Dogecoin, the "joke" currency that made millionaires overnight; CryptoKitties, a digital trading card for cartoon cats, sold for more than $100,000; Eat the fries.
On the surface, these blockchain-based projects sound ridiculous, confusing the public, and mocking financial institutions. They are spoofs and pranks that sometimes pay off. But if you can see through these names, which are full of jokes, jargon, and stupidity, you will find a series of important changes in the encryption field.
A community of developers and investors is building a solid, sustainable infrastructure to underpin a new kind of economy:decentralized economy。
Part of the decentralized economy is building an open, decentralized financial system (DeFi).
DeFi is still in its early stages and is growing in a productive way. There are too many project experiments going on, and it's still impossible to reliably predict what's going to happen next. But the growing market suggests that fundamental innovations in blockchain, along with innovations in cryptography and software, are here to stay.
While much of the attention on cryptocurrencies has been on price speculation, the bigger game is still at play. The decentralization and automation of cryptocurrencies are transformative paradigms, leading to new ways of creating and transferring value.
When AI, IoT, robotics, and cryptocurrencies converge, innovation clusters create the possibility of something new — business processes that operate autonomously or automatically.
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value of vote
There are two important concepts in the cryptocurrency ecosystem architecture: decentralization and on-chain governance. Start with decentralization with Hairball Technology. Blockchain is an autonomous, peer-to-peer ledger technology for managing and recording transactions.
Built for accuracy, transparency, and autonomy, blockchain eliminates the need for third parties or fee-paying intermediaries—the verification is built into the software. Users do not have to deal with gatekeepers or toll collectors, nor do they need to apply for permission to use this public infrastructure.
Permissionless access to public blockchains fundamentally changes how we design financial transactions and the infrastructure of financial systems. Because the blockchain is immutable, meaning you cannot edit or alter the records, this means that trust in third parties is no longer required, and this innovation itself reduces fees and friction.
Then there is on-chain governance, which mediates how the rules governing activity on a particular blockchain are set and amended. This can be used to build Decentralized Autonomous Organizations (DAOs) or DeFi systems.
Our current financial system relies on trusted intermediaries, such as mortgage brokers or bank presidents - who create protocols and rules to protect the institutions themselves and consumers. In a decentralized, blockchain-based financial system, this process of writing the rules is usually accomplished through the use of on-chain governance.
Early adopters of new DeFi services can buy (or earn) governance tokens, which give holders voting rights over how the blockchain is maintained, upgraded, and governed. One token, one vote.
These tokens tend to function after a crypto network has been established. Most blockchain projects start with what’s called “off-chain governance,” which can mean anything from developers transacting emails about how to change code to founders passing notes passed around in GitHub.
Those who build the currency create a set of founding rules, and once set, many go on to build on-chain governance and use the governance token.
Once this switch is flipped, governance tokens become very valuable. On-chain governance is more formal and democratic than off-chain governance, allowing each governance token holder the right to vote on decisions and choices that guide a particular blockchain ecosystem.
Some ecosystems may vote on features to be released. It could be the setting of monetary policy or reserve requirements for loan collateral. Alternatively, it could be what type of consensus mechanism a blockchain uses, affecting the performance, resource usage, and security of that blockchain.
The on-chain governance structure is designed to maintain transparency, as everyone can see proposals, see how votes are calculated — and avoid human-led back office transactions.
While the primary focus of cryptocurrency investors thus far has been speculation on appreciation, governance tokens are likely to become more important and valuable as cryptocurrency investments mature. The reason is quite simple:As the value of a crypto network increases, so does the value of governance rights.
Because token holders must hold crypto assets in order to continue to vote for the benefit of that particular ecosystem, investors will want to acquire and hold more tokens so that they can continue to participate in governance. As long as the ecosystem makes good decisions and provides good, competitive services, tokens may accumulate more value over time.
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Entitled Tokens
If you own a mobile phone, you are a potential cryptocurrency investor or user. But it's not as simple as opening a Coinbase account: smart investors ignore news-making gimmicks and spend time educating themselves on the fundamentals of cryptocurrencies.
Because they carry the right to help shape the future of cryptocurrencies, governance tokens are likely to become even more important as cryptocurrency investing becomes more established.
We are entering a new world of doing more and more with less and less. Part of the reason for this is technology, since innovation is at the heart of the economy. The world is becoming more automated. As this trend continues, we will need mechanisms to manage the boundary between humans and machines.
In DeFi, systems of on-chain governance and the use of governance tokens look quite promising. Crypto is still in adolescence.
The only cryptoassets that give clear rights to their holders are governance tokens. Let's engage instead of guessing. Governance tokens give investors not only equity, but also the right to speak. As we've seen throughout history, the right to vote is a powerful thing.
