An Introduction to the Economy of Blockchain Consensus

Li Wancai, Co-founder of EOS Gravity

Preface:

Dr. Li Wancai is known as the founder and director of WaterDrop Capital and the co-founder of EOS Gravity.

Recently, Dr. Li shared some of his thoughts regarding some of the key issues in the development of blockchain industry. He believes that token model and community vitality are the driving forces and key competencies of blockchain economy.

Based on the reasoning and contemplation of the above mentioned driving forces, Dr. Li put forward the notion that the development pattern of blockchain economy in the future will be focusing on community vitality and that the competition on the economy of blockchain consensus will arrive soon.

Body:

Recently, I've had some discussions with some celebrities working in the blockchain industry such as Tao Quming from WanXiang Blockchain, Wang Dapao and Jin Ma regarding the topic on the future developing trend of blockchain economy. Interestingly, during our discussions, we all unanimously showed our concerns on the value that community can add to blockchain economy, which raised my understanding and awareness of the future developing trend of blockchain economy into a new level.

With a view to further discuss the topic with all industry partners and our community members, I hereby write down some of my opinions and thoughts for your reference.

Before we dive into the development pattern of blockchain, one thing we need to clarify is that what is the driving force and the key competency of blockchain economy.

• Driving force of blockchain economy-Token Model

The so-called nature of blockchain that changes the relation of production is basically about the creation of a new way of partnership. As for the revolutionary feature that this new partnership brings about, I normally would describe it in a not-so-approriate way: tape water.

I hereby liken water to the three roles in our social production: investor, producer and consumer.

Under the pattern of blockchain economy, a certain driving force that originates from a logically consistant token model keeps pushing the three roles into the system through its embedded tokens.

• First, it stimulates value creation among all parties involved in the blockchain system and accelerates the circulation process of value within the system, which in turn expands the overall scale of economy and is finally reflected by the external representation of appreciation in token value.

• Also, based on the appreciation of token value, the system will continuously attract an increasing number of outsiders (investors, producers and consumers) into the system to join in the creation and circulation of value and finally leads to a spiral escalation of the scale of economy.

• The reason that I think the above mentioned simile of 'tape water' does not sound too appropriate is that in real life, tape water is normally driven by pressure, but the "tape water" in blockchain is driven by the "gravity" that attracts all talents and resources towards the economic system of blockchain from traditional commercial system.
  We can also say that, if the launch of a new blockchain project is like the water tap, the endless supply of water and the flow rates of water must be dependent on the fact that whether the gravitational force generated by the token logic of the project is powerful enough. Therefore, a logically-consistant token model is the core driving force of the blockchain eoconomy.

The Core Competitiveness of Blockchain Economy-Community Vitality

A logically-consistant token module does not guarantee the landing, development and success of a blockchain project, as in any domain, each blockchain project faces strong competition from its peers in the same business areas.

This kind of competition is all-dimensional throughout the life cycle of all such projects. The competition mainly exists in three aspects: consensus mechanism, token model and community vitality. Judging from the status quo, the focus of competition still mainly revolves around the former two aspects.

The feature of blockchain enables different projects to learn from others's strong points on consensus mechanism and token model and improve themselves quickly. That being said, I believe, consensus mechanism and token model themselves are not enough to form a Long Tail Effect effectively.

Now I would like to shift one of my points to another: In general, the competitions we've been talking about happen among different blockchain projects. But as a matter of fact, the competitions are among different blockchain economies (communities). Considering the fact that no substantial generation gap of the principle (consensns mechamism) and the pattern (token model) will be generated during the competitions of blockchain economies, the power of all members in the economy (community vitality) will determine the competitiveness of that particular economy.

Speaking of community vitality, two aspects need to be covered.

Firstly, the recognition

level that the community has for the consensus system in blockchain economy, which determines whether the community members are working towards the same goal and whether most of the power can be used to create more value.

Secondly, the vitality level the community has in the participation and building of the ecosystem in the economy, or whether community members participate in various constructions of the ecosystem in an active and self-driven manner.

For instance, new micro-communities keep emerging within big communities; community members are working hard to develop new DApps, share educational contents and put forward suggestions etc;

Thirdly, the engagement of all members in the community

for example, whether all community members frequently interact with each other, whether the community members contribute their values to the development of the economy and whether each individual community member feels attached to the community etc.

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I believe:

a community with strong consensus, high vitality and active engagement will be the decisive force of a blockchain economy that can swiftly take the lead in the competition, in another word, the core competitiveness of any blockchain economy lies in its community vitality..

So what is the future developing logic of blockchain in my mind?

Community vitality will definitely be the focus of competition in the future--the competition of "Community economy" is on the way.

Throughout the developing history of blockchain, whether its Bitcoin or Ethereum in its early years or most of the application level projects currently available, only after the consensus mechanism and token model become finalized did the community and the community consensus came into shape.

There are two reasons behind this phenomenon.

• Firstly, there are discrepencies in the ideologies among community members due to conflicts in interests, demand of rights and interests and cognitive level gap etc. If a consensus in ideology can not be reached at the early stage of the project launch, it is very likely that a split in the economy like Bitcoin forking will occur during the later stages.

• Secondly, as consensus mechanism and token model are usually determined by the project team, the system might be inheritantly flawed and will tend to make members feel that they are forced to accept this ideology, which will lead to a lack of vitality inside the community, and finally leave the economy in a vulnerable state.

The source of these problems are actually due to the fact that we are operating it .

as a "project" rather than an "economy". The reason behind this is because EOS incidentally revealed the certain internal logic of the development of blockchain economy during it's own course of development.

Dating back to the days when EOS was still at its crowdfunding period, the founder of EOS Gravity Ocean and I, without much consideration, thought that EOS will form various types of impact on the market and investors' expectations due to its 12 months long crowdfunding period. Many people used to have doubts that EOS might be another air coin, and this presumption was further confirmed after the token value plummeted by.

September, 4th.

However, after carefully contemplating various types of the design frameworks put forward by EOS, we believe that the consensus mechanism behind EOS is actually advanced and universal. After all, the transition from a centralizied organizational model to a decentrilized one takes a long time, and this transition even requires the breakthrough of another key technology to realize.

Therefore, small-scale centralization or weakened centralization will become a universal
phenomenon in the next development cycle of blockchain economy or a transitional model that can be accepted by the mainstream business world by then.

The slump in token value after September 4th has triggered me to think about the problem regarding the anti-vulnerability of blockchain projects. At that time, my only pure vision was to gather us together to promote the development of EOS ecosystem and therefore to increase EOS token value.

On that account, EOS Gravity was founded on 4th, September, 2017.

Looking back, what were the problems that we faced in December when the population of our community members was around 60,000? First, the way of running a community is totally different from that of the traditional big influencer mode. In my opinion, despite the fact that traditional internet celebrities have occupied the main channels of blockchain campaign before community economy exists, the "one dimensional" structure of such campaigns were too intentional to be natural.

How can we solve this problem? Compared with community model, the word "media" lacks "warmness", or "dimensions". Views of articles released by traditional media can accumulate ten thousands, even hundreds of thousands hits. However, the workload of organizing large scale community was too arduous. When the size of EOS Gravity community exceeds 50,000 in population, I started to ponder:

• 1.Whether we still have a sense of "warmness": when the distance of communication and interaction among members extends infinitely, members will start to lose sense of belonging.
• 2.The establishment of consensus entity: the formation of community value, the input,output and exchange of value contents. What is called the output of value content? I intentionally avoid the word "publicity" as you can tell why. Output is like the veins that run inside our body, it is a tunnel as well as a carrier of nutritions that nurtures every inch of our body.

We need input as much as we need output, the combination of which is called interaction

and communication, and community culture is therefore formed under a certain shared value. By solving the abovementioned problems, community value gained acknowledgement in a historical sense. At that moment, I started to think the significance that community ecosystem has on blockchain industry.

With the community size hitthing 100,000 in population, I started to realize what kind of economic pattern blockchain really is, as I quoted from Mr Tao(CEO of WanXiang blockchain), lots of economical entities of various sizes will emerge in the future with immense organizational power in the world of blockchain.

This is called community economy and the core of blockchain economy is the economical entity of consensus made up of communities of various sizes. The new form of economical entity that transcend nation, field and even ideology will bring inestimable impact on the changing of social production relations.

What does the future hold? We need to rethink the 12 months crowdfunding period by block.one, during which the two concurrent tasks were accomplished:

• 1.Raising Fund and developing community
• 2.Technical development and Dapp ecology development

What's the significance of all these? Community ecosystem of Ethereum 2.0 was formed after the maturity of techonology. At the same time, EOS happens to find a way of advancing technological development while improving community ecosystem simultaneously.

Apparently, we have seen a bit of twists and turns regarding the election recently, and the multiple revisions to the election system has also triggered heated discussions and disputes among the pubilc, which could even probably lead to the exit of some members.

Nevertheless, EOS community is still undeniably the largest and most active community at the moment.

Therefore, we could try to imagine that the future of blockchain project is likely to be a two-lane track with community ecosystem and project operation running at the same time.

The next question is, whether consensus mechanism and token model are to be determined by community consensus as well or not?

We'll wait and see.