Thoughts after reading "The Biography of Musk": My first principles thinking about the blockchain industry

Article author @hicaptainz

Since reading the new version of "The Biography of Musk", I have begun to try to think about the blockchain industry from first principles, and finally formed my own thinking framework recently.

1. The blockchain system is a distributed system that achieves decentralization through a multi-center architecture.
2. The efficiency of the centralized system is the highest, but it lacks fairness. Decentralized systems are relatively fair, but relatively inefficient. There is no system that is both efficient and fair, and a tradeoff is required.
3. Whether to pay more attention to efficiency or fairness depends on a person’s world view and reality. People in the blockchain industry pay more attention to fairness from a world view, so decentralizing a certain subsystem is a “correct world view” (I hesitate to use the term "political correctness").
4. The digital content itself is physically fungible, but the blockchain system makes the digital content nonfungible by adding sequences, which is the essence of realizing the rights confirmation of digital content.
5. The blockchain system is multi-center, and multiple centers are fungible to each other, so there is no authorization problem. This is the permissionless nature of the blockchain.
6. Composability is not unique to the blockchain industry. Any Internet industry can provide a certain degree of composability by providing API interfaces. However, dAPPs built on the blockchain have a higher degree of composability. The reasons are: first, dAPPs are almost all open source, and second, a blockchain is similar to a global virtual server. All dAPPs using the same blockchain system run on the same server, while apps on the ordinary Internet run on different servers. Apps running on the same "virtual server" naturally have higher reliability. Combinatoriality.
7. The blocks of the blockchain record the status of different addresses. This is essentially an accounting system. Since accounting, there needs to be an accounting person (miner). Regardless of the accounting consensus (POW or POS), machines are required to record accounts, and machines require real funds to purchase and maintain, which incurs costs. Therefore, the blockchain system requires an "accounting voucher (cryptocurrency)" to reward the accountant and make it valuable. This is why cryptocurrencies must exist. If there is no "accounting voucher (cryptocurrency)", there must be an entity with super rights to force or motivate the accountants. At this time, the entire blockchain system loses the advantage of decentralization and violates the rules of the blockchain. The “world view of the chain industry is correct”.
8. Blockchain technology can be combined with many specific industries. At this time, there are two combination methods: the first is to issue coins, and the second is to use smart contracts to write industry rules into smart contracts and store them in the blockchain virtual server. The purpose of issuing coins is to allow the coins to map certain rights (such as share rights) or functions (such as ticket functions) that exist in the industry. The purpose of using smart contracts is to avoid excessive centralization in the industry and achieve a fairer " The world view is correct." However, because of the permissionless and composability of the blockchain system dAPP itself, the industry is also encouraged to achieve permissionless and composability. In other words, it is to achieve a certain degree of "decentralization" by sacrificing certain efficiency, thereby achieving higher fairness, permissionlessness, and composability.
9. I don’t like the name Web3 because its definition is very far-fetched and self-brainwashing. In fact, the blockchain system is not an upgraded version of the Internet, it is just a complementary system to the Internet: the Internet is a typical centralized system, and the blockchain is a typical decentralized system. From the current understanding, there are still more people in this world who pay attention to efficiency. Estimating from the "28/20 rule", we can say that 80% of people in this world choose to use the Internet to achieve high efficiency, and the remaining 20% pay more attention to fairness. They look forward to getting a "world view" in the blockchain system. resonance".
10. All projects in the current blockchain industry are only doing two things: using coins and using smart contracts. Or in other words, how to use coins better and smart contracts better. For example, if you create a new chain (L1 or L2), it will be cheaper and faster to use coins and use smart contracts. For example, centralized exchanges promote currency liquidity by providing a place for trading. If it is a DEX, then simply write the trading rules into a smart contract and put it into the blockchain virtual machine. For example, if the GameFi project only does assets on the chain, it will map the assets in the game to coins. If it is a full-chain game, then simply write the game rules into a smart contract and put it in the blockchain virtual machine. For example, the SocialFi project, which only does assets on the chain, maps certain social assets to coins. If it is social on the chain, then simply write the social rules into smart contracts and put them in the blockchain virtual machine.
11. According to the current development history of the blockchain industry, an industry, combined with blockchain technology, always starts with the issuance of tokens to map rights. This period is often accompanied by the spiral rise and rapid decline of the Ponzi model. . Later, we transitioned to using smart contracts and putting them into the blockchain virtual machine to achieve decentralization and satisfy the "correct world view" in the industry. There is no industry that can directly skip the currency issuance stage and directly transition to the smart contract stage.
12. The blockchain system is an inefficient and fair distribution system. TPS has strong physical limitations, so this system will never replace the centralized system. For example, DeFi will never replace traditional centralized finance, and stablecoins will never replace it. Legal currencies and Web3 games can never replace traditional centralized games, and decentralized social networking can never replace centralized social platforms like Twitter and Facebook, but they can be useful supplements to centralized systems to satisfy the "remaining 20%" of people. The world view is correct." This conclusion comes from the first principles derivation of real physics.

The above thinking framework may be wrong and I will revise it at any time.