The Pathway in Exploration of Modular Public ChAains in the Web3 Era- IOTA Based Assembly
The Trend of Modular Public Chain
Modularity would be an very important part in the evolution of public chains. It refers to a system’s ability to separate and reform. In 2022, WEB3, a decentralized ecosystem based on blockchain technology, will force new requirements for the underlying infrastructure (the public chain) that typifies this concept.
And though the single-chain level still has the best composability of components, and Solana seems to have achieved the best results in terms of transactions-per-second (TPS), these are still limited by the constraints of the classic “impossible triangle.” That is, certain compromises, or “sacrifices,” have to be made in terms of both decentralization and security.
The two most recent consecutive outages seem to have convinced many people of the limitations inherent in the single-chain system. Of course, Solana can theoretically deploy Rollup for expansion in the future. However, this is complicated by the official launch of ETH L2. On top of that, both Arbitrum and Optimism have shown that Rollup L2 can be relatively fraud-proof.
Not surprisingly, Starkware and Zk-sync, which are based on Zk-Rollup (the cryptographic validity proof) are also coming down the pike in 2022. So far, ETH has managed a fair start as a modular public chain via L2 expansion. However, it begs the question: is ETH really the best L1 choice to carry a modular public chain? In this report, we’ll explore that question.
Evaluation ETH as a Modular Option
At this point, we can see the following three problems with an ETH-based model.
1. Strong liquidity fragmentation between multiple L2s. Currently, there are eight major players based on ETH Rollup on L2. They are Arb, Op, Starkware, Zk-sync, Polygon, Aztec, Boba, and Metis. However, we shouldn’t be surprised if we see a 10–20+ Rollup in the future. And although the cross-chain bridge may help alleviate this problem to some extent, it may not be enough. In fact, Vitalik Buterin recently tweeted, “Vitalik: In the future, it will be ‘multi-chain’ rather than ‘cross-chain,’ and there are basic security restrictions on cross-chain bridges” [1]
2. The timeframe for POW to POS in ETH 2.0 is undecided, and sharding has also been put on a temporary hold. This has left a veil of uncertainty overtop expectations for full expansion. Unfortunately, this is the result of the historic technical burden of ETH.
3. Many people have yet to even realize the third point, though it is perhaps the most important of all. That is, the historic ecological burden of ETH. After all, for the foreseeable future (at the very least the net two years) ETH L1 will have to compete with L2 for resources.
We’re going to expand on this last point in detail, as it is essential to our decision to invest in Assembly. As we’ve stated, the current expansion method being utilized by ETH is Rollup. Whether it is fraud-proof or ZK-Rollup [2], L2 itself serves as the Execution Layer (EL). Beyond that, all TX is packaged and compressed, and regularly uploaded to ETH L1. In such a model, ETH L1 plays two roles. The first is that of Rollup’s Settlement Layer (SL), and the other is that of Rollup’s Data Availability Layer (DA).
From the perspective of SL, all settlement TXs have to compete for resources with the native DAPP on ETH L1. This would not be a major problem in normal situations. However, when a Gas War occurs — such as a large number of L1 liquidations or Mint competition for hot NFT — the entire Rollup performance will be severely affected.
From the perspective of Data Availability, storing data on Ethereum L1 is a very costly option. This is why transaction fees for Arbitrum and Optimizm are currently much cheaper. However, they are still more expensive when compared to Alt L1, because the cost of the DA layer cannot be reduced. Remember, ZK-Rollup theoretically costs less than Optimisic Rollup because of its higher data compression ratio.
The reason for all this comes down to that historical ecological burden of ETH we were talking about. After all, in the next few years, DAPP economic activities on ETH L1 are not going to simply stop. Again, this means that all of these associated activities will need to compete with Rollup for those expensive (and increasingly scarce) ETH L1 Resources.
It begs the question: is it possible for Layer1 to only do SL+DA alone without doing any EL of Dapp?
Of course, for a new generation public chain like Polkadot, the relay chain is only responsible for settlement of + DA. All data processing is instead completed by the parallel chain. For Cosmos, there is a solution known as Celestia[3], which extracts the DA layer separately, providing and focusing on DA services for all other Rollups.
We can argue all day that the security of ETH L1 is the best or that security is the best option for SL and DA. However, if the market evolves to value security alone, this colorful multi-chain era will never come to fruition. Even Starkware, the orthodox L2 of ETH, will only end up providing users with “cheap” options where the DA layer is placed on Starkware itself rather than ETH L1. Ultimately, we are bound to see a variety of modular solutions that offer different trade-offs between safety and performance.
The Road to Modularity Based on IOTA
The Assembly smart contract layer based on IOTA is another modular direction that we think is worth exploring. Although IOTA has been operating for many years, in case new and existing investors are not familiar with the project, a brief overview of IOTA project and its relevance wouldn’t hurt.
In 2017–18, IOTA was one of the troikas of the DAG (Directed Acyclic Graph) data structure. With its original Tangle ledger model and high TPS, it occupied a spot on the Top 10 list of cryptocurrency market capitalization for quite some time. Later, when the entire blockchain industry entered the “Defi Era” and the marketplace became dominated by smart contracts, IOTA seemed to simply disappear. Simultaneously, the representatives of DAG-type public chains have been replaced by a new generation of support contracts typified by Fantom and Avax.
The characteristics of the IOTA1.0 era are as follows [4]:
1. High concurrency, high TPS
2. Based on a UTXO model, which means no gas fee
3. Doesn’t support smart contracts
4. Centralized Coordinator (provided by the Foundation)
Despite the low fees and high TPS, IOTA’s no-contract support and centralized nodes are very different from current mainstream blockchain development. This is the main reason why IOTA has all but disappeared from the conversation in recent years.
However, the arrival of the modular public chain trend in 2022 and the release of IOTA 2.0 and Assembly gives us reason to believe that IOTA will finally find its place in the market.In fact, IOTA2.0 and Assembly are remarkably well positioned to meet the requirements of a modular public chain in the Web3.0 era.
Here are some of its new characteristics:
1. High TPS — The DAG data structure of the underlying Tangle ledger ensures high concurrent TPS
2. Scalable — a multi-chain network similar to Cosmos or Polkadot that can continuously deploy new contract chains
3. EVM compatible and supports Web Assembly
4. Developers can flexibly customize the incentives and fees of each chain, etc.
5. No MEV
6. Sharing Security
An Introduction to Assembly Technology
Assembly recently released their technology white paper with brief summary written below to help introduce the core technical features of the Assembly network [5].
1. The Underlying DAG-Based UTXO
The UTXO ledger represented by BTC is characterized by its permission of concurrent writing, which gives it a significant advantage in scalability compared to the account model represented by ETH. However, this account model is most naturally suited to smart contracts because of the existence of global and objective states.
Its Turing completeness and functionality are far superior to UTXO-based scripts, which is why most smart contract chains are account-based rather than UTXOs. However, what if — in a modular stack — the L1 of a UTXO only needs to be responsible for settlement and doesn’t need to process any contracts or run Dapps?
Not supporting smart contracts would be an advantage here, because there will not be any DAPP from L1 competing with L2 for resources. At the same time, L1 processing has a huge advantage in the number of L2 supported, as it can theoretically sustain massive high concurrency under the UTXO and DAG models.
2. Assembly — Layer 1.5
Assembly can be regarded as “Layer 1.5,” which is a smart contract architecture layer. Therefore, each smart contract chain built on Assembly would end up forming the real Layer2.
For the sake of simplicity, IOTA and Assembly can been seen as the Layer1 module similar to the Polkadot relay chain, imagining all the contract chains connected to the Assembly as the parallel chains on Polkadot, appearing in this case as L2.
Assembly itself is similar to the node verification of other public chains in that it provides POS stake of its own token ASMB. If there is an error or any type of malicious behavior, it will be slashed. The ASMB token is also the governance certificate of the entire Assembly ecosystem, including the chain’s configuration, committee rotation parameters, gas fee settings for each chain, etc.
3. Sharing Security
When considering a multi-chain parallel structure, sharing security is an inescapable topic. As long as there exists a scenario involving cross-chain call, the chain with the poorest security will inevitably become the weakest short board of the barrel theory, thus affecting the overall security of the barrel. However, in the new “native modular public chain,” Polkadot has achieved strict sharing security through the use of slot auctions.
Cosmos is currently boasting rather loose autonomy by each chain for the time being. It is also not sharing security at all. In 2022, the Cosmos 2.0 version plans to introduce sharing security based on Atom Hub. Avax achieves relative sharing security by assigning “a specified subset of the overall verifier pool” to each subnet. All in all, it’s not difficult to see why Polkadot has the highest security requirements. However, the slot auction also has a tendency to make many projects flinch. Cosmos is the most flexible, but its security is still questionable. Avax’s subnet verification design is relatively balanced, so it occupies a space somewhere in between.
Assembly uses a form similar to the Rollup, the ETH2.0 fraud proof. In this instance, each verifier stakes assets as a security guarantee. Therefore, any third party can provide fraud proof when the verifier updates the wrong chain status by monitoring the activity of the chain. They can even get rewards in the process. This incentive structure helps ensure that as long as there is an honest verifier in the committee, the state of the chain will be protected from malicious transitions.
Of course, many people have their doubts. For instance, on the ETH main chain, staking the assets of the verifier, “ruling” fraud proofs, and slashing staked assets are all done through smart contracts. This contract acts as a sort of “Supreme Court” by realizing the sharing security of all Rollup chains in disguise. However, IOTA’s L1 does not support such contracts, so who would then assume the responsibility of this Supreme Court?
The best solution would be to create a separate smart contract chain on Assembly. This would allow for the implementation of all the necessary “Supreme Court” logic and maintain responsibility for the security of all other smart contract chains. This special chain is called the “root chain,” and it has the highest security because — according to the whitepaper — its verifiers include a unique set of nodes.
In the IOTA 2.0 ledger, the root chain verifiers will be chosen from so-called “high mana nodes.” High-mana verifiers are the owners of L1 IOTA nodes. They are selected on L1 nodes in a decentralized manner using access mana and consensus mana as weighting factors. Of course, this leads us to yet another inescapable topic: the IOTA2.0 of the underlying L1 and its Mana system.
4. IOTA2.0
Compared with version 1.0, IOTA2.0 has many technical updates and iterations. We’ll discuss the two most important examples below[6]:
The first significant updaate is the removal of “the coordinator.” The coordinator is a special node in the network that protects it from attacks and assists in confirming transactions. Of course, having the coordinator provided by the foundation makes the entire network highly centralized. One of the most important improvements in IOTA 2.0 is the removal of the coordinator.
NOTE: This is to be implemented in three stages. Currently, they are in the first stage and about to enter the second stage.
The second major update is the introduction of the aforementioned Mana system. After all, preventing Sybil attacks and controlling network congestion are core requirements of security and function for any blockchain or distributed ledger system. Moreover, consensus mechanisms such as POW and POS are largely based on this idea. Strictly speaking, IOTA is not a blockchain, so it does not have POW and POS in the traditional sense. As a solution, they use the “mana system.”
Mana was developed to measure the impact of various modules, including FPC voting, dRNG (distributed random number generation), autopeering (automatic pairing), and congestion control. One might think of it as a set of methods similar to the node reputation system. The higher the Mana value, the higher the integrity and security of the node. Similarly, Mana also shares a vital interest with ledgers on L1 . Therefore, through the verification of the root chain by a verifier with high Mana, the security assumption of the smart contract chain on L2 would be approximately equivalent to that of the IOTA L1 ledger.
Last Words
Let’s review the modular public chain structure proposed at the beginning of this report. After all, iIf an L1 has an L2 similar to Rollup technology, then it can also achieve:
1. Relatively safe — no major accidents for 6 years after the mainnet was launched in 2016
2. High TPS, low cost, scalable
3. No L1-based DAPP competing for resources with L2 — L1 would only be responsible for settlement or settlement + DA
IOTA2.0 is such an L1 solution. In fact, we have no doubt that — under the wave of modular public chains — ETH will continue to lead the technological innovation of the public chain track. At the same time, with the L2 blessing of the Assembly smart contract layer, we are very optimistic that IOTA2.0+Assembly will find a unique niche in the modular public chain market before the end of 2022.
References:
[1] [1] https://twitter.com/VitalikButerin/status/1479501366192132099
[2] https://docs.ethhub.io/ethereum-roadmap/layer-2-scaling/zk-rollups/
[3] https://celestia.org/technology/
[4] https://www.iota.org/solutions/technologies
[6] https://www.iota.love/202201/iota-smart-contract-whitepaper/
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