chandanCrypto Applications Product Market Fit Analysis
In Crypto, there are a lot of applications that haven’t found product-market fit. But there is also a handful of applications that have a product market fit and are growing stably Here I will just explain my thoughts on which applications have Product-Market-Fit. Storage of Value (an asset that maintains or increases its value rather than depreciating)Bitcoin is the dominant product-market fit for this, followed by ETH. However, BTC has questionable long-term sustainability properties. Thanks...
chandanHow to Protect Your Crypto Wallet 95% of the Time
Always keep your private key and seed phrase offline, such as by writing them down on paper and storing them in a secure location that only you have access to. Do not save them on any device or cloud storage, as these can potentially be hacked and your wallet compromised.To further increase security, you can consider leaving out a few words from your seed phrase when writing it down, and memorizing or securely storing these words separately. This way, even if someone gets hold of the paper wi...
chandanAre Layer 2s Superior to Alt-1 for Scaling Capabilities?
Traditional monolithic execution layers rely on 1000s of block producers and non-producing full nodes, requiring a majority of them to act honestly. In contrast, layer 2s only require a single honest "Sequencer" to guarantee network integrity. This asymmetric trade-off suggests that layer 2s will consistently deliver high throughput and significant performance advantages, even when the same hardware is employed by both layer 1 and layer 2. This is due to the inefficiencies of synchronization ...
Researching Layer 1/2s, DeFi, and modular ecosystems.
chandanCrypto Applications Product Market Fit Analysis
In Crypto, there are a lot of applications that haven’t found product-market fit. But there is also a handful of applications that have a product market fit and are growing stably Here I will just explain my thoughts on which applications have Product-Market-Fit. Storage of Value (an asset that maintains or increases its value rather than depreciating)Bitcoin is the dominant product-market fit for this, followed by ETH. However, BTC has questionable long-term sustainability properties. Thanks...
chandanHow to Protect Your Crypto Wallet 95% of the Time
Always keep your private key and seed phrase offline, such as by writing them down on paper and storing them in a secure location that only you have access to. Do not save them on any device or cloud storage, as these can potentially be hacked and your wallet compromised.To further increase security, you can consider leaving out a few words from your seed phrase when writing it down, and memorizing or securely storing these words separately. This way, even if someone gets hold of the paper wi...
chandanAre Layer 2s Superior to Alt-1 for Scaling Capabilities?
Traditional monolithic execution layers rely on 1000s of block producers and non-producing full nodes, requiring a majority of them to act honestly. In contrast, layer 2s only require a single honest "Sequencer" to guarantee network integrity. This asymmetric trade-off suggests that layer 2s will consistently deliver high throughput and significant performance advantages, even when the same hardware is employed by both layer 1 and layer 2. This is due to the inefficiencies of synchronization ...
Researching Layer 1/2s, DeFi, and modular ecosystems.
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There are currently two bottlenecks: 1) the data availability (DA), and 2) the execution.
With the introduction of blobs (EIP-4844), the cost of posting transaction data has been reduced by 17x.
Before EIP-4844, posting 128kb of Ethereum call data cost $76, and this changes with network demand.
With Blobs: Posting 128kb costs only $4, and this will increase as more rollups and app chains start using blobs.
Compress the transaction data before posting: According to Vitalik's post, a transaction takes up around 180 bytes, which can be reduced to 25 bytes using compression techniques.
https://twitter.com/VitalikButerin/status/1554983955182809088
This will allow layer2s to reduce the gas fee by 7x.
Increase the number of blobs per block. This update can be done relatively easily by a simple parameter change.
EIP-4844 (aka "blobs") does not give us data availability sampling. But it does set up the basic scaffolding in such a way that from here on, data availability sampling can be introduced and blob count can be increased behind the scenes, all without any involvement from users or applications. The only "hard fork" required is a simple parameter change. - Vitalik
Today, the bottleneck is Execution because the demand for Blobs hasn't picked up yet.
a) Increase the read and write speeds: As the state grows larger, lookup times for any given state become larger, increasing the transaction execution time. Rollups should innovate new data structures that make state access (reading values) and state updates (updating values) cheaper and faster to make state growth more tenable and increase transactions per second (TPS).
Example:
Erigon/reth offers some improvements to database efficiency, and some rollups have clients based on these clients (in particular op-reth). Erigon/reth uses a flattened data structure, which reduces lookup costs somewhat for reads; however, there isn't support for asynchronous reads or multithreading. Also, the Merkle root still needs to be recomputed after each block, and this is quite slow.
b) Parallelization: Rollups could implement something like EIP-648. This is an important engineering challenge for rollups.
c) Improving hardware efficiency: Some teams don’t focus on this, arguing that if the node requirements are high, it would centralize the system. However, even if the nodes are centralized, node operators still can’t submit wrong transactions. so, the team should work on improving the efficiency of hardware.
Finally, as new app chains are launched, the demand for Blobs increases, and they will become the bottleneck if Ethereum doesn't increase the number of blobs per block.
TLDR: The Layer2 team needs to work on data compression, Increasing the read and write speeds, Parallelization, and Improving hardware efficiency to increase TPS and reduce gas fees.
Reference:
https://vitalik.eth.limo/general/2021/05/23/scaling.html
https://github.com/ethereum/EIPs/issues/648
https://vitalik.eth.limo/general/2024/03/28/blobs.html
https://twitter.com/keoneHD/status/1772399862778065006
There are currently two bottlenecks: 1) the data availability (DA), and 2) the execution.
With the introduction of blobs (EIP-4844), the cost of posting transaction data has been reduced by 17x.
Before EIP-4844, posting 128kb of Ethereum call data cost $76, and this changes with network demand.
With Blobs: Posting 128kb costs only $4, and this will increase as more rollups and app chains start using blobs.
Compress the transaction data before posting: According to Vitalik's post, a transaction takes up around 180 bytes, which can be reduced to 25 bytes using compression techniques.
https://twitter.com/VitalikButerin/status/1554983955182809088
This will allow layer2s to reduce the gas fee by 7x.
Increase the number of blobs per block. This update can be done relatively easily by a simple parameter change.
EIP-4844 (aka "blobs") does not give us data availability sampling. But it does set up the basic scaffolding in such a way that from here on, data availability sampling can be introduced and blob count can be increased behind the scenes, all without any involvement from users or applications. The only "hard fork" required is a simple parameter change. - Vitalik
Today, the bottleneck is Execution because the demand for Blobs hasn't picked up yet.
a) Increase the read and write speeds: As the state grows larger, lookup times for any given state become larger, increasing the transaction execution time. Rollups should innovate new data structures that make state access (reading values) and state updates (updating values) cheaper and faster to make state growth more tenable and increase transactions per second (TPS).
Example:
Erigon/reth offers some improvements to database efficiency, and some rollups have clients based on these clients (in particular op-reth). Erigon/reth uses a flattened data structure, which reduces lookup costs somewhat for reads; however, there isn't support for asynchronous reads or multithreading. Also, the Merkle root still needs to be recomputed after each block, and this is quite slow.
b) Parallelization: Rollups could implement something like EIP-648. This is an important engineering challenge for rollups.
c) Improving hardware efficiency: Some teams don’t focus on this, arguing that if the node requirements are high, it would centralize the system. However, even if the nodes are centralized, node operators still can’t submit wrong transactions. so, the team should work on improving the efficiency of hardware.
Finally, as new app chains are launched, the demand for Blobs increases, and they will become the bottleneck if Ethereum doesn't increase the number of blobs per block.
TLDR: The Layer2 team needs to work on data compression, Increasing the read and write speeds, Parallelization, and Improving hardware efficiency to increase TPS and reduce gas fees.
Reference:
https://vitalik.eth.limo/general/2021/05/23/scaling.html
https://github.com/ethereum/EIPs/issues/648
https://vitalik.eth.limo/general/2024/03/28/blobs.html
https://twitter.com/keoneHD/status/1772399862778065006
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