Introduction
Introduction
In recent years, with the continuous development of Defi projects, more and more projects have been introduced to the market. However, these projects all need to solve a common problem: how to break the narrow circle and attract a wider user group. Damus, on the other hand, became a high-profile case that managed to attract the attention of many outsiders, which sparked ongoing discussions about the project.
How did Damus do this? How does it differ from other Defi projects in its commercialization path? How much does its underlying decentralized protocol Nostr contribute to the phenomenon of circle breaking? With these doubts in mind, the DAOrayaki community today specially invited our old friend Mr. Jolestar to bring his exclusive thoughts on the phenomenon of Nostr Damus breaking the circle and the financial "incentive curse" facing Defi.
Guest: Jolestar (RoochNetwork Initiator)
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Q: I noticed that you recently sent a long tweet about Nostr and Damus, talking about the road to commercialization of DeFi projects and the "incentive curse". I am particularly interested, so I took the opportunity to chat with you today. What do you think of the current business path of DeFi projects?
J: DeFi Summer has actually passed now. If we look back at history, we will find that DeFi is a product that has appeared in history, but it is a special category among all applications. What is its special point? Because its user base is mainly investors, the main goal of its application is to allow everyone to exchange assets or manage money. How did it explode in the first place? DeFi lending platforms actually existed in 2017 and 18. Why did they explode later? The main reason is that they found a combination solution that can be cold-started. Usually, the lending platform will have a dilemma in the early stage of its launch. For example, when I tried to experience the lending platform in 2018, I found that the annualized return of depositing Ethereum on the platform was less than 5%. , No one borrowed it, and there was no positive feedback cycle. Later, the project team discovered a way, through incentives, such as issuing a token, and then first encouraging everyone to save money, no matter whether someone borrows or not, if someone deposits first, I will reward you, and at the same time send users and encourage you to borrow money, There is even no need to pay interest, so that the bilateral demand and supply of users on both sides correspond, and then a positive cycle is generated, transactions occur, and revenue is generated. When the entire incentive is cancelled, the benefits are still there, so you can continue to roll. All you need to do is to apply a force at the beginning, and the rest can realize self-operation. Of course, it needs to rely on several aspects, such as token and differentiated incentive methods, to ensure that everyone can use it conveniently.
The second is this liquidity mining. Token is its own, and the project party only needs to set a suitable incentive rule and pricing. This is very similar to some Internet application incentives we have seen in Web2, such as Didi Taxi. At the beginning, there are no passengers or drivers, so rewards will be issued For users, discount vouchers are given to users, and drivers are also rewarded. Today, I just changed the concept of cash into token. If the token itself is worthless, users will definitely not be able to accept incentives, so the project builds a pool to make the token itself liquid, and even repurchases it by itself. In this way, the entire project is rolled up, and this model It was very fast to run and verify, and finally DeFi Summer was born for two consecutive years. Everyone gradually recognized this model, thinking that this model is a way to correctly build the cold start of the project, because the resources on the chain are very precious, and you need to pay Gas fees every time you send a message. If the transaction itself has no benefits, users actually I am very reluctant to operate, which happens to be the constraint for DeFi projects to adapt to the environment of the chain, so it rises first. This is the logic that I think the DeFi project is built on.
Q: Listen, this road is quite smooth. Do you think there will be any disadvantages in this commercialization path?
J: This path is the correct path for building financial commodity products, that is, as mentioned earlier, it matches the user group it faces, and incentives bring the user group. And it can be easily quantified, that is, whether it is speculative or really optimistic about this project, the required funds must be equivalent and provide the same liquidity, so neither funds nor users are selected , which is very suitable for the construction of financial projects, but once this mode is switched to other types of applications, problems will occur. For example, social applications.
Q: In fact, Damus should belong to the social field, so I heard that it is not suitable for the original path of pure Defi. What is the reason?
J: A social network with pure incentives generally means to send a token to everyone, and then fans will buy your token to motivate in this way, or in the form of NFT, but obviously there is no such scheme at present. It was particularly successful. Of course, I am not sure if Damus will be successful, but at least it has aroused extensive discussions among users outside the circle. I think it is a point for us to think about how to "get out of the circle".
Q: You wrote a word called "incentive curse". I think it's quite interesting. We usually talk about governance. When talking about DAO or project development and construction, incentives are a topic that must be discussed, and many Time is still the core element that determines how to develop in the future. How to understand that in this context, it becomes a curse?
J: Incentives are essential. All successful systems are supported by a good incentive mechanism. I didn’t check the word incentive curse, it may be my own invention, economics has a concept of resource curse, what does it mean? That is, there are many countries with very good resources, a lot of oil and minerals. Everyone thinks that with such good resources, they can definitely develop industries faster, then develop commerce, and eventually become rich, right? But later it was found that these countries often turned into poverty or closed economies. Why, because if any government, no matter what the government is, the main income comes from taxation, which must have a large number of enterprises and a large number of businesses. To support the operation of the government system, so the government will find a way to promote the development of the entire business or industry no matter what. But once there is such a very good resource endowment, the government or oligopoly can maintain the operation of the whole system by relying on resources after monopolizing the industry, and not relying on taxation, so it does not depend on the commercialization or industrialization system of the entire market. In the end, some people are very rich, but the overall economy is very backward. Then, the industrialization and commercialization system is very weak, and it is completely short-circuited.
The economy has not circulated, it is short-circuited, and the economic curse here refers to the principle that resources flow first to industry, then to commerce, and then to ordinary people. Everyone can become rich, and then pay taxes and return it to the government, but now the government directly blocks it. After one pass, there will be no cycle. Incentives in the social field are actually similar, that is to say, I originally wanted to rely on the incentive mechanism to guide users to create content, and then use the content to attract more users, entering a positive feedback loop. In fact, the process of content creation and brand building is long-term, but the existing incentives are all short-term benefits, which will attract users who focus on short-term benefits, and the content produced by such users generally is not High-quality content, so the whole purpose just doesn't match.
Q: So today when we're talking about Nostr and Damus, why do you think it avoids the incentive curse you talked about? Is it related to its technical or client-side settings?
J: In fact, its point is that this is still a very early project. It may be a little unexpected when it becomes popular, but in fact it has not yet reached the stage of motivation. Another point is that the existing technical facilities do not have the conditions to use manipulation to motivate, so this point is not involved. In fact, this is what I want to keep saying, that is, it is actually an application for everyone. It is the process of construction. It may not mean that all the mechanisms are fully thought out from the beginning.
Now many of us working on projects may need to think about all the economic incentive systems, security and risks at the very beginning, and then promote them. If it is a financial agreement, you must consider it. cycle, such as security, economic model, incentives, etc. But for such an application, these may not be the most important at present. This is the same as the Internet at the beginning. At the beginning, everyone's business model was not clear, and they felt that users were king, and users came first. Have content, and then look at how to commercialize, in fact, the path is quite similar.
Q: To ask a more technical question, do you understand the design logic of the decentralized protocol Nostr?
J: His technique is actually very, very simple, so simple that it can be explained clearly in a few lines. Briefly describe what kind of protocol it is. For example, if we want to build a financial application, the homepage needs to solve the problem. For example, if the application is Twitter, what should I do if it blocks my account and what should I do if it deletes my content? , and then Nostr thought of a simple solution, then I can send several tweets at the same time, if for example, Twitter has an agreement, and Weibo has an agreement, which is equivalent to three domestic Weibo at the same time, if they both agree It’s the same, then I sent the content at the same time, actually sent it to multiple companies at the same time, one of them blocked me, and there were others, so that my data can be guaranteed to be decentralized to a certain extent of.
Purely technically speaking, it is actually very simple, but in fact, although it is simple, it is difficult to replicate its success. For example, to imitate and do something else. I remember someone said that they wanted to be an exchange. Hey, this is not very reliable. Spectrum, can it be popular to create another type of application? That's not necessarily the case, it's just that his popularity is not because of his agreement, his popularity is due to various factors and chances, some things are hard to replicate.
Q: It seems that there are statistics now, that is, many new projects have gradually entered the track with the Nostr protocol as the bottom layer, because everyone may think this is a hot trend, but I heard, your attitude is In fact, this explosive phenomenon is difficult to be replicated and cannot become a common phenomenon?
J: Yes, it will not become a common phenomenon. If you want to develop applications from the bottom layer, you don’t have to use this protocol, but if it has already run to the network to add applications, it is valuable, because the client has already Yes, and then Relay already exists, just add some functions on top of it, but running a new network in this way may not be able to reuse the ecological model it has formed.
Q: So there is a thought in it, how can I suddenly break out of the circle in this way? I think this is quite strange. Because one day, suddenly a lot of people in my circle of friends were sending a string of that public key character. At first, I was a little confused, and most of them were not from the original web3 people in the circle of friends. I used Damus later, and to be honest, the experience was not as smooth as I was using traditional web2 products. So what is the core factor for it to go out of the circle?
J: I think one is its spiritual narrative, because Internet companies such as Twitter or Weibo are actually not very good in the hearts of users, and they all think that they are going to degenerate. The Internet with a revolutionary temperament at the beginning The company is now depraved. I suddenly discovered that day that I hadn’t really installed an application in my mobile phone for several years. Only when new things came out did I have the urge to install it. Basically, the entire Internet circle, A new thing is needed for everyone to experience and try.
Although his experience is still far behind that of applications like Web2, it is already much better than other applications in the Web3 circle. The Web3 circle itself has blocked most users from the outside. It has at least a breakthrough in this point, and of course the security is also reduced. It is not like MetaMask that reminds you step by step to write this down and save it in a safe place. It automatically generates a private Key, because at the beginning when users have no content and no assets, they don’t really care about security. They can wait until everyone has content later and care about security. Think again about the solution.
In addition, he has a client. If there is no client, the web3 experience will be even worse. With a client, the probability of breaking the circle will be higher. I think it is the accumulation of many reasons that caused it to break the circle. Of course, the other is that it did not introduce the incentive model and taken at the beginning, which is also a point that is easy to get out of the circle, because the Web3 circle is separated from the external circle, and it is normal to talk about such things as taken and incentives in the circle things, but people in other circles will feel that they are going to do something bad.
Q: The traditional web2 approach is to talk about user portraits, product design, operations, etc.
J: Yes, I feel a bit low when I hear that there are incentives, and I feel that for the sake of wool, posting this thing shows that I have the ability to dare to try new things. This kind of technology.
Q: I agree very much. I am also thinking about the client when I just talked about it. It seems that I have not installed a new app for a long time. I read the news, and it seems that Damus’s listing in the Apple Store is quite a twists and turns. I think this may also be a reason, which has driven some people to pay attention to it.
J: Especially the requirement of Apple’s payment, if he wants to access the payment of Lightning Network, for example, it will definitely conflict with Apple’s access to the payment system.
Q: Let me interpolate here, do you know about Lightning Network?
J: I know Lightning Network very well. In fact, we first built a smart contract platform on Lightning Network and wanted to do this on Lightning Network.
Q: I don’t know much about technology, but I think the parameters seem to be that it supports Lightning Network natively, because it may have something to do with the obsession of the founder of Twitter. I recently did some general research and found that this payment method It’s not bad. In the future, Lightning Network can actually be applied to some of our existing decentralized application payment scenarios. What do you think of this small, fast and high-frequency payment method?
J: I think it is good. But the Lightning Network actually has two main problems now. One is that many clients of the Lightning Network we use now actually have a hosting model. Because I want to transfer money with you on the Lightning Network, I need to open a Lightning Network channel, send a transaction on the BTC network to create this channel, and then both parties mortgage the money into it. The process of creating a channel is actually very long. According to BTC, it takes half an hour to wait for three blocks to be confirmed. In many scenarios, users do not have this patience. At present, there are some solutions, such as using a Hub to host your Lightning Network. The user does not have a Lightning Network node, but actually hosts the Lightning Network node on your behalf. In this way, you can quickly transact with anyone. As long as there are other nodes on his lightning network. But this method also has a security problem, that is, the Hub is equivalent to an exchange model, but the address used is your private key. When the Hub hangs up, your assets will be lost. This is a risk point
I am very optimistic about the model of the Lightning Network. I think the working mode of the larger Lightning Network in the future is to send a message for each transaction. Many listeners may not understand the Lightning Network model. Let me use an analogy. This is a bit like the current on-chain transaction. It is equivalent to transferring money to you in the bank but there is no mobile network. The two of us need to go to the counter to handle it, but The procedures are very troublesome, so what should I do? The two of us went to the bank to open a supply and management account, and each of us put some money into it. This is our account, and then we set up an account book offline. Today you gave me 10 yuan, and tomorrow I will transfer you 5 yuan. We changed the account book again, and the two of us kept accounts offline.
Keeping an account is very fast, this does not need to go through the bank, as long as our message communication is fast enough, and the cost of account keeping is the same, when we finally need to settle, we go to the chain to settle it. Well, that's one such model. But this kind of high-frequency payment, I have been thinking about what scenarios to realize it? In fact, I have always felt that his best scene is the network communication. If we have a channel based on the lightning network, each node will open when connected, it will be very interesting to achieve this level, so the path I have been thinking about is that the lightning channel is not set up on Layer 1. We build the Lightning Network on top of Layer 2. In this way, the speed at which we create channels is fast enough, that is, we can create channels when we create links. If the entire P2P network is connected with lightning channels, the incentives on the entire P2P network can be realized.
Q: Then, it sounds like the Nostr protocol is naturally suitable for this scenario. Isn’t it a p2p, point-to-point protocol?
J: Yes, yes, but it is not pure p2p. For pure p2p applications, it should be structured like this: For example, if I send a tweet or Weibo, I have a local client, and the data is first stored in my local client, and then it can be passed through the p2p network node Direct synchronization to fans can be forwarded through intermediate nodes, but not distributed or recorded by any centralized server, which guarantees my ultimate ownership of the data. As long as my device is there, the data is definitely there and cannot be lost. I can also ask the intermediate nodes to help me back up, but mine is the master version, and others are copies. But now Nostr is still a bit short. If you can build a decentralized application now, there is still a centralized node, such as a federation model, or a relay model like Nostr. There must still be a server to help you remember. Here, the server may be lost or deleted, but Nostr means that if I send it to several people, it will not delete me at the same time. This is such an assumption.
Q: I understand. From the perspective of technology developers, how do you evaluate Nostr's current technology? As far as I understand, it seems that the technology itself is not so sexy in terms of innovation. So what innovations do you think it has in essence, or what regrets do you have?
J: Although I said it was a pity on Twitter, but later I also thought about it, it can't be a pity, it may mean that it hasn't developed to that stage yet. Its biggest advantage is that it starts with the most simplified and minimized product model (minimalist mode) when it is started, and after startup and verification, it gradually adds functions. Now it's on the right track. Because now like the mammoth, it has a federal model. The federated model has problems with the federated model. So it simplifies the federated mode into this Relay mode, but it's hard to say which of the two is better.
Anyway, each has its own problems, but Nostr seems to be more popular. We can deduce which direction it will develop in the future. For example, the Relay method. I send my message to multiple people on the client side, and send it to multiple nodes for storage. There will actually be a problem here, such as whether to introduce an incentive mechanism. If incentives are introduced, there are several roles that need to be motivated. A character is the person it is running Relay on. Why does it keep running this node, and where does its income come from? If there is no income for it, it can only use the Web2 method to plan income. Insert some advertisements and get some membership fees yourself. We think this Relay model is actually degraded. Then, the other one is how to determine the relationship between Relay and Relay? Because of the differentiating agreements between them, one of the difficulties they face is that the participants of the agreement are not only in a competitive relationship, but at the same time they must maintain the same agreement from falling apart, so they are also in a cooperative relationship. There must be an incentive mechanism to ensure that they can communicate with each other. Compete but don't tear. Split into two agreements and then do their own things, each circles a wave of users. That would defeat our purpose.
There must be a set of such governance models, or economic|incentive models, to tie them together. This is a point. The second point is, for example, what will happen to its anti-spam, this is what everyone is talking about.
Because in fact, the most difficult thing is to ensure the meaning of the permission list. The permission list means that you can’t use centralized means to prevent spam, right? It’s to let people bind mobile phone numbers, or even identity authentication, so how to prevent spam. Anyone will generate thousands of numbers and fill them in for you. Even if such a thing is harmful to others but not beneficial to oneself, there are still bad people doing it. Then how to prevent such attacks, if there is no good method, you will eventually degenerate into a centralized solution.
There are actually only two effective anti-spam methods that the industry has explored for so long. One is POW, and the other is Gas fee. That is, you must ensure the anti-spam method of the permission list, and you cannot abandon this permission list. But if you don't want the permission list, it's not an intelligent application. There is a conflict between the two, but once this anti-spam method is introduced, it will definitely affect the user experience. For example, if there is a gas fee, how do you lower the entry threshold for this user? This is another problem. Of course, there can also be a combined solution here. In fact, when we are developing this application framework, we are talking about account abstraction. There is actually a combined solution in the solution you are discussing. That is to say, my agreement is to go to Centralized, but the payment of Gas fee can be paid by centralized means. That is to say, authenticated or bound centralized IDs, such as authenticated user platforms such as Twitter. A certain service provider can pay your gas fee on your behalf, thereby lowering your usage threshold, but it cannot be said that there is no threshold at all. If you really want to guarantee anonymity, then you have to pay the Gas fee to buy this token. This is a point. Another point is that after everyone develops, they will definitely continue to produce content, because the Relay authority, each Relays actually has its own absolute authority over the data on the entire node, it can delete data, it can Separate accounts. You can say that I may have it on multiple platforms, but the habit of end users is that even if it is posted in multiple places, its final usage habit will gradually flow into the most active relay.
In addition, if several of them are blocked, there must be a set of mechanisms, such as what are the rules for blocking accounts, what is the coordination plan between different relays, and how to restrict the rights of relay nodes. It stands to reason that an intelligent protocol node operates with as little power as possible, and it is best if it has no power itself, or just provides services.
Q: Yes, it is only used as an auxiliary tool.
J: Yes, nodes on the BTC network should not filter transactions, and in fact, Relay nodes should also play such a role, just providing resources. The easier it is to replace, the easier it is for the network to be decentralized. The harder it is to replace, the more it will return to the centralized solution in the end, that is, it has the greatest rights. How do you guarantee its rights, that is, to ensure that it can be replaced at any time. In fact, one of the current solutions is a model like the modular blockchain, that is to say, the application data in the node is actually written in a confirmed storage to ensure that the node can rerun the history with anyone at any time. All the transactions above, so as to get all the data of the entire application. Similar to the future design of Twitter, if every transaction sent by all its users is published on a decentralized ledger, and its program is also published, then it can be expected.
Q: Are you optimistic about the future of Nostr or not?
J: I think what is a good phenomenon, that is, our circle has been confined to the financial scene for many years, and it is too over-financialized. In fact, you can imagine, we hope that if there are 1 billion users rushing to this circle, what do you let them do? It's unrealistic to replace assets, right? You must have something else. This is the meaning of the Web3 narrative now. To really let everyone try this application, if we want to break the circle, we must have real applications that can be used by everyone, rather than purely financial ones. Because finance is a foundation, different people have different definitions of finance. I think finance is the source of power, but now that the power is there, you have to pour something out to realize the value of this power. It should be at this stage now, so I think it is a good thing to let more outsiders pay attention to the application layer.
Q: But in fact, Nostr seems to be different from our traditional understanding of web3, and he seems to be technically different. Because we understand that Web3 is generally linked to, for example, the blockchain. It seems that Nostr is more biased towards Web2, right?
J: I think this kind of application will eventually be associated with the blockchain. Where is the logic? First, the operation of any application ecosystem must rely on a business model. You can't rely on love to generate electricity at this point. If you rely on a business model, which financial system is this business model built on, if it is built on, for example, the US dollar system, then you are an application that is regulated by the US government. This is inevitable, right? Then if you want to centralize, you must be based on the business model of Crypto, and you must deal with the chain. You can not say that you are completely dependent on the chain because you need to use the blockchain for this payment or settlement scenario. It does not necessarily mean that the protocol layer and the chain need to communicate with each other. For example, if I simply put a QR code for others to pay, this basically does not require any connection, right?
Paste a QR code on any web page. If the application provides a reward, for example, which only shows how much the user has lost, I don’t need to settle with the chain, it is actually a piece of information, just open the interface. It just uses this as a user entry. Only under what circumstances do you need to fully open the settlement with the chain? That is to say, users can charge assets into this application, charge them from the chain to the application, and then you can use them directly in this application. For example, when commenting, at the same time bring a reward message and send it together. In this case, it needs to be uploaded to the chain.
J: I think it's time for Web3 to break the circle as a whole. Whether it is from the perspective of developers or the perspective of users as a whole, we hope to have more users and more developers, but developers can’t just write smart contracts for DeFi applications, right? DeFi applications cannot carry so many developers. It must be that larger and more complex applications need to be built. I feel like this is the time. Maybe next year, if we have the opportunity to talk about this topic again, it will be a completely different market.
Summarize
Summarize
Behind Nostr | Damus breaking the circle, it triggered our thinking about the excessive financialization of Defi. The "incentive curse" is an interesting term. How to ensure the maximization of incentives to generate kinetic energy while ensuring that they do not fall into the vicious circle of incentives for the sake of incentives is a question that everyone in the circle needs to think about in the future.
Although Damus still has many problems, the number of users who continue to grow is limited, the server is full of worthless information and spam advertisements, although Nostr still has many technical problems to be solved. However, it has never been an easy task to open up a new path. This requires the participation of more builders, as well as more outsiders to join the phenomenon of breaking the circle, and finally break the "incentive curse" together.
Thanks again to Teacher Jolestar for his passionate sharing, which has benefited a lot from the friends in the community.
The audio of today's related discussions will be uploaded later on DAOrayaki's official website, DAOrayaki.org's dedicated podcast channel. We will also release it on the domestic small universe podcast platform, Himalaya FM, and major streaming media platforms around the world, such as Apple Podcasts, Google Podcasts, YouTube and Spotify. You are welcome to listen and subscribe. Merry Christmas everyone, see you next time.
