What has blockchain changed? A beginner’s guidebook for traditional entrepreneurs

Written by the founder of Lambda Mr. He Xiaoyang

Since I have posted a piece of Wechat moment the day before yesterday, many old familiars come to contact me asking for my psychological journey: why I engage in blockchain and why now? I will talk about some personal opinions, “triggers” that spark friends’ minds.

Many people enter this industry by virtue of one sentence that is “Internet has improved productivity, and blockchain has enhanced production relations”. In my eyes, if thinking in depth from this perspective, you tend to fall into a misunderstanding: Can blockchain increase efficiency? Can it really cut cost? I acknowledge that I don’t have enough deep thinking on these questions, but I know these words and expressions can easily create a logic trap, so I personally won’t make any comment on the above views, but only talking about some issues I have known.

Blockchain has brought down the cost of network effect.

A definite advantage of block chain is that it reduces the cost of network effect. Put differently, in some areas where network effect cannot be formed, network effect can be formed reliant by some characteristics of block chain. From the software industry, I have deep feeling about this. So taking software industry as example, I would like to talk about how the software industry will be like after the introduction of network effect. I posted a piece of article in my official account long ago, with main idea that there was no network effect in software industry or traditional software industry, the business model of which is essentially similar to restaurants, law firms and hospitals. Of course, the product was better, but not much difference in distribution.

In this diagram, the first type of model features fixed product, fixed distribution. Restaurants, clinics and law firms are all in this model, which also can achieve a large scale, such as the American largest health care provider Mayo Clinic. A drawback of this model is placing much reliance on more employees in order to obtain and serve customers. The second type of model features scalable product, fixed distribution. Many traditional high-tech companies adopt this model, such as Boeing, Lockheed Martin, Oracle and Salesforce. The third type of model is fixed product, scalable distribution. Most media use this type, so do the traditional media newspapers. The fourth type of model is scalable product, scalable distribution. Uber, WikiPedia, DiDi, and many other internet products belong to this type.

What do these four models fundamentally define? They fundamentally define the cost incurred by growth. Software area for Large Enterprise, namely the Big-Ticket Enterprise Software circled in red line in the diagram belongs to the second type of model. This model can be scaled up on the product, but a linear growth model in distribution, with the biggest feature that distribution and the number of people used for distribution are positively related. Therefore, above a certain scale, there must be the problem of increased marginal costs and diminishing marginal returns. In other words, growth will slow down.

From 2015 to 2018, American VC firms Accel Partners、A16Z and Benchmark have been discussing a new business model.

GitHub 7.5 billion dollars, MuleSoft6.5 billion dollars, and MongoDB, Etastic, Docker, Kafka, Mesos, etc. these are the products that developers are familiar with, and behind them are companies with billions of dollars valuations. The growth rate of these companies is about 1 billion dollars valuation in 4 years, which is much faster than traditional software. The reason behind this is the network effect arising from the introduction of Community concept.

Then, what’s the relationship between OAS model and blockchain? Personally, I think they are the same issue, both relying on the strength of Developers and the transmission of network effect to conduct novel innovation through network connection. The only difference is that OAS selects to make revenue first and IPO later after Community formation, while blockchain is IPO directly without any revenue. However, IPO and ICO are just different ways of financing, not necessarily related to business logic. Even from the success of Docker’s community to the failure of commercialization, I think that ICO model is probably better than the IPO model.

Take Docker as an example, the company is better than the EOS and IPFS of blockchain area, whether in technology or in market influence. If choosing the ICO model, has the Docker already turned out to be a company worth of billions dollars today? Is it possible to avoid the tragedy of the founder being expelled and the founding team leaving altogether? Moreover, under ICO model, the huge selling cost incurred to obtain revenue can be avoided (Usually over the past ten years it was far greater than the income itself). The community’s contributors also receive fair benefits and can share the wealth of technological advancement. While the IPO model benefits only a few individuals and capitals, Elasitc is an example of my side.

Recently, Elasitc has submitted its IPO application, with expected market value of around 3 billion dollars, for which friends in open source community are excited and forward such news. I have written in previous articles about my friend Medcl, who has committed to promote Elastic Search in China from 2012. It can be said that Elasitc is widely used in China, at least half credit from Medcl’s contribution. We made acquaintances in community, after that I exclusively sponsored every conference of Elasitc China Community after its second session. The earliest Elastic Base lied in Dutch. The founder invited Medcl to start up business together and promised him a huge amount of share equity on condition that Medcl went to Dutch. At that time, Medcl thought through and declined such invitation, leading to a passing by of a great wealth in his life. Up to 2016, Elastic established business in China where Medcl served as the technology director.

Therefore, the conclusion of the first point is that blockchain can bring network effect to the market without it through community and token incentive. A further thinking is that why business models are inherently different? Could it be like a physical force, represented as a different force but really just a different representation of the same model at different energy levels?

Blockchain has changed value distribution.

In “The Essence of Management”, Drucker notes that the sole purpose of a business is to create customers. Today, the value of an enterprise is created by both the enterprise and its customers, says the professor Chen chunhua in “The Nature of Business”. Understanding from my own entrepreneurial career, the reason why 2C business in China is easier than 2B business, in a large sense, is that in many 2C businesses their values are created by customers and businesses together, which can be proved by the popular “Douyin”, “Kuaishou”, and two-dimension “Douyu” in bilibili.com. Today’s corporate form is far different from that when Adam Smith wrote “The Wealth of Nations”, but today’s value distribution is not much different from Dutch that established the shareholding system that year. The creators of value, the customers, did not share the value of company’s growth.

Not only that, the customer as a single individual is even on the side of being harvested in modern business rules. This is particularly evident in the use of data. From Baidu’s hemophilia post bar to the Wei Zexi incident, and to Facebook’s dissemination of personal privacy data, data, this huge value is owned by only a few companies.

A few days ago, the EU’s GDPR bill was launched, the birth of which will have a huge impact on the future data management. For example, the bill requires human iris data and fingerprint data cannot be stored on any centralized server, which will definitely booster the technological development of decentralized storage.

Blockchain evolves to the socialization of software.

Block chain is a rapidly evolving field. Many people feel “dazzling”, actually “cannot see the wood for the trees” may be more accurate. Here to talk about my vision, let us put aside the so-called public-chain disputes and consensus arguments, look into the distant future.

As early as 1995, Barbara Hayes-Roth, a professor of computer science at Stanford University, stated clearly in the IJCAI special report: “Intelligent Agent is both the initial goal and the ultimate goal of artificial intelligence.” The concept of Agent was proposed by Minsky, a well-known computer scientist and founder of artificial intelligence at the Massachusetts Institute of Technology. He introduced social and social concepts to computing systems in the book “Society of Mind.” The traditional computing system is closed to meet the requirements of strong consistency, however the society mechanism is open and cannot meet the conditions of strong consistency, under which some individuals need to reach a receivable solution through certain consultation mechanisms when facing contradictions.

Minsky refers such individual in computing society as Agent. The organic combination of such individuals constitutes computing society — multi-Agent system. Simon’s theory of finiteness is another important theoretical basis for the formation of multi-agent systems. He believes that a large structure can organize many individuals to make up for the limited ability of individual work; each individual responsible for a specific task can make up for the limited ability of individuals to learn new tasks; organized information flow between social organizations can make up for the limited knowledge of individuals; accurate social institutions and clear individual tasks can make up for the limited ability of individuals to process and apply information.I don’t know how you think of upon seeing the above words. Agent is a term in artificial intelligence, with which you might be more familiar if replaced with blockchain node.

Therefore, from my personal perspective, socialization of software is the ultimate goal of blockchain development. In the final state, simple rules can give rise to collective wisdom.

Thus, I believe blockchain in future will meet requirements as follows:

· Autonomy: The node can automatically adjust its own behavior and state according to changes in the external environment, instead of passively accepting external stimulus, and has the ability to self-management and self-regulation.

· Reactive:The ability to respond to external stimuli.

· Proactive: The ability to take actions according to changes in the external environment.

· Social: Nodes have the ability to cooperate with other nodes or people. Different nodes can interact with other nodes according to their intentions to solve problems.

· Evolutionary: Nodes can accumulate or learn experience and knowledge, and modify their behavior to adapt to new environments.

In my opinion, the future blockchain nodes are similar to the agent definition in artificial intelligence, where weakly defined agents (nodes) refer to agents (nodes) with autonomous, social, reactive, and proactive characteristics; strongly defined agents (nodes) refer to agents (nodes) that not only have basic characteristics in a weak definition, but also have mobility, communication capabilities, rationality, or other characteristics.

I would like to use a metaphor. The blockchain nodes that first adopted the POW and POS consensus algorithms are like the elementary school students who are doing gymnastics exercises on the playground with the uniform gestures. Afterwards, with the development of technology and the raising of concept of VRF and Shard, you can randomly assign a pupil to do gymnastics, while others score him. But the future blockchain is more like a social dinner, where many people dance with the music, without any human intervention.

Blockchain will further push the development of computer science

Since starting Lambda project, I have read more than 100 academic papers of computer this year and learned group theory from scratch. I experienced two feelings. Although I have been in the software business for many years, I didn’t feel like I was a CS graduate until I engaged in Lambda, besides, it’s anobvious feeling that the innovation in the blockchain field requires the use of the latest and most recent papers in the computer field, and even the creation of something that can write academic papers by your own.

In cryptography, for example, in the model of the currency and Ethereum, only six tools of traditional cryptography are used: symmetric encryption, asymmetric encryption, signature, hash function, message authentication code, and random number, respectively. However, many new public-chain projects require the use of technologies in modern cryptography, such as threshold-based secret sharing, blind transmission, homomorphic encryption, zero-knowledge proof, bit commitment, etc. In our storage project, the data distribution needs to use various variants of the consistent hash, from traditional Chord and KAD networks, to Pastry, to jump-consistent hashing, and data privacy protection requires the use of proxy re-encryption and attribute-based encryption. All these are relatively unpopular but cutting-edge fields.

Now with the popularity of Nucpher and other projects, it has gradually become popular. Therefore, we have seen an increasing number of projects looking for academic talents, and seen professors and scientists make projects for themselves to issue coins. The upsurge of blockchain has also brought about a wave of technological change.

My friend Wang Tao had written several articles before illustrating his point of view, thinking that the blockchain is essentially a multi-living database. My partner Huang Dong has also written a comparative article on Oracle RAC and blockchain in the past few days. Today, a middleware expert comes to tell me that he has followed some cross chain projects recently, which he finds very similar to the message middleware and Tuxedo we did more than 10 years ago. I think all of them are quite correct. In fact, blockchain uses a lot of knowledge in computer science. This may be the threshold.

But from my perspective, a learning threshold is indeed erected, but not very demanding. The biggest barrier to blockchain is that it actually has a threshold of knowledge, which is higher than your range of vision, making you think there is no threshold, thus creating the illusion of “just so so”. In any area, when you come to contact with something really hard, it means that you really get started. Of course, it may not be so difficult after getting started.

So, for those who don’t have a deep understanding of blockchain, which projects should they start learning from? From my personal experience, a good white paper must be a logically fluent one. For those full of mathematical formulas, the academic level of the author can be guaranteed, but not necessarily logically feasible. All human knowledge is invented by human beings, and within the reach of human brain power. Therefore, I think that in this area, we must maintain awe, but we should also believe in our judgment and learning ability.

Constantly learning, not afraid of computer technology and mathematics knowledge, looking at each seemingly outstanding project normally, believe in your own judgement, all these should be the correct basics for people at traditional Internet fields to enter the blockchain.

About Lambda

Lambda is a high-speed, secure and scalable blockchain infrastructure project. Through the logical decoupling and separate implementation of Lambda Chain and Lambda FS, we provide infinitely scalable data storage capabilities to decentralized applications and achieve data integrity proof, multi-chain data cooperative storage, cross-chain data management, data privacy protection and other services. Recently, Lambda project has obtained tens of millions of RMB investments from ZhenFund, Metropolis VC, and Dfund.

✅ Official Website and Social links.
🔹 Official website: http://www.lambda.im
🔹Telegram Community : https://t.me/HelloLambda
🔹Facebook: https://www.facebook.com/Lambdaim
🔹LinkedIn: https://www.linkedin.com/company/lambdaim/
🔹Twitter: https://twitter.com/Lambdaim
🔹White Paper : http://www.lambda.im/doc/Lambda-WhitePaper-en.pdf