Constellation Network: Crypto Meets the Real World
Crypto narratives sell tokens and make venture capitalists rich, but real world utility has been absent — until now.
Crypto Narratives
I imagine many folks reading this have not heard of Constellation Network. Before we get into what makes Constellation unique (full disclosure, I hold Constellation $DAG), we should spend a little time understanding where we are in the crypto space.
There are over 20,000 blockchain projects and counting. But let’s face it, when it comes to the real world there are really only two: Bitcoin and Ethereum.
Don’t believe me? Around 75% of Americans have “heard a little” or “nothing at all” about crypto. On the flip side, only 16% have ever invested in, or used crypto.
Then consider that 70% of the current total crypto market cap is comprised of four tokens: Bitcoin (~40%), Ethereum (~20%), USDT (~6%), and USDC (~5%). Put together, what do you think the majority of the 16% invested in?
You guessed it, Bitcoin and Ethereum. The rest of the 20,000+ crypto projects floating around are splitting 30% of the remaining market liquidity.
Only a fraction of the people that invest in crypto are investing in things like Solana, Avalanche, Fantom, or anything else that’s not Bitcoin or Ethereum. Meaning, for the vast majority of people using crypto, they’re using Bitcoin and Ethereum.
And most of that “use” is speculating on price action.
For all intents and purposes, crypto doesn’t exist in the real world — yet. Just because some tiny fraction of the population tinkers with crypto projects doesn’t make them useful.
Which is why you so often hear the idea of a “use case” from people shilling crypto projects. Whether you’re in court or you’re asking for a raise, if you’re making a case for something, it’s an argument for how things could or should be, not how they are.
And the way things are right now, very few people are “using” crypto for anything other than speculation. Think about it this way, what non-crypto related task or activity do you regularly use crypto for?
When you play “Call of Duty” do you use crypto? How about when you watch Netflix? Or order a package from Amazon? Or when you’re at work? Or while you’re driving?
It’s certainly true for me. I’m a huge crypto nerd and I recognise that crypto has about as much influence on my day to day, real-world life as the internet did back in 1990, which is exactly zero.
Constellation Network might be right on the cusp of changing that in a big way.
Crypto Mass Adoption
Beyond simply being a speculative asset, I think Bitcoin is well-poised to enjoy mass adoption in the next few years. My Bitcoin bullishness is predicated on the idea of Bitcoin being a defensible, zero-trust, egalitarian strategic financial asset.
That’s too much to go into here. Suffice to say, I think there’s more potential in Bitcoin than simply hoping the price goes up. Ethereum, on the other hand, I’m far less certain about.
The trouble with Ethereum, and indeed all layer ones, is not about throughput, or scalability, or transaction speed. The meaningful issues blocking real world adoption are composability, connectivity, and standards.
Throughput, scalability, and transaction speed receive a lot of attention because they’re important to crypto. But when it comes to using crypto in the real world, those are second order problems.
Composability
The vast majority of code written for the blockchain is done in Solidity. Solana and NEAR are notable for their use of the Rust programming language, with Cosmos using the Go language.
See any issue with that?
Go and Rust are number 13 and 14 respectively. Solidity doesn’t even make the list.
Beyond the raw lack of coders, smart contracts in general have limitations in what functions they can perform, what data they can use, and how they can execute.
Many of those limitations are inherent to a sequential blockchain environment. As such, there is likely a developmental “ceiling” to what can be done with a smart contract on a sequential blockchain.
Part of that relates to the Ethereum Virtual Machine (EVM) environment. The combination of Solidity and EVM just about guarantees the smart contract world is cut-off from mainstream software development.
Add to that the issues around scalability and throughput in a sequential blockchain world and integration with most existing business models becomes a functional impossibility. Tack on for good measure the existence of dozens of EVM compatible chains that don’t communicate with each other and the prospect of integrating blockchain anything into the real world becomes almost nil.
In other words, we’ve had smart contracts via Ethereum for almost a decade and real world adoption and use of smart contracts is basically zilch. Moreover, making these siloed blockchain systems faster or more scalable still doesn’t fix the “siloed” part.
Connectivity
As just mentioned, most of these self-referencing blockchain ecosystems can’t talk to each other. We’ve all seen the fallout from the numerous bridge hacks that have occurred recently.
So even within the siloed crypto space, the various L1s can’t even communicate among the silos without using clearly vulnerable bridges. But that’s just the start. Connecting data that doesn’t originate on the blockchain is the real problem.
The solution (until now) has been the use of oracles like Chainlink. But that has issues as well, not least of which are the transaction costs. Of perhaps greater concern is that oracles rely on centralised, off-chain data sources.
The integrity and validation of those off-chain sources represents significant risk. Manipulation of that data would essentially be undetectable prior to its inclusion in a smart contract.
Such data interference may be benign or unintended. But it also presents an attack vector for hackers, because once they can alter the centralised data, the smart contract will still execute relying on that faulty data.
To create genuine, real-world utility, a blockchain system must be able to connect with, and validate real-world sources of data on-chain. This also traces back to the composability problem above and the limitations of smart contract applications.
Again, making transaction speeds faster doesn’t do anything to fix the problem of crypto ecosystems being completely cut-off from real-world data without a centralised intermediary.
Standardisation
Concepts for a distributed information network started cropping up in the 1960s. A standardised protocol for those networks didn’t arise until 1983 with the advent of TCP/IP.
Widespread adoption of the internet based on TCP/IP didn’t happen until 15–20 years later. Today the internet is almost taken for granted.
Likewise, concepts for decentralised digital currencies had been around since the 1990s, but the one that took root was Bitcoin in 2009. It’s been almost 14 years since then and guess what’s starting to crop up?
Crypto standards.
Axelar, Layer Zero, Cosmos, Constellation and likely dozens of others are starting to roll-out what will most likely come to be the defining standards for crypto deployments and connectivity 10–15 years from now.
Which one will come out on top? No one can say.
But of those I just mentioned, only two (Cosmos and Constellation) are meaningfully dealing with the composability problem, and only one is dealing with the composability AND connectivity problem.
Constellation.
The Constellation Network
I did an article about Constellation a few weeks back. I learned about the project from a tweet of all places.
I spent the next few weeks digging into what Constellation is all about. The tech is impressive, but at the time the developer docs hadn’t been released yet.
Those docs are available now and I’m even more bullish than I was then. Constellation is a unique directed acyclic graph they call the “Hypergraph”, which uses a proprietary Proof-of-Reputable Observation (PRO) consensus mechanism.
The tech stack is based on core concepts used in “big data”. The project has been in development since 2018 and has already landed some pretty unique contracts, perhaps most notably with the United States Department of Defence.
The network is horizontally scalable, the transaction throughput in test conditions was faster than the test could measure, and the whole system is data agnostic.
Meaning, you’re not limited to smart contract rules and EVM. You can literally feed Constellation any data source and set up rules to validate it. Smart watch data to blockchain transaction data to weather data, it’s up to you.
Developing on Constellation
Rather than smart contracts, Constellation uses state channels. While smart contract functionality is limited by the blockchain they’re deployed on, state channels can be programmed with any logic you desire.
They’re based on a microservices model from “big data” and, when combined with the layered consensus approach Constellation is using, developers can incorporate complex data from untrusted sources into their application. Moreover, developers are given the ability to account for application specific dependencies that smart contracts can’t generally do.
State channels can be set up as centralised services, decentralised services, or a mix of the two. Basically, whatever your business need might dream up, there is a straight-forward way to deploy that on Constellation.
State Channel Stack
Unlike the EVM blockchain world, Constellation uses Java Virtual Machine (JVM) as part of their microservice architecture. This opens up development and “plug-and-play” functionality for Java applications.
Under the hood, Constellation is built with the Scala programming language. In terms of handling auto-scalable, big data solutions, Scala underpins such notable companies as LinkedIn, Twitter, and Siemens.
In other words, Constellation isn’t some Uniswap clone with a neat sales narrative and spiffy new food themed graphics. This is an industrial grade platform that brings decentralised, cryptographically secure data consensus, validation, and processing to the mainstream software development world.
As the dev docs say, state channel development is still in the alpha phase. A full code audit remains, as does further development and deployment of the Constellation Software Development Kit.
One key component that’s not yet in place is the Application Chain Interface (ACI). Without getting too technical (if I even could!), the ACI deals with consensus on secure remote code execution.
Secure remote code execution is fundamental to most distributed consensus protocols, as mis-implementation can expose a server to injection attacks. Most smart contract platforms handle this with an Application Binary Interface (ABI), which creates a registry for chain state update methods that each validator needs to ensure consensus on the global ledger.
However, the simplistic nature of the ABI forces serial, or sequential processing. Meaning, this method potentially creates a bottleneck and prevents parallel processing, where one contract can bugger up the works for the ones behind it.
In contrast, the Constellation Network allows for the ACI to be registered and configurable. Thus validators will be able to choose what data and logic they wish to validate from the registry before packing it up and sending it off to the global ledger. And because of the way the Constellation Network is designed, this can all happen in parallel, ensuring high network throughput.
Theoretically.
The ACI is still under development. It’s a key component though, and as the devs point out in the docs:
The ACI and ACI registry are fundamental components in the Hypergraph’s ability to process complex data types and interact with diverse data sources
Hope they get it right. They’ve come this far, it would be a shame to see it all get bungled up on the ACI piece.
Composability, Connectivity, and Narratives, Oh My!
Going back to the beginning of this article, in addition to standardisation, two of the big stumbling blocks for using crypto in the “real world” are composability and connectivity. But when it comes to investing in crypto projects, it’s all about narrative.
In terms of blockchain “competitors” for composability and connectivity, arguably Cosmos is the closest one to Constellation at the moment. And to be fair, Cosmos has some early lead advantages.
The Cosmos SDK is well-developed and fully deployed. Tons of crypto projects are building on Cosmos, including some high-profile names like Axelar, Cronos, and (the recently rekt) Terra Ecosystem.
The network is fast, scalable and (ostensibly) secure. The Cosmos IBC has the potential to create a functional, standardised system for cross-chain communication. Even if it doesn’t, Axelar is busy working on a similar (but different) cross-chain solution.
Cosmos is still a walled garden when it comes to the real world though. For developers wanting to build something using real world data, like from IoT devices, or cars, or whatever, it’s still Chainlink or bust.
With that said, what Cosmos does have is a strong crypto narrative. Constellation does not (yet). Constellation almost has the rest. Between the two, this is how I see things:
Composability? Constellation has a clear advantage with programmable state channel architecture and Java/JVM/Scala coding.
Connectivity? Within their respective ecosystems, it’s probably a technical draw. If Constellation gets the ACI part ironed out, that paves a golden road to the broader economy and real world adoption on a HUUGE scale.
…if they get it ironed out (they probably will).
Narrative? Cosmos all the way.
Cosmos has a ton of VC backing, oodles of projects that influencers just love jibber-jabbering about, and a super-devoted fan base. The native ATOM token is available to trade on most major exchanges. This is all reflected in its $4 billion market cap.
As mentioned above, I’ve been around crypto for ages and only heard about Constellation because of a random tweet that caught my eye. Constellation does have seriously devoted advocates and believers in the project.
But the native token DAG is only available on Gate.io (banned in the USA) and KuCoin. This is reflected in its $270 million market cap and mid-100s ranking.
And Constellation (as best I can tell) wasn’t at Consensus 2022, or the Korea Blockchain Week, or any number of other high-profile crypto events. I suppose you could call their crypto outreach “muted”.
Not sure why that is.
Standardisation? Neither one really. The standard is yet to be set. There are a number of projects vying for the title, with Axelar prepping for a charge up the hill.
But Constellation may already have them beat. Axelar (or Cosmos) may indeed make the first big cross-chain splash, but neither one can bring in real-world data just yet.
Constellation is about an inch away from doing just that. They just have to cross the ACI bridge and it’s off to the races.
The question remains though, will anyone in crypto notice? And would it even matter if they did?
Conclusion
I suppose you could say this article is about an amazing crypto project you’ve probably never heard of. And in a way it is.
It’s also a cautionary crypto investing tale. In the book Success and Luck: Good Fortune and the Myth of Meritocracy, there is a study about music popularity.
One group saw a list of bands ranked by users from best to worst.
A second group saw a list of the same bands with the rank order reversed (worst became the best and vice-versa).
A third group saw the same bands with no rank order at all.
The study participants were then asked to listen to all the bands and score them from best to worst.
It turns out popular opinion matters.
The best ranked always scored the highest. The worst ranked always scored the lowest. This despite the fact that best and worst were reversed between the groups.
When no rank order was supplied, the scores were all over the place, with no clear winner.
My question for you is: if you had never heard a single word about Solana, or Fantom, or Cosmos, or whatever crypto token you may be a fan of, do you think you’d still be invested in it?
Are you sure?
There may well be valid reasons why popular crypto projects tend to become more popular. But that doesn’t explain why most of the popular crypto projects from 2017 never saw their all-time highs again.
Constellation is not a popular project. I never hear people other than supporters talk about it. And yet, when I look closely, I see something pretty amazing.
They’ve still got work to do. And of course there’s never a guarantee it’ll ever catch on, whether in crypto, or in the broader economy.
But if it hits the same market cap as Cosmos, that’s a 12x on your bags from today’s prices. If it reached Solana’s current market cap, it’s a 60x.
And if it turns out to be as epic as I think it is and reached half the market cap of Ethereum, that’s a 400x. In contrast, Solana would be a 14x with the same market cap as ETH.
I know where my money’s going and it ain’t Solana.
These are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.
Until next time, be safe, be smart and be sure to tie the camel.
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