world. Judge as a service may seize a certain amount of market heat and create value. You can focus on the application associated with real-world assets—Centrifuge. This project is combined with Maker Dao, Aave, and Polkadot. It has a lot of room for imagination. However, technological development, governance models, and compliance still need to be continuously iterated and polished. What When it can explode is unknown.

• The strong combination of Bitcoin and Ethereum still has a lot of room for development. At present, the degree of decentralization and security of packaged cross-chain projects such as WBTC and renBTC cannot meet people's needs. There is an urgent need for some more credible and secure BTC cross-chain projects, decentralized BTC cross-chain projects based on polkadot and cosmos The chain project interlay deserves attention. If the integration of BTC with ethereum, polkadot and cosmos can be strengthened, it will also generate great value.

• Brief translation of the content (the order has been adjusted, and the content has been deleted)

Brief translation of the content (the order has been adjusted, and the content has been deleted)

Many of the concepts we promote in Ethereum land can seem very futuristic at times, and maybe even scary. We talk about so-called "smart contracts" that execute automatically without any human intervention or involvement, people forming Skynet-like "decentralized autonomous organizations" that live entirely on the cloud but control powerful financial resources and can incentivize People doing very real things in the physical world, decentralized "math-based laws", and the seemingly utopian quest to create some kind of completely trustless society. For uninformed users, especially those who haven't even heard of Bitcoin, it can be hard to see how these things are possible, and why they might be worth doing (if at all). The purpose of this series of articles is to dissect these ideas in detail and show exactly what we mean by each one, discussing its properties, strengths, and limitations.

The first part of the series will discuss so-called smart contracts. Smart contracts are an idea that has been around for decades, given its current name by Nick Szabo in 2005, and first brought to the attention of the (cryptographer-inclined) public. Essentially, the definition of a smart contract is simple: a smart contract is a self-executing contract. That is, while a regular contract is a piece of paper (or, more recently, a PDF document) containing text that implicitly requires a judge to order one party to send money (or other property) to the other under certain conditions, a smart contract is one that operates on A set of computer programs on a range of hardware that supports automatic execution. Nick Szabo uses vending machines as an example:

A typical real-life example, which we can think of as the prototype of a smart contract, is the humble vending machine. Within a finite range of potential losses (the amount at the cash register should be less than the cost of breaking the mechanism), the machine receives the coins and, through a simple mechanism, an entry-level computer science problem, finite automatic execution, dispenses change based on the displayed price and products. A vending machine is a contract with a transfer function: anyone with coins can trade with a vendor. Bins and other security mechanisms protect stored coins and goods from attack, allowing for ample profit margins and ensuring wider deployment.

Many things can be used in various applications through the concept of smart contracts. We could have smart financial contracts that automatically shuffle cards based on specific formulas and conditions, smart domain name sales orders that give domain names to whoever sends $200 first, maybe even smart insurance contracts that take control of bank accounts and pay automatically, based on some trusted A source (or combination of sources) provides data about real-world events.

• intellectual property

At this point, however, an obvious question arises: how will these contracts be enforced? Just like traditional contracts, which are only on paper until a judge upholds enforcement, smart contracts need to be "plugged" into a system in order to actually do things. The most obvious and oldest solution is (via) hardware, an idea also known as "smart property". Nick Szabo's vending machines are a prime example. Inside the vending machine, there is a prototype smart contract that contains a set of computer codes.

The contract takes as input a button press and inserts a currency variable, and has as output a release of an item and a change command. All four are hardware dependent, although we focus on the last three since human input is generally considered a trivial problem. It would be useless if the contract was running on an Android phone from 2007, an Android phone wouldn't know how much money was stuffed into a slot, and certainly couldn't put out a Coca-Cola bottle, and couldn't give change. On the vending machine, on the other hand, the contract carries some "power", backed by the Coca-Cola holdings inside the vending machine and its physical security, preventing people from taking the Coca-Cola without obeying the rules of the contract. Another more futuristic application of smart property is car rental: imagine a world where everyone has their own private key on their smartphone and has a car, and when you pay a hundred dollars to some address, the car will automatically start responding to commands. The same principle can be applied to houses as well. If this sounds far-fetched, remember that office buildings are already largely smart property: access is controlled by access cards, and which door each card can go through, via a piece of code linked to a back-end database of. If a company has an HR system that automatically processes an employment contract and activates a new employee's access card, then that employment contract is somewhat of a smart contract.

• Smart money and the de facto society

However, physical property has a very limited role. Physical property has limited security, so even if you spend a lot of money, you can't do something very interesting with smart property. Ultimately, the most interesting contracts are transfers. How can we actually do this? Right now, we basically can't do that. In theory, we could feed our login details into our bank accounts and then have the contract send money under certain conditions, but the problem is that such contracts aren't really "self-enforcing". The party that signed the contract can always simply close the contract before payment is due, or drain their bank account, or even just change the account password. Ultimately, no matter how a contract is integrated into the system, someone can shut it down.

How can we solve this problem? The answer is that we need a new currency. So far, the evolution of money has gone through three stages: commodity money, commodity-backed money, and fiat money. Commodity money is simple: it is money of value because it is also a commodity with some "intrinsic" use value. Silver and gold are perfect examples, and in more traditional societies we also have tea, salt, shells, etc. Next comes commodity-backed currencies—bank-issued certificates that are valuable because they can be exchanged for gold. Finally, we have fiat currency, where God said "let there be light" but the federal government said "let there be money". The money has value primarily because the government that issued it accepts it as a payment for taxes and fees, as well as some legal perks. However, we have a new kind of currency: de facto currency. The difference between fiat money and de facto money is this: fiat money is produced and maintained by a government (or other type of institution), de facto money is just a balance sheet with some rules on how to update the balance sheet, and the funds Valid among the set of users who decide to accept it. Bitcoin is the first example, but there are many more. For example, there could be a nascent rule that only bitcoins from a certain "genesis transaction" count as part of the balance sheet, which are called "colored coins" and are also a de facto currency (unless those colored coins are fiat currency or commodity-backed).

In fact, the main promise of de facto money lies in its perfect integration with smart contracts. The main problem with smart contracts is execution: if a contract says to send $200 to Bob if X happens, and X does happen, how do we ensure that $200 is actually sent to Bob? The de facto money solution is very elegant: execute the contract, updating the current balance sheet. This is actually a very revolutionary development. Using de facto money, we create a contract that, based on how general law works, is valid and does not rely on any type of mechanism to enforce it. A hundred-dollar fine for littering? Then define a currency so that if you litter, you lose a hundred dollars. Now, this particular example is very far-fetched, and likely impractical without some major caveats, which we'll discuss below, but it shows the general principle, and there are many more benign examples of this principle, absolutely can be put into practice.

• How Smart Are Smart Contracts?

Smart contracts are obviously very efficient for any kind of financial application, or more generally for an exchange between two different assets. An example is domain name sales, a domain like google.com is a de facto asset because it is backed by a database on a server, it has any importance because we accept it, and money can obviously be a de facto as well. Currently, selling a domain name is a complicated process that usually requires specialized services; in the future, you may be able to package the sales offer into a smart contract and put it on the blockchain. If someone takes it, both parties to the transaction will automatically carry out the transaction - does not exist Potential for Fraud. Going back to the currency world, decentralized exchanges are another example. We can also do financial contracts such as hedging and leveraged transactions. However, there are places where smart contracts are not so good. For example, consider the case of an employment contract: A agrees to perform some task for B in exchange for payment of x units of currency C. The payment part is easily smart contracted. However, there's one part that's not that easy: verifying that the work actually happened. This is nearly impossible if the work is in the physical world, since the blockchain doesn't have any way of accessing the physical world. Even through websites, there is still the problem of assessment quality, and while computer programs can use machine learning algorithms to judge these characteristics very effectively in some cases, it is difficult to do this in public contracts. Not good enough.

Fortunately, there is a compromise solution that offers the best of both worlds: referees. Basically, there is unlimited power to do whatever they want, and the process of judging does not have a particularly good interface; people need to write a series of documents, wait for a long time before the trial, and the judge will finally make a decision and be enforced by the legal system. Not a paragon of high efficiency. Private arbitration is often cheaper and faster than court, but even then, problems remain. Judges in the de facto world, on the other hand, are very different. Referees can simply be embedded in any contract in any way desired, whether judging the truth or falsity of a particular fact, providing a measure of some variable.

background supplement

background supplement

What is a smart contract? (English: Smart Contract)

blockchainblockchainIt is used when making a contract, which contains code functions (Function), and can also interact with other contracts, make decisions, store data, and send Ethereum and other functions. Smart contracts provide verification and execution of the conditions stipulated in the contract. Smart contracts allow for trusted transactions without third parties. These transactions are traceable and irreversible. The concept of smart contracts was developed in 1994 by a scholar who is also a computer scientist and an expert in cryptographyNick Szabotransaction costtransaction cost。

What is DeFi? (English: Decentralized finance)

blockchainblockchainon finance, it does not depend onexchange、exchangeorbanksmart contractsmart contractEthereumEthereum) for financial activities. DeFi platforms allow people to lend or borrow funds to others[2]cryptocurrencycryptocurrency, and earn in a savings-like accountInterest. As of October 2020, over $11 billion was deposited into various decentralized finance protocols. As of the end of June 2021, the DeFi market size was less than $48 billion, a 45% drop compared to May 2021 data. As of the end of August 2021, more than 150 billion has been deposited into various decentralized financial agreements.