Demolishing the White Horse Gate: From Open Finance to Open Art

This article is sourced from PAKA, authored by PAKA Labs researcher MIDDLE.X.

The historical drama "Three Kingdoms" presents a story: during the late Eastern Han Dynasty, Cao Cao, who had already proclaimed himself King of Wei, was just one step away from the throne.

One time, Cao Cao's son, Cao Zhi, had an urgent matter to attend to in the imperial palace. If he went through the White Horse Gate (also referred to as the Sima Gate), he could save an hour's journey. According to Han regulations, only the emperor's chariot could pass through the White Horse Gate. Cao Zhi, due to his father's power, thought little of this and planned to go through the gate. When he arrived at the White Horse Gate, he was stopped by Xun Yu, an old minister loyal to the Han dynasty. Xun Yu said, "If the father does not abide by the rules, how can the son?" When Cao Cao arrived and learned of the situation, he first reprimanded Cao Zhi but then ordered the demolition of the White Horse Gate, telling Xun Yu, "From now on, this is a wide road to heaven, and everyone can walk here. Where are the rules you speak of?"

However, in the context of this story, the protagonist is neither the usurper Cao Cao nor the arrogant talent Cao Zhi, but the White Horse Gate itself. We will use this as a metaphor: the White Horse Gate symbolizes the taboos of the old order, while the wide road to heaven represents an open and inclusive new system.

In the real world, there are many "White Horse Gates," and crypto hackers are breaking them down one by one. The crypto movement, sparked by encryption technology, can be seen as a vigorous "demolition of the White Horse Gate" movement.

Open Currency

In 2009, the emergence of the Bitcoin network allowed humanity to transfer value online without relying on any centralized institution, and Bitcoin itself became a new digital form of value carrier. Hayek's theories of "de-nationalizing money" and "freedom of minting" were realized in a way that had never been imagined before.

In 2014, a Russian genius teenager attempted to develop smart contracts based on Bitcoin but encountered various limitations. He then started anew and developed Ethereum, marking the transition of blockchain from 1.0 (the era of electronic currency) to 2.0 (the era of smart contracts). From Bitcoin to Ethereum, issuing cryptocurrencies became much simpler. On this basis, Ethereum's Turing completeness also endowed cryptocurrencies with programmability, laying the foundation for the birth of open finance.

Open Finance

With programmability, humanity began to build "open finance" on the basis of "open currency." Compared to traditional finance, open finance has the following characteristics of openness.

First, the openness of data. This is a characteristic inherited from open currency. In traditional finance, there are countless black boxes and information asymmetries, which have even led to severe consequences like the "subprime mortgage crisis."

In open finance, all records are traceable and queryable, permanently recorded on the blockchain. Any financial service can publicly display its service data, and any financial derivative can be clearly traced back to its underlying assets. These are inherent characteristics of encryption technology, allowing open finance to operate without the need for regulatory institutions to enforce information disclosure and punish fraud as in traditional finance.

Second, the openness of access. Whether for creators of financial services or users, finance in the crypto world is free. Developers can freely create financial services, and users can freely participate without any third-party permission. This is in stark contrast to the traditional financial world, which is filled with taboos and barriers.

Third, the openness of ownership and governance. In the traditional financial world, providers of financial services are often centralized institutions that erect various barriers, making it difficult for ordinary people to participate. In open finance systems, the circulation of governance tokens is unrestricted, and token holders become actual owners of a financial service, able to govern through proposals, voting, and other means.

Fourth, applications are mutually open, compatible, and composable. Open finance, due to its openness of access, encompasses everything: currencies, securities, derivatives, alternative assets, stablecoins, lending, synthetic assets, and decentralized exchanges (DEX) are all flourishing.

On this basis, open finance has also developed a set of interconnected protocol systems, allowing different parts of open finance to combine into an organic whole. Protocols can call each other, and existing protocols can serve as infrastructure upon which more complex financial services can be built. This characteristic endows open finance with almost limitless potential for growth, leading to continuous financial innovation.

Although the term "DeFi" has become commonly accepted, I prefer to use "open finance" because "openness" is the essential characteristic of crypto finance, rather than decentralization. Even centralized service providers, as long as they fully utilize encryption technology and achieve the basic requirement of "data openness," can become part of open finance.

If the data black boxes, access taboos, monopolized ownership lacking liquidity, and lack of interaction between different service entities in centralized financial institutions are four "White Horse Gates," then open finance has undoubtedly succeeded in demolishing them.

In addition, open finance also provides a new perspective for macroeconomic research. Historically, research on macroeconomics has been limited by the lack of experimental conditions, relying only on limited historical experience to make theoretical assumptions, leading to macroeconomics resembling a metaphysical discipline that no one can clearly articulate.

To date, there are at least ten theories explaining economic cycles, which seem self-consistent yet contradictory, making it impossible for people to understand exact causal relationships in macroeconomics as they do in microeconomics. In open finance, we finally have an experimental environment for studying macroeconomics, or at least, we have a control group outside the physical world, allowing us to begin to anticipate an ultimate explanation for economic cycles.

Open Art

Imagination can be said to be humanity's closest ability to the divine. In human society, there exists a category of activities where people rely on imagination to engage in pure creation, which is artistic creation.

As history has progressed, the ways of expressing art have continually evolved. Among them, the evolution of thought drives art; for example, during the Enlightenment, as rationalism demystified religious theology, religious portraiture shifted from expressing divinity to expressing humanity, indicating that art is a reflection of the era's thoughts. The evolution of technology also profoundly changes art; for instance, the invention of the camera in the 18th century brought an end to the realism painting initiated by Da Vinci, giving rise to styles such as abstraction, impressionism, and cubism.

So, what changes will encryption technology, as a powerful transformative force, bring to art? We have learned that encryption technology has spawned open finance, and through observation, we find that artistic forms under the influence of crypto thought and technology are undergoing interesting changes. Crypto artists are dismantling the "White Horse Gate" and creating "open art."

The Extension of Open Artworks

The value of art comes from its ability to provide beautiful visual or sensory experiences or to inspire thought and imagination. For collectors, the value of an artwork lies not only in the appreciation experience but also in self-expression and identity, social status, and even simple donation and support. Often, these factors combine to form the value of an artwork, making it inseparable.

In the past, these values were constructed independently by artists and embodied in the artworks. However, crypto hackers have discovered that the creation process, the methods of creation, and the processes of collection and circulation can all become important parts of value construction.

“everydays: the first 5000 days”

This is the first artwork in the crypto art field to be auctioned for a sky-high price, triggering a FOMO frenzy in NFT investments. The piece, titled "everydays: the first 5000 days," is a collage of 5000 paintings, created by Beeple, who has consistently produced one artwork every day for 5000 days. The artistic quality of the 5000 paintings in the work is no longer important; what matters is Beeple's commitment to creating one painting every day for 5000 days, expressing a spirit of long-termism. This creative process is the true essence of the artwork.

“Red and Blue”

This is "Red and Blue," created by Chinese artist Liu Jiaying. The artist released 100 gradient color blocks from red to blue on Ethereum and conducted a year-long auction. Audiences could bid on their favorite color blocks, and the artist did not express the meaning of each block in advance. Some interpreted it as a political inclination survey under the Sino-U.S. trade competition, while others saw it as a competition between emotion and reason, passion and calmness.

In this artwork, the artist hardly created anything but established a platform for collectors to construct value through bidding; the bids from collectors became part of the artwork.

“First Supper”

This painting, titled "First Supper," is regarded as a representative of asynchronous art (Async Art). The core value of this painting comes from the collaborative creation of multiple artists at different layers. This painting is not a static image but consists of a main canvas layer and 22 sub-layers, with each layer created by different artists.

Collectors can purchase layers individually and customize layer parameters, altering the images of those layers. Thus, this is an asynchronous artwork that evolves over time.

There are many variations of similar co-creation methods. For example, one artist creates a landscape painting, and other artists continue painting on the edges of this painting, requiring continuity, and so on, forming a composite painting created by multiple artists.

We hope more people can enjoy art; we wish for "the swallows of the old Wang and Xie halls to fly into the homes of ordinary people." However, art that expresses profound thoughts often remains aloof. "Art democracy" is a false proposition; we do not wish for art to become mere entertainment. A more inclusive way to make art accessible may not be to have more people appreciate art but to have more people participate in creating art. The socialization of the artistic creation process will give rise to more new forms of artworks.

Open Art Trading Market

NFTs, as carriers of artworks, realize the authentication and preservation of artworks. Although infringement incidents occur from time to time, the traceability of NFTs makes it easier to protect rights.

In the traditional art trading market, galleries or curators are the centers of power, and artists have little voice. Artists must rely on intermediaries to find buyers, and only well-known top artists can break free from dependence on galleries and curators. However, in the NFT trading market, the gap between artists and collectors has been bridged. Although artists still need professional curators to promote their works and build and manage communities, it is clear that the bargaining power of artists has significantly increased. Many NFT trading markets support the setting of royalties, allowing artists to enjoy long-term benefits from their works.

In this new power structure, the creativity of artists is fully respected, and only when creativity is respected can more creativity be stimulated. Therefore, encryption technology and NFTs will create a more prosperous and vibrant art market.

Open Programmability: Infinite Possibilities

NFT stands for Non-Fungible Token, and compared to FT (Fungible Token), it has characteristics of non-interchangeability and non-divisibility. However, we should pay more attention to the shared characteristic of NFTs and FTs, which is programmability. Programmability endows crypto art with new possibilities, including the potential for temporal evolution, financialization, and social display.

The potential for temporal evolution: Taking the previously mentioned "First Supper" as an example, the artwork transcends static images and evolves over time, and this change itself becomes part of the art. Of course, this is just one form; a more meaningful way of evolution is that artworks can leave marks of collectors as they circulate among them.

In Nico Yang's article "What is Open Art" from Puzzle Ventures, a method is mentioned that allows collectors to obtain "electronic annotation rights" and "electronic seal rights." I believe that further, collectors could annotate artworks, and the content of the annotations could be included in the metadata of the transaction when purchasing the artwork.

The potential for financialization: Through interaction with DeFi applications, artworks can be used as collateral for loans, ownership of artworks can be divided into shares and dispersed, and artworks can serve as underlying assets to synthesize new assets or derivatives. These directions are already being practiced by various projects. Through financialization, artworks further increase liquidity and enhance value discovery mechanisms.

The potential for gamification: The programmability of NFTs will also endow art with more possibilities for gamified interaction. For example, CryptoKitties integrates a breeding mechanism into crypto cats, and more complex mechanisms such as forging, crafting, exchanging, and random generation could also be incorporated, offering rich possibilities. Of course, some may wonder whether gamified art is still art. Little do they know, games are the ninth major category of art, alongside painting, sculpture, architecture, music, literature, dance, theater, and film!

The potential for social display: Some say that owning NFT artworks often does not mean owning the copyright of the original work. So how can I demonstrate that I own it?

In addition to the previously mentioned "annotations" and "notes," I believe that the Metaverse is the ultimate home for NFT artworks, as it can fully showcase and realize their social value. The current Metaverse is still not very mature, primarily characterized by gaming/toy attributes. I believe that in the future, the Metaverse will solidify real social relationships, forming a new social space parallel to the real world, developing life/tool attributes.

As we develop the programmability of NFTs, we will discover more layered and collaborative artistic creation behaviors: for example, someone designs a building, another person creates wall paintings on the building's walls, someone else does virtual renovations inside the building, and another person displays ornaments indoors. In this scenario, whether it is the building itself, wall paintings, renovations, or ornaments, they are all independent artworks as well as parts of the overall artwork. This combinability and collaboration far exceed the multi-layer collaboration of "First Supper." It can be said that the composability of open finance forms a "DeFi Lego," and the composability of open art will also give rise to "art Lego."

Conclusion

Encryption technology has spawned "open finance" and created "open art." "Open art" seems to be a boundaryless form of art; at least, we have not yet touched its boundaries.

In "The Three-Body Problem," a fictional organization called "Scientific Boundaries" is created, which explores the limitations of science using scientific methods. Therefore, we look forward to artists using artistic means to dismantle more "White Horse Gates" and explore the boundaries of art.