HOKIE: What is a cryptoeconomy?

2021-11-03 14:11:00

What is a cryptoeconomy

Cryptographic economy refers to the economic form of asymmetric cryptographic technology used in various fields of economy. It is the third economic form of information economy, following the digital economy brought by computer technology and the Internet economy brought by network technology.

Digital economy -- > Internet economy -- > cipher economy

Generally speaking, in the past century, human society is changing from material economy to information economy, that is, the core of people's life is changing from material products to information products.

The starting point of the information economy is that computer technology standardized all kinds of information into binary digits formed by 01, which opened the era of "digital economy". From the invention of computer in 1940, the computer industry reached its peak in 2000.

Internet technology has further connected digital information on a global scale, bringing about the "Internet economy". Internet technology began in 1960 and will reach its peak around 2020. Internet economy is currently facing two major bottlenecks, one is information security, the other is information monopoly. Almost all the bad news about the Internet economy can be attributed to these two problems.

You can pay attention to the negative news.

Cryptographic economy is a new economic form based on asymmetric cryptographic technology, which fundamentally solves the problem of Internet information security and information monopoly.

So cryptography is an evolution of the Internet economy.

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

In order to solve the problem of information monopoly, it is necessary to combine the important data and rules of social economy with the help of point-to-point network technology to form a decentralized consensus system which is not monopolized by any center.

After solving the problem of information security and information monopoly with asymmetric cryptography and decentralized consensus, Internet economy has turned into cryptography economy.

The cryptographic economy started in the 1980s when asymmetric cryptography was popularized and is expected to be fully realized around 2040.

This process will continue to have periodic innovation breakthroughs, bringing a number of bull markets.

Understand the logic of the cryptic economy, can better grasp the rhythm, seize the bull market opportunities.

Asymmetric ciphers have two main functions

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

Encryption and decryption are mainly used to prevent information leakage.

The basic method is that the sender encrypts the message with the recipient's public key and then transmits the ciphertext to the recipient, who can decrypt it only with the corresponding private key. It doesn't matter if the ciphertext is leaked during transmission, 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 publisher signs the information with his private key, and then publishes the information, the signature, and his public key. The recipient of the information can verify that the information is signed with the publisher's private key using the publisher's public key. Anyone who falsifies the information will fail verification.

Since Asymmetric cryptography was originally invented to encrypt information for the military, it is translated as Asymmetric cryptography when introducing "Asymmetric cryptography" in Chinese.

This led to the later cryptocurrencies, cryptoeconomy are also called "cryptocurrency", "crypto economy". In fact, this is wrong.

Encryption, decryption, signature, and authentication are just applications of asymmetric cryptography.

I made the same mistake at first. PlatON's Sun Lilin reminded me of this in 2018.

The correct understanding of this point can reduce the detours in the process of building cipher economy.

There are two stages to the crypto economy

Asymmetric cryptography was invented in 1970 and introduced to civilian use by cypherpunks in the 1980s. It has gone through two stages.

1) Network security stage

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

With the support of asymmetric cryptography, online payment, e-commerce and HTTPS have been popularized, contributing to the prosperity of the Internet economy.

At this stage, asymmetric passwords are hidden behind the scenes, used by enterprises and platforms, and not in the hands of ordinary people.

2) Password consensus stage

Since Satoshi Nakamoto started the Bitcoin system in 2009, asymmetric cryptography technology combined with decentralized consensus mechanism began to build an independent decentralized economic system, which is often referred to as blockchain, and I call it "cryptographic consensus".

In cryptographic consensus systems, ordinary users control their own private keys, thus gaining greater economic freedom. The decentralized economic system thus established can reconstruct all kinds of global economic infrastructure and become a new engine of 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, signature verification function is mainly used to establish verifiable trust relationship between people on the network.

What many people don't know is that all data in the Bitcoin system is completely public and nothing is encrypted.

What is decentralized consensus

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

Information monopoly refers to that all important data and system rules of economic organizations are controlled by one center, namely data monopoly and rule monopoly.

Decentralized consensus means that every member of an economic organization can grasp important data and rules, namely, data consensus and rule consensus.

The most typical scenario for decentralized consensus is mahjong: everyone keeps important records, everyone knows, follows and monitors the rules that others follow, and one person doesn't have to and can't have the final say.

Decentralized consensus system has been feasible since ancient times, but restricted by the level of information technology development, it can only be used in small economic activities.

As the size of an economic organization increases, its efficiency declines dramatically.

So, since ancient times, all large-scale economic activities have been centralized.

Now things have changed.

Computer technology and Internet technology greatly improve the storage, analysis and dissemination of information, asymmetric cryptography provides remote authentication function, so decentralized consensus can be realized in a large range.

Satoshi nakamoto combined the distributed ledger, point-to-point network, block chain and proof of work mechanism gradually discovered by predecessors, and realized the first decentralized consensus system that effectively operated on a global scale -- Bitcoin, pushing the cryptoeconomy to a climax.

Cryptographic consensus is the cornerstone of the cryptographic economy

The basic characteristics of password consensus are two: one is that individuals hold private keys and the other is decentralization.

Personal possession of private key is not only the premise of information and asset security, but also the fundamental guarantee of personal basic rights and interests, and the basis of cryptographic economy.

Blockchain, in which individuals do not have access to private keys, is no different from the traditional Internet.

Decentralization is the source of efficiency for the cryptography economy to surpass the Internet economy. It can eliminate the huge operation cost of the center, prevent the harm of the selfish interests of the center to the ecology, and promote the high-speed sharing of knowledge and free collaboration in the global scope.

Cryptographic consensus is suitable for building the most important infrastructure of the global economy, such as money, networks and storage. Infrastructure based on cryptographic consensus reconstruction is something that no individual, organization or country can stop and segment, enabling true global economic integration.

In the cryptographic economy, all kinds of centralized business activities can share the decentralized infrastructure, the operation cost will be greatly reduced, the market space will be greatly expanded, the efficiency will be rapidly improved, compared with the traditional Internet business will form a dimension reduction blow.

The year 2025 is a critical time to build a global cryptographic consensus infrastructure, and PlatON and Freecash are both working in this direction.

If this phase goes well, the crypto economy will be almost universal by 2040.