Third-party hosting mentioned by Wang Xiaochuan is changing the blockchain ecosystem
Author: More than Twitter WriterClaire Wu
Third-party hosting has moved the blockchain industry from small workshop-style operations to large-scale collaboration.
Recently, mainstream blockchain media have been dominated by DeFi. Live broadcasts about DeFi have fluctuated. It can be seen that blockchain application scenarios have gradually entered the mainstream. However, Wang Xiaochuan's recent three questions to blockchain practitioners have still sparked intense discussions in the industry for days and nights. Many of these questions are worth our thorough consideration and continuous exploration in practice.
Picture source:Chain catcher
First, we think Wang Xiaochuan's characterization of blockchain as an anti-government thing, a product of extreme anarchism, is biased. In the words of Blockchain News CEO Hu Dadao: “President Xi has characterized blockchain and its strategic position. Blockchain can improve the level of governance and better serve the people. Wang Xiaochuan's statement doesn't seem strict enough.”
Looking back at history, humans have never stopped working to put an end to corruption, put an end to counterfeit products and information, and improve production efficiency. The recent “Lao Ganma and Tencent Ad Rashengmen Incident” has brought anti-counterfeiting to the forefront. Blockchain storage seems to be the only solution at present. Placing blockchain governance in the general environment of the world. Under the scenario of a decentralized community or alliance, multiple nodes work together to create a ledger, which can indeed play a supervisory and regulatory role. It also invisibly restricts the actions of government departments; the code only exercises the function of governing some people.
Liu Jiaolian said it well: “Blockchain is not anti-government; it only has endogenous trust; it does not rely on government governance facilities to generate trust.” Bitcoin can be said to be a product of anarchy. Bitcoin is similar to gold; it only gives people under hyperinflation an asset storage option. The existence of Bitcoin has a restraining effect on the misuse of money by governments. Of course, from another perspective, these cryptocurrencies, which have the ability to transfer value across borders, are indeed a management challenge for countries with exchange controls.
Picture source:Shangguan News
Wang Xiaochuan asked blockchain practitioners, will third-party hosting solve the maintenance problem of decentralized ledgers?
Wang Xiaochuan's first question can be said to be very loud. It went directly to the core of blockchain project governance, and applauded Mr. Wang!
Indeed, now, whether it is a POW or DPOS network, the decentralized network is showing a trend of being monopolized by a small number of nodes. From the beginning, EOS designed 21 elected nodes to jointly maintain the blockchain ledger to improve the efficiency of the blockchain. In fact, there are probably only about 20 mining pools that regularly generate blocks on the Bitcoin network now. However, President Wang is probably not very clear. Unlike EOS's DPOS network, for the POW network, although most of the nodes that generate blocks are concentrated in large mining pools, there are still many verified nodes. They also have a complete Bitcoin ledger. These nodes are also members of the tens of millions who maintain Bitcoin's decentralized ledger.
Why is POW mining hosted by a third party? Blockchain practitioners familiar with POW mining know that electricity costs, power consumption ratio and price of mining machines, and currency price trends are critical to mining revenue.
Let's talk about the electricity bill first. According to information provided by the “University of Knowledge Mining”, during the flood season, mining pools built next to power plants often received electricity prices of around RMB 0.2. Also, we have noticed that some mining pools have reached agreements with certain countries to use the country's nuclear power to mine. Although these mining pools are superior to other peers in terms of electricity prices, they must know how to coordinate the relationship between the country and local governments, which is difficult for ordinary retail investors to handle.
Photo source: Zhi Kuang University
Today's new mining rigs are quite expensive. Mining machine manufacturers often sell them using hunger marketing methods. Retail investors can usually only catch fire at the end of the bull market. The price of the mining rigs they bought may be 2-3 times the price they were launched in the early days. They are uncompetitive, and the risk is extremely high. Ordinary retail investors participate in the operation of mining pools, which can not only participate in mining but also reduce the financial pressure and operational risks of the mining pool. It can be said that it is the best of both worlds. It is also very simple for retail investors to withdraw from a certain mining pool. Some mining pools require retail investors to pay electricity bills for a month in advance, and then they can have nothing to do with each other.
We review the history of Bitcoin mining. From CPU → GPU → ASIC mining, the pursuit of maximum profit is due to human nature. There are different oligopolies at different stages. Satoshi Nakamoto has been in contact with Laszlo, the first GPU miner. You read that correctly, that is Laszlo, the local tycoon who used 20,000 bitcoins to buy two pizzas. Satoshi Nakamoto said he was very worried that Bitcoin would be highly concentrated in Laszlo's hands because Laszlo's GPU mining was superior to other CPU mining at the time. Satoshi Nakamoto also hopes that the Bitcoin community will continue to grow and develop more commercial use cases for Bitcoin.
According to Satoshi Nakamoto's imagination, if the Bitcoin network is super successful, it won't have more than 100,000 nodes, probably fewer (currently the Bitcoin network has about 10,491 nodes, see figure below for details), and eventually a balance will be reached. At this point, it is no longer worth adding more nodes. At the same time, there will be millions of lightweight nodes. They only send and receive transactions and cannot generate blocks, but they can verify payments themselves. At a balanced scale, many nodes are clusters of servers, with one or two network nodes providing information to other servers through the local area network. Currently, we see some new mining machine manufacturers in the market that are strongly challenging the dominance of Bitmain.
Picture source:bitnodes
In the blockchain world, the power of community cannot be underestimated. Sun Yuchen was once judged by the Steem community to affect the operation of the community and used a hard fork to completely eliminate his influence. In the 2019 incident where Binance was hacked and lost 70 million dollars in bitcoins, some community members said they should join forces with the mining pool to help Binance recover these bitcoins. After Zhao Changpeng responded, he almost drowned in his mouth. Later, he apologized for saying the wrong thing, and the incident was calmed down. These phenomena can be seen everywhere in many blockchain communities. Therefore, strong community forces can also successfully maintain the rules of decentralized communities, but as President Wang said, the agreement upgrade may also cause community division. The issue is also very serious and will be discussed later.
Many people like to explain tokens in the blockchain field from the perspective of traditional finance, and the results come to the conclusion that they are “difficult to understand.” The voting rights and dividend rights of many new economy companies are constantly evolving. Analyzing new economic projects, especially blockchain projects, from a traditional financial perspective is definitely quite burdensome. People have always likened Bitcoin to an enterprise, but the Bitcoin network has no shareholding or ownership responsibilities, and miners can join or leave the network at any time. Only miners who verify blocks have the right to vote on major community decisions. The transaction fees and newly issued bitcoins in the block are immediately split between the “winning” miners or mining pools. The mining pool plays a role in smoothing profits, so that more retail investors can share the “bonuses” in the “gaming pool”. Therefore, blockchain networks should be viewed from a fresh perspective; otherwise, we may miss the entire blockchain era.
In terms of blockchain network governance, the trend of third-party hosting is also becoming more and more obvious.
Third-party hosting exists not only in mining pool operations, but also in blockchain project governance. In many blockchain networks, the right to vote is one currency per currency. From early Steem (Steem can be powered up to Vests with voting rights, which is complicated), EOS, and Dfinity to recent COMP, they all have voting rights that determine community governance. The 21 DPOS nodes are elected by investors holding EOS, and EOS block issuing nodes have block rewards and ticket rewards. According to Dfinity's white paper, community members who have the right to vote can choose to vote for themselves or entrust their votes to professional nodes to vote on their behalf.
Why is there a situation of professional proxy voting? Dfinity's view is that the average person's perception of the operation of blockchain networks may be quite superficial, and it is easy to get mixed up. Entrusting votes to agents with professional skills and forward-thinking thinking to determine the future direction of the network is more in line with the overall interests of project development.
Picture source:Everyone searches the internet
In the traditional world, we also often participate in different elections. We can't hand over our votes to professionals to vote for us. The phenomenon of me entrusting my votes to you, like EOS, and then you pay me dividends is called election bribery. However, everyone is usually quite busy. Generally, in mandatory elections, we may spend half an hour understanding the candidate's background and political platform, and then vote for him because of the candidate's “one-sided statement.” The views and influence of friends are very important to our election orientation. Some people are more likely to cast blindly to vent their dissatisfaction with the government, so candidates with low education or even poor handwriting will be “honored” to be elected. For those elections that are not compulsory, if the political situation has not reached the point of life or death, voting can be avoided. Overseas voters may even give up their right to vote to avoid being fined for forgetting to vote. V once complained on Twitter that the turnout for blockchain projects was very low. All I can say is that the mentality of “it's nothing to worry about oneself is laid-back” is the same everywhere.
Financial management methods managed by third parties have come into being.
As we all know, blockchain projects are a highly comprehensive economy, and project designers and operators need to have rich knowledge and experience in economics, finance, technology, and community operations. Entrusting our votes to professionals we think are forward-looking and let them lead the community to continue to grow is considered a more reasonable move.
For example, in the first blockchain Chinese content creation community —BitcoinsEvery day, Coinholders vote for “My Favorite Articles” 6 times a day. As a result, Coinholders can receive likes and reading revenue. The revenue comes from platform coins released from smart contracts every day. However, the POS network is a world where rich people can make more money. The more you invest in platform coins, the more weight and influence you have. Another way to get platform coins is to work —Post on the Coinhu platformThe more likes an author earns for an article, and the more platform coins the author earns, the greater the author's weight and influence will slowly increase. Do you think this is just a microcosm of the real world?
Picture source:Bitcoins
If the writer doesn't want to invest money first and give yourself some weight, then it will take longer in the beginning, because your talents need to be discovered, and your writing life is relatively passive. For Binance retail investors who are not writers, higher weight makes it easier for you to earn excessive likes. As a result, a financial management method hosted by a third party came into being. When retail traders entrust platform coins to financial management projects, they can easily and steadily obtain 15% income, which is much higher than the 5-10% profit they have praised. Because the financial management project has over 100 million dollars of power, like a gold medal manager in the entertainment industry, it can turn Cinderella into a princess, and easily send an author to the popular column.
Of course, if this “gold manager” is a responsible professional who can find gold from the sand, this will contribute greatly to the platform. However, if he is not professional enough, there is also a chance that hydrology will flood the platform, and retail investors will spend less time browsing the platform because they have no interest, which may reduce the activity of the platform.
On the other hand, this financial management method hosted by a third party can instead reduce the accumulation of cryptocurrencies and speed up circulation. Take Bitcoin as an example. Bitcoin has gathered community consensus because of its deflationary nature. Against the backdrop of the Federal Reserve's speeding up the release of water, Bitcoin is considered an asset that stores value. As a result, many people are hoarding Bitcoin in order to increase their assets. There are many wealth management products on the market now, and “interest” lures these Bitcoin hoarders in an attempt to get them to lend out bitcoins. These wealth management projects became “Bitcoin banks,” speeding up the circulation of Bitcoin in the market from another perspective.
Therefore, whether it is mining, community governance, or financial management, third-party hosting is a product of the continuous evolution of the times, and the blockchain industry has moved from small workshop-style operations to large-scale collaboration. Retail investors are participating in the construction and maintenance of blockchain networks in another form to reap greater benefits than “doing it alone”. We don't need to assume that decentralized networks are dead because of this. Even an alliance chain such as Libra, compared to a centralized structure, where a certain number of nodes jointly maintain the ledger and participate in community governance, can indeed play a supervisory and regulatory role, and carry out project governance more transparently.
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