Ethereum Going Mainstream: These Are the Scaling Tools That Will Get It There

https://blockonomi.com/ethereum-mainstream-scaling-tools/

Ethereum

According to more than a few cryptoeconomy analysts, Ethereum is on the precipice of making considerable inroads to the mainstream via multiple different avenues. Can the platform carry on to the promised land, then?

That remains to be seen, but optimism is growing that the reigning smart contracts platform can reach unprecedented adoption heights. To turn vision into reality, the Ethereum ecosystem will have to handle acutely high gas prices first.

Gas is the amount of ETH a user pays to get their transaction included in an Ethereum block. During periods of high demand for Ethereum block space, transaction congestion ensues and gas prices spike.

In recent weeks, gas prices have been high as Ethereum’s DeFi and NFT sectors continue to swell. On the one hand, that’s great news: it shows Ethereum is useful in the here and now and people are clamoring to use it. On the other hand, high gas prices are a pain point for users and could stunt widespread adoption if maintained over the long-term.

Luckily for Ethereum, its ecosystem of layer-two scaling solutions is also swelling and advancing toward maturity. These tools will drastically increase transaction throughput abilities and in kind drastically lower gas prices. In other words, these innovations are some of the biggest keys to Ethereum’s adoption by the mainstream’s masses.

Let’s dig deeper and survey this rising constellation of scaling solutions.

The Layer-Two Scaling Matrix

In recent years, Ethereum layer-two scaling research has coalesced into 4 main areas. In order from oldest to newest, they are Plasma, zkRollups, Optimistic Rollups, and Validium.

If you want to visually compare how all these solutions fit into the bigger picture, a great resource is Ben DiFrancesco’s 99th issue of the Build Blockchain Tech newsletter. Therein, DiFrancesco published Ethereum’s “Layer 2 Two-By-Two” matrix, which appears as follows:

Image via Build Blockchain Tech

So what’s this all mean?

Simply put, a base-layer blockchain like Ethereum stores all its data on the mainnet and executes all its computation there. By handling data storage and/or computation differently than the mainnet does, layer-two scaling solutions can deliver extensive throughput enhancements for Ethereum.

Optimistic Rollups

Optimistic Rollups, or ORUs, can be understood as extremely scalable sidechains. They fit where they do in DiFrancesco’s aforementioned matrix because they store data on-chain (on the Ethereum mainnet) while handling computation off-chain.

In order to ensure this off-chain computation is correct, ORUs employ fraud proofs. This means that if someone tries to submit fraudulent activity, users can contest the fraud and have a deposit owned by the bad actor slashed.

Compared to zkRollups, Plasma, and Validium, ORUs don’t offer as much when it comes to throughput enhancement. However, where ORUs really shine is they’re essentially ready to be deployed in widespread fashion in the here and now. In this sense, ORUs are not only very useful but can also buy time for other scaling tools to mature.

zkRollups

Like ORUs, zkRollups store data on-chain. But zkRollups differ in that their off-chain computation relies on zero-knowledge validity proofs rather than fraud proofs for accuracy.

This dynamic makes zkRollups powerful but not without their limitations. For now, they have to be tailored to specific applications because a generalized zkRollup would not be efficient.

On the bright side, various zkRollups solutions have made great strides in the Ethereum ecosystem in recent months. This reality suggests it won’t be long before these rollups gain more tangible traction around the Ethereum project.

Plasma

Plasma is the oldest of the 4 layer-two scaling solutions under discussions, and it’s noted for handling both computation and data storage off-chain. Like ORUs, Plasma implementations rely on fraud proofs rather than zero-knowledge proofs.

In 2019, it seemed that development efforts began to chill around Plasma-based systems, though that’s reversed this year as the solution’s back in the limelight on the heels of OmiseGo revealed its More Viable Plasma (MoreVP) specification earlier this month.

Validium

Validium is the newest of Ethereum’s top layer-two scaling solutions to hit the scene. It keeps data storage off-chain and deals with computation using zero-knowledge proofs

The first example of Validium in action is StarkWare’s StarkEx engine, which is designed to power decentralized exchanges with great efficiency. Accordingly, in the future many DEXes may come to rely on Validium tech.

Orthogonal to ETH 2.0

What’s interesting about the aforementioned scaling solutions is that they can power major throughput enhancements for Ethereum, no matter where the platform is in its lifespan.

For example, developers are currently in the process of evolving “Ethereum 1.0,” i.e. the platform as we currently know it, into “Ethereum 2.0,” which will effectively be an entirely new blockchain with extensive optimizations. One of these optimizations will be the rollout of sharding.

Sharding is still a few years away, but once it’s live it will make Ethereum truly ready for being public infrastructure for all the world’s people. The cool thing, though, is that solutions like ORUs, zkRollups, Plasma, and Validium will still be usable and useful once sharding is activated. Taken altogether, sharding combined with a growing stable of layer-two innovations can make Ethereum a tour de force for decades to come.

Progress Mounting

In recent weeks, the cryptoeconomy has seen multiple layer-two Ethereum scaling implementations making notable strides.

We mentioned OmiseGo’s newly rolled out Plasma tool earlier. When it comes to zkRollups, users can already take tools like Loopring Pay and zkSync for a spin, too. And last month, the ORU specialists at Fuel Labs teased Reddit Cash, an ORU system that showed how Reddit community tokens like BRICKS and MOONS can be readily scaled using Fuel’s tech.

Speaking of Reddit, the social aggregator giant made waves this week when it announced the “Great Reddit Scaling Bake-Off,” a competition for Ethereum community members to propose the best layer-two scaling solution or solutions for the website’s new community tokens system.

“Our goal is to find a solution that will support hundreds of thousands of Community Points users on mainnet today, and can eventually scale to all of Reddit (430 million monthly users),” Reddit said.

Fees Could Be High Until Wider Adoption

All of the layer-two scaling solutions discussed in this post are advancing closer to widespread adoption in the Ethereum community. Yet until this adoption is reached, the acutely high gas fees Ethereum users are facing right now could remain in place.

That’s because demand to use Ethereum is high, and this demand doesn’t seem poised to slow down any time soon as the DeFi and NFT sectors continue to heat up. So gas prices are likely to stay a pain point until layer-two implementations arrive in force to save the day.

Conclusion

Transactions on Ethereum are already cheap and quick compared to many mainstream payment rails. These transactions are imminently going to become much cheaper and much quicker courtesy of innovations like ORUs and zkRollups.

With that said, Ethereum could be on the precipice of becoming a gamechanger in the wider international payments arena and not just within the cryptoeconomy.

An Ethereum with effective scaling avenues is an Ethereum that can start to seriously contend with the PayPals, Venmos, and Squares of the world.

If Ethereum does end up making it big in the future, it will assuredly be partially on the backs of the scaling solutions that extended the platform’s capabilities in its early years.

The post Ethereum Going Mainstream: These Are the Scaling Tools That Will Get It There appeared first on Blockonomi.

New Baseline Protocol Demo Hints at the Future of Big Business On Ethereum

https://blockonomi.com/new-baseline-protocol-demo/

Baseline

Earlier this year, mainstream firms like Microsoft, AMD, and EY joined forces with cryptoeconomy stalwarts like ConsenSys and Chainlink to create OASIS, a non-profit standards body for contributing enterprise-friendly Ethereum code to the public domain.

At the time, the collaborators unveiled their flagship initiative would be Baseline Protocol, an open-source system aimed at providing “secure and private business processes at low cost” atop Ethereum’s public mainnet.

Since Baseline’s reveal, it’s become an increasingly high-profile project around Ethereum. That’s not just because of the impressive cast of contributors behind the effort but also because of the initiative’s potential to make Ethereum mainstream financial infrastructure.

That’s why heads turned anew this week when the Baseline Protocol published a promising proof-of-concept demo that shows the the initiative is poised to be a major contributor to the Ethereum ecosystem in the years to come.

A Dream System for Enterprises

Baseline Protocol’s new demo illustrates a novel process dubbed baselining, a technique that entails using Ethereum to “prevent data inconsistencies” across mainstream Enterprise resource planning (ERP) systems, i.e. automated back-office software.

Notably, then, Baseline’s fresh proof of concept shows how baselining can be used in tandem with two of the most popular ERPs around. On this point, the project’s press release explained:

“The procurement use case in the demo … highlights how two Enterprise Resource Planning (ERP) systems, Microsoft Dynamics and SAP can maintain consistency with each other using blockchain technology without exposing information about business activities or relationships to competitors or the public. Its use of the public Mainnet reduces capital expense while increasing operational integrity when automating business processes across multiple companies.”

Making Ethereum More Accommodating

Ethereum’s ran away with the lead in the smart contract platform rat race in recent years, to be sure.

Yet when things were still more wide open in that regard, more than a few debates unfurled about whether big enterprises would be able to stomach using a public blockchain like Ethereum or whether they would congregrate to private blockchain’s like J.P. Morgan’s Quorum.

The discussions have brokenly decisively in Ethereum’s favor as the project’s ecosystem has continued to rapidly mature, and the arrival of things like Baseline Protocol and the baselining process are certainly factors in the general warming to the mainstream possibilities of public blockchains.

To this end, Blockchain Research Institute co-founder Alexander Tapscott said upon the baselining unveil:

“The Baseline approach is a windfall for global enterprises looking to boost security and performance. Data is secured, contracts are governed digitally and companies can collaborate seamlessly without changing their current systems. This will change how enterprises interact in a digital setting.”

Moreover, the technique is only the latest work by the Baseline Protocol team. It most certainly won’t be the last. Beyond the project’s other solutions to come, the protocol’s inaugural release is “expected in Fall of 2020.” At that point, the system’s wider possibilities are only set to grow.

Big Companies Already Building on Ethereum

As time goes on, Baseline Protocol should make Ethereum increasingly attractive as enterprise infrastructure. But what’s notable is that big companies are already experimenting with the reigning smart contracts platform in the here and now.

For example, just this month Reddit rolled out an Ethereum-powered community tokens pilot program and Visa had a patent application come to light for a “digital currency” that could be implemented on Ethereum.

These initial forays are on the more simplistic end of the activity spectrum when compared to the more advanced processes that tech like Baseline Protocol can open up for enterprises. Even still, these developments show there is early demand for using a maturing Ethereum.

The post New Baseline Protocol Demo Hints at the Future of Big Business On Ethereum appeared first on Blockonomi.

Ethereum Privacy Tool Tornado Cash on the Verge of Being “Unstoppable”

https://blockonomi.com/ethereum-privacy-tool-tornado-unstoppable/

Tornado

In recent months, the Ethereum ecosystem has made considerable strides in several key areas, including scaling, UX, and privacy.

The rising Tornado Cash privacy tool is one of Ethereum’s brightest stars on the lattermost front, and now the much needed solution is almost ready for the big time.

Primed for Posterity

First unveiled in July 2019, Tornado is a mixer built on Ethereum that relies on special cryptographic proofs called zk-SNARKs to make ether (ETH) transactions totally anonymous.

zk-SNARKs are powerful, in that they allow people to prove the validity of information to others without having to actually reveal the underlying information. In the context of Tornado, these constructions demonstrate users have deposited ETH and thus can withdraw an equivalent amount in anonymous fashion.

The catch? A “zero-knowledge” system like Tornado needs what’s known as a Trusted Setup Ceremony, or TSC, to securely ensure the parameters of its zk-SNARKs indefinitely.

While Tornado’s been in its infancy, its builders retained controlled of the system’s smart contract with a multisig and conducted an initial TSC with one machine. The plan all along, though, has been to make Tornado totally tamper-proof and to run a large public TSC to complete the tool’s infrastructure for the future.

That final TSC launched on May 1st and ran for 10 days, allowing users from around the world to contribute computation power to the effort. In an announcement post on May 13th, the Tornado team confirmed the ceremony had concluded successfully and had become the biggest the cryptoeconomy has seen yet:

“With a record 1114 contributions this was by far the largest Trusted Setup Ceremony to date. By comparison, all other trusted setup ceremonies had less than 200 participants. Just as we hoped, everything went smoothly and we would like to thank the Ethereum Community for their support and participation.”

With that ceremony now out of the way, Tornado is now verge of becoming completely decentralized and trustless. However, one major step remains before these characteristics can be provably guaranteed forever.

Becoming Unstoppable

Projects like Uniswap are beacons of decentralization in the Ethereum ecosystem because no one can interfere with their admin-less smart contracts. These contracts will run forever in this way, all the while provably resistant to manipulation by their creators.

Now that Tornado’s final TSC is done, the project’s next major milestone will be when its creators relinquish control over its smart contracts for good, a la the model of Uniswap. And that milestone is notably coming soon, as the Tornado team explained this week:

“In just a few days, after we ensure that everything works as intended, we will set the operator address to 0x0000000000000000000000000000000000000000 so that no one ever will be able to modify it. This will make tornado.cash fully trustless, decentralized and forever unstoppable!”

Once this move is done, Ethereum’s privacy scene will instantly become that much more mature. It’s not that Tornado wasn’t interesting or promising before now, but rather that the tool will have actualized its full potential and thus become tangibly practical for use in the wider cryptoeconomy.

Will the Bitcoiners Come?

Right now, Tornado supports mixing for ETH, as well transactions around the Dai, cDai, USDC, and USDT stablecoin projects.

It’s possible the Tornado team will build more expansive mixers in the future or that other teams will take up that task. Regarding the latter possibility, it’ll be interesting to see if Ethereum mixers pop up that are focused on the slew of tokenized bitcoin offerings, e.g. tBTC, that are gaining traction around Ethereum lately.

The Bitcoin community generally loves privacy, so will Tornado-like smart contract mixers be enough to win some over to tokenized BTC? Only time will tell for now.

The post Ethereum Privacy Tool Tornado Cash on the Verge of Being “Unstoppable” appeared first on Blockonomi.

Welcome yTokens: Yield Protocol Unveils New “Zero-Coupon Bonds” DeFi Primitive

https://blockonomi.com/yield-protocol-unveils-new-zero-coupon-bonds/

Finance

Bonds are one of the areas where Ethereum holds tremendous promise. That’s why heads turned this week around the roll out of the Yield Protocol, a new Ethereum project that’s approaching digital bonds in unprecedented fashion.

Announced on Wednesday, May 7th, Yield is a startup that’s working to bring about “fixed-term, fixed-rate lending and interest-rate markets to decentralized finance.”

The company is notably the first startup incubated by Paradigm, a top crypto investment firm, and it builds off work published in a paper last month by Paradigm’s researcher Dan Robinson and Yield founder Allan Niemerg. That paper was “The Yield Protocol: On-Chain Lending With Interest Rate Discovery.”

In a Twitter thread introducing the project, Niemerg said the effort’s associated tokens, yTokens, were a novel kind of “money lego” built atop Ethereum that could lead to new kinds of DeFi activities:

“Yield is building yTokens, a new DeFi primitive, on Ethereum. The first token supported by the protocol will be yDAI, which will enable fixed-rate borrowing and lending in the Dai stablecoin with ETH collateral.

Diving Deeper

What’s interesting about yTokens is how they combine a bond-like model with the best of Ethereum’s DeFi world in a way that hasn’t been seen in the space before. As the aforementioned Robinson and Niemerg explained in the Yield Protocol whitepaper’s abstract:

yTokens are like zero-coupon bonds: on-chain obligations that settle on a specific future date based on the price of some target asset, and are secured by collateral in another asset. By buying or selling yTokens, users can synthetically lend or borrow the target asset for
a fixed term. yTokens are fungible and trade at a floating price, which means their ‘interest rates’ are determined by the market.”

Such a system is unprecedented, and it already points to an array of new DeFi offerings that can be built on, or rely on, yTokens like the coming yDAI product. But how does the system work exactly? The whitepaper’s authors noted:

“You can create yTokens by depositing collateral, then sell them to effectively borrow (and short) the target asset. Buying yTokens is economically similar to lending the target asset. The effective ‘interest rate’ received by yToken holders is determined by the discount at which yTokens currently trade, as well as the time to maturity.”

Ethereum Bustling with New DeFi Projects

As the top smart contract platform right now, Ethereum is dominating when it comes to the pace of fresh and promising financial projects that are being launched on it.

Yield Protocol is the latest oncomer, but there are other recent bond-related initiatives that are also worth considering. One of those top upstart efforts is “reflex bonds,” which were unveiled last month by blockchain developer Stefan Ionescu in an article titled “Stability without Pegs.”

In that post, Ionescu outlined how to create a bond product on Ethereum that could provide stablecoin-like price stability without maintaining an arbitrary peg to a specific price, e.g. the $1 USD that’s proven popular and common in the cryptoeconomy to date.

In other words, such reflex bonds would have “floating redemption prices” that should in practice be more resistant to significant market movements compared to traditional stablecoin offerings. As Ionescu explained:

“The purpose of a reflex-bond is to be a more stable representation of its collateral while still maintaining a high level of trustlessness. If used in other protocols, a reflex-bond can shield its users against major and sudden moves in the cryptocurrency markets. For example, if Maker had used reflex-bonds as collateral prior to Black Thursday, [Maker Vault] creators would have had more time to avoid complete liquidation.”

Along with yTokens, reflex bonds thus point toward a bright and robust DeFi ecosystem continuing to develop on Ethereum.

The post Welcome yTokens: Yield Protocol Unveils New “Zero-Coupon Bonds” DeFi Primitive appeared first on Blockonomi.

DeFi Project Synthetix Demos L2 Ethereum Exchange Powered by Optimistic Rollups

https://blockonomi.com/synthetix-l2-ethereum-exchange/

Synthetix

Optimism PBC unveiled the Optimistic Virtual Machine (OVM), a promising layer-two scaling technology for Ethereum powered by optimistic rollups (ORU), back in February.

Things are moving fast, then, as the OVM is now getting “battle testing” courtesy of top decentralized finance project Synthetix. The meld sets the stage for more DeFi projects following suit with their own efficiency-minded embraces in the months ahead.

For context, ORUs can bring about extremely scalable sidechains that can extend the capabilities of Ethereum’s mainnet massively. Accordingly, Optimisim’s OVM has been an early hit because its a layer-two, ORU-compatible virtual machine that can run inside of the “world computer,” the Ethereum Virtual Machine (EVM).

The future of smart contracts may have already arrived, as such. And the latest prime example of that future is a new, OVM-powered demo version of Synthetix’s non-custodial decentralized exchange, Synthetix.Exchange.

Ethereum’s Latest L2 Exchange Experiment

On Tuesday, May 5th, the Synthetix and Optimism projects co-announced the launch of an L2 demo of Synthetix.Exchange.

“This integration demonstrates the power of OVM to deliver high-speed Ethereum transactions to supercharge the Synthetix trading experience,” the Synthetix team said.

The collaboration is a high-profile test of the OVM’s mettle. Synthetix — a synthetic assets trading protocol — is presently the second-largest DeFi project per value locked within its smart contracts. The new L2 demo will, and already has, brought new eyes to what ORUs can help Ethereum projects achieve.

And what are the optimizations at hand? According to the Optimism team, the OVM can provide Synthetix and other DeFi projects with major advantages like “alleviating issues with high gas costs, slow transactions, and expensive oracle updates.”

Trading Competition Ensues

To celebrate and show-off what the new OVM-powered demo exchange can do, Synthetix launched a trading competition with a 1st-place prize of 15,000 SNX.

That top prize, worth more than $12,000 at current prices, will go to the most prolific trader of OVM-sUSD tokens between May 5th and May 19th. (Note: sUSD is Synthetix’s resident stablecoin.)

The 2nd- and 3rd-place traders will win 10,000 and 5,000 SNX respectively, whereas anyone else who places in the top 20 will win 1,200 SNX each.

“Our trading competition will demonstrate the improve trading experience through OVM. It will run for two weeks — to get started, anyone can request 100,000 OVM sUSD via Twitter,” Synthetix said.

The competition’s most high-profile entrant so far has been Ethereum creator Vitalik Buterin, who signaled his intent to join in on the campaign on Twitter in the hours after the Synthetix and Optimism announcement.

If Buterin’s in, then you best believe that the demo is interesting, promising, worth further consideration, and also indicative of further experiments to come.

Not Optimism’s First Rodeo

The new L2 Synthetix.Exchange demo isn’t the first OVM meld in the DEX arena. The first was Uniswap’s “Unipig” exchange last year though it had its immature limitations at the time, Optimism said:

“In October 2019, we created Unipig.exchange, the first end-to-end implementation of Optimistic Rollup in collaboration with Uniswap. Unipig proved what was possible, but it was not practical … It required a custom backend & even custom contracts. There was very little we were able to repurpose from the existing Uniswap codebase.”

Alas, that stopping point is where the new Synthetix.Exchange demo comes in. The novel initiative comes in courtesy of improved tech and understandings and is much more representative of the DeFi ecosystem that’s to come, Optimism said:

“This time we didn’t build a custom system for Synthetix — we built it for Ethereum … The next step is to combine the Optimistic Rollup backend built for Uniswap with the OVM node built for Synthetix, and realize the dream of a fully Ethereum compatible layer 2 protocol.”

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