This article presents a comprehensive analysis of the Hub-and-Spoke Thesis, a novel framework that synergistically combines the dApp Chain Thesis and Fat Protocol theses. By uniting these concepts, the Hub-and-Spoke Thesis proposes a model that fosters deep interconnectivity, composability, and resource efficiency within the blockchain ecosystem. We also discuss the potential future of Ethereum regarding the Hub-and-Spoke Thesis and examine the role of improved bridges using technologies like Axelar and LayerZero.
Introduction
The evolution of decentralized networks has given rise to various perspectives on how best to structure and optimize these systems. Two prominent theses have emerged: the Fat Protocol thesis and the dApp Chain thesis. While each offers valuable insights, they have been largely considered in isolation. The Hub-and-Spoke Thesis aims to bridge the gap between these two concepts by integrating specific dApp chains within larger protocols, thus creating a more harmonious and interconnected ecosystem.
The Fat Protocol Thesis: Value Redistribution and Open-Source Innovation
The Fat Protocol thesis, a concept popularized by Union Square Ventures’ Joel Monegro, posits that the value in decentralized networks (such as a blockchain) tends to concentrate at the protocol layer rather than the application layer, unlike traditional internet models. Essentially, the protocols become “fat” with value, while the applications built atop remain “thin.”
Diving deeper, the fat protocol thesis proposes that value in decentralized networks concentrates at the protocol layer, promoting value redistribution, open-source innovation, and enhanced network effects. However, there are concerns over monopoly tendencies, inefficient resource allocation, and governance challenges that arise from this model.
The dApp Chain Thesis: Tailored Solutions and Scalability
The dApp chain thesis postulates that each decentralized application (dApp) is best served by having its own unique, application-specific blockchain (or chain) rather than relying on a single, monolithic blockchain platform. This approach emphasizes the importance of flexibility, customization, and scalability in the decentralized landscape.
Application-specific blockchains address the need for tailored solutions, scalability, and interoperability. Nevertheless, this model faces challenges such as fragmentation, security trade-offs, and resource intensity as it is expensive to run an independent chain safely.
The Hub-and-Spoke Thesis
The Hub-and-Spoke Thesis combines the dApp chain and Fat protocol theses into a hub-and-spoke model, enabling dApp chains to offload computationally intensive tasks to their own respective chains while maintaining interconnectivity with larger protocols and ecosystems. This fusion addresses issues of composability, fragmentation, and resource redundancy, empowering tailor-made dApps to thrive within an already vibrant ecosystem.
In the contemporary blockchain landscape, computational resources are distributed across various scaling solutions, particularly within Ethereum, which currently constitutes the largest ecosystem. To facilitate the scaling of Ethereum, an array of distinct solutions has been employed. Within the context of the hub-and-spoke model, these scaling solutions would be interconnected with dApp chains that address specific challenges for the broader ecosystem. This approach promotes a more efficient and synergistic environment, fostering innovation and collaboration within dApps, scaling solutions and mainnet.
Improved Bridges and New Technologies
Bridges are one of the biggest risk points in any ecosystem. However, new technologies like Axelar and LayerZero (and many others), along with lessons learned from the past experiences (Wormhole, Ronin, Nomad… etc) have led to improved bridges that enhance security, interoperability, and overall performance. Even though most believe bridges are a Zero day exploit from the many hacks we have had in the past. I believe there are enough smart people working on the problem to create composable bridges that will stand the test of time. We shall see, as we build on the breakpoint of innovation this is still a risk.
Hub-and-Spoke in attempted action
The Hub-and-Spoke Thesis presents a unified framework that harmonizes the dApp chain and Fat protocol theses, fostering a more interconnected and efficient decentralized ecosystem.
Polkadot, Cosmos, and Avalanche showcase an attempt at a Hub-and-Spoke Thesis in action. All three projects aim to connect multiple blockchains, fostering a deeply interconnected ecosystem.
Polkadot uses a relay chain to connect parachains, while Cosmos leverages the Inter-Blockchain Communication (IBC) protocol to enable cross-chain communication. Both projects embody what the hub-and-spoke model could be, creating an environment where dApp chains can flourish alongside larger protocols. Their issue? The hub, their hubs never grew into flourishing ecosystems that required some form of hub-and-spoke model to scale, they also function more as random spokes all fighting to be a potential hub at the current moment.
Avalanche, another example of a possible Hub-and-spoke Thesis, introduces a unique consensus mechanism known as the Avalanche Consensus, which allows for the creation of custom subnets (subnetworks). Subnets in Avalanche can host multiple blockchains, allowing developers to build tailor-made solutions while taking advantage of the security, scalability, and interoperability provided by the larger hub of the Avalanche network. Each subnet operates as a spoke within the Avalanche ecosystem, enabling seamless interaction between different chains and applications while maintaining their autonomy.
By integrating dApp chains and custom subnets within larger networks, projects like Polkadot, Cosmos, and Avalanche showcase the potential of the hub-and-spoke thesis in promoting a more harmonious and interconnected digital future.
The issue, these 3 ecosystem examples have never really measured up to Ethereum in terms of users, dApps being built and TVL. Because of this, none have succeeded in creating a true hub from which spokes can grow, Cosmos and Polkadot have branched out multiple siloed spokes that fight to become a possible contender of the hub. Avalanche seems to be the only one that has created a true hub experience at the moment which mimics Ethereum’s virtual machine. For Avalanche there is still much growth lacking in order to become a contender.
Ethereum, Layer 2s and scaling
Ethereum, as the leading smart contract platform, faces the challenge of scaling to meet the growing demand for its decentralized applications. In response, various Layer 2 scaling solutions have emerged to help address network congestion, high transaction fees, and slow confirmation times. Among these are optimistic rollups, such as Arbitrum and Optimism, as well as zk-rollups (like ZKSync, ZK-evm, Scroll among others) and sidechains like Polygon or xDAI.
By leveraging these different technologies, Ethereum can provide faster and more cost-effective transactions, enabling developers and users to enjoy a seamless and more accessible experience.
Optimistic rollups, like Arbitrum and Optimism, utilize fraud proofs and off-chain computation to increase transaction throughput and reduce fees. Meanwhile, zk-rollups rely on zero-knowledge proofs to offer even greater scalability by compressing multiple transactions into a single proof, which is then submitted to the Ethereum mainnet. Prominent projects like ZKSync, Scroll and Loopring are actively working on zk-rollup implementations.
Polygon, formerly known as Matic Network, is another important Ethereum scaling solution. It is a multi-chain framework that combines various scaling approaches, including Plasma, sidechains, zk rollups and optimistic rollups, to enhance the performance of the Ethereum network. By acting as a Layer 2 aggregator, Polygon connects different scaling solutions to create an interoperable and flexible ecosystem. Currently only Polygon mainnet and ZK-evm are live.
The importance of enabling cheap and fast transactions on Ethereum cannot be overstated. Affordable and rapid transactions are essential for fostering mass adoption and making blockchain technology accessible to a wider audience.
As Ethereum continues to evolve and embrace these Layer 2 technologies, general purpose smart contract L2s wont be enough to scale. As we continue dApp specific chains that are interconnected to these ecosystems seamlessly will need to play a move pivotal role in the space.
Hub-and-Spoke for Ethereum
The hub-and-spoke model presents an alternative solution for scaling Ethereum by facilitating a symbiotic relationship between application-specific dApp chains and Ethereum’s Layer 2 solutions or even the Ethereum mainnet. In this model, Ethereum and its L2s serve as the hub, connecting various dApp chains as spokes. This setup allows dApp chains to offload heavy computation to their own chains, reducing congestion on the Ethereum network, while still maintaining seamless interconnectivity with the Ethereum ecosystem. By enabling dApp chains to interact with Layer 2 solutions or the mainnet, the hub-and-spoke model fosters a more efficient, scalable, and composable environment. This interconnected framework encourages innovation and collaboration, as dApps can leverage the benefits of the Ethereum ecosystem while also enjoying the flexibility and performance optimization offered by having dedicated chains.
By leveraging cutting-edge technologies such as Axelar and LayerZero, we can unlock unprecedented levels of interconnectivity and composability between various dApp chains and the Ethereum ecosystem. Axelar, a decentralized, interoperable communication network, enables seamless cross-chain communication by employing a protocol-agnostic approach. Axelar in this scenario behaves as the bridge between the Hub connecting each spoke with seamless communication. LayerZero is an interoperability solution that focuses on connecting multiple Layer 1 and Layer 2 networks through a trustless, decentralized protocol.
Incorporating these technologies into the hub-and-spoke model can significantly enhance the composability of the ecosystem, allowing dApp chains to interact not only with Ethereum but also with other blockchain networks. This fosters a rich, interconnected environment where developers can harness the unique features and strengths of multiple chains, fueling innovation and collaboration across the entire decentralized landscape. By utilizing Axelar and LayerZero, the hub-and-spoke model can evolve into a powerful, versatile framework, ushering in a new era of interoperability and cross-chain compatibility.
dApps and protocols using this model or variations of It
There are currently some dApps employing this model or variations of it. We will highlight a few to showcase some examples and explore how these could evolve.
Axelar is one of the clearest examples of a Hub and spoke model. With the Axelar L1 verifying transactions their base protocol allows for users to interact from 30+ different chains. Axelar built infrastructure for this model to function so regardless of the chain a user is on they can use technology like GMP (general message passing) to connect to multiple different chains and interact seamlessly.
Radiant Capital is a money market that facilitates borrowing and lending on Arbitrum. They utilize LayerZero for cross-chain communications, allowing, for instance, a user to deposit on Binance Smart Chain and then borrow on Arbitrum. In this case, Radiant uses Arbitrum as their hub while expanding to other chains. As Radiant grows, it might explore creating its own chain, from which it can seamlessly service multiple blockchains, taking on the computational load of it all.
DeFi Kingdoms: DeFi Kingdoms is a platform that combines the world of DeFi with the immersive experience of gaming, often referred to as GameFi. DeFi Kingdoms offers users an innovative approach to exploring DeFi. Although they began on the Harmony Blockchain, they have since expanded to an Avalanche subnet. This allowed them to access greater liquidity from the Avalanche ecosystem while also supporting their computationally heavy game.
Games are one of the primary use cases for dApp chains connected to larger ecosystems, as they require heavy computation and thousands of transactions per second. However, another significant use case is fully on-chain order books and matching engines for DEXs.
There currently are only two examples of protocols that have managed to bring the order book completely on-chain, while others are attempting this; those projects are not yet live.
Mars protocol is another example of a dApp chain building this. Mars Protocol is a money market that allows for borrowing and lending, users can deposit both tokens as well as LP tokens. The Mars Hub is where the base engine for borrowing and lending functions from, their spokes are what they refer to as “rovers” ; these operate on different blockchains like Osmosis while the Mars hub maintains most of the load. Using IBC Mars will be able to connect to multiple Cosmos blockchains to allow users to borrow and lend from a diverse set of chains.
Hyperliquid, boasting 20 TPS and sub-second block times, is a fine-tuned DEX focused solely on providing the optimal trading experience while still keeping the matching engine entirely on-chain, offering more transparency and security. This type of performance is only possible with a dedicated L1 chain. Because the chain is hyper optimised for the DEX to function, general smart contracts are not supported on the L1. Hyperliquid is a dApp chain integrated into the Arbitrum ecosystem; the onboarding process is akin to simply using any other Arbitrum dApp. However, once you are on the DEX, the interaction feels as if you were trading on a centralized exchange. This is a great example of the hub-and-spoke thesis in action, with Arbitrum being the DeFi hub and Hyperliquid acting as a computationally intensive spoke dApp chain.
In conclusion, the hub-and-spoke thesis, offers a different approach to addressing the challenges in scaling blockchains. By integrating dApp chains within larger protocols, this model fosters interconnectivity, composability, and scalability while mitigating issues of fragmentation and resource redundancy. Through various potential examples, such as Axelar, Radiant Capital, DeFi Kingdoms, Mars Protocol, and Hyperliquid we can see how each has taken slightly different approaches toward a more interconnected future.
We can see the potential of this framework in promoting a more harmonious and interconnected digital future. As the blockchain landscape continues to evolve, the hub-and-spoke model could play a crucial role in shaping the next generation of decentralised applications, enabling a more efficient and collaborative environment for developers and users alike.
be well,
Xulian
twitter: @kingjulianiam
