Summary
EigenLayer’s mainnet is just around the corner and has been the talk of town lately. In a nutshell, EigenLayer is a new primitive that democratizes access to restaked rewards by aggregating and propagating cryptoeconomic security to a broad suite of applications being built on top of Ethereum.
Chorus One has long been immersed in the ecosystem, and has now proudly launched our newest solution to further simplify ETH staking - OPUS Pool. This new product allows any user to easily stake ETH, mint osETH, and integrate with EigenLayer seamlessly, streamlining the process for both new and existing customers.
Additionally, users have the extra benefit of depositing not only osETH, but any other accepted liquid staking tokens (currently, stETH, cbETH, and rETH) into EigenLayer - making it significantly easier for anyone to participate in ETH restaking and earn additional rewards.
Kick-start your ETH staking journey with Chorus One! Enter the OPUS Pool here.
In this article, we break down the fundamentals of EigenLayer and Restaking, key benefits and risks, Chorus One’s involvement in the ecosystem, and how investors and institutions can restake seamlessly using the OPUS Pool. Dive in!
Restaking in the context of Ethereum, as defined by Vitalik Buterin, is a process that allows stakers to extend their staked assets' utility beyond the Ethereum network. This concept, integral to Ethereum's Proof of Stake (PoS) framework, enables staked ETH to not only support Ethereum's network but also to bolster the security and trust systems of other blockchain platforms.
Through restaking, assets that would otherwise be dormant within Ethereum gain a new functionality, serving multiple networks simultaneously and offering stakers the opportunity to earn additional rewards from various sources. Ethereum's dense network of validators and the spread of staked assets contribute to its robust security, making it an ideal candidate for restaking.
EigenLayer has pioneered this primitive by integrating smart contracts into Ethereum, facilitating restaking and expanding the possibilities for asset utilization.
It creates a market-driven ecosystem where security is pooled and governed by supply and demand. Users can opt-in to EigenLayer smart contracts to restake their $ETH or LST(liquid staking token) and extend cryptoeconomic security to additional applications on the network. Part of EigenLayer’s potential, therefore, lies in its ability to aggregate and extend cryptoeconomic security through restaking and to validate new applications being built on top of Ethereum or beyond.
Actively Validated Services (AVS), essentially new projects or applications building on Ethereum, can tap into this pool, consuming security based on their needs while validators opt-in at their discretion, weighing risks and rewards. This system negates the need for AVSs to establish their own validator networks, instead allowing them to utilize Ethereum’s existing security infrastructure.
EigenLayer not only enhances capital efficiency by enabling staked tokens to be used across multiple protocols but also simplifies the process. Ultimately, it aims to unify cryptoeconomic security within a single ecosystem, reducing the fragmentation of security across protocols and increasing trust through a larger validator network.
There are two key advantages:
Firstly, stakers can earn or stand to earn additional rewards through restaking by taking on more responsibilities.
Secondly, emerging protocols benefit from the robust security provided by Ethereum's established pool of validators. This creates a mutually beneficial relationship between Ethereum's foundational layer and other blockchain protocols, enhancing the overall ecosystem.
Before taking a deeper look into the ecosystem and how users may get involved, let’s take a look at the fundamental ideas introduced by EigenLayer:
By combining these ideas, EigenLayer serves as an open marketplace where AVSs can rent pooled security provided by Ethereum validators.
While Restaking with EigenLayer presents numerous benefits, there are certain challenges and risks.
There are primarily two categories of risks associated with restaking with EigenLayer:
(1) many operators may collude to attack a set of AVSs simultaneously
With only a subset of operators choosing to restake in specific AVSs, this selective participation opens the door to potential collusion among operators, who might conspire to compromise the system for financial gain, particularly if they are restaking across multiple AVSs with substantial total locked values.
(2) the AVSs built on EigenLayer may have unintended slashing vulnerabilities — this is the risk of honest nodes getting slashed.
The risk of unintended slashing is significant, especially in the early stages of AVS deployment before thorough battle-testing. Vulnerabilities, such as programming bugs, could trigger slashing and result in losses for honest participants. To mitigate these risks, EigenLayer proposes rigorous security audits of AVS codebases and a governance layer capable of vetoing unjust slashing decisions.
We’ll cover the potential risks and management strategies in more depth in an upcoming article in this EigenLayer series, stay tuned!
Chorus One has been actively engaged in the EigenLayer ecosystem since its early days, evolving alongside it, and has recently integrated EigenLayer restaking into our latest product, OPUS Pool.
OPUS Pool is our latest addition to the OPUS product suite enabling anyone to stake any amount of ETH with Chorus One. Not only that, users also have the extra benefit of depositing any other accepted liquid staking tokens (including osETH, stETH, cbETH, and rETH) into EigenLayer in one go!
Essentially, we have opened up an avenue for anyone (OPUS and non-OPUS users) to participate in restaking as easily as possible.
For a step-by-step guide on how to get started with restaking with Chorus One, visit our comprehensive guide.
Additionally, we have been greatly involved within the ecosystem in a multitude of ways:
…. And more!
EigenLayer revolutionizes staked asset utilization, enhancing validator rewards and strengthening protocol economies. It catalyzes the creation of innovative protocols and services, enriching the Ethereum ecosystem. This advancement fosters Ethereum's growth, making it more attractive to institutional investors by allowing a single staking mechanism to secure diverse protocols, improving resource use and network efficiency, and broadening the stakeholder base.
Why should you choose Chorus One for Restaking?
To start your ETH staking journey with Chorus One, head to OPUS Pool!
Check out our step-by-step guide for a comprehensive overview of how you can get started.
For any questions, information, or suggestions, please reach out to us at staking@chorus.one, and we’ll be in touch!
A step-by-step guide to the OPUS Pool for ETH Staking
MEV Max - Introducing Chorus One’s vault on StakeWise V3
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 50+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
In an era of rapid technological evolution, Soarchain emerges as a vanguard in the automotive industry, redefining the landscape of vehicle-based applications and services. By harnessing the power of blockchain and hardware, Soarchain simplifies the complexities of vehicular connectivity, offering a platform for applications ranging from real-time insurance adjustments to AI-driven diagnostics and safety enhancements. With its Layer-1 Decentralized Physical Infrastructure Network (DePIN) built on the Cosmos SDK, Soarchain is set to transform the mobility sector, offering a more inclusive, transparent, and scalable alternative to the proprietary networks dominating today's market.
In this article, we explore how Soarchain unlocks dePIN’s full potential.
Quick pit stop to share that we at Chorus One are on the journey with Soarchain as proud investors.
However, please note that our support and enthusiasm for this venture should not be interpreted as financial advice. While we're keen to explore the blockchain landscape with Soarchain, we advise you to make investment decisions based on your own research and judgment. Consider us as companions sharing insights, not as guides for your financial journey.
In a gist, DePIN refers to decentralized networks that employ the use of hardware to enhance data collection for specific use cases. For a wider view of the entire ecosystem, please refer to Mesari’s 2023 report.
Traditional Verification Methods and Conflicts of Interest:
Unwanted Permission Layers and Security Vulnerabilities:
Scalability Constraints and Oracle Problem:
Specific Network Challenges:
Verification in DePIN Projects:
Incentive Challenges:
Soarchain tackles these through decentralized sequencers, governance frameworks, and a layered approach to network architecture, enhancing scalability and privacy.
Soarchain introduces a robust architecture for onboarding new factory manufacturers and hardware providers in a secure and scalable manner.
Manufacturers can generate a Certificate Signing Request (CSR) using the on-chain Root Certificate through governance proposals. Soarchain aims to incorporate tier-1 manufacturers. This specifically targets those incorporating secure elements in their Electronic Control Units (ECUs) or modules, a growing trend for enhanced security in automotive electronics. This integration will unlock new possibilities on Soarchain, like supply chain management, manufacturing process optimization, and trustless Over-the-Air updates for ECU firmware/software, a long standing costly challenge.
The system allows factories to submit governance proposals for inclusion, followed by proposals to issue a certain number of certificates. A key concern is that issuing non-time-bound or non-quantity-bound certificates grants manufacturers indefinite production rights. This could lead to a lack of accountability for their manufacturing processes and the products they produce. This innovative approach leverages Cosmos SDK and democratizes the onboarding of new manufacturers. It ensures that every level of the manufacturing and device integration process is secure, flexible, transparent and scalable.
Scaling with the Runner Network - The Celestia of DePIN
To address scalability, Soarchain implements a layer-2 solution with runner nodes that handle the bulk of data processing. This significantly reduces the load on the main blockchain and enhances the network's capacity to handle large data transactions. Runner nodes in Soarchain parallel the function of sequencers in the Celestia network. They manage data flow, gather public keys, create Merkle trees, and submit these summaries to the blockchain. From the Layer 1 perspective, the addition of thousands of vehicles and hundreds of thousands of new messages translates to only a moderate increase in network transactions.
Soarchain employs a Verifiable Random Function (VRF) within its core layer-1 virtual machine to dynamically select a consensus group from the pool of runners, preventing data validation centralization and potential collusion, operating like a decentralized sequencer. Runners in the consensus group are tasked with receiving, ordering, and verifying messages from vehicles, using these to create Merkle trees. They then generate and submit claims about these trees to validate their honesty and correctness. The system involves a distributed key generation process (Shamir Secret sharing algorithm) and threshold public key encryption to ensure that the content each runner submits is identical, maintaining the integrity of the verification process.
Users can operate a 'runner' via the Motus Connect and Drive mobile app. This setup allows users to earn extra network rewards. Runners are akin to Celestia's light clients but with an added responsibility: they sequence messages and verify their authenticity, ensuring the content is original, unaltered, and plausible. Similarly, more runners in Soarchain increase the number of supported vehicles, thereby expanding the network's message broadcasting capacity (as long as a certain percentage of full / validator nodes operate as runners).
Runners are also required to delegate a minimum amount of tokens to a validator. This serves two purposes:
Just like that, Soarchain presents the first ever mobile / app based shared sequencer to operate light clients.
Soarchain has integrated zk-SNARKs, particularly through the Groth16 scheme, to ensure robust data verification while maintaining confidentiality. This technology allows vehicles to generate cryptographic proofs of data authenticity and integrity without revealing the underlying data, thereby preserving privacy.
The use of zk-SNARKs, particularly through the Groth16 scheme, allows for efficient management of multiple proofs for similar types of PID data, crucial in Soarchain's network. Soarchain employs a unique method to verify the plausibility of PIDs (Parameter IDs) through two approaches: individual analysis of each PID and joint analysis of PIDs with known high correlations. Each Performance Indicator Data (PID), like fuel pressure or engine temperature, is validated meticulously, ensuring the accuracy and reliability of data transmitted via distributed MQTT brokers. This process ensures user privacy, as it doesn't require decrypting plaintext data on the public blockchain. Instead, plausibility checks are conducted while preserving privacy. This is made possible through specially designed arithmetic circuits, verified using zero-knowledge methods, ensuring that no sensitive data is exposed during the verification process.
The oracle problem, particularly in the context of Soarchain, refers to the challenge blockchains face in accurately interacting with external, real-world data. For Soarchain, this data is physical, real-time mobility information generated by sensors, cameras, and actuators on vehicles and road users. The key issue is ensuring the data's authenticity and that the data sources are honest. To address this, Soarchain uses hardware equipped with a secure element, ensuring that a) the hardware runs the intended firmware, preserving the operational integrity, and b) private keys corresponding to public keys and certificates are securely stored, safeguarding the security, integrity, and authenticity of the data.
Once these pre-verification checks are completed, the data is transformed into "messages" akin to transactions and sent to Soarchain's verification layer. This layer constructs Merkle trees using these messages and generates a proof once a certain number of messages are aggregated. The proof is then submitted to the chain, and the metadata of the data is immutably recorded on the blockchain. This process enables any entity on the chain to interact with a reference to the proven and verified data originating from real-life sources.
To overcome the oracle problem's scalability constraints and complexities, Soarchain combines decentralized oracle systems with hardware-accelerated and proof-based mechanisms. While centralized oracle solutions pose a risk of single-point failure and require significant trust, decentralized oracles, though more secure, often lack a hardware-accelerated, proof-based system. Soarchain's runner architecture not only serves as an incentivized, trust-minimized oracle network, but it also acts as a scaling layer. This allows for the aggregation and proof of pre-verified data messages without needing to submit each message in full to the blockchain. This method significantly reduces the burden on the blockchain while maintaining the integrity and trustworthiness of the data being processed.
In conclusion, Soarchain stands at the forefront of revolutionizing decentralized mobility and related applications. Its robust Layer 1 blockchain technology enables a myriad of real-world applications, from decentralized ride-sharing platforms, offering a more equitable and transparent system, to smart parking solutions that ensure secure, fraud-resistant transactions. Additionally, Soarchain plays a pivotal role in the coordination of autonomous vehicles, promoting safety and efficiency through real-time communication and decentralized consensus.
Soarchain represents a significant leap forward in the world of decentralized networks. Its innovative governance framework, the integration of zk-SNARKs for data verification, and the unique approach of using runner nodes and a decentralized sequencer collectively forge a path towards a more secure, scalable, and trustable digital future. With these technologies, Soarchain is not just solving the present challenges of dePINs but also paving the way for the untapped potential of hardware based decentralized networks.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 50+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
Throughout 2023, Chorus One maintained its standing as one of the select few node operators to consistently deliver in-depth research reports, wherein our dedicated in-house research team delves into the latest developments in the crypto and staking world.
Edition #4 of our 2023 Reflections series recaps Chorus One’s significant research efforts in 2023. Dive in!
This year, Chorus One introduced a major research effort, fueled by a grant from dYdX, that examines the implications of Maximum Extractable Value (MEV) within the context of dYdX v4 from a validator's perspective.
This comprehensive analysis presents the first-ever exploration of mitigating negative MEV externalities in a fully decentralized, validator-driven order book.
Additionally, it delves into the uncharted territory of cross-domain arbitrage involving a fully decentralized in-validator order book and other venues.
Dive in: https://chorus.one/reports-research/mev-on-the-dydx-v4-chain#
We present a comprehensive analysis of the implications of artificial latency in the Proposer-Builder-Separation framework on the Ethereum network. Focusing on the MEV-Boost auction system, we analyze how strategic latency manipulation affects Maximum Extractable Value yields and network integrity. Our findings reveal both increased profitability for node operators and significant systemic challenges, including heightened network inefficiencies and centralization risks. We empirically validate these insights with a pilot that Chorus One has been operating on Ethereum mainnet.
Dive in: https://chorus.one/reports-research/the-cost-of-artificial-latency-in-the-pbs-context
TL;DR: https://chorus.one/articles/timing-games-and-implications-on-mev-extraction
We published a whitepaper comparing key characteristics of Ethereum and Solana, which explores the block-building marketplace model, akin to the "flashbots-like model," and examines the challenges of adapting it to Solana.
Additionally, recognizing Solana's unique features, we also proposed an alternative to the block-building marketplace: the solana-mev client. This model enables decentralized extraction by validators through a modified Solana validator client, capable of handling MEV opportunities directly in the banking stage of the validator. Complementing the whitepaper, we also shared an open-source prototype implementation of this approach.
Dive in: https://chorus.one/reports-research/breaking-bots-an-alternative-way-to-capture-mev-on-solana
Every quarter, we publish an exclusive report on the events and trends that dominated the Proof-of-Stake world. Check out our Quarterly reports below, with a glimpse into the topics covered in each edition.
Titles covered:
Read it here: https://chorus.one/reports-research/quarterly-network-insights-q1-2023
Titles covered:
Read it here: https://chorus.one/reports-research/quarterly-network-insights-q2-2023
Titles covered:
Read it here: https://chorus.one/reports-research/quarterly-network-insights-q3-2023-2024
If you have any questions, would like to learn more, or get in touch with our research team, please reach out to us at research@chorus.one
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
Staking rewards generally derive from a combination of inflationary rewards, transaction fees, and MEV. We are certain that a complete understanding of the Ethereum PBS pipeline allows validators to extract more MEV through targeted infrastructure optimizations.
While adjacent topics have been discussed in literature (e.g. Schwarz-Schilling et al., 2023), Chorus One is the first node operator to successfully test out different optimization approaches on mainnet. We find that the most impactful improvements are contingent on comprehensive internal data, and have generally not been discussed in their specificity.
The goal of this article is to share the results of a recent pilot. We will follow-up with more detail in a later, comprehensive study, which we are co-authoring with one of the most recognizable and competent teams in the MEV space.The pilot makes use of several modifications which positively impact MEV extraction. The rest of the article will discuss one straightforward, illustrative example in more detail, and present the overall results of the pilot so far.
There are two components to APR optimization. Firstly, we should maximize the payoff of the blocks we propose, and secondly, we should minimize the likelihood of missing our chance to propose (i.e. missing our slot). The first of these is more complex and can be approached in several ways, including via latency games, and other infrastructure optimizations.The latter is more accessible, and primarily hinges on running a robust infrastructure setup with appropriate redundancy. However, relay selection also plays a role. Let’s dive in!
A basic illustrative adjustment: drop underperforming relays
The goal of this section is to give an example of a straightforward MEV-adjacent infrastructure adjustment that can positively impact validator APR by minimizing the probability of a missed slot. This modification is not central to our MEV strategy in terms of impact, but it is illustrative of the Ethereum MEV supply chain.
As per conventional wisdom, a validator is best off integrating with a large number of relays, as the mev-boost auction will yield the highest bid, i.e. there is no obvious downside to soliciting a maximum number of bids.
This is only half of the story. Let’s recall how validators and relays interact in more detail. First, the validator requests a block header from a relay, which then delivers the header corresponding to the most profitable block available to the relay. In parallel, the validator also solicits bids from all other relays it is integrated with. The mev-boost auction then determines the highest bid, the validator signs the header associated with this bid, and asks all relays to deliver the payload associated with this header.
The relay that is quickest to respond (typically the relay that delivered the original bid) then broadcasts the block and returns the associated payload to the proposer. This may be done with a delay versus previous implementations (i.e. at proposer’s slot t=0), as early distribution of the payload theoretically allows an unethical proposer to build an alternative block exploiting the transactions in the block received from the relay. This vulnerability has been outlined by the “low carb crusader”, and more details can be found in this post by Flashbot’s Robert McMiller.
The upshot is that in addition to transferring bids from builders, relays also carry responsibility for propagating the final signed block to the network. This is more pronounced now than previously, as the time available for this step has been decreased. Therefore, validators should favor relays that deliver payloads rapidly, or run an idiosyncratic risk of missing their slot, for relays that underperform.In practical terms, we find that relays can diverge significantly on delivery speed, and that for one relay in particular, a routine network disturbance could lead to a missed slot if the validator depends on it to deliver a given block.
The following graph shows the cumulative probability distribution for the maximum time at which a block becomes eligible within each slot, and each line represents a relay.This is a snapshot that is relative to a subset of our nodes over a limited period, and relay performance can vary over time, i.e. should be constantly and granularly monitored. Relays are currently a costly pro-bono good, and we appreciate providers subsidizing the network in this way.
In practical terms, for this particular cluster of nodes, running the relay color-coded light blue is a negative EV decision, i.e. it should be dropped. This is due to the consistent delay it exhibits in making blocks eligible, as compared to other relays.
Our current MEV pilot: A first look at the results
Our current MEV pilot combines straightforward adjustments, like the relay selection process illustrated above, with more significant and systematic infrastructure optimizations.
The below graphs are a first look at the results, and summarize performance over approximately a quarter.
As such, getting a grip on variance requires robust statistical processing. As MEV is tail-heavy (i.e. most profit is produced by rate opportunities), results can vary significantly over time, and capital invested. We are comparing the MEV payoff distribution of the pilot with the MEV payoff realized by a set of Lido nodes. On a per-block level, we find that our pilot has improved MEV rewards significantly:
This extends to the aggregate case - over our sample, the pilot has extracted higher rewards than a “vanilla” setup with a probability approaching 100%:
The upshot is that we feel highly confident that the infrastructure optimizations implemented in our pilot study aggregate out at an APR that is consistently higher than what a non-optimized setup typically achieves.We will elaborate further on specifics in a forthcoming study. If you are interested in learning more about our approach to MEV, please reach out to us anytime at research@chorus.one.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
This edition of the Ecosystem Review covers NEAR, which in technical terms, is a layer one, sharded, proof-of-stake blockchain, and in practical terms, targets to become the operating system (“OS”) for an open web.
Each transaction in the NEAR blockchain costs less then $0.01 and blocks are finalized in only 2 seconds, placing the protocol in the group of fast and cheap blockchains. The decision to dive deeper into Near this quarter is based on the attention it’s getting from the announcement of Blockchain Operating System and other apparently successful initiatives for expansion of the ecosystem, which have been reflecting in increased on-chain activity (Fig 1), despite the current market scenario.
Before revealing the main actor behind the spike in network activity, this article will review the protocol’s technical architecture, the staking and economics parameters and other relevant aspects, like cross-chain composability.
For the new and old fans of NEAR, the community is meeting up in person in the upcoming NEARCON, a 4-day event to take place in Lisbon in November.
The NEAR protocol is a proof-of-stake network which means that Sybil resistance is done by staking the native token, also called NEAR or Ⓝ. The time is measured in epochs. An epoch is made of 43,200 blocks. Ideally an epoch lasts about 12 hours, but in practice it lasts longer than that, since average block time is currently around 1.11 seconds according to nearblocks.io - the official block explorer.
NEAR is a layer one blockchain. Because of its sharded architecture, a block in NEAR includes one chunk for each shard, and the chunks respectively include the transactions executed for its associated shard. In terms of network participants, the block producer is a heavy duty, since it requires participants to store the full ledger (aka full node) for all chunks. In order to scale and decentralize the set of operators, the protocol is designed to allow a lighter type of node in addition to the block proposer, called chunk-only producer, who creates blocks for single chunks.
NEAR features a runtime layer to execute code, and supports the deployment of applications, a.k.a smart contracts. Smart contracts are written in either JavaScript or Rust, and the NEAR SDK compiles the contracts into WebAssembly (WASM). The NEAR runtime uses the concept of Gas to unify the cost of execution and bandwidth. Each WASM instruction or pre-compiled function gets assigned a gas fee based on measurements on a common-denominator computer. Same goes for weighting the used bandwidth based on general unified costs.
Gas is priced dynamically for each block, and adjusted based on the consumption of the limit in the previous block. When a smart contract wants to store some data, storage cost is computed, and the appropriate amount of NEAR tokens is “locked” on the account. When data is removed, tokens are unlocked. Unlike gas, these tokens are locked in the smart contract’s account, so the user doesn’t directly pay for it. 30% of gas fees users spend on a particular application will go to the contract’s account, generating revenue for the deployer via usage.An interesting aspect of the NEAR protocol lies in the accounts system: it natively supports account abstraction, which means that instead of identifying users by their public/private key pairs, it defines accounts as first-class entities. The implications in usability, are:
A complete overview of the technicalities of the Protocol can be found in https://docs.near.org.
As stated previously, NEAR has its own runtime, which is not compatible with the Ethereum Virtual Machine. However, using a Layer-2 like approach developers can deploy Ethereum-compatible applications to NEAR, and leverage its lower cost and higher throughput platform. It is the case of the Aurora project, an Ethereum Virtual Machine (EVM) built on top of the NEAR Protocol. The most popular tools built for EVM development are also available to be used on Aurora.Also adding to interoperability, the Rainbow Bridge plays an important role as it allows transferring assets between the Ethereum Blockchain and NEAR. The Rainbow Bridge protocol is a trustless, permissionless protocol for connecting blockchains, developed in-house, by the NEAR team.
The core idea behind it is to implement an Ethereum light client in Rust as a NEAR contract, and a NEAR light client in Solidity as an Ethereum contract. Trust assumptions are minimized using this protocol, as anyone can deploy your own instance as a smart contract. This can facilitate simple (e.g. a canonical token migration) and complex interactions between NEAR and ETH, for example, allowing ETH holders holding a given token to vote in your DAO on NEAR.
In contrast to other ecosystems, the NEAR blockchain was able to keep up a relatively high level of daily transactions over the past year, despite the dramatic slow down the whole crypto space has seen. Activity metrics have spiked at a daily 1M transactions in August 2023, leaving behind previous heights of approximately 500k daily transactions (Fig 2).
Leveraging NEAR account system, and Flipside Crypto to plot the top accounts by number of transactions shown in Fig 3, the main driver of the increased activity can be spotted: the accounts and tokens related to Kai-Ching, or $KAIC, the token of KaiKai, a Singapore-based shopping app:
KaiKai is an application built by Cosmose, a nine-year-old company targeting the use of artificial intelligence to improve off-line shopping with ultra precise recommendations and advertising. Cosmose was featured in the list of the 100 world’s most promising private AI companies in 2022. With a team distributed across Warsaw, Shanghai, Hong Kong, Singapore, Tokyo and Paris, the company recently raised an undisclosed amount at a $500 million valuation, up from $100 million when it closed its $15 million Series A financing in 2020. The Near Foundation has made a strategic investment in Cosmose, announced in April '23, according to techcrunch.com.
Fig 4 illustrates the relevance of KAIKAI-related transactions in the ecosystem, in contrast with overall transaction volume.
KAIKAI uses AI to curate and personalize vendors’ offers and partnerships. In contrast with the conventional e-commerce, users shop online through the app but pick it up in person. With every purchase, users are rewarded with the $KAIC as cashback that never expires. The token is also used in the app to facilitate refunds, but at this point, it can not be traded anywhere, nor exchanged for Fiat.
This year, the Foundation also launched Near Horizon, a social platform to connect everyone involved in the ecosystem: builders, contributors and backers can create a profile to share and discuss ideas, hire members to the team, apply for funding etc. This came shortly after NEAR announced its transition to a Blockchain Operating System (BOS), an initiative to establish NEAR as the entry point into the decentralized internet - the Web3. BOS is designed to effortlessly create and distribute decentralized apps on any blockchain, not only on NEAR. BOS is focused on accessibility.
You can use javascript, the most popular programming language (according to statista.com) to create, fork and reuse components already published by other users; connect with a NEAR account to retrieve owned components; and deploy and host naturally open source apps on-chain. Not only adding value to the ecosystem, BOS seems like a good progress to the onboarding of developers to Web3.
At the time of writing, the project was valued at more than $1 Billion (source: coinmarketcap.com ) and the NEAR token was traded at $1.04, not far from its launch price in October 2020 - see Fig 5. The Proof of Stake network is run by 213 nodes and secured by 604.9M of staked NEAR, equivalent to $630M, or 60% of the total token supply. Judging by the list of nodes, most of them are managed by professional infrastructure providers, and are distributed globally. The largest validator concentrates 7.8% of voting power and the super minority is formed by only the top 8 validators.
The annual inflation rate is 5% and the staking APR is 7% according to Staking Rewards. The inflation is distributed to stakers every epoch in the form of block rewards. The protocol supports staking delegation, which means that token holders can natively and securely stake their tokens with node operators they trust. During each epoch, validators’ voting power in the network remains constant. Changes to stake amounts are processed at the beginning of the next epochs, e.g. it takes a maximum of 12 hours to start participating in rewards after delegating NEAR. The unbonding period is also comparatively short: upon unstaking, users receive their tokens after 3 full epochs (36-48 hours). Follow the full staking guide in this link to learn how to create and fund a NEAR account, stake your tokens and withdraw rewards.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
Celestia is the first modular blockchain network that is optimized for ordering transaction data and making it available. It solves the scalability problem of a blockchain without sacrificing decentralization and accomplishes this by separating execution from consensus and addressing data availability challenges through a technology called data availability sampling. In this article, we explore why data availability is crucial, and how Celestia addresses this. (If you're new to Celestia, we've got you covered with a quick rundown of the network in a previous article.)
Before diving into the importance of data availability, it might be helpful to have a little refresher on the basics of how most blockchains work.
Blockchains offer a range of fundamental functions that make them versatile for various applications. These functions are:
Execution: Handling transaction execution and state updates.
Consensus: Establishing agreement on transactions and their order.
Settlement: Resolving disputes and facilitating cross-chain connections.
Data Availability: Proving the publication of transactions on the network.
Monolithic blockchains, like Ethereum or Solana, which encompass all these functions in the same chain have been the dominant model in the blockchain space. However, the widespread adoption of these systems have raised concerns about the lack of specialization and high gas fees during peak usage, as seen with Ethereum, impacting both current and potential users. This issue underscores the need for more scalable, specialized and efficient solutions.
This is where Modular blockchains like Celestia enter.
Unlike other monolithic blockchains, Celestia decouples the data availability layer from the execution layer and focuses only on ordering transactions and their data availability, i.e, they solely work on proving that transactions are published on the network and are available for everyone to see. The execution and settlement of transactions are left to the respective rollup. (As a permissionless network, Celestia uses Proof-of-Stake to secure its own consensus. Like any other Cosmos network, users can help secure the network by delegating their TIA to a validator like Chorus One.)
When you make a transaction, it needs to be confirmed and added to the blockchain for everyone to see. Once the transaction is confirmed, it's put into a "mempool" where it waits for its turn to be added to the blockchain. The full nodes then download this new block, execute/compute every transaction included within this block (including yours), and make sure they are all valid. They check things like whether you have the money you're trying to send and that you're not doing anything sneaky. Full nodes therefore perform the important task of enforcing the blockchain’s rules on validators. This is where things get tricky.
Since full nodes check every transaction to verify they follow the rules of the blockchain, blockchains cannot process more transactions per second without increasing the hardware requirements of running a full node (better hardware = more powerful full nodes = full nodes can check more transactions = bigger blocks containing more transactions are allowed). But if the hardware requirements of running full nodes increased, there would be fewer full nodes and decentralization would suffer because not many people can afford to run them, and that's bad for the blockchain's security. See, the more full nodes we have, the safer the blockchain is because it would make the network more decentralized if the voting powers were well distributed. If there are only a few, we'd have to trust them a lot more, and that's risky because it's more centralized.
Now, here's where ‘data availability’ comes in. It's like making sure the information in the transactions is available for everyone to check. If the people adding new blocks to the blockchain don't share this info in the first place, it's a problem. Full nodes can't do their job of checking things, and we'd have to trust the block creators more. So, data availability is all about keeping things open and transparent to maintain trust and security in the blockchain. It's a key part of how blockchains work and stay safe.
Celestia's primary focus on data availability (DA) enables any rollup to utilize it to solve the data availability issue, while still maintaining its independent execution environment. Due to its modular nature, any language or virtual machine can be used to build on top of Celestia.
Celestia solves the issue by using a technology called ‘data availability sampling’ - a mechanism that allows light nodes to verify data without needing to download the entire block data. Essentially, light nodes perform multiple rounds of random sampling on small portions of block data. As they conduct more rounds of sampling, their confidence in the data's availability progressively grows until it meets a specified threshold. Once this threshold is reached, the block data is considered available and valid.
The key advantage is that as more light nodes participate in this sampling process, the network's capacity to handle data increases. This, in turn, permits the scaling of block sizes without a corresponding increase in the cost of verifying the blockchain. In essence, it's akin to having a larger number of independent verifiers cross-checking the blockchain's integrity,which makes the whole system better and faster.
As a permissionless network, Celestia uses Proof-of-Stake to secure its own consensus. Like any other Cosmos network, users can help secure the network by delegating their TIA to a validator like Chorus One. Check out our guide to stake your TIA with Chorus One using the Keplr wallet.
Key information
Celestia is a modular network that makes it easy for builders to launch their own blockchain by focusing solely on data availability. It allows developers to easily deploy blockchains on top of Celestia, as easy as deploying smart contracts. This accessibility empowers individuals to create their own unique rollups and blockchains, serving a multitude of purposes and ensuring scalability for a broader audience. Celestia keeps decentralization top of mind with their architecture, design choices and innovations. In addition, it significantly reduces the cost for builders to deploy their own blockchain while accelerating execution layer research and creativity. We’re excited to watch their ecosystem launch and grow in 2023 and beyond!
Resources:
Understand everything you need to know about Celestia in 10 questions
Check out their ecosystem
Check out Celestia’s docs to start building on Celestia
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
Celestia is the first modular blockchain network that is optimized for ordering transaction data and making it available. It solves the scalability problem of a blockchain without sacrificing decentralization, and accomplishes this by separating execution from consensus and addressing data availability challenges through a technology called data availability sampling.
To simplify Celestia's purpose and the essential aspects of its modular design, our Research Expert, Kam Benbrik, delves into the topic by answering ten crucial questions. Dive in below!
In a monolithic blockchain, tasks are concentrated within a single stack, where nodes handle four core functions, including consensus, data availability, settlement and execution.
On the other hand, modular blockchains specialize by delegating tasks to separate layers, forming part of a broader "modular stack" for customized objectives. This modular approach enhances scalability and offers developers more control and sovereignty to tailor their execution environments to their project's needs.
Celestia's data availability layer introduces innovative features like data availability sampling (DAS) and Namespaced Merkle trees (NMTs). DAS allows light nodes to verify data without downloading entire blocks, reducing costs compared to monolithic chains, while NMTs enable execution and settlement layers on Celestia to download transactions that are only relevant to them. Celestia offers its data availability layer to other chains for publishing data by paying for blobspace. Backed by Tendermint Consensus and a sovereign validator set, Celestia ensures further scalability and decentralization of the network.
A significant challenge that monolithic blockchains, like Ethereum, face in terms of data availability is the high cost of publishing data. For instance, Arbitrum One pays approximately $112,000 per day to Ethereum for its data availability requirements, translating to an average cost of $0.15 per transaction. In contrast, Celestia offers a cost-effective solution for publishing data. It provides an alternative security model and economic advantage by allowing costs to scale with the number of nodes, avoiding the capacity limitations of Ethereum. This makes Celestia an appealing option for both data availability and serving as a foundational layer within an ecosystem.
Data availability sampling allows light nodes to confirm data availability without the need to download an entire block, resulting in efficient and cost-effective verification of large blocks. It works by randomly selecting portions of a block for users to download and check, ensuring that data is available with a high level of confidence. This approach not only reduces the resource requirements. However, The number of light nodes needed also depends on the block size, larger blocks require more light nodes. One important assumption is that light nodes should be connected to at least one honest full node for DAS to work effectively
Celestia ensures decentralization through its permissionless Proof-of-Stake structure using the Cosmos SDK and Tendermint consensus.. Much like other networks within the Cosmos ecosystem, Celestia allows users to actively participate in securing the network by delegating their tokens (TIA) to validators, such as Chorus One. This PoS mechanism empowers users to play a crucial role in the network's security, governance decisions and decentralization, making it a collaborative and community-driven ecosystem.
Celestia's modular design makes it easier for users to confirm that all the data in a block is available without downloading the entire block. Instead, it uses a technique called data availability sampling, where light nodes only check small, random parts of the block. This way, it's much more efficient than traditional monolithic blockchains where everyone has to download the entire block. The more nodes do this sampling, the better the network can handle data, leading to faster and more secure data verification. This approach improves scalability compared to monolithic blockchains.
Two standout applications that utilize Celestia's data availability layer include:
8. What are the complexities of modular blockchains like Celestia, and what developments or improvements can we anticipate in the near future?
Modular blockchains like Celestia come with added complexity due to the need for advanced mechanisms such as data availability sampling and fraud proofs to ensure the security of the network. These complexities are essential for maintaining the flexibility and scalability that modular blockchains offer. Additionally, the success of Celestia and similar projects depends on attracting projects and rollups to build on top of them.
9. What is the role of $TIA, Celestia’s native token?
The native token of Celestia, known as TIA, plays a multifaceted role within the ecosystem.
Staking: Firstly, TIA is used for staking, allowing users to actively participate in securing the network through delegation to validators like Chorus One. This proof-of-stake (PoS) mechanism enhances network security and decentralization, fostering a collaborative and community-driven environment.
Governance: Secondly, TIA is utilized for governance purposes, enabling users to create, engage in, and vote on proposals that shape network design and functionality.
Paying for blobspace: Lastly, Layer 1 and Layer 2 networks can use TIA to pay for Celestia blockspace, facilitating the publication of their data on Celestia's data availability layer. This comprehensive utility makes TIA a vital component of the Celestia ecosystem. (For detailed information, refer to https://docs.celestia.org/learn/tia)
10. What is the difference between sovereign roll ups and smart contract roll ups?
Sovereign rollups, such as those on Celestia, differ from smart contract rollups like Ethereum in how they handle settlement and their relationship with the underlying blockchain. Smart contract rollups post their blocks to Ethereum through an enshrined smart contract, effectively creating a bridge between the rollup and Ethereum. Ethereum acts as a 'baby chain' for the rollup, and the bridge contract interprets and processes the rollup's data. In contrast, sovereign rollups, like those on Celestia, directly submit their blocks as raw data to the chain without relying on smart contracts. The Celestia consensus and data availability layer don't interpret rollup data, and the rollup's blocks are independently managed by its nodes. This approach provides autonomy to rollup chains, and they determine their canonical chain without a bridge to the settlement layer, allowing for greater flexibility and independence.
Wrapping Up
Celestia is a modular network that makes it easy for builders to launch their own blockchain by focusing solely on data availability and allows developers to easily deploy blockchains on top of Celestia, as easily as deploying smart contracts.
Users can get involved with TIA by securing the network through delegation to validators like Chorus One and enhancing the collaborative and community-driven environment of the network. Check out our comprehensive guide on how you can stake your TIA with Chorus One!
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
After rigorous testing and numerous iterations, dYdX is soon making its transformational shift to the Cosmos ecosystem, unveiling its fourth and latest version as a standalone blockchain known as dYdX Chain, built using the Cosmos SDK. We’re proud to be joining the network as a genesis validator, enabling staking for dYdX's token, DYDX.
Since its inception, dYdX has been instrumental in facilitating over $1 billion in daily trading volume, achieving a remarkable milestone by surpassing $1 trillion in total trading volume through smart contracts on the Ethereum blockchain. Looking ahead, the exchange will implement a unique off-chain, in-memory order book trading system that will be overseen by a network of validators.
This article delves deeper into what this entails for stakers and offers insights into the workings of dYdX v4.
dYdX stands out as the leading decentralized exchange (DEX), specializing in the trading of derivative products known as "perpetuals." Perpetuals allow users to take leveraged long or short positions on crypto assets. In contrast to Uniswap and other DEXs, dYdX distinguishes itself by not relying on an automated market maker (AMM) to facilitate trading. Instead, it employs a traditional orderbook and matching model to cater to the needs and expectations of sophisticated traders and institutions. We've explored the key distinctions between AMMs and order book trading here.
In its initial launch in 2017, dYdX was introduced as an Ethereum Layer 1 application. However, the chain's limited scalability became evident, with users facing exorbitant gas fees for even simple trades.
To enhance scalability, dYdX transitioned to an Ethereum-based Layer 2 solution employing StarkX/StarkNet technology. This shift significantly reduced gas fees, vastly improving the user experience. Yet, it led to a higher degree of centralization within dYdX.
To address this centralization concern and advance decentralization, dYdX made the strategic choice to transition to its blockchain, built using the Cosmos SDK. This imminent transition, on the verge of completion and soon to go live, represents the DEX’s fourth and latest version, known as the dYdX Chain and will feature a decentralized, off-chain order book capable of seamlessly scaling with the platform’s growth.
As part of the Cosmos ecosystem, dYdX stands to gain the full advantage of decentralization, along with an array of unique features such as extensive customizability and scalability. We’ve delved into the specific reasons behind dYdX’s choice of Cosmos in the following section.
dYdX's decision to migrate from Ethereum to Cosmos stems from a strategic choice to utilize the unique capabilities of Cosmos technology, which offers a distinct advantage in building new layer-1 blockchains. Cosmos' Tendermint proof-of-stake consensus engine provides the foundation to develop a standalone, application specific blockchain with cross-chain capabilities, and makes it possible to fully customize how the chain functions.
Unlike Ethereum, where network congestion can be a concern, Cosmos’ app-specific chains function independently, and each Cosmos chain operates with its network of validators and token. This move permits blockchains to have faster transaction processing while maintaining decentralization, thus positioning Cosmos as the ideal choice for dYdX’s requirements, which demand high throughput - roughly, 10 operations per second and 1,000 orders/cancellations per second. Currently, Cosmos can process up to 10,000 transactions per second, or TPS, compared to Ethereum's 15-25 TPS.
A recent twitter thread by dYdX succinctly described the key separators between Layer 2s/Roll ups and standalone app-chains, and reiterated their decision to choose the latter. Read it here.
While on-chain orderbook DEXs offers a high level of transparency and decentralization, it comes at the cost of potentially higher transaction fees and slower transaction speeds. With each transaction requiring on-chain validation, the underlying network’s throughput can become a bottleneck, thus affecting the overall network efficiency.
In contrast, on dYdX v4, each validator will maintain an off-chain in-memory order book. When a new order is placed, it is initially routed to a validator that is randomly chosen. Subsequently, this validator disseminates the transaction to other validators to ensure the order book remains up to date. This alleviates the pressure on the network, allowing the chain to achieve significantly higher throughput for the order book while retaining decentralization.
The transaction flow roughly looks this -
Total supply: 1,000,000,000 DYDX tokens
50% of tokens go to the dYdX community which will comprise liquidity providers, traders, stakeholders, and users who complete trading milestones. A portion of this share goes to the community treasury.
27.73% of the tokens go to investors.
15.27% of tokens are allocated to the official team members of dYdX including founders, advisors, employees, and others.
7% of the tokens are reserved for consultants and employees who will join the platform in the future.
We’ve had extensive involvement with dydX v4 since inception as well as the Cosmos ecosystem in general. We received a grant from dYdX to write an in-depth research report (available here) that examines the implications of Maximum Extractable Value (MEV) within the context of dYdX v4 from a validator's perspective. Additionally, we were on all three testnets and actively contributed through debugging and sharing validator best practices.
dYdX occupies a unique position as a decentralized solution that directly competes with centralized exchanges in terms of its order book model, trading volume, and user experience aligns with our vision for the future of decentralized finance. Furthermore, we share dYdX's philosophy of prioritizing the creation of the best possible product, making our support for their forward-looking vision a natural choice.
Chorus One has been more than just a player in the Cosmos space. With our $30M venture arm, Chorus Ventures, we have actively invested in promising projects such as Celestia, Osmosis, Agoric and more, which keeps us well-connected to the ecosystem. We're also deeply engaged with the community, publish research reports, and extensively cover Cosmos in our blog.
Chorus One is the only node operator with a dedicated in-house quant team focussing on MEV. MEV refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block.
Because of our MEV expertise, we were provided a grant by dYdX to work on a research paper that goes into the territories of cross-chain arbitrage and also explores the subject of negating MEV externalities in a fully decentralized, validator-driven order book.
The report entails comprehensive insights on MEV’s impact on the new chain and trading, cross-chain MEV opportunities, user welfare, and centralization risks, ultimately providing practical solutions for mitigating validator-driven MEV risks. Read the report here.
Chorus One is the most active node operator on Cosmos where on-chain governance is enabled.
We have published a detailed research report last year on Cosmos’ governance, which elaborates on Cosmos’ validator participation, voting trends, controversial proposals, and why Chorus One is one of the most active node operators in the Cosmos ecosystem.
In the report, we conducted a governance performance comparison against the top 5 validators by stake on 13 chains from April 2022 to November 2022, which includes Akash, Axelar, Cosmos Hub, Evmos, injective, Juno, Kava, Osmosis, Persistence, Regen, Secret, Sommelier, Stargaze.
As illustrated in the chart below, our voting activity exceeded that of the average top 5 validators by 30%. However, it's crucial to note that the top 5 validators can vary significantly on each chain.
Out of the 13 networks studied, we achieved a 100% voting record in two networks, and in one network, Kava, we surpassed the average by approximately 90%, as demonstrated in the graph below. We consistently exceeded the average participation rates of the Top 5 validators on 11 out of 13 networks
*Since DYDX inflation goes to traders, dYdX stakers, in contrast, will receive 100% of the trading fees that are paid out in USDC.
To learn more about staking DYDX with Chorus One, don’t hesitate to reach out to us at staking@chorus.one. For any support queries, visit here.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
