A common saying within the crypto community is that a month in crypto is like a year in traditional industries. Headlines and announcements — of fundraisings, protocol upgrades, governance proposals, airdrops, hacks, NFT mints, acquisitions, and more — barrage users seemingly every hour. Complicating this, the growth in the adoption of hundreds of blockchains and decentralized applications has made it difficult for even the most ardent Web3 user to navigate the industry.
Roadmaps are helpful guides for users to parse signals from a sea of noise and evaluate a protocol’s future goals. For instance, Vitalik Buterin’s post “a rollup centric Ethereum roadmap” in October 2020 marked a clear shift in the Ethereum ecosystem, providing a strong cue that users and developers should pay greater attention to Layer 2 platforms.
In this report, we summarize the roadmaps and key upcoming events that most crypto users should be aware of. We focus primarily on large-cap Layer 1 blockchains — as changes on L1 platforms affect all applications built on top of them.
All eyes are on the Merge. Since 2015, Ethereum developers have been planning Ethereum’s transition from proof-of-work (PoW) to proof-of-stake (PoS). Ethereum seeks to move to PoS for many reasons, including improving security, increasing decentralization, and reducing energy usage. PoW is reliable, battle-tested, and secure, but it is also extremely energy inefficient. The Merge is expected to solve this by reducing energy expenditure by up to 99.9%. A shift to PoS also improves economics for ETH hodlers as the network no longer needs to pay hardware miners for security. Urgency for the Merge increased since the emergence of PoS-based alternative L1s, such as Cosmos, Solana, and Avalanche, all of which have demonstrably proven the ability to secure billions of dollars with PoS.
The Merge will occur once the Ethereum network hits a scheduled difficulty threshold, called Total Terminal Difficulty (TTD), which tracks accumulated mining difficulty. The mechanism for this threshold was implemented in 2015 but the difficulty bomb has been delayed five times. The next scheduled difficulty bomb will occur sometime this June but will likely get pushed back as developers seek more time to stress test the Merge.
In March, Ethereum developers completed their final merge testnet — called Kiln. The goal of Kiln was to identify any final bugs or issues on a test network before moving to public testnets. It also enabled the community to practice running their own nodes, deploying contracts, and checking tooling and infrastructure. The three public testnets to be forked now are Ropsten, Goerli, and Sepolia.
But Ethereum testnets have substantial usage and activity as well. So before fully forking these public testnets, Ethereum developers are currently running “shadow forks.” Shadow forks launch an upgrade on an existing network but only using a small number of nodes that the testing team controls. These nodes fork off from the main branch, allowing developers to stress test the Merge upgrade without bringing down the entire testnet if there are errors.
Both Ethereum mainnet and Goerli testnet have been shadow forked most successfully. Blocks continued to produce and finalize post-fork. But developers identified several issues to work on before going forward with running public testnets through the Merge.
On April 23, Every Client Combination Survived the Transition in a Mainnet Shadow Fork
Only after testnets are successfully upgraded and stable will a definitive time for the Merge be set. Currently, it seems like the Merge could occur in Q3 of this year if testing goes smoothly — however, do not be surprised if that timing gets pushed back a quarter or two.
What Does the Merge Do?
The Merge simply turns transaction validation from PoW to PoS. With it, Ethereum’s economics and demand/supply ratio drastically change (as explained in the next section).
The Merge does not directly improve scalability nor fix the high gas fees of the Ethereum network [fees will probably be slightly lower, all else being equal, as block production rate will be improved from thirteen to twelve seconds]. However, it does pave the way for Ethereum developers to focus on scalability solutions post-Merge.
In particular, developers will likely turn their key focus to pave the way for danksharding. Danksharding is a type of sharding design that provides more space for blobs of data instead of transactions. This is aligned with Ethereum’s rollup-centric roadmap, which envisions most user activity occurring on roll-ups. For now, developers are considering EIP-4844 (“proto-danksharding”) which implements most of the full danksharding logic without actually implementing any sharding. More specifically, it creates a new type of transaction, called blob-carrying transactions, that can carry extremely large amounts of data.
Ethereum developers are also contemplating several changes to further improve scalability and decentralization. For instance, the implementation of proto-danksharding would significantly increase disk space requirements, increasing the cost to run a full node. Hence, the community is exploring history expiry to reduce disk load. Other proposals being actively discussed include data availability sampling, statelessness, and simplifying the EVM. Vitalik Buterin collective names these proposals “the Merge, Surge, Purge, Verge, and Splurge.”
Vitalik Explains the Updated Roadmap for Ethereum Protocol Development
With PoW, seigniorage is paid to miners to produce new blocks at 2ETH per block. Rewards are also being distributed to validators on the Beacon Chain. After the Merge, rewards to miners will cease, reducing ETH’s issuance rate by ~90%. For context, based on the last 30 days, Ethereum is net inflationary at +3.1% per year; assuming that it already moved to PoS, it would have been net deflationary at -1.0% per year.
At the time of this writing, nearly 12 million ETH are staked on the Beacon Chain, resulting in a ~4.5% gross APR. Furthermore, after the Merge, validators will receive transaction tips that are currently earned by hardware miners, which could boost returns by another ~4–6%.
In addition, nodes will begin earning MEV (maximal extractable value) due to the ability to reorder transactions. Researchers at Flashbots, an R&D organization that studies the emergent behaviors of MEV, suggest that validator yields could increase an additional 60% due to MEV.
In sum, if the Merge happened today, validators could expect to earn a total ~16–17% APR due to all the factors mentioned above.
Revenue Distribution From Miners to Validators
The Merge will increase the demand/supply ratio of Ethereum. After the Merge, not only will Ethereum’s supply issuance contract, but demand for $ETH will most likely improve as:
- $ETH de-risks after successfully transitioning from PoW to PoS;
- Removal of energy usage criticisms as network energy expenditure will drop by >99%; and
- $ETH will be increasingly seen as a financial instrument, similar to equity or a perpetual bond, due to its staking rewards.
Therefore, we expect a significant increase in ETH to be staked after the Merge. If the proportion of staked to total ETH is comparable to those of alternative L1s (Cardano: 72%, Solana: 75%, Avalanche: 66%), Ethereum staking yields would compress to below 2% APR. Readers can evaluate how staking rewards would play out under varying scenarios in this calculator.
Furthermore, for at least six months after the Merge, validators’ staked $ETH and rewards from new protocol issuance will remain locked on the Beacon Chain. Only after Ethereum undergoes the Shanghai hard fork will validators be allowed to withdraw their stake and rewards. Validators will only be able to freely use earnings from transaction fees and MEV fees before the Shanghai fork. Thus, we could see a period of serious demand/supply imbalance, where there is a sustained demand for staking $ETH and minimal new supply of $ETH.
Risks of the Merge
The Merge is not without risks. Although most Ethereum developers agree that there is a clear path to the Merge this year, tail risks remain as to unforeseen issues during the actual event.
There are also open questions as to how Ethereum miners will react close to and after the Merge. For instance, miners might coordinate their own fork and maintain PoW on another chain. However, the likelihood and impact of this risk are perceived to be low: Ethereum has signaled an intent to transition to PoS since 2015, and it is more likely that miners simply move to another PoW chain instead.
Another key focus for the Ethereum community this year is rollups. Many expect this year to be a pivotal year for rollup adoption — dubbed “L222” — as optimistic rollups mature and multiple zkEVMs launch on testnet and mainnet.
Activity on optimistic rollups — such as Arbitrum, Optimism, Metis, and Boba — is gradually increasing this year after a period of muted activity at the end of last year. One catalyst is the growing anticipation of a token launch and corresponding airdrop among the two largest optimistic rollups, Arbitrum and Optimism.
TVL on Optimistic Rollups
On April 27, Optimism took a step forward in progressively decentralizing through launching both a fungible token ($OP) and non-fungible tokens. Subsequently, Optimism will be governed by two houses:
- Citizens’ House, governing retroactive public goods funding to drive protocol development. Membership in the Citizens’ House will be conferred as non-transferrable NFTs.
- Token House, governing protocol upgrades, project incentives, and redeployment of treasury funds from sequencer revenue. Holders of $OP are members of the Token House.
Around 19% of total token supply is allocated for user airdrops, rewarding prior Optimism users and contributors. There will be future rounds of airdrops — according to the team, the best way to earn eligibility for future airdrops is to get involved in the Optimism collective by building on Optimism, being active in the community, and bridging assets to Optimism to try new projects on the platform.
$OP Token Allocations
On the heels of Optimism’s announcement, we expect there could be capital inflow to both Optimism and Arbitrum as users attempt to qualify for future airdrops.
Outside of token launches, the user experience on optimistic rollups (OPR) has also drastically improved since the beginning of last year. Each OPR has developed a strong community and ecosystem of applications. For instance, Arbitrum boasts 79 applications on its platform today — more than alternative L1s such as Solana, Terra, and Harmony. Optimism, Metis, and Boba also have thriving communities. Other statistics and catalysts that are signal positive trends for OPRs include:
- Metis, originally a hard-fork of Optimism, is the cheapest L2 network on Ethereum at the time of this writing.
- The upcoming Arbitrum Nitro upgrade is estimated to improve execution speeds by 20–50x along with a ~50% decrease in costs.
- The introduction of EVM equivalence — meaning complete alignment with the EVM specification — by Optimism. EVM equivalence allows every existing Ethereum stack to seamlessly integrate with Optimism’s L2 system.
EVM equivalence is a notable and clear differentiating factor for optimistic rollups. It provides developers with fast execution speed, low transaction fees, and strong security, all while preserving the strong network effects of the EVM. It is not the same as EVM compatibility, which requires modification of the underlying code that Ethereum’s infrastructure relies on.
In addition to optimistic rollups, the community is eagerly anticipating the mainnet launches of multiple general-purpose zero-knowledge rollups, colloquially called zkEVMs.
StarkNet, StarkWare’s zkEVM whose Alpha version is currently live on mainnet, is tentatively expected to launch mainnet Q3 to Q4 of this year. Despite its early development, over 55 projects are building on StarkNet’s alpha with several projects such as Oasis (NFT marketplace) and StarkSwap (AMM) already live. Users can play around with these apps through the Argent X wallet.
zkSync 2.0, Matter Labs’ zkEVM, launched its public testnet this February. No official timeline or roadmap is provided, but the Matter Labs team has been active in integrating its ecosystem partners. In addition, Matter Labs have stated that they will be launching a token that will be used by validators for staking. The token will likely be retroactively airdropped for testnet users.
Polygon’s suite of scaling solutions will also hit major milestones this year. Polygon Hermez, a zkEVM built by emulating the exact EVM opcodes, is expected to launch a public testnet during H1 2022. Polygon Avail, a data availability-focused blockchain most comparable to Celestia, is also expected to launch testnet around the same timeframe, and both teams have hinted at an upcoming collaboration with each other. Polygon Zero, a zkEVM built on recursive SNARKs, plans its testnet for Q4 2022. Polygon Miden, a STARK-based zkEVM, aims to launch testnet for Q3 2022 and mainnet after Q1 2023.
In addition, Polygon announced several new products and initiatives since the beginning of this year, such as:
- Polygon ID, a ZK-based identity solution that offers self-sovereign, private identity with on-chain verification. A public release of limited features is expected in Q2 2022.
- Polygon Supernets, application-specific blockchain networks that can leverage existing MATIC validators.
- A $100 million fund for the development and adoption of Supernets.
- A liquidity mining program based on key performance indicators such as weekly average users, total value locked, etc.
- A token redesign that could possibly launch this year. Details of the token redesign have not been revealed, aside from changing the token symbol and mechanics.
Scroll officially announced its zkEVM this April. Its goal is to create a zkEVM that achieves bytecode-level compatibility with Ethereum, allowing for seamless integration with existing Ethereum applications and infrastructure. Developers should expect their code to behave the same on Scroll and Ethereum mainnet. Scroll expects to launch an initial testnet release later this year.
Comparison of Various ZK Rollup Architecture
At a protocol level, Solana continues to work on improving network performance. Since the beginning of this year, Solana has experienced thirteen separate occurrences of prolonged network degradation that resulted in reduced TPS, long transaction times, and outright failed transactions. Reasons for network degradation include increases in high compute transactions, excessive duplicate transactions, and an issue that overestimated the compute units used by transactions per block. Even at the time of this writing, block production on Solana has completely halted.
Block Production on Solana Halted Due to Flood of Transactions
Network instability is fatal for DeFi activities on Solana. For instance, during one period of network degradation, users were unable to repay loans or deposit more collateral on Solend, a money market protocol, resulting in a wave of liquidations.
The root cause of these issues boils down to the lack of an auction mechanism. In Solana, the ability to write to a block state is limited. Without a way for users to bid for it, users will be incentivized to spam the network with transactions to increase the likelihood that their transactions get included in a block. This is particularly the case in a low-fee environment where the costs of spamming the network with write attempts are virtually nil. Hence, the biggest anticipated upgrade to Solana is the introduction of an auction market for transaction fees (similar to Ethereum) or for bandwidth. Not only would this type of market disincentivize duplicate transactions, but it also provides users confidence that they can get high-value, urgent transactions executed if needed.
The contours of these solutions to improve network performance are still being worked out, but some soft consensus is forming around some combination of the following features:
Integration of Quic to avoid a single entity spamming transactions. Solana currently uses UDP, which does not require a two-way handshake between nodes. This improves speed. However, it also means that the network cannot tell if the source IP of a transaction is genuine. Malicious entities could use different IP addresses to spam the network or spoof the IP of another user to get them throttled. Quic (Quick UDP Internet Connections, a network protocol developed by Google) allows the network to discern and prevent an entity from flooding the network with requests. It won’t solve all of Solana’s issues, but it would significantly alleviate congestion.
Quality of Service (QoS) by stake weight. When the network load is high, QoS kicks in and throttles inbound traffic according to the stake weight of traffic from staked validators. In this way, important protocols such as Pyth (oracle network) or Serum (order book DEX) can get guaranteed throughput.
Fee prioritization by state. There will be slightly lower fees for low-compute transactions and higher fees for high-compute transactions, ensuring that the highest bidders cannot box out all other bidders. Developers are also exploring allowing applications to set their own fee structure.
Priority transaction propagation. Congestion fees will be charged to bots saturating the network, with tips directed to validators.
Interested readers can follow Solana’s progress in implementing some or all of these changes by following its testnet releases and announcements.
The problems mentioned above emphasize one point: Solana is still in beta. The community has been clear that Solana is still a work-in-progress with several kinks to be worked out. No official date has been released yet for mainnet launch. An announcement will likely be made after network performance issues have been improved and Solana can demonstrably maintain stability even under adverse or challenging situations.
Another key event to keep an eye on is the Breakpoint conference this coming November. Last year, Solana developers announced a flurry of partnerships with important web3 infrastructure and services, such as Render Network (rendering), The Graph (indexing), Brave (browser), Nansen (data analytics), Neon Labs (EVM development environment), and more. This year, we expect there will be a whole host of announcements building on top of last year’s momentum.
Other Things to Look Out For
- Neon EVM — Neon Labs is an organization bringing the Ethereum Virtual Machine to Solana. It is currently running Alpha on Solana’s devnet and aims to transition to Mainnet Beta afterward.
- Solana x OpenSea — OpenSea recently integrated a limited set of Solana NFT collections into its marketplace, using Phantom as the default Solana wallet. Unfortunately, OpenSea’s launch coincided with network performance, leading to several user complaints. Full launch will likely occur sometime this year.
- Solana Pay — Earlier this year, Solana Labs announced Solana Pay, which allows merchants to accept crypto payments directly from customers through the Solana network. In theory, this eliminates the middleman and saves merchants and purchasers 3–4% in credit card processing fees. Over 600 merchants have already integrated with Solana Pay in a month. Further announcements of integrations and partnerships would be particularly positive for Solana’s organic user growth.
Ever since Avalanche announced Avalanche Rush, a $180 million DeFi incentive program, and Avalanche Blizzard, a $200 million ecosystem fund, user traction on the network has surged. Avalanche Rush kickstarted user growth by funding important DeFi primitives, such as stableswaps (Curve), money markets (Aave, Benqi), and DEXes (Trader Joe). Blizzard effectively retained users afterward by supporting protocols built around those primitives. Hence, whereas projects launching on Avalanche last year were primarily forks of existing Ethereum projects, we have seen new ideas and innovations launching first on Avalanche today, such as Platypus, Alkimiya, and Yeti Finance.
Daily Transaction Count on Avalanche Network On Par with Ethereum’s
Subnets — Horizontal Scaling
Avalanche aims to capitalize on this momentum through the recently announced Avalanche Multiverse, a $290 million incentive program to accelerate the adoption of subnets.
Subnets are Avalanche’s core scaling technology, allowing developers to build application-specific networks separate from existing Avalanche chains. Subnets can have different execution environments, gas tokens, control over the validator set, and more, providing developers greater control over their applications. Most importantly, they allow hundreds of transactions to be processed in parallel, allowing Avalanche to scale horizontally. They are conceptually similar to the concept of Cosmos Zones and Polkadot Parachains.
Topology of Cosmos, Polkadot, and Avalanche
The first recipient of the Multiverse incentives was Defi Kingdoms, which successfully deployed a subnet this March. Because Defi Kingdoms was on a separate subnet, at one point it cleared more transactions than both Ethereum and Avalanche’s C-Chain, while offering cheap network fees.
DFK Chain Proved Out Subnet Technology
The value proposition of subnets is particularly compelling for blockchain gaming. Game developers can have greater control of their game economy by having a separate network. Furthermore, developers do not have to worry about bootstrapping their own virtual machine or validator set. Not only that, developers can optimize subnet performance by requiring their custom validator set to run high-spec hardware. This sacrifice in decentralization is generally seen as acceptable for use cases such as gaming where most of the transactions are high-frequency and low-value. Thus, many of the subnets slated to go live in the next few years are gaming-related.
There are currently 414 subnets on Avalanche’s testnet. Some notable projects building their own subnets are:
- Crabada, a play-and-earn idle game currently on Avalanche’s C-Chain but planning to migrate to its own subnet, called the Swimmer Network.
- Shrapnel, an AAA first-person shooter game that enables players to create, trade, and own their player-created content on the chain.
- Ascenders, an adventure RPG aiming to build an open world with a crypto-driven economy.
- WAGMI Subnet Demo, a high-throughput EVM-based subnet that has supercharged parameters (2.5x higher gas limit and 6.7x the gas target of Avalanche’s C-Chain). It allows for complex VM testing on a live network without affecting the stability of C-Chain.
- SpacesVM, an Avalanche-native VM optimized for storage-related operations. A working demo is currently live and allows users to create authenticated, hierarchical storage of keys/values.
Crabada’s subnet is highly anticipated, as the application currently consists of ~64% of total transactions on the C-Chain. Its migration to a separate subnet would likely alleviate congestion on C-Chain.
Crabada Dominates Recent C-Chain Activity
Most of the attention this year will be focused on the deployment and subsequent performance of subnets. Furthermore, we expect greater cross-subnet functionality down the line. Subnets currently cannot send arbitrary messages to each other. In the future, Ava Labs expects to implement features in which one subnet can not only send messages but also invoke a smart contract on another subnet, improving the interactivity within the Avalanche ecosystem.
Other Things To Look Out For
- Launch of Core, a free, non-custodial wallet with native Avalanche bridging functionality.
- Implementation of on-chain governance where participants can vote on changes to the network.
Cosmos itself is not a blockchain, but an ecosystem and framework to enable sovereign and interoperable blockchains. The Cosmos SDK powers large L1 blockchains, such as Terra, Osmosis, Juno, Cronos, and Secret Network. However, Cosmos’ native token, ATOM, has often been criticized for not capturing the value that it creates within the Cosmos ecosystem.
Cosmos’ Technology Powers Multiple Blockchains With Total FDV of $150bn+ but There Is Minimal Value Accrual to $ATOM
This is primarily by design. $ATOM currently only secures the Cosmos Hub, a hub that connects application-specific blockchains (called Zones). Cosmos preaches hub minimalism, arguing that it 1) simplifies the code base, increasing security and reliability; 2) conducts a limited set of functions such as processing cross-chain transactions, reducing overhead costs; and 3) enables Zones to specialize in other functions, leading to efficiency gains. In line with this philosophy, Cosmos does not require any Zone to pay $ATOM for fees or security. Hence, for now, $ATOM’s value accrual primarily comes from governance, airdrops, and securing the Cosmos Hub.
The introduction of interchain security provides another path for value accrual. In contrast to Polkadot, where every parachain inherits the validator set of the relay chain, Cosmos currently requires Zones to run their own validator sets. This encourages sovereignty as each blockchain can decide on its level of security. But also creates hurdles for new Zones, which have to bootstrap their own set of validators. Interchain security allows Zones to lease security from Cosmos Hub (or other Cosmos chains).
Cosmos’ Lambda upgrade, expected in Q3 2022, will implement the first version of interchain security that allows Zones to secure their chain using Cosmos Hub validators. For example, Gravity Bridge plans to adopt Interchain Security, so $ATOM stakers would receive $GRAV rewards on top of $ATOM rewards. Next year, Cosmos’ Gamma upgrade will enable partial interchain security, in which Zones could use a combination of their native validator set and Cosmos Hub validators.
Interchain security indeed bolsters the case for hodling and staking $ATOM both by lowering the barriers of entry for new chains as well as more efficiently capturing the value that Cosmos Hub creates. But it could take a few years for the thesis to fully play out. Full interchain security will mostly be niche, long-tail chains that end up using the feature. If larger chains, such as Osmosis, choose to adopt interchain security, they would probably prefer partial interchain security. After all, a key value proposition of building a Cosmos chain is sovereignty over validator sets.
Cosmos’ Inter-Blockchain Communication (IBC) protocol, introduced last year, unlocked interoperability across the Cosmos ecosystem by enabling token transfers and oracle data across Cosmos chains. Along with NFT transfers and queries to be launched this year, IBC will allow full-blown asset/information transfer between different Cosmos chains.
But IBC allows “read-only” features. The recent Theta upgrade along with the upcoming Rho upgrade brings Interchain Accounts to Cosmos, allowing chains to also “write” state. Interchain accounts enable any Cosmos chain to perform transactions and interact with any contracts natively on other Interchain Account-supported chains. For instance, an Osmosis user could swap $ATOM for $UST and deposit that $UST into Anchor Protocol, all without leaving the Osmosis application. As another example, we previously touched on Sommelier Finance, a protocol that optimizes yield generating strategies for liquidity providers. If Sommelier wanted to deploy vault strategies on Osmosis today, each chain would require a full upgrade to deploy appropriate modules. They would both have to undergo full upgrades afterward for any module developments. With Interchain Accounts, messages can simply be sent from one side to another, drastically improving efficiency.
We expect Interchain Accounts will drastically improve composability across the Cosmos ecosystem, akin to how applications and smart contracts on Ethereum L1 can all frictionlessly interact with each other.
Other Things to Look Out For
Native liquid staking is also coming to Cosmos Hub. Cosmos team is planning to add CosmWasm to enable smart contract functionality so that teams like Lido can create liquid staking solutions.
Celestia public testnet in Q2 2022. Celestia is a modular consensus and data availability layer currently running in devnet. It aims to launch an incentivized testnet in Q3 2022 before a full mainnet launch by end of this year. Celestia’s mainnet launch would significantly widen the design space for blockchain architecture, such as enabling interoperable execution and Celestiums.
Can Evmos rebuild trust? Evmos is an EVM chain compatible with the Cosmos ecosystem. It built strong hype since the beginning of this year by offering airdrops to a wide range of Cosmos, Ethereum, and Osmosis users. Evmos launched on mainnet beginning of March amidst strong hype, but the chain halted only a couple of days after launch due to a failed network upgrade intended to patch a critical security vulnerability. A minority of users were able to claim and stake their Evmos airdrops early, gaining what other community members believe an unfair advantage. The Evmos team ultimately decided to continue the chain where it last halted instead of a full chain reset, alienating some users. Combined with delays in getting the chain back online, excitement for Evmos has died down. Nonetheless, Evmos still hold strong potential to become Cosmos’ de facto EVM Hub that can natively interact with other Cosmos chains. Evmos went live on April 28 — users can bridge to Evmos using Nomad.
Upcoming Chains and Airdrops. New up-and-coming projects on Cosmos abound. Several are planning to go through testnet -> incentivized testnet -> mainnet this year, including Gnoland, Archway, Tgrade, Pylon, and more.
Select Upcoming Cosmos Projects
One new project to look out for is Gnoland, created by Cosmos founder Jae Kwon. Gnoland’s primary value proposition is being programmed in Gnolang, a fork of the popular programming language Golang. The founder argues that because Gno is deterministic, intuitive, and resource-effective, it is superior as a smart contract platform compared to Solidity. And using a fork of Golang could draw in new developers as there are globally more Go developers than Rust developers. Right now, Gnoland is going through testnet with the community focusing on building basic DeFi infrastructure such as a DEX and stablecoin implementation.
New Cosmos chains typically provide airdrops to $ATOM stakers to incentivize validators, bootstrap community members, and gain goodwill from the wider Cosmos ecosystem. Expected airdrops from Cosmos chains this year include: Evmos, Gravity Bridge, Game, Legendao, Bitsong, Lum Network, Raw DAO, and more. A few resources that check current and upcoming airdrops:
We previously wrote about NEAR’s sharding design, Nightshade, and the roadmap to fully implementing it. Since then, the timeline has been slightly modified. NEAR plans to focus on:
- Implementing challenges and adding some form of synchronous execution by Q3 2022. Challenges protect the protocol against invalid state transitions, a particularly salient threat in sharded blockchains. Fully synchronous execution would provide drastic improvements for NEAR developers, particularly those building DeFi applications. For instance, Aurora runs an EVM environment on a separate shard — enabling synchronous executions between NEAR-native applications and Aurora applications would drastically improve composability within NEAR’s platform.
- Implementing general re-sharding by Q1 2023, allowing the protocol to balance network loads between each shard.
- Launching full Nightshade by Q2 2023.
Since we wrote the article, NEAR experienced a step-change in adoption. TVL has skyrocketed from nearly $600 million to $1.7 billion, mostly driven by the launch of money-market protocols Aurigami, Bastion, and Burrow. Sweatcoin, which aims to build a movement economy, saw over 400,000 wallet creations just one week after launch. The number of daily active contracts and transactions continue to grow.
Block Space Demand and Utilization Continue to Grow
NEAR Protocol also announced a $350 million funding this April. Along with a $150 million fundraise this January, the team has a substantial war chest to fund protocol development and adoption. We expect a wide range of new applications to be launched on top of NEAR and Aurora, including orderbook exchanges (Orderly, Tonic, Spin), wallet providers (Sender), games (Aboveland), and more.
Another noteworthy protocol development is the recent launch of NEAR’s native stablecoin, $USN, by Decentral Bank. $USN is soft-pegged to the US dollar and has a multi-currency backing of $NEAR and $USDT. $USN is overcollateralized, so Decentral Bank has “protocol-controlled value” to generate income, such as offering staking, lending, stableswaps, etc. Hence, the minimum lending APY for $USN is NEAR’s staking APY, which is currently ~11%. However, Decentral Bank suggests that yields will be over 20% through additional incentives to bootstrap $USN usage, which would likely spark significant capital inflow into NEAR’s ecosystem.
Eventually, $USN is expected to be integrated on a protocol level, where it can be used to pay for transaction and storage fees. Validators could also receive rewards directly in $USN instead of $NEAR, improving income stability. Look out for $USN integration with DEXs, CEXs, wallets, and other protocols as another measure of user adoption.
Mina, an ultra light-weight blockchain using recursive zk-SNARKs, has an ambitious and packed roadmap for this coming year. Since its mainnet launch early last year, Mina has been focused on refining its protocol, building out the ecosystem, and laying the foundation for applications to be built on top of Mina protocol (zkApps).
In addition, Mina plans to introduce non-native token support at the protocol level, similar to the ERC-20 standard of Ethereum. This would be particularly beneficial for native DeFi protocols built on top of Mina, unlocking new DeFi use cases of zk-SNARKs and strengthening Mina’s value proposition amongst other L1s.
After zkApps launch on mainnet, Mina will shift greater attention to scalability as the protocol currently only supports 1 TPS (compared to Ethereum’s 12–15 TPS). In particular, with the introduction of SnarkyJS, rollups will become possible on Mina, paving the way for zkApps to be built as rollups on top of Mina.
Another catalyst for Mina’s ecosystem is the upcoming Mina to Ethereum bridge being built by =nil;Foundation, an ecosystem partner. The bridge’s goal is to enable full Mina state in-EVM verification, meaning that it would be possible to bring everything that happens inside the Mina Chain to Ethereum. Some possible use cases that the bridge would enable include:
- Creating a trustless bridge between Mina and Ethereum to send assets, such as wrapped Mina ($WMINA);
- Proving that a particular trade order was filled on Uniswap with Mina, without actually revealing details of the actual trade; and
- Using Mina to prove the identity of an individual for Ethereum-based actions.
The project is coming close to its final steps; a production-ready version is expected in Q2 2022.
All these catalysts combined would showcase the features and uses cases uniquely enabled by Mina’s protocol design. For instance, Teller Finance is planning to leverage Mina’s blockchain to create a decentralized borrow/lending market. Through Mina, users can prove that their credit score via CreditKarma meets a certain threshold. The proof is submitted on-chain. If Mina’s blockchain accepts this transaction, it proves that the credit score is valid. Afterward, Teller can provide a competitive loan rate, confident that the borrower meets its scoring criteria. And because the user’s interactions occur locally within the web browser, the user maintains privacy.
Other products currently in development include zkOracles which connect real-world data to the blockchain and login credentials that allow users to access websites without handing over personal information.
Rapid Fire Notes for Other Protocols
Zcash pushed back its Network Upgrade 5 upgrade to around mid-May after experiencing a consensus bug in its testchain in March. One of the largest upgrades to Zcash since project launch, NU5 consists the deployment of the Halo 2 proving system on the protocol. Halo 2 removes the need to have a trusted setup and enhances scalability through recursive proof compositions.
Subsequently, core developers are expected to shift their attention to possibly transitioning Zcash to a PoS consensus mechanism. CEO of Electric Coin Company, Zooko Wilcox, argued that PoS eliminates selling pressure and improves productivity on $ZEC. Initial discussions have proposed using the Cosmos stack to support proof-of-stake due to its interoperability and existing developer community. The shift to PoS is expected to optimistically occur within three years with targeted efforts.
Polkadot’s parachain auctions continue. The near-term focus is on enabling greater cross-chain messaging within the Polkadot ecosystem. XCM, Polkadot’s protocol for cross-chain transactions, will be launched in its next upgrade. XCM was previously launched on Kusama, Polkadot’s canary network. However, due to a mismatch of versions between the Kusama relay chain and Karura parachain, an attacker was able to exploit ~11k $KSM (~$2 million).
XCM v3, Polkadot’s upgraded cross-chain messaging system, is currently being audited and should be released later this year. The new version of XCM will support NFT transfers across parachains, providing a needed boost to Polkadot’s NFT ecosystem.
Cardano deployed smart contract functionality last September, but applications on Cardano still suffer in user experience. After SundaeSwap, an AMM-style DEX, went live on Cardano, users reportedly had to wait hours or even days for their trades to clear. Therefore, Cardano’s focus is primarily on scalability now. This summer, it is expected to push an upgrade that would enable larger block size and higher transaction throughput.
Chainlink has three key areas for this year:
Crosschain Communication Interoperability Protocol (CCIP). Chainlink is doubling down on CCIP as user activity continues to surge across multiple blockchains. CCIP gives developers the ability to build cross-chain smart contracts. In theory, these smart contracts will be composable across multiple blockchains. By providing this universal communication protocol, developers will have additional flexibility to build applications that utilize different blockchains for specialized purposes.
Staking. Chainlink has developed an Explicit Staking mechanism. Unlike traditional staking mechanisms, this staking model uses quadratic functions to reduce the likelihood of any single attacker exploiting its system. As a result, the Chainlink ecosystem can expect an increased level of robustness for its 900+ decentralized oracles once staking is rolled out. The exact date of the launch is uncertain.
Enterprise partnerships. In 2021, Chainlink partnered with several large institutions including Deutsche Telekom, Associated Press, and Swisscom. As technical complexity across L1s and L2s remains high, Chainlink’s CCIP rollout will allow traditional enterprises to enter the industry without narrowing their focus to a few blockchains.
New blockchains to look out for this year:
- Espresso — Layer 1 PoS blockchain that is EVM compatible focused on scalability and privacy. It uses Configurable Asset Privacy for Ethereum (CAPE) to enable customized privacy guarantees for users.
- Aleo — Blockchain for private applications using Proof-of-Succinct-Work (PoSW) to maintain state and verify proofs. Aleo transactions are processed off-chain, and only verified (rather than executed and re-executed) by the network nodes.
- Aptos — Layer 1 blockchain backed by some members of the team behind Diem, Facebook’s attempted project. The team states that Aptos can execute over 160k TPS. Aptos uses coding language Move and aims to launch mainnet in Q3.
- Mysten Labs — Founded by four former Facebook employees that worked on Diem, Mysten Labs is launching Sui, an L1 platform with horizontal scalability. Unlike most current L1s, Sui forgoes consensus for most transactions, allowing it to parallelize transaction execution and reduce latency. Like Aptos, Sui is coded in Move.
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