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An article to understand the past and present of the crypto economy.



What is Crypto Economy

The encryption economy refers to the economic form in which asymmetric encryption technology is used in various fields of the economy. It is the third economic form of the information economy after the digital economy brought about by computer technology and the Internet economy brought about by network technology.

Digital Economy—>Internet Economy—> Password Economy

In general, in the past century, human society has been shifting from a material economy to an information economy, that is, the core of people's lives has shifted from material products to information products.

The starting point of the information economy is that computer technology standardizes various information into binary numbers composed of 01, which opened the era of "digital economy". From the invention of the computer in 1940 to the peak of the computer industry in 2000.

Network technology further connects digitized information on a global scale, bringing about the "Internet economy". Network technology started in 1960 and reached its peak roughly by 2020. The Internet economy is currently facing two bottlenecks, one is information security, and the other is information monopoly. Almost all negative news about the Internet economy can be attributed to these two problems.

The number of monthly active-zce addresses of Ethereum has dropped to the lowest level in two years: According to news on July 13, according to the CoinMetrics report, the current number of monthly active-zce addresses of Ethereum is about 6 million, which has dropped to the lowest level since June 2020. [2022/7/13 2:09:27]

You can pay attention to these negative news.

The encryption economy is a new economic form based on asymmetric encryption technology, which fundamentally solves the problems of Internet information security and information monopoly.

So the crypto economy is the evolution of the Internet economy.

The basic solution to the problem of information security lies in the popularization of asymmetric cryptography. When everyone can use their private keys to control their own information security, the information security problem of the whole society can be solved.

To solve the problem of information monopoly, on the basis of asymmetric cryptography to achieve information security, further important social and economic data and rules, with the help of peer-to-peer network technology, form a distributed consensus system that is not monopolized by any center.

Encrypted asset management company Arca’s fund completed $50 million in financing, and Alethea and others participated in the investment: On February 4, encrypted asset management company Arca announced that its fund had completed $50 million in financing. This round of financing was led by Alethea, CXIP, Portals, Raremint and Recur and others participated in the vote.

It is reported that the fund will be dedicated to investing in individual NFTs, and will also purchase digital properties, in-game assets, passive income sources, artwork and collectibles, DeFi integrated NFTs, utility and reward-based NFTs, AI NFTs, identity tokens and Royalty flow, and Tokens supporting the ecosystem, such as game assets, infrastructure, and Metaverse-related Tokens. [2022/2/5 9:31:54]

After solving the problems of information security and information monopoly with asymmetric cryptography and distributed consensus, the Internet economy has fully transformed into a cryptographic economy.

Since the civilian use of asymmetric cryptography in the 1980s, the cryptographic economy has begun to sprout, and it is expected to be fully realized by around 2040.

American Banker: Over a Third of Banks Will Offer Crypto Services in Three Years: On Dec. 19, American Banker Releases 2022 Banking Predictions Based on Survey of 175 Executives , which includes C-level, regional and sector executives from global and community finance companies. According to the report, cryptocurrencies will play a bigger role in traditional banking next year, with nearly 40% of respondents saying they are likely to offer crypto services to retail customers next year; about 10% of customers currently have crypto in their customer accounts manage bitcoin or other digital currencies; on average, respondents said 4 percent of their consumer customers currently own some type of cryptocurrency; 60 percent of survey participants said they expected their consumer customers to Ownership will increase in 2022. (DailyCoin) [2021/12/19 7:49:00]

Two major functions of asymmetric cryptography

Asymmetric cryptography has two main functions, one is encryption and decryption of information, and the other is signature verification of information.

Polygon is looking forward to deploying Uniswap V3 to the network, and has proposed it in the community: On November 21, Polygon co-founder Mihailo Bjelic proposed to deploy Uniswap V3 to the Polygon PoS chain in the Uniswap forum. He believes that Polygon is currently the DeFi ecosystem second only to the Ethereum mainnet, and they also hope to incentivize the adoption rate of Uniswap. [2021/11/21 7:02:46]

Encryption and decryption are mainly used to prevent information leakage.

The basic method is that the sender encrypts with the recipient's public key, and then transmits the ciphertext to the recipient, and only the recipient can decrypt it with the corresponding private key. During the transmission process, it does not matter if the ciphertext is leaked, because only the recipient has the corresponding decryption private key.

Signature verification is mainly used to prevent information forgery.

The basic method is that the information publisher signs the information with his own private key, and then publishes the information, signature and his own public key. The recipient of the message can use the publisher's public key to verify that the message is signed by the publisher's private key. Anyone who falsifies the information content-zce will not pass the verification.

Release of the white paper "Chain Computing": Building a Trust Network and Committing to Borderless Collaboration: On November 5, at the 2021 Tencent Digital Ecology Conference held yesterday, Tencent Cloud Blockchain and Tencent Research Institute jointly released "Chain Computing: Building a Trust Network" , Committed to Borderless Collaboration" white paper. This white paper focuses on building the next generation of information technology infrastructure "chain computing", through the combination of cloud computing and blockchain, build a trust value network, realize the borderless collaboration of data, applications, business, and ecology, and form a network infrastructure , to obtain huge scale effect, network effect and spillover effect. As a new technological paradigm, chain computing will provide a trusted value network with borderless collaboration for industrial ecological construction, and turn the data elements in the cloud, edge, and terminal formed by the industry into a new type of "capacity". Measurable "value" embodies, through the exchange of "capacity" and "value" interoperability between different industries, to promote the synergy between multiple industries, to promote the emergence of new industries, new formats and new models, to accelerate the process of digitalization, and to strengthen the digital economy development, and create new advantages in the digital economy for the construction of digital China. [2021/11/5 6:33:58]

Since asymmetric cryptography was originally invented to encrypt information for the military, it was translated into asymmetric encryption technology when "Asymmetric cryptography" (asymmetric cryptography) was introduced into Chinese.

This led to the later cryptocurrency and crypto-economy also being called "encrypted currency" and "encrypted economy". Actually this is wrong.

Encryption, decryption, signature, and verification are just application methods of asymmetric cryptography. A correct understanding of this can reduce detours in the process of building a crypto economy.

The crypto economy has two phases

Asymmetric cryptography was invented in 1970, and it was promoted to civilian use by cypherpunks in the 1980s. It has roughly gone through two stages so far.

1. Cybersecurity Phase

From the 1980s to 2009, asymmetric cryptography was mainly used by commercial enterprises in the digital economy and the Internet economy to improve the security of equipment and network transmission.

With the support of asymmetric cryptography, online payment, e-commerce, https, etc. have been popularized, which has contributed to the prosperity of the Internet economy.

At this stage, asymmetric cryptography is hidden behind the scenes, used by enterprises and platforms, and not grasped by ordinary people.

2. Password consensus stage

Since Satoshi Nakamoto launched the Bitcoin system in 2009, the combination of asymmetric cryptographic technology and distributed consensus mechanism has begun to build an independent decentralized economic system, which is often referred to as the blockchain, which is called "cryptographic consensus". ".

In the cryptographic consensus system, ordinary users hold their own private keys, thus gaining stronger economic freedom. The resulting decentralized economic system can reconstruct various global economic infrastructures and become a new engine for global economic growth.

In the first stage, asymmetric cryptography mainly uses encryption and decryption functions to ensure the security of information transmission.

In the second stage, the signature verification function is mainly used to establish a verifiable trust relationship between people on the network.

Many people don't know that all data in the Bitcoin system is completely open, and no data is encrypted.

What is distributed consensus

Distributed consensus is a natural solution to information monopoly and has existed since ancient times.

Information monopoly refers to the fact that all important data and institutional rules of an economic organization are controlled by a center, that is, data monopoly and rule monopoly.

Distributed consensus means that each member of the economic organization can master important data and rules, namely data consensus and rule consensus.

The most typical scenario of distributed consensus is playing mahjong: everyone records important data, everyone understands, abides by and supervises others to abide by the rules, and there is no need or can be decided by one person.

Distributed consensus systems have been feasible since ancient times, but restricted by the development level of information technology, they can only be used in small economic activities.

As the scale of economic organization increases, the efficiency drops sharply. Therefore, since ancient times, all large-scale economic activities have been centralized.

Things have changed now. Computer technology and Internet technology have greatly improved the storage, analysis and dissemination capabilities of information, and asymmetric cryptography technology provides remote identity verification functions. Therefore, distributed consensus can be realized in a wide range.

Cryptographic consensus is the cornerstone of the cryptoeconomy

There are two fundamental features of cryptographic consensus, one is that the individual holds the private key, and the other is decentralization.

Personal mastery of private keys is not only the premise of realizing information and asset security, but also the fundamental guarantee of personal basic rights and interests, and is the foundation of the encryption economy.

The blockchain in which individuals cannot master the private key is not fundamentally different from the traditional Internet.

Decentralization is the source of efficiency for the encryption economy to surpass the Internet economy. It can eliminate huge central operating costs, prevent the central self-interest from harming the ecology, and promote high-speed knowledge sharing and free collaboration on a global scale.

Cryptographic consensus is suitable for building the most important infrastructure of the global economy, such as currency, network, storage, etc. The infrastructure reconstructed based on cryptographic consensus cannot be stopped and divided by any individual, organization or country, and can realize true global economic integration.

In the crypto economy, various centralized commercial activities can share the decentralized infrastructure, the operating cost will be greatly reduced, the market space will be greatly expanded, and the efficiency will be rapidly improved. Compared with traditional Internet businesses, it will form a dimensionality reduction blow.

From now to 2025, it is a critical period to build a global cryptographic consensus infrastructure. Both PlatON and Freecash are working in this direction. If this stage goes well, before 2040, the global encryption economy will be basically realized.


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