Why blockchain needs Web3.0

The blockchain in the Web3.0 platform should specifically refer to the application-oriented blockchain-a huge difference from a public chain such as Ethereum.

Preface

In the previous article “Why Web3.0 Need Blockchain”, we discussed why Web3.0 applications/platforms need to use blockchain as the underlying component to build and drive. In this article, we will analyze that blockchain is different from blockchain, and it is impossible to solve all problems with one chain.

The blockchain in the Web3.0 platform should specifically refer to the application-oriented blockchain-a huge difference from a public chain such as Ethereum.

Ethereum’s development path

World computer

Around 2017, Ethereum was considered a “world computer”-a machine that never goes down and everyone in the world can write code to run on it.

In terms of these two points, Ethereum has indeed achieved it (never downtime, everyone runs). But the “computer” that the public usually understands is a tool that can do general-purpose calculations. The computational cost of Ethereum is very high, and it cannot be used for general-purpose calculations, let alone big data calculations. From this definition, Ethereum is not a general-purpose computer, at best it can only be regarded as a dedicated calculator. The calculation does not consider the cost, it is a rogue. At the moment in 2021, no one mentions the concept of “world computer”. Ethereum has already changed its position. Its ideal as a “world computer” is a failure. See: “Why I Stop Interpreting Ethereum as the “World Computer””.

Regarding the world computer, we have a good analogy-the current hot post-cloud native serverless technology stack. Serverless also has the characteristics of “world computer”: it only cares about the realization of business functions, does not care about system resource allocation and operation and maintenance, does not care about expansion issues, everyone in the world can write code to run on it, and so on. Due to this analogy, we can use some of the problems that have occurred in the development of the serverless field to illustrate what problems the blockchain will have if it is used as a world computer:

Cost issue: Serverless has an advantage in short-term and fast services in the dedicated field. It is used for long-term services and general-purpose computing, but it surpasses traditional container computing in terms of cost. See: “Serverless is more expensive than you’d expect

》,《Serverless vs Docker Containers— what to choose in 2020? (updated)》

Expansion problem: A basic requirement of the world computer is: automatic expansion. For customers, there should be no upper limit on the computing power and storage capacity of the world computer (although there is a limit for each calculation, it should be able to accommodate an almost unlimited number of function instance services horizontally, and there will be no parallel between different functions Obvious resource competition). The problem of expansion is the most difficult problem in the blockchain field, and there is no one (see: “Blockchain Scalability Overview [2020]”). From this point of view, blockchain is pessimistic in this direction.

Platform binding problem: At present, Serverless still has an extremely serious problem: platform binding. The serverless program you develop is strongly bound to a certain cloud platform (Amazon Lambda, Microsoft Azure, etc.). If you want to switch platforms, you have to rewrite the code for the new platform and undergo verification again. This cost is too high. This is also one of the most important issues for many customers, especially enterprise-level customers. Even if the world computer is realized based on the blockchain, this problem is also a problem that must be faced.

Finally, we come to a soul to ask: Is the world computer another form of centralization?

In any case, Dfinity (https://dfinity.org/) is still actively exploring in this direction.

DeFi explosion

If the world computer can’t be done, where is the way out for Ethereum?

As early as 2018, the article “The End of the Story of Ethereum is not “World Computer”, but “Open Finance”” argued that Ethereum is the most suitable for DeFi, that is, open finance. Because there are gradually a wealth of financial protocols established on Ethereum, the article classifies these financial applications and sees the possibility of DeFi challenging the traditional financial system.

By 2020, due to the maturity of objective conditions and the triggering of certain accidental factors (such as liquid mining), Ethereum has ushered in a DeFi explosion, and DeFi has officially become the killer application on Ethereum. Head applications such as Compound, Maker, Aave, Synthetix, Curve Finance, etc. ushered in a large number of user growth. See: “DeFi explosion pushes Ethereum price to 2020 high”. Everyone is cheering, Ethereum finally found its core value.

But the DeFi explosion has also caused some serious problems on the Ethereum platform: network congestion and high handling fees have led to restrictions on the expansion of mortgage scale and user scale. This is a typical negative network effect.

In other words, Ethereum at this stage can no longer carry so much value.

Value overflow

Because Ethereum is so congested at this stage and Eth 2.0 is nowhere in sight, the community has conducted a lot of discussion and innovation on the issue of capacity expansion, and now basically reached a consensus to build a two-layer network first-to expand the capacity through the two-layer network. At present, the L2 network has multiple directions being explored at the same time, such as Optimism Rollup, ZK Rollup, Arbitrum, Polygon, etc. The competition in different directions is very fierce.

Among them, Polygon is currently the most popular (see: “DappRadar Second Quarter Report: DeFi Locked Positions Are Still Concentrated in Ethereum, Polygon Ecological Growth Is Rapid”). The current implementation of Polygon is not strictly a Layer 2 network, it is actually a side chain. The side chain itself is just a concept and cannot be regarded as a specific technical means of expansion. The side chain is a mutual relationship, that is, two chains connected by a bridge, they are side chains to each other. It’s just that currently Eth is basically the dominant one. Almost all valuable assets are on Eth. Eth’s own performance is weak, so it makes people feel that all chains that “bridge to Eth” can be regarded as Eth side chains (see : “The History of Blockchain Expansion: State Channels, DPoS, Large Blocks and Sidechains”). From this point of view, Polygon’s solution can actually be classified into the same category as NEAR and BSC’s expansion ideas for Ethereum.

For example, Ethereum is like a reservoir. Although it has tried its best to dig wide and deep, it can’t keep up with the speed of water (value) flowing in, so it gradually can’t hold so much value, so it will ( Value) overflow. This is the value spillover effect of Ethereum.

Not only the second-tier network, but also various public chains (which can be classified as side chain networks) want to seize the opportunity to compete for this spillover effect. Such as: BSC, Solana, NEAR, Polkadot, etc. See: “Analyzing the Layer 1 Competitive Landscape: Where are the opportunities for the new public chain? “.

From here, we have seen a phenomenon, the blockchain world, it is no longer possible for a chain to stand alone in the world, and the future must (in fact, it is already) a multi-chain world. Even if Ethereum 2.0 is successfully launched, it is unlikely to solve the problem of Ethereum 1.0 DeFi congestion. See “DeFi in Ethereum 2.0: Urban, Suburban, and Rural”.

The hierarchical structure of the blockchain

As mentioned earlier, we firmly believe that the future is a multi-chain world. So, between these chains, is it chaotic, disorderly form of existence?

To study the structure of a system, a basic quantity should be found. Starting from different basic quantities, the system can be divided into different structures. Here, we continue to use the basic quantity mentioned in the previous section: value capture.

From the perspective of value capture, we can divide the blockchain world into a three-layer concentric structure:

Coin World-Why Blockchain Needs Web3.0

Blockchain universe hierarchy structure diagram

The explanation of this hierarchical structure diagram is as follows:

We start from the innermost circle layer Circle0 or C0. At the innermost level are Bitcoin and Ethereum, whose total value occupies most of the current blockchain market (at the time of writing, it accounted for 64%). Bitcoin entered the DeFi field by encapsulating pledges on Ethereum. Ethereum is the core of the value of the entire blockchain universe and the source of value output.

The second circle, Circle1 or C1, contains the various Layer 2 networks of Ethereum, various side chains, and other so-called layer1 public chains. They capture the value overflowed from Ethereum and jointly participate in the formation of the DeFi ecosystem. It is worth noting that all Dapp applications developed based on contracts belong to this layer.

The third circle layer Circle2 or C2 is a variety of application-specific blockchains, Application-specific Blockchain, or Appchain for short. These Appchains are used to carry various landing applications that are in line with the real world, that is, Web3.0 App. I tend to distinguish these applications from those related to financial (DeFi) or asset (such as NFT) properties. Web3.0 App corresponds more to applications in the traditional Web2.0 world, or applications in some new scenarios. Appchain is the core component of these Web3.0 Apps (see “Why Web3.0 Need Blockchain”). The blockchain in Web3.0 refers to Appchain.

Three circle layers C0, C1, C2, of which C0, C1 are mainly used for assets and DeFi-related applications, and C2 is mainly for specific landing applications, namely Web3.0 applications.

Then why can’t C2 be used as DeFi? In fact, it does not rule out. But on the whole, C0 and C1 have been able to solve the DeFi problem, and there is no need to involve C2. The C2 layer should concentrate on dealing with Web3.0 issues.

Here, the set of stratification theory we put forward has several meanings:

The first meaning is the stratification of value capture: one chain cannot accommodate all value, and it must be distributed to multiple chains.

The second meaning is the layering of security: not all chains need the same security level, some pursue higher security, some pursue higher performance, and some pursue higher scalability. From the inside to the outside of the three circles, it can be considered that the safety requirements are gradually weakening, and the performance requirements are gradually increasing.

The third meaning is the layering of business focus: DeFi and Web3.0 businesses are separated from each other, and each focuses on different concerns to solve their own problems. At the same time, it is also necessary to develop an appropriate mechanism so that the two parts can interact and collaborate.

Simply put, different blockchains do different things on different layers.

DeFi given Web3.0

Looking back at the development of blockchain, you will find that it was originally a series of innovations around financial issues. It is precisely under the accumulation of these large amounts of innovation that DeFi has exploded. As mentioned earlier, we separate DeFi and Web3.0. DeFi is the abbreviation of Decentralized Finance, which refers to those financial applications built on the blockchain network, and we define Web3.0 to specifically refer to all non-financial applications built on open protocols. There is a clear boundary between the two.

So, what is the relationship between DeFi and Web3.0? This is a subject worthy of in-depth discussion.

Let’s start with finance. What is finance? Professor Liu Qiao once summarized in “How to Reshape China’s Finance in Our Time”: Under the modern economic system, finance is formed by the interaction of the real economy, financial system, government macro policy, international capital flow, asset pricing and other modules. Complex ecosystem. At the same time, he believes that good finance must be finance that minimizes intermediary costs.

In the Web2.0 Internet era, Professor Ping Xie and Dr. Chuanwei Zou proposed the concept of Internet finance. In the article “Basic Theory of Internet Finance”, they believe that the Internet can reduce transaction costs and information asymmetry, improve the efficiency of risk pricing and risk management, expand the boundaries of transaction possibilities, and enable the supply and demand of funds to directly trade, thereby changing financial transactions and Organizational form.

Ideally, in the Internet age, capital should circulate seamlessly like information, and transaction costs should be minimal. However, Professor Liu Qiao believes that the average cost of financial assets has remained basically unchanged in the past 130 years. He called this phenomenon “the mystery of financial development”, that is, the continuous evolution of finance has not brought about the decline of financial intermediary costs.

How to reduce the cost of financial intermediation? This is the exploration and experimentation that the engineers and entrepreneurs who built the encryption world of DeFi are doing.

DeFi hopes to use blockchain technology to create a more open and transparent financial service system. Its notable feature is the permissionless openness and the transparency of transaction data. At the same time, its settlement is instant, and its financial services are 7* 24 hours a day, and our global financial system currently only operates from 9 to 5 (non-weekends and holidays).

Internet finance/financial technology and decentralized finance DeFi, the comparison of the technical architecture diagrams of the two is as follows:

Coin World-Why Blockchain Needs Web3.0

Image source: “Encrypted assets are not a scourge, understand the basic characteristics and transformative potential of DeFi infrastructure”

By simply comparing the two architecture diagrams, DeFi applications are trying to rebuild financial services from the basic layer, and their operating costs will be several orders of magnitude lower than traditional finance.

The current DeFi is mainly focused on the functions of financial payment, clearing and settlement, and financial communication. It is far from the development of financial technology in terms of financial risk assessment, social resource allocation, and especially financial compliance and supervision. Let’s compare with the example of traditional lending. Businesses take out loans to do business, generate value income to repay the loans, and banks charge interest. However, DeFi mostly only flows between agreements, and funds have not entered the social field, have not formed an effective closed loop, and have not played the role of finance in the allocation of social resources.

Therefore, DeFi is only one step ahead in financial services. Representative projects such as MakerDAO, Compound, Uniswap, Synthetix, etc. have triggered the DeFi wave. However, after nearly a year of explosive development, the development status of DeFi is very “involved”, and each track (Ethereum, Polkadot and other different blockchain infrastructures) is crowded with homogeneous projects. . DeFi urgently needs to break out, find new market space, and find a true closed loop of value that can be integrated with the physical industry.

The relationship between traditional finance and the Internet can be shown in the following figure:

Coin World-Why Blockchain Needs Web3.0

Traditional Financial Industry and the Internet

Traditional finance provides financial support (angels, seeds, loans, etc.) for Internet startups, and Internet companies return part of the profits they generate to financial institutions as principal and interest, realizing a closed loop between the financial and physical industries.

Similarly, in the Web3.0 era, we believe that the relationship between DeFi and Web3.0 is shown in the following figure:

Coin World-Why Blockchain Needs Web3.0

Decentralized Finance and Web3.0

In the picture above, DeFi finances Web3.0 application projects (App), and Web3.0 application projects generate lasting profits (analogous to the lasting profits of Web2.0 Internet applications), and generate (return, distribute) interest income to investors, So as to realize the real value input to DeFi.

If the blockchain develops to the DeFi stage, if the value of blockchain technology is to be truly long-term, it needs to rely on the value input of Web3.0. Web3.0 is the interface between DeFi and the real world.

As we mentioned earlier, every Web3.0 App should include an Appchain. Then, many Web3.0 Apps (platforms) worked together to create Web3.0. Their relationship is shown in the picture below:

Coin World-Why Blockchain Needs Web3.0

Web3.0 Times

It can be seen that compared to Web2.0, in the Web3.0 era, we have more of the core of the blockchain (application chain).

Contract and Appchain

There is a difference between the blockchain in the DeFi infrastructure layer and the blockchain in Web3.0 applications.

Looking back at the development history of blockchain again, the Bitcoin project that gave birth to the concept of blockchain opened the door to challenge the central bank’s monopoly on the currency and financial system. From this perspective, Bitcoin is the original form of DeFi. Later, Bitshares (Chinese name BitShares BTS) created by Daniel Larimer (BM) can be regarded as the first project to try DeFi. But the ideal plump and realistic skinny, BTS’s exploration finally aborted. Later, Vitalik Buterin proposed Ethereum, which established a programmable, Turing-complete smart contract blockchain, hoping to become a decentralized application development platform. So far, based on smart contract technology, global crypto developers have conducted various active explorations and developed various types of decentralized projects (finance, games, social media, etc.). According to the current Coingecko market capitalization classification data, we will find that the top three market capitalizations are stablecoins, trading, and DeFi, which are all financial asset trading applications. From this perspective, smart contracts are not suitable for the development of DApps in all fields, but are more suitable for DeFi applications in the financial field.

With the development of blockchain technology, blockchain development frameworks such as Cosmos SDK, Substrate, and Muta have emerged, which provides developers with a completely different way from smart contracts to create decentralized applications. The contract is developed for a general virtual machine, limited by the limitations of the underlying virtual machine, and has weak customization. Using the blockchain development framework, developers can choose various modules available in the framework (such as consensus, governance) And other components) or build a custom module to quickly customize and start a blockchain, which greatly improves flexibility. For example, since security tokens require more functions in the infrastructure layer to ensure regulatory compliance and enhance institutional confidence, Polymath has built a blockchain Polymesh to better implement security tokens. The creation, issuance and management of certificates. Compound specifically built the Gateway blockchain to realize the cross-chain interest rate market. These teams chose to build an application chain due to certain limitations of the smart contract platform, which to a certain extent shows that the application chain is more suitable for developing Web3.0 apps.

The following is the difference between Smart Contract and Appchain.

Coin World-Why Blockchain Needs Web3.0

As can be seen from the above table, Smart Contract has strong composability, which is conducive to the innovation of DeFi applications. Appchain is self-controllable and highly customizable, suitable for Web3.0 applications in specific scenarios. Therefore, when building decentralized applications that need to be customized for specific business scenarios, Appchain obviously has more technical options.

Appchain related research

This article defines Appchain in the previous chapter, and makes a detailed comparison between Appchain and smart contracts. This section goes a step further and does some research on the universal nature of Appchain.

Token in Appchain

As we analyzed in the last article “Why Web3.0 Needs Blockchain”, Token is an indispensable part of the Blockchain.

But there is a serious misunderstanding: all tokens are cryptocurrency. In fact, not all tokens issued on the blockchain are currencies (digital currencies). Tokens can be roughly divided into the following three categories:

1. Currency Token: Currency Token

2. Utility Token: Functional Token

3. Security Token: Security (options, stocks, etc.) Token

And Untitled INC goes a step further and gives five more refined classification dimensions for the tokens currently on the market: purpose, use, law, underlying value, and technology. See “Five Dimensions of Token Classification”

Coin World-Why Blockchain Needs Web3.0

This article is not prepared to describe the classification theory of Token. Readers can refer to the reference materials at the end of the article for further understanding.

In June 2017, the SEC (United States Securities Regulatory Commission) announced that DAO Token is a security (see “SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities”), and is regulated in accordance with securities-related laws. This is a major characterization of the blockchain Token.

The article “Transformation of Regulatory Paradigm for Issuance of Security Tokens” also believes that Tokens issued by STO (Security Token Offering) should be included in the regulatory framework in the form of securities. On the premise of effectively guaranteeing the country’s financial stability and maintaining market order, sufficient innovation space should be reserved for financial innovation models, and institutional changes should be accepted conditionally. Among them, the way of obtaining profits has become a key factor in determining whether to constitute securities.

And Appchain or Web3.0 App, as a landing application that enters people’s daily life, naturally should actively embrace supervision.

Based on the above background information, back to Appchain, in Web3.0 App, we should issue securities tokens and functional tokens, instead of issuing Currency Tokens in Appchain. In fact, in the entire blockchain universe, there are very few tokens that can be classified as cryptocurrencies. Currency, as a general equivalent, is a medium of value exchange. Only extremely limited tokens (such as Bitcoin) have the potential to take on this role. In addition, if the token at the application layer is not classified as a security token or a functional token, it will encounter serious obstacles at the regulatory level.

On the other hand, securities/functional tokens also need to enter the market. Once it comes to asset circulation, we should spin off the relevant business logic to the DeFi layer for execution. At the Appchain layer, you should try to only deal with specific application business-related matters.

By the way, the Chinese translation of Token is accurate using “token “compared to” token”. It is recommended not to misinterpret Token as “token” in the future.

Consensus in Appchain

Generally speaking, the most suitable consensus for Appchain is PoS consensus.

First, we exclude PoW consensus in Appchain for the following reasons:

1. PoW energy consumption is huge, and the PoW chains that can eventually be accommodated in the world are limited, and there may be only a few

2. It is very difficult to cold start the PoW chain. When the total computing power of the platform does not reach a critical value, the security of the PoW chain is very fragile

In contrast, the PoS chain has the following basic characteristics:

1. The energy consumption is very low (compared to PoW), and the assessment of Ethereum is less than 1% of the energy consumption of PoW

2. When the PoS chain is started, other assets need to be used as collateral. Its security has been guaranteed from the very beginning, and as the value of the application chain grows, its security mortgage will also grow correspondingly, that is, security is also a positively correlated growth curve

Of course, PoS also has some problems of its own. Countless smart brains all over the world are trying various innovations to solve these problems and have proposed various improved PoS protocols, such as DPoS, NPoS, LPoS, etc. The comparison of the pros and cons of PoS and PoW is not the focus of this article. You can refer to relevant materials for in-depth study.

On the other hand, PoS-type protocols are more like traditional stock companies, but now they have become community-based companies (see: “Future Companies: Blockchain Technology + Token Economy”). The Appchain or Web3.0 App entrepreneurial team based on the PoS protocol still needs to rely on the team’s own characteristics and efforts to innovate, market, solve specific problems, generate value feedback, and develop, just like the entrepreneurial team in the Web2.0 era. The state is large, and finally developed into a platform-level project owned by the community.

As far as the classic PoS is concerned, it is not suitable for small teams to use directly. It is a bit like a wild horse and is difficult to control. A start-up team can easily be brought into the pit by PoS. Because it is not only a technical problem, but also a sociological problem. And once there is a problem in governance, it is often impossible to turn back.

Generally speaking, Appchain does not have too many nodes. There may be only a few at the beginning, and there may be only a few dozen at the mature stage. Too many nodes will affect the operating efficiency of the business system. Appchain attaches great importance to user experience. The project needs to strike a balance between security, operating efficiency, and user experience.

Considering that Web3.0 App is a product that truly affects people’s lives, it will certainly embrace supervision in the future. In the case of regulatory participation, Appchain is more appropriate to choose PoS. Because in theory, the supervisor can directly join the network as a node to conduct first-hand data supervision and analysis.

Appchain independent chain problem

Although Appchain has many advantages, its disadvantages are also obvious. This section analyzes in detail the shortcomings of Appchain as an independent chain.

Difficulty in development. In the past, it was very difficult to develop an independent blockchain from the bottom. Many blockchain projects just clone the source code of Bitcoin or Ethereum, change the parameters, and change the module, which is a new blockchain project. Even so, development is still very difficult. It is more difficult to operate and maintain an independent chain. But later, after Cosmos-sdk, Substrate, Muta and other frameworks came out, it became a very easy task to start a new chain. These development frameworks greatly reduced the cost of blockchain research and development.

Start difficulty and safety. Starting difficulty refers to the difficulty of successfully starting a chain, which is closely related to security. For the PoS chain, its initial pledge amount, the number of validator nodes, the rationality of STO distribution and the Token issuance mechanism, etc., all directly affect the security of the chain. To be considerate, for an entrepreneurial team, it is not easy. The startup of an independent chain also requires each validator to start its own node, which places certain requirements on the validator’s technical capabilities and operation and maintenance capabilities. There are some ancillary services such as the operation of third-party managed nodes, which can reduce such requirements to a certain extent.

Difficulty in operation and maintenance. The validator node needs to operate and maintain its own independent server. Operation and maintenance are reflected in several aspects:

  • Stable operation of the server. Monitor its CPU load, memory load, network load, storage space, etc., and increase the configuration in a timely manner to prevent the node from failing due to hardware reasons
  • Anti-attack. Do a good job in node protection to prevent external hackers or unknown source attacks, which will impact the security of the chain
  • Timely upgrade and follow-up of the code version on the chain. Some versions can be automatically upgraded by technologies such as wasm, while some versions need to upgrade the entire node content, which requires manual or DevOps automatic follow-up

In contrast, contract developers on the contract platform do not need to care about such detailed operation and maintenance content.

Difficulty of cross-chain interaction. If all chains are independent and non-interactive chains, then only one island of value will eventually be formed. Only by opening up chains and increasing the liquidity of value can more value be created. Therefore, cross-chain interaction is an issue that Appchain must consider from the beginning. For Ethereum, the above contract does not need to consider this issue: internally, Ethereum assets share the same state space, and different contract assets can be combined and interacted. Externally, as long as Ethereum and other chains do cross-chain bridges, these bridges can be conveniently used to transfer assets. But Appchain has to face this problem by itself, either by implementing cross-chain bridges with other chains, or using cross-chain communication interfaces like Cosmos IBC, or joining Appchain network clusters like Polkadot and Octopus.

Among them, it is basically not feasible to implement cross-chain bridges with other chains by yourself, because under the multi-chain architecture, there are so many cross-chain bridges, and it is not worth the loss to achieve one by one.

In addition to the above four difficulties, there are other difficulties such as governance difficulty: Appchain uses PoS mechanism for on-chain governance, and contracts use DAO-like facilities for on-chain governance, which is quite difficult. How to use PoS itself is a non-technical problem, which is quite difficult. Token economics design difficulty: In the Token economics design, Appchain can do more and more flexible, but the implementation is also more complicated, and the difficulty is greater than that of the contract (or this is objective complexity).

Based on the above factors, we can conclude that the founding team is basically unable to afford the development and operation of the Appchain independent chain.

Appchain independent chain cluster

In order to solve the above-mentioned Appchain independent chain problems, some teams have proposed solutions. Each of these programs has its own characteristics, and the focus of solving the problem is different.

Cosmos

Cosmos is committed to solving the problem of cross-chain interaction between different blockchains, and the goal is to build the Internet of blockchains.

First of all, Cosmos-sdk is used to quickly develop and start a chain, which solves the difficult problem of development.

Then, it designed the IBC protocol, IBC is a universal solution. Between the chains that have implemented the IBC protocol, messages can be exchanged across chains without barriers. The independent chain developed using Cosmos-sdk can easily integrate the implementation of the IBC protocol. In this way, the chains developed based on Cosmos-sdk can communicate with each other without barriers.

However, Cosmos Appchain still did not solve the security startup problem in the initial stage of the chain, and left the security startup problem to Appchain to solve it by itself.

polka dots

Polkadot’s goal is to become a perfect blockchain expansion solution.

Polkadot’s Substrate is a rapid development framework for the blockchain, which is very good. For details, please refer to the author’s “Why Compound Gateway uses Substrate for independent chain development”.

Polkadot shares security, and its pledge security is very high, which is at the same level as the contract platform.

Polkadot also supports cross-chain messages between parachains, allowing seamless asset circulation between parachains.

The above three points solve the three biggest problems described above, and it seems that Polkadot’s solution is perfect.

But it also brings new problems. The security level of the Polkadot relay chain is very high, and the security mechanism is very complex. This leads to a very high cost of bidding and pledge of parachain slots, which in turn brings about a very high annual rent for its parachains, which has given rise to the design and economics of the Token economy of parachains. The release brought a lot of pressure. From this point of view, it is not friendly to the development of parachains. Because of this feature, Polkadot has gradually changed from a relay network for Appchain to a platform of platform (Platform of platform), which Gavin calls layer0. Each slot of Polkadot is actually connected to a homogeneous shard. And each shard is a platform. 100 slots are 100 shards. Therefore, Polkadot can connect to 100 platforms, which is a network of 100 shards. The application development model in the Polkadot network has once again returned to the model of contract development and deployment on a certain parachain. From this model, on the contrary, it has the same goal as Ethereum 2.0.

Octopus

The goal of Octopus is to provide a complete basic protocol for Appchain.

The design of Octopus: Choose a contract chain platform as the main chain instead of running its own main chain or relay chain. All Appchains directly interact with the main chain. The advantage of this is that it reduces the cost of independently operating and maintaining a relay chain, which also reduces the access cost of Appchain (the operating cost of a relay chain like Polkadot will be passed on to the access cost of Appchain). Let the Appchain track have lower entrepreneurial costs and higher survival rates.

On the other hand, due to the DeFi characteristics of the main chain (contract chain), Octopus actually has a two-sided market: one side is the DeFi investor and the other side is the Appchain entrepreneurial team. The employers voluntarily staking the Appchain (similar to the traditional Angel, but more decentralized) and become the Validator of this Appchain. When the amount of staking exceeds a threshold, Appchain enters the startup pipeline. At the same time, Octopus also provides a complete set of cloud platform automation tools, so that capitalists who lack sufficient knowledge of operation and maintenance can also be Validators. Since Octopus strongly binds the Staking role and the Validator role, the security issue of Appchain was solved by the way in the process of starting the mortgage. In other words, the security of Appchain is a by-product of Stakeholder and Staking. It’s just that the value of this security is low when it is started. With the development of Appchain, this value will gradually increase. So this kind of security is called leased security. This design is also more in line with the valuation growth curve of traditional Internet entrepreneurial teams.

The problem with Octopus is that since its main chain is an existing contract chain, its flexibility and customizability will be subject to some restrictions, and it is not as flexible and controllable as a fully autonomous relay chain. The Octopus protocol design conforms to the basic rules of capital and finance, but it remains to be seen how effective the actual operation will be.

In this section, we have analyzed several typical Appchain cluster solutions on the market. It can be seen that the problem is indeed very complicated, and it is not so easy to get a perfect solution. Innovation has infinite possibilities, and the core lies in the art of compromise. In the future, it is not ruled out that a better design can better (compromisingly) solve those problems of Appchain.

Introduction to Appchain Development Framework

Almost every blockchain has its own SDK, but not all SDKs are designed for Appchain development. Here we mainly introduce several development frameworks for developing Appchain.

Cosmos-sdk

“Cosmos SDK Developer Document” describes Cosmos-sdk as follows:

Cosmos-sdk is an open source framework for building multi-asset public blockchains based on PoS consensus algorithms such as Cosmos Hub, as well as permission chains based on proof-of-authority consensus algorithms. Blockchains built using the Cosmos SDK are usually called application-specific blockchains.

The goal of the Cosmos SDK is to allow developers to quickly build a customizable blockchain that can natively interoperate with other blockchains. In their vision, this SDK is like a web application framework, allowing developers to quickly build secure blockchain applications based on the Tendermint algorithm. The blockchain developed by the Cosmos SDK is built with modular modules, most of which are open source and can be used by any developer. Anyone can create new modules for the Cosmos SDK and integrate already built modules, as easy as importing them into your blockchain application. Another point is that the Cosmos SDK is a system based on capabilities, which allows developers to better consider the security of interactions between modules.

Substrate

In the process of developing Polkadot, Paritytech disassembled all the functions of the blockchain into abstract designs and implemented them into an open source and general blockchain framework, and used this framework as a tool to build Polkadot products. This framework is Substrate.

Substrate is a blockchain development framework with the goal of versatility developed in Rust language. Its design elements, such as cryptographic algorithms, storage structure MPT tree, account system, etc., are mostly borrowed from the most successful Ethereum infrastructure in history. (It is understandable that Paritytech started as an Ethereum client. Gavin Wood is also one of the co-founders of Ethereum). For a framework to be universal, it needs to be highly abstract. The cost of a high degree of abstraction often appears to be complex and difficult to use. So Substrate also provides a lot of DSL (domain specific language), which is convenient for novices to learn and use. To summarize briefly, Substrate has the following characteristics:

1. Orient to general purpose. Its design is oriented to the general field, rather than an SDK developed specifically for a certain chain. Each team can use Substrate to develop a completely independent chain that does not depend on any existing network (for example, the blockchain developed using Substrate can be completely independent of Polkadot, which is also one of Paritytech’s design goals)

2. Comprehensive functions. It can cover almost all scenarios of the blockchain, and it can be said to be the most comprehensive blockchain framework on the market.

3. Runtime code is compiled into wasm for execution. Wasm is the mainstream VM bytecode choice in the blockchain industry today

4. Super customizable. Substrate itself is a bunch of scattered components, you can freely replace components and combine freely under a set of specification constraints

As one of the strongest blockchain development frameworks so far, Substrate has been welcomed by more and more innovative teams.

Move

Muta is a blockchain Appchain development framework developed by the Nervos team. The document describes it like this:

Muta is a multi-faceted, high-performance blockchain development framework that makes building a blockchain simple and flexible. Blockchain developers can use Muta to quickly build their own blockchains, focusing on business functionality, thereby eliminating the huge amount of work to build the underlying network and consensus mechanism from scratch.

The basic core components provided by Muta are:

  • A newly designed consensus algorithm-Overlord, with high throughput and low latency
  • Fast and stable storage
  • Modular p2p network
  • High-performance memory pool

The customized parts provided by Muta are:

By developing services-including governance mechanisms, business logic, and even virtual machines connected to the blockchain, developers can easily customize the functions of the chain.

In Muta, a service is an abstraction layer used to extend the Muta framework. Each service is a relatively independent unit that maintains its own storage and operation interface. These services together form the state machine part of the chain. After connecting with the underlying components of the blockchain, it becomes a unique blockchain that belongs to you.

There are many other rapid development frameworks for blockchain, which are not listed in this article.

to sum up

This article proposes a theory of C0, C1, C2 stratification from the perspective of value capture for the current blockchain universe. And in this theory, it analyzes the difference and connection between DeFi and Web3.0, and demonstrates why the blockchain (DeFi part) needs Web3.0. Then, it compared the advantages and disadvantages of Smart Contract and Appchain in detail. Finally, a comprehensive study was done on the application chain, the main blockchain used to carry Web3.0 App, and laid a theoretical foundation for future practical innovations based on the application chain.

The transformation of Web3.0 from an ideal into a reality requires countless teams to fully practice in various fields. Summarize experience in practice, revise theories, and explore new programming paradigms, product paradigms, and governance paradigms. In the fight in the market, we will obtain first-hand feedback from users, improve product form, upgrade user experience, and finally embark on a broad road.

The dawn has risen, just waiting to move forward bravely.

reference

“Why Web3.0 Need Blockchain”

“Why I Stop Interpreting Ethereum as a “World Computer”” https://ethfans.org/toya/articles/why-i-no-longer-explain-ethereum-as-a-world-computer

Serverless is more expensive than you’d expect

Serverless vs Docker Containers— what to choose in 2020? (updated)

[Translation] Overview of Blockchain Scalability [2020]-知识(zhihu.com)

“The ending of the Ethereum story is not “world computer” but “open finance” https://mp.weixin.qq.com/s/8WvURohy1WD4tbf0nfbdrw

DeFi explosion pushes Ethereum price to 2020 high

“DappRadar second quarter report: DeFi lock-up is still concentrated in Ethereum, Polygon ecology grows rapidly”

“The History of Blockchain Expansion: State Channels, DPoS, Big Blocks and Sidechains”

“Analyzing the Layer 1 Competitive Landscape: Where are the opportunities for the new public chain? 》

“DeFi in Ethereum 2.0: Urban, Suburban, and Rural”

“How to Reshape China’s Finance in Our Time”

http://finance.sina.com.cn/zl/china/2020-08-19/zl-iivhuipn9458143.shtml

“Basic Theory of Internet Finance”

http://www.jryj.org.cn/CN/abstract/abstract373.shtml

“Encrypted assets are not a scourge, understand the basic characteristics and transformative potential of DeFi infrastructure”

“Five Dimensions of Token Classification”

SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities

“The regulatory paradigm shift in the issuance of security tokens”

“Future Company: Blockchain Technology + Token Economy”

“Why Compound Gateway uses Substrate for independent chain development”

“Cosmos SDK Developer Documentation”

Mike Tang, Lester Li

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-blockchain-needs-web3-0/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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