Web3 infra, Crpyto Gaming, Metaverse Researcher; Ex. JPM TMT IB banker @ HK; MIT MFin Class '20
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Web3 infra, Crpyto Gaming, Metaverse Researcher; Ex. JPM TMT IB banker @ HK; MIT MFin Class '20
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Primary Role: Executes transactions by applying the State Transition Function (STF) to the rollup's state.
Responsibilities:
Transaction Ordering: Central to managing transaction sequences.
Execution of Transactions: Involves processing transactions according to predefined rules or smart contracts.
Data Posting: Involves posting transaction data on the Data Availability (DA) layer for transparency and verification.
Proof Creation: Generating fraud or validity proofs to ensure transaction integrity.
User Interaction: Acts as the user-facing component of the rollup stack, where users interact and transact.
Transaction Fees (Gas): Users pay a fee, which is a margin over the costs incurred by the execution layer.
Maximal Extractable Value (MEV): An additional revenue stream derived from the strategic ordering of transactions.
Validity Verification: Ensures that the proofs generated by the execution layer are valid.
Canonical State Definition: Establishes the definitive state of the rollup, crucial for smart contract rollups.
Low Cost: The cost of utilizing a settlement layer is generally low, with platforms like Optimism incurring minimal daily expenses for settlement on Ethereum.
Viability: Despite its critical role, the settlement layer does not capture high economic value due to low operational costs.
Data Broadcasting: Key role in distributing ordered transaction data to the network.
State Reconstruction: Enables anyone to reconstruct the state of the rollup using the broadcasted data.
Cost Factor: DA is a significant expense in the operation of rollups, especially when using secure layers like Ethereum.
Emerging Alternatives: Protocols such as Celestia, Avail, and EigenDA offer cost-effective and faster DA solutions.
Trade-offs: While building an independent DA layer can reduce costs, it may introduce complexities in bootstrapping and interoperability.
Data Integrity: Ensures that all transaction data is available and accurate, which is critical for maintaining the reliability and trustworthiness of the network.
Security: By maintaining a comprehensive and accessible record of transactions, the DA layer enhances the overall security posture of the blockchain.
High Operational Costs: Posting and maintaining data on secure layers like Ethereum incurs substantial costs, making it a significant economic factor in the modular stack.
Revenue Stream: DA layers can generate substantial revenue through fees charged for data posting and availability services, reflecting their value in the blockchain ecosystem.
DA Economic: This assumption is made by Jon Charbonneau, a research associate at delphi, and based on Polygon Hermez’s prediction that they will eventually need only 14 bytes per transaction in Danksharding. Also the above EIP-4844) specification at 1.3 MB/s, L2 can reach around 100,000 TPS, then the projected revenue will reach the staggering figure of $30 billion. Under such a huge cake, the future disputes in the DA market will be very fierce. In addition to the three major solutions, Stark’s Layer3, zkPorter, and several modular DA projects will join the fray. So from the existing Layer2 project, the universal chain is fully inclined to use Ethereum DA. And application chains and long-tail chains will be the main customers of “unorthodox DA”. My personal opinion is that modular DA and soon Layer3 will be the mainstream choice in the future.
Data Sharing: By providing a reliable source of transaction data, the DA layer enables different blockchain networks to access and verify cross-chain transaction information.
Inter-Chain Trust: Establishes a foundation of trust for transactions that span across multiple blockchains, essential for interoperable ecosystems.
Unified Data Reference: Acts as a central point of data reference, helping to overcome the fragmentation of blockchain networks and ecosystems.
Standardization: Facilitates a standardized approach to data availability, which is crucial for developing interoperable protocols and applications.
Scalability through Modularity: By offloading the responsibility of data availability from the main chain, DA layers contribute to the overall scalability of blockchain networks.
Support for Layer 2 Solutions: Plays a pivotal role in the scalability of Layer 2 solutions by ensuring data availability without overburdening the main chain.
New Opportunities: A robust and efficient DA layer opens up new opportunities for developers to build innovative cross-chain applications.
Ecosystem Expansion: Contributes to the growth and expansion of the blockchain ecosystem by enabling more complex and varied use cases that require cross-chain functionalities.
The blockchain community has been engaged in a debate ignited by Ethereum Foundation researcher Dankrad Feist's tweet, which suggested that rollups not using Ethereum's DA aren't true Layer 2 solutions. This highlights the evolving nature of DA solutions in the modular blockchain ecosystem.
Fee Structure:
Execution Fee: Charged for computational resources in executing transactions.
State Fee: Incurred for updating the state on the main chain.
Data Availability Fee: The most significant expense, for publishing data to Layer 1.
High Cost: Illustrated by Arbitrum's significant Ethereum gas fees.
Ethereum's EIP-4844: Aims to reduce these costs by introducing a more cost-effective Blob transaction format.
App Chain Usage: Preferred in app-specific rollups for low-cost, high-throughput needs.
Centralized Data Management: Raises concerns about fund security.
Data Availability Committees (DAC): Introduced to mitigate trust issues but highlights reliance on entity security over blockchain security.
Diverse Implementations: Various projects, like Celestia, are exploring modular approaches to DA.
Economic Potential: Significant projected revenues indicate the high value of DA in blockchain ecosystems.
Future Trends: Shift towards modular DA and Layer 3 solutions, focusing on non-Ethereum DA solutions for specific segments.
Cheaper Data Availability: Aims to provide cost-effective data availability.
Ethereum's Role: Remains significant in DA, settlement, and consensus.
Trade-offs: Unique advantages and challenges in terms of cost, security, and centralization.
Rapid Growth: The DA market is evolving with an emphasis on cost-effectiveness, scalability, and security.
Innovative Approaches: Solutions like Celestia and EigenDA are becoming prominent due to their novel methods.
Celestia: Offers modular blockchain solutions with a strong focus on DA and scalability.
EigenDA (EigenLayer): Utilizes Ethereum's security via re-staking and offers high DA throughput.
Avail: Integrates DA within the Polkadot ecosystem, enhancing interoperability and multi-chain support.
Technical Robustness and Scalability: Essential for managing large data volumes.
Network Security and Decentralization: Critical for trust and adoption.
Community Support and Ecosystem Integration: Vital for solution growth and acceptance.
User-Friendly Design: Important for both developers and end-users.
Token Utility and Incentives: Clear utility and incentives for network participation and growth.
DA Bandwidth: Increases linearly with DA nodes.
Functions: Focuses on increasing DA throughput without ordering.
Security Checks: Proof of Custody and local retrieval fee markets ensure data storage and serving integrity.
Target Market: Ethereum L2s and L3s.
Cost and Latency: Aims for low cost and latency, requiring Ethereum compatibility.
Offerings: Provides ordering and DAS.
Technology: Uses fraud proofs, slower due to mandatory challenge periods.
Finality and Validator Set: Single slot finality but limited validator set due to Tendermint.
Community and Backing: Strong community support and backers.
Development: Originated from Polygon, built on Polkadot stack.
Launches: Testnet followed by Incentivised Testnet and planned mainnet.
Approach: Aims to serve sovereign rollups seeking ordering and DA guarantees.
Solution: Combines DA, Nexus, and Fusion Security for a comprehensive approach.
Technology Alignment: Built with future-proof ZK technology.
Investment decisions should be based on a combination of factors: customer alignment, market scenario analysis, revenue model sustainability, community support, and valuation considerations.
Prioritize DA solutions that demonstrate robustness, scalability, strong community backing, and strategic partnerships, ensuring a balanced approach between technological innovation and market realities.
Valuation analysis must be an integral part of the decision-making process, taking into account the project's market positioning, revenue potential, and the utility of its token in the broader ecosystem.
Customer Alignment Evaluation: Assess DA products based on their alignment with potential customers (L2s, Appchains, Sovereign Rollups, RaaS Companies).
Key Consideration: Alignment with Ethereum and readiness for upcoming upgrades like Danksharding.
Strategic Investment Direction: Favor DA solutions with a clear alignment strategy and potential for wide-scale adoption.
Market Scenario Analysis: Evaluate DA products against bull and bear market scenarios for app chains.
Bull Scenario Strategy: Identify DA products poised to benefit from a surge in app chains and on-chain gaming.
Bear Scenario Contingency: Focus on DA solutions with diversified use cases beyond app chains to mitigate risks in a bear market.
Revenue Model Assessment: Scrutinize the business models of DA solutions.
Investment Criteria: Sustainable revenue streams, scalability, and token utility.
Action Plan: Prioritize DA products with a robust and scalable revenue model.
Community and Partnership Evaluation: Consider the role of community support, narrative building, and partnerships in the success of DA solutions.
Key Focus: Strong community engagement, narrative crafting abilities, and strategic partnerships.
Investment Directive:
Market Positioning: Celestia's pioneering role in modular blockchains and EigenLayer’s Ethereum security extension create distinct market positions.
Valuation Implications: Celestia’s FDV of $15-20 billion sets a benchmark. EigenLayer's diverse services could command a similar valuation.
Utility and Market Dynamics: The utility of EIGEN in collateralizing AVS and its efficiency in providing security.
Projected Valuation Range: $10 billion to $20 billion, considering its less direct utility compared to Celestia's TIA token.
Airdrop Potential: A significant airdrop could enhance EigenLayer’s market positioning and investor interest.
Growth Potential: Raising at $400m to $800 million indicates confidence in its interoperability focus and DA solutions.
Investment Implication: High valuation suggests market confidence in its future-proofing with ZK and comprehensive solutions.
Overview
Nature: Modular data availability network.
Scalability: Scales securely with user growth.
Revenue Sources: Payment for blobspace and gas fees from rollups.
Key Components and Functionalities
Native Consensus Mechanism:
Structure: Full nodes and light nodes.
Architecture: Scalable Proof of Stake (PoS).
Light Nodes and Data Availability Sampling (DAS):
Function: Validate block data availability.
Process: Sampling small random segments of block data.
Data Availability Fraud Proofs:
Role: Notify light clients of anomalies.
Focus: Only on consensus and data availability.
Primary Role: Executes transactions by applying the State Transition Function (STF) to the rollup's state.
Responsibilities:
Transaction Ordering: Central to managing transaction sequences.
Execution of Transactions: Involves processing transactions according to predefined rules or smart contracts.
Data Posting: Involves posting transaction data on the Data Availability (DA) layer for transparency and verification.
Proof Creation: Generating fraud or validity proofs to ensure transaction integrity.
User Interaction: Acts as the user-facing component of the rollup stack, where users interact and transact.
Transaction Fees (Gas): Users pay a fee, which is a margin over the costs incurred by the execution layer.
Maximal Extractable Value (MEV): An additional revenue stream derived from the strategic ordering of transactions.
Validity Verification: Ensures that the proofs generated by the execution layer are valid.
Canonical State Definition: Establishes the definitive state of the rollup, crucial for smart contract rollups.
Low Cost: The cost of utilizing a settlement layer is generally low, with platforms like Optimism incurring minimal daily expenses for settlement on Ethereum.
Viability: Despite its critical role, the settlement layer does not capture high economic value due to low operational costs.
Data Broadcasting: Key role in distributing ordered transaction data to the network.
State Reconstruction: Enables anyone to reconstruct the state of the rollup using the broadcasted data.
Cost Factor: DA is a significant expense in the operation of rollups, especially when using secure layers like Ethereum.
Emerging Alternatives: Protocols such as Celestia, Avail, and EigenDA offer cost-effective and faster DA solutions.
Trade-offs: While building an independent DA layer can reduce costs, it may introduce complexities in bootstrapping and interoperability.
Data Integrity: Ensures that all transaction data is available and accurate, which is critical for maintaining the reliability and trustworthiness of the network.
Security: By maintaining a comprehensive and accessible record of transactions, the DA layer enhances the overall security posture of the blockchain.
High Operational Costs: Posting and maintaining data on secure layers like Ethereum incurs substantial costs, making it a significant economic factor in the modular stack.
Revenue Stream: DA layers can generate substantial revenue through fees charged for data posting and availability services, reflecting their value in the blockchain ecosystem.
DA Economic: This assumption is made by Jon Charbonneau, a research associate at delphi, and based on Polygon Hermez’s prediction that they will eventually need only 14 bytes per transaction in Danksharding. Also the above EIP-4844) specification at 1.3 MB/s, L2 can reach around 100,000 TPS, then the projected revenue will reach the staggering figure of $30 billion. Under such a huge cake, the future disputes in the DA market will be very fierce. In addition to the three major solutions, Stark’s Layer3, zkPorter, and several modular DA projects will join the fray. So from the existing Layer2 project, the universal chain is fully inclined to use Ethereum DA. And application chains and long-tail chains will be the main customers of “unorthodox DA”. My personal opinion is that modular DA and soon Layer3 will be the mainstream choice in the future.
Data Sharing: By providing a reliable source of transaction data, the DA layer enables different blockchain networks to access and verify cross-chain transaction information.
Inter-Chain Trust: Establishes a foundation of trust for transactions that span across multiple blockchains, essential for interoperable ecosystems.
Unified Data Reference: Acts as a central point of data reference, helping to overcome the fragmentation of blockchain networks and ecosystems.
Standardization: Facilitates a standardized approach to data availability, which is crucial for developing interoperable protocols and applications.
Scalability through Modularity: By offloading the responsibility of data availability from the main chain, DA layers contribute to the overall scalability of blockchain networks.
Support for Layer 2 Solutions: Plays a pivotal role in the scalability of Layer 2 solutions by ensuring data availability without overburdening the main chain.
New Opportunities: A robust and efficient DA layer opens up new opportunities for developers to build innovative cross-chain applications.
Ecosystem Expansion: Contributes to the growth and expansion of the blockchain ecosystem by enabling more complex and varied use cases that require cross-chain functionalities.
The blockchain community has been engaged in a debate ignited by Ethereum Foundation researcher Dankrad Feist's tweet, which suggested that rollups not using Ethereum's DA aren't true Layer 2 solutions. This highlights the evolving nature of DA solutions in the modular blockchain ecosystem.
Fee Structure:
Execution Fee: Charged for computational resources in executing transactions.
State Fee: Incurred for updating the state on the main chain.
Data Availability Fee: The most significant expense, for publishing data to Layer 1.
High Cost: Illustrated by Arbitrum's significant Ethereum gas fees.
Ethereum's EIP-4844: Aims to reduce these costs by introducing a more cost-effective Blob transaction format.
App Chain Usage: Preferred in app-specific rollups for low-cost, high-throughput needs.
Centralized Data Management: Raises concerns about fund security.
Data Availability Committees (DAC): Introduced to mitigate trust issues but highlights reliance on entity security over blockchain security.
Diverse Implementations: Various projects, like Celestia, are exploring modular approaches to DA.
Economic Potential: Significant projected revenues indicate the high value of DA in blockchain ecosystems.
Future Trends: Shift towards modular DA and Layer 3 solutions, focusing on non-Ethereum DA solutions for specific segments.
Cheaper Data Availability: Aims to provide cost-effective data availability.
Ethereum's Role: Remains significant in DA, settlement, and consensus.
Trade-offs: Unique advantages and challenges in terms of cost, security, and centralization.
Rapid Growth: The DA market is evolving with an emphasis on cost-effectiveness, scalability, and security.
Innovative Approaches: Solutions like Celestia and EigenDA are becoming prominent due to their novel methods.
Celestia: Offers modular blockchain solutions with a strong focus on DA and scalability.
EigenDA (EigenLayer): Utilizes Ethereum's security via re-staking and offers high DA throughput.
Avail: Integrates DA within the Polkadot ecosystem, enhancing interoperability and multi-chain support.
Technical Robustness and Scalability: Essential for managing large data volumes.
Network Security and Decentralization: Critical for trust and adoption.
Community Support and Ecosystem Integration: Vital for solution growth and acceptance.
User-Friendly Design: Important for both developers and end-users.
Token Utility and Incentives: Clear utility and incentives for network participation and growth.
DA Bandwidth: Increases linearly with DA nodes.
Functions: Focuses on increasing DA throughput without ordering.
Security Checks: Proof of Custody and local retrieval fee markets ensure data storage and serving integrity.
Target Market: Ethereum L2s and L3s.
Cost and Latency: Aims for low cost and latency, requiring Ethereum compatibility.
Offerings: Provides ordering and DAS.
Technology: Uses fraud proofs, slower due to mandatory challenge periods.
Finality and Validator Set: Single slot finality but limited validator set due to Tendermint.
Community and Backing: Strong community support and backers.
Development: Originated from Polygon, built on Polkadot stack.
Launches: Testnet followed by Incentivised Testnet and planned mainnet.
Approach: Aims to serve sovereign rollups seeking ordering and DA guarantees.
Solution: Combines DA, Nexus, and Fusion Security for a comprehensive approach.
Technology Alignment: Built with future-proof ZK technology.
Investment decisions should be based on a combination of factors: customer alignment, market scenario analysis, revenue model sustainability, community support, and valuation considerations.
Prioritize DA solutions that demonstrate robustness, scalability, strong community backing, and strategic partnerships, ensuring a balanced approach between technological innovation and market realities.
Valuation analysis must be an integral part of the decision-making process, taking into account the project's market positioning, revenue potential, and the utility of its token in the broader ecosystem.
Customer Alignment Evaluation: Assess DA products based on their alignment with potential customers (L2s, Appchains, Sovereign Rollups, RaaS Companies).
Key Consideration: Alignment with Ethereum and readiness for upcoming upgrades like Danksharding.
Strategic Investment Direction: Favor DA solutions with a clear alignment strategy and potential for wide-scale adoption.
Market Scenario Analysis: Evaluate DA products against bull and bear market scenarios for app chains.
Bull Scenario Strategy: Identify DA products poised to benefit from a surge in app chains and on-chain gaming.
Bear Scenario Contingency: Focus on DA solutions with diversified use cases beyond app chains to mitigate risks in a bear market.
Revenue Model Assessment: Scrutinize the business models of DA solutions.
Investment Criteria: Sustainable revenue streams, scalability, and token utility.
Action Plan: Prioritize DA products with a robust and scalable revenue model.
Community and Partnership Evaluation: Consider the role of community support, narrative building, and partnerships in the success of DA solutions.
Key Focus: Strong community engagement, narrative crafting abilities, and strategic partnerships.
Investment Directive:
Market Positioning: Celestia's pioneering role in modular blockchains and EigenLayer’s Ethereum security extension create distinct market positions.
Valuation Implications: Celestia’s FDV of $15-20 billion sets a benchmark. EigenLayer's diverse services could command a similar valuation.
Utility and Market Dynamics: The utility of EIGEN in collateralizing AVS and its efficiency in providing security.
Projected Valuation Range: $10 billion to $20 billion, considering its less direct utility compared to Celestia's TIA token.
Airdrop Potential: A significant airdrop could enhance EigenLayer’s market positioning and investor interest.
Growth Potential: Raising at $400m to $800 million indicates confidence in its interoperability focus and DA solutions.
Investment Implication: High valuation suggests market confidence in its future-proofing with ZK and comprehensive solutions.
Overview
Nature: Modular data availability network.
Scalability: Scales securely with user growth.
Revenue Sources: Payment for blobspace and gas fees from rollups.
Key Components and Functionalities
Native Consensus Mechanism:
Structure: Full nodes and light nodes.
Architecture: Scalable Proof of Stake (PoS).
Light Nodes and Data Availability Sampling (DAS):
Function: Validate block data availability.
Process: Sampling small random segments of block data.
Data Availability Fraud Proofs:
Role: Notify light clients of anomalies.
Focus: Only on consensus and data availability.
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