Dear friends, dear audience, thank you very much for coming to the Wanxiang Blockchain Global Summit. Today, the topic I want to share is "The Explosion of Application Protocols in the New Phase of Blockchain". A few days ago, a large migration of the Ethereum consensus protocol was not only of great significance to Ethereum, but also a very important historical moment for global blockchain technology and blockchain applications. It means that the infrastructure construction phase of blockchain is coming to an end, and the explosion of applications is about to come.
Before we talk about the explosion of blockchain application protocols, let’s review how the Internet protocol stack was built. From the 1970s to the 1990s, Internet protocols were chaotic and flourishing.
The main agreements at that time were:
1. The then famous DEC company launched the DECNET Internet protocol model.
2. IBM's own SNA Internet protocol model.
3. OSI Internet protocol model launched by European official agencies.
4. In the United States, the TCP/IP Internet protocol model was initiated by the private sector from the bottom up.
In the decades of protocol wars, the TCP/IP model has become the ultimate winner. I believe that the TCP/IP model can defeat the Internet protocol models advocated by government, large companies, scholars and experts, mainly for the following five reasons:
First, the TCP/IP model is driven by demand, with code coming before standards, that is, the runnable code is used first, and then the standards are gradually obtained after market testing. However, the Internet protocol model of OSI, which is organized by the European government, first goes from framework to standard, and finally to code. Obviously, the demand-driven TCP/IP model is more competitive.
Second, the TCP/IP model was initiated from the bottom up by the community and self-organization. Although it eventually had an official organization, in the first 20 years, that is, until the mid-1980s, it was a community approach, with some developers with the same values jointly promoting the development of the TCP/IP model.
Third, the TCP/IP model uses an agile development model for rapid iteration, constantly iterating the TCP/IP model based on market demand and technical possibilities. The OSI model is a waterfall development model, which means that the entire model is designed and then given to users at once, which is obviously not a typical Internet practice.
Fourth, the TCP/IP model is a developer-friendly and user-friendly model. Customers come first and customers are prioritized.
Fifth, the TCP/IP model is a completely open source model. Of course, several other Internet models are also open source, but they are not license-free. They are proprietary models that require authorization to use. The TCP/IP model does not require authorization, and anyone can use it and anyone can add to it.
By summarizing the successful experience of the Internet protocol stack TCP/IP model, we can find that the blockchain protocol also follows these characteristics and develops in a similar way. In this regard, the Internet protocol stack and the blockchain protocol stack follow the same path.
We generally divide TCP/IP into five layers: the physical layer is the first layer, that is, the bottom layer, including cables, optical fibers, etc. The second layer is the link layer, such as IP. The third layer is the network layer, the fourth layer is the switching transmission layer, and the fifth layer is the application layer of the Internet.
Borrowing the five layers of the TCP/IP Internet protocol stack, we can design a protocol stack for a blockchain value network.
The bottom layer is the foundation layer of the value network protocol stack, which we call L0, and mainly includes decentralized bandwidth, decentralized storage, and decentralized computing. Bandwidth, storage, and computing are very important foundations for the future value network. In the roadmap announced by the Ethereum Foundation to the community, Ethereum's performance will reach 10 million TPS per second in the next 10 years. The premise of reaching 10 million TPS per second is that the bandwidth must increase 100 times.
The second layer, L1, is what we call the settlement layer. Since it is a value network, there must be a protocol layer related to valuable clearing and settlement.
The third layer is L2, which I call the transaction layer. This layer is mainly used to realize the smooth and efficient exchange and trading of some value markers such as NFTs and Tokens.
The fourth layer I call the data layer. This layer of protocol is mainly used to generate data assets and digital assets. Data assets and digital assets are two different things. Data assets here specifically refer to the identities bound to each of our users, individuals or institutions on the Internet and on the blockchain, and the identity data generated based on the behavior of these identities, which we call data assets. Digital assets are new asset categories created by users as creators on the Internet and on the blockchain, including some digital artworks marked by NFT.
The fifth layer is the top layer, which I call the application layer. All the business scenarios we are familiar with, experienced, and used will eventually be reconstructed at L4, the application layer. Any business is worth doing again on the value network, which is the structure of the blockchain protocol stack we are assuming now.
In this structure, I personally think that Ethereum plays a core role. Ethereum had an important upgrade on September 15th, upgrading from the PoW consensus algorithm to the PoS consensus algorithm. This is not only an important historical moment for Ethereum, but also an important historical moment for the global blockchain industry. Ethereum founder Vitalik Buterin once announced the future development roadmap of Ethereum, which has a total of 5 stages. I think the merger on September 15th, the sharding after the merger, and the Verkle tree after the sharding are the three most important stages in this upgrade process. The fourth and fifth stages are just optimizations and partial iterations of the previous ones.
After these three stages are completed, Ethereum, as the underlying value settlement network of blockchain, will have very high performance and very flexible scalability, while also having the robustness and security of the Ethereum network that has been proven in practice over the past seven years. Higher TPS and more flexible scalability on a robust and secure network provide a very good technical foundation for the explosion of applications, which will surely usher in a huge explosion of applications.
In addition to the five-stage upgrade of the Ethereum mainnet, there are other new technologies and protocols such as sharding, layering, side chains, and sub-chains on or outside the mainnet, which will jointly further promote the security, robustness, higher TPS, and more flexible scalability of Ethereum, so that the entire blockchain technology system is expected to reach hundreds of thousands of TPS within three years, millions of TPS within five years, and tens of millions of TPS planned by the Ethereum Foundation within 10 years.
If these 3, 5, and 10-year plans can be realized as scheduled, then Ethereum will be the value settlement achievement of the blockchain protocol stack. At the same time, Ethereum's infrastructure construction should have been completed within these three to five years. The next step is to build a lot of applications on top of a very good infrastructure, so it will usher in a stage of explosive growth in blockchain applications.
We can also compare the historical periods of the explosion of Internet applications and the explosion of blockchain applications. First, let’s review how the explosion of Internet applications occurred.
Everyone agrees that the explosion of Internet applications began in 2010, but the TCP/IP Internet model was formally established in the early 1990s. In 2000, the basic models of Internet business had actually appeared, but they had not yet been able to achieve large-scale operations, especially they had not found ways and means to realize them.
With the emergence of mobile Internet and smart phones in 2010, especially the revolution of APP, the way of presenting the Internet, we believe that the explosion of Internet applications has begun. Before APP, we had a relationship with the Internet through computers and browsers to log in to web pages. Such a complex and multi-step process prevented most people from connecting with the Internet. However, using APP on mobile phones can access the Internet with one click, which has enabled Internet businesses to gain hundreds of millions and billions of customers. Based on billions of customers, through algorithm recommendations and customer portraits, companies can have a high conversion rate to obtain commercial value.
The explosion of blockchain applications refers to the development process of Internet applications. I think the explosion of applications will begin in 2025. This judgment is based on the fact that by 2025, the blockchain system may be able to reach a TPS of one million transactions per second. At the same time, the technologies of Web3 in all aspects may be basically ready. In addition, new business organizational forms begin to improve and start to operate well. At that time, blockchain will begin to enter its explosion period of application. I predict that this time is 2025.
The application protocol of blockchain must first be on the blockchain chain and run based on the blockchain. Second, it must use smart contracts to ensure the effective operation of the entire business activity. Third, all blockchain applications must adopt a decentralized governance mechanism. Fourth, NFT is not just a proof of rights and interests of digital products. NFT will become the proof of ability, behavior, workload, contribution, and activity of each blockchain application participant. Based on these proofs, blockchain applications will use Token as an incentive tool to establish a very effective Token-based incentive mechanism, so that all participants and related parties can get what they deserve and get full and effective incentives.
In addition, the application protocol of blockchain must be open source and open to collaboration. Open collaboration means that all blockchain application protocols can allow participants to come and go as they please without obtaining permission from anyone. This is the characteristic of blockchain application protocol that I have summarized myself. I believe that this characteristic can also be used to analyze Web3 and DAO (distributed autonomous organization). DAO will become a very important form of business organization in the future when blockchain applications explode.
From the perspective of the commercial organizational form of blockchain applications, I think DAO has four characteristics.
First of all, DAO is a trustless network. To be trustless, it must be based on blockchain, smart contracts and digital wallets.
Second, DAO is a transparent network, and the entire process is on the blockchain. Therefore, DAO's operating data is completely open and transparent to the entire network. From the perspective of information disclosure, DAO is an order of magnitude higher than traditional business in terms of transparency, timeliness, authenticity and comprehensiveness of information disclosure.
Third, DAO is a network of usage rights. There is no founder in this usage rights network, which means that DAO has no owner. DAO has initiators, who may have a certain influence on the network and have the appeal of the community, but they do not own the network.
Fourth, DAO is a permissionless network. Joining or exiting DAO is a personal decision, and no application is required. No person or organization can decide who can join DAO and who cannot.
Fifth, there are two value markers in the DAO business model, which I think are indispensable and equally important. One is NFT. I mentioned earlier that NFT is actually a proof tool that records your behavior, contribution, ability, and property rights. After this information is recorded, DAO can issue tokens based on a set of models to economically incentivize these behaviors, so tokens are economic models and incentive models. At the same time, because tokens are shared and standardized, they are also the value exchange of all DAOs, so the entire DAO business model should be said to be "Play NFT to Earn Token", which is what I personally think of the DAO business model.
Finally, let me summarize. Whether it is the Internet protocol stack or the blockchain protocol stack, the lower the level of the protocol, the more globally unified it is. The more unified the underlying protocol is, the more diverse the application layer protocols are. For example, there are hundreds of application layer protocols for the Internet. I believe that in the future, there will be hundreds of application layer protocols for blockchain. The explosion of application protocols is actually the explosion of applications, which is the explosion of blockchain business, so I am very much looking forward to the arrival of blockchain in 2025.
This is the end of my sharing, thank you everyone.
