The Avalanche Foundation has unveiled ACP-77, a transformative proposal set to redefine subnet creation and operation within the Avalanche blockchain ecosystem. This ambitious initiative aims to lower entry barriers, enhance flexibility, and foster a more decentralized and dynamic network environment. Here, we delve into the intricacies of ACP-77, exploring its current context, proposed changes, benefits, and potential challenges.
-> Note, as part of the ACP-77 proposal, 'Subnets' will be known as 'Avalanche L1s (Layer 1s).'
Subnets and Their Role: In the Avalanche ecosystem, subnets function as independent blockchains that leverage the mainnet for interoperability. However, the existing requirements for subnet validation have created significant hurdles for developers.
The Cost Barrier: Currently, validators of subnets must also validate the Avalanche mainnet, necessitating a minimum stake of 2,000 AVAX. At today's rates, this amounts to a substantial financial commitment, approximately $70,000. This high cost deters many developers that aim to jumpstart their subnet by running their own validators, stifling innovation and limiting the expansion of the subnet ecosystem.
ACP-77 introduces a series of pivotal changes designed to overhaul the subnet creation process, making it more accessible and efficient.
1. Decoupling Subnet and Mainnet Validation:
2. Enhanced Validator Set Management:
3. P-Chain Fee Mechanism:
4. Streamlined Synchronization:
The proposed changes in ACP-77 bring several significant benefits to the Avalanche network and its developers.
1. Lower Costs and Increased Accessibility:
2. Greater Flexibility and Autonomy:
3. Incentives for Decentralization:
4. Enhanced Security and Interoperability:
While ACP-77 promises numerous benefits, it also introduces certain challenges that need to be addressed.
1. Economic Implications:
2. Implementation Complexity:
ACP-77 represents a bold and forward-thinking step in the evolution of the Avalanche network. By lowering financial barriers, enhancing flexibility, and promoting decentralization, this proposal has the potential to unlock unprecedented growth and innovation within the subnet ecosystem. While challenges remain, the careful implementation of ACP-77 could pave the way for a more accessible, dynamic, and resilient Avalanche network, fostering a new era of blockchain development and collaboration.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally, operating infrastructure for 60+ 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. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
In Part 2 of our TON Series, we dive into TON’s staking mechanisms. We'll cover the what, why, and how of staking TON, as well as how to get started easily with Chorus One.
TON leverages the Proof of Stake (PoS) consensus algorithm, a system where validators are responsible for proposing and validating new blocks of transactions. In TON's PoS model, validators are selected through a competitive election process to ensure the highest levels of security and performance.
The Election and Validation Process
The election process is central to TON staking. During each consensus round, potential validators submit their applications along with their stake and other parameters, which determines the level of maintenance they are willing to perform. The Elector governance contract evaluates these applications, selecting validators based on their stake and parameters, aiming to maximize the network's overall stake.
Once selected, validators enter a validation cycle, as depicted in the timeline diagram below:
Key Phases of the Validation Cycle:
To ensure continuous network operation, TON employs two types of pools—odd and even—which operate in alternating cycles, providing seamless validation without interruptions.
Minimum stake
To be eligible for the validator election process, validators need a minimum stake of
300,000 TON. Validators stake Toncoin for a fixed specific term, and the stake is refunded with interest after the completion of a validation round.
Validator rewards
Each transaction on TON requires a computation fee called gas used to conduct network storage and the transaction processing on-chain. Like most blockchain networks, on TON, these fees are accumulated within the Elector contract in a reward pool. 50% of fees users pay are burnt and 50% goes to validators.
The network also subsidizes block creation by adding a subsidy to the reward pool equal to 1.7 TON for each block in the main chain, called masterchain. TON’s architecture allows for the creation of parallel chains, called workchains. For workchain blocks, the reward per block is set to 1 TON. The network has an inflation rate of approximately 0.3-0.6% annually.
TON offers several staking mechanisms to cater to different needs and preferences. Let's explore these options:
The Nominator Pool is central in TON's staking ecosystem, offering a collaborative approach to staking that allows multiple users to pool their Toncoin (TON) tokens and collectively participate in the network's validation process. This pooling mechanism is designed to democratize staking, making it accessible to a broader range of participants who may not have sufficient tokens to meet the minimum staking requirements individually.
The Nominator Pool enables a group of up to 40 nominators (stakers) to combine their staking power and delegate it to a validator like Chorus One. This collective staking approach not only helps in meeting the high minimum staking thresholds but also ensures that the network remains secure and robust by leveraging the combined resources of multiple stakeholders.
How the Nominator Pool Works:
To visualize the Nominator Pool workflow, consider the following diagram:
This workflow ensures continuous network validation, with odd and even pools alternating their validation cycles to maintain seamless operation and security of the TON blockchain.
Pros and Cons of the Nominator Pool
Pros:
Cons:
2. Single Nominator Pools
The Single Nominator Pool is a streamlined and secure staking mechanism within the TON ecosystem, designed specifically for validators who have sufficient TON to stake independently (aka solo stakers). This approach reduces complexity and enhances security by focusing on a single nominator, making it an ideal choice for those who prefer a more straightforward staking process.
The Single Nominator Pool allows a single entity to manage the staking process, providing a simplified and secure framework for validators. By eliminating the need for multiple nominators, this mechanism significantly reduces the attack surface, making it easier to safeguard the staked assets.
How the Single Nominator Pool Works
To illustrate the workflow of the Single Nominator Pool, consider the following diagram:
This simplified workflow highlights the continuous cycle of election, delay, validation, and hold phases, ensuring the seamless operation and security of the TON blockchain.
Pros and Cons of the Single Nominator Pool
Pros:
Cons:
The Single Nominator Pool offers a secure and efficient staking solution for individual validators, combining simplicity with enhanced security measures. By focusing on a single participant, this mechanism ensures that the staking process is straightforward and easy to manage, making it an attractive option for those looking to stake their TON independently.
3. Liquid staking
Liquid Staking protocols enable TON holders to participate in staking pools, lending their funds to validators at a predetermined interest rate. In return, stakers receive liquid staking receipt tokens, known as Pool Jettons, which represent their share in the pool. These tokens can be exchanged back for TON at any time, allowing stakers to maintain liquidity while earning rewards.
The protocol is user-agnostic, accommodating users of all capital sizes without any minimum or maximum stake requirements.
How TON Liquid Staking Works
Pros and Cons of TON Liquid Staking
Pros:
Cons:
The Liquid Staking Contract offers a versatile and powerful staking solution on the TON blockchain, combining the benefits of liquidity, decentralization, and accessibility. By understanding and leveraging this mechanism, users can participate in network validation more flexibly and securely, contributing to the overall stability and growth of the TON ecosystem.
Chorus One offers white-label TON validator services for institutional customers, as well as deployment and management of nominator pools. We can create nominator pools for our customers, requiring a minimum delegation of 300,000 TON tokens (TONcoin).
As the operator, Chorus One takes full responsibility for the operational fees, maintenance, and performance of the validator, ensuring seamless and efficient service.
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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. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
The rise of TON (The Open Network) has been spectacular, driven by its seamless integration with Telegram and remarkable price performance, reaching new all-time highs in June 2024. Its native token, Toncoin ($TON), has achieved a market cap of $17 billion and a total value locked (TVL) of over 660 million at the time of writing.
This year, the network has gained tremendous traction, becoming the preferred solution for Web3 integration with Telegram, which reportedly has over 900 million users worldwide.
Key developments fueling TON's rapid adoption include the global launch of TON Space, a self-hosted digital wallet (Telegram Wallet), a strategic partnership with Tencent to create a ‘Super App Eco-platform,’ and the launch of native stablecoin payments. Major investors like Pantera Capital have also highlighted TON’s scalability and extensive user base, comparing its potential to that of Solana or Ethereum and claiming TON as one of the most exciting and unique blockchains in existence today.
Below, we explore some of the most unique innovations within the TON ecosystem. 👇
The Telegram Wallet, introduced in the fall of 2023, is a versatile tool for managing digital currencies directly within the Telegram messaging app. It offers both custodial and non-custodial options, giving users the flexibility to choose between having Telegram manage their keys or maintaining full control themselves.
TON Space, a novel feature within the Telegram Wallet, serves as its non-custodial component. It allows users to store, send, receive, and exchange various cryptocurrencies, including Toncoin, Bitcoin, and stablecoins, all within the app. Users can back up their wallets using Telegram and their email, eliminating the need to remember a seed phrase. Additionally, users can track their portfolio in real-time and receive transaction notifications.
Why this matters:
The key advantage of TON Space is its seamless integration with Telegram, providing easy access to funds, quick transactions with contacts, as well as enhanced security and flexibility for experienced users. Its integration with Telegram bots and services allows for efficient market updates, trading actions, and service payments, all in one place.
TON Space simplifies digital asset management, making it accessible to a broader audience while offering advanced features for experienced users. By combining the convenience of a messaging app with the functionality of a comprehensive wallet, TON Space aims to drive mass adoption of cryptocurrency, potentially increasing the user base to 500 million by 2028.
To understand how to choose the right wallet for your TON assets here, visit: https://www.coingecko.com/learn/top-ton-wallets-jettons-crypto
TON capitalizes on the messaging app's extensive user base to create a network capable of supporting a wide range of applications. Its ecosystem comprises the TON Blockchain, TON Storage, TON DNS, and TON Services, all designed to work seamlessly together.
At the core of TON is its blockchain, built for high performance and scalability. Its dynamic sharding mechanism enables the network to process millions of transactions per second, scaling efficiently as the user base expands.
Dynamic sharding is TON's key feature for achieving high scalability. The ability to shard into individual chains (work chains and shard chains) allows TON to "distribute" transactions, effectively removing the bottleneck of processing transactions on a single blockchain. Learn more about how TON’s dynamic sharding works here.
Why this Matters:
TON’s multifaceted services extend beyond traditional blockchain functionality, aiming to establish a foundational Web3 platform. By integrating various decentralized services within a single ecosystem, TON provides the infrastructure necessary for a decentralized internet, positioning itself as a significant player in the evolution of digital infrastructure. Additionally, TON’s highly scalable blockchain offers an ideal platform for developers looking to deploy applications for a large audience without compromising on speed or security.
Over 360 million users engage monthly with Telegram's “Mini Apps,” including chatbots and mini-games which are easily accessible via the TON Space. These TON-based applications leverage TON’s innovative support for payment channel technology (or Lightning Network) designed for fast off-chain transactions, efficiently handling microtransactions and high-frequency trading.
Why this Matters:
TON’s native support for off-chain scaling and the lightning network design addresses the scalability trilemma more effectively than bolt-on solutions. It allows the blockchain to handle high-frequency, low-value transactions, which are essential for the mainstream adoption of blockchain technology.
Currently, there are over 300 projects on TON, with most building mini-apps accessible via the Telegram Apps Center. Earlier this year, memecoin trading tools like BonkBot leveraging this technology generated millions of dollars in revenue through Telegram’s interface. TON-based applications such as StormTrade now enable users to trade perpetuals, cryptocurrencies, stocks, and equities using the same platform. With StormTrade facilitating over $10 million in daily trading volume, similar TON-native Telegram bots are poised to become the preferred user experience for many traders.
On April 19th, 2024, Tether announced the deployment of a stablecoin, USDt, on the TON blockchain and in Wallet in Telegram. This development represents a significant advancement for the industry, allowing hundreds of millions of users to seamlessly send and receive stablecoins through the Telegram platform, making payments as easy as using Venmo or Apple Cash.
Additionally, as part of the TON network’s scalability plan, straight from Telegram Wallet, users can transfer USDt to i) contacts or other Telegram users; and ii) their own or others’ addresses in the TON blockchain for a very low fee (currently ~0.005 TON), making it a very convenient and competitive platform for small businesses and services.
Why this Matters:
For the TON community, integrating USDt into Wallet in Telegram significantly improves the transaction experience. Users benefit from free transfers within Telegram and only pay network fees when transacting on-chain, using TON space or other self-custodial wallets. USDt on TON also provides an accessible entry point for newcomers to cryptocurrencies, combining the advantages of digital currencies with the stability of traditional fiat currencies.
In fact, the supply of USDT stablecoin on the TON network crossed 500 million after two months of rollout, reflecting a high demand for this use-case.
Even when transacting on-chain, the TON blockchain is relatively cheap. Employing a gas based model, simple transactions’ fee currently averages 0.005 TON, or $0.04 at the time of writing when $TON was priced at $8. At this level, TON positions itself as a potential competitor to Solana - although TON’s scalability has not yet been tested as extensively.
Inflation rate in the protocol is 0.5% per year - considerably small compared to other blockchains. To compensate for that, all network participants are rewarded from both transaction fees and block rewards. As a consequence, users are incentivized to stake their TONcoin to secure the network and directly benefit from network adoption. The biggest advantage lies in keeping assets staked on-chain rather than with external parties offering a fixed APY, e.g. centralized exchanges. As part of a deflationary mechanism, 50% of all TONcoin collected in fees is burnt.
TON relies on the DPoS consensus mechanism with a set of validators who propose and validate new blocks. The validator set is determined by the Elector governance smart contract, which allocates new rounds based on each validator's weight, represented by the amount of tokens delegated to them.
Staking is one of the safest and most predictable ways to earn rewards in the crypto space, as the value originates from the blockchain’s native currency inflation, making it forecastable.
By staking your TON, you help secure the network and earn rewards. Chorus One is the leading enterprise-grade staking platform, enabling institutional customers to stake TON and integrate TON staking functionality into their offerings. We are ready to closely collaborate and contribute to the success of the TON ecosystem, and provide the best staking experience possible.
Reach out to us if you are an institution looking to stake TON with Chorus One.
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. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
This article is extracted from the Q1 2024 Quarterly Insights. To read the full report, please visit https://chorus.one/reports-research/quarterly-network-insights-q1-2024
Authors: Michael Moser, Umberto Natale, Gabriella Sofia, Thalita Franklin, Luis Nuñez Clavijo
On PoS networks, the financial aspect of staking is equivalent to the computational power committed on PoW networks. If we were to make an analogy with PoW, shared security could be compared to “merge mining”, a mechanism that allows a miner to mine a block in one blockchain, by solving the cryptographic challenge on another chain.
As a generalization, shared security technologies imply, at least, one security provider chain and, at least, one security consumer chain. To guarantee security, the shared security solution must allow for misbehavior in either the provider or consumer chains to be penalized, and that can be even by slashing the capital used for security of the provider chains. Different approaches are being used to optimize for the specific needs of each ecosystem. We will review the approaches most advanced in terms of development, and highlight the incentives and risks associated with the adoption of those technologies.
Although one may argue that Ethereum has pioneered the concept of shared security with L2s - like Arbitrum and Optimism, other blockchains have been exploring “the appchain thesis” and experimenting with more customized solutions:
The motivation behind shared security is twofold:
Rollups solutions are the main contenders for Layer 2 (“L2”) scalability in the Ethereum (the “L1”) path to modularity. This strategy allows the execution, in terms of computation and memory, to be processed “off the main chain”. The settlement properties of the state are kept on the L1 chain, which pools the security of the ecosystem through its validator base, and “rolled” from the L2 in batches (thus the name “rollup”).
This aggregation of transactions helps to minimize execution costs for each individual transaction. To maintain an ordered control of the state and upcoming transactions, rollups can make use of different architectures: historically we’ve seen a growing trend of optimistic (e.g. Arbitrum, OP, Base) or zero-knowledge (“ZK”, e.g. Starknet, Scroll) rollups, both of which have achieved limited levels of maturity in their proving mechanisms.
New architectures or upgraded versions of past ideas have also taken flight in the past months. Validiums have been brought backto the spotlight with new developments such as X Layer, and a particular flavor deemed “Optimium” (that uses the OP stack) now powers contenders such as Mantle, Mode Network, Metis, etc. The innovation, however, continues to thrive. The idea of “Based rollups” was first introduced in March by lead EF researcher Justin Drake,a simple design that allows L2 sequencing to be defined by L1 validators in their proposed blocks, thus deepening the shared security model between the layers.
It is safe to say that the rollup ecosystem continues to be the leading product in the shared security environment, with a TVL of $45.49 billion (counting canonically bridged, externally bridged, and natively minted tokens). In the last 180 days, transactions per second on the rollups have dwarfed activity on Ethereum mainnet, and the number of active users (considering distinct wallets) has risen meteorically in comparison to the L1.
The idea behind shared security has captured extraordinary attention with EigenLayer, the restaking protocol built on Ethereum that has become a leading narrative within the network’s large staking community. In fact, restaking might as well become a larger sector than even the entire industry of single-asset staking. Driven by growing demand from stakers (seeking increased returns on their investments) and developers (sourcing security), the industry is witnessing an unprecedented shake up with capital flowing to secure multiple chains in aggregate. Concretely, EigenLayer’s TVL has managed to reach the 5 million ETH milestone at the time of writing.
Since we first identified restaking as a fundamental trend in our Q1 2023 edition, we’ve discussed EigenLayer at length and become deeply invested in the future success of the protocol: our research has focused on finding optimal risk-reward baskets for AVSs - total risk is not simply a combination of linear risks, but needs to take correlations into account.
As a result of our experience on the Holesky testnet and as mainnet operators for several AVSs, we publicized our approach to AVS selection. The thesis is straightforward: to identify and onboard the AVSs that have chances of being break-out winners, while filtering out the long tail of AVSs that merely introduce complexity and risk.
Much of what’s left to flesh out has to do with reward mechanisms and slashing conditions in these restaking protocols. As EigenLayer and other shared security models evolve and reach maturity, more information surfaces. Most recently, the Eigen Labs team presented their solution for the slashing dilemma (at least partially): $EIGEN. Current staking tokens have limitations in a model such as the AVS standard, due to the attributable nature of the slashing conditionson Ethereum. In other words, ETH can only secure work thatis provable on-chain. And since AVSs are by definition exogenous to the protocol, they are not attributable to capital on Ethereum.
Enter $EIGEN, the nominal “universal intersubjective work token” that intends to address agreed faults that are not internally provable. The slashing agreements under this classification should not be handled through the ETH restaked pool (as they necessitate a governance mechanism to determine their validity) but this second token, thus fulfilling the dual staking promise that the team had previously outlined. Currently, EigenDA is in its first phase of implementing this dual-quorum solution, and users can restake and delegate both ETH and EIGEN to the EigenDA operators.
Replicated security went live on the Cosmos Hub in March 2023as the initial version of the Interchain Security protocol (“ICS”). Through this system, other Cosmos chains can apply to get the entire security of the Cosmos Hub validator set. This is accomplished by the validator set of the Cosmos Hub running the consumer chain's nodes as well, and being subject to slashing for downtime or double signing. Inter-Blockchain Communication (“IBC”) is utilized to relay updates of validator stake from the provider to the consumer chain so that the consumer chain knows which validators can produce blocks.
Currently, all Cosmos Hub validators secure the consumer chains. Under discussion is the “opt-in security” or ICS v2, an evolution of the above, that allows validators to choose to secure specific consumer chains or not. Another long-awaited feature is the ability for a consumer chain to get security from multiple provider chains. Both, however, introduce security and scaling issues. For example, the validator set of a consumer chain secured by multiple providers can have poor performance, since it will grow too large.
Solving most of the concerns around Replicated Security, Mesh Security was presented by Sunny Agarwal, the co-founder of Osmosis, in September 2022. The main insight is that instead of using the validator set of a provider chain to secure a consumer chain, delegators on one blockchain can be allowed to restake their staked assets to secure another Cosmos chain, and vice versa...
With Mesh Security, operators can choose whether to run a Cosmos chain and enable features to accept staked assets from another Cosmos chain, thereby increasing the economic security of the first one. This approach allows one chain to provide and consume security simultaneously.
BabylonChain uses Bitcoin’s economic value to secure PoS chains. Specifically, Bitcoin has several properties that make it particularly for economic security purposes, prominently its large market cap, and beyond this, the fact that it is unencumbered, less volatile, and generally idle and fairly distributed.
Staking is not a native feature of the Bitcoin blockchain. Babylon implements a remote staking mechanism on top of Bitcoin’s UTXO model, which allows the recipient of a transaction to spend a specific amount of coins specified by the sender. In this way, a staking contract can be generated that allows for four operations: staking, slashing, unbonding, and claiming coins after they have been unbonded.
Blocks are processed natively on the PoS chain using BabylonChain for security first, and then in a second round, validators provide finality by signing again using so-called extractable one-time signatures (EOTS). The central feature of this key type is that whena signer signs two messages using the same private key, it is leaked.
Therefore, if a validator signs two conflicting blocks at the same time, the corresponding private key is leaked, allowing anybody to exit the staked BTC through a burn transaction.
Separately, BabylonChain protects against so-called long-range attacks by timestamping, where the PoS chain’s block hashes are committed to the Bitcoin chain. Such an attacked would occur when a staker unbonds but is still able to vote on blocks, i.e. could attack a chain costlessly. Through timestamping, the set of stakers on Bitcoin is synchronized with the blocks of the PoS chain, precluding a long-range attack.
When exploring the evolution of different solutions to shared security, it becomes clear that it improves one of the dimensions of security in PoS chains - the financial commitment behind a network, resulting in a higher cost of corruption, or the minimum cost incurred by any adversary for successfully executing a safety or liveness attack on the protocols. As a natural challenge to modularity, some networks are born with optimized solutions to how different projects would be able to leverage a validator set. That is the case for Avalanche and Polkadot, for example. On the other side, there are solutions being built as an additional layer on top of existing networks, like EigenLayer and Babylon. And there is the Cosmos ICS, which leverages IBC, and is modular enough to not form part of either of the previous two groups.
In the set of analyzed projects, two categories emerged: restaking and checkpointing. The former aims to unlock liquidity in the ecosystems, while the latter works as an additional layer of security to a protocol, without directly changing the dynamics for stakers nor node operators. In the end, those projects also have secondary effects on the networks. For example, restaking reduces the need for scaling the validator set in the Cosmos, while checkpointing has the potential to minimize the unbonding period for stakers.
Shared security can also change the economic incentives to operate a network. Particularly related to restaking, the final rewards for validating multiple networks are expected to be higher than validating only one. However, as always, return scales with risk. Shared security can compromise on the decentralization dimension of security, opening the doors to higher levels of contagiousness during stress scenarios, and it also adds new implementation and smart contract risk.
In the context of decentralized networks, shared security is the idea of increasing the economic security of a blockchain through the use of resources from another - one or multiple - networks.
Shared security can also change the economic incentives to operate a network. Particularly related to restaking, the final rewards for validating multiple networks are expected to be higher than validating only one. However, as always, return scales with risk. Shared security can compromise on the decentralization dimension of security, opening the doors to higher levels of contagiousness during stress scenarios, and it also adds new implementation and smart contract risk.
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. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
