State of the Industry with Jack Lu and 8BTC
Jack Lu recently sat down with leading Chinese blockchain news provider 8BTC for a series of wide ranging interviews on the state of the blockchain industry and what he expects from 2019.
8BTC: As an experienced leader in the blockchain field, both abroad and within China, and as a serial entrepreneur, what are some of the key takeaways from your experiences?
Jack Lu: The main use of public chains for enterprise users is as notary public. When promoting blockchain domestically, I found that there was a great potential market for private and consortium blockchain service providers, so I returned to China to found Wanglu Tech. My initial plan with Wanglu Tech was to focus on services for enterprise clients. In the process of building Wanglu Tech, I found that there was great value in being able to connect many different blockchains together (public, private, as well as consortium), and to allow for the exchange of value between them. As a result, we incubated and established the Wanchain project.
As for the overall market sentiment, in recent years there are more and more people and institutions entering the industry, and each wave is bigger than the one before. Entrepreneurship is the same in any industry, only solutions and business models with sustainable user bases which create value for the end user can succeed.
I hope that everyone will not lose confidence during the crypto winter!
8BTC: Next question. When you spoke with 8BTC at the end of last year, you said that cross chain interoperability is achieved through three distinct stages. The first is the redefinition of value, the second is the circulation of value, and the third is the standardization of cross-chain. Which step do you think is being developed now? One of the most important issues to be solved by Wanchain is cross chain interoperability. There are also several other star projects in the cross chain field. Cosmos is expected to launch their main network at the end of February 2019, and the market is also looking forward to Polkadot. Overall, what is the progress and status quo of cross chain in the blockchain industry?
Jack Lu: We have successfully launched decentralized cross-chain interoperability with Bitcoin and Ethereum and are currently working with many parties to study and promote the standardization of cross chain. Throughout 2018, the development of cross-chain technology has gradually stabilized, and consensus has been reached as to how to approach the problem. That is, the use of a notary mechanism, side chain/relay, hash locking, and distributed private key controls.
There are slightly different approaches, each with their own strengths and weaknesses, but the core ideas are the same. Every mainstream cross chain technology faces the same two problems, that is: information transmission and value locking. Different mainstream cross chain technologies only differ in leaning more towards either decentralization or efficiency when solving these two problems, but they are all still building on the same general framework. In 2019, cross chain technology will continue to be an important area for the development of blockchain technology. At present, there is no distinguishing advantage of any technology relative to other technologies. Therefore, whoever can really deliver working technology will come out ahead. We at Wanchain are fully confident in our own approach.
In my previous interview, I mentioned the significance of cross-chain. It can break the value transfer barrier between chains, make the connection of blockchains a reality, and usher in the blockchain based internet of value. To explain it in everyday language, I’m going to make an analogy to the game industry. Games can be broadly divided into two categories, namely, standalone games, and multiplayer games.
Standalone games can be excellent, but no matter how well made they are, players will always get tired of them eventually and then gradually lose interest. Online games may be very simple and rough, but the audience is very wide, and grows virally. Only by connecting the lines into a network can the information and value be transmitted smoothly, thus bringing a steady stream of users and value. Wanchain aims to turn blockchain from “standalone” into a “network game hall”. In this game hall, players can arbitrarily shuttle through different standalone games as much as they wish. Of course, building the internet of value is even more important!
8BTC: 2018 has been hailed as the year of the public chain. There is a general view in the industry that the development of state channels, side chains, crosschain, and sharding technologies will develop greatly throughout 2019. Solving public chain’s performance issues is the prerequisite for their eventual enterprise adoption. How can these performance issues be solvebd? What is currently holding back public chain development?
Jack Lu: In 2018, as the hype died down and everyone began to return to their senses, focus again shifted back to research on underlying technology. The technologies of privacy, efficiency, and consensus mechanisms have all developed tremendously in the recent months. In particular, the performance improvements have greatly expanded the application scenarios of blockchain. It can be said that 2018 is the bear market for prices, but it has been a “bull market” for technology development.
At present, one of the issues holding back the development of major public chains is the fact that the various blockchains are not connected to each other and are still value islands. Wanchain is the main chain leading cross chain development. We believe that the current performance of public chains has made a big leap compared to the past, but it is still not enough to meet the demands of large-scale commercial use. The decentralized nature of public chains is the source of its shortcomings in performance. Wanchain plans to implement cross-chain, POS, sharding, and second layer scaling in phases to continuously improve performance. Large-scale commercial use of blockchains is only a matter of time.
The challenges holding back public chain development cannot be easily generalized. In addition to performance issues, there are various issues such as privacy and governance. There may be different constraints in different application scenarios. It is impossible to have a public chain to solve all problems and adapt to all application scenarios. Therefore, there will still be vigorous competition between public chains in the future.
8BTC: The debate about the consensus mechanisms is a hot topic in the blockchain industry. Especially in the past year, many emerging public chains are more inclined to choose the DPoS or PoS algorithms. The actual performance of PoS projects has been a hot topic, as well as worries about the threat of computational attacks against small PoW blockchains. What was the consideration for the selection of a consensus mechanism? How do you view the evolution of the consensus mechanisms? In the future, what dimensions should new projects consider in the selection of consensus mechanisms? Is there a trend in mainstream public chains moving from PoW to PoS?
Jack Lu: Our team has been working on a consensus mechanism for some time now. The consensus mechanism is the core and soul of blockchain technology, and it has evolved along with the evolution of all blockchain technology. I think the evolution of consensus mechanisms can be described in three phases:
The first stage of consensus mechanisms is POW represented by Bitcoin. It is based on the unidirectionality of the hash function, and uses hash collision to construct the problem, making mining transparent and fair.
The second stage is the simple POS consensus mechanism proposed by Peercoin. The essential principle is that under the assumption of rational actors, those with more stake in the chain will have more motivation to maintain the consistency of the chain.
The third stage is now, represented by the improved POS protocols proposed by Algorand, Ouroboros, etc. These consensus mechanisms use complex cryptographic algorithms and elaborate design to achieve provable security in mathematical terms. It is not difficult to see that from POW to simple POS, to the newer and more complex POS with provable security, consensus mechanisms are constantly developing and progressing, and it also shows that blockchain technology is constantly maturing. The fundamental reason for this development is that we now have a deeper understanding of blockchain. The essence of consensus mechanisms is exploring how to find the “right” proposer of the “right” block under the principles of security and fairness, so only if you clearly think through the problem, can you find the way to solve the problem.
I personally think that the choice of consensus mechanism should be evaluated from four dimensions:
1. Safety and security are always the first considerations, and security here refers to “application security”, which means that it can withstand the test of real use. This refers to security which is provable in a mathematic sense.
2. Efficiency is the next consideration. The key factor which restricts the performance of a chain is the consensus mechanism, which also directly affects its application scenarios, so an efficient consensus mechanism is necessary.
3. Decentralization is the next consideration. The essential reason for the decentralization of the blockchain is that its underlying consensus mechanism is decentralized, which is the key point which distinguishes blockchains from the centralized databases.
4. The last consideration is balance. This is actually a summary of the above three points, because when you understand the different consensus mechanisms, you will find that security, efficiency, and decentralization are often not compatible. Different consensus mechanisms have different focuses, but after all, there will always be tradeoffs between these three properties. Therefore, when we choose the consensus mechanism, we must closely evaluate the nature of the chain and the future application scenarios, and achieve an optimal balance in security, efficiency, and decentralization.
The evolution of POW to POS is an inevitable trend in the development of public chain consensus mechanisms. In the context of increasingly deep understanding of blockchain technology and consensus mechanisms, we must find a new consensus mechanism that is more suitable for than POW, and that is the third phase of POS. The Wanchain team is also working hard in this direction and has recently developed their own excellent POS protocol.
8BTC: We’ve spoken about some of the major technical trends, but let’s take a step back and look at the market situation. How do you view the current market? I would like to ask you to make a bold prediction. What will set off the first wave of 2019? What can we expect from the blockchain field in 2019? Why?
Jack Lu: Traditional financial markets are similar in that participants are the main factor. The first wave may be set off by the Ethereum upgrade. The institutional players have been waiting for a long time for the market recovery.
We can expect big institutions to step up their interest in 2019. We have cooperated with the Ethereum Enterprise Alliance as well as Hyperledger. Recently, Dr. Zhang Weijia, Vice President of Wanchain, was appointed as the representative of the Ethereum Enterprise Alliance (EEA) in China. We also are cooperating with Telefonica and look forward to seeing more and more of such cooperation. I’m really looking forward to seeing more enterprise level blockchain applications landing this year.
I also expect that decentralized exchanges with stable coins will begin see explosive growth everywhere and will gain more and more users. We are also working with a number of partners and hope to launch a cross-chain decentralized exchange as soon as possible.
Wanchain is a blockchain platform that enables decentralized transfer of value between blockchains. The Wanchain infrastructure enables the creation of distributed financial applications for individuals and organizations. Wanchain currently enables cross-chain transactions with Ethereum, and today’s product launch will enable the same functionalities with Bitcoin. Going forward, we will continue to bridge blockchains and bring cross-chain finance functionality to companies in the industry. Wanchain has employees globally with offices in Beijing (China), Austin (USA), and London (UK).
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