DAPP Network Is The Perfect Glue Between Chains
Create Distributed Hubs of Functionality, Liquidity, and Data Across Multiple Decentralized Networks
TL;DR
- The ‘hub-and-spoke’ model is widely recognized as a great method to scale blockchain. This system, whereby a series of ‘spoke’ chains connect to a ‘central’ hub by means of interblockchain communication (IBC), is currently being pursued in some form by projects like Cosmos, Polkadot and Ethereum.
- Hub networks leverage the collective network effects of all the chains connected to them in order to deepen liquidity pools, leverage shared data, and enhance functionality.
- Thanks to LiquidChains, anyone can harness the power of hub networks in their ecosystem by spinning up custom, feature-rich chains and connecting them to multiple other networks.
Trying to scale public mainnets is hard and inefficient.
Both developers and users became painfully aware of this fact during the growth phases of 2017–2018, when a flurry of activity exposed the inherent limitations of base-layer blockchains. The final straw came when Cryptokitties, a digital collectibles trend that took the blockchain ecosystem by storm, took up 12% of all transactions on Ethereum which caused the entire network to clog up. Thus began the next step in the search for scaling, which saw many teams set out to devise solutions that would allow for thousands of transactions a second on high-throughput, low-cost networks.
Across the blockchain industry, most of the scaling solutions being explored and implemented are harnessing some variation of a similar model — one that traces its origins all the way back to the transportation industry of the ‘50s.
What is ‘Hub and Spoke’?
Regular customers of Delta airlines are probably familiar with the experience of flying to their destination via the Hartfield-Jackson airport in Atlanta, which was pioneered in 1955 in order to save money and give passengers and goods better routes to their destination. Today, many airlines use Denver, Colorado as a hub, as shown in the center of the image below, for travel and logistics in the United States to which various ‘spokes’ — the other airports — can connect.
Firstly, such a model significantly reduces the number of routes required to connect all the airports. To demonstrate, let’s assume there are 4 airports in the entire country. A ‘hub-and-spoke’ model would only require 3 routes to connect each airport to the hub, and therefore to one another. Meanwhile, connecting the airports individually, or a ‘point-to-point’ model, would necessitate 6 routes to connect the entire network together. Having fewer routes means each route can be flown with more passengers, reducing the cost for the airlines.
For a network with n nodes, a ‘hub-and-spoke’ model requires (n-1) O(n) connections, while a ‘point-to-point’ model will need n(n-1)/2 O(n²) routes to connect the entire network.
When it comes to blockchain scaling, the ‘hub-and-spoke’ model is the architectural basis for a number of leading projects such as Cosmos, Polkadot and even Ethereum.
While the Ethereum community has not explicitly embraced the ‘hub-and-spoke’ model per se, the prominent scaling solutions they are pursuing share many similarities with the model. For example, popular derivatives exchange Synthetix and decentralized exchange Uniswap are both integrating Optimistic Rollups — a way to scale Ethereum dApps on the second Layer. The technical details of optimistic rollups are beyond our scope at the moment, but the idea behind this scaling technique is offloading transactions from the Ethereum mainnet to a Layer-2-Plus sidechain that remains connected to the mainnet for liquidity and record-keeping. In a sense, Optimistic Rollups envisions the Ethereum mainnet serving as a ‘hub’ chain to which application-specific side chains can connect.
Furthermore, the ‘hub-and-spoke’ model also forms part of Eth2.0, the ambitious project which has set out to create an entirely different chain that will be built from the ground-up for scalability. Central to Eth2.0 is the concept of sharding, a technique that scales a blockchain horizontally by splitting it up into many smaller ‘shards’. Each shard processes its own transactions and stores its own data, while still retaining its connection to a ‘main chain in order to transfer some information in the main chain in accordance with the implementation’, also known as the Beacon Chain.
To summarize, a system that connects multiple ‘spoke’ chains to a central ‘hub’ by means of interblockchain communication (IBC) is viewed by many as one of the better ways of scaling blockchain. In an ideal world, the IBC that forms the foundation of any hub network model would allow contract execution, rich data exchange, and value transfer across all the connected chains. The multi-purpose IBC that is active and evolving on the DAPP Network is thus an essential component in constructing decentralized, high-throughput hub networks.
The #DAPPNetwork gives you the opportunity to leverage ‘hub’ networks for scale!
Click to Tweet your favourite use-case of ‘hub’ networks for DeFi dApps.
1) Build a market aggregator that displays price points and general information for traders, lenders and asset owners. (Click to Tweet)
2) Create an oracle dashboard that displays various data sources in real-time. Allow users to pick from a range of consensus mechanisms when aggregating a final result. (Click to Tweet)
3) Develop an ‘instant switch’ wallet that can hold a basket of currencies. (Click To Tweet)
3 Reasons To Create Your Hub With The DAPP Network
1. Functionality
Part of the appeal that led the transportation industry to adopt the ‘hub-and-spoke’ model was the ability to shift complicated operations, such as package sorting and accounting, from smaller airports to the main hubs. This makes spokes simpler to operate and allows the entire network to enjoy economies of scale for service delivery.
Similarly, by connecting to a ‘functionality hub’ using DAPP Network IBC, blockchain can source trustless functionalities, like decentralized storage (using LiquidStorage), robust oracles (using LiquidOracles, and scaled computation (using vCPU), for the entire network, without having to migrate to a different ecosystem. This model has already been activated in the EOSIO ecosystem to provide multiple chains, such as Wax, Telos, and BOS, with the range scaling services available on the DAPP Network. As a universal second-layer that is Ethereum-compatible, thanks to LiquidChains and LiquidLink, the DAPP Network’s hub functionalities could be harnessed by multiple chains.
2. Liquidity:
Applications that rely on a token to fuel their ecosystem, and especially those offering financial services, need to ensure that users can swap in and out of their token with relative ease. It is no use receiving a loan, trading derivatives, or earning interest if the token earned is illiquid and hard to convert into goods and services.
Abundant liquidity is one of the reasons driving Ethereum as the leading platform for DeFi. At the heart of many leading DeFi protocols is the act of providing liquidity by locking up Ethereum in a smart contract, so much so that ‘ETH locked in DeFi’ has become the meaningful metric for measuring the growth of DeFi as an industry. The fact that the leading DeFi platforms share a ‘reserve asset’ in ETH allows the ecosystem to leverage their network effects to deepen liquidity pools.
LiquidChains, a unique blockchain-as-a-service solution running on the DAPP Network, can unlock the value of ‘hub-and-spoke’ scaling while preserving the pooled liquidity of the mainnet. This service allows anyone to spin up a custom chain, one that comes with the entire suite of DAPP Network services built in and is compatible with any smart-contract platform. Once a LiquidChain is created, it can be seamlessly connected to a public network such as Ethereum by means of DAPP Networok IBC. The connection to the Ethereum mainnet means projects don’t need to migrate their tokens or adapt their code to a new blockchain.
Ethereum enjoys a competitive moat when it comes to DeFi, and the pooled liquidity available on the network is one of the primary reasons for this lead. With LiquidChains, entire DeFi ecosystems can operate on gas-reduced, high-throughput customizable chains of their own without having to give up the superior liquidity available on the Ethereum mainnet.
3. Oracles and Data Sources:
dApps face difficulties in both sourcing and storing data in a way that is both cost-effective and does not compromise on decentralization. Sourcing data from the web is a challenge that has given rise to a thriving market for decentralized oracles, while storing files directly on-chain is costly and inefficient. A key benefit of creating a ‘hub-and-spoke’ model with LiquidChains is reducing the load off the ‘main chain’ and having it store the minimum amount of data that is needed to validate the state of each chain that is connected to it.
Furthermore, applications can run computation, oracle services, IPFS hosting and many other functionalities on a LiquidChain for additional speed, cost-efficiency, and privacy, while maintaining a mainnet connection with DAPP Network IBC in order to record periodic updates of their chain’s state for complete transparency and auditability. The DAPP Network offers an end-to-end data solution, from sourcing information to storing it cheaply and even performing trustless calculations and queries on the data.
One of the challenges for any application looking to migrate to a more scalable architecture, especially those in the DeFi space, is how to do so without breaking composability — the inter-relationships of its components. Blockchain applications are co-dependent, building on each other’s technology, and closely integrating other protocols within their tech stack. Having all these applications and protocols on a single public network, such as Ethereum, allows developers to build DeFi dApps in a ‘lego-like’ fashion. Ethereum dApps looking to achieve scale without sacrificing composability can utilize LiquidChain to create application-specific ‘spokes’ that will run reliably regardless of prevailing conditions on the mainnet.
From the Airport to the Blockchain
While Delta airlines were the first to pioneer a ‘hub-and-spoke’ model, other airlines soon picked up on their success and began replicating it in their own operations. Now, hub-and-spoke is a commonly used model for supply chain management. If early blockchain adaptations of ‘hub-and-spoke’ show similar results, it could become a ‘must-have’ for ecosystems in the same way it is for airline companies. With the DAPP Network’s as their universal Layer-2-Plus, teams can harness hubs as a way to scale beyond their current restrictions.
