The article is authorized to be translated from: https://medium.com/@utxostack/p2p-economy-leading-a-blockchain-renaissance-d4b091bf2c44
The entire blockchain industry is currently in a state of nothingness. In the past few years, from ICO to DeFi, from NFT to Meme coins, there are few projects that provide real innovation or value to the public, and most projects are just chasing short-term interests and speculative opportunities. Many industry veterans are increasingly questioning the current path.
Ethereum core developer Péter Szilágyi expressed his disappointment with the industry on Twitter a few days ago, pointing out that the blockchain industry is becoming a casino that has nothing to do with innovation or value creation, let alone mass application. He believes that the ideals that blockchain should have are being replaced by the game of cutting leeks.
This makes us wonder: Why is this happening? We believe that the reason is that Ethereum, the blockchain with the largest number of users and applications, has led the entire industry astray.
Ethereum’s Wrong Path: Everything on the Chain
Ethereum’s biggest mistake was to insist on putting everything on the blockchain and trying to put all business processes on the blockchain. Even transactions that could have been completed offline between two individuals were forced to rely on the consensus of the entire network.
In Ethereum's worldview, it seems that only applications that are fully on-chain are "orthodox" blockchain applications. Whether it is financial, gaming or social applications, it is "politically correct" to be on-chain. When the main chain is congested or lacks resources, more chains are created, Layer 2, and even Layer 3. In short, all business processes must be on-chain. And the underlying chain must publish transaction data to the upper chain or third-party chain to ensure the so-called data availability, etc.
The result of putting everything on the chain is that the blockchain is overwhelmed and performance cannot keep up, resulting in on-chain congestion and high transaction fees. This gives the impression that the blockchain is slow and costly, and the user experience is extremely poor.
There is an old saying that a product has to be ten times better than the existing one to be successful - for example, the iPhone is ten times better than Nokia. However, the user experience and cost of today's blockchain applications are far inferior to Web2, let alone ten times better. This makes large-scale application of blockchain impossible. The end result is that blockchain can only serve a small number of people, such as speculators and gray industries, and it inevitably becomes a casino.
Back to first principles: What exactly is blockchain?
First of all, we need to make it clear that blockchain is a tool and a means. A true blockchain application does not need to put all business processes on the chain. The key is to meet user needs, including currency freedom, market freedom, content freedom, social freedom, etc.
As we all know, Bitcoin is the origin of blockchain and is widely regarded as the most decentralized blockchain and the most valuable cryptocurrency. However, few people realize that in the Bitcoin white paper, Satoshi Nakamoto never mentioned "blockchain" or "decentralization". Instead, he used the term "peer-to-peer (P2P)" and put it directly in the title - "Bitcoin: A Peer-to-Peer Electronic Cash System".
A P2P service is a decentralized platform through which two individuals can interact directly without the need for a third-party intermediary. Going back to first principles, let's rethink what blockchain is. A simple explanation comes to mind - blockchain is essentially a P2P network.
In fact, what we call "on-chain" is actually the consensus layer built on the P2P network. Many business processes do not need to rely on the consensus layer to complete, and can be solved directly on the P2P network layer. For example, Alice wants to pay Bob. The ideal way is for Alice to send the money directly to Bob point-to-point, rather than through unnecessary intermediaries (such as consensus validators or block producers). This method is not only faster, but also naturally protects privacy.
At the same time, building applications on the P2P network layer avoids performance bottlenecks and high transaction fees, which makes truly useful applications that can be adopted on a large scale possible.
P2P Economy: Make P2P Great Again
We advocate a P2P economy, where people can trade autonomously in a peer-to-peer manner. The role of the blockchain consensus layer here is to facilitate and coordinate the formation and settlement of transactions, rather than taking over their execution.
In this architecture, the P2P network and the consensus layer run in parallel. The P2P network acts as a marketplace for information exchange, where consumers and producers negotiate and exchange quotes. The consensus layer can provide smart contracts when necessary to ensure the smooth operation of the decentralized market.
P2P economy can truly meet user needs and provide better solutions than traditional centralized services. Actual use cases include peer-to-peer payment, decentralized storage, decentralized computing, etc.
Let’s look at an example.
In a P2P computing network, Alice wants to outsource a heavy computing task to Bob's computing cluster for a week. They reach an agreement in a peer-to-peer manner. As a provider, Bob provides computing services; as a user, Alice pays stablecoins through payment channels in the form of "flow payments" according to the amount of computing resources consumed. If Bob fails to provide computing services, Alice can stop paying; if Alice does not pay, Bob can stop the service. The whole process is simple and clear, protects privacy, and does not require intermediaries. More importantly, it does not impose too much burden on the blockchain consensus layer.
Decentralized services like BitTorrent have been popular on the Internet for many years, proving that they effectively meet user needs and are superior to centralized services to some extent. The P2P economy can build on this and enhance these distributed systems by combining stablecoin payments. We believe that in the next few years, peer-to-peer stablecoin payment infrastructures like Bitcoin's Lightning Network and CKB Fiber Network will mature significantly and greatly promote the development of the P2P economy.
P2P economy will lead the blockchain Renaissance
The P2P economy has opened up a new paradigm and provided a new development path for the blockchain industry. Compared with the current path dominated by Ethereum, the P2P economy has the following advantages:
The P2P economy solves real problems and has real user needs and practical application scenarios (such as peer-to-peer payment and decentralized storage). These needs have been verified for many years, rather than being hypothetical. The P2P economy can truly create value, rather than simply providing a speculative tool.
In the P2P economy, most business logic does not need to be on-chain, avoiding performance bottlenecks and transaction fee issues. As a result, the user experience is greatly improved and large-scale applications are more likely to be achieved.
The P2P economy uses stablecoins for payment, which is easier for users to understand and for participants to evaluate service costs and benefits. The use of stablecoins also weakens the hype space for coin issuance.
In addition, the P2P economy will bring about a revival and help the blockchain industry rediscover its original intention of changing the world, as embodied in:
Decentralization of services: Many services can be re-implemented in a P2P decentralized manner, such as payment, storage, computing, and even VPN services. The P2P approach can provide a user experience that is superior to existing centralized solutions.
Payment equality: Peer-to-peer payments allow everyone to participate in transactions equally. There are no centralized financial institutions, no barriers to entry, and no large companies taking advantage of small participants.
Large-scale application：P2P networks are more open and inclusive, better meet user needs, and are more likely to bring the public into the blockchain and achieve large-scale applications.
In short, the P2P economy is expected to revive the long-neglected P2P concept, give it new life, and use it to inject new vitality into the blockchain industry, leading a new blockchain Renaissance.
