What does it take to go from blockchain to DAO?

First of all, I want to state that the DAO I am talking about is not the crowdfunded DAO project, but the general concept of DAO: decentralized autonomous organization. This article is mainly an analysis and summary of future blockchain application scenarios.

1. Application and development of blockchain

The application scenarios of blockchain have always been a hot topic. For detailed introductions, we can see a lot of classified information on 8btc.com: smart contracts, notarization and anti-counterfeiting, asset transactions, bank settlements, etc.

Today we will first talk about the development dependencies of these application scenarios, as shown below:

We can see in the figure that digital notarization is followed by four important elements: digital assets, decentralized digital exchanges, digital identity authentication, and smart contracts .

These four elements are very important*3. Digital assets are asset information issued by most institutions and can be traded at any time. At present, they are likely to be hosted on the blockchain. The most typical example in China is Antshares. However, digital assets alone are not enough, and exchanges are also needed. The reasons here have been explained in our previous article (How to use blockchain to build a value circulation network).

But what happens even if we have digital assets and exchanges? Digital assets on the Internet cannot have a legally recognized association mapping relationship with physical (legal/natural) persons. Even if a transaction occurs, there is still a possibility of breach of contract. Therefore, a digital identity is needed. Only digital identity + digital assets can generate a valid smart contract. Only with a smart contract can we talk about DAO.

2. Core Concepts

To solve smart contracts, we first need to solve four concepts:

DA, DAE, Oracle, DI
1) DA = Digital Asset

It is easier to understand here. Digital assets, in a broad sense, refer to all assets in the form of electronic data, including even digital currency, business points, electronic stocks, bonds, intellectual property rights, electronic deeds, funds, income rights, or other asset packages, etc. These digital assets may be issued by centralized institutions, or decentralized, and may be blockchain or non-blockchain. Everyone knows that blockchain is a technology derived from the Bitcoin system. Blockchain is originally a decentralized ledger of Bitcoin. Its openness, immutability and successful solution to the double-spending problem make it a natural technology for issuing, recording, transferring and managing digital assets. The digital assets we are discussing today are digital assets on the blockchain in a narrow sense. It is similar to the concept of asset securitization, but the difference is that it is an asset concept expressed by blockchain technology, that is, a liquid asset based on the Internet that is fully controlled by the asset owner. I believe that the digitization of assets on the blockchain is the inevitable direction of the future evolution of Internet finance.

2) DAE = Digital Asset Exchange

A digital asset exchange, or better known as a DAM (Digital Asset Management) digital asset management platform, is a platform for the issuance, custody, accounting, and transaction matching of all digital assets. Unlike traditional exchanges, DAM's issuance, custody, accounting, matching services, and asset delivery are all automatically completed by the blockchain or its client asset wallet.

The birth of Paypal and Alipay in 2002 marked the transition of the Internet from the information Internet era of merely transmitting and exchanging information to the value Internet era of transmitting and exchanging currency or value. Bitcoin was born at this opportunity. The value Internet will not just stay at the online transmission and transaction of currency. The next step of the value Internet is the free transmission and exchange of assets on the Internet. At the end of 2008, Satoshi Nakamoto's Bitcoin creation paper "Bitcoin - A Peer-to-Peer Cash System" kicked off the prelude of blockchain technology. Today, when Bitcoin has safely passed its seventh year, everyone can't help but ask, is Bitcoin the only application of blockchain? Should there be a peer-to-peer blockchain digital asset management and transaction system?

Bitcoin is the first application of blockchain, and the blockchain digital asset management and trading system may be the next killer application of blockchain.

3) Oracle
Arbitration service: This clause is for smart contracts, that is, when a smart contract breach occurs, an arbitration service provider generally conducts online arbitration.

4) DI = Digital Identity
Digital identity is a very interesting and important concept.
The combination of 1, 2, and 3 is collectively referred to as Fin-network, that is, (decentralized point-to-point) financial Internet, Fin-net.
So, how does an entity (legal or natural) person associate with Fin-net? The answer is DI.
This DI should be a real-name authentication endorsed by the law on the side of the entity (legal/natural) person. It can take unique identification features from biological people according to different authorization levels. It can be a DNA fragment, a pupil, or a fingerprint (the ID card is too weak). When a physical person uses DI to enter Fin-net, he uses the feature fragment to sign and obtain a temporary (permanent) authorization to enter the target DA network. After entering the DA network, an associated account is generated according to the authorization code, and the authorization credential represents the physical person.

The following figure shows the relationship between the four elements:

Any entity (natural/legal) person, through the digital identity authentication service, uses his/her own characteristic value (passwd/ID card/DNA/pupil/fingerprint) to sign an authorization code, defines the validity period of the authorization code, and then uses the authorization code signature to enter the target digital asset network (DA-net), or directly enter the exchange to obtain the target digital assets through transactions.

The VR line represents the boundary between reality and the Internet.

Secondly, I believe that when exchanges provide indiscriminate digital asset trading services, all blockchain digital assets should follow certain development standards, otherwise the performance and security of the exchange will be difficult to guarantee. As I mentioned in my previous article, a basic encryption protocol can be added to the application layer of the TCP/IP protocol, which includes basic interfaces such as asymmetric encryption algorithms/BT protocols/blockchain data sending and receiving.

Different DIS (Digital Identity service) service providers can provide different types of DI services, such as financial services specifically provided by financial services, and notarization services provided by notarization services.

For example, in the future, police will not need to show their ID when enforcing the law. Suspects (ordinary people) can simply use their mobile phones to access the DI network to verify the identity of the police. This DIS is a notarization DIS.

For example, when someone needs to purchase a digital asset issued by Tencent, they can directly enter Tencent's DA-net through the financial DIS and use legal digital currency to purchase it, or they can directly enter a certain Ex (digital exchange) and use other digital assets to trade.

I didn’t draw the Oracle (arbitration service) in the above picture. In fact, Oracle should be divided into two types: one is online, and the other is a judicial institution similar to a court. For online arbitration, we can embed it in the code and let the transaction parties specify it.