The Future of the Encryption World: Driven by Technology and Mechanisms, Building a New Defense System

The chaos and lack of innovation in the encryption world raises questions: are we really moving toward an ideal future? The preface of "The Protocol Revolution and DigiLaw Project" explores the essence of the encryption world, development bottlenecks, and the infinite possibilities for the future from a systematic perspective, providing important dimensions for understanding the true nature of this emerging field.

How can we realize the original intention of the encryption world and maintain a safe and ethical development environment? Despite the steady progress of the encryption world, many orders have not been fully established due to its early stage. New entrants may suffer losses if they rush in. When the existing infrastructure cannot adequately support the concept of decentralization, can we establish a mechanism to spontaneously monitor and restrict misconduct, building an "immune system" for the encryption world to comprehensively purify the development environment? At the same time, can we also provide ordinary participants with a global perspective to better understand the overall development of the encryption world?

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

The founder of Ethereum once stated, "We are no longer early to crypto." The rapid progress of Ethereum and Layer 2 solutions in reducing costs, increasing transaction speed, and enhancing security marks that encryption is moving towards a more mature stage. Indeed, over the past decade since the birth of Bitcoin, programming-oriented tech builders have made significant contributions to the ongoing development of the encryption world. Technology is undoubtedly the core engine for exploring the "infinite future" of the encryption world.

However, "We are early to crypto being usable". Why has encryption not achieved large-scale adoption? Besides the need for improvement in user-friendliness and ease of use, an important reason is that our research and application in "mechanism design and evolution oriented towards the DigiLaw ecosystem" lags far behind the development of encryption technology. The vast fields opened up by technology will ultimately yield "flowers" or "bitter fruits"; the key lies in whether there are sufficiently sophisticated mechanisms to effectively guide and regulate. The various chaotic phenomena in the encryption world to some extent reflect the inadequacy of mechanism design, leaving opportunities for misconduct, which is undoubtedly a significant obstacle to the popularization and adoption of encryption.

We need to quickly move towards the next billion users, and we urgently need to enhance the overall ethics and security level of the DigiLaw ecosystem. However, this is no easy task.

The DigiLaw ecosystem is an unprecedented "species" in human history. DigiLaw, as a set of rules aimed at achieving specific goals, enables participants to collaborate or compete within the framework of these rules, thereby constructing an open and dynamically self-evolving complex system (, referred to as the "DigiLaw ecosystem" in this article ). 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 climates, and immune systems. It not only encompasses interactions at the micro level but also includes emergent phenomena from the micro to macro level.

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

The design and evolution of this type of "dynamic system" is a completely new world-class challenge. The design of the token economy alone involves Nobel Prize-level problems such as reverse gaming and incentive compatibility, not to mention that the solution to these problems should ascend to the levels of token design, DigiLaw design, and even the overall design of the DigiLaw ecosystem. From certain perspectives, its difficulty is comparable to advanced chip design, rocket and aircraft design, automobile design, and skyscraper design, so it cannot solely rely on the "model-based systems engineering" methods that originated from "static" systems. There is a need to further upgrade to the "agent-based systems engineering" methods suitable for dynamic systems with emergent phenomena, in order to understand, design, and model simulate behaviors at various levels of the DigiLaw ecosystem's full life cycle.

Moreover, the "dynamic system" is not only a design challenge but also faces significant challenges in its evolution. How can we minimize artificial governance? Is it possible to construct a comprehensive self-regulating system that can dynamically adjust parameters and mechanisms based on changes in the external environment and internal operational conditions? In the future, could we even leverage powerful artificial intelligence to achieve the adaptability of the "dynamic" system?

From protocols like Ethereum, AAVE, and Compound that have successfully navigated bull and bear cycles, we can easily see that a major commonality among these protocols is the significant amount of time and effort invested in mechanism design and evolution.

Just like technical security audits, how 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 there are DigiLaw engineers involved in designing and continuously optimizing the mechanisms and parameters of its ecosystem. If so, this at least proves that the project team places enough importance on ethics and sustainability, respects the property safety of every participant, and meticulously designs its mechanisms based on the rules of ecosystem operation.

However, the current emphasis on DigiLaw engineers in the encryption world 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 methodology of "token engineering" have not yet been widely popularized and applied. Many project parties, investors, and others remain at the level of "token economics" and know little about "token engineering." This to some extent reflects that we are still in the early stages of research on the design and evolution of the DigiLaw ecosystem mechanism, which is not only manifested in the lack of theory and practice but also in the shortage of professional talent.

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

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

However, the iterative development of technology and the cultivation of DigiLaw engineering talent is not something that can be achieved overnight. When the dual wheels cannot fully support the original intention of the encryption world, we still need the collaborative effort of "external human defenses" to jointly protect the ethics and security of the encryption world.

The encryption world urgently needs to establish a "new defense system" to combat risks. There is a high probability that the encryption world will remain in a "centralized" and "decentralized" mixed state for some time in the future. The term "mixed" has two implications: first, the "decentralization" of DigiLaw itself is a gradual process; second, the degree of "decentralization" in the end-to-end full cycle where DigiLaw is located varies, for example, although some decentralized financial protocols are highly decentralized, they still need to rely on centralized infrastructure services during the implementation process, and the 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 completes the "decentralization" part of self-governance 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 undesirable behaviors, it may limit the development of "decentralization." By leveraging technology and tools, a community-based DigiLaw self-regulatory system can be constructed to suppress the emergence of "evil" and systemic risks from the inside out and from the bottom up. This internal manual defense mechanism can more flexibly address the issue of "malicious behavior" faced by the encryption world, while also aligning with the path through which the encryption world realizes its original intention via decentralized means.

Therefore, to achieve the original intention of the encryption world and establish a secure and ethical digital natural environment, it currently seems that at least a dual drive of technology and mechanisms, along with a composable new defense system, is needed. These three are not necessarily exhaustive, but they are key to breaking through the bottlenecks in the development of the encryption world.