Full Text of Xiao Feng's Speech at Wanxiang Blockchain: The New Phase of Blockchain Application Protocol Will Welcome a Great Explosion

Source: Wanxiang Blockchain

Organized by: Deep Tide TECH FLOW

Dear friends and audience, thank you very much for attending the Wanxiang Blockchain Global Summit. Today, the topic I want to share is "The New Stage of Blockchain: The Explosion of Application Protocols." A few days ago, a significant migration of the Ethereum consensus protocol not only holds great significance for Ethereum but also marks a very important historical moment for global blockchain technology and applications. It signifies that the infrastructure construction phase of blockchain is nearing its end, and a massive explosion of applications is about to come.

Before discussing the explosion of blockchain application protocols, let's review how the internet protocol stack was built. From the 1970s to the 1990s, internet protocols were diverse and flourishing.

The main protocols at that time included:

1. The well-known DEC company launched the DECNET internet protocol model.
2. IBM's own SNA internet protocol model.
3. The OSI internet protocol model introduced by European official organizations.
4. In the United States, the TCP/IP internet protocol model initiated from the grassroots level.

In the protocol wars of those decades, the TCP/IP model emerged as the ultimate winner.

I believe the TCP/IP model was able to defeat the internet protocol models favored by officials, large companies, and academic experts for five main reasons:

First, the TCP/IP model is demand-driven, where code precedes standards. It starts with functional code, which is tested by the market, gradually leading to standards. In contrast, the OSI model, organized by European official entities, begins with a framework, then standards, and finally code. Clearly, the demand-driven TCP/IP model has greater competitiveness.

Second, the TCP/IP model was initiated by communities and self-organized from the bottom up. Although it eventually had an official organization, for the first 20 years, up until the mid-1980s, it was developed collaboratively by developers sharing similar values in a community manner.

Third, the TCP/IP model adopted an agile development approach for rapid iteration, continuously evolving based on market demands and technological possibilities. The OSI model, on the other hand, followed a waterfall development approach, designing the entire model upfront and delivering it all at once to users, which is clearly not a typical internet practice.

Fourth, the TCP/IP model is developer-friendly and user-friendly. Customers come first; customer priority is paramount.

Fifth, the TCP/IP model is completely open-source and open. While other internet models are also open-source, they do not allow usage without permission. They are proprietary models that require authorization for use. The TCP/IP model, however, does not require authorization; anyone can use it, and anyone can contribute to it.

By summarizing the successful experiences of the TCP/IP model in the internet protocol stack, we can find that blockchain protocols also follow these characteristics and develop in a similar manner. In this regard, the internet protocol stack and the blockchain protocol stack are on the same path.

We generally divide TCP/IP into five layers:

The physical layer is the first layer, the lowest layer, which includes cables, fiber optics, etc.

The second layer is the link layer, such as IP.

The third layer is the network layer.

The fourth layer is the transport layer.

The fifth layer is the application layer of the internet.

By borrowing the five layers of the TCP/IP internet protocol stack, we can design a protocol stack for a blockchain value network.

• The bottom layer is the foundational layer of the value network protocol stack, which we call L0, primarily including decentralized bandwidth, decentralized storage, and decentralized computing. Bandwidth, storage, and computing are very important foundations for the future value network. In the roadmap announced by the Ethereum Foundation to the community, Ethereum's performance is expected to reach 10 million TPS in the next ten years. The prerequisite for achieving 10 million TPS is that bandwidth must increase by 100 times.
• The second layer—L1, which we call the settlement layer. Since it is a value network, there must be a protocol layer related to value clearing and settlement.
• The third layer, L2, which I call the transaction layer, is mainly for facilitating the smooth and efficient exchange and trading of value markers such as NFTs and Tokens.
• The fourth layer, which I call the data layer, is primarily used for generating data assets and digital assets. Data assets and digital assets are two distinct categories. Data assets specifically refer to the identities bound to each user, individual, or institution on the internet and blockchain, along with the identity data generated based on the behaviors associated with these identities. We call this data asset. Digital assets are new asset categories created by users as creators on the internet and blockchain, including digital artworks marked by NFTs.
• The fifth layer is the top layer, which I call the application layer. All the business scenarios we are familiar with, experienced, and used will ultimately be reconstructed at L4, the application layer. Any business is worth redoing on the value network, which is the structure we are currently hypothesizing for the blockchain protocol stack.

In this structure, I personally believe Ethereum plays a core role. Ethereum had a significant upgrade on September 15, transitioning from the PoW consensus algorithm to the PoS consensus algorithm. This is not only an important historical moment for Ethereum but also for the global blockchain industry.

Ethereum founder Vitalik Buterin once announced the future development roadmap of Ethereum, which consists of five stages. I believe that the merge on September 15, the sharding after the merge, and the Verkle tree after sharding are the three most important stages in this upgrade process. The fourth and fifth stages are merely optimizations and partial iterations of the previous ones.

After completing these three stages, as a network for the underlying value clearing and settlement of blockchain, Ethereum will possess very high performance and flexible scalability, while also demonstrating the robustness and security of the Ethereum network proven over the past seven years. A robust and secure network with higher TPS and more flexible scalability provides a solid technical foundation for the explosion of applications, which will undoubtedly usher in a massive explosion of applications.

In addition to the five stages of upgrades to the Ethereum mainnet, there are also other new technologies and protocols such as sharding, layering, sidechains, and child chains, which together further enhance Ethereum's security, robustness, higher TPS, and flexible scalability, making it possible for the entire blockchain technology system to reach hundreds of thousands of TPS within three years, millions of TPS within five years, and tens of millions of TPS as planned by the Ethereum Foundation within ten years.

If these three, five, and ten-year plans can be realized as scheduled, then the achievements of value settlement in the blockchain protocol stack will undoubtedly belong to Ethereum. At the same time, the infrastructure construction of Ethereum should be completed within the next three to five years, and the next step will be to build many applications on a very solid infrastructure, thus ushering in the stage of a massive explosion of blockchain applications.

We can also compare the historical periods of the explosion of internet applications and blockchain applications.

First, let's review how the explosion of internet applications occurred.

It is widely believed that the explosion of internet applications began in 2010, but the TCP/IP internet model was officially established in the early 1990s. By 2000, the basic models of internet commerce had already emerged, but they had not yet achieved large-scale operations, especially in finding monetization methods and pathways.

With the emergence of mobile internet and smartphones in 2010, especially the revolutionary rise of the APP as a way to present the internet, we began to recognize that the explosion of internet applications had started. Before APPs, we interacted with the internet through computers and browsers, which was a complex, multi-step process that prevented most people from connecting with the internet. However, using an APP on a mobile phone allows for one-click internet access, enabling internet businesses to start acquiring customers in the hundreds of millions and billions. Based on a billion customers, through algorithm recommendations and customer profiling, companies can achieve high conversion rates to gain commercial value.

Referring to the development process of internet applications, I believe the explosion of blockchain applications should begin in 2025. This judgment is primarily based on the expectation that the blockchain system may achieve millions of TPS by 2025. Additionally, various aspects of Web3 technology may be fundamentally ready by then. Furthermore, new forms of business organization will begin to improve and operate effectively. At that time, blockchain will enter its period of application explosion, which I predict will be in 2025.

Blockchain application protocols must, first and foremost, operate on the blockchain itself. Second, they must ensure the effective operation of commercial activities through smart contracts. Third, all blockchain applications must adopt decentralized governance mechanisms. Fourth, NFTs will not merely serve as proof of rights for digital products. NFTs will become proof of capability, behavior, workload, contribution, and activity for every participant in blockchain applications. Based on these proofs, blockchain applications will use Tokens as an incentive tool to establish a very effective, Token-based incentive mechanism, allowing all participants and stakeholders to receive adequate and effective incentives.

Moreover, blockchain application protocols must be open-source and open for collaboration. Open collaboration means that all blockchain application protocols allow participants to come and go without needing anyone's permission. This is the characteristic of blockchain application protocols that I have summarized. I believe this characteristic can also be used to analyze Web3 and DAOs (Decentralized Autonomous Organizations). DAOs will become a very major form of business organization during the explosion of blockchain applications.

From the perspective of the business organization form of blockchain applications, I see five characteristics of DAOs.

First, DAOs are trustless networks. To be trustless, they must be based on blockchain, smart contracts, and digital wallets.

Second, DAOs are transparent networks, with all processes recorded on the blockchain. Therefore, the operational data of DAOs is completely open and transparent across the network. In terms of information disclosure, DAOs have a significant improvement in transparency, timeliness, authenticity, and comprehensiveness compared to traditional businesses.

Third, DAOs are networks of usage rights, meaning there are no founders; in other words, DAOs have no owners. DAOs may have initiators who have some influence over the network and community appeal, but they do not own the network.

Fourth, DAOs are permissionless networks, where joining or leaving a DAO is a personal decision that does not require an application. No individual or institution can decide who can join or leave a DAO.

Fifth, within the business model of DAOs, there are two value markers that I believe are equally important and indispensable. One is NFTs, which I mentioned earlier as a proof tool to record your behavior, contributions, capabilities, and ownership. Once this information is recorded, DAOs can issue Tokens based on a model to economically incentivize these behaviors, making Tokens the economic and incentive model. Additionally, due to the fractionalization and standardization of Tokens, they also serve as the medium of value exchange for all DAOs. Therefore, the entire business model of DAOs can be summarized as "Play NFT to Earn Token," which I personally consider to be the business model of DAOs.

In conclusion, whether it is the internet protocol stack or the blockchain protocol stack, the more foundational the protocol, the more globally unified it is. The more unified the underlying protocols, the more diverse the application layer protocols become, with the internet application layer protocols numbering in the hundreds. I believe that in the future, blockchain application layer protocols will also number in the hundreds. The explosion of application protocols is essentially the explosion of applications, which is the explosion of blockchain business, so I am very much looking forward to the arrival of blockchain in 2025.