Written by: Brook
Compiled by: Elaine & Sissi & Leia, TEAO
The chaos and lack of innovation in the encrypted world have led people to question: Are we substantively moving towards an ideal future? (Protocol Revolution and DigiLaw Engineering) The preface discusses the essence of the encrypted world, the bottlenecks in its development, and the infinite possibilities for future construction from a systematic perspective, providing important reflections to understand the true nature of this new planet.
How to realize the original intention of the encrypted world and maintain a safe and ethical development environment? Despite the gradual progress of the encrypted world, it is still at an early stage of development where many orders are still being established. New entrants often find themselves in a position where they lose both people and resources. When existing infrastructure cannot well support the encrypted world's original intention of decentralization, can we collaborate with traditional regulatory agencies and the community to establish a mechanism that can spontaneously monitor and compress the space for evil, constructing the 'immune system' of the encrypted world to comprehensively purify the development environment of the encrypted world? At the same time, can we allow ordinary people caught in it to gain a global perspective and better understand the overall development of the encrypted world?
Technology and Mechanism: Dual Drives for the Future of the Encrypted World
To realize the original intention of the encrypted world, to break existing dilemmas, especially to dismantle the root of 'evil', it must rely on the dual drive of 'technology' and 'mechanism'.
'We are no longer early to crypto.' Vitalik has stated that the rapid development of Ethereum and Layer 2 solutions, especially in terms of reduced fees, increased transaction speeds, and enhanced security, marks that crypto is moving towards a more mature stage. Indeed, over the past decade since Bitcoin's birth, tech builders focused on coding have made significant contributions to the continuous development of the crypto world. Technology is undoubtedly the core engine for exploring the 'endless future' of the encrypted world.
However, 'We are early to crypto being usable'. Why has crypto not achieved large-scale adoption for so long? In addition to friendliness and usability still needing improvement, another important reason is that our research and application on 'mechanism design and evolution for the DigiLaw ecosystem' lag far behind the development of crypto technology. Whether the vast territory opened up by technology will yield 'flowers' or 'evil fruits' depends crucially on whether there are sufficiently sophisticated mechanisms to effectively guide and regulate. The various chaos in the current encrypted world reflects, to some extent, that our mechanism design is still not sophisticated and perfect enough, leaving ample opportunities for evil, which is undoubtedly a major obstacle to the popularization and adoption of crypto.
To quickly move towards the next billion users, we urgently need to enhance the overall morality and security level of the DigiLaw ecosystem. However, this is not an easy task.
DigiLaw Ecosystem: A New 'Species'
'The DigiLaw ecosystem' is an unprecedented new 'species' in human history. DigiLaw, as a collection of rules that achieve specific goals, allows participants to cooperate 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 like natural ecosystems, global climates, and immune systems; it encompasses interactions at the microscopic level and includes emergent phenomena from the microscopic to the macroscopic.
It should be noted that 'Mechanistic' and 'Adaptive' are not two completely opposing states; they are at opposite ends of the same spectrum. Overall, the crypto protocol ecosystem tends to lean more towards an 'Adaptive' state, but current mechanism research is insufficient to support the construction and sustainable operation of a 'Completely Adaptive' system.
The design and evolution of such 'living systems' is a whole new world-class challenge. The design of token economics alone involves Nobel Prize-level problems such as reverse games and incentive compatibility, not to mention that solving these problems should elevate to token design, DigiLaw design, and even the design of the entire DigiLaw ecosystem (as shown in the above diagram). From certain dimensions, its difficulty is no less than advanced chip design, rocket and airplane design, car design, and skyscraper design, so we cannot solely rely on the 'Model-Based System Engineering (MBSE)' methods that originate from such 'dead' systems. We need to further upgrade to the 'Agent-Based System Engineering (ABSE)' methods suitable for living systems that exhibit emergence phenomena, to understand, design, and model simulate the behaviors at various levels throughout the entire lifecycle of the DigiLaw ecosystem.
Moreover, 'living systems' are not only a design challenge but also face significant challenges in their evolution. How to minimize artificial governance? Can we build a comprehensive self-regulating system that can dynamically adjust parameters and mechanisms based on changes in external environments and internal operating conditions? Can we even leverage powerful AI in the future to achieve the self-adaptation of 'living' systems?
DigiLaw Engineers: The Rise of a New Type of Talent
From successful protocols like Ethereum, AAVE, and Compound that have traversed bull and bear cycles, it is not difficult to find that a significant commonality among these protocols is that they have invested a lot of time and effort in mechanism design and evolution.
Similar to technical security audits, how to judge whether a project is trustworthy involves not only looking at whether it has conducted a compliant code security audit on a technical level but also paying attention to whether DigiLaw engineers are involved in designing and continually optimizing the structure and parameter adjustments of its ecosystem mechanisms. If so, this at least proves that the project party values ethics and sustainability enough, respects the property security 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', which is indeed distinctive, novel, and clearly directed. I have also been wavering between 'token engineers' and 'DigiLaw engineers'. For example, protocols like AAVE and Compound, as highly automated ecosystems, significantly influence the security and effectiveness of the entire crypto protocol ecosystem through the operational management of economic mechanism parameters (such as adjustments to key parameters like collateral ratio and liquidation ratio in core lending operations). However, these issues are unrelated to their native tokens but are key leverage points for the robust 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 lead to misunderstandings, mistakenly suggesting that the role of such talents solely focuses on 'tokens'. 'DigiLaw engineer' more accurately reflects the essence of their work — designing and evolving the transparent and tamper-proof rules in the digital world. Therefore, I choose the term 'DigiLaw engineer' as the 2.0 version of 'token engineer').
However, the current emphasis on DigiLaw engineers in the crypto world is far from sufficient. Although organizations like TokenEngineeringCommons have been continuously promoting the development of the token engineering field and have achieved significant results, the concept and methods of 'Token Engineering' have not yet been widely popularized and applied. Many project parties, investors, etc., remain at the 'Tokenomics' level and are even largely unaware of 'Token Engineering'. This reflects, to some extent, that 'We are still VERY early' in the research on mechanism design and evolution of the DigiLaw ecosystem, which is evident not only in the lack of theory and practice but also in the shortage of professional talents.
The encrypted world needs to further leverage the potential and value of DigiLaw engineers to break through security and effectiveness bottlenecks.
Technology is the pioneer of the unknown, and mechanisms are the guardians of vast territories. Without the collaborative drive of both, it is difficult to build a balanced, robust, and anti-fragile DigiLaw ecosystem. The ultimate ideal state is that, without any human intervention, the development of 'technology' and 'mechanisms' 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 engineer talents are not accomplished overnight. When the dual drives cannot fully support the original intention of the encrypted world, we still need the collaborative effort of 'external artificial defenses' to jointly safeguard the morality and security of the encrypted world.
New Defense System: Co-building the morality and security of the encrypted world with technology and mechanisms
The encrypted world urgently needs to establish a 'new defense system' against risks. It is highly likely that the encrypted world will remain in a 'centralized' and 'decentralized' mixed state for some time in the future. The 'mixed' here has two meanings: first, DigiLaw's own 'decentralization' is a gradual process; second, the degree of 'decentralization' in the end-to-end full cycle where DigiLaw is situated varies, for example, although some DeFi protocols are highly decentralized, they still rely on centralized infrastructure services in the implementation process, while 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 'decentralized' part of self-regulation (self-governance) from the bottom up, while traditional institutions complete the 'centralized' part of regulation 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 compress some evil spaces, it may restrict the development of 'decentralization'. By leveraging technology and tools, building a community-based DigiLaw self-regulatory system can suppress the emergence of 'evil' and systemic risks from inside out and from the bottom up. This internal artificial defense mechanism can more flexibly address the 'evil' challenges faced by the encrypted world while aligning with the path of realizing its original intention through decentralized means.
Conclusion: The collaborative drive of technology, mechanisms, and defense systems
Therefore, to realize the original intention of the encrypted world and establish a safe and ethical digital natural environment, it seems that at this stage, at least the dual collaborative drive of technology and mechanisms is required, along with a composable new defense system. These three are not necessarily exhaustive but are key to breaking the bottleneck in the development of the encrypted world.
