Subscribe to Signum Capital Newsletter to receive new posts directly to your inbox.
This edition of the newsletter dives into consensusless protocols where traditional blockchain networks rely on consensus mechanisms for all transactions, creating bottlenecks and enabling MEV, but new research shows that many transactions (like simple transfers) don't actually require consensus to be secure. Consensusless protocols are emerging as an alternative that can process independent transactions without global consensus, offering better scalability and lower latency while maintaining security and decentralization—potentially transforming blockchain adoption by eliminating current performance bottlenecks. We'll also share some interesting articles, portfolio updates and market highlights.
a) DePIN On Ethereum: Redefining Coordination Systems
• This comprehensive article explores how Decentralized Physical Infrastructure Networks (DePIN) on Ethereum are revolutionizing various sectors including telecommunications, computing, energy, and transportation by enabling individuals to participate in and earn rewards from providing infrastructure services.
• Several notable projects including DIMO for connected vehicles, Wicrypt for internet access, Aethir and Spheron for GPU compute, Glow for solar energy, and WeatherXM for weather data collection, showcasing how DePIN is addressing traditional infrastructure limitations while fostering more efficient, accessible, and sustainable systems through blockchain-based incentives.
DePIN brings Ethereum's global coordination to the physical world. Learn how Ethereum DePIN networks solve problems across energy, telecom, compute, and more.
b) Mental Models for Intent-Solver Systems
• Five core components of intent-solver systems in blockchain interoperability: intent expression (how users communicate their desired actions), solver selection (how the system chooses who fulfills the intent), intent fulfillment (how solvers execute the request), proof of fulfillment (how solvers verify completion), and solver settlement (how solvers get paid for their services).
• Various approaches and innovations within each component are discussed, including different solver selection mechanisms (like RFQ and Dutch auctions), various methods for accessing liquidity (such as solver inventory and collaborative approaches), and multiple settlement systems (including cross-chain messaging and optimistic settlement via oracles).
A guide to understand how intent solver system works behind the scenes
c) Don’t try to onboard the next billion users to Ethereum, here's a better way
• This article argues that instead of trying to build a single application to onboard a billion users to Ethereum, the ecosystem should focus on creating hundreds of well-executed applications targeting smaller user groups of 100,000 to 10 million users each.
• The author supports this thesis by pointing out that historically successful billion-user applications (like Facebook, Google, Instagram) only emerged after their underlying technologies were widely adopted, and emphasizes that early killer apps should focus on solving specific problems for targeted user groups rather than attempting to appeal to everyone immediately.
Learn why onboarding "next billion users" is a bad idea and what we can do instead to grow the Ethereum ecosystem.
a) Arrakis Finance
• Automated Market Makers (AMMs) are facing a sustainability crisis as MEV searchers extract significant value from liquidity providers through arbitrage, making it nearly impossible for both token issuers and retail LPs to maintain profitability in providing onchain liquidity.
• To address this, next-generation solutions like Unichain, Semantic Layer, and Arrakis are implementing innovative mechanisms including dynamic fees that increase with volatility, MEV auctions that tax arbitrageurs, chain-level solutions with faster block times and priority ordering, and application-specific sequencing systems that let protocols customize their transaction execution rules.
TL;DR AMMs can use MEV auctions to tax arbitrageurs and collect fees to mitigate MEV and LVR. We explore how cutting-edge solutions like Unichain, Semantic Layer, and Arrakis are using similar mechanisms to prevent LVR today.
b) Particle Network
• UniversalX is a chain-agnostic trading platform that enables users to trade, send, and manage crypto across multiple blockchains (including Solana and various EVM chains) through a single Universal Account, eliminating the need for bridging and allowing gas fees to be paid with any token.
• The platform can be accessed through web, mobile, or Telegram, offering features like cross-chain transactions, token discovery, cash purchases, and social gifting through Red Packets, all while maintaining a non-custodial, user-friendly approach that works with both Web2 (like Google login) and Web3 (like MetaMask) authentication methods.
Last week, we released the first-ever chain-agnostic, 100% non-custodial trading platform, powered by Universal Accounts. UniversalX is designed to simplify crypto trading for both beginners and experienced players, putting an end to the struggles of dealing with Web3's fragmentation. With a combined balance across any chain, the ability to
c) D3 Labs
• Indonesia, Southeast Asia's largest economy, is embracing asset tokenization to transform its financial infrastructure, particularly in its robust mining and agriculture sectors which account for 20% of GDP and 48% of exports.
• The government is actively supporting this transformation through various initiatives like regulatory sandboxes and digital currency projects, with projections suggesting the market could reach US$88 billion by 2030 while potentially reducing financial costs by US$300 million and helping address financial inclusion for the country's 97.7 million unbanked adults.
DocSend helps you communicate more effectively by telling you what happens to content after you send them and letting you keep control in real time.
Consensus is unnecessary when the truth is available
Introduction
Since the emergence of blockchains, their core ideology has focused on being decentralized systems for asset transfers and serving as non-custodial asset ledgers. A primary design focus has been addressing the double-spending problem, which is still widely believed to require a strong consensus mechanism among all validators and full nodes of a protocol. This assumption has shaped protocols like Bitcoin, Ethereum, Solana, and others, which rely on Byzantine Fault Tolerant (BFT) consensus or its scaled derivatives, such as Solana's Tower BFT and MonadBFT.
While crucial for decentralized networks, censorship resistance with fast inclusion guarantees are often missing in many existing chain architectures and widely used consensus protocols. In leader-based protocols like Ethereum, the leader has the monopoly power to choose which transactions are included in a new block. This control empowers timing games, maximal extractable value (MEV), and incentivizes vertical integrations among transaction supply chain operators, introducing points of centralization and potential censorship.
Consensusless networks
Since transaction-independent asset transfers do not need to be processed in a specific order, transaction-dependent transfers or operations, like asset swaps, require total transaction ordering and generally rely on consensus. However, the market for on-chain transaction-independent transfers is often undervalued. In recent years, this has been recognized by several individuals and companies, prompting the development and research of systems that use consistent, reliable broadcast methods and consensusless mechanisms, such as Sui’s Lutris, FastPay, and AT2 (Asynchronous Trustworthy Transfers). These approaches have emerged in the R&D of "consensusless" systems, which are decentralized and censorship-resistant alternatives to traditional networks and do not require global consensus to transfer assets. Those networks bypass the high costs of traditional BFT mechanisms while achieving low-latency performance akin to Web2 systems, without compromising on decentralization or censorship resistance. However, Ethereum and its ecosystem of rollups still rely on slow and costly consensus mechanisms for processing payments, a well-known bottleneck for the network.
Since transaction-independent asset transfers do not need to be processed in a specific order, transaction-dependent transfers or operations, like asset swaps, require total transaction ordering and generally rely on consensus. However, the market for on-chain transaction-independent transfers is often undervalued. In recent years, this has been recognized by several individuals and companies, prompting the development and research of systems that use consistent, reliable broadcast methods and consensusless mechanisms, such as Sui’s Lutris, FastPay, and AT2 (Asynchronous Trustworthy Transfers). These approaches have emerged in the R&D of "consensusless" systems, which are decentralized and censorship-resistant alternatives to traditional networks and do not require global consensus to transfer assets. Those networks bypass the high costs of traditional BFT mechanisms while achieving low-latency performance akin to Web2 systems, without compromising on decentralization or censorship resistance. However, Ethereum and its ecosystem of rollups still rely on slow and costly consensus mechanisms for processing payments, a well-known bottleneck for the network.
Expensive consensus overhead is a well-known bottleneck in blockchain systems. Various solutions have been proposed, such as Tendermint, Hotshot and scaled derivatives of existing BFT consensus protocols, to mitigate this issue. These solutions compete on speed, cost, scalability, security, and distribution, but still rely on global consensus. As a result, most of them require tradeoffs on properties like decentralization, slow finality or cost. Consensusless architectures address costly settlement and finality issues by bypassing consensus to deliver a highly efficient, scalable architecture that empowers high - performance, consensusless applications.
Consensus isn't required for all on-chain transactions
On average, over 50% of transactions on Ethereum (~ 600k daily) are transfers and payments, accounting for approximately 30% of fees generated, yet they don't actually require full consensus to be processed, creating a bottleneck to scale transfers and generating more fees. While bypassing traditional consensus can enable low-latency transaction confirmation and finality, all by maintaining network decentralization and censorship resistance, Ethereum and its rollups still process payments through slow consensus mechanisms.
Must every transaction need to be processed in a total order?
Consider two payment transactions:
• Alice pays Bob
• Charlie pays Dave
Since these payments are independent, they can be executed in any order. They are commutative, meaning the order of execution does not affect the resulting state - it remains the same regardless of which transaction is processed first.
To prevent double-spending without the latency of consensus, validators sign valid transactions based on their local views rather than agreeing on a global order. A transaction is finalized once it has signatures (a certificate) from more than two-thirds of the validators - assuming less than one-third are malicious. Validators only sign the first valid transaction,, making it impossible for Eve to obtain sufficient signatures for conflicting transactions. This approach ensures security and works in both token - based and account - based models with minimal overhead.
Conclusion
Addressing scalability challenges could unlock a transformative wave of innovation, attracting EVM developers and encouraging users to embrace more efficient, scalable blockchain applications. By eliminating the bottlenecks that currently limit mass adoption, scalable infrastructure can drive exponential growth across blockchain ecosystems. Consensusless protocols offer the essential foundation to capture the majority of such transactions, providing unparalleled scalability for developers while preserving the core principles of blockchain technology. These protocols ensure decentralization, security, and censorship resistance, empowering developers to build applications capable of serving millions without compromise. This shift will not only empower developers but also propel blockchain toward achieving mainstream adoption across industries.
This was written by @0xNiko
Over 200 subscribers
