The Future of the Encryption World: A Dual Drive of Technology and Mechanisms

The development of the encryption world has hit a bottleneck, and people are beginning to question: Are we really moving towards an ideal future? The preface of "The Protocol Revolution and the DigiLaw Project" explores the essence of the encryption world, the obstacles in its development, and the infinite possibilities for the future from a systematic perspective, providing us with an important framework for understanding this emerging field.

Although the encryption world is gradually developing, many orders are still being established due to its early stage, making it easy for newcomers to suffer losses. When the existing infrastructure cannot adequately support the original intention of decentralization, can we establish a mechanism to spontaneously monitor and compress the space for wrongdoing, creating an "immune system" for the encryption world to purify the development environment in all aspects? At the same time, can we also provide ordinary participants with a global perspective to better understand the overall picture of the encryption world?

To achieve the original intention of the encryption world and break through the current difficulties, especially to dismantle the root of "malicious acts", it is necessary to rely on the dual driving force of "technology" and "mechanisms".

Vitalik once stated, "We are no longer in the early stages of encryption." The rapid advancements of Ethereum and Layer 2 solutions in reducing fees, increasing transaction speeds, and enhancing security signify that encryption is moving towards a more mature phase. Since the birth of Bitcoin, technology developers have made significant contributions to the ongoing development of the encryption world. Technology is undoubtedly the core engine for pioneering the "endless future."

However, "we are still in the early stages of encryption usability." One important reason why encryption has failed to achieve widespread adoption is that we are far behind technological development in our research and application of "mechanism design and evolution towards the DigiLaw ecosystem." Whether the vast fields opened up by technology will yield "flowers" or "evil results" depends on whether there are sufficiently ingenious mechanisms to effectively guide and regulate. The various chaos in the current encryption world reflects, to some extent, the imperfection of mechanism design, leaving opportunities for wrongdoing, which is undoubtedly a significant barrier to the popularization of encryption.

To quickly move towards the next billion users, we urgently need to improve the overall ethics 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. It is a set of rules designed to achieve specific goals, enabling participants to collaborate or compete within the framework of these rules, thereby constructing an open and dynamically self-evolving complex system. Unlike "dead" complex engineering systems such as chips, airplanes, and bridges, the DigiLaw ecosystem is more akin to living complex adaptive systems such as natural ecosystems, global climate, and immune systems. It encompasses not only interactions at the micro level but also emergent phenomena from micro to macro levels.

The design and evolution of such "living systems" present a brand new world-class challenge. The design of token economics alone involves Nobel Prize-level problems such as reverse games and incentive compatibility. Moreover, the solutions to these problems should elevate to the level of token design, DigiLaw design, and even the entire DigiLaw ecosystem design. In certain dimensions, its difficulty is comparable to advanced chip design, rocket and airplane design, automobile design, and the design of skyscrapers. Therefore, it cannot solely rely on methods born from "dead" systems; it needs to be further upgraded to methods applicable to living systems that exhibit emergent phenomena, to understand, design, and model simulation of behaviors at various levels throughout the entire lifecycle of the DigiLaw ecosystem.

Moreover, "living systems" are not just a design challenge; their evolution also faces enormous obstacles. How can we minimize human governance? Is it possible to establish a complete self-regulating system that can dynamically adjust parameters and mechanisms based on changes in the external environment and internal operational conditions? Even in the future, could we leverage powerful AI to achieve the adaptability of "living" systems?

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

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

However, the current attention of the encryption world to DigiLaw engineers is far from sufficient. Although some organizations have been continuously promoting the development of the token engineering field and have achieved significant results, the concept and method of "Token Engineering" have not yet been widely popularized and applied. Many project parties, investors, and others are still stuck at the "Tokenomics" level, and even know very little about "Token Engineering." This reflects, to some extent, that in the research on the design and evolution of the DigiLaw ecosystem mechanism, we are still in a very early stage, which is not only reflected in the lack of theory and practice but also in the lack of professional talent.

The encryption world wants to further break through the bottlenecks in security and efficiency, and it needs to further tap into the potential and value of DigiLaw engineers.

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

However, the iterative development of technology and the cultivation of DigiLaw engineering talents are 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 encryption world urgently needs to establish a "new defensive system" to combat risks. There is a high probability that the encryption world will be in a "centralized" and "decentralized" mixed state for some time in the future. The term "mixed" 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 process where DigiLaw is located varies, for example, although some DeFi protocols are highly decentralized, they still need to rely on centralized infrastructure services during the implementation process, and the apps 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 -- the community completes the "decentralization" part of self-regulation from the bottom up, while traditional institutions regulate the "centralization" part from the top down. Currently, the regulation by the government and other traditional institutions is accelerating, which constitutes external artificial defense. Although this regulation can indeed compress certain spaces for wrongdoing, it may restrict the development of "decentralization." By leveraging technology and tools, establishing a community-based DigiLaw self-regulation system can suppress the emergence of "evil" and systemic risks from the inside out and from the bottom up. This internal artificial defense mechanism can more flexibly address the "wrongdoing" challenges faced by the encryption world, and it is also consistent with the path of achieving the original intention through decentralized means in the encryption world.

Therefore, to realize the original intention of the encryption world and to 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 new combinable defense system, is needed. These three elements may not be exhaustive, but they are key to breaking the bottleneck in the development of the encryption world.