Apr 12th, 2024 | Laobai ABCDE

Recently in the primary market, the hottest track undoubtedly is AI, followed by BTC. About 80% of the projects discussed every day are focused on these two tracks. Personally, there are times when I can talk to 5 or 6 AI projects in a single day.

It’s foreseeable that the AI bubble will peak in the coming years. With hundreds of new AI projects coming online, the market value of the AI track will skyrocket. Eventually, when the bubble bursts and chaos ensues, genuine unicorns that have truly found the intersection between AI and Crypto will emerge, pushing this race track and the entire industry forward.

So, in the current overheated environment of AI, it’s worth taking a step back and observing the changes that have occurred in the infrastructure layer, especially in the public chain infrastructure track, in recent months. Some of the new developments in this area are definitely worth discussing.”

I. Further Deconstruction of ETH, or Monolithic blockchain

When Celestia first introduced the concept of modularity and the DA layer, the market actually took quite some time to digest and understand it. Now, this concept has become ingrained, and various RaaS (Rollup as a Service) infrastructures have proliferated to the point where the number of infrastructure > applications > users, reaching an exaggerated stage.

In the past few months, there have been different technological advancements in the execution layer, DA layer, and settlement layer. Each layer has spawned new technical solutions, and even the concept of the settlement layer is no longer exclusive to ETH. Let’s briefly discuss representative technologies from each layer.

II.Execution Layer

The hottest concept in the execution layer is undoubtedly Parallel EVM, represented by projects like Monad, Sei, and MegaETH. Existing projects such as FTM and Canto are also beginning to plan upgrades in this direction. However, just as not all ZK projects protect privacy, projects labeled as Parallel EVM actually have different technological roadmaps and ultimate goals.

Taking a diagram from Sei as an intuitive demonstration, it’s clear that in an optimistic scenario, transitioning from sequential processing to parallel processing can significantly improve performance.

Within Parallel EVM, there are actually several different technological pathways.

From the perspective of how transactions are parallelized, there’s nothing particularly new under the sun; it boils down to differences between pre-verification and post-verification.

Pre-verification, represented by Solana and Sui, requires transactions to explicitly declare which parts of the chain state they modify. This allows for pre-checking before block production to detect any state conflicts (such as accessing the same AMM pool). If conflicts are detected, the conflicting transactions are discarded.

Post-verification, also known as optimistic parallelism, represented by Aptos BlockSTM, assumes initially that there are no conflicts and includes transactions. Then, after execution, it checks for conflicts. Any conflicting transactions are declared invalid, the results are refreshed, and execution is repeated until all transactions in the block are executed. Similar solutions are used by Sei, Monad, MegaETH, and Canto.

In the primary market, we’ve also seen parallelization solutions tailored for scenarios involving state conflicts (like accessing the same AMM pool as mentioned earlier). However, these solutions appear to be relatively complex from an engineering standpoint, and their commercial viability is uncertain, still under evaluation.

The degree of emphasis on Parallel EVM can also be divided into two schools of thought.

One is represented by Monad and Sei, which prioritize parallelizing transactions as the main scaling approach, making Parallelization the primary narrative.

For example, besides optimistic parallel processing, Monad has also developed MonadDB specifically for asynchronous I/O to complement parallel processing.

The other school of thought is represented by Fantom, Solana, and MegaETH, where parallelization is one of the scaling solutions but not the only one. Parallelization serves as an auxiliary narrative, with performance improvements relying more on other technological solutions.

For instance, Fantom’s Sonic upgrade focuses on the FVM virtual machine paired with an optimized Lachesis consensus mechanism. Solana’s next phase focuses on the modular architecture of the Firedancer new client, optimized network communication mechanisms, and signature verification, among others.

MegaETH aims to achieve a Realtime blockchain. Firstly, it builds on the high-performance Reth client developed by Paradigm. Then, it further optimizes and enhances various aspects such as the state synchronization mechanism of full nodes (only synchronizing state differences rather than all data), the hardware design of Sequencer (using a large amount of high-performance RAM with storage capabilities for state access, avoiding slow disk I/O), improvements in Merkle Trie data structure, and more. This comprehensive optimization covers software, hardware, data structures, disk I/O, network communication, and transaction sorting and parallel processing, pushing the performance ceiling of EVM to the limit, approaching the concept of “Realtime Blockchain”.

III.DA Layer

The DA layer hasn’t seen particularly significant technological iterations, so the fervor in this track is far less than that in the execution layer. There are only a few major players in the game.

ETH’s CallData upgrade to Blob, coupled with significant fee reductions across various Layer 2 solutions, has made ETH now a “not-so-expensive” DA.

Interestingly, Celestia’s greater impact lies in being the first project to propose the concept of the DA layer after its launch, lifting the DA track from a $2 billion FDV (Fully Diluted Valuation) ceiling to $20 billion, thereby expanding the landscape and imagination. Many new Layer 2 Appchains naturally prefer DA, with Celestia leading the way.

Avail has emerged independently from Polygon and is technically more like an “enhanced version of Celestia.” For example, it adopts the Grandpa+BABE consensus mechanism from Polkadot, theoretically supporting a more decentralized setup with more nodes compared to Celestia’s Tendermint. It also supports features that Celestia does not, such as Validity Proof. However, the differences in technology are far less important than the ecosystem, and Avail still needs to catch up on the ecosystem level.

EigenDA went live a few days ago along with the EigenLayer mainnet launch. As one of the strongest narratives of this round and the project most adept at business cooperation, I personally feel that EigenDA’s adoption rate won’t be low. In theory, as long as it “feels secure and the price is cheap,” not many projects really care whether you use Validity Proof or Fraud Proof, or whether DAS is supported, and so on.

Interestingly, what’s worth mentioning are the following three DAs below.

• Near DA — Near is a remarkable public blockchain that was originally focused on sharding, and it continues to do so. However, in addition to sharding, it has also ventured into the realm of DA. It’s cheaper than Celestia and supports fast settlement on Layer 2. Chain abstraction — Recently, Near introduced chain signatures, allowing users to sign transaction for any chain transaction through a single NEAR account. AI — Their founder, Illia, is one of the Transformer Eight and was famously patted on the shoulder by Mr. Huang at the NVIDIA GTC. They are currently planning to hire AI engineers and will release near.ai-related announcements next month… As a hexagonal warrior, I’ve also thrown myself into the DA track.
• BTC & CKB — Since BTC’s layer one does not support smart contracts and direct settlement, nearly every BTC EVM Layer 2 solution treats BTC as a DA. The only difference lies in whether they directly apply ZK Proofs to BTC or simply hash the ZK Proof. It’s as if not doing so disqualifies them from being called “BTC Layer 2.” Recently, there have been new projects saying, “I won’t pretend; I’m an ETH L2, and DA settlements are done on ETH, but I serve the BTC ecosystem!” Quite amusing… The only unconventional scaling solution is RGB++, introduced by CKB. In this framework, CKB serves as a pseudo-DA, while BTC, due to its UTXO Universal Isomorphic Binding technology, becomes the settlement layer for RGB++.
• New DAs — I’ll mention two innovative DA approaches I’ve come across without naming specific projects. One integrates DA with AI, acting not only as a high-performance DA but also serving as a storage layer for AI large models, training data, and training trajectories. The other improves the RS-codes underlying DAs like Celestia, providing a more robust network state in unstable conditions, such as a dynamic network where several nodes drop out randomly each round.

IV.Settlement Layer

Originally, this layer was almost exclusively dominated by ETH. While DA had competition from Celestia and execution had various L2 solutions, settlement was predominantly ETH’s domain. Other chains like Solana, Aptos, and others didn’t have L2 solutions yet. BTC’s L2 solutions either weren’t used or couldn’t utilize BTC for settlement. Currently, ETH is pretty much the only settlement layer you can think of.

However, this situation is about to change. Several new projects are already moving in the direction mentioned at the beginning of this article. Some older projects are also beginning to transition in this direction, namely — ZK Verification/Settlement Layer — further deconstructing ETH (stealing ETH’s business).

Why is this concept emerging?

The reason lies in the fact that running contracts on ETH L1 to verify ZK Proofs theoretically isn’t the most optimal choice.

From a technical perspective, to verify the correctness of ZK Proofs, developers need to write verification contracts based on the ZK project and the chosen ZK Proof System using Solidity. This involves relying on numerous cryptographic algorithms, such as supporting different elliptic curves. These cryptographic algorithms are often quite complex, and the EVM-Solidity architecture isn’t the most optimal platform for implementing these complex cryptographic algorithms. For some ZK projects, the cost of writing and verifying these verification contracts is also quite high.

To some extent, this has hindered the native integration of some ZK ecosystems into the EVM ecosystem. Therefore, ZK-friendly languages like Cario, Noir, Leo, and Lurk can currently only verify on their own Layer1. At the same time, updating or upgrading on ETH always involves a “big ship turning around.”

In terms of cost, although majority of the “protection fee” paid from L2 are DA charge, ZK contract verification also incurs gas fees. Verifying on Ethereum is definitely not a cheap option. Coupled with Ethereum’s gas fees occasionally skyrocketing, transforming it into a “premium chain,” verification costs are similarly affected.

As a result, new projects with the concept of a ZK verification/settlement layer have emerged. These new projects are still relatively early-stage, with Nebra being a representative example. Older projects are also pivoting in this direction, such as Mina and Zen, which have just passed new proposals.

The overall approach of most projects in this track is basically to:

• Support multiple ZK languages
• Support ZK aggregation proofs for higher efficiency and lower costs
• Achieve faster finality times

It’s highly likely that the ZK settlement layer will be closely linked with decentralized proof markets, as having technology alone isn’t enough; computational power is also needed. We might see some settlement layer projects collaborating with proof market projects. Alternatively, settlement layers with computational power might establish their own proof markets, while proof market projects with technological expertise might venture into settlement layers. Ultimately, the market will decide the path forward.

In other areas of infrastructure, such as the Oracle and MEV fields (OEV) and interoperability (ZK light client networks), there are likely many articles available online. I won’t delve into them here. I’ll share anything new and interesting I come across next time.

About ABCDE

ABCDE is a VC focused on leading investment in top Crypto Builders. It was co-founded by Huobi Cofounder Du Jun and former Internet and Crypto entrepreneur BMAN，who both have been in the Crypto industry for more than 10 years. The co-founders of ABCDE have built multi-billion dollar companies in the Crypto industry from the ground up, including listed companies(1611.HK), exchanges(Huobi), SAAS companies(ChainUP.com), media(CoinTime.com), and developers platforms(BeWater.xyz).