Consensus does not equal credit: “designing” a social system is an unprecedented innovation
The core concepts often mentioned in the discussion of blockchain are:
- Distributed Ledger: Distributed ledger, can not be changed, traceable, fully transparent, which is achieved through the encryption algorithm. Confirmation and accounting are achieved through point-to-point distributed networks.
- Protocol and Permissionless trust: Since the confirmation and recording of any transaction is done automatically by some kind of consensus, generally agreed upon by somebody, beforehand, an important feature of such a network is that it does not require a centralized agency to endorse these Record the authenticity. This is often referred to as permissionless trust.
- Smart contract: Smart contract Based on (2), due to decentralized peer-to-peer networks, some consensus can be followed and certain transactions are automatically completed without the endorsement of a centralized agency, thereby greatly reducing the transaction costs and bringing about huge economic benefits. This feature is called a smart contract. Due to the rules of interaction between points and points, the behavior of points can be programmed. The space of imagination that “intelligence” can develop is huge.
Point (1) is the technical characteristics of the blockchain. Points (2,3) are the economic characteristics of the blockchain and form the basis of value creation. This is why the blockchain will be called a revolution in relations of production. I fully agree with this point. Division of labor and cooperation are the basic motives for the economic progress of human society. The more precise the division of labor, the more extensive and in-depth cooperation is needed, because if there is no exchange, the fruits of division of labor can not be realized and the division of labor will never occur. Therefore, the exchange and cooperation are not only the result of division of labor but also the prerequisite for further division of labor. In fact, the two are mutually reinforcing and spiraling. In this sense, we often say that the blockchain is a revolution in the relations of production, but it will inevitably bring about major changes in productivity.
Blockchain reduces the cost of exchange and cooperation between point-to-point, that is, “the decline of transaction costs”, which will greatly promote the further refinement of division of labor and bring about another round of development of productivity. This is a very important technical revolution in infrastructure. I used to summarize the essence of the Internet as “interconnection” and “mutuality.” “Network”: “Alliance” is connected and online. The value creation in the PC Internet era is basically based on this foundation. “Mutual interaction” is interaction. Mobile Internet makes full use of The value of interaction; “net” is netting, using network collaboration to replace traditional supply chain management methods. Taobao in this area is a preliminary evolution of the sample. The blockchain provides the underlying technical support of “mesh coordination”, which is likely to lead to further development of network coordination.
But the current enthusiasm for the blockchain is largely based on the imagination and expectation of the above possibilities. Most of the discussions did not realize how big the challenge was to move forward, where the real difficulties would be, and what the next steps were.
The value of fully transparent ledger information in overall business information is very limited.
Blockchain technology provides credible, full-book records at low cost, providing direct value in some areas. For example, the entire supply chain records. But as a whole, the information that affects business decisions is massive and the book information is just the foundation. Just accounting this point is unable to mobilize the commercial revolution. But so far, even though the commercial Internet has been in development for more than two decades, business online has only begun in most industries. If the blockchain can drive a full-scale online core business process in an industry, that value is much larger.
The value of “objective” information is very limited. Transparent information does not equal judgment.
Many people often talk about blockchain can greatly reduce the information asymmetry. indeed so. However, apart from the first point mentioned above, whether the value of the information itself is high enough or not, there is another important issue to consider. Even if the information is symmetrical, people often judge the same information is not the same. And the more complicated the information, the more so. Valuable business information, however, is rarely simple information, often complex information, requiring subjective / professional judgment. Even we can say that without so-called “objective” information, the information is subjective. Inconsistent judgments of people bring inconsistencies in the final decision. Commercial, in the foreseeable future, will also rely heavily on human creativity and judgment. Transparency and symmetry of information only increase the value of judgment. The discussion of the current blockchain, the understanding of business and credit is too mechanical and simple. This point I will start in the fourth article.
The use of the word “trust” in Permissionless trust is easily misleading. The authenticity of the record is only the minimum requirement of “trust / credit”.
The “trust” mentioned here is really not a credit that everyone generally understands can really promote the cooperation. You believe that all information provided to you by one person is true to the point where you believe he has given you all the information you need to trust your relevant ability (ability to judge) to believe you will not harm you to You believe he will do his best (motivation to judge), each step forward, are a huge hurdle.
Taobao’s development process, the building of credit is a huge long-term challenge. The establishment of Alipay, from the secured transactions to establish the most basic trust, and then through a wide range of participation in the point-to-point evaluation system formed a basic credit rating for each seller (reflected in the seller’s Star Diamond crown system), to the long-term professional counterfeiting and Anti-fraud team, are to build trust. We can simply say that as long as the problem of trust is solved, the market can prosper. However, in fact, these words are to come to the ground and they are the process of continuous innovation. Like Taobao’s case, these mechanisms are accumulated through long-term interaction. There is still a long way to go in creating a decentralized trust in a blockchain based on transparent accounting.
Therefore, the consensus that blockchain technology itself can achieve at present is very limited in promoting the value of social coordination, and huge innovations are needed. Of course, this is why everyone emphasizes Token. The success of bitcoin has a direct bearing on the design of the miners’ incentive mechanisms. Therefore, we need to make everybody willing to cooperate actively through the design of interest mechanism. But this in itself is a very complex economics, management and psychology problems, but also consider how to combine with the technical advantages of blockchain. From simple consensus to substantively reduce transaction costs, you need real innovation. This is the key to the future success of blockchain applications. We will discuss this next article.
The blockchain assumes that there is a consensus that is as large as possible without trust. These consensus are written in the algorithm, it has been able to significantly reduce transaction costs. However, what this article emphasizes is that on the basis of these consensus, how to form true trust is the basis of business. The higher trust that can emerge on a larger scale, the greater the breadth and depth of collaboration, the greater the business value created.
Materiality, energy and information are the most basic components of the world. The handling of information is an important main line for the development of human society. One of the most important is how to generate trust. When the primitive tribes exchange goods, they often exchange prior chiefs before they can trade. Trading and then release, the so-called mutual hostage mechanism. The two countries have not given any diplomatic support or diplomatic assistance but also for the basic exchange of information and the establishment of trust. Historically, the evolution of various systems is often a long historical process. Therefore, institutional economics, such as North’s research, are the historical evolution of the Western capitalist system over the centuries.
What we are doing today is that in the absence of an economic ecology, we need to put the consensus of trust into the process. What a shocking thing to do! We are designing our own destiny! It’s like we have a CRISP tool, trying to encode the same gene. Much like the fundamental challenge that AI faces in breaking human brains, the challenge of the blockchain in designing the economic system that humankind has evolved together will also be fundamental and revolutionary. Because it faces humanity directly. Only by understanding Token at this level can we be sufficiently awake and truly committed to the historic opportunities and challenges we face.