Key Trends Rollup Specialization
General-purpose chains are designed to be as suitable as possible for smart contract applications, including financial applications. Financial use cases require extremely high security requirements to maintain assets, and in Ethereum, this requirement leads to relatively high transaction costs. Although high transaction costs are good for financial protocols, they are bad for most users. Even if Ethereum's Rollup transaction costs are only a few cents, it is still a burden for many high-volume, low-value use cases (social and gaming applications).
To overcome the limitations of general-purpose chains and rollups, there has long been a theory that application protocols will eventually fork off from their smart contract roots and operate their own application chains in order to optimize blockchain architecture for their specific use cases. This theory is reflected in dYdX's migration from Ethereum Rollup to its own Cosmos-based application chain so that it can internalize its order book matching engine in the validator design.
However, when migrating to their own isolated chain, projects will make some trade-offs in liquidity network effects, cross-protocol composability, and potential developer tooling. Therefore, it is only a viable strategy for large, mature applications with existing brands, user relationships, and product-market fit.
Compared to the either-or choice of general protocols or application chains, a third design has emerged in the past few months and has become a new trend - Sector-specific Chains.
Some recent examples highlighting this trend include:
Argus - Argus has a gaming-specific chain architecture that enables games to launch separate game shards on top of the core L2. This allows games to retain composability while splitting execution requirements. Kinto - Built on the OP Stack, Kinto is a universal KYC Layer-2 where all wallets must pass a KYC check before launching. The Kinto node is responsible for keeping the identity of the user address and the KYC provider separate, while also securely passing information between users and providers. And, because it is built with the OP Stack, Kinto retains the developer tooling effect inherent in the EVM, allowing it to adopt existing protocol smart contracts. Lens Momoka - Similarly, Lens' Momoka is a sector-specific optimization with parallel execution for low-value transactions such as social posts. Instead of writing post transactions to Polygon, Momoka bundles transactions and stores them on Arweave after doing some validity checks. This design allows Lens to scale its social transactions while keeping the unit cost ultra-low to keep consumer use cases economically viable. As developers continue to find compelling applications, they will increasingly seek optimization methods that can enable new application functionality. However, unlike specialized application chains that have only achieved limited success, sector-specific chains may continue to emerge in a way that solves optimization needs while retaining the benefits of users, developers, and shared infrastructure associated with fully general-purpose chains.
The Bedrock upgrade implements the modular OP Stack into Optimism's mainnet Layer-2. An important component of the upgrade is the optimization of data compression, which, according to recent data, will reduce the overall transaction costs for users by approximately 55%. In addition, Bedrock decouples the OP Stack from the verification framework, enabling the chain to adopt proof of validity (zk-SNARK) for transaction verification in the future. The Base team has released an RFP for building a zk prover for the OP Stack. Overall, the Bedrock upgrade is the first step in realizing the Optimism superchain vision, in which multiple Rollups such as Coinbase's Base can efficiently share resources and provide a better user and developer experience.
RiscZero x LayerN ZK Fraud Proof
RiscZero and LayerN have worked together to build a ZK Fraud Proof (ZKFP) system for Optimistic Rollup, combining Optimistic Rollup with zk-rollup. ZKFP uses a hybrid approach to prove the validity of transactions, only executing ZKFP when there is a possibility of fraud, which reduces the overall transaction cost compared to the ZK layer that proves all transactions.
Architecturally, RiscZero provides a zero-knowledge virtual environment (zkVM), which is a general-purpose, provable execution environment. General-purpose execution means that it can execute various languages within its environment, such as C/C++, Rust, etc., including EVM execution. With the recently released continuations, RiscZero can now prove any EVM transaction. In the future, the team hopes to release Bonsai, a general-purpose zero-knowledge proof network that can serve as a secure off-chain execution and computation layer for a wide range of use cases.
Sovereign SDK released
Sovereign Labs, a team that is building the “Internet of Rollups”, has released an alpha version of their Rollup SDK. The SDK provides standardized interfaces and modules, giving developers an easy way to run their applications as zk-rollups. The team has defined three logical components of the SDK: Rollup Interface, Module System, and Full Node. The Rollup Interface defines the core aspects of Rollup, such as the Data Availability (DA) layer, allowing developers to simply choose a DA provider without having to worry about integration work. Abstracting the core interface and making it unbiased to the application logic gives developers the freedom to design their applications and use the module system. The module system provides some ready-made packages such as state storage and is configurable, effectively giving Rollup developers the freedom to create custom state transition functions (application logic). Overall, Sovereign’s goal is to build an interconnected ZK Rollup network through their SDK by simplifying the way to build scalable infrastructure.
Succinct Telepathy
Succinct has released Telepathy, a decentralized and secure zkSNARK interoperability protocol for Ethereum. It allows users to send messages from Ethereum to any other chain, and can read Ethereum's state trustlessly on other chains while having the security of Ethereum's light client protocol. Succinct uses zkSNARK proofs to overcome the traditionally computationally expensive operations of light clients. This makes cross-chain connections possible without single points of failure such as multi-signatures or centralized entities. Potential applications include cross-chain staking, governance, and trustless bridging. Telepathy is already live on the Ethereum mainnet and eight supported EVM chains.
Mesh Security Initiative
The Osmosis Grants Program, in partnership with Axelar, Akash Network, Osmosis Foundation, and ATOM Accelerator, has launched a program to complete the development of Mesh Security in the Cosmos ecosystem. Mesh Security is a shared security mechanism that improves the overall security of the system by effectively combining the market capitalization of participating chains. It allows stakers to re-delegate their bonded tokens to validators on another chain, with the added benefit of not introducing more validators and connection risks. This two-way design is different from Cosmos' Interchain Security (ICS), which is a one-way model that rents security from the parent chain. Due to the differences in the two shared security models, they will serve different use cases, with the Mesh Security model being more suitable for established chains, while the ICS model is optimized for new application chains that do not want to initially start a validator set.
Taro Testnet on Celestia
Caldera and Celestia Labs announced Taro, the first public testnet of the Celestia x OP Stack. Taro is a testnet chain based on Optimism Bedrock that leverages Celestia’s Arabica testnet for data availability. This approach differs from the way traditional Rollups publish transaction data in Ethereum calldata, which can be congested and incur high fees. Celestia provides a modular data availability layer optimized for data throughput, allowing chains like Taro to use Celestia without relying entirely on the Ethereum network for all transaction data. Taro is a complete Rollup settled on Ethereum’s Goerli testnet, including faucet, bridge, and block explorer.
Kinto KYC Layer-2
Recently announced Kinto is a KYC-verified Optimistic Layer-2 chain built on OP Stack and running on Ethereum. The KYC process requires users to register their addresses on-chain, but at the same time does not reveal the connection between identity information and wallet addresses to the KYC provider. Once the KYC process is completed, users can interact with the decentralized, non-custodial chain. The goal is to bridge the gap between fully open DeFi and fully private blockchains and traditional infrastructure. This opens up the possibility of on-chain operations for traditional financial institutions, which were previously unable to operate on-chain due to increased regulatory and compliance risks.
Main Financing Argus - $10 Million Seed Round
Haun Ventures led a $10 million seed round for Argus, a game developer and publisher committed to building the "Internet of Games" and its infrastructure. Argus announced the launch of World Engine, a Layer-2 blockchain designed for on-chain games. World Engine allows game developers to build and customize their own open and interoperable game worlds. Architecturally, World Engine uses a base Rollup (or base shard) as well as other game shards on the upper layer.
This horizontally scalable design enables game developers to distribute game load across different shards, allowing the chain to adjust throughput based on demand. In addition, the sharding architecture avoids the interoperability/platform fragmentation issues that come with launching another independent Rollup to scale. World Engine's EVM-based shards provide players and developers with a centralized place to build user-generated content and platforms that interoperate seamlessly with game shards through the Shard Router system.
Overall, World Engine is designed to overcome the limitations of current blockchain infrastructure, which cannot effectively support on-chain games.
Kakarot – Pre-seed round
With the participation of Starkware, Vitalik and others, Kakarot has completed a seed round of financing to build zkEVM on top of Starkware's CarioVM. Since Cario uses the zk-STARK proof system to provide verifiable computation, every transaction within Kakarot is verifiable. This allows application developers to scale the computing needs of their applications without sacrificing decentralization. In the first phase, Kakarot will become the zkEVM in Starknet L2, allowing any EVM smart contract to be deployed and using familiar development tools like Foundry or Hardhat. In the second phase, Kakarot plans to expand to fractal expansion by building a Layer-3 zkEVM chain on top of Starknet. To do this, Kakarot is working with Madara, a Starknet full node serializer based on Substrate. By expanding to higher layers, the goal is to further reduce transaction costs.
Taiko - $22 Million Loan
Founded by former Loopring employees, Taiko Labs has raised a total of $22 million in two rounds of funding to build a decentralized (Type 1) zkEVM equivalent to Ethereum. The first round of financing was a $10 million seed round led by Sequoia China in Q3 2022, and the second round was a recent $12 million pre-Series A round led by Generative Ventures.
Taiko aims to scale in a way that is as close to Ethereum as possible, both technically and ideologically. Taiko aims to develop the world's first Type 1 ZK-EVM with decentralized and permissionless provers/proposers from the beginning. The team recently released the third Alpha testnet version, focusing on decentralizing proposers and provers and building support for Layer-3. Currently, the team plans to release its mainnet in the first quarter of 2024.
Market value
The recent lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase mentioned that many emerging ecosystem tokens, such as SOL and MATIC (Polygon), were identified as securities. This caused the market value of the emerging ecosystem to drop by about 25%.
The decline in market cap also had an impact on the total value locked (TVL) valuation multiples of Solana and Polygon. The market cap to TVL ratios of both ecosystems fell by more than 20%, with investors writing down the valuation premiums they had placed on these assets.
Notably, despite the negative price action, Ethereum’s total locked value (TVL) valuation premium increased slightly, suggesting that it has not been affected by the SEC lawsuit, reducing the risk of the asset to some extent.
Active Addresses
While active addresses do not necessarily represent the number of users, they can serve as an indicator of the overall utility of the chain. Over the past 30 days, there has been some variation in the active address trends across major ecosystems.
Solana and Arbitrum saw the largest declines in active address activity, indicating waning utility for applications. On Arbitrum, application categories such as DeFi, memecoins, and general ERC-20 transfers saw the largest declines in active addresses, suggesting that overall financial opportunities on the chain are saturated relative to usage.
Conversely, Avalanche has seen a 42% increase in active addresses over the same period. The main drivers of recent activity growth include Stargate (and LayerZero), Trader Joe, and Holograph.
Decentralized Exchange (DEX) Volume
As the memecoin craze wanes and general opportunities stagnate, decentralized exchange (DEX) volumes on most major chains are trending slightly downward overall. For example, Ethereum’s average daily DEX volume is down 35% over a 30-day period.
Avalanche is a notable exception, with DEX volume increasing by more than 40% in the past 30 days. Most of this volume is related to the main wAVAX/USDC pool as well as the BTC.B pool on Trader Joe V2.1. It’s usually a good sign when volume is concentrated in high-quality pools rather than meme coin pools, as it indicates activity is more sustainable and organic.
Original link: https://messari.io/report/ecosystem-brief-rollup-specialization?referrer=all-research
Translation: YYT | Hu Zi Guan Coin