Article author: @hicaptainz
Since watching the new version of "The Musk Biography," I have started to use first principles thinking to consider the blockchain industry, and I have finally developed my own thinking framework recently.
The blockchain system is a distributed system that achieves decentralization through a multi-center architecture.
Centralized systems have the highest efficiency but lack fairness. Decentralized systems are relatively fair but less efficient. There is no system that has both high efficiency and good fairness. There is a tradeoff here.
Whether to focus more on efficiency or fairness depends on a person's worldview and real-life situation. People in the blockchain industry tend to prioritize fairness from a worldview perspective, so achieving decentralization of a subsystem is a kind of "worldview correctness" (I prefer not to use the term "politically correct").
Digital content itself is fungible in nature, but blockchain systems achieve the non-fungibility of digital content through a sequential approach, which is the essence of establishing ownership of digital content.
Blockchain systems are multi-centered, and multiple centers are fungible with each other, so there is no authorization issue. This is the essence of permissionlessness in blockchain.
Composability is not unique to the blockchain industry; any internet industry can provide a certain degree of composability through API interfaces. However, dApps built on the blockchain have a higher degree of composability for two reasons: first, dApps are almost always open source, and second, a blockchain is similar to a global virtual server, with all dApps using the same blockchain system running on the same server, while regular internet apps run on different servers. Apps running on the same "virtual server" naturally have higher composability.
The blockchain's block records the states of different addresses, which is essentially an accounting system. Since accounting requires accountants (miners), regardless of the accounting consensus (POW or POS), machines are needed to do the accounting, and machines require real funds to purchase and maintain, which incurs costs. Therefore, the blockchain system needs an "accounting voucher (cryptocurrency)" to reward the accountants and give it value. This is why cryptocurrency must exist. Without an "accounting voucher (cryptocurrency)," there would inevitably be an entity with super rights to force or incentivize the accountants, at which point the entire blockchain system would lose the advantage of decentralization and violate the "worldview correctness" of the blockchain industry.
Blockchain technology can be combined with many specific industries, resulting in two types of integration: first, issuing coins, and second, using smart contracts to write industry rules into smart contracts stored in the blockchain virtual server. The purpose of issuing coins is to map certain rights (such as equity rights) or functions (such as ticketing functions) of the industry to the coin, while the purpose of using smart contracts is to prevent excessive centralization in the industry to achieve a fairer "worldview correctness." However, due to the permissionlessness and composability of blockchain system dApps, it also promotes the industry to achieve permissionlessness and composability. In other words, by sacrificing a certain degree of efficiency, a certain "decentralization" is achieved, thereby achieving higher fairness, permissionlessness, and composability.
I don't like the term "Web3" because its definition is very forced and self-brainwashing. In reality, the blockchain system is not an upgraded version of the internet; it is just a complementary system that has emerged alongside the internet: the internet is a typical centralized system, while the blockchain is a typical decentralized system. From the current understanding, there are more people in this world who prioritize efficiency. Based on the "80/20 rule," we can say that 80% of the people in this world choose to use the internet to achieve high efficiency, while the remaining 20% of people prioritize fairness and hope to resonate with the "worldview" in the blockchain system.
Currently, all projects in the blockchain industry are only doing two things: using coins and using smart contracts. In other words, how to better use coins and smart contracts. For example, creating a new chain (L1 or L2) is about using coins and smart contracts more cheaply and quickly. For centralized exchanges, they facilitate the liquidity of coins by providing a place for trading, while DEX simply writes the trading rules into smart contracts on the blockchain virtual machine. For GameFi projects that only put assets on the chain, they map the assets in the game to coins, and for full-chain games, they simply write the game rules into smart contracts on the blockchain virtual machine. For SocialFi projects that only put assets on the chain, they map certain assets in social interactions to coins, and for on-chain social interactions, they simply write the social rules into smart contracts on the blockchain virtual machine.
According to the current development history of the blockchain industry, the combination of an industry and blockchain technology always starts with mapping rights through coin issuance, often accompanied by a spiral of Ponzi schemes and rapid declines. It then transitions to using smart contracts on the blockchain virtual machine to achieve decentralization and meet the "worldview correctness" within the industry. There has not yet been seen an industry that can directly transition to the smart contract stage without going through the coin issuance stage.
The blockchain system is an inefficient and fair distributed system, with TPS having strong physical limitations, so this system will never replace centralized systems. For example, DeFi will never replace traditional centralized finance, stablecoins will never replace fiat currency, Web3 games will never replace traditional centralized games, and decentralized social interactions will never replace centralized social platforms like Twitter and Facebook. However, they can serve as a beneficial supplement to centralized systems to meet the "worldview correctness" of the remaining 20% of people. This conclusion comes from the first principles deduction of real physics.
The above thinking framework may be wrong, and I will modify it at any time.
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