Author: Xinwei, MT Capital

MT Capital has always been committed to investing in innovative companies with disruptive technology potential. We believe that the combination of Fully Homomorphic Encryption (FHE) and AI with Decentralized Physical Infrastructure Networks (DePIN) is a critical future track. FHE technology allows computation on encrypted data, ensuring privacy and security throughout the data processing lifecycle. The integration of AI with DePIN not only efficiently utilizes external computing resources but also enables complex data analysis and machine learning tasks without the risk of data leakage. Privasea’s leading position and technological advantages in this field align perfectly with MT Capital’s investment strategy. We believe that by supporting Privasea, we will advance the FHE AI DePIN track and contribute to the security and sustainable development of the global digital economy.

1. What is Fully Homomorphic Encryption (FHE)?

Fully Homomorphic Encryption (FHE) is an encryption technology that allows arithmetic or logical operations to be performed directly on ciphertext while keeping the data encrypted. This means complex processing can be carried out on encrypted data without decrypting it into plaintext, which is revolutionary for maintaining data privacy and security.

In traditional data processing scenarios, data must first be decrypted to perform computations, exposing sensitive information and increasing the risk of data theft or misuse. FHE technology changes this entirely. With FHE, encrypted data can be directly input into the computation process, and the results remain encrypted until decryption is required to view the outcomes. This feature is crucial for industries that handle sensitive data, such as finance, healthcare, and government sectors.

FHE also enables outsourcing of data processing without sacrificing data confidentiality. Companies can send encrypted data to third-party service providers for complex data analysis or machine learning tasks without worrying about data leakage, as the service providers cannot see the raw data throughout the process.

2. Privasea：The First AI+DePIN Network Using FHE

Privasea leverages FHE technology to provide data privacy and security, utilizing AI and distributed network architecture. This allows for complex data processing and analysis while keeping the data fully encrypted. Users can perform machine learning and other advanced computations without exposing the original data, which is not possible with traditional cloud computing, revolutionizing privacy computing.

The Privasea platform employs several advanced FHE schemes, such as TFHE and CKKS, which ensure accurate and efficient computation while providing high levels of data privacy protection. The TFHE scheme supports fast bit operations within a single instruction cycle, while the CKKS scheme optimizes floating-point processing capabilities, enabling Privasea to effectively support various complex research and commercial applications, such as financial analysis, medical data processing, and machine learning tasks.

Additionally, Privasea has implemented a highly scalable distributed computing network called Privanetix. This network consists of multiple computing nodes, each capable of performing FHE operations and providing necessary computing resources. This distributed architecture not only enhances the platform’s processing capabilities but also increases system redundancy and fault tolerance, ensuring high availability and reliability of the services. The integration of AI with the distributed network allows Privasea to handle advanced AI tasks such as deep learning, pattern recognition, and machine learning, which typically require massive computational power and high levels of data protection. For example, users in the healthcare industry can use Privasea to securely analyze sensitive patient data for disease prediction and treatment optimization without worrying about violating data protection regulations.

Privasea also offers a unique suite of smart contracts that enable users to manage and automate data processing workflows while keeping data encrypted. These workflows include data validation, result output, and the allocation and rewarding of computing tasks. Executed on a distributed ledger, these smart contracts ensure process transparency and traceability, and they can automatically distribute incentives based on the computing resources provided by the nodes. This blockchain-based incentive mechanism further enhances network participation and computing efficiency, as each node is motivated to deliver reliable services. Thus, Privasea is not just a data encryption and processing platform but a comprehensive encrypted data ecosystem.

Through Privasea’s API, developers can easily access this complex system and leverage its powerful features to develop and deploy their AI applications. These applications can use the distributed network to decentralize computational loads while ensuring data integrity and security, which is particularly important for blockchain applications that need to handle large volumes of sensitive data.

3. Collaboration with Solana Showcases Mass Adoption Potential

Privasea, utilizing FHE technology, has innovatively launched the ImHuman application. This not only demonstrates the application of FHE in combating Sybil attacks but also marks its mass adoption potential in the crypto space. Sybil attacks are a significant threat in decentralized networks, especially in the realm of airdrops, where attackers create numerous fake identities to manipulate the network or gain unfair advantages. The ImHuman application effectively counters such attacks in a secure and privacy-preserving manner.

Privasea plans to deploy its technology on the Solana network, becoming the first Proof of Human application on Solana. Solana’s high performance and low latency make it an ideal blockchain platform to support Privasea’s FHE technology and AI computational needs. This deployment will not only enhance the security of the Solana ecosystem but also showcase the potential of FHE in Web3 applications. By operating on Solana, Privasea’s ImHuman application will be able to more broadly verify user identities, ensuring network security and reliability while protecting user privacy.

The ImHuman application creates a unique digital identity using the user’s biometric data. First, the user scans their facial vectors using the device’s front camera, ensuring that this process is entirely completed on the user’s device to prevent sensitive data from leaking. The data is then encrypted and transformed into an NFT representing the user’s encrypted biometric vector. This utilizes the feature of FHE that allows complex calculations on encrypted data without decryption, ensuring data security and privacy.

During user identity verification, the ImHuman application scans the user’s facial features again and compares the newly collected data with the encrypted data stored on the blockchain. This process also uses FHE technology, ensuring that data is not decrypted during verification, effectively preventing the risk of data breaches. Additionally, since each user’s NFT is generated based on their unique biometric features, it is difficult to duplicate or forge, significantly increasing the difficulty of executing Sybil attacks.

Through the ImHuman application, Privasea not only provides a powerful tool to enhance the security of decentralized networks but also demonstrates the feasibility of Fully Homomorphic Encryption technology in real-world applications. This biometric and FHE-based authentication method offers a secure and privacy-preserving solution for decentralized networks, making Privasea’s ImHuman the first application in the FHE field with mass adoption potential. Moreover, by issuing airdrop rewards to participants, ImHuman can incentivize user participation and continuous use, further promoting its widespread application. This innovative solution offers a new strategy for defending against Sybil attacks.

4. Comparison of Privasea and Existing Proof of Human Solutions

Current Proof of Human solutions, such as Worldcoin and Human Protocol, face compliance risks and privacy issues. For example, a recent investigation by the Hong Kong Privacy Commissioner found that Worldcoin’s operations in Hong Kong violated the Privacy Ordinance. The investigation revealed that participants in the Worldcoin project were required to undergo iris scans to collect facial and iris images for human identity verification, posing significant personal data privacy risks. Consequently, the Hong Kong Privacy Commissioner ordered Worldcoin to cease collecting iris and facial images of Hong Kong citizens.

Human Protocol, on the other hand, verifies users by collecting task response data, interaction data, device and browser information, geographical location, and user behavior data. Although this data is anonymized before use and transmitted securely, it still involves extensive personal data collection, posing certain privacy and compliance risks.

In contrast, Privasea places a greater emphasis on user privacy protection in its design. Privasea’s DApp “ImHuman” uses FHE technology for user identity verification without the need to collect sensitive information such as facial or iris images. The verification process is entirely conducted on the user’s mobile device, with facial vector data encrypted and not transmitted to any server. This ensures the security of the verification process while maximizing user privacy protection, effectively avoiding the risk of data breaches.

Privasea not only leads in privacy protection but also offers robust data privacy and security solutions through the integration of FHE, DePIN, and ZK technologies. These technologies enable Privasea to perform complex data processing and analysis without exposing user data, further reducing compliance risks. This unparalleled privacy protection and data security capability allow Privasea to stand out in the competition, making it the industry-leading Proof of Human solution.

5. Accseal and Privasea Collaborate to Advance Privacy Computing

Privasea has set new standards in the field of privacy computing with its superior FHE, DePIN, and ZK technology capabilities. As a pioneer in the AI DePIN domain, Privasea seamlessly integrates distributed computing networks with advanced security measures through its innovative Fully Homomorphic Encryption Machine Learning (FHEML) solution, establishing a new benchmark for data privacy and security. Privasea’s DApp “ImHuman” employs FHE technology to securely execute Proof of Humanity (PoH), encrypting facial vector data directly on users’ mobile devices without server transmission, thereby significantly enhancing privacy protection and the security of user data.

In this context, Privasea has entered into a strategic partnership with Accseal to further strengthen its technological advantages. As a leading company in privacy computing hardware acceleration, Accseal will provide hardware acceleration support to Privasea, enhancing the efficiency and performance of its FHE operations. Together, they will explore the potential integration of ZK and FHE technologies to improve the efficiency of privacy computing and expand its application scope.

Through this collaboration, Privasea not only demonstrates its leadership in the FHE field but also elevates its DePIN project to new heights. Accseal will develop new hardware acceleration products to support the computational needs of upper-layer applications like Privasea, further advancing privacy computing technology. This partnership heralds new breakthroughs in the field of privacy computing, with more extensive and in-depth applications, particularly in DePIN projects.

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital/

Twitter: https://twitter.com/mtcap_crypto

Medium: https://medium.com/@MTCapital_US

Author: Zoey, MT Capital

Introduction

In the current wave of social networking, Telegram group communication has become an integral part of people’s daily lives. Notcoin and UXLINK are excellent products that utilize Telegram to achieve rapid user growth. Since its launch on January 1, 2024, Notcoin has rapidly accumulated over 30 million users and 6 million Telegram group members through lightweight Tap-to-Earn mining and viral spread. In contrast, UXLINK, based on familiar social connections and referral mechanisms, has attracted a large number of participants through Link-to-Earn, currently boasting 4.6 million on-chain token holders and 1.6 million NFT holders.

Since its inception, UXLINK has amassed 8.2 million registered users, established nearly 100,000 WEB3 groups, and reached over 80 million users through these groups, with this number continuing to grow. Throughout May, UXLINK consistently topped DappRadar’s social DAPP daily, weekly, and monthly rankings, and maintained a position in the top three across comprehensive rankings.

Zoey from MT Capital remarked, “What we are most optimistic about is UXLINK’s dual business positioning, not only having rich features and applications for C-end users but also providing powerful services and support for B-end developers. Traditional SocialFi platforms mostly rely on the scale effect of C-end users, while UXLINK achieves a more extensive coverage and stable revenue through dual market positioning. The expansion of C-end users enhances the overall ecosystem, while cooperation with B-end developers monetizes the value of traffic, which in turn feeds back into community growth and increases user stickiness — acting as both a user platform and developer infrastructure.”

Furthermore, from MT Capital’s strategic perspective, we believe that the key to the Mass Adoption track lies in breaking the limitations of a single market, forming a multi-dimensional, multi-level user and revenue structure. UXLINK is not just a social platform but also a core node of the ecosystem. By integrating various functions such as social interaction, trading, and development into one platform, UXLINK can effectively attract and retain users and provide developers with a stable and scalable development environment. This diversified strategy not only enhances the platform’s risk resistance but also provides a solid foundation for future expansion and innovation.

In addition, UXLINK will also strive to create a Social-Dex, expand more functional applications, and generate more positive value. Currently, UXLINK’s monthly income is already able to cover project expenses, forming a virtuous cycle effect, and the value of UXLINK Token will further be reflected. We believe that through continuous innovation and strategic layout, UXLINK will establish a new benchmark in the field of SocialFi and drive the development and transformation of the entire industry.

This research report will explore the current development and future prospects of UXLINK from the perspectives of the Mass Adoption path, sustainability of products and business models, user data, and user profiles.

I. Path to Mass Adoption

So far, no projects that have achieved “Mass Adoption” have emerged in this round of bull market, making how to break through a common topic in the web3 community.

Currently, UXLINK’s path to Mass Adoption is as follows:

(1) Leveraging existing platform traffic Utilizing Telegram’s massive traffic pool:

UXLINK relies on Telegram’s large user base to quickly acquire initial users at low cost and replicate real-world social relationships on-chain. Acquisition and conversion: By incentivizing mechanisms, Telegram users are converted into on-chain users.

(2) Link to earn

Users earn UXUY points by sharing invitation links to “join UXLINK TG groups.” This mechanism rapidly expands the user base through familiar social relationships. In the AIRDROP2049 event launched in April and May, UXLINK attracted participation from over 1 million users from 190 countries and regions, with over 50 partners involved. It is worth noting that over 60% of users participated in the event through social invitations, demonstrating UXLINK’s broad appeal and viral spread.

(3) Introducing external developers Developer incentive mechanism:

Attract developers to continuously develop high-quality applications by using $UXLINK to pay for protocol, data, and Dapp usage fees. Open Dapp layer social relationship data, provided to developers through protocol layer APIs.

(4) Ecological cooperation and expansion Extensive ecological cooperation:

Cooperate with partners in the DeFi, AI, and GameFi fields to promote the distribution of UXLINK points and NFTs and expand influence. Release “UXLINK Social Ecology Alliance”: Further expand the developer community and collaborate with third-party projects to promote revenue and profit growth.

(5) User incentives and retention Layered operation and long-term incentives:

Implement layered operation by issuing different levels of community NFTs, retaining 65% of incentives for the community, and ensuring long-term incentives for active users. Continuous “mining” opportunities: Build a strong Web3 social network among users and continuously allow users to earn $UXLINK through community contributions, where contribution equals “mining,” maintaining user stickiness and activity.

(6) Diversified Token use cases and reasonable distribution

$UXLINK has clear use cases in protocol usage, transaction commissions, airdrop/investment opportunities, etc., forming a benign deflationary model. Community allocation and incentives: Most $UXLINK tokens are allocated to community users and developers to promote continuous development and user participation within the ecosystem.

(7) Data-driven optimization Data-driven decision-making:

Optimize user experience and incentive mechanisms through on-chain data analysis to ensure that the platform’s development direction aligns with user needs and market trends. Continuous improvement and innovation: Utilize on-chain data insights to continuously improve existing features and introduce new features, maintaining the platform’s competitiveness and innovation capabilities.

Similarly rooted in Telegram, Notcoin utilizes lightweight Tap-to-Earn mining and viral spread, enabling many new users to smoothly enter Web3 through the Telegram gateway. Since its launch on January 1, 2024, Notcoin has quickly become one of the most popular channels on Telegram in terms of activity and user volume, with over 30 million participants and over 6 million Telegram group members, making it a favorite of traffic.

According to Dune Analytics, even before TGE, UXLINK currently has around 4.6 million on-chain token holders and over 1.6 million NFT holders, with this number continuing to grow rapidly. Compared with Notcoin, although UXLINK’s current WEB2 traffic data may lag behind Notcoin to some extent, its conversion rate for users far exceeds that of Notcoin. Currently, UXLINK’s on-chain holders are far more than Notcoin’s, and the ratio of off-chain to on-chain conversion and active users/total users is higher, which also strongly proves the stronger native user base and deeper interaction of UXLINK.

From this, it can be seen that UXLINK’s conversion rate from off-chain to on-chain is very considerable, with deeper user interactions. UXLINK is still actively cooperating with projects, while continuously conducting market education-related work. With the launch of more applications, it is highly likely to become the next Mass Adoption product.

II. Business Model — Balancing Both Ends, Positive Flywheel In terms of the business model

UXLINK caters to both B and C ends.

C-end Users: C-end users mainly engage in social interactions in group scenarios, discovering, participating, and investing/trading Crypto assets. Most features are free for C-end users, but transactions incur a fee of around 1–3%.

B-end Developers: B-end developers utilize UXLINK’s Dapps and RWS social protocols for the development and growth of social relationships and data. They offer different transaction scenarios and products, such as Airdrop, Pre-market, MEMECOIN, etc., for which UXLINK receives a commission. UXLINK charges B-end developers for the use of applications, protocols, and data, priced in Tokens, and distributes 85–90% to community users, while also collecting a 10–15% infrastructure usage fee. Income Situation: UXLINK began generating income in 2023 and has since March 2024, started building the UXLINK social ecosystem, benefiting both the community and developers more. Currently, UXLINK’s monthly income (measured in Tokens’ value) is sufficient to cover project expenses.

III. User Data and User Profiles

Since its launch in late April 2023, UXLINK has already amassed 8.2 million registered users, established nearly 100,000 WEB3 groups, and reached over 80 million users through these group chats, with this number still growing. Throughout May, UXLINK consistently ranked first on DappRadar’s daily, weekly, and monthly lists for social DAPPs and remained in the top three across comprehensive rankings. According to Coin98’s data, UXLINK’s 30-day active unique address count currently ranks first in the socialfi track, with an absolute gap from the second.

In terms of operations, UXLINK has adopted user segmentation and strategies, accurately creating user profiles. Current on-chain interactions mainly include two types: Interactions related to identity/social: such as SBT, Group, Social Graph, learning check-ins, invitations, etc. Interactions related to assets and transactions: such as NFT, airdrop, SWAP, Pre-Market, etc. Through the issuance of NFTs, user quality recognition is also achieved. The threshold for users to mint NFTs is based on their contribution to the community, on-chain interaction behaviors, and the value of assets held. Among them:

(1) LINK NFT holders number 1,464,755, representing highly active on-chain users and the world’s largest NFT holding group.

(2) FRENS NFT holders number 328,696, representing an active social group and a driving force for Web3 project growth.

(3) TRUST NFT holders number 4,374, representing KOLs and group leaders/Group Leaders in the UXLINK ecosystem.

(4) MOON NFT holders number 353, representing opinion leaders and asset whales in the WEB3 ecosystem.

Conclusion:

As an innovative SocialFi platform, UXLINK has successfully attracted a large number of users and developers, becoming a benchmark product in the industry with its powerful group tools and unique dual-market positioning. From rapidly acquiring users based on the Telegram traffic pool to achieving user growth through the Link-to-Earn mechanism and introducing external developers and extensive ecological cooperation, UXLINK has demonstrated tremendous potential on the path to Mass Adoption. Its business model caters to both C-end users and B-end developers, building a robust ecosystem through diversified Token use cases and reasonable incentive mechanisms. UXLINK has not only successfully converted a large number of web2 users but also maintained platform competitiveness and user stickiness through continuous data-driven optimization and innovation. In the future, UXLINK will continue to focus on building Social-Dex and will introduce the Social Liquidity Layer for developers to generate more positive value. Currently, UXLINK’s monthly income is sufficient to cover project expenses, forming a virtuous development cycle, and the value of UXLINK-related assets will further be reflected. Through continuous innovation and strategic positioning, UXLINK will not only establish a new benchmark in the field of SocialFi but also drive the development and transformation of the entire industry, potentially becoming a model product for future Mass Adoption.

Reference：

https://docs.uxlink.io/uxuy-labs-api/whitepaper/white-paper

https://blog.uxlink.io/airdrop2049-uxlinks-ecological-program-draws-over-1-million-users-from-190-countries-in-the-b4d1c87a2994

https://dune.com/queries/3753998

https://dune.com/queries/3755514

https://tonalytica.redoubt.online/public/dashboards/DdU5wpspip3RiIozMgVm2Tv8D9skZjSaNdMoumck?org_slug=default

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital/

Twitter: https://twitter.com/mtcap_crypto

Medium: https://medium.com/@MTCapital_US

TL;DR

1. DePIN Overview: Decentralized Physical Infrastructure Networks (DePIN) combine the physical world with Web3, using decentralized technology to reduce costs and improve efficiency. They are widely applied in computing, storage, wireless networks, and more, spanning from traditional fixed devices to new-generation portable and wearable devices, presenting vast market potential.
2. Investment Trends and Projects: DePIN projects have shown significant growth in both bull and bear markets, covering wireless networks, mapping, vehicle networks, agriculture, drones, weather, energy, and more. Investment institutions have expanded from the US and Europe to Asia, with increasing participation and investment numbers, indicating strong interest in the DePIN sector.
3. Market Demand and Potential: Emerging DePIN markets are diverse, including health data, weather, energy, bandwidth, AI, and mobile phones, with huge market space and high growth rates. The energy and mobile phone markets, in particular, show immense potential, while health data and AI markets also demonstrate considerable year-on-year growth.
4. Project Ecosystem and Blockchain Choices: Ethereum and Solana are the main blockchain choices for existing and emerging DePIN projects, respectively. Solana, with its high performance, low cost, and strong community support, has attracted numerous new projects, gradually becoming the preferred platform for DePIN projects. Representative projects like Render, Helium, and Hivemapper showcase the diverse applications of DePIN. Key players such as Solana and IoTeX provide strong technical support and ecosystems for DePIN projects, driving rapid development.
5. Modular Blockchain Trends: Modular design significantly enhances the scalability and adaptability of DePIN. With standardized interfaces and interchangeable components, DePIN can flexibly adapt to various application scenarios and technical requirements, promoting rapid network deployment and maintenance.
6. Evolution of Token Economics: From early fixed incentive models to dynamic incentive mechanisms, DePIN projects like Helium adjust incentives for new and old devices, regional incentive policies, and time-based adjustments to ensure continuous network growth and healthy development.

Definition of DePIN

DePIN, short for Decentralized Physical Infrastructure Network, can be literally interpreted as “decentralized physical infrastructure network.” Here’s a breakdown:

• “De” stands for Decentralized

• “P” represents Physical

• “I” signifies Infrastructure

• “N” means Network

The core definition of DePIN is to bring real-world users into Web3, achieving cost reduction and socialization through decentralized networks. In the current world, especially in the realm of physical businesses, DePIN aims to achieve cost reduction and efficiency improvement through decentralized technology.

While previous studies and reports have often focused more on the Infrastructure aspect of DePIN, this report emphasizes the Decentralized part, striving to showcase the diverse future markets and investment opportunities in the DePIN space.

Types of DePIN Projects

Classic DePIN Devices:

• Characteristics: These devices are typically stationary and fixed in one location.

• Primary Functions: Include computing, bandwidth, and storage.

• Market Features: The market for classic DePIN projects leans towards technology, particularly in fields like AI computing power, which attracts significant funding and traffic. This market is large but highly competitive, often referred to as a “red ocean.”

• Representative Projects: Filecoin, RNDR, etc.

New Generation DePIN Devices:

• Characteristics: These devices are small, flexible, portable, and even wearable.

• Primary Functions: Include lifestyle-related services such as health monitoring, weather forecasting, and mobile phone functionalities.

• Market Features: The market for new generation DePIN projects is more lifestyle-oriented and low-cost, suitable for everyday applications. This market is diverse and has a wide range of applications, with enormous potential yet to be fully explored, often referred to as a “blue ocean.”

Comparison:

By comparing these two generations of DePIN projects, we can see that DePIN technology is continuously evolving, with expanding application scenarios. From traditional fixed devices to more flexible and portable ones, the market potential of DePIN is becoming increasingly vast, covering various needs from high-tech sectors to everyday life. The traditional DePIN market is large and competitive, a red ocean; whereas the innovative DePIN market is diverse, widely applicable, and has vast potential, a blue ocean.

DePIN Investment Ecosystem Overview

During the current bull market cycle, the number and variety of DePIN projects have significantly increased, with a surge in new generation lightweight DePIN projects. These include AI, wearables like wristbands and watches that collect health data, and many portable lightweight physical DePIN devices.

From January 1, 2022, to January 1, 2023:

• Total Financing: 19 DePIN projects.

• Average Disclosed Financing Amount: $18M. Excluding Helium’s $200M Series D round, the average financing amount is $5.9M.

• Project Types: Wireless networks, mapping, vehicle network data, agriculture, drone imaging, weather, power market, DePIN infrastructure.

• Most Common Project Type: Wireless networks, with 7 projects.

From January 1, 2023, to January 1, 2024:

• Total Financing: 9 DePIN projects.

• Average Disclosed Financing Amount: $7.2M. This is a 22% increase compared to 2022, despite the bear market.

• Project Types: Wireless networks, decentralized computing power, mapping/geospatial data, weather, DePIN infrastructure.

• Market Trends: Fewer projects and categories, indicating a need for more viable business scenarios and models during a bear market.

From January 1, 2024, to May 20, 2024:

• Total Financing: 26 DePIN projects.

• Average Disclosed Financing Amount: $6.5M. The number of financings has increased significantly, though the average amount has slightly decreased.

• Project Types: Decentralized computing power, vehicle networks, IoT, wireless networks, FHE, mapping, weather & environment, bandwidth, DePIN infrastructure, mobile phones, energy, storage, mixed reality.

• Emerging Project Types: AI, VPN, wearables like wristbands and watches, and portable device projects (health data) that have not yet disclosed financing details.

This dynamic evolution in DePIN investment reflects the growing diversification and expansion of the sector, from high-tech applications to practical everyday uses, driving significant interest and investment in various innovative areas.

DePIN Project and Institutional Involvement

In the previous cycle, DePIN participation was predominantly led by institutions from Europe and the United States. In the current DePIN cycle, more Asian institutions are emerging, showing a growing interest in DePIN from this region. The number of DePIN projects has also significantly increased, with over 135 secondary DePIN projects and more than 130 primary DePIN projects.

Project Breakdown:

• Secondary Market Projects: 137 projects

• Projects with >$1B FDV: 20

• Projects with $500M — $1B FDV: 19

• Projects with $100M — $500M FDV: 48

• Projects with $50M — $100M FDV: 16

• Projects with $30M — $50M FDV: 14

• Projects with $10M — $30M FDV: 12

• Projects with <$10M FDV: 6

• Primary Market Projects: 133 projects

• Since the start of the current bull market cycle (from October 2023 to present), 8 projects have raised over $2M in funding, and 6 projects have raised over $10M.

This increase in both project numbers and the diversity of participating institutions highlights the expanding scope and interest in the DePIN ecosystem, showcasing its potential for growth and innovation across different regions and markets.

DePIN Investment Institutions

Previous Cycle:

• Andreessen Horowitz (A16z)

• Multicoin Capital

• HashKey Capital

• IOSG Ventures

• Spartan Group

• Borderless Capital

• Lattice Ventures

• Variant Fund

• Delphi Digital

• Big Brain Holdings

• Cogitent Ventures

Current Cycle:

• OKX

• Animoca Brands

• JDI

• IoTeX

• FMG

• Waterdrip Capital

• MH

This shift in institutional participation from primarily Western-based firms to a more diverse inclusion of Asian institutions indicates a growing global interest in DePIN. This broadening of the investor base underscores the increasing recognition and potential of DePIN projects in reshaping the future of decentralized physical infrastructure.

DePIN Market Demand

In the previous cycle, sub-sectors like computing power, storage, wireless networks, and mapping saw continuous emergence of new projects. In the current cycle, new sub-sectors have emerged, including wearables focusing on health data, weather, energy, bandwidth, AI, and mobile phones.

From the market demand perspective, the energy and mobile phone markets have vast potential. The health data market and AI market not only have significant market space but also exhibit very high year-over-year growth rates, making them very attractive markets.

Market Breakdown (Number of Primary + Secondary Market Projects):

• Health: 5+ projects

• Weather: 9 + 1 projects

• Energy: 15 + 10 projects

• Computing Power: 17 + 29 projects

• Storage: 7 + 19 projects

• Wireless Networks: 9 + 11 projects

• Bandwidth: 6 + 4 projects

• Mapping: 3 + 2 projects

• AI: 8 + 13 projects

• Mobile Phones: 5+ projects

Previous Cycle Market Project Numbers:

• Computing Power: 17 + 29 projects

• Storage: 7 + 19 projects

• Wireless Networks: 9 + 11 projects

• Mapping: 3 + 2 projects

Emerging Market Project Numbers:

• Health Data (Wearables): 5+ projects

• Weather: 9 + 1 projects

• Energy: 15 + 10 projects

• Bandwidth: 6 + 4 projects

• Mobile Phones: 5+ projects

• AI: 8 + 13 projects

The market demand for DePIN is diversifying and expanding, with traditional sectors continuing to grow and new sectors showing promising potential. This diversification indicates a robust and dynamic ecosystem with ample opportunities for innovation and investment across various domains.

Market Size and Growth Rate

• Health Market: $243B, CAGR 17%

• Weather Market: $7B, CAGR 7%

• Energy Market: $880B, CAGR 8.4%

• Computing Power Market: $95.7B, CAGR 6.8%

• Storage Market: $108B, CAGR 22%

• Wireless Network Market: $500B, CAGR 12%

• Bandwidth Market: $8.6B, CAGR 13.75%

• Mapping Market: $19B, CAGR 12.5%

• AI Market: $150B, CAGR 36.8%

• Mobile Phone Market: $484B, CAGR 7.3%

The diverse DePIN market segments each exhibit significant size and varying growth rates, indicating substantial opportunities across different domains. The AI and storage markets, in particular, stand out with their exceptionally high CAGRs, suggesting rapid expansion and innovation potential. Meanwhile, the health, wireless network, and energy markets also represent large and steadily growing sectors with considerable investment opportunities.

Blockchain Choices and Device Types

Currently, there are the largest number of secondary market DePIN projects on the Ethereum chain, with a total of 70 DePIN projects choosing to be built on Ethereum, accounting for 81% of the total.

Among the collected first-level projects, the number of Solana ecological projects is 28, accounting for 62% of the total. Solana is gradually becoming the first public chain for the new cycle of DePIN projects.

From the perspective of equipment types, there are more new energy and sensor equipment types. And more projects using Wearable, Portable, and Home Device devices as physical hardware are beginning to emerge in the primary market.

DePIN Full Industry Chain

Upstream Supply Chain

1. Hardware Manufacturing and Supply

• Hardware Suppliers: Produce various devices and sensors used in DePIN networks, such as GPUs, servers, IoT devices, and wireless devices. For example, LoRaWAN hotspots for the Helium network and dash cams for Hivemapper.

• Specialized Hardware Manufacturers: Some specialized manufacturers provide custom hardware for specific DePIN projects, such as storage mining machines for Filecoin and GPUs for the Render network.

2. Chips and Semiconductors

• Chip Manufacturers: Companies like NVIDIA and AMD provide high-performance GPUs used in computing networks like Render and Akash. These chips are essential for handling AI workloads and complex computational tasks.

3. IoT Devices

• Sensor Manufacturers: Provide sensors needed for environmental monitoring, traffic data collection, and more. Examples include Bluetooth sensors in the Nodle network and noise pollution detectors by Silencio.

• Smart Devices: Smartphones and other mobile devices can be part of the sensor network, used for data collection and transmission.

4. Power and Energy Equipment

• Energy Equipment Suppliers: Provide equipment for decentralized energy networks, such as solar panels, wind turbines, and storage batteries. Examples include solar panels and battery systems in the Daylight Energy network.

Midstream Industry Chain

1. Network Operation and Maintenance

• Network Operators: Companies like Helium and Hivemapper manage and maintain the decentralized networks, including node management, data transmission, and storage.

• Service Providers: Provide essential infrastructure services for the networks, such as cloud computing and storage services.

2. Software and Platform Development

• Blockchain Platforms: Platforms like Solana and IoTeX offer foundational blockchain technology support for DePIN projects, including smart contract execution, data storage, and validation.Software developers: Develop software platforms and tools for managing and operating the DePIN network, such as the distributed storage management platform provided by Filebase and the video stream management tool provided by Livepeer Studio.

3. Data processing and analysis

• Process and analyze data collected from sensor networks to provide users with valuable insights and services.AI and machine learning services: Beam, for example, provides cloud AI computing services to distribute model training and inference workloads to a decentralized GPU network.

Downstream Industry Chain

1. Applications and Services

• Enterprise Customers: Use services provided by DePIN networks to enhance business efficiency. For example, logistics companies use Hivemapper’s mapping data, and agricultural companies use Geodnet’s high-precision positioning data.

• Consumer Applications: Applications like Teleport’s ride-sharing app and DIMO’s vehicle data platform offer convenient services to consumers and reward them for contributing data.

• Smart Cities and Public Infrastructure: Utilize data and services from decentralized networks to optimize city management and public services, such as energy management and traffic management.

Modular/Data Layer/Middle Layer

Modular Blockchain Architecture

Modular blockchains enhance scalability, security, and flexibility by separating core functions — such as execution, consensus, data availability, and settlement — into different layers. For instance, Ethereum improves data availability and processing capacity through sharding and rollups, while Cosmos achieves cross-chain interoperability and high customization with its IBC protocol and Tendermint consensus mechanism. The advantages of modular blockchains include higher transaction throughput, enhanced security, and greater development flexibility, which will further advance blockchain technology.

DePIN Modular Trend

The modular trend in DePIN significantly enhances its scalability. Modular design allows DePIN to flexibly adapt to different application scenarios and technical requirements, simplifying network deployment and maintenance through standardized interfaces and interchangeable components. For example:

• Render Network: Utilizes a modular structure to expand from image rendering to AI model training, increasing its service range and market potential.

• Filecoin: Modular design enables the extension of its storage services to include hot storage and data computation functions, further enhancing its network’s utility and appeal.

Benefits of Modular Design in DePIN

• Technical Compatibility and Upgradeability: Modular design improves the technical compatibility and upgradeability of DePIN networks. Independent modules can develop and optimize separately, accelerating innovation and progress within the entire ecosystem.

• Flexibility and Efficiency: This architecture significantly boosts DePIN’s scalability, allowing it to respond quickly to market demands and technological changes.

• Broader Application and Development: Modular design facilitates widespread application and development of decentralized infrastructure by making it easier to tailor networks to specific needs and maintain them effectively.

Overall, the modular trend in DePIN networks fosters a more dynamic and responsive ecosystem, capable of rapid adaptation and growth in line with evolving market and technological landscapes.

Representative Projects

DePHY

DePHY is a development framework specifically designed for DePIN, featuring key functionalities such as message layers, Device ID (DID), open-source hardware design, off-chain computing networks, and re-staking layers. These features significantly reduce development costs and time, supporting any standard interface hardware for the rapid, efficient, and secure deployment of decentralized infrastructure projects.

PINGPONG

PINGPONG is a DePIN liquidity and service aggregator that optimizes and maximizes mining yields across multiple networks through innovative tools and solutions.

Core Players in the DePIN Track

Solana

Solana is emerging as a new super infrastructure for DePIN. Its high performance, low network fees, robust developer and user community, and high purchasing power make it the preferred launch network for many DePIN projects. Established DePIN projects like Render and Helium have achieved greater success after migrating to Solana, demonstrating the vitality that Solana’s powerful infrastructure and extensive community base bring to DePIN projects. Solana is gradually attracting various emerging and cutting-edge DePIN projects, including Grass, Natix, and Exabits, while steadily improving its own DePIN ecosystem.

Representative Projects

• Render

Render Network is a decentralized GPU rendering platform that uses blockchain technology to connect artists with GPU providers, offering scalable and cost-effective rendering solutions.

• Hivemapper

Hivemapper is a decentralized map network that uses blockchain technology and crowdsourced dashcam data to create detailed, real-time maps.

• Helium

Helium is a pioneering DePIN project that created a decentralized wireless network, allowing IoT devices to connect globally through a distributed network of hotspots.

• Natix

Natix Network is a blockchain-based crowdsourced camera network designed to create real-time world maps.

• Exabits

Exabits is a decentralized infrastructure for AI and compute-intensive applications. It enables users to provide distributed GPU services, data storage, or expertise to the AI community without a central authority or intermediary.

• Grass

Grass, developed by Wynd Network, is a DePIN project that allows users to monetize their unused network resources by adding their connected devices to a decentralized network designed to provide data for AI training.

EV3

EV3 is an investment-driven firm that supports entrepreneurs building DePIN (Decentralized Physical Infrastructure Networks). By investing up to $1 million in early-stage projects, EV3 aims to unlock the next $100 trillion of global GDP through next-generation open infrastructure networks, such as telecommunications, logistics, energy, cloud computing, and artificial intelligence. Founded by institutionally trained investors Mahesh Ramakrishnan and Salvador Gala, EV3 combines deep industry expertise with long-term partnerships, backed by leading investors.

Representative Projects

• 3DOS

3DOS is the world’s largest decentralized on-demand manufacturing network, aiming to revolutionize manufacturing through blockchain technology and 3D printing. The platform allows anyone to upload designs, receive royalties, and facilitate on-demand manufacturing globally.

• Zonal

Zonal is developing a decentralized network based on a micro-location protocol, utilizing wireless communication technologies such as ultra-wideband (UWB) and low-power Bluetooth (BLE) to provide highly reliable global and indoor positioning services. Its goal is to create a unified protocol offering location verification tools for various services and enterprises, validating real-world interactions.

• XNET

XNET is a next-generation mobile operator building a decentralized network using blockchain technology. By leveraging the CBRS spectrum, XNET aims to establish a reliable, industry-grade neutral host network. The project’s goal is to address inefficiencies and capital intensity in the telecommunications industry through its distributed radio access network (RAN).

IoTeX

IoTeX is an open platform designed for modular AI+DePIN infrastructure, aimed at connecting smart devices and real-world data with Web3. It enables Web2 to seamlessly integrate with blockchain, creating a decentralized open ecosystem of multi-dimensional data and scenarios. Through modular construction, developers can connect innovative applications in Web3, ranging from smart wearables and vehicle networks to green energy and environmental data, covering a full spectrum from smart living to intelligent industries.

As of Q1 2024, the IoTeX network has 108 active nodes, with a total staked value reaching $29 million, marking a quarter-over-quarter growth of 73%. The average staking participation rate reached a record high of 40.6%. Additionally, node rewards grew by 71% quarter-over-quarter, totaling $3.3 million.

IoTeX provides comprehensive “plug-and-play” products and tools, enabling efficient construction and deployment of blockchain-driven IoT applications. The platform is divided into four layers: hardware, middleware, tools, and blockchain. Since its inception, IoTeX has raised over $90 million to support its R&D and market expansion. IoTeX’s solutions support various IoT ecosystems, such as the sharing economy, smart homes, autonomous driving, and supply chain management.

Representative Projects

• Network3

Network3 is an integrated AIoT Layer 2 blockchain platform designed to provide AI developers with efficient model training and validation tools, while empowering users to earn cryptocurrency by running nodes.

• Inferix

Inferix is a decentralized GPU visual computing platform dedicated to 3D/AR/VR rendering and AI inference.

• Wayru

Wayru Network is a decentralized wireless network that achieves various smart functions through WayruOS and the Wayru Connectivity Superapp.

DePIN segmented by physical hardware devices

Primary Market Projects Mapping

Sensor Track

We define “sensors” as outdoor sensors that help users collect various types of data, such as mapping, weather, and vehicle information. These outdoor sensors gather data, which users can then contribute to create a data value network and receive corresponding token rewards. DePIN projects can aggregate this shared data from users, providing B2B customers with a more diverse data sample and capturing commercial revenue from Web2.

Representative Projects

Mapping Network

• Hivemapper: Hivemapper is a decentralized mapping network that uses blockchain technology and crowdsourced dashcam data to create detailed real-time maps.

Vehicle Network Data

• DIMO: DIMO is a decentralized IoT vehicle data DePIN network that allows vehicle owners to collect, use, and monetize their vehicle data.

Positioning Network

• Geodnet: GEODNET is a blockchain-based global earth observation decentralized network that uses Real-Time Kinematic (RTK) technology to significantly improve GPS accuracy.

These projects exemplify how outdoor sensors can be leveraged to create valuable decentralized data networks, benefiting both individual contributors and commercial entities.

Wireless Network Track

Mobile Wireless Network

• Market Size and Growth: In 2022, mobile wireless networks held over 76% of the telecom market share, driven mainly by 5G and IoT technologies. The compound annual growth rate (CAGR) from 2023 to 2030 is projected to be 6.2%.

• Role: Provides extensive personal and commercial connectivity through cellular technology. Supports various devices and applications, enabling mobile communication and data services.

• Future Outlook: The demand for mobile wireless networks will continue to rise due to increasing demand for higher bandwidth, advancements in 5G technology, and the integration of IoT devices.

Representative Project

• Helium: Helium is a pioneering DePIN project that created a decentralized wireless network, allowing IoT devices to connect globally through a distributed network of hotspots.

Fixed Wireless Access (FWA)

• Market Size and Growth: FWA is rapidly growing as an alternative to wired broadband, especially in areas where laying cables is impractical. The market size is expected to grow from 130 million connections at the end of 2023 to 330 million by 2029.

• Role: Provides internet service using radio waves between fixed points. Typically deployed in areas with inadequate mobile wireless network service, offering lower costs and easier deployment compared to mobile wireless networks.

• Future Outlook: With the advancements in 5G technology, FWA is expected to become a more prevalent form of internet access, particularly in remote and underserved rural areas.

Representative Project

• Andrena: Andrena is a high-speed fixed wireless access network service provider, using cutting-edge radio technology to create high-speed, low-cost wireless networks in urban and underserved areas.

Wi-Fi Networks

• Market Size and Growth: The market was valued at approximately $14.5 billion in 2023 and is expected to reach $39.4 billion by 2028, with a CAGR of 22.2%.

• Role: Provides local area network (LAN) connections for devices using radio waves, supporting a wide range of consumer electronics from smartphones to home appliances. Used in homes, businesses, and public hotspots within limited private spaces.

• Future Outlook: Market growth will be driven by the increasing need for reliable internet connections for smart devices and the growing implementation of IoT in both public and private sectors.

Representative Project

• Roam: Roam is a decentralized global Wi-Fi network offering enterprise-grade OpenRoaming Wi-Fi roaming services to the global public.

These projects highlight the diverse applications and growing importance of wireless networks in connecting devices and enabling data services across various environments.

Energy Track

The traditional energy market faces several issues: mismatched supply and demand in regional energy networks, lack of transparent and tradable energy markets, a vast untapped clean energy market, and slow, costly energy network expansion. However, DePIN can help shape the next generation of decentralized energy networks.

Market Perspective:

The clean energy market is experiencing significant growth, currently valued at approximately $1.4 trillion, with a projected compound annual growth rate (CAGR) of 9.1% from 2022 to 2032. The renewable energy market is expected to grow from a market size of $881.7 billion to around $1.9 trillion by 2030, with a CAGR of approximately 8.4%. Energy-related DePIN projects have a vast market space to tap into.

Representative Projects

Power Plants:

• StarPower: StarPower is a pioneering DePIN project aimed at revolutionizing energy management and distribution by creating virtual power plants (VPPs) through a decentralized network utilizing blockchain technology.

Energy Trading:

• Daylight: Daylight is an open-source blockchain network focused on creating a decentralized market for renewable energy and carbon credits, promoting more sustainable global energy trading and usage.

Energy Storage:

• PowerPod: PowerPod aims to revolutionize electric vehicle (EV) charging by creating a shared, blockchain-driven network of community-owned charging stations.

These projects illustrate how DePIN can address the challenges of the traditional energy market, fostering innovation and growth in clean and renewable energy sectors.

Home Devices Track

The home devices sector focuses on enhancing and optimizing various aspects of daily life through decentralized technology. This field addresses key issues such as high costs, privacy concerns, and unequal resource distribution by transforming standard household devices into decentralized network nodes. By utilizing blockchain and other decentralized protocols, these devices offer low-cost, secure, and efficient alternatives to traditional cloud services and computing power. This approach reduces reliance on centralized infrastructure and grants users greater control over their data and resources. Additionally, the integration of these devices not only enhances smart home ecosystems and gaming experiences but also aims to improve daily interactions, creating a globally connected community.

Representative Projects

Distributed Cloud Storage:

• FX Land: FX Land offers a distributed cloud storage solution through Crowd Storage nodes and the Fula protocol, addressing high storage costs and privacy issues.

Edge Computing for AI:

• Hajime AI: Hajime AI aims to create a global edge computing power supply network that provides cost-effective computing services for AI startups. This decentralized platform addresses the uneven distribution of computing resources and plans to seamlessly integrate with smart home and IoT ecosystems.

Embodied AI with Gamification:

• FrodoBots: FrodoBots addresses embodied artificial intelligence (Embodied AI) challenges by using real-world robots in a gamified manner.

These projects illustrate how decentralized technology can revolutionize the home devices sector, offering innovative solutions to traditional problems and fostering a more connected and efficient ecosystem.

Wearable Devices Track

The wearable devices sector focuses on integrating smart wearable technology with blockchain. These devices use advanced artificial intelligence and data privacy protection technologies to offer personalized health monitoring and data management services. By enabling users to monetize their data and providing reward mechanisms, these devices encourage active participation in health management. Made from high-quality materials with long battery life and robust waterproof capabilities, these smart wearables ensure user convenience and safety. Additionally, they are compatible with mainstream mobile devices and cryptocurrency ecosystems, enhancing user health and quality of life while promoting the widespread adoption of decentralized applications and the Web3 ecosystem.

Representative Projects

CUDIS

• Description: CUDIS is a stylish, pioneering AI smart ring that incentivizes users by rewarding their health journeys. It features immutable data collection and control, personalized AI coaching, health incentive tasks, and social activities.

WatchX

• Description: The WatchX project aims to integrate millions of smartwatch users into the Web3 ecosystem, providing extensive opportunities for partners within the ecosystem.

Dogewalk

• Description: Dogewalk is a DePIN platform that enhances interactions between pet owners and Web3 users by integrating innovative software and hardware with GameFi and SocialFi elements.

These projects exemplify how wearable technology can be revolutionized through the integration of blockchain and decentralized applications, offering innovative solutions for health management and enhancing user engagement in the Web3 ecosystem.

Portable Devices Track

Portable devices focus on providing convenient mobile devices and applications to enhance the Web3 experience. They aim to simplify user interactions, improve security, and implement data ownership and reward mechanisms. These projects integrate hardware and software solutions to promote the development and use of decentralized applications, especially in mobile environments. The goal is to drive the adoption and application of Web3 technologies by lowering entry barriers, optimizing user experience, and providing practical use cases.

Representative Projects

Solana Mobile Saga

• Description: The Solana Mobile Saga project aims to lead the Web3 mobile revolution by providing top-tier hardware and robust developer resources, offering a secure and user-friendly decentralized application experience.

Universal Phone by Oyster Labs

• Description: The Universal Phone project by Oyster Labs targets 800 million Telegram users, focusing on emerging markets such as India, Indonesia, and Nigeria.

Puffpaw

• Description: Puffpaw is a “quit-to-earn” project incubated by Arweave and OrangeDAO. It helps users quit smoking using vaping devices and blockchain technology, offering financial rewards for their progress.

These projects highlight how portable devices can integrate with blockchain and decentralized applications to provide innovative solutions that enhance the Web3 experience and drive broader adoption.

Tokenomics of DePIN Projects: Evolution from Fixed to Dynamic Incentives

Intrinsic Logic Analysis: Helium Case Study

Early Incentive Mechanism and Its Impact

In the early stages of the Helium project, early participants could earn significant token rewards by purchasing and deploying mining devices. This high return attracted a large number of early users and rapidly expanded the network. However, this incentive mechanism also led to some issues:

• High Profits for Early Participants: Early users quickly achieved high returns due to the large number of tokens they earned. While this drove rapid network growth initially, it also led to a rapid increase in the token supply in the market.

• Token Economy Volatility: As early participants held a large number of tokens, they started selling them on the market, causing token price volatility and declines. New users entering the market found their returns significantly lower than those of early users, slowing the growth of new users.

• Network Growth Stagnation: As the initial high returns diminished, the willingness of new users to join decreased, slowing the network’s expansion and project growth.

Introduction of Dynamic Incentive Mechanism

To address these issues, Helium introduced a dynamic incentive mechanism to ensure continuous network growth and healthy development.

• Adjusting Incentives for New and Old Devices: Helium adjusted the incentive mechanisms for new and old devices, allowing new device users to receive attractive rewards. For example, initial rewards for new devices were increased, while rewards for outdated devices were gradually reduced, encouraging users to purchase and deploy new devices.

• Regional Incentive Policies: To promote balanced global network development, Helium implemented differentiated incentive policies based on device deployment in various regions. Higher token rewards were offered in areas with fewer devices to attract users to deploy devices there.

• Time-based Incentive Adjustments: Helium balanced network load and enhanced device utilization by offering different rewards at different times. Users operating devices during off-peak periods could earn additional rewards, ensuring stable network operation around the clock.

• Device Density Incentives: In areas with low device density, Helium provided extra incentives to promote stable device operation and efficient data transmission. This not only increased user returns but also improved overall network performance.

Implementation of Dynamic Incentives

Helium uses smart contracts and algorithms to implement dynamic incentive mechanisms, ensuring real-time adjustments and fair distribution of incentives. These measures increased new user participation enthusiasm and stabilized market expectations, preventing market volatility caused by early high returns.

• Smart Contract Incentive Adjustments: Through smart contracts, Helium dynamically adjusts rewards for different devices based on usage and market demand, ensuring incentive flexibility and real-time responsiveness.

• Real-time Data Feedback: By collecting and analyzing device operation data, Helium can promptly adjust incentives for different regions and time periods, ensuring optimal resource allocation and utilization.

• Transparent Incentive Mechanism: The transparency and openness of the dynamic incentive mechanism enhance user trust, encouraging more users to participate in network construction.

Changes in Incentives for New and Old Devices

• New Device Incentives: To lower the entry barrier, new devices typically receive higher initial incentives to attract early adopters. High token rewards and lower initial costs encourage users to purchase and deploy new devices, making it easier for new users to participate.

• Old Device Maintenance Incentives: To prevent users from abandoning old devices, Helium offers ongoing incentives, though these may gradually decrease over time. By providing device upgrade rewards and maintenance cost subsidies, Helium can manage the operating costs of old devices, ensuring their continued effective operation.

Physical Market Changes

• Device Price Adjustments: Based on market demand and device lifespan, Helium adjusts prices for different types of devices. New devices generally cost more due to production capacity, supply, and order reasons, but they also offer higher incentives. Older devices are cheaper but still provide stable returns, attracting a diverse user base.

• Secondary Market Trading: Devices can be traded on the secondary market, with Helium collecting transaction fees and using part of the proceeds for token buyback and burn to support token prices. This increases device liquidity and stabilizes token value.

Different Regional Markets

• Regional Incentive Policies: To promote balanced global device deployment, Helium implements differentiated incentive policies based on market demand and development in different regions. Higher rewards in low-density areas attract more device deployments, achieving global network coverage.

• Localized Support: Helium provides localized technical support and training in different regions, helping users better install and maintain devices, enhancing device operational efficiency and user participation. This localized support effectively promotes project expansion and development across regions.

Device Density

• Density Rewards: In areas with low device density, Helium offers additional rewards to stimulate growth, promoting stable device operation and efficient data transmission. These rewards may include higher token incentives and device upgrade subsidies, encouraging users to maintain optimal device performance.

• Dynamic Adjustments: Helium dynamically adjusts device density incentives based on real-time data to ensure balanced network development and optimal resource allocation. This flexibility allows Helium to respond to market changes and optimize network performance.

Device Operation Time

• Time-based Rewards: To balance network load and increase device utilization, Helium sets different rewards for different time periods. Users operating devices during off-peak periods can earn additional incentives, ensuring stable network operation around the clock.

• Load Balancing Mechanism: Helium uses smart contracts and algorithms to dynamically adjust time-based incentives, achieving balanced network load distribution and optimal resource utilization. This mechanism effectively manages network resources and improves overall operational efficiency.

These dynamic incentive mechanisms ensure the Helium network remains robust, attracts new users, and maintains healthy growth while addressing the issues seen with early fixed incentive models.

Summary and Outlook

We believe that both classic and new generation DePIN projects have a broad range of categories and extensive markets, with the potential to produce significant projects with large-scale user adoption. It is highly likely that a project from this sector will emerge as a Top 20 Web3 project in the future.

Core Logic of DePIN

The core logic of DePIN lies in the cost reduction and efficiency improvements that Web3 brings to existing world operations. By integrating real-world users into Web3, DePIN not only achieves cost-effectiveness and socialization but also significantly increases the quantity and accuracy of data sources. The market outlook for DePIN, from fixed devices to flexible and portable devices, continues to expand, covering a wide range of high-tech and everyday life needs.

Market and Investment Growth

In recent years, the variety and number of investments in the DePIN market have increased significantly, with a growing number of institutions and projects. From the demand side, DePIN shows tremendous potential in multiple markets (such as weather, air quality, health, AI) and device types (such as wearables and mobile phones). The upstream and downstream industry chains are also gradually improving, including on-chain data interaction, device middleware, data, and hardware.

Life Cycle and Investment Potential

One noteworthy aspect is that the lifecycle of DePIN projects, due to their combination of physical devices and token design, is theoretically longer than that of non-DePIN projects. This gives the DePIN track enormous potential, making it highly attractive for investors.

Future Prospects

Looking ahead, with the development of DePIN projects and advancements in technology, we have every reason to believe that this sector will give rise to more innovative and impactful projects. These projects will inject new vitality and possibilities into the Web3 ecosystem.

In conclusion, the DePIN sector is poised for substantial growth and innovation. Investors and stakeholders should keep a keen eye on this space, as it holds the promise of transforming various industries and enhancing the overall Web3 landscape.

Special thanks to:

Salvador @DAnconia_Crypto from EV3

Anna @gizmothegizzer from Solana

Raullen @raullen from IoTeX

Peter from Hashkey

EO from Future Money Group

Reference:

State of DePIN 2023

https://messari.io/report/infrastructure-sector-brief-gpu-networks

• Navigating the DePIN Domain
• The DePIN Sector Map

https://htxresearch.medium.com/depin-current-state-and-prospects-ad6b1a59b3d4

https://foresightnews.pro/article/detail/50839

https://twitter.com/rsarrow/status/1778471355425386928?s=46

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital/

Twitter: https://twitter.com/mtcap_crypto

Medium: https://medium.com/@MTCapital_US

By Severin & Ian, MT Capital

TL;DR

1. Originating in 2021, Berachain emerged from the founders’ observation of liquidity fragmentation across multiple chains and the ghost town effect in public chains, sparking the idea of creating a liquid public chain. The Berachain community exhibits distinct characteristics of Ponzi culture, Meme culture, and NFT culture.
2. Berachain is a high-performance EVM-compatible public chain built on the Proof-of-Liquidity consensus (PoL). EVM compatibility allows Berachain to seamlessly integrate with the mature EVM ecosystem. The PoL consensus, achieved through BGT emission and bribery, directly incentivizes on-chain liquidity, mitigating the liquidity ghost town dilemma faced by existing public chains. This fosters the prosperity of on-chain DeFi ecosystems and trading activities, providing the public chain with protocol-level flexibility to effectively incentivize and guide on-chain liquidity, thereby promoting balanced ecosystem development and turning the public chain’s upward momentum.
3. Ecosystem projects on Berachain are still in the very early stages of development. Apart from official components, ecosystem projects on Berachain exhibit three distinct development trends: (1) supplementing the long tail market untouched by official components; (2) innovating around the PoL, BGT, and bribery mechanism; (3) a large number of high-quality external projects attracted to the Berachain ecosystem by the PoL mechanism.
4. From an investment perspective, we will focus on high-quality DeFi projects on Berachain and infrastructure innovations around Berachain’s PoL mechanism, BGT mechanism, and bribery mechanism. We will continue to monitor NFTFi protocols that combine NFTs with DeFi and L2 solutions based on Berachain and their related infrastructure. (Relevant project teams are welcome to DM on Twitter at @0X_IanWu and @Severin0624 at any time.)

Introduction

A recent intriguing phenomenon is that Alt-L1 public chains have begun to vie for attention in the crypto market using memes. Just like Solana, whose technical advantages such as high TPS and low confirmation latency have finally been perceived by users amidst the sweeping wave of meme speculation, leading to a bountiful harvest of public opinion, funds, users, and traffic. Solana’s meme speculation wave not only brought a significant amount of attention and new users to Solana but also generated a substantial amount of active trading and liquidity. The injection of liquidity funds has also made Solana’s meme ecosystem more vibrant, further driving the prosperity of the entire Solana ecosystem. Especially noteworthy is that Solana’s meme trading predominantly occurs on DEX Raydium, which has experienced a 246% monthly TVL growth. Thus, while technology remains the historical foundation of blockchain iterative waves, it is by no means the sole determinant of a public chain’s future development. Market attention and liquidity, represented by memes, may become the main battlefield in the new round of public chain competition.

However, there is one public chain, Berachain, which from its inception has embraced meme culture, enabling it to gather a large and loyal community of users even in the midst of a crypto bear market, despite team anonymity and a lack of technical documentation. The name Bera itself is one of the most distinctive Crypto Meme cultures. It’s named Bera as a tribute to the classic crypto meme HODL, thus modifying “Bear” to “Bera”. It has also innovatively introduced the Proof of Liquidity (PoL) mechanism, aiming to attract liquidity by rewarding tokens for on-chain liquidity provision, thus avoiding the ghost town dilemma faced by existing public chains. Additionally, it is EVM compatible, allowing seamless migration for developers and users from the EVM ecosystem. The combination of these three advantages has led to its testnet quickly attracting millions of users upon launch, achieving a growth of one million active wallets in just 7.5 days.

As a public chain with inherent technology, community, meme culture, and liquidity, Berachain is poised to reshape the current competitive landscape of public chains, breaking the ghost town dilemma of liquidity scarcity in public chains, and emerging as the superstar public chain of this bull market cycle.

Development History

Berachain’s Development Journey

The founders of Berachain are all early anonymous DeFi players, investing in crypto projects and actively participating in DeFi activities since 2015, including the DeFi Summer. Between 2021 and 2022, they engaged in various DeFi ecosystems across different chains, experiencing the liquidity fragmentation among multiple chains and the ghost town effect in public chains. They observed that public chains often overly rely on token incentive subsidies to attract TVL and liquidity. Once token emissions are depleted, most public chains gradually lose liquidity. Additionally, they noticed some issues with PoS public chains, where a large amount of value tokens are used for staking to ensure network security. While network security increases, the cost in terms of liquidity is substantial, and liquidity is vital for the activity of DeFi and ecosystem protocols. Their rich experience in the DeFi industry shaped their basic understanding of the ideal public chain model, laying the foundation for proposing the PoL mechanism.

About a year and a half ago, Smokey and another co-founder jokingly mentioned creating smoking bear NFTs called Bong Beras. After the issuance of Bong Bears NFTs, they unexpectedly gained significant attention and support from the community. As the founders were industry OGs who were early members of the top DeFi communities, most of the community members attracted were DeFi enthusiasts. Through multiple interactions with the community, the founders gradually developed the idea of creating a liquid public chain and initiated a vote within the community. Surprisingly, despite their lack of experience in creating public chains, they received overwhelming support from the community, leading to the birth of Berachain.

Although the founding team had rich DeFi experience and precise market insights, developing a public chain requires significant technical expertise. During discussions, the Berachain team connected with the Polaris team, which focuses on EVM compatibility development. The two teams quickly formed a partnership, forming the core of Berachain as it stands today. Technically, Berachain will adopt Polaris’ technology to build a high-performance L1 based on Cosmos and compatible with EVM. Mechanically, Berachain will utilize the PoL mechanism to incentivize on-chain liquidity, promoting the prosperity of on-chain DeFi ecosystems.

Key Historical Milestones

• 2021.8: Bong Bears NFTs minted and issued, laying the groundwork for the emergence of Berachain.
• 2021.10: First rebase of Bong Bears NFTs.
• 2021.11: First mention of Berachain.

• 2022.3: Proposal OIP-87 from Olympus DAO regarding seed round financing for Berachain is approved, with Berachain securing 0.5M funding from Olympus at a valuation of 50M.
• 2023.4: Berachain discloses a 42M financing round led by Polychain.
• 2024.1: Berachain testnet launched.
• 2024.3: Disclosure of Berachain undergoing a super 69M financing round led by Framework Ventures.

Community Culture

Ponzi Culture

Berachain was originally initiated by several early OGs who were active members of the top DeFi communities. The founding team of Berachain do not shy away, but rather embrace, the Ponzi culture. Thus, in the Berachain community, Ponzi is openly discussed and embraced. Berachain is also regarded by the current market as the next Luna with a Ponzi model, although this metaphor is not entirely accurate. Nonetheless, it reflects the cultural core of the Berachain community and the external perception of its culture.

Meme Culture

In addition to Ponzi, Berachain naturally embodies Meme culture, as its origin lies in the smoking bear NFT, Bong Bears. The idea for Bong Bears originated jokingly among the founders and unexpectedly gained significant attention and support from the community. Besides Bong Bears, the name “Bera” itself is part of the meme culture. The choice of the name “Bera” is a homage to the classic crypto meme HODL, with “Bear” rephrased as “Bera”. The founder of Berachain, Smokey, even attends various formal events wearing a Bera mask, embodying the spirit of memes. The Berachain community also actively engages in meme culture. The official account deliberately misspells words, such as spelling “Hello” as “Henlo”. In other communities, you might frequently see “GM” or “GN”, but in the Berachain community, you’ll see the highly meme-personalized “Ooga Booga” dominating the chat. From top to bottom, from official to community, Berachain is immersed in a highly distinctive meme culture.

NFT Culture

Since Berachain originated from an NFT Collection, NFTs have naturally become one of the most representative cultures of the public chain. When discussing other public chains, it is rare to associate them with iconic NFTs other than Ethereum. However, when discussing Berachain, the conversation cannot bypass the Bong Bear NFTs based on the rebase mechanism. In addition to NFTs issued by the founders, ecosystem projects on Berachain also release their own NFT collections, with each collection tied to the bear theme. To some extent, for Berachain, NFTs are as important assets as tokens. Compared to tokens alone, NFTs carry an additional layer of cultural attributes and community identity, which enhances the consensus and community stickiness of the entire Berachain community. Taking Bong Bear and Honey Comp as examples, although both NFT series have seen considerable increases in the secondary market, few users sell them for profit. The listing rate of NFTs is even less than 2%, reflecting the strong community consensus under Berachain’s NFT culture.

Conclusion

Berachain’s unique cultural attributes are also one of the distinguishing features that set it apart from other public chains. We anticipate that Berachain’s unique community culture will have the following effects:

1. Stronger purchasing power and wealth effect compared to other public chains: The attractiveness of Ponzi culture for funds is self-evident. Berachain’s loyal users native to the top DeFi and Ponzi communities, combined with its preference for Ponzi, may give Berachain stronger purchasing power compared to other public chains, making it the best soil for Ponzi projects.
2. Stronger traffic and attention compared to other public chains: In this cycle, public chains have gradually realized that native memes are the best marketing tool for a public chain. From this perspective, Berachain, which naturally embraces meme culture, self-deprecates with memes, and constantly propagates meme culture, is more likely to stand out and capture more market attention.
3. Stronger community cohesion compared to other public chains: Existing public chains are somewhat lacking in a unified symbol as a spiritual consensus. Just as every country has its national treasures as representatives and consensus, for Berachain, Bera is the best spiritual symbol and consensus. Almost all NFT collections on Berachain are created based on Bera as the basic carrier, and the dissemination of NFT culture will further enhance community identity and increase community stickiness. Meanwhile, cooperation and profit-sharing based on NFTs between different projects on Berachain will also bring stronger ecosystem synergy and community cohesion to Berachain’s ecosystem.

Berachain Technical Architecture

Berachain is a high-performance L1 public chain built on top of the Cosmos SDK, utilizing the CometBFT consensus engine and compatible with EVM. Building on the Cosmos SDK enables Berachain to seamlessly integrate with the Cosmos ecosystem and achieve horizontal expansion through the IBC module. Additionally, Berachain has developed the Polaris Ethereum module in-house, aiming to provide EVM compatibility and better aggregate developers and users from the existing EVM ecosystem, integrating existing EVM ecosystems to provide users with a more familiar development and usage experience. Berachain aims to become a key node for unified liquidity in both the EVM ecosystem and the Cosmos ecosystem, creating the most powerful, fastest, and most liquid blockchain network in the multi-chain ecosystem.

Polaris Ethereum

Polaris Ethereum provides advanced EVM development experience for developers. In addition to providing basic EVM compatibility, Polaris Ethereum also offers additional features such as creating stateful precompiled contract modules and supporting developers to customize opcodes, allowing developers to build more flexible and versatile smart contracts with Polaris Ethereum.

EVM Compatibility

The basic principle of Polaris is similar to running an additional Ethereum-equivalent virtual machine on top of the L1 main chain. By plugging and unplugging corresponding plugins such as Configuration plugin, State plugin, Gas plugin, etc., Polaris can effectively handle state transitions, thus supporting the execution of Ethereum transactions for any type of L1 main chain smart contracts.

Precompiled Contracts

Precompiled contracts, also known as precompiled functions or precompiled contracts, are a set of specific functionalities that are directly built into blockchain nodes rather than executed as bytecode in the EVM. Precompiled contracts can achieve more efficient state operations at a lower gas cost, providing additional functional logic. Polaris supports precompiled contracts, enabling direct interaction with various Cosmos modules. Currently, Berachain’s precompiled contract types include operations such as redemption in the BGT precompiled contract and operations related to creating bribes and obtaining bribe fees in the Bribe precompiled contract.

Polaris EVM implementation also introduces support for custom opcodes to facilitate more complex smart contracts.

Modularity and Interoperability

Polaris is a modular implementation of the EVM, which can be easily integrated into any consensus engine. Each component of Polaris is developed as a unique package and comes with comprehensive test documentation. Developers can choose to use individual components of Polaris based on the complete documentation or combine multiple components as needed to create customized EVM integrations. The modular implementation of EVM integration by Polaris helps developers significantly reduce the time cost of implementing their own EVM integration solutions.

Furthermore, the combination of Polaris Ethereum and the Cosmos SDK enables interoperability with the Cosmos ecosystem in an EVM-compatible environment. By integrating multiple state precompiles on-chain, Polaris allows EVM users to execute native Cosmos operations, such as governance voting and validator delegation, as well as interact with other chains through IBC. This design preserves the native EVM experience while further achieving true interoperability between Cosmos and EVM, bringing Berachain closer to its vision of becoming the hub for liquidity in both the EVM and Cosmos ecosystems.

(Of course, since Polaris has not been field-tested, the specific performance, traffic load, and compatibility with EVM after Berachain goes live on the mainnet are yet to be observed.)

PoL Consensus

Why PoL is Needed

PoS is currently one of the most common consensus mechanisms. Although PoS has been tested and proven effective over the years, recognized by the market as a consensus mechanism that balances network security, decentralization, and consensus efficiency, it still has some issues. For example, the security of PoS networks depends on the amount of assets staked in the network; the larger the value of staked assets, the lower the probability of the network being attacked. However, excessively large staked asset values also mean a decrease in the value of assets available for on-chain liquidity, which is detrimental to the flourishing of on-chain trading activities, especially in the years 2021 and 2022 when liquidity staking was not highly popular. Additionally, token incentives in PoS networks only flow to token stakers, meaning that PoS networks only incentivize staking activities and do not provide sufficient incentive support for on-chain transactions and liquidity provision activities that promote ecosystem prosperity. The existence of these two major problems led Berachain to ultimately abandon the PoS consensus and propose PoL: Prove of Liquidity.

The core of PoL is still to incentivize the prosperity of on-chain DeFi ecosystems, and one of the keys to DeFi is liquidity. Therefore, the essence of PoL is to incentivize sustainable deep liquidity on-chain.

PoL Mechanism

The specific mechanism of PoL is as follows:

1. Users who want to obtain token incentives similar to PoS networks need to provide liquidity to specific liquidity pools on Berachain, and Berachain will reward users with governance tokens BGT. Note that while the traditional way to obtain native token rewards in PoS networks is through staking, in PoL networks, the way to obtain native token rewards is by providing liquidity.
2. Similar to token staking in PoS, users can also delegate the BGT they receive to validator nodes, and validator nodes will participate in network validation on behalf of users.
3. Like PoS, validators will participate in block generation and construction based on the proportion of BGT delegated to them, and receive block generation rewards and transaction fees as rewards.
4. Unlike PoS, validators can vote on the future emission of BGT rewards in different liquidity pools. In PoS networks, the rewards received by stakers are relatively fixed. However, in PoL, the rewards received by liquidity providers are dynamic and influenced by governance factors.
5. Finally, a new round of BGT will be dynamically emitted among different liquidity pools based on the voting results, and BGT rewards will be distributed to liquidity providers, forming a closed loop.

PoL vs PoS

The improvements PoL brings over PoS are evident.

1. Firstly, PoL directly incentivizes on-chain liquidity, promoting the flourishing of on-chain DeFi ecosystems and trading activities. The only way to obtain token emission rewards in PoL networks is by providing liquidity. Therefore, the emission rewards of the network’s native token in PoL networks will attract users to provide liquidity. Moreover, the higher the value of the network’s native token, the greater the attractiveness of token emission rewards, which will encourage more users to become LPs, continuously deepening the network’s liquidity. Additionally, the persistence of liquidity incentives makes the liquidity of PoL networks more sustainable compared to other PoS blockchains, which may face a dilemma of massive liquidity withdrawal once the airdrop incentives are completed.
2. Secondly, PoL enables the blockchain to gain protocol-level flexibility, allowing for more effective incentivization and guidance of on-chain liquidity, promoting balanced development of the ecosystem. The PoL mechanism of the public chain is similar to the protocol-level vetoken mechanism. Through the governance module, the public chain can incentivize and guide specific assets and liquidity pools that were previously unorganized. Its core essence is very similar to the token subsidy that public chains provide to specific ecosystems, protocols, and assets, but the implementation is more elegant.
3. PoL mechanism may achieve higher security than PoS. The PoL mechanism has a potential positive feedback loop. In the PoL mechanism, users providing liquidity and receiving network token emission rewards will deepen the network’s liquidity, provide a better user experience for DeFi users, and promote the prosperity of the network ecosystem. The improvement in network fundamentals will also be reflected to some extent in the token price, promoting the price increase of the token. The increase in token price will further incentivize users to provide liquidity, capture network token emissions, forming a closed-loop positive feedback loop. In this process, the increase in liquidity provided by users also means an increase in network security. Therefore, the PoL mechanism may achieve higher security than PoS networks.

In summary, the PoL mechanism can effectively promote sustainable liquidity on-chain and the prosperity of the DeFi ecosystem through token reward emissions, avoiding the dilemma of existing public chains’ excessive reliance on airdrop marketing to attract users and liquidity, while capturing higher security. The PoL mechanism also allows public chains to flexibly incentivize the ecosystem and is expected to drive the upward spiral of liquidity, token price, and ecosystem development.

However, the PoL mechanism also has its corresponding drawbacks, namely that PoL only incentivizes liquidity and only addresses the most basic liquidity needs of DeFi. Although liquidity is essential to DeFi, it does not encompass the entirety of DeFi. PoL cannot incentivize DeFi protocols with low liquidity demands. For example, a decentralized exchange aggregator protocol may not have a very high TVL, but it can contribute significant trading volume. However, under the PoL mechanism, Berachain cannot effectively incentivize such protocols. Additionally, for non-DeFi sectors such as NFTs and GameFi, it is also difficult for PoL to provide balanced incentives. Therefore, the current version of PoL may be further optimized in the future development of Berachain to more evenly incentivize different DeFi protocols and the development of different cross-chain ecosystems.

Token Model

Berachain’s token model differs from other public chains. The token economy of Berachain consists of three different tokens: governance token BGT, gas token BERA, and stablecoin HONEY.

Introduction to the Three-Token Model

BGT is positioned similarly to governance tokens in PoS networks, but with a unique feature: BGT is non-transferable. Additionally, the ways to acquire BGT are relatively limited. Currently, users can earn BGT emission rewards by providing liquidity on BEX, borrowing HONEY, or providing HONEY in the bHONEY Vault on Berps. BGT can be used for governance participation; users can delegate BGT to validators and receive governance rewards and bribe rewards. Upon validator participation in block production, users can also receive transaction fee rewards from Berachain’s native applications BEX, Bend, and Berps, within that block, along with gas fee rewards. BGT can also be converted 1:1 into Berachain’s gas token BERA, but this process is unidirectional and irreversible; users cannot convert BERA back to BGT at a 1:1 ratio.

BERA is positioned similarly to native tokens in other public chains, mainly used for paying gas fees and block rewards. However, holding BERA tokens does not entail governance voting rights, as governance rights are allocated to BGT.

HONEY is Berachain’s native stablecoin, providing a stable trading medium for applications on Berachain. Users can mint HONEY by collateralizing USDC at a 1:1 ratio.

Understanding the Three-Token Model

To comprehend the three-token model, we must return to Berachain’s PoL mechanism. PoL incentivizes liquidity in Berachain by rewarding users with BGT tokens. Hence, for the incentive of liquidity to be effective, BGT must have value to attract sufficient liquidity.

How is the value of BGT ensured? If, like other L1s, the native token is only a governance token, its value is difficult to guarantee. In such cases, the token’s value is weakly correlated with the fundamentals of the public chain, which is evidently an unreasonable path. Ensuring the value of BGT can be approached in two ways: first, by backing BGT with real value inflows or anticipated returns visible to users. Second, by ensuring that users hold onto BGT rather than selling it. Based on these two approaches, revisiting Berachain’s PoL and three-token model design becomes clearer.

Firstly, addressing the issue of minimizing user selling, Berachain’s approach is straightforward: design BGT as a non-tradable, non-transferable governance token, while adding an additional gas token, BERA. If users wish to sell BGT, they must exchange it 1:1 for BERA, effectively adding an extra barrier, delaying user selling of BGT as much as possible.

However, this approach merely addresses the symptoms rather than the root cause. To make users perceive BGT as valuable, the most direct approach is to show users the returns behind BGT. In this regard, Berachain offers two empowerment solutions. Firstly, Berachain grants governance rights to BGT. This governance is not about governing the project’s development but directly relates to BGT emissions, i.e., governance over user income. The significance of governance lies in the fact that every user, to maximize their own income, must hold BGT and delegate it to a validator willing to vote for them in the liquidity pool they are mining. In user-to-user PVP, if one party chooses to mine and sell, it’s apparent that this party will anticipate relatively less BGT emissions in the future, which is not conducive to maximizing their own income. From this perspective, by giving BGT income governance rights, Berachain can effectively delay the process of users mining and selling BGT, encouraging more users to hold BGT and seek higher future returns.

Secondly, not only Berachain but also the nodes themselves empower BGT. Because a node’s income comes from ecosystem income and gas income from block production. To maximize their own interests, nodes must receive as much external BGT delegation as possible to increase their block production rate. To attract external BGT, nodes need to engage in bribery. There are many ways to bribe, such as nodes sharing ecosystem income with users or nodes launching high APYs to exchange users’ BGT. The competition among nodes to maximize their own interests gradually evolves into a process of empowering BGT. BGT’s value is further secured by protocol income and bribery income from nodes, which increases user confidence in holding BGT.

Thus, the relationship between the PoL mechanism and the three-token model gradually becomes clear. It’s understandable why the Berachain team wants to control the DEX, Lending, and Perps trio. The reason is simple: as the three components with the strongest money-printing ability, DEX, Lending, and Perps can enjoy significant gains brought by PoL, generating high protocol income. By handing over this portion of income to intermediary underwriters, and then empowering BGT, this ensures the most genuine value guarantee for BGT. Imagine if there were no dividends from DEX, Lending, and Perps, wouldn’t the value empowerment of BGT feel somewhat illusory?

Furthermore, BGT and the entire Berachain ecosystem are intertwined. The income of ecosystem projects is the most genuine value inflow behind BGT. If the Berachain ecosystem is not active enough, the value of BGT will not be sufficiently guaranteed, and users will tend to sell BGT. The decrease in BGT value will reduce Berachain’s attractiveness to LPs, leading to users withdrawing liquidity and seeking higher-yield pools elsewhere, further deteriorating the user experience of on-chain DeFi, and consequently reducing ecosystem activity, leading to a negative spiral. Conversely, if the Berachain ecosystem is active enough, and the protocol income from the Berachain official trio is high enough to be shared with users, BGT will receive more value guarantee, and users will be more willing to hold BGT. The increased attractiveness of BGT to users will attract more users to provide more liquidity, thereby further driving the prosperity of on-chain DeFi ecosystems, initiating a positive spiral. Rationally, the start and stop of the spiral depend on the relationship between the income from BGT delegation staking and the current price of BGT. If the values of the two are close, the system will maintain overall stability. If the difference between the two values is significant, Berachain will easily enter an upward or downward spiral.

Berachain Ecosystem

Although Berachain was born in 2021, its core mechanisms have been continuously optimized and designed, and its related documents have not been publicly disclosed. Therefore, a comprehensive project ecosystem has not yet been fully formed on Berachain. Even with the delayed publication of Berachain’s related documents, most community projects have been established after January 2024. Thus, the Berachain ecosystem is still in its early stages.

Official Ecosystem

The official ecosystem of Berachain is the most crucial foundational component of the Berachain ecosystem. According to the founders, to avoid meaningless vampire attacks among similar protocols offering DEX, Lending, Perps, etc., the officials have decided to step in and provide DEX, Lending, and Perps products themselves. As analyzed earlier, DEX, Lending, and Perps also contribute significantly to the income of the Berachain ecosystem. The officials firmly hold these three components to better benefit BGT holders, provide more sources of value to BGT, and turn the positive spiral of Berachain upwards.

In addition to BEX, BEND, and BERPS, the officials also provide a governance platform called BGT Station based on BGT delegation governance, a platform for minting and redeeming the native stablecoin HONEY, the Berachain blockchain explorer Beratrail, and a testnet faucet.

DeFi Ecosystem

Infrared

Infrared is a PoS and LSD protocol on Berachain, which disclosed a $2.5 million seed round financing led by Synergis in January 2024, with participation from institutions such as NGC Ventures, Tribe Capital, CitizenX, Shima Capital, and Dao5. Infrared ingeniously transforms Berachain’s PoL into a more familiar PoS for the market and users. It further enhances the efficiency of fund utilization by issuing staking liquidity certificates. Infrared accepts users’ liquidity assets to provide liquidity and capture BGT emissions on Berachain. Subsequently, Infrared provides users with liquidity certificates, iBGT, and staking certificates, siBGT, as mappings of BGT. Users can enjoy corresponding BGT benefits and further participate in other DeFi ecosystems on Berachain using iBGT and siBGT. Infrared is expected to become a Lido on Berachain and expand its own iBGT ecosystem.

Kodiak

Kodiak is the only DEX project incubated under Berachain’s Build-a-Bera accelerator program. It disclosed a $2 million seed round financing led by Build A Bera, along with investments from Amber Group, Shima Capital, DAO5, and other institutions in February 2024.

Kodiak aims to become a comprehensive liquidity platform on Berachain, offering DEX services along with automated liquidity management and no-code token deployment services for users. Despite being a DEX, Kodiak’s positioning does not conflict with the official DEX. Instead, Kodiak aims to provide trading services for long-tail assets on Berachain. Moreover, Kodiak can provide liquidity providers with automated liquidity management solutions, relieving LPs from the hassle of actively managing liquidity. Additionally, Kodiak offers a no-code token deployment solution, enabling developers to quickly deploy and issue tokens. It can be said that Kodiak provides a full-service solution process from token deployment and issuance to trading and liquidity.

Beradrome

Beradrome aims to be the DEX and Restaking liquidity market on Berachain, bringing the gameplay of Solidly into the Berachain ecosystem through the design of ve(3,3) token economics. Users holding iBGT can leverage Beradrome to purchase and stake BERO. By acquiring hiBERO tokens, users can capture validator rewards, protocol bribe rewards, and oBERO emission rewards owned by the Beradrome platform. Simultaneously, users can use hiBERO to recursively borrow and stake iBGT without the risk of liquidation, further enhancing fund utilization efficiency and amplifying returns.

It is worth noting that Beradrome has partnered with The Honey Jar to jointly operate a validator node on BeraChain. Additionally, Beradrome has issued its own NFT Collection, Tour de Berance. NFT holders can gain higher allocation and voting rights for hiBERO.

HoneyPot Finance

Similar to the concept of Infrared, HoneyPot Finance also offers a solution for staking BGT on Berachain, transforming Berachain’s PoL into a more familiar PoS for users. Unlike Infrared, which absorbs users’ liquidity assets and provides them with iBGT liquidity certificates, HoneyPot Finance adopts a platform token bribery approach. It accepts users’ delegated BGT and incentivizes users to use bribery platform tokens to provide liquidity in pools through yield governance, earning BGT emissions and forming PoS. In addition to this, HoneyPot Finance has launched a Launchpad for fair launches of long-tail assets and a Batch AMM model optimized for trading long-tail assets, aiming to become the liquidity infrastructure for long-tail asset issuance and trading on Berachain.

Apart from the aforementioned DeFi Protocol, there is still a batch of high-quality protocols within the Berachain ecosystem that are under construction but have not disclosed product details, such as:

• Gummi, a protocol supporting any supported currency market on Berachain.
• Wakalah, a commodity and RWA protocol on Berachain.
• Exponents, an oracle-free derivative platform on Berachain.
• IVX, a 0DTE options AMM platform.
• OOGA BOOGA, a DEX trading aggregator.
• Smilee Finance, an options protocol offering up to 1000x leverage, no liquidations, and impermanent loss.
• Shogun, an order flow aggregator with an intent-centric approach and modular smart liquidity routing platform.
• D² Finance, a 100% on-chain non-custodial multi-strategy hedge fund protocol.
• …

NFT Ecosystem

NFT Collection

Bong Bears

Berachain originated from the Bong Bears NFT Collection. On August 27, 2021, three anonymous founders of Berachain issued the Bong Bears NFT Collection, consisting of 100 uniquely designed bears. The subscription process differed from other NFTs, with each NFT priced at 0.069 ETH, and buyers could view specific bears for subscription on OpenSea before purchase.

Bong Bears NFT also introduced the concept of Rebase NFT and subsequently rebased four different NFT Collections: Boo Bears, Baby Bears, Band Bears, and Bit Bears.

The early high user stickiness of the Bong Bears community allowed the price of Bong Bears NFT to rise steadily, even though Berachain had not disclosed any relevant information externally, gradually increasing from 0.069 ETH to over 50 ETH. With the disclosure of Berachain’s financing information, holding Bong Bears NFT was also seen as the optimal choice for receiving Berachain airdrops. As a result, the listing rate of Bong Bears NFT quickly decreased, and it has now formed a state of having value but no market, with a floor price reaching 200 ETH.

The Honey Jar

Apart from the official Bong Bears NFT Collection, the most vibrant NFT Collection on Berachain is undoubtedly The Honey Jar. The Honey Jar serves as the entry point for traffic into the Berachain ecosystem. Even before Berachain publicly announced PR activities, The Honey Jar had already been assisting Berachain in operating online and offline events and managing its own community. Not only does The Honey Jar serve as the gateway for traffic into the Berachain ecosystem, but it also undertakes the responsibility of educating users within the ecosystem. Additionally, as a community itself, The Honey Jar also facilitates incubation and collaboration with other projects within the Berachain ecosystem.

The Honey Jar has also launched its own NFT series called Honey Comb NFT. As a core NFT project within the Berachain community, holding Honey Comb NFTs entitles users to additional benefits brought by The Honey Jar’s partners, such as NFT whitelist minting opportunities and increased mining yields. Currently, the trading volume of Honey Comb NFT on OpenSea has reached 4.3k ETH, with a floor price of around 0.25 ETH and a listing rate of only 1%, reflecting the exceptionally high user stickiness of The Honey Jar community.

NFT Protocol

Goldilocks

Goldilocks is a comprehensive DeFi + NFTFi platform on Berachain, providing NFT-based lending services to users. The unique features of Goldilocks NFT lending service include: (1) The floor price of NFT Collections is determined by voting of LOCKS governance token holders, eliminating the need for oracle price feeding. (2) NFT loans are priced in iBGT, where users can supply BGT to the lending pool and receive liquidity certificates GiBGT. Users can not only enjoy interest income from lending but also further participate in other Berachain ecosystems using GiBGT.

Kingdomly

Kingdomly aims to be the native OpenSea of Berachain. For end-users, Kingdomly offers NFT minting, sales, trading, and leasing services. For business users, Kingdomly supports the quick deployment of NFT Collections, seamlessly completing NFT issuance. Kingdomly has partnered with Honeypot Finance to issue the Honeypot Finance Genesis NFT.

Protecc

Protecc is a comprehensive NFTFi platform. It aims to be an all-in-one NFT trading marketplace, providing NFT AMM for traders to trade at any time, offering NFT OTC and bulk trading platforms, supporting whale trading, providing NFT automatic income strategy vaults to help users earn income automatically, and offering cross-chain NFT trading bots and other products.

Gumball Protocol

Gumball Protocol is an innovative NFT Launchpad and AMM protocol. In Gumball Protocol, each NFT Collection is backed by corresponding tokens and underlying assets, allowing users to trade NFTs promptly. By forming liquidity trading pairs with fragmented NFT assets and underlying assets, Gumball Protocol supports users’ immediate buying and selling needs for NFT trading.

GameFi Ecosystem

BeraTone

BeraTone is a massively multiplayer online open-world role-playing game inspired by “Animal Crossing” with farming as its core gameplay element. Each player has their own plot of land, allowing for free customization and expansion. Players can engage in activities such as crop cultivation, resource gathering, animal husbandry, and trading with other farmers. BeraTone is also a continuously evolving virtual world constructed with 3D aesthetics. In addition to basic farming and gathering activities, players can explore the rich virtual world, interact with various characters, complete tasks, level up, solve different game puzzles, and gradually uncover the mysteries of BeraTone.

BeraTone has also released its Genesis NFT, the BeraTone Founder’s Sailcloth, priced at 0.1E for minting. Currently, the floor price is close to 1E, with a total trading volume of 355E and a listing rate of only 3%. Although BeraTone has not been released yet, the strong performance of its NFTs in the secondary market reflects the market’s high expectations for BeraTone as a BAB incubation project.

Beramonium

Beramonium is an ARPG blockchain game on Berachain, and they have released an action-oriented role-playing game called Gemhunters. In this game, players can send their Beramium Genesis beras to explore dungeons, challenge bosses, complete quests, and obtain gems, which can be exchanged for NFTs from other well-known Berachain projects such as Honey Combs, Beradoges, and more. Currently, the floor price of Beramonium’s Genesis character NFT is approximately 0.06 ETH, with a total trading volume of 158 ETH and a listing rate of only 3%. The overall game community is very active.

Meme

BabyBera

BabyBera aims to be a three-in-one ecosystem on Berachain, combining NFTs, Yield Farming, and Meme Coin. BabyBera will be released in three phases: first, NFT issuance, followed by Yield Farming, and finally, the launch of $BBBERA Meme Coin. All $BBBERA tokens will be distributed as liquidity mining rewards during the Yield Farming phase, ensuring that BabyBera users are loyal Degen users with extremely high stickiness, thus realizing the vision of making $BBBERA the premier Meme Coin on Berachain.

BeraDoge

BeraDoge is another major Meme project on Berachain. The project consists of two NFT collections: Beradoge Gen 1 and Mibidiots. Holding these two series of NFTs will promise holders “a bunch of useless stuff” or “a bunch of useless BDOGE.” Additionally, there are rumors that BeraDoge will also launch its own DeFi platform.

Summary of the Ecosystem

At present, official components remain one of the most important infrastructures in the Berachain ecosystem. In addition to official components, the DeFi ecosystem on Berachain presents three different development trends: (1) Supplementing the long tail market that official components cannot reach; (2) Innovating around the PoL mechanism, BGT, and bribery; (3) Many high-quality DeFi projects are attracted to the Berachain ecosystem by the PoL mechanism.

From the current DeFi ecosystem on Berachain, it is as the official expected. After the official’s own foundational but crucial DEX, Lending, and Perps components, there are no longer a large number of homogeneous projects continuing to repeat the wheel, playing vampire attacks. On the contrary, the existence of official components forces DeFi projects to explore actual points of innovation and strive for excellence on the basis of existing businesses.

At this stage, in terms of project quality, projects incubated by Build A Bear incubator have relatively higher quality, followed by external high-quality projects introduced by Berachain. The quality of native community projects on Berachain is slightly uneven, lagging behind to some extent.

As mentioned earlier, because Berachain itself comes with NFT culture, platforms for issuing and managing NFTs as well as liquidity protocols will also be crucial components of Berachain.

Currently, the gaming and Meme ecosystems on Berachain are still in a very early stage of development.

Investment Opportunities

Focus on High-Quality DeFi Protocols on Berachain

Berachain’s PoL mechanism will attract high-quality DeFi protocols significantly. Moreover, there are fewer vampire attacks on Berachain, and leading DeFi protocols can enjoy greater traffic exposure in their niche markets. It is expected that they will achieve higher TVL, traffic, and user support. The more concentrated liquidity will also improve the protocol’s user experience. We anticipate that on Berachain, the effect of network effects will be more pronounced, and leading protocols in niche markets will receive higher valuation premiums. Therefore, early participation in high-quality niche-leading DeFi projects on Berachain is undoubtedly the best choice to enjoy the market premium of Berachain.

Focus on Innovative Infrastructure Around Berachain’s PoL Mechanism, BGT Mechanism, and Bribery Mechanism

The most significant difference between Berachain and other public chains lies in its innovative PoL mechanism and three-token model. In addition to replicating gameplay that other public chains have, some projects on Berachain will inevitably innovate at the underlying infrastructure level regarding the PoL mechanism and three-token model. The direction of innovation can mimic Infrared, converting the market’s unfamiliar PoL into the more familiar PoS for the public, thereby allowing their own liquidity certificate tokens to gain larger-scale market adoption inherently. Alternatively, innovation can start from the BGT mechanism and bribery mechanism, innovating around users’ delegation rights, income rights, and bribery rights at the token model level, combined with Berachain’s bribery mechanism to bring more composable gameplay. Innovation at the infrastructure level around Berachain’s PoL mechanism and three-token model is expected to build the protocol’s own ecosystem moat and shape its ecological barrier.

Bullish on NFTFi Ecosystems Combining NFTs with DeFi on Berachain

Unlike other public chains, NFTs are also an important liquidity component on Berachain. How to release liquidity around NFTs and how to integrate NFT gameplay with DeFi gameplay on Berachain is also one of the themes worth exploring on Berachain. Although NFTFi protocols on other chains have not sparked much, NFTFi protocols on Berachain are expected to capture sufficient liquidity and have a greater chance of long-term development. Income strategies and income vaults derived from NFTFi protocols can also be combined with node bribery mechanisms, making NFTFi protocols more flexible.

Bullish on Berachain-based L2 and Its Related Infrastructure

The popularity of the Berachain testnet at this stage also reflects the market’s strong expectations for Berachain to some extent. With the launch of the Berachain mainnet, under the blessing of the PoL mechanism, Berachain is expected to replicate the prosperity of Ethereum’s DeFi Summer. Although Berachain’s positioning is a high-performance L1 public chain, faced with a massive influx of traffic and high-frequency on-chain interactions, Berachain also has scalability needs. Moreover, once Berachain starts its positive flywheel, the rise in BGT price will also drive up the Berachain interaction gas fees. Therefore, Berachain also needs to reduce costs and increase efficiency. In summary, we expect that in the future, some super DeFi applications on Berachain and applications with high-frequency interaction demands such as GameFi and SocialFi will develop their own L2 based on Berachain for expansion. Based on this logic, we will continue to be bullish on and focus on the Berachain-based L2 and its related infrastructure ecosystem.

Conclusion

Liquidity has always been the most important topic in the cryptocurrency field. All tokens, grants, and points ultimately aim to compete for users and liquidity. Without liquidity as the foundation, even the most complete ecosystems and infrastructures are just castles in the air.

Berachain is poised to become a breakthrough in the liquidity dilemma of public chains. Through its innovative PoL consensus mechanism and three-token model, it can siphon liquidity from other public chains and become the liquidity hub of both the EVM and Cosmos ecosystems. Solidified liquidity not only brings financial support to Berachain but also attracts more developers, users, and market attention. Berachain is expected to become the new infrastructure for hosting massive crypto liquidity, making liquidity, maker DeFi great again!

Final Note: MT Capital is very bullish on the future development of Berachain. We welcome early-stage projects and entrepreneurs in the Berachain ecosystem to reach out to us anytime. (Twitter: @0X_IanWu, @Severin0624, MT Capital Email: deck@mt.capital)

Reference

1. What is Berachain? 🐻 ⛓️ | Berachain Docs
2. Welcome to Polaris Ethereum — Polaris Ethereum Docs (berachain.dev)
3. Berachain — The Convergence of a Strong Community and Experimental Endeavors | DeSpread Reports
4. https://research.despread.io/reports-berachain/
5. Berachain — Innovating the Approach to L1 Building | blocmates.
6. Berachain: Building Sticky Liquidity — by Pavel Paramonov (shoal.gg)
7. https://twitter.com/berachain/status/1749522523895570700?ref=research.despread.io
8. https://twitter.com/burstingbagel/status/1565705660888596481
9. https://twitter.com/DylanXVFETH/status/1745176859728560131
10. https://www.shoal.gg/p/berachain-building-sticky-liquidity
11. https://foresightnews.pro/article/detail/31431
12. https://foresightnews.pro/article/detail/54714
13. https://foresightnews.pro/article/detail/52627

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital/

Twitter: https://twitter.com/mtcap_crypto

In recent years, we have witnessed the emergence of various Layer 1 (L1) public blockchains such as Ethereum, Polygon, Solana, and Aptos, most of which are pursuing high performance, EVM compatibility, and more. However, aside from Ethereum, which has maintained innovation through its active developer community and user base, continually introducing applications like Uniswap and AAVE that create new value domains for users, other public blockchains mostly replay the same script — copying the market’s DeFi trio, attracting users/traffic from other chains with airdrops, high APYs, token listings, and developing ecosystem projects to drive the rise of their blockchain’s token. Homogenization of chains, products, and user groups largely relies on rewards or airdrops for “hiring”, making it impossible for innovation to meet user needs. In bull markets, the bubble effect makes these blockchains appear prosperous, but it’s only in bear markets that we see who is truly vulnerable.

Recently, whether it’s ZK, AA, or L2 solutions, there’s been a trend toward pursuing technology detached from specific products, repeating the same narrative, essentially a case of old wine in new bottles, leading to a high degree of internal competition. Moreover, the issue of liquidity fragmentation in L2 has become increasingly severe.

In the red ocean of public blockchains, what’s lacking is not high performance or narratives, but users with real needs for the blockchain. The TON blockchain, backed by Telegram with nearly 900 million monthly active users, stands out from the multitude of blockchains due to its deep connections with Telegram. With a broad global user and developer base, Telegram has long been unsatisfied with being merely a social messaging platform. By continuously enriching its product line (Dapps) and creating links to high-frequency payment and lifestyle scenarios, it aims to transition into a social platform and ultimately a super app similar to WeChat. If Telegram is the WeChat of the Web3 realm, then TON is its indispensable public blockchain.

Recent Highlights of TON

In February, Telegram’s founder Durov openly declared the official sales channel for TON tokens on his personal channel, bringing TON and Telegram closer together in an unspoken understanding.

Telegram Advertising Platform Utilizes TON

The Telegram advertising platform will officially open to advertisers in nearly a hundred new countries, with channel owners in these countries receiving a 50% commission from the revenue generated by Telegram displaying ads on their channels.

The official statement indicated that to ensure rapid and secure ad payments and withdrawals, the TON blockchain will be exclusively used. The revenue will be shared with channel owners, creating a virtuous cycle where content creators can cash out their Toncoin, or reinvest it to promote and upgrade their channels.

Fish

The first meme coin on TON was launched fairly, boasting over 22,000 holders. Currently, it has a market cap of $47 million, with a staggering 14-fold increase in value in March. It has officially announced partnerships with several projects: TonRaffles, Tonano, Tap Fantasy, RoOLZ, Catizen.

Telegram is Poised for an IPO

According to the ‘Financial Times’ of the UK, Telegram’s founder, Pavel Durov, revealed that Telegram has reached 900 million active users and is nearing profitability, with revenues reaching hundreds of millions of dollars. The company anticipates going public later this year or next year once it achieves profitability, with the United States as a potential listing location. Durov mentioned that, during the IPO, Telegram would consider offering shares to its loyal users.

Telegram has raised approximately $2 billion in debt financing, including a $1 billion bond issue in 2021, and bonds worth $750 million and $270 million issued last year. If the company goes public before the end of March 2026, these bondholders will have the option to convert their senior unsecured debts into equity at a discount of 10% to 20% off the IPO price.

Introduction to TON

The Open Network (TON), originally named Telegram Open Network, was created by Telegram in 2018 with the goal of developing a powerful and scalable blockchain platform. It completed the largest ICO fundraising in history through its token, $Grams. However, due to allegations by the SEC of conducting an unregistered securities offering, in 2020, the Telegram team agreed to pay a $18.5 million fine and settled with the SEC, abandoning the Telegram Open Network project and returning the ICO-raised funds in USD.

Afterward, the Telegram Open Network was continued by a community known as NewTON. In May 2021, the community voted to rename the long-running testnet 2 to Mainnet; the NewTON community was rebranded as the TON Foundation, serving as a non-profit community to support and develop TON. The Telegram Open Network was also renamed to The Open Network.

The TON Foundation is now the main force driving the development and growth of TON. The TON Foundation supports initiatives that contribute to the mission of creating an open network, maintaining the community’s interests, and supporting the development of TON projects without controlling the TON technology. The TON Foundation team consists of over 50 people, with more than half from countries like Russia and Ukraine, covering areas such as business development, engineering, marketing, finance, and legal, with most employees having experience at VK and Telegram. Notably, one of the core founding members of the TON Foundation, Andrew Rogozov, is the former CEO of VK.com, a social network founded in Russia by Telegram’s founder, with VK.com’s first CEO being Durov himself. Additionally, TON Foundation members include Bill Qian, former head of global M&A and Binance Labs at Binance, and John Hyman, former chief investment advisor at Telegram.

TON Blockchain Development and Current Status

TON aims to offer easy-to-use tools and a reliable, stable infrastructure to make massive adoption easier. Though TON was listed on exchanges in 2021 and subsequently introduced features such as TON payments, storage, DNS, and cross-chain bridges (the official bridge supports TON/ETH and BSC), it was the surge of Telegram Bots like Unibot and Bananagun in July last year that truly drew widespread attention. In September, at the Token 2049 event, Telegram officially announced its collaboration with TON and launched the self-custodial crypto wallet TON Space, propelling TON to new heights. As a result, the price of TON rose from $1.2 in August of the previous year to $3.8 (a 215% increase), pushing its market value into the top twenty and making it a standout performer during the bear market. Now, even though TON’s hype has cooled, being the only public blockchain officially supported by Telegram and backed by Telegram’s 900 million active users, TON is set to unfold a narrative completely different from existing public blockchains, focusing on performance (TPS), MEV compatibility, and storytelling from the angles of payment, social networking, and mini-programs, against the backdrop of the current landscape of public blockchains.

As of March 20, 2024, the TON blockchain hosts 301 validators, with a total of 440 million $TON staked under the PoS mechanism, distributed across 29 countries. The total number of accounts on TON has been showing a long-term growth trend, currently standing at 8.12 million accounts. Official information from the Dubai conference indicates that, over the past year, TON has achieved a 2.5-fold increase in active user addresses, with a daily transaction volume of approximately $220,000. The current Total Value Locked (TVL) on the TON blockchain is $53.43 million, with 13 projects listed on DefiLlama. Beyond the TON blockchain, TON also includes TON Storage — a decentralized file storage system; TON DNS — which assigns readable names to accounts, smart contracts, services, and nodes; TON Pay — a micropayment channel for instant off-chain transactions; and TON Proxy — a network proxy anonymity service for the TON network to hide the IP addresses of TON nodes. Although TON has been established for 5 years, the grand vision for TON is just beginning to unfold, with developers and users gradually exploring this ecosystem.

Token Economy

The initial supply of the token $TON was 5 billion, with the last $TON mined on June 28, 2022. The supply of $TON is unlimited, growing at a rate of approximately 0.6% per year (about 30 million tokens). After settling with the SEC in 2020, all tradable $TON tokens were placed in a special Giver smart contract for mining by anyone, thus 98.55% of the tokens were allocated in the early PoW (Proof of Work) mining, leaving only 1.45% of the tokens in the hands of the team. Unlike the early tokens of most public blockchains, which are held by large capitals, a significant number of $Ton are held by early miners, leading to a more dispersed distribution of chips. To address the issue of most tokens being held by early miners, in February last year, TON initiated a community proposal, freezing 171 inactive early wallets for 48 months with a total of 1.08B $TON (about 21% of the total supply). If this frozen portion of $TON is considered, TON’s total market value would rank in the top 10 of the cryptocurrency market. After the last $TON was mined and the transition from PoW to PoS (Proof of Stake), the annual inflation of 0.6% (about 3 million tokens) of $TON will be used to reward validators who maintain network security, but validators may lose their staked $TON for misconduct. According to information revealed at the Dubai conference, TON intends to increase staking rewards to further boost the staking rate on the TON blockchain.

The token $TON has multiple use cases, such as paying transaction fees on the TON blockchain, staking, cross-chain transactions, and in the future, $TON could also be used for paying for TON proxy services. The positioning of $TON is similar to fiat currency on Telegram, and its application on Telegram is particularly noteworthy. For example, $TON can be used to pay for Telegram Premium membership fees at a more favorable discount. Currently, Telegram wallet allows direct purchase of $TON with credit cards, which can then be used to buy virtual goods like anonymous accounts. It is reported that anonymous accounts worth a total of $50 million were sold out within a month of their launch. To date, anonymous accounts have generated sales of $130 million, highlighting the enormous payment potential of $TON. In the future, $TON could also be used for Telegram promotions, with advertising services payable in $TON.

Furthermore, the $TON token may undergo deflation as the network’s usage increases. This is because, in June of the previous year, the TON Foundation proposed introducing a burning mechanism: 50% of the transaction fees generated from transactions on the TON chain, as well as from domain and number auctions within the TON network, will be used to burn $TON.

TON Token Analysis

As of March 20, 2024, the total supply of $TON is 5.104 billion, with a circulation of 3.469 billion. The price per token stands at $3.8, resulting in a Fully Diluted Valuation (FDV) of $19.276 billion and a Market Cap of $13.101 billion, ranking it 13th. $TON is currently listed on CEXs such as Bybit, OKX, Kucoin, and Bitget, and has contracts listed on Binance. $TON has also become the highest-ranking token not yet listed on Binance spot. Given time, if TON’s visibility and user traffic see explosive growth, $TON would become a prime candidate for listing consideration by Binance. Looking at the distribution of tokens, the top ten wallets hold 38% of the total $TON supply, and the top 100 wallets hold 49%, indicating a dispersed distribution of tokens and mitigating potential selling pressure from being heavily owned by investment institutions and project parties. Moreover, TON has launched the TON Believers Fund, locking up over 1.317 billion $TON (about 25% of the total supply). The TON Believers Fund allows any $TON holder to donate or lock their tokens for 5 years: a 2-year lock-up period followed by a 3-year vesting period, with the donated tokens being rewarded to all depositors starting from the 3rd year. According to current public information, 10.54% of the tokens were donated to the TON Foundation by the community in 2022.

Compared to existing public blockchains that envision mass adoption, if we assess TON chain using the common public chain metric of “market cap/TVL,” it’s clear that TON has the highest “market cap/TVL,” indicating a risk of overvaluation in TON’s price. However, as will be discussed below, TON’s value should not be assessed using traditional public blockchain valuation methods. Instead, it should be evaluated from the perspective of its grand narrative in combination with Telegram, focusing on transaction volume and protocol revenue from Dapps. This is because the effect of making money through DeFi may not necessarily retain traffic in the long term, as can be seen from the dwindling TVL of public chains like Avalanche and Fantom during bear markets. Thus, the key lies in low-barrier user experiences, integration with daily high-frequency life scenarios, and massive traffic entries. This represents TON’s core competitiveness — its deep integration with the Telegram ecosystem. The application experience TON offers, deeply integrated with Telegram, far surpasses that of most Web3 products, and its comparable valuation can be benchmarked against Web2 entities with similar ecosystem experiences, like WeChat and WhatsApp. From this perspective, TON’s current valuation of only 7–8 billion is still undervalued. Although we are optimistic about TON’s long-term development and its huge future potential, a 5–10 fold return on the $TON token would likely require the arrival of a major bull market.

TON’s Crucial Role in Telegram’s Web3 Vision

Telegram’s Inherent Web3 DNA

Telegram is a cloud-based free instant messaging software founded in 2013 by Nikolai and Pavel Durov, the creators of VK (one of Russia’s mainstream social media platforms). Telegram’s commitment to free speech and privacy protection has attracted a global user base, with over 1.3 billion registered users and nearly 800 million monthly active users (MAU). The platform’s lenient atmosphere for speech and regulatory environment have made Telegram an “important stronghold” for the crypto world — almost all Web 3.0/Crypto projects have Telegram communities for project announcements, news dissemination, and community interaction. The activity level of Telegram communities has become an important metric for assessing a project’s marketing capabilities. Moreover, more than half of the Channels and Groups with the highest subscription/member counts on Telegram are related to crypto content (as shown below, the two largest Groups on Telegram are crypto-related). Most importantly, according to statistics from the TON Chinese channel, Telegram hosts over 37,000 active crypto communities.

Due to regulatory reasons and others, a large number of real users have migrated from Slack and WeChat groups to Telegram. This shift has given rise to a significant demand for services beyond group chat functionality, such as news, announcements, notifications of large transfers, and more. Telegram has timely captured these user needs by revamping its emoji system, launching story video sharing, and introducing blockchain-driven anonymous number logins (with +888 as the prefix for virtual phone numbers). Moreover, the immense success of WeChat as a social platform serving a wide user base has prompted Telegram to move closer to WeChat, attempting a transformation from a communication protocol to a social platform, and ultimately into a large, integrated super app.

Furthermore, Telegram’s open-source nature, open API, and rich database have made it a developer-friendly platform, attracting a large number of developers to build apps on it.

Based on the above discussion, it’s clear that Telegram has amassed a broad and active user and developer base, fully equipping it with the necessary conditions to build its own public blockchain or even a unique Telegram-closed-loop blockchain kingdom — users and developers. In this context, coupled with the Telegram founders’ support for blockchain and the aim to commercialize Telegram through blockchain, TON and Telegram Bots naturally emerged.

The Iron Triangle of Telegram’s Web3 Domain: Wallet, Dapp/Bot & TON

Wallet

The success of WeChat is not solely due to its social features but also its financial functionalities — we can use WeChat for transferring money, splitting bills, ordering rides, booking train tickets, online shopping, topping up mobile credit, and more, covering a wide range of online and offline life scenarios. In China, a smartphone with WeChat is all you need to step out of the house. The network effect of the internet enables the user base to grow exponentially. Similarly, a large number of crypto enthusiasts commonly use TG (Telegram) as one of their core communication tools with the community. As the crypto world expands, the network effect will come into play here, making the TG platform a vital communication tool for crypto enthusiasts and project teams, subtly trending towards becoming the WeChat of Web3.

Just as the widespread development of mobile internet in China is inseparable from the emergence of WeChat Pay and Alipay, the growth of Web3 from attracting new users to mass adoption also relies on a traffic portal — a crypto digital wallet — a simple, secure digital wallet! Of course, apart from facilitating free trade of various crypto assets like most existing crypto wallets, it is more crucial for such a wallet to link with traditional currencies, allowing users to easily exchange and move between fiat and crypto currencies. The emergence of the non-custodial wallet @Wallet built into Telegram enables users to access and use @Wallet without leaving the Telegram platform, perfectly meeting the needs of Web2 users. Its convenience and simplicity lower the entry barrier and learning costs for Web2 newcomers, making it the preferred wallet for Web2 users transitioning to Web3. Moreover, since @Wallet can also operate on the mobile Telegram app, and people use mobile phones more frequently and for longer durations than computers, the emergence of @Wallet also signifies a quiet shift from PC Web3 to mobile Web3. One problem that all social solutions in Web3 haven’t solved is that users must first have some app, which is precisely the hardest step in mass adoption. The core logic behind Telegram’s built-in wallet is that users don’t need to download another app; it naturally inherits users’ trust in Telegram, making the last step much simpler.

So, what features does @Wallet offer? @Wallet is Telegram’s built-in non-custodial wallet, similar to Alipay and WeChat Pay. It can be opened directly within the Telegram chat interface without the need for a password. Users can use bank cards to purchase, receive, trade, and transfer cryptocurrencies, and easily pay for products and services on Telegram using $TON, $USDT, or $BTC via Telegram Bots. Furthermore, @Wallet could potentially become the Telegram version of Yu’E Bao, offering users flexible cash management functionalities by integrating assets such as government bonds.

In September last year, Telegram introduced a new feature called TON Space — a self-custodial version of @wallet, directly integrated into Telegram’s @wallet interface. Third parties cannot access users’ assets, allowing users to settle payments directly on the TON Space page without being redirected to a third-party payment platform. This enhancement not only improves the wallet’s security and privacy features but also strengthens the cryptographic financial attributes of the Telegram platform itself. Unlike existing wallets like MetaMask or TP Wallet, TON Space allows users to recover their wallet using an email and their Telegram account, offering additional convenience and security. Currently, the user interface of TON Space resembles that of MetaMask, allowing users to receive, send, and exchange tokens, with the wallet page displaying the NFT assets held by the wallet. However, it is not yet possible to open Dapps through TON Space, but this functionality is planned for future release. According to the team, the TON Space wallet will support projects within the TON ecosystem, meaning users can link their Telegram accounts to ecological projects on the TON blockchain. The official version of TON Space is expected to launch in November in regions outside the United States and some other countries. To facilitate users managing multiple wallet addresses, TON Space plans to integrate multi-address support in the future. Additionally, TON will support the transfer and display of NFT collectibles to meet the social needs of Telegram users. Moreover, considering the dimension of information density, Telegram has a higher information density than WeChat, with users experiencing deeper immersion in information on Telegram and a broader density of private domain traffic. This will drive the integration of TON Space with payment and social scenarios within Telegram, achieving more refined and high-density transmission of value, traffic, and information through higher information density.

From the above, we can conclude that the wallet serves as the gateway for traffic into Telegram’s Web3 ecosystem. However, after attracting users, it’s essential to offer various entertainment facilities, which means providing Telegram’s existing Web2 Dapps in a Web3 manner. This led to the creation of Telegram mini apps (tApp Centre) and Telegram Bots.

Telegram mini app（tApp Centre）and Telegram Bot

Telegram Mini Apps are web applications that run within the Telegram Messenger, launched by the TON Foundation to meet users’ needs for gaming, content sharing, and productivity tools. They can be easily accessed from Telegram chats or group conversations. Telegram Mini Apps include three main types: bots, games, and web applications, which are functionally divided into four categories: management, Web3, utilities, and games. Telegram Bots are automated programs that operate through the Telegram chat application, allowing users to access information and market data without leaving the Telegram platform and to interact with smart contracts.

At this point, readers might wonder about the connection between Telegram Mini Apps and Web3. These Telegram Mini Apps can be built on the TON blockchain using the infrastructure provided by TON, and made available to users via Telegram Bots within the Telegram interface. This setup allows app developers not only to use TON’s infrastructure for project development — reducing the complexity and duration of development and obtaining financial support through TON grants — but more importantly, it enables developers to quickly reach Telegram’s extensive user base. Consequently, developers can monetize in various ways within Telegram, such as through in-app purchases, subscription models, or advertising.

The bridge between Telegram Mini Apps and Telegram itself is the Telegram Bot, evident from the “cumulative transaction volume exceeding $190 million by last July, with the highest single-day transaction volume reaching $10 million.” This indicates the popularity of the Telegram Bot field and its substantial real user demand. From the user’s perspective, they can utilize these Bots for operations such as DEX trading, claiming airdrops, or following the transactions of a specific wallet. Through interaction with Telegram Bots, users can easily interface with the entire blockchain on the Telegram platform by paying a certain fee.

Currently, the main functions provided by Telegram Bots include: 1) Trading: direct buying and selling of tokens; 2) Sniping: monitoring token listings and setting up automatic purchases in advance; 3) Copy trading: imitating the trades of other traders; 4) Airdrop farming: automatically executing a series of actions to increase the chances of receiving airdrops; 5) Finding the best liquidity pools for a specific token, among others. According to a Binance research report, Telegram Bots profit by collecting transaction fees and token sale “taxes.” As of last July, Telegram bots had collected over 15,000 ETH (approximately $28.7 million) in revenue.

According to a Binance research report, the daily active users of Telegram Bots peaked in July last year, exceeding 6,000. The most used bots were Maestro (with daily active users ranging between 2,000 to 3,000) and Unibot (approximately 1,700 users).

Certainly, using Telegram Bots also comes with concerns about project security and privacy: 1) As with all Web2 applications, users’ Telegram accounts are at risk of being stolen, and logging into Telegram Bots does not require a password, exposing Telegram Bots to the risk associated with Telegram account password security; 2) Trading through a Bot means the Bot will have access to private keys, posing a risk of private key leakage; 3) Like all crypto projects, interaction between Bots and smart contracts exposes wallets to smart contract risks; 4) Most people are concerned about transferring coins to a bot. Despite the risks associated with Telegram Bots, compared to the current DeFi frontends, Telegram Bots offer a more user-friendly and convenient experience, have real and significant demand, and, backed by Telegram’s 800 million daily active users, fill the Bot sector with imaginative potential. Using Blueprint under the Telegram TACT language also lowers the difficulty for developers to build and maintain Bot projects, leading to a surge in Bot projects. The following section, “Investment Opportunities — Bot,” will attempt to analyze the investment opportunities in the Telegram Bot sector.

TON: The Only Blockchain Supported by Telegram

From its inception, TON has been intricately linked with Telegram, and the higher echelons of Telegram have not been shy about their support for TON. For instance, Telegram’s CEO, Du Rove, publicly stated in a declaration last July that he holds $TON.

At the TOKEN2049 conference held in Singapore last September, Telegram openly stated that it would fully rely on TON as its blockchain infrastructure. This means that $TON and its Web3 ecosystem will be promoted within Telegram and will enjoy priority access to Telegram’s global advertising platform, Telegram Ads. Telegram aims to foster and promote a TON-centric Web3 ecosystem on its platform, and to develop the Telegram integrated wallet into a unified platform that meets all user needs.

Readers may be confused about why TON is needed when Telegram Bot already provides users with a convenient Web3 experience. The role of the Bot is primarily to direct traffic and link users to Dapps. As a representative of the TON Foundation stated, TON allows developers to create products with real-world demand, which can be deployed on the Telegram platform. TON, as a public chain, not only provides tools and infrastructure for blockchain development but also allows Dapps built on TON to be used within the Telegram interface, empowering Telegram and creating a powerful flywheel effect. In other words, TON can facilitate the use of Dapps. For example, using the TON wallet to open Telegram Mini Apps can enhance user trust. With the introduction of TON Connect, a technology based on modern cryptography, users can log in to services and applications with just one click through the TON wallet, ensuring that their keys never leave their devices and their privacy is not compromised. The use of TON Connect can alleviate concerns about entering private keys when using Telegram Bot, thus promoting the usage of Telegram Bot and Mini Apps. On the other hand, the $TON token provides Telegram with a path to commercialization — due to historical sensitivity, Telegram’s single revenue model, and limited operating funds (raised approximately $1.2 billion from personal funds of the founder and two bond issuances), Telegram is turning to decentralized commercialization avenues. Additionally, the $TON token provides the public with technology to protect their rights and freedoms, adding new dimensions to communication between users based on transactions. For example, in July last year, the TON Foundation announced the introduction of encrypted messaging on the TON chain, using end-to-end encryption to ensure that only the sender and receiver can see the message content, with a transaction fee of 0.006 $TON per message sent. The infrastructure and financial attributes of TON are indispensable components of Telegram’s Web3 vision.

Iron Triangle

As Halil Mirakhme, Chief Operating Officer of @Wallet, pointed out when discussing its competitor Signal, @Wallet’s advantage over Signal lies in having the support of a platform like Telegram, which facilitates social interaction and discussion around cryptocurrencies. The seamless integration of Wallet, Dapps/Bots, and TON forms a complete closed-loop Web3 experience for Telegram users: starting from receiving messages and engaging in discussions in Telegram groups/channels, to conducting token transactions via Telegram Mini Apps and Telegram Bots, and finally participating in TON ecosystem projects through @Wallet and TON Space.

Thus far, we can outline the grand vision of Telegram Web3: Wallet serves as the gateway for Telegram Web2 users to enter the Web3 world, Dapps capture traffic and retain users, Bots bridge Wallet and Dapps to provide users with a simple and convenient operational process, the TON chain provides infrastructure, and the $TON token offers commercialization avenues. Additionally, Dapps developed on TON can empower Telegram, forming a powerful flywheel effect. The organic integration of Wallet, Dapps/Bots, and TON provides users with a simple, convenient, and censorship-resistant Web3 experience, while also creating a platform for developers to rapidly reach a wide range of users through Web3 Mini Dapps. This integration allows Telegram to not only function as a network but also as a decentralized digital kingdom, with its own economy, citizens, digital property rights, currency, free market, communication infrastructure, and many other services.

TON Framework and Technical Development

Understanding TON requires stepping away from the current design framework dominated by ETH-based public chains. TON is a public chain designed from the outset by a team experienced in handling massive platform businesses, such as Russia’s largest social network VK, with the goal of accommodating large-scale applications. As a project contemporaneous with Ethereum, TON even proposed the concept of sharding earlier than Ethereum 2.0 to support more complex operations. The underlying architecture of TON differs significantly from Ethereum, and to a certain extent, this design logic determines whether the public chain can meet its goal of accommodating a large user base. The inability of WhatsApp and WeChat to support simultaneous message synchronization across multiple devices (such as phones and computers) is attributed to architectural design issues.

The core design of the TON blockchain includes “resource payment” and “asynchrony.” “Resource payment” differs from other public chains like Ethereum and Solana in that every smart contract on TON requires a certain amount of $TON tokens to cover fees, and if a smart contract’s $TON token balance is depleted, the contract will eventually be deleted. This design introduces an automatic cleanup mechanism to prevent data inflation on the blockchain. “Asynchrony” refers to the asynchronous nature of calls between smart contracts — when two contracts are involved in a call, the call is not executed immediately but processed on a future block after the transaction concludes. The advantage of this design in TON is higher scalability and flexibility, but it also increases the difficulty and complexity of application development and maintenance, leading to challenges and slow progress in DeFi development on the TON chain.

TON’s architecture is divided into three layers: masterchain, workchain, and shardchain. The masterchain serves as the coordinating hub, while the workchain and shardchain handle actual transactions. Therefore, TON has a main chain, the masterchain, which can accommodate up to 2 to the power of 32 workchains, with each workchain further subdivided into up to 2 to the power of 60 shardchains. TON claims to support millions of transactions per second (TPS) and applied for the Guinness World Record for the “fastest blockchain” in October last year. However, the actual TPS of TON may need to wait until the TON chain ecosystem thrives and substantial traffic runs on the TON chain to be verified.

Smart contract development on TON can be done using three programming languages: Fift, FunC, and Tact. Fift is considered more challenging with lower-level difficulty, and very few developers choose to use Fift. Currently, the most widely used development language is FunC, which is similar to the C programming language. Tact is a newly introduced high-level language on TON, designed to resemble popular programming languages like JavaScript, Python, and Solidity, aiming to lower the development barrier for a broader range of developers.

As this text is not a technical article, the technical details of TACT are not elaborated here. Readers interested in TACT’s technical specifics can refer to “Why TACT is the Next Big Breakthrough for TON”. However, noteworthy aspects of TACT include:

1. Support for Message-Oriented Programming (MOP) principles, simplifying the development process and improving efficiency. It also enables the creation of contracts that interact easily through message passing, simplifying integration and interaction between different contracts.
2. The availability of the Blueprint framework, which provides a comprehensive set of tools for smart contract development, simplifying and streamlining the process of contract development and deployment. With Blueprint, developers can easily manage all stages of the smart contract lifecycle. Other Telegram Bots like the popular Unibot from last year were developed using TACT language and its Blueprint scripts.

Although TACT is still undergoing auditing, its promise of simplified development is expected to play a significant role in the development of the TON ecosystem, with widespread adoption anticipated in the future.

TON Ecosystem and Opportunities

As of the end of September last year, the TON developer community on Telegram consisted of 10,747 members, with 176 active developers on GitHub. Some well-known development teams include TonWhales, Orbs, and TON Tech. To attract more project teams to develop on TON, the TON community not only provides basic tools such as TON SDK, Ton Connect, TACT language, and the Blueprint framework but also offers TON blockchain courses and promotes the TACT language through the TON TACT Challenge. Additionally, events like the Hack-a-TON x DWF x AWS hackathon have been organized, with a prize pool exceeding $415,000 USD.

Projects like TON Bounties have successfully processed over 155 proposals, with 40 new bounty tasks approved in the third quarter of last year. Currently, 25 completed projects have received approximately $53,000 USD in rewards. The TON Grants program has received 103 project applications and approved 10 projects.

In addition to these initiatives, TON has established the $250 million TONcoin.Fund to invest in TON ecosystem projects. Investment areas cover infrastructure, DeFi, NFT, gaming, sociafi, and more.

As of November 11th last year, the TON ecosystem consisted of 551 Dapps, spanning across categories such as wallets, DeFi, NFT, gaming, and socialFi. However, according to an article on Starbase, the TON ecosystem projects actually include many Telegram groups as well. Overall, it appears that the TON ecosystem is still in a very early stage of development.

(From public social media)

The on-chain Total Value Locked (TVL) for TON is $53.43 million USD, with 13 projects listed by DeFiLlama. The projects with the highest TVL are Tonstakers ($105 million USD) and Bemo ($27.33 million USD). It can be observed that the TON ecosystem lacks blockbuster DeFi projects. One reason for this is that existing DeFi projects support only a single stake asset with relatively low yields. For example, the highest TVL project Tonstakers currently only supports staking $TON with an APY of 4.64%.

Another reason for the low TVL on the TON chain is the lack of stablecoins. Currently, besides USDT, other stablecoins on the TON chain, such as oUSDT, oUSDC, jUSDT, and jUSDC, have low liquidity and incur significant slippage during exchanges. Moreover, unlike USDT and USDC, these stablecoins lack real-world asset backing and audits, which greatly reduces users’ enthusiasm for trading across chains to the TON network. With more cross-chain bridges expected to be launched in the future, it is anticipated that stablecoins with liquidity other than USDT will appear on the TON network to promote ecosystem prosperity. Additionally, a native USDT on TON is expected to be launched this year, and TON is currently in negotiations with other stablecoin projects. The introduction of stablecoins is expected to continue stimulating TVL growth on the TON chain.

Currently, the TON chain has only launched an ETH cross-chain bridge, but mature projects in the Ethereum ecosystem have not yet expanded to the TON chain. Projects such as AAVE and Uniswap do not support the TON chain, resulting in a large amount of traffic on Ethereum unable to flow into the TON chain. From various activities launched by the TON Foundation and TON Society, it seems that the official stance on cross-chain and EVM integration is not very proactive. One possible reason is that users’ cross-chain needs can be met through Telegram bots, Mini Apps, official, and third-party cross-chain bridges. Additionally, with the immense traffic on Telegram, it may be more urgent for other public chains to reach TON users through cross-chain bridges rather than TON needing to attract traffic from other chains through these bridges. Therefore, at this stage, TON can collaborate with mainstream DeFi protocols such as AAVE and Uniswap, as well as select suitable projects from numerous cross-chain cases, and strive for better benefits through these partnerships.

However, it is worth noting that due to the different underlying architectures between TON and Ethereum, the atomicity of transactions on Ethereum cannot be achieved on TON. This will to some extent limit the richness of DeFi applications on TON, such as implementing flash loans, which are difficult to achieve on TON. Therefore, we need to pay more attention to DeFi applications and scenarios that are integrated with the Telegram ecosystem.

TON Community Governance

Currently, the TON community has not achieved a fully autonomous state, but this does not mean that community members cannot participate in the development and governance of TON. The official channels and chats provided by TON allow community members to subscribe and communicate. For developers, the official platform also offers comprehensive tutorials and developer documentation to assist in development, along with developer communities and TON Answers to provide support and guidance.

The general governance process of TON is as follows:

1. Firstly, an Author submits a proposal through TON Enhancement Proposal, initiating a pull request to put the proposal under review.
2. Next, an Editor checks the pull request and assigns Reviewers for evaluation.
3. Reviewers share opinions or comments and vote in favor or against the proposal.
4. Once the majority of Reviewers agree on the proposal, it enters a 10-day period of public comment.
5. After the comment period ends, the Editor changes the proposal status from Review to Active or Rejected.

Through this process, community members and core contributors can participate relatively easily in the internal governance of TON. However, considering that in the early stages of public chain development, excessive decentralization of power and governance often leads to inefficiency, the TON community has not yet reached a state of complete autonomy. As TON chain gradually matures, it is expected to move towards a fully autonomous DAO governance model.

TON TVL and Ecosystem

Traditionally, when assessing the prosperity of a blockchain ecosystem, we often use Total Value Locked (TVL) as a key metric — a reflection of the DeFi Lego effect. However, in the crowded space of public chains, we believe that evaluating TON using traditional blockchain valuation methods may not be suitable.The core value of TON lies in its strong integration with Telegram. Therefore, we should evaluate TON from the grand narrative of TON x Telegram, focusing on metrics such as transaction volume and protocol revenue from Dapps.

Telegram, which is evolving rapidly, has attracted a large number of real users and is continuously expanding its functionality and Dapps to retain users. It aims to transition from a communication protocol to a social platform and then to a super app platform. Its open and liberal atmosphere, coupled with a growing array of Dapps and services, is bound to attract more users. Given that Telegram is a crucial space for cryptocurrency, TON, being its sole supported blockchain, is poised to benefit. According to the TON Foundation, they aim to migrate 30% of Telegram’s active users to TON by 2028, which means that by then, 500 million Telegram users will become users of the TON chain. Hence, we believe the primary concern for TON currently is how to attract Telegram users to migrate to TON. In addition to continuously developing various types of Dapps to cater to the traffic brought in by Telegram, integrating games, DeFi, creator economies, encrypted e-commerce, and other aspects into daily life scenarios using TON wallets can increase user frequency and stickiness. Furthermore, TON also needs broader and more active promotion on Telegram. From an investment perspective, the current price of $TON is $3.8 per token, with a market capitalization of $13.1 billion, ranking 13th. TON’s market capitalization is relatively high at present, surpassing other chains such as Apt and Sui. Investors seeking a return of 5–10 times may need to wait for the arrival of a major bull market. Six months ago, TON’s price was $2.48 per token, now it is $3.8. Aptos’ price was $5.2 six months ago, now it is $14.4. Solana was $20 six months ago, now it is $166. Sui was $0.45 six months ago, now it is $1.52. It can be seen that TON’s growth over the past six months has not been significant, but there is still potential for growth.

TON Ecosystem Projects

Tonup

Tonup is a launchpad platform on the TON chain that has received strong support from TONCoin.Fund and the TON Foundation since its inception. It has successfully completed a seed round of financing led by TONCoin Fund, with other investors including Foresight X, Waterdrip Capital, BitFund DAO, and more.

Fragment

Fragment is a non-custodial decentralized NFT trading platform on the TON network. Currently, users can trade Telegram-specific usernames and virtual phone numbers on Fragment, with settlements conducted in TON. Listing NFTs on Fragment incurs no fees, but a 5% platform fee is charged for each auction, where the highest bidder wins. It’s worth noting that Pavel Durov, the founder of Telegram, is also a co-founder of Fragment.

Telegram usernames are similar to decentralized usernames like ENS. As Pavel Durov, the founder of Telegram, has mentioned, this is the first publicly transparent username market established on a social platform. This means that users now have ownership of their usernames for the first time on a Web2 social platform. If Telegram can explore integrating usernames with activities on channels/groups into a points system, such as “participate to earn,” and other features into Web2, it will surely attract more users to purchase and use Telegram usernames. Fragment has introduced virtual phone numbers starting with “+888”, which can be used to register Telegram accounts and bind TON wallets. These virtual phone numbers are defined as NFTs recorded on the TON blockchain, serving the purpose of protecting privacy and showcasing user identity. These virtual phone numbers have speculative and collectible value, with the current floor price being 9 $TON. Additionally, Fragment also integrates Premium features, allowing users to pay for Telegram Premium subscriptions on Fragment or donate $TON to Fragment for the opportunity to promote channels on Telegram.

Bot Track

As mentioned in the section “Telegram Mini Apps (tApp Centre) and Telegram Bots” above, Telegram Bots provide users with easy access to the entire crypto world within the Telegram interface. They fulfill numerous real needs and have been widely integrated into various fields such as trading, DeFi, cross-chain transactions, and airdrops. However, Telegram bots currently operate in a blue ocean market, with many new application scenarios yet to be developed, such as integrating bots with Telegram payments or with Ethsign. It is expected that Telegram Bots will integrate with other narratives and applications, and in the future, they will also transition into Telegram mini apps to provide users with a better Web3 experience.

From the 24-hour trading volume on Dex, Unibot and Banana dominate the majority of the trading volume in the Telegram Bot track, accounting for 50% and 41% respectively. They are currently in the stage of competing for market share.

Additionally, according to research analysis by CertiK, nearly 40% of Telegram Bot projects are suspected to be in a dormant state, potentially facing fraud or the risk of being unable to recover from significant sell-offs. One possible reason for this is that Bot projects directly use TACT language and Blueprint provided by TON for development, making the development process relatively simple and easy to replicate successful projects on the market. However, these projects often lack the ability to continuously attract users after their launch. Therefore, investors should also consider the risks when paying attention to Bot track projects.

LootBot LootBot focuses on automating interaction with airdrops, filtering out the most advantageous airdrop opportunities, while implementing robust security measures to protect users from hacking and fraudulent activities. It currently supports ZkSync, Layerzero, Linea, Base, Taiko, and Polygon chains. The first 15 transactions on Lootbot are free, after which users are encouraged to purchase its Premium version for $30 per month. As of now, Lootbot has received $148,000 in subscription fees. LOOT token holders can choose to burn LOOT to mint xLOOT tokens to earn rewards, with a total of 1.98 million LOOT tokens burned.

WagieBot

WagieBot provides users with the ability to conduct due diligence and interact with any liquidity pool on Ethereum, Binance Smart Chain, and Arbitrum via Telegram and Discord. Users simply need to paste a contract, and WagieBot will automatically retrieve the largest liquidity pool for that token along with all necessary information and complete anti-rug checks. WagieBot’s interaction speed is several times faster than Dex and it also integrates with GMX, allowing users to engage in leverage trading of up to 50x. As of now, the trading volume on WagieBot is $7.17 million USD, with a total of 414 users.

Reference

1. TON发展简史
   https://foresightnews.pro/article/detail/44875
2. TON发展简史图
   https://foresightnews.pro/article/detail/43776
3. TON的技术特点与网络结构、开发语言 https://foresightnews.pro/article/detail/44324
4. OKX Ventures最新研报：TON 生态和投资分析 https://www.techflowpost.com/article/detail_14363.html
5. 为什么TACT是TON的下一个重大突破
   https://blog.ton.org/why-tact-is-ton-s-next-big-breakthrough
6. TON +Telegram的叙事到底有多性感？ https://www.theblockbeats.info/news/45907?search=1
7. TON Space：Telegram未来的加密「微信钱包」 https://www.theblockbeats.info/news/45428
8. 继 Maestrobot 后，Telegram Bot 项目再遭恶意利用：Unibot 攻击事件分析
   https://foresightnews.pro/article/detail/46248
9. TON Developer Report: Q3 2023
   https://blog.ton.org/ton-developer-report-q3-2023
10. TON 链上数据
    https://www.tonstat.com/https://m3talab.io/reports/ton-telegram-open-network
11. TON 代币持仓数据
    https://eagleeye.space/detail/toncoin
12. Telegram group数据
    https://tgstat.com/ratings/chats
13. Telegram mini app与bot 介绍
    https://core.telegram.org/bots/
14. Building a Web3 Ecosystem in Telegram with TONcoin https://blog.ton.org/building-a-web3-ecosystem-in-telegram-with-toncoin
15. 钱包支付简介：使用加密货币购物的革命性技术 https://blog.ton.org/introducing-wallet-pay-revolutionary-technology-for-shopping-with-cryptocurrency
16. 一文了解Unibot（UNIBOT） https://www.gate.io/zh/learn/articles/understanding-unibot-in-one-article/759
17. 解读币安研究院 Telegram Bots 报告：移动端的另一种交易体验 https://www.techflowpost.com/article/detail_12664.html
18. Bot代币DEX交易量
    https://dune.com/wuhuzai/telegram-bots-data-cn
19. Unibot的数据
    https://dune.com/whale_hunter/unibot-revenue
20. Loot数据
    https://dune.com/dknugo/lootbot
21. Wagiebot数据
    https://dune.com/whale_hunter/wagie-bot
22. TON 链上生态报告：趋势与机会，如何在 TON 生态中找到切入口？ https://foresightnews.pro/article/detail/46655
23. Telegram Bot 项目再遭恶意利用：Unibot 攻击事件分析 https://www.tuoluo.cn/article/detail-10110116.html
24. 一文速览 Telegram 上线的用户名拍卖平台 Fragment https://foresightnews.pro/article/detail/17620

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Twitter：https://twitter.com/mtcap_crypto

Website：https://mt.capital/

By Xinwei, Ian MT Capital

TL; DR

1. We believe that the development in the AI x Crypto track is sustainable, not just a temporary hype. With the advancement of AI technology over time, we anticipate seeing more funds and attention continuously flowing into this area, bringing multiple rounds of development opportunities. Therefore, laying out a strategy for the AI x Crypto track is not only feasible but a necessary strategic choice.
2. In the AI x Crypto domain, we can identify several sub-fields, including AI Agent, decentralized computing, data, oracles, ZKML (Zero-Knowledge Machine Learning), FHEML (Fully Homomorphic Encryption Machine Learning), co-processors, Memes, Universal Basic Income, generative art platforms, and gaming applications. Among these, decentralized computing is particularly notable. Whether it’s GPU computing or algorithmic models, it represents a huge space for innovation, with an extreme demand for computational power. Computational power becomes a form of consensus, whose potential value can compete with the market cap ceiling of public blockchains. We are also optimistic about the early-stage yet potentially huge fields of ZKML, FHEML, and co-processors.
3. Considering the current market liquidity, project fundamentals, and community influence, Worldcoin, Arkham, Render Network, Arweave, Akash Network, Bittensor, and io.net are the leading projects we believe have a position of leadership and potential for growth.

Introduction

In the past few years, the AI x Crypto domain has experienced unprecedented development and transformation. This emerging field combines two of the most transformative technologies: blockchain and artificial intelligence, aiming to explore how decentralized approaches can empower AI applications, thereby enhancing transparency, security, and user control. With the rapid progress of artificial intelligence technology, especially the rise of generative AI, and the growing demand for decentralized solutions, AI x Crypto has become one of the most exciting innovation frontiers in the technology field.

A New Landscape of Assetization in the AI x Crypto Domain: The Innovative Path of Computational Power, Models, and Data

The most direct use case of Crypto is assetization, and in the AI x Crypto domain, “Computational power assetization,” “Model/Agent assetization,” and “Data assetization” represent three major scenarios.

In the assetization of computational power, there are two main directions: decentralized computing and decentralized inference by AI Agents. Decentralized computing focuses on using distributed networks for the training of AI models. AI Agents mainly utilize trained AI models for decentralized inference. These AI Agents can be deployed on decentralized networks to provide various intelligent services for users, such as automated trading, knowledge assistants, or security auditing.

However, from a technical perspective, the training of current large AI models involves massive data processing and demands high-speed communication bandwidth, which imposes significant requirements on hardware infrastructure. Training Transformer large models typically requires high-end CPUs like NVIDIA’s H100 or A100, NVIDIA’s NVLink technology for GPU connection, and professional fiber switches to achieve over 100Gbps network connections to support training across multiple data centers. These models contain tens to hundreds of billions of parameters, requiring powerful computational capabilities and memory to execute deep network algorithms. At the same time, to rapidly supply data for processing, high-speed storage and network bandwidth are necessary to reduce I/O bottlenecks. Parallel computing strategies, such as model parallelism and data parallelism, demand high-speed internal and external network bandwidth for effective synchronization among multiple GPUs. These requirements indeed present a significant challenge for decentralized AI training under current technological and cost conditions.

The AI inference executed by AI Agents, due to its lower demands on computational power and communication bandwidth, makes the adoption of decentralized methods more feasible and practical. This is also the reason why many projects related to computational power in the current market are more focused on inference rather than training. Despite this, considering cost-effectiveness and reliability, centralized solutions often still surpass decentralized ones at this stage.

The assetization of models/Agents is another important direction, especially under the push of large language models like GPT, becoming a significant trend. Users can interact with AI-based virtual characters. Transforming these AI Agents into NFTs, allowing users to buy, sell, collect, or trade them, similar to art transactions. However, projects in this direction often have a lower technical threshold, lack innovation, and have a lower degree of integration between AI and Crypto. Many projects simply convert AI models into NFTs without deeply considering the integration points between AI and Crypto, leading to homogeneous competition in the market. Moreover, Agents are mostly stored on cloud servers, with only the proof of ownership made into NFTs and placed on the blockchain, resulting in a shallow integration with Crypto.

Data assetization is also an important direction in the AI x Crypto track, focusing on using decentralized technology and incentive mechanisms to release and utilize a large amount of data resources, typically confined to private domains, including personal data and internal enterprise data, etc. Once these data are transformed into resources available for training or fine-tuning large models, it can significantly improve the professionalism and efficiency of AI models in different vertical fields. However, factors like the diversity, quality, application scenarios, and privacy protection of data add complexity to data assetization, making standardization a challenge. While non-standardizable data can be NFTized, this also highlights the difficulty of establishing a market with strong liquidity and ease of trade.

Decentralized data labeling, as a part of data assetization, through the “Label to Earn” model or crowdsourcing platforms, incentivizes community members to participate in data labeling, improving data usability and quality while reducing costs and time. This decentralized labor approach not only ensures the efficiency and quality of data labeling but also ensures that participants receive fair compensation, providing a new pathway for data assetization.

From the above, it can be seen that the actual established scenarios in the AI x Crypto track are relatively limited at present, with most directions having low barriers to entry, and the recent market enthusiasm largely driven by capital operations and FOMO sentiment. The AI x Crypto track currently faces several core pain points:

1. Immature Business Models: AI x Crypto is at a very early stage, and many projects attempting to combine the two are not mature enough to fully leverage their respective advantages. With teams that have a deep understanding of both fields getting involved, it is expected that more solutions will be developed that showcase the power of AI technology while deeply integrating Crypto characteristics.
2. The Dual Challenge of Interdisciplinary Expertise and Practitioner Preferences: In AI x Crypto projects, teams often have a deep background in either the AI field or a profound understanding of Web3 and cryptocurrencies, but struggle to excel in both. This not only limits the ability for technological innovation and exploration of business models but also reflects the preference tendency of practitioners when choosing their field, i.e., excellent AI talents often hesitate to venture into the crypto industry. This lack of interdisciplinary expertise and the contradiction of practitioner preferences become major obstacles to innovation in the field. In the future, teams capable of working across boundaries and having insights into both AI and cryptographic technologies will become the key force in innovation and progress in this domain.
3. Internal Empowerment Technical Challenges: When Crypto tries to internally empower AI, such as through ZKML and FHEML, the main pain point is the poor scalability of these technologies, which limits their practical application. Similarly, when AI tries to internally empower Crypto, the challenge is not only the complex engineering problem of integrating AI into existing systems but also ensuring that this integration can work effectively without hindering system performance. These challenges reflect that in deeply integrating AI with Crypto, innovative technical solutions are needed, as well as overcoming the complexity and scalability issues when implementing these solutions.

Despite the current difficulties, we still believe that AI x Crypto is one of the most important tracks of this cycle. The combination of AI and Crypto not only shows strong technical potential and application prospects but also occupies a unique and important position in the current technology and investment fields:

1. The Revolutionary Status of AI in Technology: AI is widely regarded as a key force driving the next round of technological revolution. Compared to the previous cycle centered around concepts like the metaverse, which requires more practical application landings and faces challenges in user data verification, the enthusiasm for the metaverse concepts, as represented by companies like Roblox and Meta, has rapidly declined following their stock price crashes. In contrast, high-tech companies like OpenAI that are not yet public do not need to prove their value through revenue at this stage. Compared to the metaverse, AI has a broader impact on practical applications and technological innovation. It penetrates various fields such as healthcare, education, transportation, and security, capable of advancing the entire high-tech industry chain. Decentralized computational power further unleashes the potential of AI by providing the necessary computational resources through distributed networks to support the training and inference of AI models, promoting the advancement and widespread application of AI technology.
2. The Importance of Computational Power: In AI x Crypto projects, the importance of computational power is self-evident. Computational power is not only directly related to the efficiency and effectiveness of AI model training but also an important indicator of a project’s technical strength and market consensus. The higher the computational power, the stronger the consensus, and the higher the market value. As more enterprises and individuals participate in contributing to decentralized computational power, it not only achieves the optimization of resource allocation but also promotes the exploration of new economic models and methods of value distribution, such as through computational power mining and AI computational power hosting.

Representative Projects

Worldcoin

The reason behind WLD’s recent stellar performance is quite simple. On February 15, OpenAI released a large-scale video generation model called Sora. With text instructions, Sora can generate up to 60 seconds of high-definition videos that include highly realistic backgrounds, complex multi-angle shots, and emotionally rich multi-character narratives, demonstrating a profound understanding of the physical common sense of the real world. Despite the anticipation for the release of GPT-5, the impact of Sora is comparable to a GPT-5 launch.

This event reignited enthusiasm for the AI field. It’s well-known that Sam Altman, the founder of Worldcoin, is also the CEO of OpenAI. With the operation of market makers, WLD quickly became the most eye-catching focus in the market at the beginning of the year.

Worldcoin mainly involves two areas: identity verification and the issuance of digital currency. Rumors have it that OpenAI is developing two types of agent robots capable of deeply understanding human instructions and acting upon them, which is seen as the final step toward General Artificial Intelligence (AGI). Once this step is reached, almost all jobs could be replaced, leaving the majority of people facing unemployment, but they cannot starve. At this time, OpenAI would need to issue a Basic Income (UBI) through Worldcoin, where individuals can collect 6 WLD per month just by iris recognition.

However, a detailed analysis reveals that WLD does not have substantial empowerment, and its existence is more as a hyped-up “air coin”. If WLD is truly used to distribute basic income in the future, this form of non-stablecoin could cause various problems. This is why the white paper and founders of Worldcoin are ambiguous when discussing the role of WLD.

WLD is likely to remain a meme coin forever. Nevertheless, this does not mean WLD lacks investment value. Looking at the market cap, WLD shares similarities with DOGE. If Altman’s fame can surpass Musk’s, WLD might have a chance to reach DOGE’s market cap. However, its high unit price to some extent limits its potential as a top meme coin. If Worldcoin’s price were more accessible, it would undoubtedly greatly increase its appeal as a top meme coin. As a top figure in the AI field, Sam Altman’s every public statement related to AI or major events in the AI field can significantly impact Worldcoin’s market, adding to Worldcoin’s attractiveness and uncertainty as an investment target.

If there are future actions to split the coin, i.e., redefining Worldcoin’s market positioning with a lower unit price and higher circulation, such a strategy could trigger a rapid price increase.

Although the current market positioning and practical application of Worldcoin are somewhat ambiguous, making it viewed by some as a meme coin, Altman’s influence and the rapid development of the AI field provide Worldcoin with unique market dynamics. If reasonable market strategies, such as coin splits, are adopted in the future, Worldcoin has the potential to become a force that cannot be ignored in the market.

Arkham

Arkham, founded in 2020 and headquartered in the United States, is led by founder and CEO Miguel Morel, with a team that includes Operations Director Zachary Lerangis, Business Development Director Alexander Lerangis, and Institutional Relations Expert John Kottlowski. Arkham has secured over $12 million in funding, including a $2.5 million public round from Binance Labs. The founders are veterans in the crypto industry, having previously established Reserve, a stablecoin project designed for high-inflation economies, with investors including Peter Thiel, Sam Altman, Coinbase, and Digital Currency Group among others.

Binance announced on July 10, 2023, that Arkham’s token $ARKM would be listed on its Launchpad, marking the first time Binance introduced a tool-type product, sparking great interest.

Arkham is a platform that uses artificial intelligence algorithms to analyze blockchain data, capable of associating blockchain addresses with real-world entities, providing users with a complete behind-the-scenes behavior perspective. Arkham recently launched a blockchain intelligence trading platform, Arkham Intel Exchange, which allows users to request needed information through rewards, while information providers can earn rewards by supplying information. Arkham also offers powerful tools that allow users to search, filter, and sort any crypto transaction, revealing the entities and personal information behind market activities.

In addition to its listing on Binance, exchanges like Kraken, OKX, and Hotbit also support $ARKM trading.

Arkham introduced an “Intel-to-Earn” model, matching buyers and sellers on the blockchain to realize an intelligence economy. Its platform token $ARKM is used to pay for analysis platform fees, governance voting, and user incentives. The total supply of $ARKM is 1 billion, with a circulating supply of 150 million (15% of the total supply), and the test website has registered 200,000 users. After listing on exchanges, the trading volume is expected to reach the scale of $100 million.

Arkham mainly includes blockchain analysis tools and an intelligence trading marketplace. Analysis tools provide comprehensive data insights through entity pages, token pages, network mapping, etc. Arkham uses its proprietary AI engine Ultra to de-anonymize blockchain data and match addresses with real-world entities through algorithms. The intelligence trading marketplace allows users to buy and sell information through rewards, auctions, and data sharing. Arkham maintains long-term platform operation by charging fees — for listing and auction payments, a 2.5% minting fee is taken, and for reward payments and successful auctions, a 5% acceptance fee is charged.

Compared to other data analysis platforms on the market, Arkham has several unique advantages, such as creating token use cases, realizing on-chain data value transactions through the intelligence exchange, and providing data analysts with a channel for monetizing their knowledge. The platform self-motivates through mechanisms like taking cuts, which is beneficial for sustainable development; it offers users the ability to track the archives of their historical investment portfolios and lowers research costs with visualized data graphs. However, Arkham faces challenges such as limited support for public chains, functional gaps with platforms like Nansen, limited replicability of token scenarios, a user base primarily of professionals limiting appeal to ordinary investors, weaker data processing capabilities reliant on external data teams, and more.

The Arkham project has a first-mover advantage and broad market space in blockchain information analysis but is still in the early stages with a business model that needs validation. Ecosystem construction and scaling require time to cultivate. Risks include the time needed for the popularization of on-chain information analysis, high user education costs, limited replicability of the business model, reliance on personnel for information processing, high operational costs and risks, variable information quality, reputation risks, and regulatory policy uncertainty.

Render Network

Since its launch in April 2020, Render Network has become a leading decentralized rendering platform, bridging users in need of GPU computational power with providers who have surplus computing resources. This platform primarily serves high-demand computing fields such as artificial intelligence, virtual reality, and multimedia content creation, offering a fair and competitive market environment for all parties involved through its unique dynamic pricing strategy, which takes into account the complexity of tasks, urgency, and available resources. In this way, GPU owners can connect their devices to the Render Network and accept and complete rendering tasks using the OctaneRender software developed by OTOY. In exchange, users pay individuals who complete rendering tasks with RNDR tokens, while OTOY takes a small percentage of RNDR as a fee to facilitate transactions and network operations.

Render Network is headquartered in the United States and was founded by Jules Urbach. Not only is Urbach the founder of Render Network, but he is also the founder and CEO of OTOY, contributing deep insights and advancements in 3D rendering technology and decentralized computing platforms.

Render Network has completed several rounds of funding, including strategic financing. On December 21, 2021, Render Network successfully raised $30 million in a strategic financing round, with investors including well-known investment institutions and individuals such as Multicoin Capital, Alameda Research, Sfermion, Solana Ventures, Vinny Lingham, and Bill Lee. Additionally, Render Network raised $1.16 million through an ICO in January 2018. The successful fundraising not only supported the technological development and market expansion of Render Network but also reflected the market’s recognition of the potential for decentralized rendering services.

Utilizing the peer-to-peer network capabilities of RNDR tokens, Render Network can effectively distribute workloads among providers of idle GPU resources, while incentive mechanisms encourage nodes to share their unused computational capacity. This approach not only maximizes the efficiency of resource utilization but also creates value for participants, driving the prosperity of the decentralized rendering ecosystem.

In December 2023, Render achieved a significant technological leap by migrating its infrastructure from Ethereum to Solana. This transition brought new capabilities to Render, including real-time streaming, dynamic NFTs, and state compression, significantly improving the network’s performance and scalability, and opening up a wider and more diverse range of application scenarios for users.

DePIN (Decentralized Physical Infrastructure Network) emerges as a new concept, comprising two main domains: digital resource networks and physical resource networks, aiming to incentivize individual participation in the construction and efficient use of real-world infrastructure through a Physical Proof of Work (PoPW) mechanism. The advent of DePIN not only brings innovative solutions to the traditional Information and Communication Technology (ICT) industry but also heralds the arrival of a more decentralized and efficient infrastructure network model.

Despite the challenges of high barriers to entry and low resource utilization efficiency faced by the current ICT industry, DePIN introduces a peer-to-peer network model that enables the reuse of idle resources and, through decentralization, lowers the barriers to entry, enhancing market competitiveness and efficiency.

The successful upgrade of Render Network and its close integration with Solana demonstrate the advantages of decentralized rendering platforms in addressing real-time responsiveness and reducing transaction costs. This not only strengthens Render’s leadership position in the DePIN domain but also opens new paths for its future development.

As Render Network continues to advance technological innovation and ecosystem construction, its potential in leading-edge domains such as decentralized rendering, artificial intelligence, and digital rights management is gradually emerging. Render is more than just a rendering service platform; it is a powerful engine driving innovation, connecting resources with demand, and promoting decentralization and digital transformation. With ongoing technological advancements and growing market demand, Render Network is poised to become one of the key forces driving new developments in the digital economy.

Arweave

Arweave is an innovative decentralized data storage protocol designed for the permanent storage of data. Through its unique permaweb, Arweave enables stored data to be accessed in human-readable forms (e.g., via web browsers), thereby creating a persistent, immutable internet. This capability for permanent storage is revolutionary for ensuring the immutability and perpetual accessibility of information, particularly in applications that require high data integrity and permanence, such as legal document storage, academic research archives, and copyright protection.

Arweave incentivizes data storage providers within its network through its native token, AR, with an economic incentive mechanism that ensures the sustainability and scalability of the network’s storage capacity. As an infrastructure and storage network project, Arweave aims to reshape the way data is stored and accessed. Originally known as Archain, it was founded in 2017 and is headquartered in Germany. The founding team includes co-founder and CEO Sam Williams, COO Sebastian Campos Groth, and Legal Director Giti Said, who bring extensive experience in technology, operations, and legal fields, and are key to driving the development of the Arweave project.

Since the launch of its mainnet in June 2018, Arweave has attracted broad attention and support from several key investors, including notable entities like a16z Crypto, Coinbase Ventures, and Union Square Ventures. In May 2018, a public fundraising round raised $1.57 million. Subsequently, the project conducted two rounds of financing in November 2019 and March 2020, raising $5 million and $8.3 million, respectively, with investors including a16z Crypto, Multicoin Capital, Union Square Ventures, and Coinbase Ventures.

The AO (Actor Oriented) solution launched by Arweave represents a significant innovation in blockchain technology, primarily reflected in its provision of a hyper-parallel computing architecture. This architecture allows an arbitrary number of processes to run in parallel within a decentralized computing environment, greatly enhancing computational efficiency and scalability. The core features of AO include massive computational capacity, the realization of verifiable computing, and high parallel processing and scalability through the construction of three different subnetworks (messenger units, scheduling units, computing units) and basing on Arweave as the foundational layer.

Named AO (Actor Oriented), inspired by the Actor model in computer science, this model is particularly suited for designing and implementing systems that are highly concurrent, distributed, and fault-tolerant. Through AO, the Arweave team demonstrates their profound understanding of and innovative solutions for the future development of decentralized computing environments.

AO is built upon the foundational layer of Arweave, utilizing Arweave’s on-chain storage as its permanent host for operational data, enhancing its decentralized computing capabilities and allowing an arbitrary number of parallel processes to run simultaneously, akin to the collaborative functioning of data centers and internet computers. Additionally, a key part of AO is AOS, a specific operating system based on the AO architecture, which allows developers to create applications using the Lua language, further enhancing its usability and flexibility.

The launch of AO aligns with Arweave’s long-term goal of supporting a highly scalable blockchain network through its data storage platform. Although the Arweave team faced challenges in achieving this goal, their persistence and innovation ultimately made AO possible. This not only enhanced the functionality of the Arweave chain, enabling it to support more smart contracts and blockchain protocols, but also provided a new and powerful solution for decentralized computing.

The working principle of Arweave AO breaks through the limitations of traditional blockchain technology by decomposing the three main components of the blockchain into independent units that can communicate with each other and execute a large volume of transactions simultaneously, achieving unprecedented scalability. This innovation opens up new possibilities for the development of Arweave itself, as well as providing new perspectives and inspiration for the entire blockchain and decentralized technology field.

Ultimately, Arweave’s goal is to make AO a stable system that requires only infrequent updates, similar to Bitcoin, ensuring the continuity of core functionalities and user rights. This stability and transparency are crucial for users as it allows them to have deeper trust and understanding of the protocols they use. As Arweave AO continues to evolve and improve, it has the potential to become a significant player in the decentralized smart contract platform space, posing a strong competition to existing blockchain technologies like Ethereum.

Akash Network

The core value of Akash Network lies in its role as a decentralized computing platform that taps into the globally underutilized GPU resources, connecting these resources with users in need of GPU computational power. This platform not only offers a profitable opportunity for GPU resource owners but also provides a more cost-effective option for users requiring these resources. According to data from September 2023, Akash Network has successfully deployed between 150 to 200 GPUs on its network, achieving a utilization rate of 50% to 70%. This achievement translates to an annual transaction value of $500,000 to $1,000,000, demonstrating the market potential of the decentralized computing resource sharing model.

Further analysis of Akash Network’s business model draws a fitting parallel to Airbnb in the real estate market. Akash has created a marketplace that allows GPU resource owners to rent out their unused computing power, similar to how Airbnb hosts rent out their properties, while users needing these resources can access the required computing power at lower costs. This model not only increases the utilization rate of GPU resources but also lowers the barrier to entry into fields like artificial intelligence and machine learning.

With the rapid development of artificial intelligence, the demand for high-performance computing resources like GPUs has surged dramatically. Nvidia, a leading manufacturer of GPUs, is expected to see its revenue grow significantly in the coming years, from $27 billion in 2022 to $60 billion in 2023, with an anticipated reach of around $100 billion by 2025. This growth forecast reflects the robust demand for GPU computational power globally, providing Akash Network with a vast market space.

Akash Network’s decentralized model is particularly suited to the current market environment, where demand for cloud computing services is increasing, and a significant amount of global GPU computational capacity remains underutilized. Through Akash, providers can offer idle GPU resources, while consumers can access the necessary computational power at a lower cost. This model not only optimizes the distribution of resources but also democratizes computational power, enabling more businesses and individuals to participate in the research and development of artificial intelligence and high-performance computing.

The native token of Akash Network is AKT, which plays several important roles within the network. First, AKT is used to pay for computational resources on the network, including but not limited to GPU computation, storage, and bandwidth. Second, AKT is also part of the network governance, where holders can participate in the decision-making process through token voting, such as protocol updates and improvement proposals. Additionally, AKT serves as an incentive mechanism, encouraging users to participate in network maintenance, including providing computational resources and validating transactions.

To encourage more users to offer unused computational resources, Akash has designed an incentive mechanism primarily through two methods: token rewards and transaction fees.

• Token Rewards: Akash Network provides rewards to users who offer computational resources through the issuance of new tokens. These newly issued tokens are distributed to resource providers as incentives, encouraging them to connect more resources to the Akash Network. Furthermore, network validators and users participating in network governance can also receive AKT token rewards, motivating them to contribute to network security and governance.
• Transaction Fees: Akash Network charges fees for transactions using its services, paid in AKT tokens. According to Akash’s policy, a portion of the transaction fees is allocated to nodes providing computational resources, serving as a direct economic incentive for their service provision.

Akash charges a 4% fee for transactions paid with AKT, while transactions paid with USDC (a stablecoin) incur a higher fee of 20%. This differentiated fee structure aims to promote the circulation and use of AKT tokens, while also providing financial support for the network’s maintenance and development.

Akash Network has also established a community pool, collecting a portion of the network’s revenue, including tokens generated from inflation and transaction fees. The funds in the community pool are used to finance projects and proposals for network development, such as technical improvements and marketing campaigns, with the allocation of funds decided by community voting.

Through this complex but effective token model and incentive mechanism, Akash Network not only ensures the network’s active and healthy development but also offers users the opportunity to participate in the network and benefit from it. These incentive measures help attract more resource providers and users to join the Akash ecosystem, driving the long-term success and continued growth of the decentralized computing platform.

However, despite the broad market prospects for Akash Network, the challenges it faces cannot be overlooked. In addition to competing with traditional cloud service providers, Akash must continually optimize its technical platform to ensure efficient and secure services. Moreover, building and maintaining a decentralized market requires continuously attracting new resource providers and users and maintaining high market activity.

Bittensor

Bittensor was founded in 2019 by AI researchers Ala Shaabana and Jacob Steeves, originally conceived as a parachain for Polkadot. In March 2023, the project strategically pivoted to develop its own blockchain, aimed at incentivizing global machine learning nodes with cryptocurrency to promote the decentralization of AI development. Bittensor introduced a new paradigm by enabling these nodes to collaboratively train and learn, enhancing the network’s collective intelligence through the integration of incremental resources and expanding the contributions of individual researchers and models to the whole.

Bittensor introduced several innovative concepts and mechanisms, such as the distributed Expert Model (MoE) and Proof of Intelligence, designed to promote the development of a decentralized AI ecosystem by rewarding useful machine learning models and outcomes. Its token economics and ecosystem structure are aimed at supporting and rewarding participants in the network, encouraging fair distribution practices and network participation through the TAO token.

The architectural design of Bittensor reflects its pursuit of establishing a robust AI ecosystem. Through a layered structure consisting of miners, validators, enterprises, and consumers, Bittensor aims to build a network that comprehensively supports AI innovation. In this structure, the miner layer drives innovation with AI models, the validator layer maintains network security and integrity, and the enterprise and consumer layers ensure that technological achievements are transformed into practical applications to meet market and societal needs.

The core participants of the Bittensor network include miners and validators. Miners submit pretrained models in exchange for rewards, while validators are responsible for confirming the validity of model outputs. Bittensor creates a positive feedback loop through incentive mechanisms, encouraging competition among miners, which promotes the refinement and performance improvement of models.

Although Bittensor itself does not directly participate in model training, its network provides a platform that allows miners to upload and fine-tune their models. This approach enables Bittensor to integrate various models, processing different tasks through specific subnetworks, such as text generation and image generation, among others.

The subnetwork model adopted by Bittensor is a significant feature of its architecture, with these subnetworks focusing on executing specific tasks. Through this approach, Bittensor aims to achieve model composition and decentralized intelligence, although this goal still faces challenges due to current technological and theoretical limitations.

Bittensor’s token economy model is heavily influenced by Bitcoin, featuring a similar token issuance mechanism and incentive structure. The TAO token is not only part of the network rewards but also key to accessing services on the Bittensor network. The project’s long-term goal is to democratize artificial intelligence technology by promoting the iteration and learning of models within the intelligent network in a decentralized manner.

Compared to traditional centralized AI models, Bittensor’s greatest advantage lies in promoting the openness and sharing of AI technology. This enables AI models and algorithms to be iterated and optimized within a broader community, accelerating technological progress. Furthermore, through its decentralized network structure, Bittensor hopes to reduce the application costs of AI technology, enabling more individuals and small businesses to participate in AI innovation.

io.net

io.net is an innovative decentralized GPU network designed to address the challenge of accessing computational resources in the machine learning (ML) field. The project integrates GPU resources from independent data centers, cryptocurrency miners, and participants in projects like Filecoin and Render to create a vast pool of computational power. The idea was conceived by founder Ahmad Shadid in 2020 while building a GPU computing network for the machine learning quantitative trading company Dark Tick, facing high costs and difficulties in accessing resources. Subsequently, the project gained broader attention and recognition at the Austin Solana Hacker House.

The main challenges io.net aims to solve include limited availability of computational resources, lack of options, and high costs. By aggregating underutilized GPU resources, io.net offers a distributed solution that enables machine learning teams to build and scale their model service workflows on a decentralized network. During this process, it leverages advanced distributed computing libraries, such as RAY, to support data and model parallel processing, optimizing task scheduling and hyperparameter tuning.

In terms of products, io.net provides a range of tools and services, including IO Cloud, IO Worker, and IO Explorer. IO Cloud is designed to deploy and manage decentralized GPU clusters, featuring seamless integration with IO-SDK and offering a comprehensive solution for scaling AI and Python applications. IO Worker offers a comprehensive user interface that allows users to efficiently manage their computational resource supply operations, including account management, real-time data display, and tracking of temperature and power consumption. Meanwhile, IO Explorer provides comprehensive visualization of network activity and key statistics, helping users better monitor and understand the network status.

To incentivize participation and balance supply and demand, io.net introduced the IO token, which functions to reward continued use by AI and ML deployment teams, price computation units for IO Workers, and participate in community governance. Additionally, considering the volatility of cryptocurrency prices, io.net specifically developed a stablecoin pegged to the US dollar, IOSD, to stabilize the payment system and incentive mechanisms.

io.net demonstrates strong innovation and market potential in both its technology and business model. Through collaboration with Filecoin, it is expected to further expand its capabilities in model storage and computational resources, providing robust support for the development and expansion of decentralized AI applications. By offering a cost-efficient, accessible, and user-friendly platform, io.net aims to become a strong competitor to traditional cloud service providers like AWS, driving innovation and progress across the entire AI field.

In terms of capital, io.net has successfully completed a Series A funding round, raising $30 million with a valuation of $1 billion. This funding round attracted participation from several renowned investment institutions, including Hack VC, Multicoin Capital, Delphi Digital, Animoca Brands, Solana Ventures, Aptos, OKX Ventures, and Amber Group. This series of investments reflects the market’s high recognition of io.net’s innovation capabilities and market potential in decentralized computing and artificial intelligence.

Conclusion

As AI and blockchain technology continue to evolve, the AI x Crypto domain has shown tremendous potential and opportunities, while also facing a series of challenges. By delving into the three core scenarios of “Computational power assetization,” “Model/Agent assetization,” and “Data assetization,” we can see the innovative paths and existing obstacles in this field. Decentralized computational power opens new possibilities for AI training and inference, despite the dependency on high-performance computing resources and communication bandwidth. The assetization of models and Agents through NFTs provides proof of ownership and enhances interactive experiences, but deeper technological integration is still needed. Data assetization unlocks the potential of private domain data, facing challenges in data standardization and market liquidity, yet also paving new paths for AI efficiency and specialization.

It is noteworthy that with the continuous development and iteration of AI technology, there will periodically be influxes of attention and capital into the AI x Crypto domain, bringing continuous waves of development to AI, rather than just single-stage opportunities. The enduring value and innovation potential of the AI x Crypto domain signify its role as a key track in the technology and investment fields.

Looking forward, the development of AI x Crypto will rely on technological innovation, interdisciplinary cooperation, and exploration of market demands. By breaking through technological limitations, deepening the integration of AI with blockchain, and developing practical application scenarios, this field is moving towards long-term development, offering safer, more transparent, and fairer AI services. In this process, the decentralized philosophy and technological practices will continue to drive the AI x Crypto domain towards more open, efficient, and innovative directions, ultimately achieving dual leaps in technological innovation and value creation. Thus, the AI x Crypto track in the current cycle represents an important opportunity not to be missed, signifying not only the forefront of technological innovation but also indicating significant trends in future technological advancements and investment directions.

References

1. https://foresightnews.pro/article/detail/54962
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MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

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TLDR

1. Decentralized sequencers, as an emerging technology, aim to optimize the transaction ordering process in blockchain networks through decentralization, thereby enhancing transaction efficiency, reducing costs, and addressing the MEV issue. The development of this technology signifies further efforts in the blockchain field towards achieving higher performance and stronger decentralization.
2. Metis’ “proprietary store” model and Espresso’s “outsourced module” approach illustrate the two main paths for building and maintaining decentralized sequencers. The former emphasizes the security and stability of internal management and operations, while the latter offers more flexibility and openness, promoting technological universality and reducing operational burdens.
3. The development of decentralized sequencers heralds potential advancements in blockchain technology in terms of network security, censorship resistance, transaction efficiency and costs, as well as ecosystem diversity and interoperability. Further optimization and innovation of these technologies, such as batch processing and state channels, will enhance the performance of L2 platforms, reduce user costs, and foster the formation of a more open and interconnected decentralized ecosystem.
4. Despite the challenges faced by decentralized sequencers in terms of technical implementation, network performance optimization, and governance model design, their key role in building a more efficient, secure, and open decentralized world cannot be underestimated. Future developments may focus on researching more efficient consensus mechanisms, scalable network architectures, and developing user-friendly interfaces and tools to meet the growing market demand and user expectations.

Sequencer Introduction

Sequencers, as the name implies, are responsible for sorting the originally unordered transaction data in blockchain, thereby organizing it into ordered block data for execution. Each L1 blockchain has its own sorting system, but for L2, centralized sequencers have become an increasingly serious issue.

For L2, sequencers are not mandatory. L2 can also choose to use L1’s sequencers. However, for cost and speed considerations, L2 operating its own sequencers can offer users a more affordable and convenient experience. Running their own sequencers, L2 can compress hundreds or thousands of L2 transactions into a single L1 transaction for submission to L1, significantly saving on Gas fees. Moreover, users can enjoy a fast soft confirmation experience provided by L2 sequencers without being restricted by the Ethereum transaction throughput. Therefore, for L2, operating its own sequencers is also an inevitable choice to enhance the user interaction experience.

Sequencer Status Quo

Although L2 operating its own sequencers can significantly enhance user experience, the centralization of L2 sequencers has become an undeniable issue today. Currently, the locked value in Ethereum L2 has reached 22B, with a massive influx of L2 solutions emerging. However, almost all L2 sequencers are centralized, relying on a single sequencer to determine the ordering of all transactions on L2. Centralized sequencers face numerous problems, such as theoretically having the authority to exclude user transactions, extracting MEV from transactions without limitations, facing censorship issues, and the risk of single points of failure.

In addressing the complex challenge of MEV, rollups face the delicate balance between protecting users and generating profits. This challenge involves preventing harmful MEV practices such as front-running and sandwich attacks while efficiently utilizing block space for revenue. Although traditionally rollups have relied on a single operator model and adopted a first-in-first-out (FIFO) order to protect users from MEV, this approach might miss out on revenue opportunities from block space utilization and overlook the significant role of economic incentives in promoting rollup stability and growth. Moreover, ensuring adherence to the FIFO principle and maintaining transparency in block ordering poses additional operational challenges. Furthermore, utilizing the underlying block space as a source of income, while potentially profitable, also raises trust issues among users who must trust that operators will not exploit this space to their detriment through means like sandwich attacks, potentially eroding the integrity of transactions and user trust.

Shared sequencers offer an innovative solution to the MEV problem by introducing a more secure and fair transaction ordering mechanism in the blockchain network, especially for Ethereum’s layer 2 solutions like rollups, offering significant benefits. By dividing rollup block space into a top portion that protects user transactions and a bottom portion that allows builders to exploit MEV, it effectively balances the needs and interests of network participants. Using Practical Verifiable Delay Encryption (PVDE) technology, shared sequencers ensure that user transactions are invisible to malicious actors, thereby preventing harmful MEV practices like front-running and sandwich attacks. Moreover, by allowing beneficial MEV activities in the bottom block space, shared sequencers generate income for rollups while maintaining network integrity and user trust. This mechanism not only enhances the security and fairness of transactions but also supports the sustainable development of blockchain networks through innovative revenue-generation methods. In short, shared sequencers bring positive change to the blockchain ecosystem with their unique approach to handling MEV, balancing the protection of user interests with the promotion of healthy network development.

Overall, the issue with centralized sequencers stems from the excessive power and risk exposure of single-node sequencers. Decentralized sequencers, composed of multiple nodes, can effectively address the problems faced by centralized sequencers. Decentralized sequencers can ensure the robustness and effectiveness of L2 ordering while bringing additional benefits. For example, decentralized sequencers like Metis can further empower tokens while achieving profit sharing, and shared sequencers allow L2s to avoid building their own sorting networks while also providing more convenient interoperability for multiple shared sequencer L2s. In the long run, the wave of modularization and L2 will inevitably push for the decentralization of sequencers, with a vast market space still available for decentralized sequencer markets.

Decentralized Sequencer Projects

Metis

Elena Sinelnikova, co-founder and CEO of Metis, has been dedicated to blockchain industry education and evangelism. She is also the co-founder of CryptoChicks, an educational non-profit organization that is now the world’s largest female blockchain community, with members in 56 countries. Kevin Liu, another co-founder and the product manager of Metis, is also the co-founder and CEO of ZKM, and an active researcher in token economics, DAOs, DeFi, and blockchain governance.

Metis is at the forefront of proposing and testing decentralized sequencers for Ethereum L2.

Metis has transformed the originally singular sequencer node into a pool of sequencer nodes, achieving decentralization of the sequencer through a mechanism of random rotation.

Initially, the Metis decentralized sequencer network includes an Admin role. The Admin is responsible for managing the decentralized sequencer system, including adding qualified sequencer nodes to the Sequencer List whitelist, setting individual node stake limits, block reward release rates, and more.

Following that, Metis introduced a node staking mechanism. Any node that stakes 20,000 METIS tokens can become one of the nodes in the sequencer pool. Nodes in the pool have the right to view the contents of the transaction pool, and the selected sequencer node has the right to package transactions.

Subsequently, Metis introduced a PoS-based node rotation mechanism. Metis randomly selects the block producer by considering each node’s staked amount combined with a hash value drop mechanism. The selected sequencer node can then package block transactions.

Next, the transaction batch that has been packaged requires signatures from at least two-thirds of the sequencers to be considered valid, and thus be submitted to L1. The signing keys for sequencer nodes are managed by Metis’s PoS consensus layer, which generates, shards, and distributes multisig keys when sequencer nodes join or leave the network.

Finally, to prevent malicious behavior by sequencers, Metis also introduces the role of validators to randomly sample blocks, checking if transactions within the block are in the correct order, among other things. Nodes that act maliciously will be penalized by forfeiture of their staked funds.

Based on the aforementioned process, Metis has been able to construct a decentralized sequencer architecture based on PoS network consensus. By staking 20,000 METIS, one can become a sequencer node, which diversifies the sequencer nodes, avoiding single points of failure, control, and malicious MEV extraction. The node rotation mechanism and multisig confirmation make the selection of sequencer nodes fairer and can to some extent prevent malicious actions by sequencer nodes. The sampling checks by validators and the penalties for forfeiture further reduce the risk of malicious behavior by nodes.

To further incentivize more nodes to participate in Metis’s decentralized sequencer network, Metis has also introduced additional incentive mechanisms. After successfully creating a block, sequencer nodes not only receive the original gas income but also earn additional METIS token emission rewards. The incentive mechanism of Metis could create a positive growth flywheel. The prosperity of transaction activities in the Metis network will lead to increased income for sequencer nodes. The increase in sequencer node income will attract more users to stake METIS, become sequencer nodes, and capture sequencer income. The reduction of METIS in circulation and the increased demand for METIS due to staking will further elevate the market price of METIS. The increase in METIS price will enhance the asset value of the staking nodes and the value of staking rewards, thereby attracting more nodes to stake, forming a flywheel loop.

Metis’s PoS decentralized sequencer network is the first attempt at implementing a decentralized sequencer in L2. The implementation of Metis’s decentralized sequencer is expected to drive other L2s to advance their plans for sequencer decentralization.

Espresso Systems

The team behind Espresso is exceptionally prestigious, with co-founders Charles Lu and Ben Fisch both holding PhDs in Computer Science from Stanford University. Team members have also worked at leading Web2 and Web3 companies such as Binance Labs, Coinbase, and Google. Previously, Espresso successfully raised $23 million in financing from top venture capital firms, including Sequoia Capital, Coinbase Ventures, Polychain, and Robot Ventures.

Espresso is positioned as middleware between L1 and L2, decoupling ordering from execution, aiming to become a decentralized shared sequencer network that provides decentralized sequencer services to various L2s. Similar to the concept of modular DA outsourcing, the service provided by Espresso is more akin to an outsourcing service for transaction data ordering. Like DA outsourcing, Espresso’s ordering service is chain and virtual machine agnostic, meaning any type of L2 can use Espresso’s sorting services.

The core idea of Espresso is to provide a set of modular sequencer middleware for L2s. After users send transaction data through the client, the transaction data, along with the identifier of that L2, is sent by L2 to Espresso’s sequencer network. Espresso’s nodes (nodes of the Espresso Hotshot proof-of-stake system) will order the transactions, and after ordering, broadcast them to subscribers (L2 nodes). Subsequently, L2 executes based on the ordered transaction data that has been packaged. Meanwhile, Espresso also submits a block commitment containing transactions to the L1 sequencer contract. Finally, L2 needs to send the new state to L1, and L1’s Rollup contract will use the block commitment from Espresso to verify the state update submitted by L2 to ensure the correctness of the execution.

In the future, Espresso also plans to reuse Ethereum’s existing validator nodes for ordering through Eigenlayer, achieving higher security.

Overall, Espresso’s decentralized sequencer solution aligns more closely with the concept of modular blockchain, utilizing its own PoS network to achieve decentralized ordering through outsourcing, forming a decentralized sequencer network middleware between L1 and L2. Espresso’s generic sorting service also enables it to become a shared sequencer network, with any L2 able to use Espresso’s sorting services. Furthermore, L2s that use Espresso as their sorting service provider can even enjoy more seamless interoperability.

Astria

Astria’s CEO, Josh Bowen, is the project’s main driving force. Bowen, who has previously worked for startups behind The Graph, Edge & Node, and Celestia Labs, brings a deep understanding of modularization and decentralization concepts. He has often shared insights on the critical role shared sequencers play in maintaining speed and decentralization in the blockchain space. Bowen argues that most application-specific Rollups may not need their own sequencers; fostering a more decentralized, modular shared sequencer network could instead benefit the construction of a more decentralized and efficient blockchain system. Josh Bowen and Astria’s philosophy have also received support from institutions like Maven 11, 1kx, Delphi Ventures, and Figment Capital, raising $5.5 million in seed funding.

Similar to Espresso, Astria aims to provide a decentralized shared sequencer network. Astria’s shared sequencer network is a middleware blockchain with its own decentralized set of sequencers, capable of accepting transaction data from multiple L2s. Likewise, Astria can handle sorting requests from any type of L2. Furthermore, L2s using Astria can also enjoy atomic-level interoperability provided by Astria.

The sorting process in Astria is illustrated in the following diagram:

• After users submit transactions, L2 submits transaction data to Astria via an interface.
• Astria’s shared sequencer reaches consensus and packages transactions into blocks through the CometBFT PoS consensus network. Astria’s shared sequencer network uses CometBFT as its consensus algorithm. During the network consensus phase, the proposer decides on the transactions for the block and creates commitments for each Rollup to the sequenced data for that Rollup. Then, other nodes in the network need to validate and reach consensus, forming a final determination.
• After the transaction data is sorted, Astria’s Conductor analyzes the sequenced block for each Rollup’s required data, validates the batch of data — including verifying whether the block has been finally confirmed, whether the extracted Rollup data is complete, correct, and properly sequenced, etc. Once validated, the Conductor transforms the sequenced data for Rollups into a transaction list, which is then passed to the Rollup’s execution engine for execution.

L2s seeking a faster user experience can receive soft commit sequenced blocks from Astria through a reading interface, offering users quick block confirmations. L2s can also read hard commit sequenced blocks written by Astria through the DA layer.

Astria’s decentralized sequencer network shares similarities with Espresso’s solution, both aiming to provide any L2 with decoupled, decentralized sequencing services. By outsourcing sequencing services, L2s can further simplify their development process and operational costs, enjoying atomic-level composability between L2s.

Radius

Radius focuses on developing a trustless shared sequencing layer, aimed at addressing the challenges of harmful MEV extraction and censorship within the blockchain space. Radius has successfully secured $1.7 million in pre-seed funding from investment institutions such as Hashed, Superscrypt, Lambdaclass (Ergodic Fund), and Crypto.com.

Radius aims to build a trustless, censorship-resistant shared sequencer network, and its most distinguishing feature compared to Espresso and Astria is its ability to effectively reduce harmful MEV through encrypted memory pools.

The overall architecture of the Radius shared sequencer network is similar to mainstream shared sequencer networks. Users submit encrypted transaction data and proofs via Dapps to the sequencer layer. The sequencer verifies the user-provided transaction data and proofs, and packages and sorts them. Subsequently, Rollups receive sequenced blocks from the sequencer network, execute transactions in order, and submit the executed state and state proofs to the settlement layer.

Interestingly, Radius introduces encrypted memory pools to prevent sequencers from extracting harmful MEV. Transactions submitted by users are encrypted and submitted to the sequencer network in encrypted form. Sequencers cannot obtain the keys to decrypt and view the specific contents of each transaction while sorting. Thus, sequencers cannot extract MEV through malicious ordering or inserting transactions.

Radius divides the block space into a top space and a bottom space. The top space is dedicated to user transactions, effectively avoiding harmful MEV through encrypted memory pools. The bottom space introduces an auction-based open market for traders, where beneficial MEV bundle transactions can be created across Rollups, such as benign arbitrage and liquidations, etc. Traders then submit their bundle transactions and bids to the sequencer, which selects the highest-bidding bundle transaction to include in the block, thereby maximizing Rollup profits and fostering a healthy MEV competition market.

Compared to Espresso and Astria, Radius has two significant advantages. Firstly, by introducing encrypted memory pools and dividing the block space into top and bottom spaces, Radius can effectively eliminate harmful MEV transactions, cultivate a healthy MEV competition market, and maximize Rollup profits. Secondly, the introduction of encrypted memory pools prevents individual sequencer nodes from acting maliciously through MEV, thus eliminating the need for additional consensus mechanisms to ensure the correctness of sequencing. This can greatly increase the final confirmation speed and scalability of the sequencer network.

SUAVE (Single Unifying Auction for Value Expression)

The SUAVE proposal was put forward by the Flashbots team, pioneers in addressing the Miner Extractable Value (MEV) issue within the Ethereum ecosystem, comprised of professionals with deep expertise across fields such as computer science, mathematics, psychology, and economics. According to LinkedIn, the team currently includes 28 members with skills ranging from Python programming, blockchain technology, machine learning, to C programming.

Flashbots’ founding team includes Philip Daian and Stephane Gosselin, with the latter departing in October 2022 due to disagreements over censorship policies with the team. Additionally, Alex Obadia, another co-founder and top strategy researcher, left Flashbots in June 2023 for personal reasons. Core members include Andrew Miller, known for his research on cracking Intel SGX codes, currently serving as the research director for Trusted Execution Environments and SUAVE. Miller plans to take a temporary leave from his assistant professor position at the University of Illinois, where his academic work focuses on electrical and computer engineering. Another core member, Hasu, serves as Flashbots’ strategy director, wielding widespread influence in the blockchain space, including roles as a strategic advisor for the liquidity staking protocol Lido and a research collaborator with Paradigm investment firm. Hasu is committed to driving industry development and education through writing, social media, and podcasts.

SUAVE is a unique decentralized builder and sequencer, distinct from other shared layers or sequencing layers in design. It aims to provide transaction sequencing services for Ethereum and other blockchains without being directly embedded into any chain’s protocol. Users can send transactions to SUAVE’s encrypted memory pool, and SUAVE’s executor network is responsible for outputting blocks or partial blocks for chains. These blocks compete with those generated by traditional centralized Ethereum builders, with Ethereum proposers selecting them.

SUAVE does not replace the mechanism for Rollups to choose blocks, nor does it change the chain’s fork choice rules. It focuses on providing the most profitable sequencing for any chain, typically having full state to simulate different transaction outcomes and create optimal sequencing. This design allows SUAVE to collaborate with shared sequencers or other MEV-aware builders to offer services like atomic cross-chain arbitrage, ensuring several transactions are executed or canceled atomically.

In the long term, Rollups might be a better option. Rollups secure their safety, censorship resistance, and liveness through L1, whereas SUAVE, a chain focused on transaction sequencing, is not intended for ordinary user interaction. Its goal is to limit users’ need to bridge funds to SUAVE, focusing instead on providing a platform for searchers/builders. SUAVE is dedicated to providing the most favorable transaction sequencing without completely replacing existing sequencing mechanisms. It can handle full-state transactions to create optimal transaction sequencing.

Regarding MEV handling, various mechanisms aim to reduce potential competition and negative externalities related to transaction sequencing and inclusion. For example, Arbitrum’s time dilation mechanism and Flashbots’ FBA-FCFS model attempt to reduce the incentives for latency competition by allowing users to express their preference for fast transaction inclusion through fees.

Arbitrum’s Time Dilation Mechanism

The time dilation mechanism is a security measure against a specific type of attack known as the “Time Bandit Attack,” where attackers might attempt to reorganize confirmed blocks to profit from previously unknown information (e.g., exploiting knowledge of a transaction after the fact).

Arbitrum defends against this attack through a unique mechanism that allows anyone to submit a “challenge” proving the attacker’s actions when a time bandit attack is attempted. This mechanism, based on economic incentives, ensures the attacker’s potential gains are offset, thus protecting the network’s security and fairness.

Flashbots’ FBA-FCFS Model

The FBA-FCFS (First Bid Auction — First Come, First Served) model is a transaction ordering mechanism proposed by Flashbots, aiming to address traditional transaction selection and ordering issues, especially in the context of MEV extraction.

• The First Bid Auction (FBA) part means traders can prioritize their transactions by bidding (usually in the form of extra fees paid to miners), similar to an auction where the highest bidder gets priority.
• The First Come, First Served (FCFS) part ensures that under certain conditions, transactions are processed in the order they are submitted, ensuring fairness and transparency.

The FBA-FCFS model seeks to balance fairness and efficiency by allowing bidding on transactions to optimize the use of network resources while ensuring that some users are not completely excluded due to an inability to pay.

These mechanisms each have their pros and cons, but share the common goal of improving the efficiency and fairness of transaction processing.

By collaborating with Rollups and other MEV-aware builders, SUAVE aims to provide higher economic security and efficiency for cross-chain operations, exploring new economic security models and MEV mitigation mechanisms to improve the decentralization of blockchain transaction ordering and execution.

Summary and Outlook

Projects such as Metis, Astria, Espresso, Radius, and SUAVE, though each with its own focus, collectively aim to enhance the scalability and transaction efficiency of blockchain technology while addressing the issue of Miner Extractable Value (MEV), enhancing decentralization, and improving interoperability.

Metis, with its Layer 2 solution, focuses on optimizing Ethereum’s transaction processing capabilities to reduce costs and increase efficiency, aiming to provide developers and enterprises with a more convenient platform for development. Astria and Espresso propose the concept of a decentralized sequencer network, supporting the processing of transaction data for multiple Layer 2 solutions. This not only simplifies the development and operational processes but also strengthens the composability and interoperability between systems. The Radius project, by introducing encrypted memory pools and block space partitioning, strives to create a trustless, censorship-resistant network aimed at reducing the adverse effects of MEV while enhancing transaction privacy and security. SUAVE focuses on addressing the impact of MEV on transaction fairness and transparency through a decentralized sequencer network, demonstrating a commitment to improving the fairness of the trading environment.

In exploring the development direction of decentralized sequencers, Metis and Espresso provide two distinctly different models: the “in-house” model and the “outsourced module” approach. These models reflect the community’s differing thoughts and strategies on how to build and maintain decentralized sequencers.

Metis’s “in-house” model emphasizes managing and operating its decentralized sequencer network internally to ensure the network’s security and stability. This approach allows Metis to directly control the nodes within its network, maintaining a healthy network environment through staking and incentive mechanisms. Although this model can enhance network security and reliability, it also requires Metis to assume significant operational responsibilities and resource investments, potentially limiting the network’s flexibility and scalability.

In contrast, Espresso’s “outsourced module” approach offers a more flexible and open solution. By allowing any blockchain project to access its sequencing services, Espresso promotes technological universality and diversity while reducing the operational burden on individual projects. The challenge of this model is that it may introduce additional trust issues, as projects need to rely on Espresso to process transactions fairly and securely. Moreover, any issues or attacks on Espresso’s services could impact a wide range of client projects.

Metis’s “in-house” model and Espresso’s “outsourced module” approach showcase two main development paths in the field of decentralized sequencers. Each model has its unique advantages and challenges, and the choice between them depends on the specific needs, resource conditions, and emphasis on decentralization and security of the project.

The development prospects of decentralized sequencers indicate the tremendous potential of blockchain technology to enhance network security, increase resistance to censorship, improve transaction efficiency, reduce costs, and promote ecosystem diversity and interoperability. With the continuous advancement of decentralized sequencer technology, we can foresee a more secure and efficient blockchain network where decentralized sequencing mechanisms effectively defend against single points of failure and malicious attacks, safeguarding user assets and data. Furthermore, optimizations and innovations in decentralized sequencers, such as batch processing and state channels, will further enhance the transaction processing capabilities of L2 platforms, reduce transaction costs for users, achieve high throughput and low latency in transaction confirmations, thereby enhancing the user experience without sacrificing security and decentralization.

Moreover, the widespread adoption of decentralized sequencers is expected to drive the formation of a more diverse and interoperable blockchain ecosystem. Shared sequencer networks, like Espresso and Astria, will not only serve multiple L2 platforms but also promote the flow of data and assets between different platforms, creating a more open and connected decentralized world. Additionally, innovations in incentive mechanisms and token economic models will provide reasonable incentives for participants in the decentralized sequencer network while achieving network governance and profit distribution through token economic models, attracting more participants and stimulating community vitality.

Despite the bright prospects for decentralized sequencers, they still face challenges in technical implementation, network performance optimization, and governance model design. Therefore, future development directions may focus on researching more efficient consensus mechanisms, exploring scalable network architectures, and developing user-friendly interfaces and tools to meet the growing market demands and user expectations. In summary, as a key factor in driving the development of blockchain technology and applications, the future evolution of decentralized sequencers will play a crucial role in building a more efficient, secure, and open decentralized world.

Reference

1. https://twitter.com/tmel0211/status/1735187745159676196
2. https://web3caff.com/zh_tc/archives/83612
3. https://www.theblockbeats.info/news/36748
4. https://foresightnews.pro/article/detail/30473
5. https://foresightnews.pro/article/detail/48503
6. https://foresightnews.pro/article/detail/28930
7. https://foresightnews.pro/article/detail/32526
8. https://foresightnews.pro/article/detail/41120
9. https://foresightnews.pro/article/detail/44487
10. https://foresightnews.pro/article/detail/38993
11. https://hackmd.io/@EspressoSystems/EspressoSequencer
12. https://hackmd.io/@astriaorg/HJ6cCpp9T
13. https://maven11.substack.com/p/the-shared-sequencer
14. https://www.gate.io/learn/articles/the-battle-for-decentralized-sequencers/1049
15. https://ethresear.ch/t/shared-sequencer-for-mev-protection-and-profitable-marketplace/15313
16. https://foresightnews.pro/article/detail/42395

MT Capital

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MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital

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TL;DR

1. Celestia currently exhibits a robust staking trend, with a staking rate of 48.88% and an Annual Percentage Rate (APR) of 15.74%. It is predicted to reach the ideal staking limit by the end of 2024. As there will be no new token unlocks before November 2024, the actual circulation of tokens is expected to continue decreasing, positively impacting the price. Currently, the Celestia network maintains 100 active nodes.
2. Celestia’s current data utilization rate is only 0.1% of its total daily capacity. Despite this, its activity is growing compared to Ethereum. As data utilization increases, future costs could significantly rise. If it reaches a daily data capacity of 46,080 MB per year, the annual cost could be about 5.2 million USD, 65 times that of Ethereum’s current data fees. User demand is expected from high TPS applications and games, with numerous chains based on Celestia RaaS emerging in the coming months.
3. EigenDA’s adoption of technologies like erasure coding, KZG commitments, and ACeD, as well as its decoupling of DA from consensus, enables superior performance over Ethereum’s DA solutions in terms of transaction throughput, node load, and DA costs. Compared to other DA solutions, EigenDA also has advantages in lower startup and staking costs, faster network communication, data submission speed, and higher flexibility.
4. Compared to EigenDA, Celestia’s competitive edge lies in its extremely low data availability costs and higher data throughput, making it more favored by medium and small L2 and application chains. EigenDA’s advantages include potentially higher security and Ethereum orthodoxy, making it a rational choice for more significant L2 open-source throttling. In the future, Celestia could benefit from the incremental market brought by the dual trends of modularization and application chains, while EigenDA might capture a larger share of the Ethereum-centric market that demands higher security.
5. The NEAR Protocol enhances scalability and decentralization through sharding technology and stateless validation, simplifying data management for L2 projects. Avail optimizes blockchain data processing and storage through a modular system, supports asynchronous interactions between application chains, improves network performance, and enables light clients to effectively verify data integrity. These technologies collectively advance the user-friendliness and development of a decentralized digital world in blockchain technology.

Introduction:

The Data Availability Layer has become an essential component of modular architecture, with DA gradually becoming one of the hottest tracks in 2024. The market is rife with discussions about Ethereum DA, Celestia, and other DA solutions. This article delves into the core mechanisms, characteristics, comparisons, and future expectations of key players in the DA track, Celestia and EigenDA. It also scans other players in the DA track, helping readers get a comprehensive view of the current development of the DA track and understand the future competitive landscape of the DA track.

Celestia

Celestia is the first modular Data Availability (DA) network designed to scale securely with the growth of its user base. This modularity allows anyone to easily launch independent blockchains.

Celestia Technical Features

1. Modular DA Network

Celestia’s design separates execution, consensus, settlement, and data availability. This modular structure allows for specialization and optimization at each level, enhancing the overall efficiency and scalability of the network.

2. Data Availability Sampling (DAS)

DAS is a method that allows light nodes to verify data availability without downloading the entire block. Light nodes randomly sample data blocks; if these data can be successfully retrieved and verified, it implies that the data of the entire block is available.

3. Namespace Merkle Trees (NMTs)

NMTs allow block data to be divided into separate namespaces for different applications. This means that applications only need to download and process data relevant to them, significantly reducing data processing requirements.

4. Scalability Through Light Nodes

The more light nodes participate in data availability sampling, the more data the network can process. This scalability feature is crucial for maintaining efficiency as the network grows.

5. Fraud Proofs for Incorrectly Expanded Data

To address potential data expansion errors by block producers (either intentional or unintentional), fraud proofs allow for the verification and rejection of blocks with invalid data, enhancing network security.

6. Building a PoS Blockchain for Data Availability

Celestia uses a PoS blockchain, called celestia-app, to facilitate transactions and data availability. This layer is built on top of celestia-core, which is an improved version of the Tendermint consensus algorithm, designed to handle the unique needs of the DA layer.

7. Scalability

Two decisive factors for scalability are the amount of data available for centralized sampling (the volume of data that can be sampled) and the target block header size for light nodes (the block header size of light nodes directly impacts the overall network performance and scalability).

In response to these factors, Celestia utilizes the principle of collective sampling, i.e., by having many nodes participate in partial sampling of data, it can support larger data blocks (i.e., higher transactions per second, TPS). This method can expand network capacity without sacrificing security. Moreover, in the Celestia system, the block header size for light nodes grows proportionally to the square root of the block size. This means that to maintain nearly the same security as full nodes, light nodes will face bandwidth costs proportional to the square root of the block size.

Characteristics of the Modular Celestia Stack

1. Self-Sovereignty

Celestia’s Rollups are different from Ethereum’s Rollups in that when they run on Celestia, their canonical state is independently determined. This increases autonomy, allowing nodes to freely decide their operation through soft and hard forks. This self-sovereignty reduces reliance on central governance and fosters more experimentation and innovation.

2. Flexibility

The execution-agnostic nature of Celestia means its Rollups are not confined to EVM-compatible designs. This openness provides broader opportunities for virtual machine innovation, aiding in technological advancement.

3. Easy Deployment

Celestia simplifies the blockchain deployment process. Using tools like Optimint, developers can rapidly deploy new chains without worrying about the complexities and high costs of consensus mechanisms.

4. Efficient Resource Pricing

By separately addressing active state growth and historical data storage, Celestia offers a more effective resource pricing mechanism. This approach reduces the interplay between execution environments, improving user experience.

5. Trust-Minimized Bridges

Celestia’s architecture supports the creation of trust-minimized bridges, enabling different chains to securely interconnect. This enhances the security and interoperability of the blockchain ecosystem.

6. Minimal Governance

Celestia’s modular design reduces the need for centralized governance. The execution layer can develop independently and rapidly, while the consensus layer remains stable. This separation decreases the need for complex social coordination.

7. Decentralized Block Verification

Celestia emphasizes the decentralization of block verification, not just block production. This approach enhances network security and trustworthiness.

8. Simplicity

Celestia opts for simplicity, using straightforward and mature technologies like Tendermint as its foundation to avoid overcomplication. This simplicity is beneficial for system stability and scalability.

Celestia’s Data Cost

Numia Data recently published a report titled “The impact of Celestia’s modular DA layer on Ethereum L2s: a first look”, which compared the costs incurred over the past six months for different Layer 2 (L2) solutions deploying CallData on Ethereum, and the potential costs if they were to use Celestia as the Data Availability (DA) layer (assuming a TIA price of $12 in this calculation). This report, by contrasting the cost differences in these two scenarios, clearly demonstrates the significant economic benefits of a dedicated DA layer like Celestia in reducing L2 Gas expenses.

Tokenomics

Total Supply at Genesis: 1 billion TIA.

Distribution of TIA at Genesis:

Inflation Plan: Initially 8%, decreasing by 10% each year, until reaching a minimum annual rate of 1.5%.

Utility of TIA Tokens

1. Paying for Data Space: Developers submit PayForBlobs transactions on Celestia, using TIA to pay fees for using its data availability layer.
2. Bootstrapping New Rollups: Developers can use TIA as a gas token and currency to start new blockchains, similar to the use of ETH in Ethereum-based Rollups. This helps focus on application or execution layer development without the immediate need to issue new tokens.
3. Proof of Stake: Celestia is built on Cosmos SDK and uses Proof of Stake for its consensus. Users can delegate TIA to validators and earn a portion of the staking rewards.
4. Decentralized Governance: TIA holders participate in governance, voting on network parameters and managing the community pool, which receives 2% of block rewards.

Token Unlocking

Staking Situation

Celestia currently has a staking rate of 48.88% and an Annual Percentage Rate (APR) for staking of 15.74%.

Based on the current relationship between staking APR and the staking rate, the following linear relationship is fitted:

Staking APR = -0.3331 * Staking Rate + 0.3204

Given that Celestia’s staking APR is at least its own inflation rate of 7.85%, the ideal limit for the staking rate is 72.6%.

Fitting the data on the change in staking rate over time, it appears that the staking rate is expected to reach this limit around the end of 2024.

As there will be no new token unlocks for Celestia before November 2024, we can expect the actual circulating supply of Celestia to continue decreasing until then, and we remain optimistic about the token price of Celestia until November 2024.

Currently, Celestia has 100 active nodes.

Compared to the Ethereum mainnet, Celestia’s data cost has been reduced by 99.9%. Users can publish data to blobs with namespaces and access data by filtering specific namespaces. Since Celestia’s launch two months ago, users have published a significant amount of data to various namespaces, but 87% of it is concentrated in three main namespaces.

Currently, Celestia’s daily data usage rate is only 0.1%, far below its daily support capacity of 46,080 MB. Nevertheless, compared to Ethereum’s current 15 Rollups and daily data volume of 700 MB, Celestia’s activity is still growing.

Currently, Celestia’s fees are relatively low, but if data usage increases, fees could significantly rise. In the future, if Celestia achieves a daily data capacity of 46,080 MB at a TIA price of $13, the network will generate about $5.2 million in annual fees. This would be 65 times the cost of data currently published to Ethereum. The network’s fee structure might lead to bidding wars among users, further driving up costs.

Future user demand may come from various applications, such as high TPS general chains, specific applications, or games. While it is difficult to predict specific sources of demand, games and high TPS Rollups may be key drivers. In the coming months, we will see a surge of chains utilizing Celestia’s RaaS entering the market.

New Valuation Model for Celestia

Considering Celestia is the first modular public chain DA layer, and the Cosmos community has been very generous with airdrops to Celestia stakers (like the Dymension airdrop which already covered the cost of staking in Celestia), and more modular public chain-related projects will likely airdrop to Celestia stakers, the following valuation approach is proposed:

Price (TIA) = Accumulated value for DA layer + Monetary premium of TIA as a “modular currency” + Value of all future airdrops

Celestia Ecosystem Projects

Cevmos

Cevmos is a rollup stack developed in collaboration between Cosmos EVM chain Evmos and Celestia, aimed at providing the optimal settlement layer for EVM-based rollups on Celestia. The name is a combination of abbreviations from Celestia, Evmos, and Cosmos. Cevmos is designed to provide a dedicated settlement layer for rollups to reduce costs and improve efficiency, as part of its enforced settlement rollup solution. As a settlement layer, Cevmos is built on Evmos and implements EVM recursive rollups on top of it.

Unlike the existing Tendermint Core consensus engine on Cosmos, Cevmos adopts Optimint (Optimistic Tendermint), an alternative to Tendermint BFT, allowing developers to deploy rollups using existing consensus and data availability (like Celestia). Since Cevmos itself is a rollup, all rollups built on it are collectively known as settlement rollups. Each rollup is re-deployed with minimal bi-directional trust bridges to Cevmos rollup, reducing migration workloads. All rollups will use calldata on the Cevmos rollup, with Cevmos batching data through Optimint and publishing it on Celestia.

Cevmos rollup, as a constrained EVM environment, also attempts to address challenges through single-round fraud proofs. Cevmos not only avoids designing and maintaining complex consensus mechanisms but also brings the efficiency of rollups and the interoperability of EVM to the entire Cosmos ecosystem, providing a practical modular solution for widespread applications and adoption within the Cosmos ecosystem.

Dymension

Dymension is a Cosmos-based sovereign rollup platform aimed at greatly simplifying the development process of application-focused custom rollups (called rollApps) through its Dymension Chain (settlement layer), RDK (RollApp Development Kit), and IRC (rollup inter-chain communication) functionalities.

The autonomous Dymension hub settlement layer, based on the Tendermint Core state replication model and PoS consensus mechanism, enables RollApps built on Dymension hub not only to inherit its security but also to communicate with each other through dedicated module assemblies supported by RDK and the hub.

RollApps consist of two key components: client and server. The server side, as the application end of RollApp, is responsible for implementing custom business logic and constructing pre-packaged modules of the RollApp Development Kit RDK. The client component, named dymint, derived from Celestia’s Optimint, serves as a direct substitute for Tendermint, handling block production, peer-to-peer network message propagation, and inter-layer communication. Since RollApp itself does not undertake consensus tasks, dymint can provide the low latency performance required for modern applications.

Similar to Cosmos, Dymension RollApps aim to create application-specific blockchains to reduce consensus overhead. RDK adds new modules on top of Cosmos-SDK and modifies existing ones to ensure compatibility with the Dymension protocol while remaining compatible with other Cosmos ecosystem tools. RollApps can interact with any IBC-supporting chain through Dymension Hub, making them also part of the Cosmos ecosystem.

Eclipse

Eclipse is a sovereign rollup project within the Cosmos ecosystem, specifically allowing customizable modular rollup settlement layers using the Solana VM on any chain. In its early stages, Eclipse plans to use Celestia as its consensus and data availability (DA) layer, while adopting the Solana VM for execution and settlement. Eclipse’s ultimate goal is to provide customized rollup execution layers for different Layer1 heterogeneous blockchains, connecting various blockchains through a modular approach. Additionally, Eclipse plans to further evolve its Solana VM-based settlement layer rollups into Optimistic rollups and zk rollups in the future, extending its functionality and application scope.

Fuel

Fuel, while similar to Celestia, has distinct differences. Celestia focuses on data availability and consensus optimization, handling data ordering, whereas Fuel positions itself as a modular execution layer.

A key distinction of Fuel lies in its novel virtual machine architecture — FuelVM, along with the accompanying Sway language and toolchain. FuelVM, a custom virtual machine designed specifically for executing smart contracts, is capable of processing transactions in parallel and is fraud-proof by design, suitable for the transaction execution layer of Optimistic rollups.

FuelVM combines features from WASM, EVM, and Solana’s SeaLevel but uniquely adopts the UTXO model instead of the account model. This means that Fuel VM requires each transaction to specify explicitly the UTXOs it will touch. Because the execution engine can precisely identify the state involved in each transaction, it can easily identify and process non-contentious transactions in parallel. This design makes Fuel VM more efficient and secure in transaction processing.

Celestia Summary and Future Outlook

Celestia, as the first modular DA network, focuses on scaling securely with the growth of its user base. Its modular design makes launching independent blockchains straightforward. Key technologies of the network include Data Availability Sampling (DAS) and Namespace Merkle Trees (NMTs), with the former allowing light nodes to verify data availability without downloading the entire block, and the latter enabling applications to process only relevant data, greatly reducing data processing requirements.

Based on the current relationship between staking rate and APR, with no new unlocks expected for Celestia before November 2024, the staking rate is anticipated to continue rising, and the actual circulating supply is expected to decrease, suggesting a continued increase in token price. Additionally, Celestia’s data cost is reduced by 99.9% compared to Ethereum’s mainnet, with a daily data usage rate of only 0.1%, far below its daily support capacity of 46,080 MB, indicating substantial potential for expansion.

The value of Celestia’s TIA token is based not only on its applications and innovations in blockchain technology but also on the potential value of future airdrops. As blockchain technology develops and modular public chains become more widespread, Celestia and its TIA token may demonstrate even greater potential and value.

The Celestia ecosystem includes innovative projects like Cevmos, Dymension, Eclipse, and Fuel, which use Celestia’s modular features to provide customized solutions for specific applications, reflecting Celestia’s significant position and potential for development in the blockchain technology field.

Given its unique approach and technological innovations, Celestia is poised to play a significant role in the blockchain industry. Its focus on solving the trilemma of blockchain, particularly scalability without sacrificing security or decentralization, positions it as an important participant in the evolving blockchain ecosystem.

EigenDA

Introduction to EigenDA

EigenDA is the first AVS product under EigenLayer. EigenDA aims to leverage Ethereum’s security by making re-staking nodes the validator nodes of EigenDA, supporting Rollups to publish data to EigenDA for lower cost and higher transaction throughput data availability services.

EigenDA Technical Architecture

EigenDA closely follows Ethereum’s ultimate scaling path of Danksharding. Therefore, the technical path of the DA layer adopted by EigenDA is also highly relevant to Ethereum’s Danksharding scaling technical path. Furthermore, EigenDA’s adoption of technologies like erasure coding, KZG commitments, ACeD (Authenticated Coded Dispersal), and the decoupling of DA and consensus enables superior performance over Ethereum Danksharding DA solutions in transaction throughput, node load, and DA costs.

The specific implementation flow of EigenDA is as follows:

1. First, after the Rollup sequencer creates the data blob, it needs to send a request to split the data blob to the Disperser. (The Disperser can be run by the Rollup itself or third parties like EigenLabs.)
2. Next, upon receiving the data blob, the Disperser needs to split the data blob into different data shards and use erasure coding to generate redundant data blob shards along with corresponding KZG commitments and KZG multi-reveal proofs.
3. Then, the Disperser will distribute the data shards, KZG commitments, and KZG multi-reveal proofs to different EigenDA nodes (Ethereum re-staking nodes registered as EigenDA nodes). The nodes need to use the KZG multi-reveal proofs and KZG commitments to verify the validity of the data shards. After verification, the nodes need to store the data and send signatures back to the Disperser.
4. Finally, the Disperser will aggregate the signatures and submit them to the EigenDA contract on Ethereum mainnet. The signatures in the EigenDA contract will be further verified, and if valid, the process ends.

Similar to other DA solutions, the core idea of EigenDA is also to use DAS technologies to reduce the storage and verification load on individual nodes, while improving the overall throughput of global DA consensus. Erasure coding redundancy is used to ensure data security. However, EigenDA chooses KZG commitment verification technology that aligns with Ethereum upgrades for its specific technical implementations. Also, EigenDA does not rely on consensus protocols and P2P propagation, but instead uses unicast to further improve consensus speed.

Additionally, EigenDA has some more refined designs to ensure node data storage and node verification.

EigenDA uses Proof of Custody to ensure EigenDA nodes actually store the data in the data shards. Each EigenDA node must periodically compute and submit the value of a certain function, which requires the node to have stored the corresponding data shard to compute the function value. Nodes that fail Proof of Custody will have their ETH slashed as punishment.

EigenDA further safeguards the validity of DA consensus through Dual Quorum proofs. EigenDA will have at least two independent Quorums to attest data availability. For example, one Quorum consists of ETH re-stakers, another consists of native token stakers of the Rollup. The DA must be validated by both independent Quorums simultaneously to be confirmed as valid.

Analysis of EigenDA Features

To better differentiate EigenDA from Ethereum DA and other DA solutions in terms of differences and advantages/disadvantages, we can compare them separately.

Compared to Ethereum DA, EigenDA:

1. EigenDA nodes do not need to download and store all data, only a small portion of data shards. This significantly reduces node operation and running costs.
2. EigenDA decouples DA and consensus, so nodes don’t need to wait for serial ordering and can directly process proofs of data availability in parallel. This greatly improves network efficiency. Also, with erasure coding and KZG commitments, nodes only need to download and store small chunks of data for verification, increasing network throughput.
3. Since EigenDA only inherits part of the mainnet’s security, from a
   security perspective, EigenDA is still weaker than Ethereum DA.

Compared to other DA solutions, EigenDA:

1. EigenDA nodes are a subset of re-staking nodes in the EigenLayer network, becoming an EigenDA node does not require additional staking costs.
2. EigenDA decouples DA and consensus, using direct unicast so data shard propagation is no longer limited by consensus protocol and P2P network throughput. This greatly reduces communication, network latency and confirmation times, increasing data submission speed.
3. EigenDA inherits part of Ethereum’s security, which is generally higher than other DA solutions.
4. EigenDA also supports Rollups flexibly choosing different staking token models, erasure coding ratios, etc., providing higher flexibility.
5. Since EigenDA’s final confirmation relies on the EigenDA contract on Ethereum mainnet, the time overhead for final confirmation will be significantly higher than other DA solutions.

Latest Progress and Use Cases of EigenDA

EigenDA launched its testnet in mid November 2023. Initially, the number of node operators on the EigenDA testnet was limited to 30, with an initial throughput target of 1Mbps. EigenDA plans to gradually expand the number of operators, so that EigenDA can eventually approach the target throughput of 10Mbps.

According to current testnet data, the number of node operators on the EigenDA testnet has expanded to 200. However, the average network throughput over the past 7 days is only 0.45Mbps, still not reaching the initial 1Mbps target.

Currently, the total TVL on EigenDA testnet is around 3.5M, with Ankr, Lido, and LST from Stader as the top 3 staked assets by share. The total number of node operators has reached 200, with total stakers reaching 29.4k.

Although EigenDA is still in testnet stage, we can make some simple comparisons between the current EigenDA testnet data and related Ethereum data, to get a sense of how far EigenDA is from its ultimate goals.

Inheriting Ethereum’s security:

1. The current TVL on EigenDA testnet is around 3.5M, while Ethereum’s FDV is around 264B. In terms of asset value, EigenDA only inherits 0.001% of Ethereum’s security.
2. The current number of staking validators on EigenDA testnet is 29.4k, while Ethereum has 904k staking validators. In terms of staking validators, EigenDA inherits around 3.2% of Ethereum’s security.

Improved network throughput:

1. The current throughput of EigenDA testnet is around 0.45Mbps, while Ethereum’s throughput is around 0.083Mbps. Although not yet reaching the ideal levels of 1Mbps-10Mbps or eventually 1Gbps, EigenDA’s throughput is about 500% higher than Ethereum’s.

Currently, EigenDA has also launched a partnerships program, with 8 projects including AltLayer, Caldera, Celo, Layer N, Mantle, Movement, Polymer Labs and Versatus having partnered with EigenDA to use its data availability services.

Summary

EigenDA’s adoption of technologies like erasure coding, KZG commitments, ACeD, and the decoupling of DA and consensus enables superior performance over Ethereum DA solutions in transaction throughput, node load, and DA costs. Compared to other DA solutions, EigenDA also has advantages in lower setup and staking costs, faster network communication and data submission, and higher flexibility. EigenDA is poised to take on some of Ethereum’s DA services and become an emerging competitor in the DA market.

Comparison of Celestia and EigenDA and Future Outlook

Comparison of Data Availability:

Data Availability Sampling:

Celestia supports data availability sampling, allowing light nodes to randomly sample and download/verify data shards. EigenDA does not support data availability sampling. Supporting sampling enables Celestia to safely increase block size through more light nodes, without increasing node burden while ensuring minimum node verification. More light nodes can also improve network decentralization.

Encoding Proofs:

Celestia uses fraud proofs to ensure original data is encoded properly, while EigenDA uses KZG commitments for validity proofs. Celestia’s fraud proofs have lower implementation barriers and more mature technology, without needing to generate additional KZG commitments. However, EigenDA’s use of KZG commitments allows faster verification of data accuracy than Celestia’s fraud proofs, since with fraud proofs, light nodes need to wait to receive proofs from full nodes.

Consensus Mechanisms:

Celestia uses Tendermint consensus, requiring P2P network propagation. EigenDA decouples DA and consensus, using direct unicast for faster network communication and confirmation without consensus protocol and P2P throughput constraints.

However, EigenDA relies on the EigenDA contract on Ethereum mainnet for final confirmation, so for final block confirmation time, Celestia only needs 15 seconds, significantly faster than EigenDA’s 12 minutes.

Node Load:

Celestia full nodes need to handle broadcasting, consensus, and validation, requiring 128MB/s download and 12.5MB/s upload bandwidth. EigenDA nodes don’t handle broadcasting and consensus, requiring only 0.3MB/s bandwidth.

Throughput:

Celestia has ~6.67MB/s throughput. EigenDA testnet has 0.45MB/s, below its 1–10MB/s target. Currently Celestia has significantly higher throughput.

Setup Costs:

Celestia depends on its PoS network security, so nodes must stake Tia tokens, requiring setup costs. EigenDA inherits Ethereum’s security so nodes just register as re-stakers, avoiding setup costs.

Usage Costs:

Celestia currently charges $3.41/MB to Manta. EigenDA testnet costs around 0.024 Gas/Byte, much lower than Celestia.

Security:

Celestia’s security comes from its network value. The higher the value, the higher the attack cost, making attacks less likely. Celestia’s staked value is ~$1.2B, so an attack would cost >$0.8B.

EigenDA inherits a subset of Ethereum’s security based on re-staked asset value and operator share on mainnet. Currently EigenDA testnet TVL inherits only 0.001% of Ethereum’s security. To exceed Celestia’s security, EigenDA would need >0.45% of Ethereum’s value re-staked. This is expected to increase significantly on mainnet launch.

Node counts also matter for security. Celestia has ~100 validators while EigenDA testnet has 200 nodes. By node count, EigenDA may exceed Celestia’s security.

Although Celestia and EigenDA currently have different approaches for data availability sampling and encoding proofs, as DAS and KZG technologies continue maturing, their choices may converge.@sreeramkannan has hinted EigenDA may add DAS support for more light nodes in the future. @likebeckett also said Celestia could switch to validity proofs based on KZG commitments if they become more attractive than fraud proofs.

So the differences in DA technical architecture may not remain core differentiators in the future.The most notable differences going forward are more likely to be in network security, usage costs, and throughput capabilities.

Future Outlook for Data Availability

Based on the Celestia and EigenDA comparison, network security, usage costs, and throughput may become the key considerations for projects choosing between DA solutions. EigenDA’s Ethereum-native status is also a significant factor.

For network security, although EigenDA testnet currently lags behind Celestia, we believe EigenDA mainnet launch, relaxing re-staking limits, and the rise of Ethereum restaking narratives could lead to exponential growth in re-staked asset value and node counts on EigenDA. This may allow EigenDA to exceed Celestia’s network security. More security-focused projects may prefer EigenDA.

• Ethereum’s current FDV is $277B. Just 0.4% participating in EigenDA could exceed Celestia’s security, very achievable.

For usage costs, Celestia is still significantly cheaper than EigenDA. More cost-sensitive smaller L2s and application chains may prefer Celestia. Lyra and Aevo’s migration demonstrate this. Profitability is a must-have for mid-sized L2s early on. Being cost-conscious rather than blindly chasing Ethereum’s “brand premium” may better enable growth. For app chains, lower costs provide more asset flexibility for incentives tailored to their growth.

• Aevo cuts 90%+ of DA costs by migrating to Celestia.

For throughput advantages, Celestia currently has 10x+ higher observed throughput over EigenDA testnet. This may make Celestia more appealing for performance-sensitive app chains, along with the flexibility to increase block sizes. However, EigenDA testnet is just a reference point and mainnet performance remains to be seen for a fairer comparison.

For Ethereum-native status, using EigenDA will still be seen as more “legitimate” in the short term. But over time, as modular architecture and app chains gain traction, being non-Ethereum native will likely face less backlash. Ethereum legitimacy may blur in the coming waves of L2s and app chains. Still, major DeFi and L2s are unlikely to migrate from Ethereum in the near future — its narrative remains key.

In summary, Celestia’s ultra-low costs and higher throughput provide strong appeal for smaller L2s and app chains. The cost savings give them more revenue flexibility to stimulate growth. EigenDA’s advantages lie more in leveraging Ethereum’s security and legitimacy. Near term, it may be the more rational choice for larger L2s versus expensive Ethereum DA.

Therefore, we believe Celestia is better positioned to capture the incremental growth from modular architecture and app chains, while EigenDA will compete more for the existing Ethereum-native market with higher security needs.

Near DA & Polygon Avail

Currently, the competition between Celestia DA and Ethereum-native DA solutions is becoming a focus of market discussions. In addition, third-party DA solutions such as Near DA and Polygon Avail are also starting to emerge. This article will examine the major third-party DA players Near DA and Polygon Avail, to gain insights into the other development trajectories in the DA space.

Near DA

Cost Efficiency

Using NEAR DA can significantly reduce the cost of data storage and transmission. The cost of publishing calldata for a block on NEAR is only $0.0016, while on Ethereum L1 (after the Dencun upgrade), the cost of publishing the same amount of data is approximately $7.73. This indicates that NEAR is 5000 times more cost-efficient.

Technical Principles

The Blob Store contract is a key component on the Near blockchain, specifically designed for processing and storing DA blobs. Blob Store contracts use Near’s consensus mechanism to store blobs, forming consensus around the data when a block producer processes it.

Data Pruning: Once a block includes the receipt and processes it, the receipt is no longer needed for consensus and can be pruned. The pruning time is at least 3 NEAR epochs, each lasting 12 hours, typically five epochs in practice.

Archive Nodes: Once receipts are pruned, the responsibility for storing transaction data shifts to archive nodes. This data can also be obtained from indexers.

Blob Commitment Verification: By checking blob commitments, we can verify that the blob was retrieved from ecosystem participants in the submitted format. Blob commitments are created by dividing a blob into 256-byte segments and creating a Merkle tree, where each leaf is a Sha-256 hash of a segment. The root of the Merkle tree is the blob commitment, provided to the L1 contract as [transaction_id ++ commitment], which is 64 bytes of data.

Key Advantages

1. Consensus Verification: Near validators provide consensus around blob submissions.
2. Data Persistence: Functional input data is stored by full nodes for at least three days, with archive nodes capable of longer-term storage.
3. Efficient Use of Consensus: Consensus is not occupied more than necessary for data.
4. Indexer Support: This data is currently indexed by all major browsers on NEAR.
5. Long-term Availability of Commitments: Commitments are easy to create and can be built by anyone with limited expertise and tools.

Currently, NEAR’s data availability layer product, NEAR DA, has integrated with developer stacks like Polygon CDK and Arbitrum Orbit, allowing developers to build their own L2 or L3 networks, etc.

The NEAR-Polygon CDK integration allows developers building their own rollups to become part of the Polygon ecosystem, marking the first integration of NEAR DA with a ZK-based L2 stack, adding options for developers seeking scalable DA solutions. This integration also builds on the NEAR-Polygon research collaboration to create zkWASM — a new prover for WASM blockchains. In the future, builders could even create zkWASM chains based on NEAR DA. NEAR DA and zkWASM technology will play a significant role in parallel scaling of the EVM and Wasm ecosystems while maximizing interoperability in a multi-chain future.

Arbitrum Orbit chains utilize the Arbitrum Nitro technology stack, a technology developed by Arbitrum for scaling Ethereum. It allows developers to create their own blockchains, which can settle transactions on Arbitrum One, Arbitrum Nova, or the Ethereum mainnet, provided the Arbitrum DAO grants an L2 license. These Orbit chains use Arbitrum’s Rollup and AnyTrust protocols, offering customization in throughput, privacy, gas tokens, and governance to meet specific use cases and business needs. For example, rollup developers looking for a cheaper data availability (DA) alternative can now utilize NEAR DA within the Arbitrum Orbit stack. In this way, developers can build self-managed, configurable blockchains with more control over their functionality and governance while benefiting from Ethereum’s security assurances.

Polygon Avail

Avail was initially a project by Polygon in 2020 and became an independent entity in 2023. Led by Polygon’s co-founder Anurag Arjun and former head of Polygon research Prabal Banerjee, it aims to provide industry-leading data availability solutions. Polygon Avail is a modular blockchain solution focused on the data availability layer, designed to build scalable data availability solutions. It employs a series of technologies, including light clients, data availability sampling, KZG (Kate-Zaverucha-Goldberg) polynomial commitments, and erasure codes, to improve on-chain data throughput and address performance bottlenecks.

Avail’s design features include:

1. Consensus Mechanism: Uses BABE and GRANDPA consensus mechanisms from Polkadot SDK, combining liveness and security to provide network resilience and withstand temporary network partitions and a large number of node failures.
2. Decentralization: Adopts Polkadot’s Nominated Proof of Stake (NPoS) supporting up to 1000 validator nodes and reducing stake centralization risks through effective reward distribution. Avail’s full nodes and light clients use Data Availability Sampling (DAS) for verification, allowing the same security assurances as traditional full nodes while reducing dependency on them.
3. Validity Proofs: Avail uses KZG polynomial commitments to reduce memory, bandwidth, and storage requirements, providing an efficient verification process. This differs from the fraud-proof technology used by Celestia, although Avail shares many similarities in data availability but differs in the method of validity proofs.
4. Data Availability and Security: Avail’s design philosophy focuses on establishing a data available layer, providing a universal data availability solution. It does not rely on the honest majority assumption, as light clients can independently determine data availability through random data sampling, allowing block reconstruction from light nodes even if full nodes crash or attempt to censor data.
5. Technical Implementation: Avail employs data redundancy, anti-fraud proofs, and commitment mechanisms to ensure data validity. It uses KZG polynomial commitments to ensure that data remains valid even after “erasure,” including data redundancy, anti-fraud proofs, and commitment mechanisms, enabling full nodes to incorporate all transaction data of light nodes.

Avail’s practical applications include hosting independent chains, sidechains, and off-chain scaling solutions, aiming to provide all-scenario data availability solutions for the application layer. For example, in Ethereum Layer 2 solutions, Avail can be used for transaction ordering and data availability, ensuring data availability on-chain while easing the data volume restrictions of the main chain.

Future Outlook for Near DA and Polygon Avail

The NEAR protocol, through its sharding method and NEAR DA technology, showcases its scalability capabilities and blueprint for future development. The engineering team’s recent shift towards stateless validation marks a further evolution in sharding technology, aimed at increasing the number of shards and decentralization by lowering validator hardware requirements and shifting state to memory. This will enhance NEAR protocol’s overall processing capacity, freeing projects and developers from competing for block space. As the number of shards increases, the data storage requirements for each shard decrease, theoretically allowing each account to become its own shard, enabling the running of lightweight RPC nodes. This means more efficient data management for L2 projects using NEAR DA. Although data availability sharding is still in development, it has already shown NEAR protocol’s significant advantages for various builders and the ecosystem. As the Web3 domain evolves, NEAR, by providing rapid, low-cost data availability solutions for rollups, not only addresses the scaling challenges faced by Ethereum but also prepares for a multi-chain and cross-chain future, positioning NEAR DA technology at the forefront of this transformation.

Avail’s future outlook focuses on enhancing the efficiency and accessibility of the blockchain ecosystem. Through its modular system, Avail aims to independently optimize data processing and storage, improving overall network performance. It particularly emphasizes enhancing data availability, ensuring that even if data is not directly stored on-chain, it can still be effectively verified, crucial for maintaining transaction transparency and security. Avail also plans to support asynchronous interactions among multiple application chains, similar to a microservices architecture, to increase overall flexibility and scalability. For ordinary users, Avail’s advanced technology enables light clients to verify data integrity without downloading the entire blockchain, making blockchain technology more user-friendly. Since becoming independent from Polygon, Avail has begun exploring new collaborative opportunities with a diverse range of partners, showcasing its potential in multiple application scenarios. Ultimately, Avail’s goal is to provide developers with an easy-to-use environment, inspiring them to create innovative applications while driving the construction of a more open, interconnected, and decentralized digital world.

Reference

https://www.chaincatcher.com/article/2111784https://docs.celestia.org/learn/how-celestia-works/monolithic-vs-modular

https://staking-explorer.com/staking/celestia

https://twitter.com/smyyguy/status/1744419436449222864?s=46

https://docs.eigenlayer.xyz/eigenda-guides/eigenda-rollup-user-guides/building-on-top-of-eigenda

https://www.blog.eigenlayer.xyz/intro-to-eigenda-hyperscale-data-availability-for-rollups/

https://www.blog.eigenlayer.xyz/launch-of-the-stage-2-testnet-eigenlayer-eigenda/

https://www.reflexivityresearch.com/free-reports/exploring-eigenlayer

https://medium.com/@VendingMachine/avs-token-design-considerations-eigenda-compared-to-celestia-89d416059758

https://forum.celestia.org/t/a-comparison-between-da-layers/899

https://mirror.xyz/edatweets.eth/zZG84zO6EjGo9sieBvHUEYYjsY1935n2XMkc_12_678

https://twitter.com/sreeramkannan/status/1595863300679831552

https://blog.celestia.org/ethereum-off-chain-data-availability-landscape/

https://www.odaily.news/post/5189320

https://foresightnews.pro/article/detail/45728

https://foresightnews.pro/article/detail/45308

https://www.panewslab.com/zh/articledetails/z7f4srnb.html

https://foresightnews.pro/article/detail/52079

https://foresightnews.pro/article/detail/51570

https://foresightnews.pro/article/detail/42095

https://foresightnews.pro/article/detail/20581

https://twitter.com/smyyguy/status/1744419436449222864?s=46

https://near.org/blog/near-foundation-launches-near-da-to-offer-secure-cost-effective-data-availability-for-eth-rollups-and-ethereum-developers

https://near.org/data-availability

https://pages.near.org/blog/arbitrum-integrates-near-da-for-developers-building-ethereum-rollups/

https://foresightnews.pro/article/detail/51873

https://foresightnews.pro/article/detail/46036

https://foresightnews.pro/article/detail/48885

https://dodotopia.notion.site/Celestia-f86a7f5e0a154e229a2fddf9a90c37ea

https://docs.celestia.org/concepts/how-celestia-works/data-availability-layer

https://forum.celestia.org/t/an-open-modular-stack-for-evm-based-applications-using-celestia-evmos-and-cosmos/89

https://fuel-labs.ghost.io/beyond-monolithic-the-modular-blockchain-paradigm/

https://medium.com/alliancedao/the-case-for-parallel-processing-chains-90bac38a6ba4

https://docs.dymension.xyz/learn/dymension-hub

https://mirror.xyz/neelsalami.eth/rvhK5mEcFTOjyu_DFsqS2cYR7U6Fjvbw3nf8tI-pr-Q?ref=twitter

https://polygon.technology/solutions/polygon-avail/

https://rainandcoffee.substack.com/p/the-modular-world

https://www.techflowpost.com/article/detail_15557.html

https://medium.com/@numia.data/the-impact-of-celestias-modular-da-layer-on-ethereum-l2s-a-first-look-8321bd41ff25

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital

Twitter:https://twitter.com/mtcap_crypto

By Severin, MT Capital

bitSmiley Fills the Stablecoin Gap in the BTC Ecosystem

Since the second half of last year, the fervor around Ordinals has brought a huge influx of capital and user traffic to the Bitcoin network, propelling the evolution of the Bitcoin ecosystem. The demand for inscription transactions gave rise to numerous Bitcoin wallets and inscription market infrastructure. The limitations on Bitcoin network transaction throughput and excessively high gas costs have also led developers to gradually shift their focus to Bitcoin scalability solutions. The massive amount of capital locked in inscription needs new use cases and yield opportunities, while other ecosystems are eager to capitalize on the inscription bull run, giving rise to various cross-chain projects.

As of now, although the Bitcoin ecosystem as a whole remains in a very early stage, it has nurtured a batch of high-quality infrastructure that fills market gaps. For example:

• Wallets: Unisat, Alby, OKX Wallet, Wizz Wallet….
• Marketplace: Unisat, OKX BRC20 Market, idclub, Dotswap swap, Alex lab….
• L2/Scalability: B² Network, Merlin Chain, BounceBit, BEVM, Bison Labs, SatoshiVM….
• Bridges: MultiBit, TeleportDAO, Ordinifinity, Ordbridge….
• DA: Nubit, B² Network, Babylon….

The excitement around the Bitcoin ecosystem is reminiscent of Ethereum’s DeFi Summer. However, compared to Ethereum, the Bitcoin ecosystem still lacks quality DEX, lending and stablecoin projects. In particular, the crown jewel of DeFi — native stablecoins — remains a major gap in the Bitcoin ecosystem. As BTC L2 solutions continue to emerge, the L2 ecosystem needs stablecoins to leverage BTC DeFi and unlock liquidity from the Bitcoin mainnet. As the inscription frenzy gradually cools down and the market becomes more rational, the funds remaining on the Bitcoin network also need new yield and utility, for which stablecoins are the obvious choice. Therefore, we have our eyes on bitSmiley, the first bitRC-20 overcollateralized stablecoin project on the Bitcoin ecosystem. bitSmiley has the potential to fill the stablecoin gap and become a core component in the next wave of BTC ecosystem growth.

BTC’s “MakerDAO + Compound”

bitSmiley consists of two core components: the overcollateralized stablecoin bitUSD, and the fully decentralized P2P lending protocol bitLending. Its business model, combining stablecoin issuance with decentralized lending, is often referred to as the “MakerDAO + Compound” of the Bitcoin ecosystem.

bitUSD

bitUSD is the cornerstone of the bitSmiley ecosystem. Due to the limited functionality of Brc-20, bitSmiley optimized Brc-20 into an enhanced version called bitRC-20 to meet the needs of running a stablecoin. bitRC-20 is backwards compatible with Brc-20, with additional Mint and Burn operations to facilitate stablecoin minting and burning.

The overall minting logic of bitUSD is similar to MakerDAO. First, users need to overcollateralize BTC on the Bitcoin mainnet. Then, the oracle will relay the information to L2. The bitSmileyDAO deployed on L2, after receiving and validating the oracle information via consensus, will send a Mint bitUSD message to validators on the Bitcoin mainnet, thus minting bitUSD on the mainnet.

The redemption logic is similar to the minting logic. When users retrieve their collateral, the corresponding bitUSD will also be burned accordingly.

If the collateral ratio drops below the threshold, bitSmiley will also initiate liquidation to auction off the collateral assets. Similar to MakerDAO’s liquidation mechanism, bitSmiley’s liquidation uses a Dutch auction model where the bidding starts high and gradually decreases. bitSmiley will also allocate 90% of the stability fees and auction proceeds to a liquidation buffer to safeguard the overall system’s security. Beyond that, when the liquidation buffer is still insufficient to cover the debt, bitSmiley will use the platform’s future revenue as collateral for debt auction to minimize bad debt as much as possible, thus better protecting the platform from extreme market volatility.

MakerDAO’s decentralized overcollateralized stablecoin design has been validated by the market. bitSmiley cleverly references MakerDAO’s approach, while innovating more delicately on the token standard and liquidation mechanism to better meet the stablecoin needs in the Bitcoin ecosystem.

bitLending

In addition to stablecoin needs, bitSmiley also keenly noticed Bitcoin users’ demand for liquidity lending. So bitSmiley can also provide native decentralized lending services on Bitcoin.

The implementation of bitLending is similar to other P2P lending protocols on other ecosystems. Lenders can post loan offers on bitLending, specifying the type and amount of bitRC-20 tokens offered, loan terms, and interest rates. Borrowers can accept loan offers they like. Upon matching, bitLending will generate a multisig address for fund transfer. The borrower and lender need to transfer assets to the multisig address and wait for on-chain confirmation. After confirmation, the borrower can withdraw the loan.

Due to the Bitcoin network’s long block times, bitLending cannot rely on oracles for liquidation like other lending protocols. If the collateral asset price of the borrower drops significantly, the borrower may default, exposing the lender to major losses. To solve this, bitLending introduces loan insurance. Both the borrower and lender need to transfer an insurance fee to the multisig address before transferring the loan and collateral. Insurers can collect the fees in the multisig address and opt to insure the lender’s losses. If the borrower defaults, the insurer’s funds in the multisig will be used to compensate the lender, thus protecting the lender’s interests.

bitSmiley also plans to further optimize bitLending’s lending mechanism to support order splitting and merging to improve capital efficiency. Additionally, bitSmiley plans to introduce CDS (credit default swaps) tailored to bitLending, bringing more sophisticated traditional finance plays into the Bitcoin ecosystem.

In summary, bitSmiley not only introduced stablecoins and lending to the DeFi ecosystem, but also made delicate optimizations to the stablecoin and lending protocols based on Bitcoin’s uniqueness. With the launch of BTC L2s and the gradual maturation of bitSmiley’s products, its combined stablecoin and lending model has the potential to become the liquidity hub of the Bitcoin network, aggregating liquidity, improving capital efficiency, and injecting ecological vitality. bitSmiley’s first mover advantage may establish bitUSD as the hard currency for value exchange on Bitcoin, and continue expanding its network effects to build ecosystem moats and achieve dimensional reduction impact on competitors.

Recent Progress

In addition to its strong founding team and product capabilities, bitSmiley’s marketing, community building, and operational strengths are also noteworthy. Recently, bitSmiley has ramped up promotions — announcing investors, partners, organizing AMAs and Twitter Spaces, increasing community discussions and followers. To further strengthen community engagement and reward early supporters, bitSmiley has launched a series of NFT campaigns.

Firstly, bitSmiley issued 100 OG NFTs called bitDisc-Gold exclusively to Bitcoin OGs and industry leaders. bitDisc-Gold holders get invited to a private Bitcoin OG club, priority access to bitSmiley products, and more future benefits.

Secondly, bitSmiley launched 10,000 bitDisc-Black NFTs to reward regular users, early supporters and contributors. bitDisc-Black holders also enjoy product trial access, potential airdrops, and other perks.

Currently, bitSmiley has snapshotted 1,999 early community followers, and the remaining whitelist spots will be given out through future campaigns. Major KOLs on Twitter have also started retweet campaigns for whitelist giveaways. Additionally, bitSmiley kicked off a new whitelist giveaway campaign for active Discord members — users can join bitSmiley’s Discord and actively participate in discussions to earn whitelist eligibility.

Conclusion

After in-depth research and analysis, MT Capital is very bullish on bitSmiley’s growth potential and has participated in bitSmiley’s latest funding round. bitSmiley has keen insights into the market gaps for stablecoins and lending products in the Bitcoin ecosystem. By launching innovative native Bitcoin overcollateralized stablecoins and decentralized P2P lending, they have achieved perfect product-market fit. Moreover, bitSmiley’s stablecoins not only provide new value anchoring and transfer capabilities to the Bitcoin network, but its lending products also create new use cases and value capture opportunities for the stablecoins. We believe that with its first-mover advantage, bitSmiley will quickly build powerful ecosystem network effects and become a leading DeFi product in the Bitcoin ecosystem.

MT Capital

Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.

MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.

Website: https://mt.capital

Twitter: https://twitter.com/mtcap_crypto

TL;DR

• The necessity of Parallel EVM lies in its solution to the efficiency issues of traditional EVM’s sequential transaction processing. By allowing multiple operations to execute simultaneously, it significantly enhances network throughput and performance.
• Implementations of Parallel EVM include scheduler-based concurrent processing, multi-threaded EVM instances, and system-level sharding, while facing technical challenges such as unreliable timestamps, blockchain determinism, and validator profit orientation.
• Monad Labs, through its Layer 1 project Monad, aims to significantly enhance blockchain scalability and transaction speed with unique technological features. These include processing up to 10,000 transactions per second, 1-second block time, parallel execution capabilities, and the MonadBFT consensus mechanism.
• Sei V2, a major upgrade to the Sei Network, aims to become the first fully parallelized EVM. It offers backward-compatible EVM smart contracts, optimistic parallelization, a new SeiDB data structure, and interoperability with existing chains, aiming to greatly improve transaction processing speed and network scalability.
• Neon EVM, a platform on Solana, aims to provide an efficient, secure, and decentralized environment for Ethereum dApps. It allows developers to easily deploy and run dApps while leveraging Solana’s high throughput and low-cost advantages.
• Lumio, developed by Pontem Network, is a Layer 2 solution that innovatively addresses Ethereum’s scalability challenges by uniquely supporting both the EVM and the Move VM used by Aptos, elevating the Web3 experience closer to Web2 levels.
• Eclipse is an Ethereum Layer 2 solution that accelerates transaction processing using SVM. It adopts a modular rollup architecture, integrating Ethereum settlement, SVM smart contracts, Celestia data availability, and RISC Zero fraud proofs.
• Solana uses its Sealevel technology for parallel smart contract processing. Sui enhances throughput with Narwhal and Bullshark components. Fuel achieves parallel transaction execution through the UTXO model, and Aptos uses the Block-STM engine to enhance transaction processing capabilities. All demonstrate different implementations and advantages of parallel technology in the blockchain field.
• The main challenges of adopting parallelism include resolving data races and read-write conflicts, ensuring compatibility with existing standards, adapting to new ecosystem interaction models, and managing increased system complexity, especially in terms of security and resource allocation.
• Parallel EVM demonstrates tremendous potential in enhancing blockchain scalability and efficiency, marking a significant shift in blockchain technology. It improves transaction processing capacity by executing transactions simultaneously on multiple processors, breaking free from the constraints of traditional sequential transaction processing. While Parallel EVM offers immense potential, its successful implementation requires overcoming complex technical challenges and ensuring widespread adoption in the ecosystem.

Basic Concepts of Parallel EVM

Introduction to EVM

The Ethereum Virtual Machine (EVM) is a core component of the Ethereum blockchain, acting as its computational engine. It is a quasi-Turing-complete machine that provides an execution environment for smart contracts on the Ethereum network, crucial for maintaining trust and consistency across the entire Ethereum ecosystem.

The EVM executes smart contracts by processing bytecode, a more basic form of smart contract code typically written in high-level programming languages like Solidity. This bytecode consists of a series of operation codes (opcodes) used to perform various functions, including arithmetic operations and data storage/retrieval. The EVM operates as a stack machine, processing operations in a last-in, first-out manner, and each operation in the EVM has an associated gas cost. This gas system measures the computational work required to execute an operation, ensuring fair resource allocation and preventing network abuse.

In Ethereum, transactions play a vital role within the functionality of the EVM. There are two types of transactions: one that leads to message calls and another that leads to contract creation. Contract creation results in a new contract account containing compiled smart contract bytecode, which is executed when another account makes a message call to the contract.

The architecture of the EVM includes components like bytecode, stack, memory, and storage. It has a dedicated memory space for temporarily storing data during execution and a persistent storage space on the blockchain for indefinite data preservation. The EVM’s design ensures a secure execution environment for smart contracts, isolating them to prevent reentrancy attacks, and incorporates various safety measures, such as gas and stack depth limits.

Furthermore, the influence of the EVM extends beyond Ethereum, reaching a broader scope through EVM-compatible chains. While these chains differ, they maintain compatibility with Ethereum-based applications, enabling seamless interaction with Ethereum’s foundational applications. These chains play a key role in various domains like enterprise solutions, GameFi, and DeFi.

The Necessity of Parallel EVM

The necessity of Parallel EVM (Ethereum Virtual Machine) stems from its ability to significantly enhance the performance and efficiency of blockchain networks. Traditional EVM processes transactions sequentially, which is not only energy-intensive but also places a heavy burden on network validators. This method of processing often leads to high transaction costs and inefficiency, considered a major barrier to the widespread adoption of blockchain technology.

Parallel EVM revolutionizes the consensus process by allowing multiple operations to execute simultaneously. The ability to execute in parallel greatly increases the network’s throughput, thus enhancing the performance and scalability of the entire blockchain. With Parallel EVM, blockchain networks can process more transactions in a shorter amount of time, effectively addressing the common congestion issues and slow processing times of traditional blockchain systems.

Parallel EVM has significant impacts on various aspects of blockchain technology:

• It provides a more energy-efficient and effective method for processing transactions. By reducing the workload of validators and the network as a whole, Parallel EVM contributes to building a more sustainable blockchain ecosystem.
• The increased scalability and added throughput directly lead to reduced transaction fees. Users will enjoy a more economical experience, making blockchain platforms more attractive to a broader audience.
• Processing multiple transactions simultaneously rather than sequentially means that dApps can run more smoothly, even during periods of high network demand.

Implementation Methods of Parallel EVM (Credited to Siyuan H.)

In the current EVM architecture, the most granular read and write operations are sload and sstore, used for reading from and writing to the state trie, respectively. Therefore, ensuring that different threads do not conflict on these two operations is a straightforward entry point for implementing parallel/concurrent EVM. In fact, in Ethereum, there is a special type of transaction that includes a special structure called the "access list," allowing transactions to carry the storage addresses they will read and modify. Thus, this provides a good starting point for implementing a scheduler-based concurrent approach.

Regarding system implementation, there are three common forms of parallel/concurrent EVM:

1. Multithreading of a single EVM instance.
2. Multithreading of multiple EVM instances on a single node.
3. Multithreading of multiple EVM instances across multiple nodes (essentially system-level sharding).

The differences of parallel/concurrent processing in blockchain compared to database systems include:

• Unreliable timestamps make timestamp-based concurrency methods difficult to deploy in the blockchain world.
• Absolute determinism on blockchain systems to ensure that transactions re-executed by different validators are identical.
• Validators’ ultimate goal is higher revenue, not faster transaction execution.

So, what do we need?

• A system-level consensus is required where faster execution leads to higher rewards.
• A multi-variable scheduling algorithm considering block limitations, capable of capturing more revenue while completing executions more quickly.
• More granular data operations, including opcode-level data locking, memory caching layers, etc.

Major Projects and Their Technologies

Monad Labs

Monad is an EVM Layer 1, aimed at significantly enhancing the scalability and transaction speed of the blockchain through its unique technological features. A key advantage of Monad is its capability to process up to 10,000 transactions per second with a block time of just 1 second. This is made possible by its MonadBFT consensus mechanism and compatibility with EVM, enabling it to process transactions efficiently and swiftly.

One of the most notable features of Monad is its parallel execution capability, which allows it to process multiple transactions simultaneously. Compared to the sequential processing method in traditional blockchain systems, this greatly increases network efficiency and throughput.

Monad’s development is led by Monad Labs, co-founded by Keone Hon, Eunice Giarta, and James Hunsaker. The project has successfully raised $19 million in seed funding and plans to launch its testnet in mid-Q1 2024, followed by the mainnet launch.

Monad has optimized in the following four main areas, making it a high-performance blockchain:

1. MonadBFT:

MonadBFT is the high-performance consensus mechanism of the Monad blockchain, used to achieve consistency in transaction ordering under partially synchronous conditions in the presence of Byzantine actors. It is an improved version based on HotStuff, utilizing a two-phase BFT algorithm, featuring optimistic responsiveness, linear communication costs in common cases, and quadratic communication costs in timeout scenarios. In MonadBFT, the leader sends a new block and the previous round’s QC (Quorum Certificate) or TC (Timeout Certificate) to validators each round. Validators review the block and send a signed “yes” vote to the leader of the next round if they agree. This process aggregates 2f+1 validators' "yes" votes into a QC through threshold signatures. In common communication cases, the leader sends the block to validators who then send votes directly to the leader of the next round. MonadBFT also employs pairing-based BLS signatures to address scalability issues, allowing signatures to be incrementally aggregated into a single signature, proving that shares associated with public keys have signed the message. For performance considerations, MonadBFT adopts a hybrid signature scheme, where BLS signatures are only used for aggregatable message types (votes and timeouts). The integrity and authenticity of messages are still provided by ECDSA signatures. Due to these features, MonadBFT can achieve efficient and robust blockchain consensus.

2. Deferred Execution:

This is a key innovation that decouples the execution process from the consensus process. In this architecture, the consensus process involves nodes agreeing on the official ordering of transactions, while execution is the actual process of executing these transactions and updating the state. In this design, the leading node proposes a transaction order but does not know the final state root when proposing the order; validators also do not know whether all transactions in the block will execute successfully when voting on its validity.

This design allows Monad to achieve significant speed improvements, enabling a single-shard blockchain to scale to millions of users. In Monad, each node independently executes the transactions in block N while reaching consensus on block N+1. This method allows for a larger gas budget, as execution only needs to keep up with the pace of consensus. Additionally, since execution only needs to average up to the pace of consensus, this method is more tolerant of specific variations in computation time.

To further ensure state machine replication, Monad includes a Merkle root delayed by D blocks in the block proposal. This delayed Merkle root ensures consistency across the entire network, even if there are node execution errors or malicious behaviors.

In MonadBFT, finality is single-slot (1 second), and the execution results typically lag less than 1 second on full nodes. This single-slot finality means that after submitting a transaction, users will see the official order of the transaction after a single block. There is no possibility of reordering unless a supermajority of the network behaves maliciously. For users who need to know transaction results quickly (e.g., high-frequency traders), running a full node can minimize delays.

3. Parallel Execution:

It enables Monad to execute multiple transactions simultaneously. This approach might initially seem different from Ethereum’s execution semantics, but it is not. Blocks in Monad are the same as in Ethereum, both being linearly ordered sets of transactions. The results of executing these transactions are the same between Monad and Ethereum.

In the parallel execution process, Monad uses an optimistic execution method, i.e., starting the execution of subsequent transactions before earlier transactions in the block are completed. This sometimes leads to incorrect execution results. To address this issue, Monad tracks the inputs used in the execution of transactions and compares them with the outputs of previous transactions. If differences are found, it indicates that the transaction needs to be re-executed with the correct data.

Additionally, Monad employs a static code analyzer to predict dependencies between transactions during execution, avoiding invalid parallel executions. In the best-case scenario, Monad can predict many dependencies in advance; in the worst-case scenario, it reverts to simple execution mode.

Monad’s parallel execution technology not only improves network efficiency and throughput but also reduces the occurrence of transaction failures due to parallel execution by optimizing execution strategies.

Ecosystem Projects

Tayaswap

TayaSwap is an AMM DEX based on Monad, supported by SubLabs, allowing asset trading without traditional order books or intermediaries. AMMs rely on mathematical formulas and smart contracts to facilitate token exchanges, determine prices, and enable peer-to-peer transactions using smart contracts.

Ambient Finance

Ambient (formerly CrocSwap) is a decentralized trading protocol allowing combined centralized and constant product liquidity on any pair of blockchain assets through a bilateral AMM. Ambient runs the entire DEX within a single smart contract, where individual AMM pools are lightweight data structures, not separate smart contracts.

Shrimp Protocol

Shrimp is a (3,3) DEX with a flywheel token economy, supporting real-world assets, set to launch on Monad.

Catalyst

Catalyst is a permissionless liquidity solution between modular blockchains, built to connect all chains, aiming to enable access to any asset anywhere. Catalyst allows developers to automatically connect to all chains, gaining access to users in a unified ecosystem, while its simple, decentralized, and self-custodial design ensures safe, seamless access to liquidity.

Swaap

Swaap is a market-neutral Automated Market Maker (AMM). It combines oracles and dynamic spreads to provide sustainable returns for liquidity providers and cheaper prices for traders. The protocol significantly reduces impermanent loss and offers multi-asset pools.

Elixir

Elixir is a decentralized market-making protocol that interacts with centralized exchanges using market-making algorithms through API calls, bringing liquidity to long-tail crypto assets.

Timeswap

Timeswap is an AMM-based decentralized money market protocol that operates without oracles or liquidators. Unlike Uniswap, which allows real-time asset trading, borrowing on Timeswap involves trading tokens until repayment. Lenders provide Asset A for loans, simultaneously “insuring” a certain amount of Asset B used as collateral by borrowers. Users can adjust their risk profile, obtaining higher rates with lower collateral ratios, and vice versa.

Poply

Poply is a community-based NFT marketplace, specifically for the Monad chain, showcasing and empowering NFT collections created specifically for this chain. It attracts individuals interested in unique NFTs for ERC-721 token trading through AI-generated art and user-friendly interfaces.

Switchboard

Switchboard is a permissionless, customizable, multi-chain oracle protocol for general data feeds and verifiable randomness. By allowing anyone to push any form of data, regardless of type, it offers a one-stop solution for users and helps drive the development of the next generation of decentralized applications.

Pyth Network

Pyth Network, developed by Douro Labs, is a next-generation price oracle solution aiming to provide valuable financial market data on-chain to projects, protocols, and the public, including cryptocurrencies, stocks, forex, and commodities. The network aggregates first-party price data from over 70 trusted data providers and publishes it for use by smart contracts and other on-chain or off-chain applications.

AIT Protocol

AIT Protocol is an artificial intelligence data infrastructure offering Web3 AI solutions. AIT’s decentralized marketplace provides a unique and extensive opportunity for millions of cryptocurrency users to engage in “train-to-earn” tasks, a concept allowing them to earn rewards while actively contributing to the development and advancement of AI models.

Notifi

Notifi offers a universal communication layer for all Web3 projects, planning to embed notification and messaging functionalities into decentralized applications for interaction with users across digital and on-chain channels. The Notifi API allows developers to unlock complex communication infrastructures through simple APIs, providing native user experiences for applications worldwide; Notifi Center offers users a customized notification experience, allowing them to view and manage all messages in the Web3 world from mobile and web endpoints; Notifi Push enables marketers to create cohesive multi-channel engagements, driving business growth and retaining their user base.

ACryptoS

ACryptoS is an advanced crypto strategy platform, a multi-chain yield aggregator optimizer, and DEX, offering a range of unique products including automated compounding single token vaults, dual token LP vaults, unique liquidity vaults, Balancer-V2 branch DEX, and stablecoin exchange. Initially launched on the BNB chain in November 2020, ACryptoS has now expanded to 11 chains, deploying over 100 vaults, aiming to support DeFi users and protocols.

MagmaDAO

MagmaDAO is a DAO-controlled liquidity staking protocol aiming for fair token distribution through ecosystem competitive airdrops. It is the first distributed validator outside Ethereum, built on the fastest, cheapest, and most censorship-resistant EVM L1 Monad.

Wombat Exchange

Wombat Exchange is a multi-chain stablecoin swap with open liquidity pools, low slippage, and one-sided staking.

Wormhole

Wormhole is a decentralized universal messaging protocol, enabling developers and users of cross-chain applications to leverage the advantages of multiple ecosystems.

DeMask Finance

DeMask Finance is an on-chain AMM protocol for trading between NFTs and ERC20 tokens. DeMask Finance supports creating NFT collections and NFT launchpads: paired with ETH and other tokens. NFT decentralized exchange: supports ERC-1155 NFTs or other tokens paired with ETH and ERC-20 tokens. The DeMask protocol aims to increase liquidity in the NFT market, providing an interface for seamless exchanges between ERC20 tokens or native tokens and NFT collections. DeMask is an interconnected system of smart contracts where all users can create and own liquidity pools and trade in a fully automated way. Each pool holds a pair of assets, including a token and an NFT, providing fixed prices for instant trading. This also allows other contracts to estimate the average price of both assets over time. Users owning liquidity pools are rewarded when exchanging asset pairs.

Sei V2

Sei V2 is a significant upgrade to the Sei network, aiming to become the first fully parallelized EVM. This upgrade will endow Sei with the following capabilities:

1. Backward Compatibility with EVM Smart Contracts:

This means that developers can deploy already-audited, EVM-compatible smart contracts on Sei without any code changes. This is extremely important for developers as it simplifies the process of moving their existing smart contracts from other blockchains like Ethereum to Sei.

Technically, Sei nodes will automatically import Geth — the Go implementation of the Ethereum Virtual Machine. Geth will be used to process Ethereum transactions, and any resulting updates (including state updates or calls to non-EVM related contracts) will go through a special interface created by Sei for EVM.

2. Optimistic Parallelization:

It allows the blockchain to support parallelization without the need for developers to define any dependencies. This means all transactions can run in parallel, and when conflicts arise (e.g., transactions touching the same state), the chain will track the storage parts each transaction touches and re-run these transactions in order. This process will continue recursively until all unresolved conflicts are resolved. As transactions are ordered within a block, this process is deterministic and simplifies the developer workflow while maintaining chain-level parallelism.

3. SeiDB:

It will introduce a new data structure called SeiDB to optimize the platform’s storage layer. The main goal of SeiDB is to prevent state bloat, the issue of the network becoming data-heavy, and to simplify the state synchronization process for new nodes. This design aims to enhance the overall performance and scalability of the Sei blockchain.

Sei V2 achieves this by transforming the traditional IAVL tree into a dual-component system — state storage and state commitment. This change significantly reduces latency and disk usage, and Sei V2 also plans to transition to using PebbleDB to improve read-write performance for multi-threaded access.

From a performance perspective, Sei V2 will offer a throughput of 28,300 batch transactions per second, along with a block time of 390 milliseconds and finality of 390 milliseconds. This enables Sei to support more users, provide a better interaction experience, and offer cheaper transaction costs per transaction compared to existing blockchains.

The main upgrade progress of Sei V2 is currently nearing code completion. After the review is completed, this upgrade will be released in the public testnet in Q1 2024 and deployed to the mainnet in the first half of 2024.

Neon

Neon EVM leverages the capabilities of the Solana blockchain to provide an efficient environment for Ethereum dApps. It operates as a smart contract within Solana, allowing developers to deploy Ethereum dApps with minimal or no code changes, and benefit from Solana’s advanced features. The architecture and operations of Neon EVM focus on security, decentralization, and sustainability, offering Ethereum developers a seamless transition to the Solana environment. Utilizing the advantages of Solana’s low fees and high transaction speed, it enables parallel execution of transactions, high throughput, and reduced costs. The key components of the Neon EVM ecosystem include:

1. Neon EVM Program:

It is an EVM compiled into Berkeley Packet Filter bytecode, running on Solana. It processes Ethereum-like transactions (Neon transactions) on Solana, following Ethereum rules. Neon EVM is configured through a decentralized multi-signature EVM account, with participants able to change Neon EVM code and set parameters.

The process of Neon EVM handling transactions involves several key steps. Firstly, users initiate Ethereum-like transactions (N-tx) through Ethereum-compatible wallets. These transactions are encapsulated into Solana transactions (S-tx) via the Neon Proxy and then passed to the Neon EVM program hosted on Solana. The Neon EVM program decapsulates the transactions, verifies user signatures, loads the EVM state (including account data and smart contract code), executes the transaction in the Solana BPF (Berkeley Packet Filter) environment, and updates Solana’s state to reflect the new Neon EVM state.

2. Neon Proxy: It enables Ethereum dApps to be ported to Neon with minimal reconfiguration. Neon Proxy packages EVM transactions into Solana transactions, offered as a containerized solution for ease of use. Operators running Neon Proxy servers facilitate the execution of Ethereum-like transactions on Solana, accepting NEON tokens as gas fees and other payments within the Solana ecosystem.

3. Neon DAO: The DAO provides custodial services for the Neon Foundation and guides future research and development. It operates as a series of contracts on Solana, providing a governance layer to control Neon EVM functions. NEON token holders can participate in DAO activities, including proposing and voting on decisions.

4. NEON Token: This utility token serves two primary purposes — paying for gas fees and participating in governance through the DAO.

5. Integrations and Tools: Neon EVM supports various integrations and tools for development and analysis. These include block explorers like NeonScan, ERC-20 SPL wrappers for token transfers, NeonPass for transferring ERC-20 tokens between Solana and Neon EVM, NeonFaucet for test tokens, and compatibility with EVM-compatible wallets like MetaMask.

Eclipse

Eclipse is a Layer 2 solution for Ethereum that significantly accelerates transaction processing by leveraging the Solana Virtual Machine (SVM). Designed for speed and scalability, Eclipse adopts a modular rollup architecture and integrates key technologies such as Ethereum settlement, SVM smart contracts, Celestia data availability, and RISC Zero security.

Specifically, Eclipse Mainnet combines the best modular stack components:

• Settlement Layer — Ethereum: Eclipse uses Ethereum as its settlement layer. At this layer, transactions are finalized and secured. Utilizing Ethereum means not only leveraging its robust security and liquidity but also using ETH as the gas token for paying transaction fees. This setup allows Eclipse to inherit Ethereum’s strong security features.
• Execution Layer — SVM: For smart contract execution, Eclipse employs SVM. This contrasts with the EVM’s sequential transaction processing, as SVM can handle parallel transaction processing. Its Sealevel runtime feature allows parallel processing of transactions that do not involve overlapping states, enabling Eclipse to scale horizontally and increase throughput.
• Data Availability — Celestia: To ensure timely and verifiable data availability, Eclipse adopts Celestia. Celestia provides a scalable and secure platform for data publication, supporting Eclipse’s high throughput.
• Fraud Proofs — RISC Zero: Eclipse integrates RISC Zero for zero-knowledge fraud proofs, eliminating the need for intermediate state serialization, thus enhancing the system’s efficiency and security.

Eclipse’s design goal is to provide a genuinely scalable and general-purpose Layer 2 solution for Ethereum. It aims to address the limitations and resulting isolation and complexity brought by specific application rollups, which could degrade user and developer experiences. Through its modular rollup system and integrated technology components, Eclipse offers an attractive option for building scalable and high-performance dApps on Ethereum.

Lumio

Lumio is a Layer 2 solution developed by Pontem Network, designed to address Ethereum’s scalability challenges and bring a Web2-like experience to Web3. It stands out as a unique rollup in the blockchain space because it supports both the EVM and Move VM used by Aptos. This dual compatibility allows Lumio to process transactions on Aptos while settling on Ethereum, providing a versatile and efficient solution for dApp developers and users. Its key features include:

1. Dual Virtual Machine Compatibility: Lumio uniquely supports both the EVM and Aptos’s Move VM. This dual compatibility enables Lumio to seamlessly integrate the functionalities of Ethereum and Aptos, enhancing flexibility and efficiency in dApp development and execution.
2. High Throughput and Low Latency: By leveraging high-performance chains like Aptos for transaction ordering, Lumio significantly enhances transaction bandwidth. This integration ensures that Lumio can efficiently handle a large volume of transactions while maintaining Ethereum’s security and liquidity features.
3. Optimistic Rollup Technology: Lumio uses open-source OP stack and adopts optimistic rollup technology. Optimistic rollups are known for their efficient transaction processing and lower costs, suitable for scaling Ethereum-based applications.
4. Flexible Gas Fee Economic Model: Lumio introduces an application-centric gas fee economic model. This model allows app developers to directly benefit from network usage, potentially incentivizing more innovative and user-friendly dApp development.
5. Interoperability and Integration: Lumio’s ability to process transactions on Aptos and settle on Ethereum demonstrates a high degree of interoperability between different blockchain ecosystems. This feature allows developers to fully utilize the strengths of both Ethereum and Aptos in their applications.
6. Balance of Security and Scalability: Combining Ethereum’s robust security and Aptos’s scalability offers developers an attractive solution for building high-performance, secure dApps. Lumio’s architecture is designed to effectively balance these two key aspects.

Lumio is currently in a closed testing phase, with plans to gradually roll out to selected users. This approach allows for comprehensive testing and improvements to the platform based on user feedback, ensuring a robust and user-friendly platform when released more broadly.

Other Parallel Projects in the Industry

Solana

Solana’s Sealevel technology is a key component of its blockchain architecture, designed to enhance the performance of smart contracts through parallel processing technology. This approach significantly differs from the single-threaded processing of other blockchain platforms, such as EVM and EOS’s WASM-based runtime, which handle one contract at a time and modify the blockchain state sequentially.

Sealevel enables the Solana runtime to process tens of thousands of contracts in parallel, utilizing all the cores available to validators. This parallel processing capability is possible because Solana transactions explicitly describe all the states that will be read or written during execution, allowing non-overlapping transactions to be executed concurrently, and transactions that only read the same state.

The core functionality of Sealevel is based on Solana’s unique architecture, including components like the Cloudbreak account database and the Proof of History (PoH) consensus mechanism. Cloudbreak maps public keys to accounts, with accounts maintaining balances and data, while programs (stateless code) manage these accounts’ state transitions.

Transactions in Solana specify an instruction vector, each instruction containing a program, program instructions, and a list of accounts the transaction wishes to read and write. This interface is inspired by low-level operating system interfaces to devices, allowing the SVM to sort millions of pending transactions and schedule all non-overlapping transactions for parallel processing. Furthermore, Sealevel can sort all instructions by program ID and run the same program simultaneously on all accounts, a process similar to SIMD (Single Instruction, Multiple Data) optimizations used in GPUs.

Sealevel in Solana offers several benefits, including enhanced scalability, reduced latency, cost efficiency, and improved security. It enables the Solana network to handle a significantly higher number of transactions per second, provide almost instant transaction finality, and reduce transaction fees. Even during parallel processing, smart contract security is maintained through Solana’s robust security protocols.

By achieving high-speed parallel processing and increased transaction throughput, Sealevel makes Solana a powerful platform for decentralized applications.

Sui

Sui’s parallel technology features make it a highly efficient, high-throughput blockchain platform suitable for various Web3 applications and use cases. These significant features work together to enhance the efficiency and throughput of its network:

1. Narwhal and Bullshark Components: These two components are crucial to Sui’s consensus mechanism. Narwhal, acting as a mempool, is responsible for accelerating transaction processing and improving network efficiency, ensuring data availability when submitted to Bullshark (the consensus engine). Bullshark is tasked with ordering data provided by Narwhal, utilizing Byzantine Fault Tolerance mechanisms to validate transactions and distribute them across the network.
2. Asset Ownership Model: In the Sui network, assets can be owned by a single owner or shared among multiple owners. Assets owned by a single owner can move quickly and freely within the network, while shared assets require validation through the consensus system. This asset ownership system not only improves the efficiency of transaction processing but also enables developers to create various types of assets for their applications.
3. Distributed Computing: Sui’s design allows the network to scale resources as needed, functioning similarly to cloud services. This means that as demand for the Sui network increases, network validators can add more processing power, maintaining the network’s stability and keeping gas fees low.
4. Sui Move Programming Language: Sui Move is Sui’s native programming language, specifically designed for creating high-performance, secure, and feature-rich applications. Based on the Move language, it aims to address shortcomings in smart contract programming languages, enhancing the security of smart contracts and the efficiency of programmers.
5. Programmable Transaction Blocks (PTB): PTBs in Sui are complex, composable sequences of transactions that can access any public on-chain Move functions in all smart contracts. This design offers strong assurances for payment or finance-oriented applications.
6. Horizontal Scalability: Sui’s scalability extends beyond just transaction processing to include storage. This allows developers to define complex assets with rich attributes and store them directly on-chain, without resorting to indirect off-chain storage to save on gas costs.

Fuel

In the Fuel network, “parallel transaction execution” is a key technology that enables the network to efficiently process a large volume of transactions. This parallel execution is fundamentally achieved through the use of strict state access lists based on the UTXO (Unspent Transaction Output) model, a basic element in Bitcoin and many other cryptocurrencies.

Fuel introduces the capability of parallel transaction execution within the UTXO model. By utilizing strict state access lists, Fuel can process transactions in parallel, thereby leveraging more CPU threads and cores that are typically idle in single-threaded blockchain systems. As a result, Fuel can offer more computational power, state access, and transaction throughput than single-threaded blockchains.

Fuel addresses the concurrency issues in the UTXO model. In Fuel, users do not sign UTXOs directly, but instead sign contract IDs, indicating their intention to interact with a contract. Hence, users do not directly alter the state, leading to the consumption of UTXOs. Instead, block producers are responsible for processing how various transactions in a block affect the overall state, which in turn impacts contract UTXOs. The consumed contract UTXOs create new UTXOs with the same core characteristics but updated storage and balances.

To facilitate parallel transaction execution, Fuel has developed a specific virtual machine — the FuelVM. The design of FuelVM focuses on reducing wasted processing found in traditional blockchain virtual machine architectures, while offering developers more potential design space. It incorporates lessons learned and improvements from years in the Ethereum ecosystem, improvements that could not be implemented in Ethereum due to the need for backward compatibility with previous versions.

Aptos

The Aptos blockchain utilizes a parallel execution engine known as Block-STM (Software Transactional Memory) to enhance its transaction processing capabilities. This technology allows Aptos to execute transactions in a pre-determined order within each block and allocate the transactions to different processor threads during execution. The core idea of this method is to record the memory locations modified by transactions while executing all transactions simultaneously. After all transaction results are verified, if it is found that a transaction accessed a memory location modified by a previous transaction, that transaction will be invalidated. The aborted transaction is then re-executed, and this process is repeated until all transactions are completed.

Unlike other parallel execution engines, Block-STM maintains the atomicity of transactions without needing to know the data to be read/written in advance. This makes it easier for developers to build highly parallelized applications. Block-STM supports richer atomicity than other parallel execution environments, which often require breaking down operations into multiple transactions (breaking logical atomicity). By reducing latency and increasing cost efficiency, Block-STM enhances user experience.

Additionally, Aptos employs a consensus mechanism known as AptosBFTv4, a rigorously proven correct production blockchain BFT protocol. This protocol optimizes responsiveness, capable of delivering low latency and high throughput, fully leveraging the advantages of the underlying network. AptosBFTv4 employs a pipeline design similar to processors, ensuring maximum utilization of resources at every step. Therefore, a single node might participate in many aspects of consensus, from selecting transactions to be included in a block, to executing another set of transactions, writing the output of another set of transactions to storage, and certifying the output of another set of transactions. This means that throughput is limited only by the slowest stage, rather than the sequential combination of all stages.

Challenges

Technical Difficulties

Generally, the core challenge of adopting parallel or concurrent approaches is the issue of data races, read-write conflicts, or data hazards. All these terms describe the same problem: different threads or operations trying to read and modify the same data simultaneously. Implementing an efficient and reliable parallel system requires solving complex technical problems, especially ensuring predictable, conflict-free execution of parallel operations across thousands of decentralized nodes. Additionally, the challenge of technical compatibility lies in ensuring that new parallel processing methods are compatible with existing EVM standards and smart contract code.

Ecosystem Adaptability

For developers, they may need to learn new tools and methodologies to maximize the advantages of parallel EVMs. Moreover, users might need to adapt to potential new interaction patterns and performance characteristics. This requires a certain level of understanding and adaptability to new technologies by all ecosystem participants, including developers, users, and service providers. Furthermore, a robust blockchain ecosystem relies not just on its technical features but also on broad developer support and a rich array of applications. New technologies like parallel EVMs need to establish sufficient network effects to attract participation from developers and users for market success.

Increased System Complexity

Parallel EVMs require efficient network communication to support data synchronization across multiple nodes. Network latency or synchronization failures can lead to inconsistent transaction processing, adding to the complexity of system design. To effectively leverage the advantages of parallel processing, the system needs to manage and allocate computing resources more intelligently. This might involve dynamically distributing load among different nodes and optimizing the use of memory and storage. Developing smart contracts and applications that support parallel processing is more complex than traditional sequential execution models. Developers need to consider the characteristics and limitations of parallel execution, which can make the coding and debugging process more challenging. In a parallel execution environment, security vulnerabilities might be amplified, as a security issue could affect multiple transactions executing in parallel. Therefore, more stringent security audits and testing processes are required.

Future Outlook

Parallel EVMs demonstrate tremendous potential in enhancing the scalability and efficiency of blockchains. The mentioned parallel EVMs represent a significant shift in blockchain technology, aiming to enhance transaction processing capabilities by executing transactions simultaneously on multiple processors. This approach breaks free from the traditional sequential transaction processing method, allowing for higher throughput and lower latency, which are crucial for the scalability and efficiency of blockchain networks.

The successful implementation of parallel EVMs largely depends on the foresight and skills of developers, especially in the design of smart contracts and data structures. These elements are crucial in determining whether transactions can be executed in parallel. Developers must consider parallel processing from the start of the project, ensuring their designs facilitate independent, uninterrupted operation of different transactions.

Parallel EVMs also maintain compatibility with the Ethereum ecosystem, which is vital for developers and users already involved in Ethereum-based applications. This compatibility ensures smooth transition and integration of existing dApps, a challenge for systems like DAG, which often require significant modifications to existing applications.

Developing parallel EVMs is seen as a key step in addressing the fundamental limitations of blockchain scalability. These innovations hold promise for preparing blockchain networks for the future, enabling them to keep up with growing demands and becoming the cornerstone of the next generation of Web3 infrastructure. While parallel EVMs offer immense potential, their successful implementation requires overcoming complex technical challenges and ensuring widespread adoption in the ecosystem.

References

https://github.com/hsyodyssey/awesome-parallel-blockchain

https://www.techflowpost.com/article/detail_15290.html

https://amberlabs.substack.com/p/parallel-power-unlocked

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