Two Paths of Blockchain Development: Usability and Trustworthiness

The development of blockchain technology presents two different paths: centralization and decentralization. These two paths correspond to the core concepts of usability and credibility.

Usability refers to how easy a system is to learn and use, but it may lack comprehensiveness and depth. Most internet products and electronic devices we come into contact with in our daily lives focus on solving usability issues. Credibility, on the other hand, is more concerned with expanding the boundaries of human knowledge; for example, projects like Bitcoin are exploring how to establish universal trust in things and data.

The coexistence of these two demands has led to the bifurcation development of Blockchain technology. Taking the birth of Bitcoin as a starting point, Ethereum can be seen as a continuation of Bitcoin's fundamental concepts and spirit. Ethereum did not compromise towards centralization, but also experienced bifurcation during its development.

Currently, the general public, including many people in public systems, mostly understands Blockchain at this level. Some consortium chain projects have made certain compromises in usability, mainly because Ethereum does have some inconveniences in practical use. When we extend simple transfer functions to complex smart contracts, the logic on the chain becomes more complex. Consortium chains obviously have advantages in computation, storage, and communication efficiency, so the emergence of this fork has its practical demand.

In the entire blockchain industry, verification is the most important and challenging aspect. Currently, there are mainly three verification methods: guarantee, cumulative game ( approximation ), and built-in efficient market hypothesis. Bitcoin uses reconciliation verification, Layer 2 solutions use zero-knowledge proofs for verification, while some projects claim to be decentralized systems but have not truly achieved verification. It is worth noting that Bitcoin has also not completely solved the verification incentive issue, which has always been one of the core challenges in the development of blockchain technology.

Forks can actually be seen as a benign development, representing different technical route choices. Open finance has, to some extent, eliminated the boundaries between countries, with certain stablecoin projects being the most typical applications. However, there are still certain centralization risks in these projects, as someone needs to provide guarantees.

The aspects of blockchain technology that align with traditional finance are usually easier for the average person to understand, while projects that stray further from traditional concepts often appear more obscure and difficult to comprehend. When studying Bitcoin, what truly attracts and convinces people is the concept of decentralized assets. However, anyone with a bit of knowledge about monetary theory understands that Bitcoin has problems as a currency. Modern monetary theory has moved away from the gold standard thinking of the past; currency needs to reflect all dynamic information of the economy, otherwise, it is difficult to achieve stability. Bitcoin's information acquisition is relatively narrow, especially since its total issuance is entirely constrained by algorithms.

If we consistently adhere to the original architecture, we will discover the deeper essence of the Bitcoin project: it is not merely about creating a simple product, but about constructing a non-cooperative game system. Looking back at the course of social development, early management models often adopted cooperative game methods, such as religious and political systems, which were very sensitive to resource allocation issues. This allocation mechanism attempts to assess everyone's contribution and constrain behavior through strong contracts to ensure alignment with the overall allocation mechanism. However, the two questions of who will perform the allocation and how to verify the consistency between allocation and contribution have never been satisfactorily resolved in traditional social management systems.

The political mechanism represented by agricultural civilization inevitably faces the dilemma of cooperative games, making it difficult to achieve optimal results. In contrast, the non-cooperative game under the market mechanism does not require participants to establish direct relationships or mutual trust, with explicit pricing exchange mechanisms being the most typical example. From an economic perspective, "The Wealth of Nations" is actually elaborating on the rules of non-cooperative games and the transformations it may bring.

Bitcoin has built a new global non-cooperative game system. In this system, miners participate in mining based on their own positions and resources ( computing power ), and their decisions ( on whether to mine and how much computing power ) to invest will affect every participant. The system pays rewards to miners through a random algorithm, and when this information spreads widely enough and everyone can freely enter and exit, the system achieves stability at a certain point, realizing general equilibrium. The blockchain has opened all information to the world from the very beginning, enabling it to achieve the goal of general equilibrium.

In contrast, traditional credit can be seen as a local equilibrium, similar to the assessment of each other's qualifications by two individuals. In the blockchain world, you can issue a token and allow the market to price it, making it an asset. On-chain lending typically uses collateral.

Several mainstream cryptocurrency projects are attempting to build non-cooperative game systems, and through this system, they are consolidating decentralized assets. These decentralized assets are not simply replicable, and their risk-return structure is fundamentally different from traditional asset classes. From the perspective of information theory, these decentralized assets demonstrate stronger stability in eliminating uncertainty.

Despite the significant price volatility of certain cryptocurrencies, their hash rate data and transaction data are all publicly available, which makes their uncertainty much lower compared to traditional credit assets or publicly traded company stocks. We should not judge it from a traditional perspective. When a secondary market is introduced, factors such as institutional accumulation can lead to drastic price fluctuations, but the distribution of miners' mining within the game theory core remains relatively stable and certain, and any changes in data can be known immediately.

In contrast, internal events of companies in traditional equity assets often do not get publicly disclosed in the market. The questions surrounding whether certain cryptocurrencies are classified as securities and whether dividends constitute a security, fundamentally pertain to discussions regarding the confirmation of legal entities. The main reason for restricting participants from purchasing securities lies in the potential for utilizing insider information to build advantageous strategies; if true distribution is achieved, it becomes difficult to classify it as a security asset.

It is worth noting that the process of swapping certain cryptocurrencies for fiat currencies on exchanges may involve a larger scale of speculation than the speculation on the cryptocurrency itself. The initial idea was to create a closed-loop on the blockchain to provide services similar to traditional finance, but many problems were discovered in practice. The core issue is how to solve the replication problem: simply writing a smart contract, how to provide financial services in a completely decentralized manner, what advantages this approach has, and how to achieve value payment, realization, capture, and accumulation. Ultimately, it was found that trading on decentralized exchanges is difficult to accumulate value.

Blockchain is not a simple linear service system; it lacks functions such as automatic communication. On-chain services ultimately converge to decentralized finance ( DeFi ) services, but the two issues of how to capture value and how to compete should have been considered in the early stages of the project.