Neglected blockchain node operations: the hidden value of mining

Author: Vice President Sun

Editor’s Note: The original title is “When discussing blockchain, don’t ignore the value of node operations”

There are two interesting news in the blockchain industry recently. Although they involve different sub-sectors, they both have the same effect, which is to give practitioners and investors a shot in the arm, allowing them to feel the mainstream society's recognition of the blockchain industry that has developed from the bottom up. The first news is the blockchain conference talk of the Chinese Political Bureau on October 25, which made blockchain truly a "formal industry" in China. The second news is that the well-known mining machine manufacturer Canaan Creative landed on Nasdaq on November 20, becoming the first blockchain stock in the true sense.

In the eyes of many people, one of these two news stories happened in China, and the other happened in the United States, one happened at the government level, and the other happened at the capital market level. But many people may have overlooked one point: in addition to the differences in countries and institutions, there is another very obvious difference between these two news stories: the former mainly involves the blockchain technology itself, while the latter involves a relatively low-key but crucial work for the blockchain: that is, the operation of blockchain nodes.

1. The real key indicator of blockchain: decentralization

There is no doubt that in today's society, blockchain has become a hot topic. In all walks of life, there are discussions such as "what is blockchain technology", "how does blockchain technology empower the real economy", and "which country or company has achieved a leading position in blockchain technology". It should be noted that in relevant discussions, people often focus on the "technology" of blockchain. This may indicate one thing, that is, many people regard blockchain as something similar to the Internet of Things, big data, cloud computing, and artificial intelligence, and believe that as long as enough resources are invested in research and development, related products can achieve performance leadership, just like the 5G network they focus on. But the fact is probably: blockchain is far from as simple as they think. As long as it leads in technical performance, it can gain recognition from developers and users.

Why do you say that?

To explain this, we must first understand why people need blockchain. Unlike other technologies, this digital technology does not play the role of a channel in the digital economic system, but the role of trust. That is, it creates a credible execution environment in an economic scenario without credibility. The indicator of "credibility" is quite subjective, which determines that the indicators of blockchain products are likely not positively correlated with people's recognition.

For example, from the perspective of transfer experience, Bitcoin is definitely not as good as many altcoins that appeared later, but if you ask which project has the highest degree of recognition and user group in the field of cryptocurrency. The answer is undoubtedly Bitcoin. The reason for this is naturally not because of how superior the technical indicators of this project are, but because of the success of Bitcoin in operation. Since 2010, this project has never had a privileged person who can have the final say on the project development route like Satoshi Nakamoto. So now when people think of ETH, they think of Vitalik, and when they mention EOS, they think of BM, but when it comes to BTC, except for Satoshi Nakamoto who has disappeared for many years, most people probably can't think of who else can be the backbone of this project now. This is the most successful part of Bitcoin and the reason why many fans think it is unique.

On the other hand, many current blockchain followers have a misunderstanding about blockchain: in their opinion, as long as the technical indicators of a chain are strong enough, it will naturally gain people's recognition. However, this is probably not the case. Looking at the "public chain war" that started at the end of 2017, each chain had a high TPS, but in the end, no one used it. So where did they lose? The answer is credibility, and the key to high credibility does not only come from the technical level itself that is now being pursued by all sectors of society, but from another job - that is, operation.

2. Neglected blockchain node operation: the hidden value of mining

One thing that needs to be clarified is that in the past few years, because the blockchain industry has been simply and crudely equated with the "cryptocurrency circle" and the product that needs to be sold to the outside world is "cryptocurrency", the so-called "operation" of the blockchain industry is also generally regarded as activities similar to "meetings, dinners, and face-to-face meetings". Its purpose is very simple, which is to connect many social resources through various sales activities, thereby creating more liquidity for the company's tokens, and ultimately sell digital currencies to exchange for legal currency income for the company.

But in fact, if we look at it from the perspective of the "chain", that is, if we promote the "chain" itself as a product, then the operation of the blockchain industry is actually much more complicated - you must not only make users (at this time, users are not only investors with relatively simple ideas, but also numerous developers and DAPP users) feel that the performance of your chain is relatively easy to use, but more importantly, this chain must have a certain degree of decentralization: your nodes cannot be too concentrated in the hands of a single interest subject, otherwise the information will be tampered with; if a node withdraws, there must be other interest subjects to fill its vacancy to prevent the node from becoming a monopoly or even becoming unsustainable due to too many node withdrawals; when encountering major decisions in the development of this chain, the development direction of the chain cannot be determined by a privileged person, but must be discussed by all parties with close interests...

It is no exaggeration to say that it is the "decentralization" that lacks industry standard measurement and seems quite subjective that makes blockchain stand out from many digital technologies and attract the attention of the outside world. Otherwise, if people only pursue performance such as TPS, then people will simply use centralized cloud platforms directly, and the speed is really much faster than blockchain. The real operation of blockchain should actually make the outside world realize that this chain is not only objectively superior in performance, but also worthy of people's subjective trust in sustainable decentralization. However, unfortunately, this work has been ignored by people in the past. For example, a well-known public chain project made a lot of money by selling tokens in the primary market. However, in the subsequent development of the public chain, various centralized events were exposed, which greatly hit the confidence of investors and developers. In other words, the project was very successful in the operation of "coins", but it was a great failure in the operation of "chains". This is also an important reason why its results are currently far below the expectations of the outside world.

In fact, even now that blockchain has received great attention from the mainstream society, the operation of blockchain does not seem to have received much attention. Now all walks of life are discussing blockchain technology, and they all hope that their companies can take the lead in the field of blockchain technology. However, the real essence of blockchain lies in decentralization, and the achievement of decentralization is not only about technology, but also about the rationality of system design and subsequent related operations, which is where the real industry added value of blockchain lies. At present, the industry that is closest to blockchain operation should be the mining industry, which includes mining pools, mining farms and mining machines. It is under the continuous operation of the mining industry that the Bitcoin main chain can produce blocks continuously for 10 years.

However, looking around the world, although countries do have certain preferential policies for the introduction of mining farms. But this is more from the perspective of the energy industry, hoping that mining can promote local energy consumption and increase employment in the labor-intensive energy industry. However, few people will examine the mining industry from the perspective of the blockchain industry. Although China has realized the importance of blockchain technology, at present, the main focus is still on technology research and development, rather than related mechanism design and node operation. For example, there are still many people who do not understand the significance of the existence of Bitcoin mines and think that this is a waste of electricity. This idea just reveals that they currently regard blockchain as a channel technology like smart hardware, big data, and artificial intelligence, and this understanding of blockchain is very superficial. Because it is precisely because of the continuous competition between mining pools that the data on the Bitcoin main chain is highly credible.

From this perspective, Canaan's listing on Nasdaq some time ago actually has another important meaning. It at least sends a signal to the outside world: that is, in the eyes of the US securities review agency, Canaan's current business related to blockchain mining is meaningful and can create a certain social added value. For the blockchain management of various countries, which are paying more and more attention to each other, they are likely to re-examine blockchain mining, and finally put aside the prejudice that "mining only wastes energy", understand the true meaning of blockchain operation business, and encourage all sectors of society to invest more resources in this currently inconspicuous but vital business.