Written by: Brook
Translated by: Sissi & Leia, TEDAO
Introduction: The chaos and lack of innovation in the crypto world make people question: Are we making substantial strides towards an ideal future? The preface to (Protocol Revolution and DigiLaw Project) explores the essence of the crypto world, the bottlenecks in its development, and the infinite possibilities for future construction from a systematic perspective, providing important insights for understanding the true nature of this new star.
This article is part of the preface content series, exploring the essence and future direction of the crypto world, starting from the current state of the crypto market. More Chinese translations will be released in succession, so stay tuned.
In September 2023, Matt Huang's article Casino on Mars reignited hopes that had long been silent during the crypto bear market. He compared the crypto world to a new star being settled, reminding everyone that despite the various chaos currently present in the crypto world, it cannot overshadow its vigorous development and infinite possibilities for future construction. He also rationally analyzed the duality of speculative behavior in the crypto casino, objectively acknowledging that there indeed exists space for fraud, scams, and other evils on the planet. This article served as a shot of adrenaline during a time when everyone was generally skeptical and frustrated, injecting new hope into the crypto world.
In 2024, the crypto world welcomed several important historical moments: the U.S. Securities and Exchange Commission (SEC) successively approved spot ETFs for BTC and ETH; the U.S. House of Representatives passed the FIT21 bill, formally establishing a regulatory framework for digital assets; BTC underwent its fourth halving; and so on. Numerous favorable developments led to a slight increase in the crypto world.
However, in this small bull run, the market volatility remains severe, speculative gambling is still rampant, Ponzi schemes and rug pulls continue to emerge, and hacking attacks and scams persist. What are the innovations that truly strike at the essence? At the very least, we nurtured DeFi and NFT during the last wave of enthusiasm; what about this time? Meme fever? Inscription? Why does everyone's sense of value seem to be decreasing, to the point of experiencing 'crypto shame'? Are we really making substantial strides toward an ideal future?
As I write this preface, it has been nearly a year since the publication of Casino on Mars, and the market seems to have once again fallen into a similar silence. A recent tweet by Péter Szilágyi reflecting on himself has sparked an industry-wide debate about the 'meaning of crypto existence.' He candidly stated: 'It's past time this industry creates something genuinely useful that people want to use, or should just close up shop.'
Although he also believes that many great things are being created, the objective fact that must be admitted is that from an overview of the entire crypto planet, we have still not established a prosperous crypto civilization. If we view blockchain protocols as urban infrastructure and smart contract protocols as city buildings, it must be said that apart from the unexploited wasteland, the cities under construction are also largely in ruins, with unfinished buildings clustered together. Maintaining the normal operation of the cities are still established projects like MakerDAO, AAVE, Compound, and Uniswap. It is undeniable that many projects are beautifully packaged and have strong momentum, but how many will ultimately withstand the tests of time, human nature, and market storms to become truly meaningful landmark buildings? Why can’t we build skyscrapers? How can we attract the next billion users? Where exactly are the bottlenecks in development? Or more fundamentally, what is the true nature of the crypto world we are striving to build?
The SEC's narrowly passed 3:2 vote, the dramatic ups and downs of the market, and the fluctuating mental states of participants partly validate my current thoughts:
The crypto world is not a binary opposition of black and white, but rather a superposition of 'endless future,' 'open casino,' and 'breeding ground for evil.' Different people see vastly different crypto worlds from different angles and levels.
In terms of market value, high-value projects represented by Bitcoin and Ethereum contribute over 80% of the crypto market value, indicating that the overall crypto market is healthy. The crypto world has transitioned from being overlooked to once exceeding Apple's market value, and now to being recognized by mainstream financial markets. Following this development trend, it is very likely to gradually surpass gold and even real estate in the next decade. The rise of decentralized finance (DeFi), the popularity of non-fungible tokens (NFT), the emergence of digital identities (DID) and decentralized autonomous organizations (DAO), and the gradual implementation of regulation and recognition of legal status all indicate that the 'endless future' of the crypto world is accelerating.
From the perspective of project quantity, among the tens of thousands of cryptocurrencies in the crypto market (counting memes will exceed hundreds of thousands), possibly only a few hundred projects ultimately hold value, while the vast majority still focus on 'making money.' They resemble 'open casinos' that are not restricted by time and space, where anyone can participate. This new type of casino is 'open and evolving,' where project teams seize the greed in the nature of speculators, continuously updating the casino's gameplay through technological upgrades, creating an endless variety of new gambling games, continually attracting batches of speculators to invest their 'chips.' The influx of resources further drives technological and commercial innovation, and the 'casino ecosystem' evolves openly and dynamically in this cycle.
From the perspective of malicious events, in areas where regulation has yet to reach, criminals often use cryptocurrencies for money laundering and other crimes, as well as dark web transactions involving drugs and weapons, attempting to evade sanctions. Fraud, scams, and other malicious financial events are also rampant in the crypto world. Decentralized finance platforms and wallets frequently become targets of hacking attacks. These are all objective facts, largely due to the relative freedom and openness of innovation in the crypto world, where the speed of ecological evolution far exceeds the pace of regulatory implementation. Those 'blank areas' untouched by regulation naturally become 'breeding grounds for evildoers.' Meanwhile, the iteration of crypto technology also takes time; it is difficult for us to build a 'perfect' underlying structure in the early stages of new developments. 'Vulnerabilities' are continuously fixed through repeated trial and error, but this also provides hackers with potential opportunities for attack, inevitably becoming a breeding ground for evil.
The mixing of three states makes it undoubtedly difficult for the majority of people to untangle the true nature of the crypto world. Some only see the 'endless future,' so they blindly worship; some only see the 'breeding ground for evil,' so they fear and evade; some only see the 'open casino,' so they pursue profit single-mindedly, stopping to think about the true meaning of the crypto world.
Chris Dixon pointed out in his work, Read Write Own, that blockchain networks can combine the social benefits of protocol networks with the competitive advantages of enterprise networks, ultimately reshaping the internet to become a more open, democratic, and innovative 'endless future.' This book is concise and easy to understand, making it worth reading for anyone who wants to better understand the true potential of blockchain and Web3.
However, possibly due to length constraints, Chris Dixon only made some brief acknowledgments of skeptics in the book, without delving deeper. To help more people see the true nature of the crypto world, I believe we need to clarify the following core issues:
First, what is the intrinsic value of the crypto world?
Matt Huang pointed out in Casino on Mars that the crypto world is a new star worth building, because it provides a blank slate where we have the opportunity to establish a new property rights system and build an upgraded financial system and internet platform. This is an analysis from a more macro perspective. From a more micro and first-principles perspective, what is the intrinsic value of the crypto world? What is its most fundamental difference from the existing world system? What are the unchanging foundations and driving forces that ensure its vigorous development?
Second, why, after 16 years, is our understanding of the crypto world still in a torn state?
The birth of emerging technologies often comes with enormous skepticism and uncertainty, not only because they reshape our way of life but also challenge our cognition and values. However, the divided perception of iPhone and Tesla quickly reached consensus. Yet today, the crypto industry, led by Bitcoin, has made significant progress, so why is there still a lot of both positive and negative controversy intertwined? Why is the public's perception of the crypto world still filled with confusion and conflict, and why do many people still fail to see the bright future of the crypto world?
Third, why is wrongdoing so rampant and persistent in the crypto world?
Why has the crypto world, after more than a decade of development, still experienced frequent chaos and disorder? It is often attributed to 'the emergence of any new financial market will be accompanied by various problems.' However, there exists a very contradictory point, which I call the 'crypto paradox': the original intention of the crypto world was to hope to construct a new system from 'do not do evil' to 'cannot do evil' through blockchain technology and decentralization principles, yet it has now fallen into the absurd dilemma of 'widespread wrongdoing.' This inevitably raises the question of whether there is some particularity to the wrongdoing in today’s crypto world.
Fourth, how can we realize the original intention of the crypto world and maintain a safe and ethical development environment?
The crypto world is still in its early developmental stage, and many orders are still being gradually established. Newcomers who rashly enter can easily end up with 'nothing to gain.' When the existing infrastructure cannot effectively support the original intention of decentralization in the crypto world, can we collaborate with traditional regulatory bodies and the public to establish a mechanism that can spontaneously monitor and compress the space for wrongdoing, thereby building an 'immune system' for the crypto world to purify its development environment comprehensively? At the same time, can we also provide ordinary people caught in it with a global perspective to better understand the overall picture of the crypto world's development?
However, these questions cannot be clarified through just a few articles.
Since I first encountered Bitcoin and Ethereum in 2016, I have experienced two major bull-bear cycles in the crypto market, during which I witnessed the rise and fall of hundreds of crypto projects. Some projects can transcend cycles and still firmly support their territory today; some projects thrived in the bull market but collapsed in the bear market; and some projects simply use the guise of Web3 and decentralization to engage in Ponzi schemes and scams. When stripping away the halo conferred by 'crypto' and 'decentralization,' and turning off the beauty filters, what is the true nature of each project? Crypto entrepreneurship? Crypto business? Or just making money with crypto? My past experiences have deeply made me feel the dangerous yet alluring complexity and chaos of the crypto world, as well as the importance and urgency of understanding and collaboratively addressing these challenges at this stage.
I have always wanted to write a book to gather those rational and profound frontier insights that have been overwhelmed by a flood of information, to explore the underlying principles behind common issues, and to attempt to string existing wisdom together with a relatively scientific and rigorous systematic logical framework. I intend to name this book (Protocol Revolution and DigiLaw Project), not only to understand the aforementioned issues from a first-principles perspective cognitively but also to outline a comprehensive practical methodology. I hope to reduce the blind, chaotic exploration of participants and lower unnecessary trial-and-error costs.
Writing this book does not mean that my answers are correct and profound, but rather that in the still chaotic early development of the crypto world, there is indeed a need for effective sorting and summarization. Thus, the 1.0 version of this book is temporarily completed by a centralized small team led by me. But this is just the beginning, and I hope it can become an open communication community in the future, where everyone can openly discuss, collide ideas, and co-create the 2.0 version of this book.
It should be noted that when describing this field, I prefer to use the term 'crypto.' As the industry develops, the possibilities built on blockchain in the coming decades will far exceed the current imagination space, and hot terms like 'Web3' and 'metaverse' are likely to be replaced by new emerging concepts that continuously appear. Today, the 'crypto world' commonly referred to in consensus typically refers to this new digital ecosystem built on decentralized public chain technology after the emergence of Bitcoin and blockchain. It also encompasses the infinite possibilities arising from the combination of some new crypto technologies (such as zk and homomorphic encryption) with blockchain technology. At least for now, I believe the name 'crypto world' is still relatively appropriate.
This book will focus more on exploring and solidifying the universally applicable principles that have been validated by the market, which can help participants navigate through bull and bear cycles to address more long-term problems and challenges. As for the current trending phenomena, I do not intend to discuss them much, as they may not necessarily withstand the test of time. This article will serve as a preface to (Protocol Revolution and DigiLaw Project), briefly outlining my thoughts on the above four questions and the vision and content overview of this book.
This book aims to present content that is easy to understand, suitable for a wide audience looking to gain a deeper understanding of the crypto world.
For bystanders and newcomers, this book will use rich examples to introduce the complex concepts, technologies, and development summaries of the crypto world in a simple and straightforward manner, allowing you to quickly obtain a relatively objective and rational understanding of the crypto world at minimal cost.
For active participants, this book will summarize the historical development patterns of the industry and the characteristics of high-quality projects that have navigated bull and bear cycles, providing a perspective of 'trust economy' to help rationally analyze and filter out truly valuable crypto projects, rather than relying entirely on 'luck' and 'industry dividends.'
For innovative builders, this book focuses on discussing business models, quickly scanning the industry, and sharing a theoretical framework and engineered intelligent solutions designed for the DigiLaw ecosystem. These are essential 'core courses' on the growth path of every builder.
For regulators and policymakers, this book aims to provide a new understanding of the complexity of the crypto world and its rapidly evolving ecological mechanisms. By analyzing the DigiLaw ecosystem, it hopes to help you find the boundaries of regulatory scope, thereby devising more comprehensive and long-term effective policies to jointly create a healthy, fair, transparent, and innovative digital natural environment.
