Ecosystem Introduction: A More Subdivided and Specialized Rollup Track

Main Trends

Rollup Specialization

The General-purpose Chain is designed to be most suitable for smart contract applications including financial applications. Financial use cases require extremely high security requirements to maintain assets, and in Ethereum, this requirement results in relatively high transaction costs. While high transaction costs are good for financial protocols, they are bad for most users. Even if Ethereum's Rollup transaction cost is 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, it has long been theorized that application protocols will eventually fork off from their smart-contract roots and operate their own application-chains for their specific use cases. Optimize the blockchain architecture. This theory manifests itself in dYdX’s migration from Ethereum Rollup to its own Cosmos-based Lisk so that it can internalize its orderbook matching engine in its validator design.

However, when migrating to their own isolated chain, the project party will make some trade-offs in liquidity network effects, cross-protocol composability, and potential developer tools. As such, it is only a viable strategy for large, established apps with existing brands, user relationships, and product-market fit.

Compared with 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 game-specific chain architecture (Gaming-Specifc Chain Architecture), which enables games to launch individual game fragments on the basis of core L2. This allows games to retain composability while splitting up execution requirements.
• Kinto -- Built on the OP Stack, Kinto is a universal KYC Layer-2, all wallets must pass the KYC check before launching. Kinto nodes are responsible for keeping user address identities separate from KYC providers, while also passing information securely between users and providers. And, since it is built with the OP Stack, Kinto retains the developer tooling effects inherent in the EVM, allowing it to adopt existing protocol smart contracts.
• Lens Momoka -- Similar to this, 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 enables Lens to scale its social transactions while maintaining an ultra-low unit cost to keep consumer use cases economically viable. As developers continue to find compelling applications, they will increasingly look for optimizations that enable new application functionality. However, unlike specialized application chains that have had only limited success, sector-specific chains may continue to emerge in ways that address optimization needs while retaining the user, Benefits for developers and shared infrastructure.

important events

Optimism Bedrock Upgrade

The Bedrock upgrade implements the modular OP Stack into Optimism's mainnet Layer-2. An important part of the upgrade is the optimization of data compression, which, according to recent data, reduces the overall transaction cost for users by approximately 55%. In addition, Bedrock decouples the OP Stack from the verification framework, enabling the chain to adopt validity proofs (zk-SNARKs) for transaction verification in the future. The Base team has published an RFP for building a zk prover for the OP Stack. Overall, the Bedrock upgrade is the first step to realize Optimism's super chain vision, in which multiple Rollups like Coinbase's Base can share resources efficiently and provide 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 adopts a hybrid method to prove the validity of transactions, and only executes ZKFP in the case of possible 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. Universal execution means it can execute various languages such as C/C++, Rust, etc. within its environment, including EVM execution. With recently released continuations, RiscZero can now attest to any EVM transaction. In the future, the team hopes to release Bonsai, a general-purpose zero-knowledge proof network capable of serving 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 defined three logical components of the SDK: Rollup Interface, Module 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 worrying about integration efforts. Abstract the core interface and make it unbiased to the application logic, so that developers can freely design 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 ability to freely create custom state transition functions (application logic). Overall, Sovereign's goal through their SDK is to build a network of interconnected ZK Rollups by simplifying the way of building scalable infrastructure.

Succinct Telepathy

Succinct released Telepathy, a decentralized and secure zkSNARK interoperability protocol for Ethereum. It allows users to send messages from Ethereum to any other chain, and to read the state of Ethereum on other chains without trust, while having the security of the Ethereum light client protocol. Succinct uses zkSNARK proofs to overcome traditionally computationally expensive operations for light clients. This enables cross-chain connections without single points of failure like 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 has partnered with Axelar, Akash Network, Osmosis Foundation, and ATOM Accelerator to launch a program to complete the development of Mesh Security within the Cosmos ecosystem. Mesh Security is a shared security mechanism that improves the overall security of the system by effectively combining the market value of participating chains. It allows stake delegators to re-delegate their bonded tokens to validators on another chain, with the added benefit of not introducing more validator and connection risks. This two-way design is different from Cosmos' Interchain Security (ICS), which is a one-way model of renting security from the parent chain. Due to the difference between the two shared security models, they will serve different use cases, with the Mesh Security model being more suitable for established chains, and the ICS model being optimized for new application chains that do not want to initially launch a set of validating nodes.

Taro Testnet on Celestia

Caldera and Celestia Labs announced Taro, the first public testnet for Celestia x OP Stack. Taro is a test network chain based on Optimism Bedrock, utilizing Celestia's Arabica test network for data availability. This approach is different from the way traditional Rollup publishes transaction data in Ethereum calldata, which can be congested and cause high fees. Celestia provides a modular data availability layer optimized for data throughput, allowing chains like Taro to use Celestia without fully relying on the Ethereum network for all transaction data. Taro is a complete Rollup, settled on Ethereum's Goerli test network, including faucet, bridge and block explorer.

Kinto KYC Layer-2

The recently announced Kinto is a KYC-verified Optimistic Layer-2 chain built on OP Stack, running on Ethereum. The KYC process requires the user to register an address on-chain, but at the same time does not reveal the connection between the identity information and the wallet address to the KYC provider. Once the KYC process is complete, users can interact with the decentralized, non-custodial chain. Its goal is to bridge the gap between fully open DeFi and fully private blockchain and traditional infrastructure. This opens up the possibility of on-chain operations for traditional financial institutions, which previously could not operate on-chain as it would increase regulatory and compliance risk.

Primary Financing

Argus - $10 Million Seed Round

Haun Ventures led Argus’ $10 million seed round. Argus is a game developer and publisher building the "Internet of Games" and its infrastructure. Argus announced the launch of World Engine, a Layer-2 blockchain designed for on-chain gaming. World Engine allows game developers to build and customize their own open and interoperable game worlds. In terms of architecture, World Engine uses the basic Rollup (or basic shard) and other game shards on the upper layer.

This horizontally scalable design enables game developers to distribute game load to different shards, enabling the chain to adjust throughput according to demand. Additionally, the sharding architecture avoids the interoperability/platform fragmentation issues that come with scaling by launching another independent Rollup. World Engine's EVM basic sharding provides a centralized place for players and developers to build user-generated content and platforms, and seamlessly interoperate 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 gaming.

Kakarot – Pre-Seed Funding

With the participation of Starkware, Vitalik and others, Kakarot has completed a seed round of financing, aiming to build zkEVM on top of Starkware's CarioVM. Since Cario provides verifiable computation using the zk-STARK proof system, 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 be 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 scaling by building a Layer-3 zkEVM chain on top of Starknet. To do this, Kakarot partnered with Madara, a Substrate-based Starknet full-node serializer. By scaling to higher tiers, the goal is to further reduce transaction costs.

Taiko - $22 Million Meltdown

Founded by former Loopring employees, Taiko Labs has raised a total of $22 million in funding over two rounds to build a decentralized Ethereum-equivalent (Type 1) zkEVM. The first round of financing is a $10 million seed round led by Sequoia China in the third quarter of 2022, and the second round is 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 Layer-3 support. Currently, the team plans to release its mainnet in the first quarter of 2024.

Atlas

Market Cap

The recent US Securities and Exchange Commission (SEC) lawsuit against Binance and Coinbase mentioned a number of emerging ecosystem tokens, such as SOL and MATIC (Polygon), as securities. This resulted in a roughly 25% drop in the value of the nascent ecosystem.

The drop in market capitalization also had an impact on Solana and Polygon's total value locked (TVL) valuation multiples. The market capitalization-to-TVL ratios of both ecosystems have fallen by more than 20%, and investors have written down the valuation premiums on these assets.

Notably, despite the negative price action, Ethereum’s Total Value Locked (TVL) valuation premium has increased slightly, suggesting that it has not been impacted by the SEC lawsuit, somewhat de-risking the asset.

Active address

While active addresses do not necessarily represent the number of users, they can serve as an indicator of the overall utility of the chain. In the past 30 days, there have been certain changes in the trend of active addresses in major ecosystems.

Solana and Arbitrum saw the largest declines in active address activity, indicating waning utility for the applications. On Arbitrum, application categories such as DeFi, memecoins, and general ERC-20 transfers saw the largest declines in the number of active addresses, indicating that the overall financial opportunity on-chain is saturated relative to usage.

In contrast, Avalanche saw a 42% increase in active addresses during the same period. Key drivers of recent activity growth include Stargate (and LayerZero), Trader Joe, and Holograph.

Decentralized Exchange (DEX) Trading Volume

As the memecoin craze ebbs and general opportunities stall, decentralized exchange (DEX) volumes on most major chains are trending slightly lower overall. For example, Ethereum’s average daily DEX volume dropped by 35% over a 30-day period.

Avalanche is a notable exception, with DEX volume growth of more than 40% over 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. When volume is concentrated in high-quality pools rather than memecoin pools, this is usually a good sign, as it indicates more sustainable and organic activity.

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Translation: YYT |