Interviewee: Gulu
Source: ChainFeeds
The Dencun upgrade will take place on March 13th. As an important node in the development of Ethereum, the EIP-4844 introduced in this upgrade will significantly improve the efficiency of the Ethereum L2 network and help Ethereum achieve higher performance on Rollup by introducing a new Blob space data structure. throughput and lower costs.
In this context, ChainFeeds invited Ethereum OG Guru to discuss key issues in the Ethereum ecosystem, including the understanding of the chain, the importance of decentralization in the development of blockchain, and the potential development of DeFi, stablecoins and value storage.
Guru is the Chinese compiler of the Ethereum white paper and has participated in Ethereum crowdfunding. In addition, he founded the blockchain education platform Bihu and the multi-chain smart wallet MYKEY, and is also an evangelist for DeGate.
Key Takeaways:
1) The final outcome of the blockchain industry is modular blockchain, i.e. Layer1 + Layer2, and Layer3 may appear in the future;
2) Blockchain provides a "non-state independent space" that promotes the development of global financial infrastructure, enables any user to trade freely through private keys, and will derive unexpected applications;
3) When the throughput of the underlying infrastructure is no longer a problem, the blockchain transaction paradigm will change, and the order book transaction model may become the final form;
The end of blockchain: modular blockchain or monolithic blockchain, which is better?
The debate between modularity and monolith in the blockchain field has never stopped, and each camp firmly believes that its own solution is superior. Twitter is full of controversial points about the two solutions, involving many issues such as cost, speed, degree of decentralization and scalability. In this Spaces, Guru also expressed his own views. He believes that the end of the entire blockchain industry is modular blockchain, that is, the combination of Layer1 and Layer2, and he expounded his views from the two perspectives of gas cost and degree of decentralization.
Gas Cost
In a monolithic blockchain, each consensus node must verify every transaction in every block. This means that each node will bear a huge computational burden when processing a large number of transactions. For example, if the transaction demand of the blockchain grows to 100,000 transactions per second, then each consensus node must process 100,000 transactions per second, which will be a huge challenge.
In contrast, Guru believes that modular blockchains have lower gas costs. Taking the Ethereum Rollup expansion route as an example, Layer1 provides computing and data storage services, and Layer2 handles actual transactions, which will eventually evolve into application transactions occurring on the second layer. Guru gave an example, assuming that there are 50 Layer2s in the future, each Layer2 processes 2,000 transactions per second, and the entire modular ecosystem can process 100,000 transactions per second, and the verification of transactions is ultimately completed on the Layer1 node. Such a model is more economical for the entire ecosystem, because each node does not need to verify and calculate each transaction, but only needs to pay the hardware cost of 2,000 transactions per second. In addition, after the Cancun upgrade is completed, Layer2 will become very cheap to use BlockData, and the gas price at the data level is expected to drop by at least one order of magnitude, or even two orders of magnitude. Taking into account the cost and gas cost, the gas cost can be reduced by at least 80% for different Layer2s.
Decentralization
From a decentralized perspective, a single blockchain may end up with only a dozen or even fewer nodes, all of which are likely to be operated by data centers. In this case, the government or other entities can interfere with the operation of the blockchain by controlling these nodes, thereby affecting its decentralized nature. Taking Bitcoin as an example, the government may limit its issuance or control transaction rules. Guru said that in this case, the blockchain will lose its most core value, that is, independence. Therefore, a single blockchain may not be able to achieve true decentralization, and its ecosystem will become fragile and vulnerable to attack.
In contrast, in modular blockchains, Layer2 does not actually have strong independence, because the overall design is to make Layer2 lose some of its independence and assign its management rights to Layer1. In other words, although Layer2 still retains a certain degree of autonomy, the ultimate power is controlled by Layer1. Guru said that such a design pattern can retain the decentralized nature of the entire Layer1 network. For example, Arbitrum has achieved the trustless and permissionless features.
On the "non-state space" of blockchain: trust, expansion and financial revolution
The term "non-state space" historically refers to the early stages of state formation, when most areas were not yet ruled by the state, so large tracts of "non-state space" were formed between the points where the state was distributed. Various primitive forms of human organization, such as tribes, exist in these spaces. In this concept, breaking away from national borders means gaining independence and freedom. In the early days, the scope of a country was usually limited to a radius of about 48 kilometers, which was the scope that the country could effectively control.
Mapping this concept to the blockchain is the so-called independent space, which means independence from the national system. This independent space provides a decentralized, autonomous and free environment, allowing individuals to better control their own data and assets. Similar to the early "non-state space", the "non-state space" on the blockchain is a network composed of decentralized nodes without a centralized ruling body.
Guru pointed out that Bitcoin is the earliest application in the "non-state space" of blockchain, showing the perfect fit between the decentralized characteristics and the currency market. Subsequently, more and more flexible applications appeared based on the technical architecture of blockchain, such as DeFi, NFT, and lending. These applications and the essential blocks of Web2 utilize the "non-state space" of blockchain. So why choose to build applications on blockchain, and what advantages can the "non-state space" of blockchain bring? Guru also explained:
Trust: Blockchain applications increase users’ trust in applications because their data is publicly visible and cannot be tampered with. For example, the contract for issuing tokens can be made public on the chain, and anyone can verify its validity;
Expansion space: Guru also mentioned in the article "Endgame Interpretation (Part 1): Ethereum is winning" that the "non-state space" of blockchain will gradually develop into an Internet financial center, covering various DeFi applications, decentralized transactions, mortgages, stablecoins, etc. on Bitcoin and Ethereum, providing users with more financial options and services;
Product-market fit: Guru particularly mentioned the product-market fit of stablecoins in the "non-state space" of blockchain, especially in cross-border payments. Unlike the high fees of traditional international remittances, it provides low transfer fees and efficient transaction speeds, facilitating global economic activities.
Dollarization process: Although the consensus on the US dollar is stronger, there are national border issues, which leads to a slow dollarization process. However, with the popularization of blockchain technology, a second wave of dollarization may emerge, making products like the US dollar more widely used in the blockchain "non-state space";
Asset blockchainization: Guru believes that the demand for asset blockchainization is inherently very attractive. Blockchain technology makes it possible to put assets on the chain, further expanding the application scenarios. For example, the real estate certificate is put on the chain to become an NFT token, which can be used as collateral to provide users with convenient lending services. From a long-term perspective, on-chain assetization is an exciting track that will spawn many innovations and applications;
Evolution of blockchain transaction paradigm
As the Evangelist evangelist of ZK Rollup order book DEX DeGate, Guru also shared his views on the future form of exchanges in Spaces.
DeGate is a decentralized order book protocol based on ZK Rollup in the Ethereum ecosystem. It does not require trust and supports permissionless listing of tokens. It has officially entered the mainnet stage on January 9 this year. So far, its TVL has reached 64.67 million US dollars, and the cumulative transaction volume has exceeded 200 million US dollars.
Guru believes that decentralized transactions are essential to the blockchain ecosystem. He said that when the blockchain throughput is sufficient to support 100,000 transactions per second, the cost of on-chain transactions is the lowest and most convenient for users. However, the current high GAS fees limit applications like DeFi, resulting in most transactions still occurring on centralized exchanges. But Guru believes that as the throughput of the chain increases, more transactions will be completed on the chain in the future. He emphasized that this will take some time, but once the throughput of the underlying infrastructure is no longer a problem, the order book will become the trading form that exchanges will eventually adopt.
Guru also mentioned that the earliest decentralized exchanges on the blockchain were actually based on order books, such as EtherDelta. However, as the number of users increased, the gas fee rose, resulting in the inefficiency of the entire order book-based decentralized trading. As a result, the AMM model came into being, and its biggest advantage is its high gas efficiency. However, in terms of the form of trading products, it has the defect of low capital efficiency. Guru pointed out that the reason why traditional exchanges such as the New York Stock Exchange and the Shanghai Stock Exchange chose the order book model is because the order book has the advantages of flexibility, high capital efficiency, and the ability to implement various complex trading strategies through APIs.
In addition, Guru also summarized the characteristics of DeGate:
Asset autonomy: Like all DEXs, DeGate private keys are kept by users, and assets belong entirely to users. No one can use or freeze users’ assets without authorization.
Order book trading: provides a better experience, higher capital efficiency and greater flexibility;
Permissionless listing: Users only need to pay gas fees to list any ERC20 token compatible with the protocol
Decentralized grid trading: Similar to Uniswap V3, users can provide funds within a specified price range, and the protocol will automatically help users buy low and sell high in a decentralized manner to earn the difference;
Decentralized fixed investment: allows users to set time intervals for regular buying and selling of assets to smooth out the impact of market fluctuations;
Free order trading: users do not need to pay gas fees and transaction fees.
