Author: Brook
Compiled by: Elaine & Sissi & Leia, TEAO
The chaos and lack of innovation in the crypto world raise the question: Are we making substantial progress towards the ideal future? (Protocol Revolution and DigiLaw Engineering) The preface discusses 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 planet.
How to realize the original intention of the crypto world and maintain a safe and ethical development environment? Although the crypto world is gradually moving forward, it is still in its early stages of development, and many orders are still being established. New entrants often face the risk of 'losing both money and people'. When the existing infrastructure cannot support the crypto world in realizing its decentralized original intention well, can we collaborate with traditional regulatory institutions and the community to establish a mechanism that can spontaneously monitor and compress malicious behavior, thus building an 'immune system' for the crypto world and purifying the development environment comprehensively? At the same time, can we allow ordinary people caught in it to gain a global perspective and better understand the overall picture of the crypto world's development?
Technology and mechanism: a dual-driven approach to the future of the crypto world
To realize the original intention of the crypto world and break the existing dilemmas, especially to dismantle the root of 'malicious behavior', it is necessary to rely on the dual-driven approach of 'technology' and 'mechanism'.
'We are no longer early to crypto.' Vitalik has stated that the rapid development of Ethereum and Layer 2 solutions, particularly in terms of reduced fees, enhanced transaction speeds, and improved security, marks that crypto is moving towards a more mature stage. Indeed, over the past decade since the birth of Bitcoin, technology builders focused on coding have made tremendous contributions to the ongoing development of the crypto world. Technology is undoubtedly the core engine driving the crypto world towards an 'endless future'.
However, 'We are early to crypto being usable'. Why has crypto not achieved large-scale adoption for so long? In addition to the need for improvements in friendliness and usability, another important reason is that our research and application in 'mechanism design and evolution for the DigiLaw ecosystem' are far behind the development of crypto technology. Whether the vast territories opened up by new technology will yield 'flowers' or bear 'bad fruits' hinges on whether there are sufficiently sophisticated mechanisms to effectively guide and regulate. The various chaos in the crypto world currently reflects, to some extent, that our mechanism design is still not sophisticated enough, leaving ample opportunities for malicious behavior, which undoubtedly poses a significant barrier to the popularization and adoption of crypto.
To quickly move towards the next billion users, we urgently need to enhance the overall ethics and security level of the DigiLaw ecosystem. However, this is no easy task.
DigiLaw Ecosystem: A new 'species'
'DigiLaw Ecosystem' is an unprecedented new 'species' in human history. DigiLaw, as a set of rules that achieve specific goals, enables participants to collaborate or compete within the framework of these rules, thereby constructing an open and dynamically self-evolving complex system (referred to in this book as the 'DigiLaw Ecosystem'). Unlike 'dead' (Mechanistic) complex engineering systems such as chips, airplanes, and bridges, the DigiLaw ecosystem is closer to 'living' (Adaptive) complex adaptive systems such as natural ecosystems, global climates, and immune systems. It not only includes interactions at the microscopic level but also includes emergence from the microscopic to the macroscopic.
It should be noted that 'Mechanistic' and 'Adaptive' are not two completely opposed states; they lie at opposite ends of the same spectrum. Overall, the crypto protocol ecosystem leans more towards an 'Adaptive' state, but current mechanism research is still insufficient to support the construction and sustainable operation of a 'Completely Adaptive' system.
The design and evolution of such 'living systems' is a brand new world-class challenge. The design of just the token economy involves Nobel Prize-level problems such as reverse game theory and incentive compatibility. Moreover, the solutions to these problems should rise to the level of token design, DigiLaw design, and even the design of the entire DigiLaw ecosystem (as shown in the above diagram). In some dimensions, its difficulty is no less than advanced chip design, rocket and aircraft design, automotive design, and skyscraper design. Therefore, we cannot rely solely on the 'Model-Based System Engineering (MBSE)' methods that originated from these 'dead' systems; we need to further upgrade to the 'Agent-Based System Engineering (ABSE)' methods suitable for living systems with emergent phenomena, to understand, design, and model simulations of behaviors at all levels of the entire lifecycle of the DigiLaw ecosystem.
Moreover, 'living systems' are not only a design challenge; their evolution also faces enormous challenges. How can we minimize artificial governance? Is it possible to build a complete self-regulating system that can dynamically adjust parameters and mechanisms based on changes in the external environment and internal operational conditions? Even in the future, can we leverage powerful AI to realize the self-adaptive nature of 'living' systems?
DigiLaw Engineers: The Rise of a New Type of Talent
From protocols that have successfully traversed the bull and bear cycles, such as Ethereum, AAVE, and Compound, we can easily find that a commonality among these protocols is that they have invested a significant amount of time and effort into mechanism design and evolution.
Similar to technical security audits, determining whether a project is trustworthy involves not only evaluating whether it has conducted compliant code security audits at the technical level, but also examining whether DigiLaw engineers have participated in designing and continuously optimizing the mechanism structure and parameters of its ecosystem. If so, this at least proves that the project party places enough importance on ethics and sustainability, respects the property safety of every participant, and meticulously designs its mechanisms based on the laws of ecosystem operation.
(Note: In the TokenEngineering field, such talents are often referred to as 'token engineers'. This term is indeed distinctive, novel, and clearly targeted. I have also been oscillating between 'token engineer' and 'DigiLaw engineer'. However, for example, protocols like AAVE and Compound, as highly automated ecosystems, have their economic mechanism parameters (such as collateral ratios, liquidation ratios, etc. in core lending operations) highly impacting the security and efficiency of the entire crypto protocol ecosystem. However, these issues are not related to their native tokens, yet they are key leverage points for the steady and efficient upward development of the Compound protocol today. Compared to 'tokens', 'DigiLaw' is a more comprehensive proposition, and I worry that the term 'token engineer' might mislead people into thinking that the role of such talents is solely focused on 'tokens'. In contrast, 'DigiLaw engineer' more accurately reflects the essence of their work—designing and evolving the transparent and immutable laws in the digital world. Therefore, I choose the term 'DigiLaw engineer' as a 2.0 version of 'token engineer'.)
However, currently, the crypto world does not value DigiLaw engineers enough. Although organizations like TokenEngineeringCommons have been continuously promoting the development of the token engineering field and have achieved significant results, the concept and method of 'TokenEngineering' have not yet been widely popularized and applied. Many project parties, investors, etc., still remain at the 'Tokenomics' level, and are even very unfamiliar with 'TokenEngineering'. This to some extent reflects that 'We are still VERY early' in the research on mechanism design and evolution of the DigiLaw ecosystem, which is not only manifested in the lack of theory and practice but also in the shortage of professional talents.
If the crypto world wants to further break through the bottlenecks in security and efficiency, it still needs to further explore the potential and value of DigiLaw engineers.
Technology is the pioneer of the unknown, while mechanisms are the guardians of vast territories. Without the collaborative drive of both, it is challenging to create a balanced, robust, and anti-fragile DigiLaw ecosystem. The ultimate ideal state is that, without any human intervention, the development of 'technology' and 'mechanism' is sufficient to support the endogenous self-defense and automatic efficiency optimization of the DigiLaw ecosystem.
However, the iterative development of technology and the cultivation of DigiLaw engineering talents cannot happen overnight. When the dual drivers cannot fully support the original intention of the crypto world, we still need the collaborative force of 'external artificial defenses' to jointly safeguard the ethics and security of the crypto world.
New Defense System: Co-building the ethics and security of the crypto world with technology and mechanism
The crypto world urgently needs to establish a set of 'new defense systems' to combat risks. There is a high probability that the crypto world will be in a 'centralized' and 'decentralized' mixed state for a period of time in the future. Here, 'mixed' has two layers of meaning: first, the 'decentralization' of DigiLaw itself is a gradual process; second, the degree of 'decentralization' across the entire end-to-end process where DigiLaw is located varies, for example, although some DeFi protocols are highly decentralized themselves, they still rely on centralized infrastructure services during implementation, and the apps built on top of the protocols may also be centralized.
In such a hybrid system, the defense system should also be composable. The ultimate ideal state is -- the community completes the self-regulation (self-governance) of the 'decentralized' part from the bottom up, while traditional institutions complete the regulation of the 'centralized' part from the top down. Currently, the regulation by traditional institutions such as the government is accelerating, which belongs to external artificial defense. Although this regulation can indeed compress certain spaces for malicious behavior, it may restrict the development of 'decentralization'. By leveraging technology and tools to build a community-based DigiLaw self-regulatory system, we can suppress the emergence of 'evil' and systemic risks from the inside out and from the bottom up. This internal artificial defense mechanism can more flexibly address the 'malicious behavior' challenges faced by the crypto world, while also aligning with the path of realizing the original intention of the crypto world through decentralized means.
Conclusion: Collaborative driving of technology, mechanism, and defense system
Therefore, to realize the original intention of the crypto world and establish a safe and ethical digital natural environment, it seems that at this stage, at least a dual-driven collaboration of technology and mechanism, along with a composable new defense system, is required. These three elements may not be exhaustive, but they are key to breaking through the bottlenecks in the development of the crypto world.
