The Future of the Encryption World: A Three-Dimensional Drive of Technology, Mechanisms, and Defense Systems

The chaos and lack of innovation in the encryption field have raised doubts about its development direction. Are we really moving towards an ideal future? This question deserves in-depth consideration. To understand the essence of the encryption world, the challenges it faces, and the possibilities for the future, a systematic analysis is required.

Although the encryption world is steadily advancing, many orders have not yet been fully established due to its early stage. New entrants may easily suffer losses if they participate recklessly. When the existing infrastructure cannot sufficiently support the idea of decentralization, can we establish a mechanism to coordinate the community and regulatory agencies, spontaneously monitor and limit misconduct, and build an "immune system" for the encryption world, fully optimizing its development environment? At the same time, can we help ordinary participants gain a global perspective to better grasp the overall development of the encryption world?

To achieve the original intention of the encryption world and break through the existing dilemmas, especially to eliminate the root causes of "malicious behavior," it is necessary to rely on the dual drivers of "technology" and "mechanism."

Ethereum and Layer 2 solutions have made significant progress in reducing fees, increasing transaction speeds, and enhancing security, marking a shift towards a more mature phase of encryption. Over the past decade, code-centric developers have made substantial contributions to the ongoing development of the encryption world. Technology is undoubtedly the core engine driving the future of encryption.

However, encryption technology has not yet achieved large-scale application. In addition to the need for improvement in user-friendliness and ease of use, an important reason is that we are far behind in the research and application of "mechanism design and evolution oriented to the DigiLaw ecosystem" compared to technological development. Whether the new fields opened up by technology can yield "good results" hinges on whether there are sufficiently sophisticated mechanisms to effectively guide and regulate. The various chaotic phenomena in the encryption world to some extent reflect the imperfection of mechanism design, leaving room for misconduct, which is undoubtedly a major obstacle to the popularization of encryption.

To quickly move towards the next billion users, we urgently need to improve the overall ethical and security level of the DigiLaw ecosystem. However, this is not an easy task.

The DigiLaw ecosystem is an unprecedented new "species" in human history. As a collection of rules designed to achieve specific goals, DigiLaw enables participants to collaborate or compete within the framework of these rules, thereby constructing an open and dynamically self-evolving complex system. Unlike "static" complex engineering systems such as chips, airplanes, and bridges, the DigiLaw ecosystem is more akin to dynamic complex adaptive systems like natural ecosystems, global climate, and immune systems. It encompasses interactions at the microscopic level and emergent phenomena from the microscopic to the macroscopic.

It should be noted that "static" and "dynamic" are not entirely opposed, but rather at two ends of the same spectrum. Overall, the encryption protocol ecosystem leans more towards a "dynamic" state, but current research on mechanisms is still insufficient to support the construction and sustainable operation of a "completely dynamic" system.

The design and evolution of such "dynamic systems" is a brand new world-class challenge. The design of token economics alone involves Nobel Prize-level problems such as reverse games and incentive compatibility, not to mention that the solutions to these problems should rise to the levels of token design, DigiLaw design, and even the design of the entire DigiLaw ecosystem. From certain dimensions, the difficulty is no less than that of advanced chip design, rocket and aircraft design, automobile design, and skyscraper design. Therefore, one cannot rely solely on the "model-based systems engineering" methods that emerged from "static" systems; there is a need to further upgrade to "agent-based systems engineering" methods suitable for dynamic systems that exhibit emergent phenomena, in order to understand, design, and model simulations at various levels of the DigiLaw ecosystem's entire lifecycle.

In addition, the "dynamic system" faces challenges not only in design but also in its evolution. How can we achieve minimal human governance? Is it possible to build a comprehensive self-regulation system that dynamically adjusts parameters and mechanisms according to changes in the external environment and internal operating conditions? Will it be possible in the future to leverage powerful AI to achieve the adaptability of the "dynamic" system?

From protocols like Ethereum, AAVE, and Compound that have successfully navigated bull and bear cycles, it is not hard to find that a major commonality among these protocols is that they have invested a significant amount of time and effort in mechanism design and evolution.

To determine whether a project is trustworthy, in addition to examining whether it has conducted compliant code security audits at the technical level, we should also pay attention to whether DigiLaw engineers are involved in designing and continuously optimizing the structural mechanisms and parameter adjustments of its ecosystem. If they are, it at least proves that the project party places sufficient importance on ethics and sustainability, respects the property safety of every participant, and carefully designs its mechanisms based on the operational laws of the ecosystem.

However, the current emphasis on DigiLaw engineers in the encryption world is far from sufficient. Although some organizations have been promoting the development of token engineering and have achieved significant results, the concept and methodology of "token engineering" have not yet been widely popularized and applied. Many project parties and investors are still stuck at the level of "token economics" and are even quite unfamiliar with "token engineering." This reflects, to some extent, that we are still in the early stages of research on the design and evolution of mechanisms within the DigiLaw ecosystem, which is not only manifested in the lack of theory and practice but also in the shortage of professional talent.

The encryption world needs to further break through the bottlenecks in security and efficiency, and must further explore the potential and value of DigiLaw engineers.

Technology is the pioneer of the unknown realm, while mechanisms are the guardians of vast territories. Without the collaborative drive of both, it is difficult to create a balanced, robust, and anti-fragile DigiLaw ecosystem. The ideal state is that the development of "technology" and "mechanisms" is sufficient to support the endogenous self-security defense and automatic efficiency optimization of the DigiLaw ecosystem without any human intervention.

However, the iterative development of technology and the cultivation of DigiLaw engineers is not achieved overnight. When the dual wheels cannot fully support the original intention of the encryption world, we still need the collaborative efforts of "external artificial defenses" to jointly safeguard the morality and security of the encryption world.

The cryptocurrency world urgently needs to establish a "new defense system" against risks. It is likely that for a considerable period in the future, the cryptocurrency world will remain in a mixed state of "centralization" and "decentralization." The "mixed" here has two layers of meaning: first, the "decentralization" of DigiLaw itself is a gradual process; second, the degree of "decentralization" in the end-to-end full cycle where DigiLaw resides varies, for example, although some DeFi protocols are highly decentralized, they still need to rely on centralized infrastructure services during implementation, and applications built on top of the protocols may also be centralized.

In such a hybrid system, the defense system should also be composable. The ultimate ideal state is that the community at large completes the "decentralization" part of self-regulation from the bottom up, while traditional institutions complete the "centralization" part of regulation from the top down. Currently, the regulation by traditional institutions such as the government is accelerating, which belongs to external manual defense. Although this regulation can indeed compress the space for certain misconduct, it may restrict the development of "decentralization." By leveraging technology and tools, building a community-based DigiLaw self-regulatory system can suppress the emergence of "evil" and systemic risks from the inside out and bottom up. This internal manual defense mechanism can more flexibly address the issue of "malicious behavior" faced by the encryption world and is consistent with the path of achieving the original intention through decentralized means in the encryption world.

To realize the original intention of the encryption world and establish a secure and ethical digital natural environment, it currently seems that at least a dual-driven synergy of technology and mechanisms, along with a composable new defense system, is needed. These three elements may not be exhaustive, but they are key to breaking through the bottleneck in the development of the encryption world.