Crypto Native: Narrative transition from Bitcoin to Web3.0

OP Research: Crypto Native: Narrative Transition from Bitcoin to Web3.0

The original author: OP Research

1. 2008-2012 The Creation of the crypto industry

On November 1, 2008, a mysterious man with the online name Satoshi Nakamoto posted "Bitcoin: A point-to-point electronic cash system "article, that is, Bitcoin white paper, therefore, 2008 is known as the first year of Crypto, Bitcoin white paper is regarded as Crypto" bible ", which opened the entire initial enlightenment era of Crypto, To realize that the combination of cryptographic algorithms and blockchain technology can create a digital currency that is censor-resistant, decentralized, and anonymous. And on January 3 of the following year, Nakamoto mined the Bitcoin Creation block on a small server in Helsinki, Finland, on what Bitcoin believers call "Creation Day." Since then, the concept of Bitcoin has spread like wildfire around the world, and the concept of "Code is Law" has also spread. According to Bitcoin.org, based on cryptographic principles and blockchain technology, Bitcoin has the durability, portability, fungibility, scarcity, divisibility and identifiability as a currency. In particular, on May 22, 2010, a programmer in Florida, the United States, used 10,000 bitcoins mined from his computer in exchange for two pizzas.

This is the first purchase of Bitcoin as a currency that is definitely recorded, and it turns the use of Bitcoin as a currency from theory to reality, so the property of Bitcoin as a currency is verified and believed by people. Since then, individual merchants have begun accepting Bitcoin as payment, and MT.GOX, the world's first online bitcoin exchange, was established on July 11, 2010. With the emergence of bitcoin trading platforms, Bitcoin has for the first time been traded as a commodity price, and its price continues to increase, attracting more and more people to participate in bitcoin mining.

Especially after Wired magazine reported on Bitcoin in April 2011, the price of Bitcoin skyrocketed, and it became famous and began to be talked about. But most people are skeptical about Bitcoin, question its credibility, and even say that it is a pyramid scheme, but this does not affect people to join the bitcoin mining for profit. At the same time, Bitcoin believers are also growing, believing that Bitcoin is investable and truly decentralized, and that Bitcoin will break the existing monetary system and become a truly unregulated universal currency, thereby creating a unified global monetary system. It was around this time that Bitcoin's fundamentalism -- "open, transparent, immutable, anonymous, and decentralized" -- began to be embraced.

However, everything has its two sides. With the increase of popularity, Bitcoin began to be paid attention to and used by hackers and the dark web. Finally, under the dual influence of the Mentougou coin theft incident and the dark web "Silk Road", Bitcoin peaked in June 2011 and entered the first winter since its birth. Those who hope to hype the currency in order to profit from it and simply take a fancy to the currency anonymity people for money laundering, the currency of the disciples began to claim to be "Crypto Native", refers to a real and trading currency, and believe the cryptography algorithm and block chain technology behind the COINS, who believes in "Code is Law". "Crypto Native" preaches of that period were based on "fundamentalist" ideas, and there was a lot of consensus around the world that Bitcoin was built. At the same time, Bitcoin winter has not affected "Crypto Native" continue to explore the crypto world, on October 7, 2011, Bitcoin has the first follower or challenger -- Litecoin-LTC, which is a key step of the crypto world from the second life.

This is the creation of the crypto industry, in this stage, the public first contact with Bitcoin and realize that this is a cryptocurrency to the existing monetary system revolution. A "Crypto Native" in this period was someone who believed in cryptographic algorithms and who also owned and used Bitcoin.

Figure 1: Bitcoin price chart from October 2010 to 2012

Source: https://history.btc123.fans/

Figure 2: Bitcoin power chart from 2009 to 2012

Source:https://explorer.btc.com/zh-CN/btc/insights-hashrate

2. The Age of Enlightenment for crypto industry from 2013 to 2015

As can be seen from the chart of Bitcoin's computing power, during the long winter of 2011 and 2012, people gradually recognized the technical status of Bitcoin and began to try to participate in this "social experiment". During this period, in addition to gaining recognition in crypto technology by Litecoin challenge, Bitcoin payment was also openly accepted by real economy providers and gained recognition in monetary value.

On November 28, 2012, the output of Bitcoin halved for the first time. The deflationary effect reminded people of the potential of Bitcoin's appreciation, and its unit price gradually climbed and eventually returned to the peak, leading to the explosion of the crypto industry that lasted for three years. The soaring price of bitcoin, together with the mass production of ASIC mining machines and the launch of trading platforms such as Coinbase, Huobi and OKEX, has given more people the opportunity to join in bitcoin mining and let more people know about bitcoin and other cryptocurrencies. From then on, Bitcoin was given the title of "digital gold" by people. Its commodity nature stole the thunder from its monetary nature, and the unit price of Bitcoin surpassed the price of an ounce of gold on November 29, 2013. Due to the entry of a large number of personnel and capital, the early infrastructure and cognition of the crypto industry were gradually built and perfected during this period. Mining machines, payment scenes, trading platforms and financial derivatives are gradually mature, which is well proved by the rapid growth of Bitcoin computing power.

As a result, people began to explore new possibilities, which led to the emergence of various cryptocurrencies in addition to Bitcoin and Litecoin, such as Bitcoin Cash BCH, XRP and Dogecoin. Their birth makes people truly realize that cryptocurrency is not only bitcoin, but also other products using cryptography and blockchain technology, and makes the concept of Crypto expand from bitcoin to Crypto Currency in people's mind. However, it is at this time that Crypto Native people are divided, with a significant number of people insisting on "fundamentalism" and firmly defending the status of native bitcoin; While others believe that the world is evolving and Crypto should not be limited to bitcoin, but start with Bitcoin and end with bitcoin.

While Bitcoin and its followers took turns attracting public attention, another event of generational significance for the crypto industry took place. Ethereum founder Vitalik Buterin released the first white paper of Ethereum and pre-sold ether coins on July 24, 2014. Ethereum was born with a great mission: to change the crypto world. The emergence of smart contracts is a sign that the crypto industry has found its future direction in the midst of chaos, namely the next generation of smart contracts and decentralized application platforms.

Ethereum is a distributed computer that cannot be turned off. It uses blockchain as ROM, performs CPU functions through miners' calculations, and runs smart contracts as programs. Its cryptographic architecture and Turing completeness have enabled the birth and development of a number of new industries, and the cryptographic industry has gradually evolved from a simple peer-to-peer currency system to a decentralized, world-class computer system.

Although the emergence of Ethereum is trans-epochal, in this period, the crypto industry is still in the state of enlightenment, people further understand bitcoin and other cryptocurrencies, Ethereum is only one of many cryptocurrencies. Therefore, although the definition of "Crypto Native" has changed during this period, it is still generally considered as a person who believes in the cryptocurrency system established by cryptography and blockchain technology, but it is no longer limited to believers of Bitcoin, and any supporters of cryptocurrency can be accepted.

Figure 3: Chart of Bitcoin price from 2013 to 2015

Source: https://history.btc123.fans/

Figure 4: Chart of Bitcoin mining power from 2013 to 2015

Source:https://explorer.btc.com/zh-CN/bch/insights-hashrate

3. 2016-2019 Industrial Revolution in crypto

The Industrial Revolution is recognized as the development singularity of human history. Since the outbreak of the industrial revolution, science and technology have made rapid progress and productivity has been greatly improved. The birth of Ethereum and smart contract is the industrial revolution of the crypto industry. After this time scale, the industry began to expand rapidly and more practitioners joined, allowing a variety of projects to emerge. The rapid development of this era is due, on the one hand, to the emergence of the typical public chain track with Ethereum and the exploration of the value of smart contracts, such as the emergence of new financing methods such as ICO (Initial Coin Offering) and the ecological prosperity of various on-chain Dapps. Let people gradually realize the potential value of blockchain and crypto industry. On the other hand, it also benefits from the development and improvement of the trading platform of the crypto industry represented by trading platform and related derivatives, which enables people to carry out spot and contract transactions based on various currencies, injecting vitality into cryptocurrency.

Specifically, in this stage, the infrastructure of the crypto industry is further developed, and derivatives such as contracts and loans are becoming more and more perfect. Binance was launched in 2017 and has since grown to become the world's largest cryptocurrency trading platform and a giant in the entire crypto industry. In addition, the main theme of this era is the public chain in 2018, so 2018 is also known as the first year of the public chain. The new generation of public chains represented by EOS challenge Ethereum, EA, ADA, NEO, BTM and other competitors emerge in a flood, respectively in the performance, compatibility, security to launch a new story.

作为被挑战者，以太坊智能合约的创新为整个行业带来了加密生态的繁荣：以 ICO 为代表的新的融资范式的出现，这意味着任何项目甚至个人都可以直接发行自己的Token并允许公众以 BTC、ETH 或稳定币（如 USDT、USDC、DAI 等）等通用 Token 来换取其 Token ，这大大降低了融资门槛。同时，公链赛道的大爆发为链上生态带来了以博彩和游戏 DAPP 为主的初步繁荣发展，涌现出了以 F3D 为代表的现象级 DAPP 游戏，其中博彩业也因为需求完美契合「透明，公平」的区块链技术特点受到这一时期 DAPP 开发者的青睐，人们也第一次发现将区块链技术和博彩业结合起来是对传统博彩和相关行业的降维打击，而博彩和游戏高刺激度和利于引流的特点也促进了用户打开链上生态的大门。

With the rapid development of crypto trading platforms and the fading of ICO craze, IEO (Initial Exchange Offering) has gradually become one of the melodies of the new era. IEO made up for the lack of supervision of ICO by reviewing and endorsing the trading platform, and became one of the hot financing methods at that time, making a large number of Taiwan dollars as the new threshold value was discovered. Therefore, the infrastructure construction represented by the trading platform in the crypto industry has been further improved. At the same time, the trading platform represented by Binance still represents the rise of the centralization power in the crypto industry. However, to completely decentralize, the process of centralization is inevitable, which is the performance of the industry to mature.

Along with The tremendous changes in productivity and ecological environment, the impact on people's thoughts and cognition has been brought about. Some disadvantages of decentralization on security and efficiency have gradually emerged. In June 2016, The DAO, the largest smart contract crowdfunding project on Ethereum public chain at that time, was attacked by hackers. Founder Vitalik Buterin took a hard fork to recover most of the losses, Ethereum bifurcated into ETC and ETH two chains, most people chose ETH, but there are still a group of people insist that Ethereum should adhere to the most decentralized native way of operation and choose to stay in ETC. This controversial approach has since left a long debate in the Crypto industry about "Crypto Native" : how to make the right trade-off between centralization and decentralization in the face of security and efficiency? Is decentralization the only solution or the ultimate solution to crypto utopia? If not, where is the ultimate solution? How can you find a balance with efficiency/security in the spirit of native encryption like decentralization?

Back in 2014, Mr. Chang, founder of BTM, proposed Blockchain Trilemma, That is to say, block chain technology cannot achieve Decentralization, Security and Scalability at the same time. In general, decentralization refers to nodes with a large number of blocks for production and verification. The more nodes, the higher the degree of decentralization. Security is the cost of gaining control of a network. It is often used to anchor real-world assets in the design of consensus mechanisms, such as computing power in proof-of-work mechanisms. Efficiency is the number of transactions processed per second, also known as TPS. The main reason for the inefficiency of blockchain projects is that each transaction has to be agreed upon at all nodes. Of course, the Impossible Triangle was just a summary of the past experience of blockchain technology at that time, and was not supported by strict theoretical derivation. In this triangle, decentralization and the fairness it brings is the core value of the encryption industry, so early native encryption projects are often built strictly in accordance with the principle of full decentralization.

As the industry has grown, practitioners have come to realize that the crypto industry is a difficult place to grow if security and efficiency are not considered as important as full decentralization. However, the new generation of the public chain represented by EOS TRON adopted the latest DPoS consensus mechanism at that time. Unlike the PoW of BTC and ETH at that time, which required the confirmation of the whole chain nodes, the DPoS mechanism of EOS only required the selection of 21 super nodes through the coin holding voting mechanism of EOS. The super nodes take turns to confirm and account the transaction data, and give them certain rewards. This is the latest era of the public chain in the sacrifice of a certain decentralized premise, the public chain operation efficiency tilt. At the same time, it is also a compromise and attempt to balance the idea of native encryption and efficiency.

Similarly, in 2018, the initial outbreak of on-chain ecology, due to the lack of effective prediction machines, DApps of gambling often fail to generate truly random numbers, so they use the last few bits of the hash of the block as the proof of the lottery results to determine the random gambling results. This choice has a certain degree of centralized risk. However, it is an expedient measure to ensure the reasonable and normal operation of DAPP in the early chain, which is also one of the attempts to balance the feasibility and risk of the project with the reasonable use of centralized means in this stage.

At this stage, people begin to realize that the early spirit of idealism of encryption (for example, the completely decentralized) resistance in the reality, and began to consciously try to implement in the form of technical efficiency, safety, and the balance of decentralization, for the consideration and balance between these three, creates a block chain of technological innovation in different direction. But more questions arise, what is the ultimate solution to the impossible triangle, and is the impossible triangle really impossible? The first modified steam engine of the industrial revolution has begun to roar, but there is still a long way to go before the Crystal Palace is completed.

Figure 5: Overview of major public chain consensus mechanisms during this period

Source: Huobi Research Institute

Figure 6: Blockchain Impossible Triangle

4. 2020-2022 Great sailing era of encryption industry

在经历过 2018 年-2019 年加密行业寒冬和受疫情影响的阵痛后，2020-2022 年伴随着机构级别资金的入场和全球范围的宽松的货币政策，行情迎来了自诞生之后的第三次牛市，这次我们有更大的叙事，更好的创新。在 2020 年夏天，去中心化世界关于传统金融的次元壁被打破，之后借贷平台 Compound 率先推出 Token ，该 Token 用于在称为流动性挖矿的过程中作为奖励发放给用户，随后无数效仿 DeFi 概念的其他协议纷纷涌现， Token 价格飙升，DeFi 爆发了。

This Summer, we call it DeFi Summer. In March of the following year, American artist Beeple's digital work Everydays: The First 5000 Days was finally sold at a price equivalent to RMB 450 million, which sounded the horn of the NFT trend. Subsequently, a series of NFT blue chips such as BAYC Doodles went online and exploded in this environment. At the same time, thanks to Axie Infinity's popularity, GameFi is back in the spotlight. After the initial development of on-chain ecology from 2016 to 2018, with the increasingly complete underlying infrastructure conditions such as public chain and the popularity of on-chain projects such as DeFi and NFT, on-chain ecology has finally achieved considerable development in this era. More and more professional traditional game producers have entered the crypto industry, such as Blizzard, Ubisoft, There are also some excellent innovative Web3.0 games like StepN.

On the other hand, the FTX trading platform, launched in 2019, has built a $40 billion business in less than three years and is valued at more than $26 billion, making founder Sam Bankman-Fried famous, From Alameda Research to FTX and then to the new generation of public chain Solana, SBF is rapidly expanding its territory, becoming one of the encryption giants on par with V God and CZ.

The crypto industry finally got rid of the previous monotonous narrative and entered the era of great navigation thoroughly. The ecosystem on the chain represented by DEX and DeFi exploded one after another, and the ecosystem represented by NFT gradually prospered and completely went out of the circle, and the market value of the industry exploded. These phased achievements are also due to the gradual ecological improvement brought by the construction of industrial infrastructure over the past decade, and the long work has finally ushered in the temporary harvest.

After learning from the experience of the previous era, projects in this era have adopted more market-oriented solutions on issues such as the impossible triangle of blockchain.

For example, the POH consensus mechanism of public chain upstart Solana takes measures such as disclosing the Leader list of block makers in advance. These features almost go to the extreme in the direction of Layer1 expansion at the cost of partial decentralization, and basically reach the TPS ceiling of non-sharded public chain. Currently, 132 Solana nodes account for 67% of the pledge share, and 25 of them account for 33% of the pledge share, basically constituting the "elite" monopoly of the project. Secondly, Solana has high requirements on node hardware level. Most of the individuals running Solana nodes are whales or institutions or enterprises. It achieves vertical expansion at the cost of equipment, which is obviously not conducive to decentralization in a real sense, but to a certain extent, it pushes the efficiency characteristics to a new level.

Another example is the BSC chain (Binance Smart Chain), which is the forked version of ETH. BSC was launched by Binance in early 2020 and officially went live in September of the same year. Since DeFi Summer, TVL has been above $6 billion for a long time. Since the outbreak of Ethereum ecology, in addition to bringing ecological prosperity to Ethereum, the soaring price of currency, there are also high gas costs and extremely poor user experience. Therefore, the market lacks an alternative to Ethereum and a public chain option with low gas fees and good user experience. In this context, BSC led by Binance came into being. BSC is compatible with Ethereum virtual machine EVM, which allows Ethereum developers to quickly access BSC. It emphasizes low gas costs and user experience, and is backed by Binance, which has launched a $100 million incentive plan to support its development. By introducing PoSA consensus mechanism and pledging BNB to reach consensus, BSC requires a total of 21 verifier, almost all of which are controlled by Binance. This mechanism is often criticized for being too centralized, but BSC greatly improves the network efficiency.

In addition, DAOs (decentralized autonomous organizations) are also an exploration of the many forms of decentralization in the industry. A DAO is an autonomous community spontaneously established around a mission, which shares rules for coordination and cooperation. To some extent, a DAO is an off-chain form of a blockchain project, and a DAO often exists as a community product of a project. Fairness and spontaneity are characteristics that all DAOs value, so they are more transparent than traditional companies, which greatly reduces the risk of centralized evil, but because of its spontaneity, the bar is often lower.

On the other hand, the DAO at the present stage still has many shortcomings, such as lower threshold and unclear power and responsibility division system compared with the traditional corporate form. For example, the organizational form of DAO cannot be effectively determined, how to ensure the decentralization of power while ensuring the voting rights and truly reflecting the public opinion of the community. The essence of these questions is actually the oldest and most difficult political problem in human history. The thinking started from ancient Greece has never ended. With the support of blockchain technology, we hope to get better answers. At present, the concrete form of DAO is still in the early stage of exploration.

In the hot field of NFT, YugaLabs, the developer of the newly emerging blue chip BAYC, has the right of unlimited additional issuance. Although it has recently announced that it has destroyed the private key of additional issuance of BAYC, we can still see the project side's own balance and regulation between centralization and decentralization. Similarly, The latest matching project, The Saudis, a man named RIGHTBLOCK found a large amount of NFTS in free mint by using technical means and then sold them on the market. When the project found out, it quickly targeted the user and made changes to the contract in order to transfer a large amount of NFTS back from the user, which they then promised to return to the community. The contract for the NFT project used the EIP-2535 protocol (also known as the Diamond protocol). The project used the protocol to rewrite the contract functionality to enable the transfer of these NFTS. The project has been controversial and criticised by the community for being too centralised.

Figure 7: Total crypto market capitalization versus precious metals market capitalization in January, 2011

Source:https://medium.com/ngrave/too-big-to-fail-crypto-market-size-vs-traditional-assets-eff4bb2ec529

Figure 8: Total crypto market cap versus top tech stocks in January, 2011

Source:https://medium.com/ngrave/too-big-to-fail-crypto-market-size-vs-traditional-assets-eff4bb2ec529

Figure 9: Total market capitalization of crypto industry and global market capitalization of each industry in January, 2011

Source:https://medium.com/ngrave/too-big-to-fail-crypto-market-size-vs-traditional-assets-eff4bb2ec529

Now encrypted industry is in transition from early fully comply with the principle of decentralization to constantly to decentralized, efficiency and safety of these three points balance, block chain fundamentalism that encryption industry project must have a "fight censorship, tamper-resistant, transparent, anonymous" completely decentralized characteristics, that is a reflection of free will. More and more practitioners believe that value application is the ultimate goal of technology, and blockchain technology must be combined with various vertical fields to find the landing point, and finally promote the efficiency of social organizations to be valuable. They realized that the utopian vision of "fundamentalism" is wonderful, but the realization of it requires down-to-earth recognition of objective facts and respect for laws, which is the only way to utopia.

In thirteen years later, the currency and encryption industry after countless "death" and the phoenix nirvana, triggered the financial, games, art and other fields of great change, this is already a trillions of dollars of business, the resulting tens of thousands of change and innovation continues to occur, a new narrative often contain the change with the change of ideas, Industry expansion and new racetrack formation. However, we believe that Bitcoin and various cryptographic technologies are just the embodiment of the narrative, and the idea behind these representations is the spirit and real soul of the crypto industry, namely: fairness and justice represented by decentralization.

The Crypto spirit of "Crypto Native" is actually closer to a kind of human sociological and philosophical thinking. Since human history, the struggle between centralization and decentralization has never stopped. If we review the history, we can clearly see that, The whole human history is actually a history of the evolution and exploration of the spirit from centralization to decentralization in reality and society. For the first time in human history, blockchain technology is promising to use technological means to solve such problems. It will represent the innovation of the traditional order and the establishment of new connections in the world. In the exploration of the new technological vision, we firmly believe that the crypto industry will be a key link to mankind's progress towards utopia.

In Math We Trust.

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