Beyond Token Economics: a16z Launches "Protocol Design" Course

a16z has recently been focusing on the topic of transcending Token economics. Following the "Token Design" presentation and the article "Tokenology: Beyond Token Economics," they have launched the highly anticipated "Protocol Design" course. As the main speaker of this course, Eddy Lazzarin, CTO of a16z crypto, emphasized that the key to transcending Token economics lies in Protocol Design, while Token Design is merely an auxiliary means. This article provides a concise summary of the course content, helping entrepreneurs gain a deeper understanding of the critical role of Protocol Design in the success of projects.

The Internal Laws of Protocol Evolution

Internet protocol: the bond of interaction

The Internet is essentially a network composed of various protocols. These protocols are formalized interactive systems that facilitate complex group behaviors. The power of Internet protocols lies in their ability to connect interactions between people as well as interactions with software. Therefore, it can be said that Internet protocols are one of our most important types of protocols.

Evolution of the protocol: Web1 - Web2 - Web3

The evolution of the protocol can be analyzed from two dimensions: the degree of decentralization and the clarity of the economic model.

Web1 protocol: decentralized but lacks a clear economic model Web2 protocol: centralized and with a clear economic model Web3 protocol: decentralized with a clear economic model

Web1 protocols such as NNTP, IRC, SMTP, etc. remain neutral in terms of value flow, ownership, and other aspects, lacking a clear economic model. However, due to a lack of funding and specific functionalities, they ultimately struggle to compete with Web2 counterparts.

Web2 protocols are fully controlled by their owners and are only limited by business strategies and legal restrictions. They address the limitations of Web1, providing specific functionalities, but also introduce issues of centralization.

Web3 protocol utilizes encryption and blockchain technology, maintaining decentralization while having a clear economic model. It offers openness, interoperability, and open-source characteristics, integrating funds within the protocol to achieve sustainable development.

Web3 Protocol Design Case

Taking "Unstable Confusion" as an example, several key aspects of Web3 protocol design are introduced:

1. Verification mechanism: methods such as game theory and cryptography can be used to ensure the accuracy of reasoning.

2. Pricing Strategy: An order book can be established on-chain, or on-chain verified computational resources can be used as a proxy measurement.

3. Storage Mechanism: Consider on-chain storage, dedicated storage encryption networks, or off-chain storage solutions.

4. Task allocation strategy: can be chosen by workers, allocated by protocol, or selected by users.

Key Points of Decentralized Protocol Design

1. Pay attention to the 7 key design elements that may lead to centralization: namespace, payment system, reputation, storage, matching, pricing, and verification system.

2. Reduce switching costs and promote interoperability between different systems.

3. Make full use of Web3 technology to create decentralized systems.

4. Conduct in-depth research in all aspects and choose the best solution.

In summary, the design of Web3 protocols should focus on building long-term robust and truly decentralized systems, providing broader space for innovation.