Topic: Why BTC so successful? What's the Next? (Read 50 times)

I. Why BTC so successful?

Undoubtedly, Bitcoin is the most successful application of blockchain to date.  Its success can be attributed to the fact that Bitcoin sets up a perfect automatic system taking over all obligations that could occur in paying activities, which effectively changes the act of paying into a self-service mode.

DLA technology ensures that transaction records cannot be revised, demolished, or changed in order. The POW mechanism randomly assigns book-entry rights to prevent anyone from dominating the original source of data and making fake records. The '6-blocks-rule' effectively defends against 'double spending' attacks and the generating algorithm limits the total supply to ensure its scarcity. All of these technical measures together create a robust and automated system that effectively prevents defaults, violations, or infringements.

Therefore, people can depend on the rigid coding logic of the computer programs to achieve the primary function of cash (transfer value), rather than relying on the binding forces of legal documents as they usually do in traditional banking systems.

Not relying on any agents or obligors, exercising rights by self-service under automatic control, which may summary the legal meaning of “decentralized” and “trustless”.

II. Book-Entry Interest

Furthermore, BTC has another important characteristic: it is a book-entry interest that can be fully controlled by computers.

Currently, a significant portion of human’s wealth and assets exist as book-entry interests, such as bank deposits, real estate, equity shares, stocks, bonds, and beneficiary rights of trust etc.

Therefore, if we define Web3 as “read, write and own”, the object of ownership should primarily refer to the economic benefits of these book-entry interests.
 
III. Legal Documents & Their Shortcomings

To protect the safety of book-entry interests and facilitate transactions, legal documents, such as deeds, contracts, bylaws, regulations and even constitutions, are introduced into the economic activities. However, they have a common shortcoming: they cannot prevent default or violation in the front end and can only rely on afterward remedies. This is why commercial disputes often result in costly and time-consuming arbitrations and litigations.

To prevent defaults or violations, people often involve a third party in the legal relationship, such as a supervisor or custodian. This obligor is responsible for monitoring the governance power or escrowing the subject or consideration of a transaction. For example, banks issue letters of credit to assist sellers and buyers in settling their international trades despite the distance, and Alipay holds and releases consideration for goods in e-commerce.

What if we use smart contracts to replace third parties and automate the escrow process?

IV. Problems Web3 Can Solve

To speak frankly, most of the “problems” in commercial activities are caused by humans, specifically obligors or fiduciaries.  Defaulting on contracts or violating bylaws are two typical examples. 

So, what problems web3 can solve?

In my opinion, quite a few.

As long as the legal right or value vehicle is a book-entry interest and there are obligors and obligations involved, Web3 will have its broad stage to play its active role: to define the book-entry object, control their auto-updates, and take over all obligations through the automatic operation of smart contracts.


V. Problems of Capital Markets & Solutions

Take capital market as an example:
    (1) “Oppression of Minority Shareholders” occurs because rightholders can hardly exercise their rights directly;
    (2)  “Insiders Control” exists because executives can easily violate their fiduciary duties;
    (3) “Misleading Statements” appear due to the fact that legal acts and information disclosure are separate behaviors; and
    (4) “Commingle Assets” happens because transactions in securities markets need to be conducted through brokers and dealers.

Using smart contracts to define register of shares and all other statutory books of companies, and control their automatic updating, eliminate obligors and obligations extremely from the activities of share transaction and corporate governance, then all the above mentioned problems of capital markets can be solved.


So, What's the Next?