ArkStream Capital: The market may not only be L2, the new public chain cannot be ignored

Original Author: Ray

Original source: ArkStream Capital

The environment of the new public chain

If there is a law of gravitation in the blockchain world, then at present, Bitcoin and Ethereum are like the two brightest stars, illuminating this bright star field. And the reason why they are able to stand out among the stars and shine brightly is that they have their own original technology implementation (that is, blockchain and smart contract platforms), as well as continuous iterative upgrades over the years. Accumulated huge market value, prosperous ecology and active community.

In the past, in the cryptocurrency cycle from 2017 to 2021, we often heard the term "Ethereum killer". Many new public chains aimed to surpass Ethereum, and proposed their own technical architecture and implementation solutions. For example, proposed Solana with Proof of History, Avalanche with avalanche protocol and subnet function, NEAR with sharding technology, Flow with consensus and computing separation, EOS with parallel processing and asynchronous communication capabilities, and IOTA with DAG transaction structure , as well as Polkadot and Cosmos with native built-in multi-chain support. It has to be said that they have all made achievements in data indicators such as daily user activity on the chain, DApps development, and TVL within a specific period of time. However, with different reasons (such as the team lying flat and the collapse of the capital, etc.) and the rollup of Ethereum’s second layer being launched one after another, the situation is quietly changing. The most obvious thing is that in DeFiLlama’s public chain TVL rankings, Arbitrum and Optimism came from behind Overrides most of Alt L1. In addition, some innovative projects have also migrated their focus to the Rollup Layer 2 network. The most representative example is the migration from Avalanche to Arbitrum's derivative platform GMX.

**At the current point in time, the stable development of Bitcoin and Ethereum, as well as the rapid growth of the second-tier network, are obviously squeezing the once lively Alt-L1 market. **Many Alt-L1 projects seem to be in a bottleneck period of "stagnation", which indicates a not optimistic future for the new public chain. Take Aptos and Sui, the new public chains of the Move series, as examples in the past year. The market's voice for them has changed dramatically. Before the main network is launched, everyone is keen to deeply interpret their white papers and technical architecture, and make good assumptions about their application scenarios. Developers frantically learn new contract languages and DApps project parties compete for each ecological niche of the new public chain DApps. However, after the launch of the mainnet of the public chain, especially after the issuance of tokens, with the downturn of the DApps ecology and the sluggishness of TVL data, everything seems to be far away from us.

PS: Considering that the privacy public chain emphasizes anonymity and protection of user privacy, and the storage public chain emphasizes decentralized storage, their design concepts and technical routes are somewhat different from general public chains. In order to make the discussion more focused and in-depth, we will not discuss the privacy public chain and storage public chain for the time being.

The necessity of new public chain research and development

It can be said with certainty that it is undoubtedly a challenging undertaking to develop and implement a new public chain to challenge the two giants of Bitcoin and Ethereum, and even the new and thriving second-tier network. This makes us can't help thinking about a question, is it necessary to continue research and development of the new public chain?

The answer is yes. From the perspective of Mass Adoption, from 2020 to the present, the entire Web3 has a variety of new application scenarios such as DeFi, NFT, and Metaverse, and the popularity of users has risen to millions or even tens of millions. Compared with those technologies that have already achieved Mass Adoption, such as search engines and instant messaging, Web3 still has huge room for development. If we compare the infrastructure public chain of Web3 with traditional cloud computing, then the number of applications and users of public chain services is still in the stage of rapid development, far from reaching the mature stage of large-scale application. Therefore, the huge size of the market in the future and the rapid changes in demand will lead to the emergence of public chains with excellent service capabilities and response speeds. At present, in the field of public chains, those that have taken the lead and gained wide recognition and market share It is Bitcoin and Ethereum, but this does not mean that other Alt-L1 and new public chains have no living space, and there is no opportunity to overtake in certain segments. **Because of this, institutions are willing to invest a large amount of funds in the field of public chains, not purely out of financial investment considerations, but based on the judgment of the future of Web3 and the importance of public chains. **

Hard Power and Soft Power

When we research and analyze the public chain, we can evaluate it from two aspects: hard power and soft power. Hard power mainly focuses on the technical innovations involved in the public chain, such as P2P network, consensus mechanism, block data structure, smart contract language and virtual machine, token economy, etc., as well as the ability to adapt to the technological development route and the status quo. Soft power involves more business operation capabilities, ecological construction and capital coordination. In the process of R&D, landing and development of the public chain, these two strengths are indispensable. If there is only hard power but lack of soft power, it is easy to fall into the predicament of building a car behind closed doors; and if there is only soft power but lack of hard power, it will not go far.

As far as hard power is concerned, Alt-L1 is prone to technical rigidity and stubbornness, which is why we emphasize the ability to adapt and adjust the technology development route and the status quo**. Not long after Bitcoin was founded by Satoshi Nakamoto, the development of the entire network and community was Organic. When it comes to major functional changes and new functional support, the overall progress will be slow and conservative, but now it is also beginning to keep up with the times. For example, the recent Fiery Ordinals deal. Before the expansion plan of Ethereum officially entered Rollup as the center, the Plasma plan was once popular. In the new version of the development roadmap announced by Ethereum last year, we can see that the focus of the protocol level is mainly on the optimization of the security and decentralization of the PoS consensus mechanism, the combination of data sharding and Rollup, and the original goal of eWASM and state Sharding has been replaced by other functions.

Exploration of innovative technology

When Ethereum's Frontier was launched in 2015, it provided a basically usable network, including features such as PoW consensus mechanism, transaction, account model, and core EVM smart contract platform. Since then, Ethereum has been iteratively upgraded for many years. For example: Homestead, which is more stable and efficient in 2016, Metropolis Byzantium, which supports ZK-Snarks proof chain verification through pre-compiled contracts in 2017, Beacon Chain, which supports PoS function in 2020, and introduces EIP-1559 based on the market transaction fee model in 2021 London Hard Fork, which will officially close PoW and open PoS Paris upgrade (ETH Merge) in 2022. Adhering to the spirit of openness and freedom of the blockchain, Ethereum started with rich programmability, and has never stopped. It has been upgraded time and time again in the past, showing the continuous development of a public chain on the road of innovative technology exploration.

Because of this, whether it is a new public chain that has not been launched in the primary market, or a long-time Husband chain that has been online in the secondary market, those new Husband chains that are brave enough to explore innovative technologies are worthy of our attention and learning.

Next, let’s ignore the pros and cons of the economic model design of the public chain for the time being, and the performance of market tokens. Combined with the open source developer data panel provided by Electric Capital, we will select some interesting public chains other than Ethereum. or iconic innovative technologies for further research.

Polkadot - Substrate

Polkadot introduces the concept of relay chain and parallel chain with the technology of blockchain parallelization, and realizes the shared security and intercommunication of multiple blockchains through the cross-chain communication protocol XCMP. The technical framework that supports these features of Polkadot is Substrate. Substrate provides the smallest development unit, Pallets, abstracts and extracts various functional modules, such as assets, pledges, and EVM, etc., and provides a development framework Frame and a blockchain-customizable Runtime based on Pallets. Combining the unique asynchronous model and parachain sharding mechanism, Substrate provides the ability to process a large number of transactions simultaneously, improving the throughput and performance of the overall network. In addition, Substrate also supports a pluggable consensus mechanism. Developers can choose different consensus algorithms according to their needs. In addition, Substrate has built-in Ethereum EVM and WASM runtimes, which is also convenient for the application migration and development of the Ethereum ecosystem. Finally, Substrate supports hot upgrades on the chain, which can upgrade and update the blockchain without interrupting the network.

Cosmos - Tendermint / Sovereign Chain / App Chain /IBC

Tendermint is the first PoS consensus algorithm to achieve Byzantine fault tolerance, and it is also one of the inspirations for Ethereum's PoS algorithm. The concept of Sovereign Chain and App Chain perfectly embodies the Cosmos decentralized multi-chain concept, which not only allows each sovereign chain to have its own consensus mechanism, economic model and governance rules, but also allows specific applications or services to directly pass through the Cosmos network Build a small application chain. The two can also use IBC to communicate and interact with each other, building a multi-chain Internet advocated by Cosmos as a whole.

Cosmos has two core development kits: the consensus engine CometBFT (the successor to Tendermint Core upgrade) that implements the Tendermint consensus algorithm and defines the application chain interface ABCI, and the Comos SDK that supports IBC and CosmWasm. The corresponding ecological appearance is the Cosmos Hub, the center of the Cosmos network, and various Zones connected to the Cosmos Hub. **Since the launch of the Cosmos mainnet in 2019, IBC has already supported the initial Zones interconnection, Zones and Hub interconnection, to richer and more complete functions such as inter-chain accounts (ICA) and inter-chain security (ICS). Cosmos Hub also regards September 2022 as a key turning point, officially transitioning from the first phase of initiation (Initiation) to the second phase of integration (Integration). **

Sei Network - Optimized for Trading

As a recently launched popular Cosmos ecological application chain, Sei has a built-in order matching engine, sub-second settlement speed, parallel processing of orders, single block order execution and other features. All these customized functions of Sei are completed at the base layer, mainly through ABCI++ to achieve some of their optimizations. ABCI++ is an upcoming upgrade to Cosmos' ABCI, which allows every step of the consensus to be programmable.

Solana - Proof of History

Proof of History (PoH) is an innovative proof of time technology, which can be understood as a global clock implementation mechanism in a distributed system, used to coordinate operations and time sequences between distributed system nodes. By embedding timestamps in each block, PoH builds a globally shared time sequence in the Solana network, allowing nodes in the network to easily verify the order and time of transactions. In this way, not only the throughput and performance of the entire network can be improved, but also malicious tampering and replay attacks can be effectively prevented.

NEAR - Nightshade Sharding / Beacon chain

Originated from the idea of sharding in the early days of Ethereum, it also inherits the concept of Beacon chain, but optimizes the block producers and verifiers of each shard. Each shard has a group of block producers responsible for generating blocks and packaging transactions and state data in the blocks. Since each shard is relatively independent, each block producer only needs to pay attention to the shard to which he belongs, and can generate blocks independently without coordinating with block producers of other shards. Validators also only need to verify the transactions and states belonging to their own shards, without paying attention to the state of the entire network. This can improve the efficiency of block generation and verification, so that more transactions and status updates can be processed.

Avalanche - Avalanche Consensus

The avalanche protocol introduces an avalanche effect voting mechanism, enabling nodes to quickly reach a consensus and form a consistent decision sequence in the entire network. The key to the protocol lies in the process of multiple rounds of voting and iterative decision-making. Through continuous voting and feedback, the nodes in the network gradually converge to a consistent consensus result. Since nodes can vote and make decisions in parallel, the parallel processing capability of the entire system is improved, and the Avalanche protocol also allows dynamic entry and exit of nodes and adaptive adjustment of voting rules and parameters, thereby achieving flexible scalability.

Flow - multi-node architecture

Pipelined multi-node architecture. The execution node is responsible for the execution of the transaction, so as to achieve the massive processing and computing operations of the transaction. The verification node monitors and verifies the calculation results of the execution node, ensures that the execution node executes the smart contract correctly according to the rules, and verifies the accuracy and consistency of the calculation. The consensus node is responsible for the ordering of transactions and the generation of blocks, and its task is to ensure the security of the network. Such a multi-node architecture has to be sighed, as if the execution layer, data availability layer, settlement layer, and consensus layer advocated by the current modular blockchain are directly realized at the public chain level.

Monad - Asynchronous concurrent transactions

Monads are EVM-compatible L1, and transactions are EVM-equivalent. In order to improve TPS, Monad will identify and identify transactions that do not affect each other, thereby eliminating the common dependencies of these transactions, and then achieve high concurrent transaction performance through the asynchronous execution mechanism.

Diem/Libra - Move

Facebook/Meta's Diem (formerly known as Libra) has attracted worldwide attention since its inception. Whether it is due to criticism from traditional regulators or doubts from the native Web3 world, Diem's original intention is to serve the global digital world. One billion people, so that they can fully enjoy financial services comparable to traditional bank account payment systems. To this end, Diem has designed high-performance verification nodes in terms of technology, as well as the Move language and the corresponding Move virtual machine that take into account asset security and smart contract execution efficiency. However, due to regulatory and policy reasons, Diem failed to launch the main network as scheduled. Then, after inheriting these technical accumulations, the Diem team derived three public chain projects with different exploration routes. Mentioned Sui Network, Aptos and Linera.

Sui Network - Causal Order / Object Model

For transactions, a DAG-like processing method is adopted, combined with a unique object model and a snapshot-like version number management mechanism, so that transactions no longer need to be arranged in a complete order, but only need to be arranged in a causal order, which can naturally be obtained Massive parallel execution capabilities. Of course, the technical support behind this also comes from the optimization and adjustment of Sui's object system in the Move language, adding many asset attributes related to Web3.

Aptos - Block-STM

The parallel execution engine of Block-STM is like the Rollup of optimistic fraud proof, which directly introduces the optimistic lock concurrency control mechanism in the first layer of public chain. Of course, the technology of optimistic locking has been widely used in traditional databases. However, because optimistic locking is prone to high conflict rate and retry rate in scenarios with frequent write operations, it is not as suitable as pessimistic locking for scenarios with high concurrency . Here, Aptos also optimizes this through solutions such as preprocessing and transaction splitting.

Linera - Microchains

If Sui Network and Aptos make good use of Diem's Move language feature, then Linera inherits Diem's consensus mechanism well. Even going back to the source, Linera's technical architecture comes from Facebook's original FastPay project, and FastPay is more like the predecessor of Diem/Libra, providing specific design concepts and in-depth solutions for fast, secure and low-latency large-scale payment scenarios technical details.

Linera has done a lot of research on architecture scalability as a whole, mainly through Microchains. The Multi-chain network is formed by the maintenance of Microchains by the client. Microchains can be publicized or privatized. Communication between microchains uses asynchronous messages. The entire network uses the same set of validators and DPoS consensus guarantee and execution. Validator nodes are responsible for message delivery and state synchronization. In addition, validator nodes also undertake the operation and maintenance of public Microchains.

To some extent, Linera's technical architecture and concept are similar to the current popular cloud-native design. Microchain corresponds to many mirrored containers, and App corresponds to mirrored instances. Such an architecture, like cloud-native infrastructure, has good performance in terms of elasticity and fault tolerance. Of course, how to safely and efficiently solve the communication and synchronization between Microchains is a different core issue that Linera, as a public chain, has to face and solve.

Just as the cloud-native architecture has gradually occupied the selection of traditional application architectures through its own advantages in the past ten years or so. This phenomenon of coming from behind and even overtaking makes us believe that the investment in Linera is our firm expectation. Linera, which is based on Diem/Fastpay's mature solution and has unique innovative technology, will one day be able to be used in certain application scenarios in the future. Beyond Ethereum.

Conclusion

I don’t know if it’s an illusion, but after reviewing the innovative technologies of these public chains again, I feel that the Rollup As A Service framework that is popular in Ethereum Layer 2 is so similar to Cosmos’ SDK and Polkadot’s Substrate (Optimism’s OP Stack, Arbitrum's Orbit, Polygon's zkSupernet, Starknet's Appchains, and zkSync's Hyperchains), and even some ideas of the new narrative Restaking are somewhat similar to Polkadot's pledged DOT for slot auctions and Cosmos 2.0's ICS. The rise of Layer 2 is closely related to the strength of Ethereum. However, the exploration of the new public chain is as important as Layer 2, or even surpasses. The innovation and breakthrough of the new public chain in technology and solution exploration will greatly improve the foundation of the entire Web3 industry. service capacity limit.

When the past public chains have accumulated more mature experience for the entire industry, the public chain track is more likely to produce a more powerful new public chain in the exploration of innovative public chains. Just as Satoshi Nakamoto could use the proof-of-work mechanism and UTXO model, combined with public-private key cryptography, P2P network and chain block technology to creatively propose the decentralized blockchain network of Bitcoin, now and in the future, We have reason to believe that, based on the innovative technology of the above-mentioned new husband chain, in the Web3 world, there will inevitably be a public chain that combines the strengths of hundreds of schools and realizes the heavy responsibility of Mass Adoption. We can see that, especially the innovative public chains of the Cosmos system (such as Sei Network) and the Diem system/Move language system (such as Linera) will continue to explore the possibility of blockchain in different latitudes and challenge the Ethereum The status of the workshop, to extend the ceiling of the public chain!

Reference