These days, all my friends are very anxious. I heard that they stay up till 3am working on the blockchain, sending ICOs, talking about things like “if it rises or falls within the range of 50%, it’s called a stable sideways move”, and “the profit rate will at least be 100 times”. They also talk about the next-generation Internet, the greatest technology revolution since the Industrial Revolution. So, how does this decentralized blockchain influence our life?

Before we talk about the challenge of decentralization, we have to figure out why the challenge of decentralization exists.

Things after a long period of division, tend to unite; after a long period of union, tend to divide.

It is believed in China that “domains under heaven, after a long period of division, tend to unite; after a long period of union, tend to divide.” This rule applies not only to history, but also to the development of the Internet industry.

In the past, the Internet was only used to make phone calls and was monopolized by one or two large companies. This was because of the circuit switching technology back then. If we look back to even earlier age, we’ll find that people had to use manual wiring. Such low level of technology determines that the network at that time can only be centralized.

But the improvement of technology always leads to the new round of decentralization. The invention of the TCP/IP protocol gave an impetus to the arrival of the Internet era. As packet switching took the place of circuit switching, information could get around freely. Under such circumstances, it was simply impossible for one single company to monopolize the the resources of the entire network. It brought us the era of decentralization. Many portal sites and personal blogs came into being, and everyday there were newborn projects plunging into the great tide of the times.

This state of decentralization lasted for a while, then new problems appeared — information was difficult to search

Driven by this demand, search engines and super APPs became the new centers of the whole system. However, based on the data and portals that they had, these apps could collect more data. This is how centralization got to the era of cloud computing and big data.

Just as the time when TCP/IP made the world decentralized. Today, the new technology of blockchain has once again led the world to an era when centralization gives its way to decentralization.

Blockchain, Value Network and Consensus

Many years ago, I had thought, “Why can’t I just put my money into a file folder, in which each file represents a certain value, and when I send someone else a file, I simply transfer my money to him?” It is a pity that this idea could not be achieved by traditional Internet. The traditional Internet is a net of information and can only transmit the copies of those information. However, value, is not easy to transmit. But the birth of blockchain has totally changed the game and made it possible for value to be transferred, just as information is transmitted. This is the magic and charm of blockchain.

Transactions on the blockchain can only be generated by the user’s private key, and once they are recorded by the blockchain, they are impossibly to be changed. Based on the consensus of certain mathematical principles, people can trade with everyone without trusting them. Where there is consensus, there is possibility of cooperation.

All the wars and tragedies in human history are nothing but the result of the failed consensus. After the financial tsunami in 2008, almost at the same time, two people thought of a solution to all trust problems in the world.

l A Chinese and a Japanese

l Ge You and his invention, the conflict resolution terminal

l Satoshi Nakamoto and his invention, blockchain

I have explained to others what blockchain is for a million times —

1. It’s a distributive ledger.

2. It’s a decentralized application.

3. It’s a consensus platform.

4. It’s cryptocurrency

5. It’s token economy.

I was totally enjoying my explanation, and the listeners were always like “What on earth are you talking about? Can you stop speaking Greek?”

Let’s watch an interesting video first. it’s called “Ge You and his conflict resolution terminal”. After that I’ll explain what blockchain actually is.

URL: https://v.qq.com/x/page/e133670fxux.html

Ge You is a famous Chinese comedian actor, and I mention him here just for fun. In this movie, his conflict resolution terminal only has two nodes, and simply by this, he defrauds another man to bankruptcy. We can just give it a laugh.

We can understand blockchain in this way: it is a conflict resolution terminal that countless people can participate at the same time. It can seal all the transaction contracts collectively, and no sealed participants can withdraw their transactions. One particular feature about the seal is that it’s a very complex paging seal, so that no one can change the data in it.

Using his knowledge in cryptography and POW algorithm, Nakamoto really implemented such a conflict resolution terminal. The world’s top scientists and mathematicians have verified the solidity of this theory, and after nearly ten years of running tests, nothing wrong has ever happened. And its value has increased by millions of times.

Well, I also admire Mr.Ge and his efforts for world peace.

The challenge brought by decentralization

OK I’ll skip the chitchat and go back today’s theme, the challenge of decentralization.

The challenge of technology development

Change is the only constant in life. Technology is updated and renewed everyday, and so is the technology of decentralization.

Because of its trustworthiness by nature, many systems that requires an intermediary to increase credibility are strongly impacted, such as banks, insurance industry, and lottery industry. Beside that, due to decentralization and anonymity, decentralization will impact existing industry rules in many gray dark-web trades or in the field where the law is lagging.

From the perspective of security, any problems caused by the high centralization can have great social consequences.These days, Facebook is facing a 2-trillion-dollar fine for its data breach, which is a wake-up call for everyone. As for China, let’s just imagine how our life will be impacted if Tencent or Alibaba or any other Internet industry giants go wrong.

With the commercialization of 5G technology and the explosive growth of IOT devices, the Internet traffic has shown an exponential increase. The asynchronous growth of the terminal devices and the server is a bottleneck that all centralized processing systems will eventually face.

The challenge of awareness.

We can catch up when our technology is left behind, but we will forever be stuck in the past if our mind is left behind.

Many of us have a belief that the society in which we are living, was, should be, and always will be what it is now. It’s not true.

The money you are using is not actually your own money.

The money we use today has not always been the same. In fact, it is only a few decades old. Before the Bretton Woods system collapsed, it required equivalent value of gold as the credit guarantee to issue currency. And nowadays, we always see news like the following:

1）The U.S. national debt has exceeded 20 trillion U.S dollars.

2）Xiong’an New Area received 100 billion yuan of credit.

3）China Merchants Bank grants 4 billion yuan of credit to Anbang Insurance Group

4）Anbang Insurance Group granted 10 billion yuan of credit to Guangyuan

If you can understand that national debt and credit are the same as direct currency printing, you can understand that the money you use is actually not your own money.

Blockchain is a bubble. So is the very essence of currency itself.

The reason why the release of TOKEN is so popular is that people for the first time actually realize that the essence of currency is credit. Credit, however can be created by media packaging and celebrity platform. And TOKEN is human’s first try to issue currency by blockchain. In the past, it took real guts to do such things. People who can understand it, will be zealous for it. People who don’t, call it fraud.

Companies, have not always been like their current form. Actually, in the future, they might even disappear.

Economic rules tell us that the transaction cost is the reason why company exists. A company will eventually grow to a state in which the company’s transaction costs and management costs are in balance. After that, the expansion of the company will lead to the increase in management costs. However, in the future blockchain world, the transaction of costs will inevitably converge to zero. Can companies still find their reasons to exist at that time? It’s not a long time since the first company came into being. So I would like to say that, the demise of the form of companies will not be far in the future.

In terms of market value, bitcoin market value is over $190 billion, exceeding Goldman Sachs and Morgan Stanley, as well as Boeing.

In terms of trading volume, some bitcoin companies such as Binance, OKEX and Huobi have almost reached the scale of the China A shares.

And here comes DAO, Distributed Autonomous Organization. In the future, more and more companies will be community-oriented on the base of blockchain. Also, there will be more start-up companies choosing to finance by blockchain and operate as a community directly.

Different people will have different feelings and understandings even when watching the same TV series. I watched a Chinese TV series called “Nothing Gold Can Stay”. It led me to think that, in the era of emerging capitalism, how greatly the traditional family business was impacted by the new production relations of the companies. The protagonist Zhou Ying, richest women in her province, failed not because she did not do well, but because the backward production methods dragged her down to the inevitable tragedy. Similarly, in the future, it’s not because that you are not good enough, nor your company is not good enough, but because more and more companies change their patterns and choose a decentralized and community-based mode.

Challenge of the society

The law always lags. Code is the (new) law.

The laws in almost in every country stipulate that users’ data on the Internet only belongs to the users themselves. Companies like Huawei and WeChat also claim that the data belongs to the users. But they know clearly that the data belongs to whoever has access to it.

Facebook, as well, claims that they will protect the user’s data. However, things turns out that they sell the data to whoever pay them.

All software has user authorization and agreement terms, but who will actually read it? What’s the point of reading? Since the law is merely a useless ceremony thing.

There are hundreds of laws about company governance and financing, but how does it do with decentralized communities?

The law stipulates that whoever commits a fraud over a certain amount of money will be put into jail. But in reality, there are people who just defraud billions of dollars by using the blockchain, and the law can do nothing about it.

The country is also a form of relation of production

Chinese students have learned about the relations of production since primary school. I’m not very good at it, so I won’t dig too deep.

Today, we are living in a centralized society, working in a centralized company, getting paid with the temporary coinage issued by the centralized system and imagining the challenges that decentralization will bring to our lives. Of course, our biggest goal is to make a better and fairer society by blockchain, where everyone will have more new opportunities.

In the end, I’d like to end up my speaking with a song. It’s called “ Song of Blockchain”. Hope you enjoy it.

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Guoping Liu

Blockchain technology and applications expert, one of Bitcoin’s first miners, founding developer of the Hero mobile cross-platform framework, president of the Hero Council. Formerly @ Wind, The9, and Dianrong, where he was heavily involved in the development of Dianrong’s blockchain applications.

Previously spent many years developing the Hero framework and blockchain applications. In 2017, meshed the two together to create Hero Node, aimed at making distributed applications easy to develop for everyone. Staunch believer in a better future with distributed applications.

In an open world, Hero Node welcomes any and all feedback. Especially helpful feedback will be rewarded!

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