Partnered With:

The ability to describe the world with Token will be the most important ability

Read this article in 29 Minutes

The appearance of the blockchain at each stage of development is the residual model of its purposefulness.

Original title: "District The purposefulness of the block chain: Pool is the basic organizational form of the world on the chain"

Original source: Mechanical Clock

DeFi protocols are emerging in a blowout style. Although their functions are different, many protocols are designed differently There are some commonalities, and I think about these commonalities, trying to find the embodiment of "purposefulness" on the blockchain.

This article is divided into four parts. The first part discusses the purposefulness; the next three parts discuss the following three thoughts:

< br>

The basic organizational form of the blockchain world is pool.
Blockchain native applications: flash loan, (mint, burn), (token(+), token(-)).
The species in the blockchain world is token.
Blockchain protocols: standards, applications, plug-ins.

The "Purpose" of Blockchain

" Darwin's theory of evolution points out that evolution is not a kind of high and higher, good and good spontaneous ascent process, but such a phenomenon: life forms in which The spontaneous tendency of multidirectional development and the tendency of maintaining one's own ancestral pattern.The combination of these two effects eradicates the messy development in nature, and at the same time eliminates those by the process of natural selection An organism that cannot adapt to its surroundings.

The result of this eradication is how many residual patterns of life forms that are able to adapt to their surroundings are left. This residual pattern is An expression of the purposiveness of everything." (Quoted from "The Usefulness of Human Beings", Norbert Wiener)

This means that human beings are not the best life form that the earth can evolve, and human beings can only advance along the path of seeking their own purpose; not only human beings, but also all life forms; not only life forms , technology, including blockchain. ("What Technology Wants" discusses the purposefulness of technological evolution)

The ancestral model of the blockchain is in the bit It is determined when the first block is dug out. No matter what our expectations for the blockchain are, no matter what design and construction we do on it, it will and will only seek its own purpose. Things with a purpose will last for a long time, and things without a purpose will only appear temporarily. The appearance of the blockchain at each stage of development is its purposeful residual mode.

We have no way of knowing the purpose of the blockchain itself, but we can try to find some things that are suitable for the purpose by observing the remaining patterns Or some elements related to purposefulness, and then try to find some theoretical support for them. Its significance lies in that purposefulness represents the direction of development or evolution with a higher success rate, which can be used as an important guide for our actions.

The basic organizational form of the blockchain world is pool

< p>Phenomenon: In the field of transactions, it is the transaction pool that succeeds on the chain, although the order book is more in line with user habits; in the field of lending, the successful It is a loan pool; in the field of synthetic assets, there is a debt pool of Synthetix, in the field of derivatives, there is an option trading pool of Hegic , and a perpetual contract trading pool adopted by multiple protocols but with different implementations. Two domains have yet to come out that can be considered successful designs, but the pool-based model seems to have more innovative possibilities.

It is difficult to describe this phenomenon by chance. If you jump out of DeFi, you will find that the computing power that makes the blockchain work is also organized in a pool , which we call a mining pool.

Thinking: The blockchain is point-to-point, how to organize the points? Converging points into pools is a way. What are the characteristics of this method?

Take borrowing as an example. If one lender has 10 million and the other lender has 10,000, in the traditional organizational structure, the party with 10 million can easily use its own capital advantage to establish a monopoly, such as lowering interest rates so that the other lender’s capital utilization rate becomes lower. Low, and even squeeze the other party out of the market.

But in the pool model, 10,000 and 10,000,000 are fair, the capital utilization rate of 10,000 is the same as that of 10,000,000 It is one-thousandth of the income of 100 million. Even if you have 100 billion, you will not be able to gain additional advantages because of 100 billion, which is impossible in the traditional organizational structure.

The pool seems to be an organizational form suitable for the decentralized world, it It has the characteristics of eliminating centralized monopoly. In the off-chain world, it is the relationship between peers and big peers; in the on-chain world, it is the relationship between peers and pools, and the difference between peers is smoothed out.

Furthermore, pools are a loose form of organization, and points themselves can flow unfettered from one pool to another, which can be very Elimination pools rely on their own advantages to create additional fences that impede flow, thereby further expanding their own advantages, thereby forming and benefiting from centralization.

If the ancestral model of the blockchain has a peer-to-peer, decentralized part, the pool may be a purposeful evolutionary direction.

Divergent Thinking:

1. The pool is easier to deal with homogeneous objects and more difficult to deal with non-homogeneous objects (difficult to price), which is one of the reasons why the pool model has not yet achieved an absolute advantage in the field of derivatives.

Maybe there are two directions. One direction is refinement, that is, to classify a non-homogeneous object into several homogeneous objects, or to further divide non-homogeneous objects into homogeneous parts and non-homogeneous parts; one direction is passivation , that is, treat non-homogeneous objects as homogeneous objects through complex pricing algorithms.

2. NFT represents a non-homogeneous object. If there is a breakthrough new method in the NFT transaction field, then the homogeneous object will be handed over to Pool, non-homogeneous objects are handed over to this new method. But there is no way in sight that might take on this burden. The breakthrough may come from the evolution of the traditional NFT field, or from the demand push in the DeFi field.

Personally, I don’t like to mention the NFT field and limit it to NFT trading, NFT Represents not some hype target, it is the expression of non-homogeneous objects in the world on the chain. Compared to DeFi , the prosperity of DeFi is that many different protocols have different ways of playing. We can't imagine that the difference between different DEX is that they have different coins, and this is almost the status quo of NFT.

Flow takes NFT as a resource in the design of the chain, and resource-oriented programming can support the operability of NFT and the interaction between NFT This idea is different from the protocol interaction in DeFi . Can this idea become a breakthrough in the ecological evolution of NFT? However, the implementation of Flow depends on the underlying design of the chain itself. I don't know if it can be realized on other public chains with the help of the NFT standard formulation.

3. If the development of NFT is based on the innovation of NFT technology, it will be an output from the chain to the outside of the chain; if the development of NFT is limited to NFT sales , which is actually dumping from outside the chain to the chain.

4. The order book is more in line with trading habits, but a successful order book in the future may encapsulate a layer of orders on top of AMM realized in the form of a book.

5. The pool has its shortcomings, and there are various protocols that improve these shortcomings in different ways, but what I am thinking is whether some shortcomings are the inability to get the essence The physical improvement means that if you accept its advantages, you must accept its disadvantages at the same time.

Just like in the real world, we need to rely on centralized trust, and at the same time bear the problems caused by centralization; now we want to go to the center If you want to be trustless, you have to bear the problems caused by decentralization at the same time.

Native applications: lightning loan, (mint, burn), (+token(), -token())

Phenomenon: What is the native application of blockchain is a topic of great concern. Because native applications represent new and imaginative ones. In addition, native applications are new things evolved in the blockchain environment, and clues related to the suitability of blockchains may be found from them. I currently see three kinds of native applications, namely Lightning Loan, (mint, burn), (+token(), -token()).

Flash Loan:

Everyone is familiar with flash loans, I also wrote The article "Flash Loan: The Most Magical Building Block of DeFi Lego" will not be expanded here .

(mint, burn):

(mint, burn) refers to minting new tokens in a transaction or a series of transactions, and destroying these tokens before the end of the transaction.

For example, in Bancor v2.1, users only need to provide one-sided liquidity, and the other side is to mint new BNT to form a transaction pair. If the user withdraws Liquidity, destroy the corresponding BNT ; cross-chain is also a (mint, burn) process, when crossing out, the standard tokens of the chain are minted on the target chain, and these tokens are destroyed on the target chain when they return; lightning casting It is an extreme (mint, burn) application whose function is to mint and destroy any token in a transaction.

In the (mint, burn) application, minting token is not for adding wealth, nor will it add wealth, it is Use token as an intermediary or tool to reduce friction or achieve other purposes.

I personally feel that the generation of synthetic tokens through collateral is also in a broad sense (mint, burn), such as Yield’s fixed-income token fyToken, Opyn ; the option token oToken and so on. Instead of simply using a contract to guarantee that the token will be destroyed after being minted, they also use collateral to ensure that the destruction will occur.

From this point of view, the role of (mint, burn) is not only to create a temporary tool, but also an important way to create new types of tokens .

(+token(), -token()):

In the fixed-rate lending agreement Notional , the borrower and the market maker can generate a positive fCash and a negative fCash , and a positive fCash It represents assets, which can be exchanged for one currency unit at maturity; negative fCash represents debt, and one currency unit needs to be provided at maturity.

In the option agreement AntiMatter , the market maker mortgage assets can generate a Value (long) and a Value (short) of a certain token, Value ( long) represents perpetual bullishness, and Value(short) represents perpetual bearishness.

In the insurance agreement Cover , participants can generate a CLAIM The insured party, CLAIM is the redemption certificate for claims that have occurred; the holder of NOCLAIM sold CLAIM is the insurer, and NOCLAIM is the redemption certificate for claims that have not occurred.

The above are all examples of (+token(), -token()), which refers to generating both positive and negative tokens at the same time, representing a The two opposite directions of things, the sum of positive token and negative token is constant. (+token(), -token()) are suitable for tokenizing financial scenarios where there is a certain opposition.

Thinking: I try to find common or something in common, but failed. There are only a few possible derivations as follows.

1. Symmetry: All three applications above exhibit symmetry, or Integrity? Borrow and return, mint and burn, positive token and negative token. This symmetry guarantees the rights and interests of all participants, but this is difficult to achieve in the real world, or requires a high price to achieve, such as relying on trust and laws. But blockchain can achieve symmetry naturally through code.

2. Creation out of nothing: Reality cannot be nested, so "Inception In "Space", the dreamer can only nest dreams, but the code can be nested. We use code to build a world A, and world B can be nested in world A. In world B, we can create something out of nothing, as long as we don’t bring back the matter in world B when we return to world A, and keep the conservation of world A. Flash loans and narrowly defined (mint, burn) both mean something out of nothing.

Going one step further, we can do things out of nothing in world B, so can we do more things, including breaking the rules of the original world?

3. The most basic and important native application of blockchain is token: Coinless blockchains used to be a topic of discussion, but the topic is out today. With the development of DeFi , we can see more and more clearly that token is the most basic and important native application on the blockchain.

Token is no longer just a project token issued, representing some kind of rights and interests related to the project, it is a tool/product, we are through The tokenization of financial products can realize the reconstruction of a financial system in DeFi . In a broad sense (mint, burn) and (+token(), -token()), both are the embodiment of token as a tool/product.

The tokenization of financial products may include two design goals, one is to realize the functions of the original financial products through tokens, and the other is to make the token is more suitable for the blockchain environment, for example, it is easier to operate in the form of a "pool", in other words, it is to achieve financial functions in a way that fits the purpose of the blockchain. The latter design makes DeFi not just as simple as moving traditional financial things to the blockchain, it makes DeFi a brand new financial system.

4. The species in the blockchain world is token: token (including NFT) It is the smallest subject on the blockchain, and it is the concept of species in the blockchain world. Creating a new type of token is creating a new species. The "biological diversity" of the chain ecology comes from this, and evolution takes place here. If you observe the development of DeFi , you will find that the creation of new types of tokens is indeed where there is the most innovation and the most proven innovations.

DeFi is still in the early stage of the explosion of species, the most important thing for the entire ecology is the continuous emergence of new types of tokens; after this stage , is the long evolution of the self of the token type (species) that has not been eliminated.

Divergent Thinking:

1. The ability to describe the world with token will be the most important ability.

2. If sending a token does not solve the problem, send another one. This was a kind of ridicule in the past, but now it may be a desirable idea to disassemble a complex object into multiple manageable objects, or disassemble an object into multiple components we need.

(+token(), -token()) is a typical disassembly method, and there are other disassembly methods. For example, Lien disassembles a token representing an asset into a part of SBT for stable assets and a part of LBT for volatile assets.

Blockchain protocols: standards, applications, plug-ins

< p>Phenomenon: At present, there seem to be three types of agreements, namely standards, applications, and plug-ins. Applications are the most common, and most protocols are applications; standards are relatively rare, and they formulate some kind of standard or implement some kind of core logic, such as Opium, which makes standards related to derivatives, so there will be a series of related products around it, Such as credit default swap products, zero strike price option products and so on.

Plug-in protocols or protocols with plug-in functions have recently begun to increase. They are a layer above other protocols and provide additional functions for other protocols. For example, RateLock on top of MakerDAO , provides users with fixed-rate loans; Peanut on top of DEX , reduces slippage for users.

Different protocol types give the DeFi ecology more layers, which not only contributes to the prosperity of the system, but also contributes to the robustness of the system. Different protocol types also allow the development team to only focus on their core business or the business they are best at, and focus is crucial to the development of a DeFi protocol.

Divergent thinking:DeFi is still in the earliest stage of rapid innovation and rapid development , for the vast majority of DeFi protocols, they were outdated the moment they were born. The DeFi protocol needs to continue to develop, even if it has seized the opportunity, it will only fall behind if it stays where it is.

The team is the guarantee for the sustainable development of the agreement, not only the team's innovation and engineering capabilities, but also the team's morality and quality, which determines whether they are right The agreement has a sense of responsibility, whether it has the ability to focus, and so on.

I personally don't like a protocol or a team doing several things with different core logic at the same time, or doing multiple things related to a certain topic on the surface products, but in fact a certain theme is not the core logic of these various products, and the design logics of the products are actually quite different. Doing multiple products at the same time means falling behind on multiple products at the same time.

Conclusion:

In the article, multiple items are mentioned for example, which does not mean that Projects are worth investing in, and some of them have even been considered failures for reasons other than technology.

In 2019 , I will discuss with my friends whether the blockchain is a false proposition. I remember that we said that even if it has only a 20% possibility, Also worth the leap. At that stage, the most frequently asked questions were related to what blockchain is, the purpose of learning and research, and also to understand what blockchain is.

In 2021 , the 20% possibility becomes maybe 80% or even greater. What became what the blockchain wanted. And writing this article, I hope to sort out my understanding of what the blockchain wants so far. If you are also interested in this topic, welcome to discuss together.

Just today when I finished writing the above text, I heard Mr. Cheng Xianfeng talk about what he thinks the blockchain is and what it will be used for. A much wider picture than what we see now. The question of what a blockchain is still needs to be continued.

(The picture in this article is the work of Richard Allen)