by Xinwei & Awood
TLDR
Observing the historical trend, STX always lags behind the trend of BTC, and its fluctuations are more pronounced than those of BTC. It is also relatively strong compared to other currencies in the BTC ecosystem.The BTC halving is approaching, and the popularity of the BTC ecosystem concept continues to rise. Stacks, as the leading project in the BTC ecosystem, will usher in the Nakamoto upgrade in Q4. The fast block generation every 5 seconds and the trustless sBTC will bring great benefits to BTC. The possibility of DeFi is expected to further prosper the Stacks ecosystem.Among the concept coins in the BTC ecosystem, STX has the largest number of listings and is listed on all mainstream exchanges including Upbit. It is also the most liquid target and can be used as a phenomenon-level indicator to observe the entire BTC ecosystem.Stacks uses the Proof of Transfer (PoX) consensus mechanism to implement smart contracts and decentralized applications based on Clarity language based on the security of Bitcoin, by locking Bitcoin to mine and enhance its performance as Bitcoin The functions of the second layer of the currency include fast processing of transactions and guarantee of Bitcoin finality.The current TVL of the Stacks ecosystem exceeds 19 million US dollars, the number of deployed smart contracts exceeds 120,000, and the number of wallets exceeds 760,000. The ecosystem projects are relatively complete, including wallets, DeFi, NFT, DAO, DID, Social, etc.
Introduction
Stacks (STX) is a Bitcoin smart contract layer designed to extend the functionality of Bitcoin to support smart contracts and decentralized applications.
Goal: The main goal of Stacks is to introduce smart contract functionality on the Bitcoin blockchain, allowing developers to build decentralized applications (DApps) and smart contracts to expand the uses of Bitcoin.
POX Consensus: Stacks 2.0 adopts the POX consensus mechanism. Participants are rewarded with a more stable, underlying chain cryptocurrency. Compared with the cryptocurrency of the new blockchain, the underlying chain cryptocurrency rewards are more motivating for early participants. This has Helps attract early participants and creates stronger consensus.
Empower BTC: Increase the vitality of the Bitcoin economy by converting BTC into assets used to build DApps and smart contracts.
Ecology: Currently, there are 79 projects in the Stacks ecosystem, boasting a Total Value Locked (TVL) of $24.95M.
1. Team background

Source: Linkedin
Stacks is a project composed of multiple independent entities and communities, initially led by Blockstack PBC and later renamed Hiro Systems PBC. According to the latest information from Linkedin, the headquarter is in NYC and the team currently has 49 people.
Key team members and their responsibilities:
Muneeb Ali: Co-founder of Stacks and CEO of Hiro. He holds a Ph.D. in computer science from Princeton University and focuses on the research and development of distributed applications. He has spoken at TEDx and other forums to spread the word about encrypted digital currency and blockchain. , and has written a large number of academic journals and white papers on related topics. Muneeb is also the CEO of Trust machine.
Jude Nelson: Stacks Foundation research scientist, former Hiro engineering partner, holds a PhD in computer science from Princeton University, and was a core member of PlanetLab, which was awarded for its implementation of planet-scale experiments and deployments won the ACM Test of Time Award.
Aaron Blankstein: Engineer, he joined the Blockstack engineering team after receiving his PhD in 2017. He studied computer science at Princeton University and Provincial University of Science and Technology. His research covers a variety of topics, focusing primarily on web application performance, caching algorithms, compilers, and applied cryptography. His research on CONIKS won the Caspar Bowden Privacy-Enhancing Technology Award in 2017. Emacs has been used for more than 10 years.
Mike Freedman: Hiro technical consultant. He is a professor of distributed systems at Princeton University and provides technical guidance for the project. He has received the Presidential Early Career (PECASE) Award and the Sloan Scholarship. His research has spawned multiple commercial products and deployed systems with millions of daily users.
Albert Wenger: Director of Hiro and managing partner of Union Square Ventures (USV). Before joining USV, he served as president of del.icio.us and was an active angel investor, having invested in companies such as Etsy and Tumblr. Albert graduated from Harvard University with majors in economics and computer science, and holds a PhD in information technology from the Provincial University of Science and Technology.
JP Singh, director of Hiro, professor and undergraduate director of Princeton University, mainly researches parallel computing systems and applications. He has won the Presidential Early Career (PECASE) Award and the Sloan Scholarship. He also co-founded a business analysis company, FirstRain Inc. . He graduated from Princeton University and holds a graduate degree in electrical engineering and a Ph.D. from Stanford University. He is also one of the founders of Trust machine.
In addition to Hiro, there are multiple independent entities in the Stacks ecosystem. Including Stacks Foundation, Diling Technology, Freehold, New Internet Labs, and Secret Key Labs.

Source: stackschina
Hiro: Focus on providing and maintaining developer tools in the Stacks ecosystem.
Stacks Foundation: Supports the development of the Stacks ecosystem through governance, R&D, education, and funding.
Daemon Technologies: Focus on supporting Stacks mining and staking business.
Secret Key Labs: Focus on providing Chinese mobile wallets that can directly participate in Stacking.
2. Fundraising
Stacks has conducted a total of 5 rounds of financing, totaling $88M.
The specific time points and resources are as follows:

Source: Rootdata
Trust machine：
Trust Machine was founded by two Princeton computer scientists (Muneeb Ali, co-founder of Stacks, and JP Singh, executive director of Hiro), both Bitcoin.
A true believer in Bitcoin, I believe that the Bitcoin layer can unlock a wide range of new use cases for Bitcoin. Muneeb Ali, one of the founders of Stacks, and JP Singh, executive director of Hiro, Trust machine was established.
Trust Machines has three products: Leather (wallet, formerly known as Hiro wallet), Console (social platform), and LNswap In April 2022, Breyer Capital, Digital Currency Group, GoldenTree, Hivemind and Union Square Venture announced investments in Trust Machine $150M [1]
In addition, in March 2023, Trust Machine and Gossamer Capital announced a $2.5 million investment in Alex (the largest dex on Stacks).

Source: Compiled by Awood & Xinwei
3. Development History and Current Situation

Source: Public information
Status quo
Dedicated hardware enables participation and provides greater transparency to network participants. However, POW and proof-of-burning are also destructive, requiring miners to destroy value in exchange for blocks. Stacks has carried out the latest v2.1 network upgrade in the first quarter of 2023, which includes improving the stacking function, improving the Clarity programming language, Stacks underwent its latest v2.1 network upgrade in Q1 2023, which included improvements to the stacking function, enhancements to the Clarity programming language, internal blockchain upgrades, reliability enhancements, and more. In addition, the Hiro Developer Platform was launched, enabling developers to build and deploy smart contracts on Stacks through a hosted experience.
Currently, the community is actively preparing for the Nakamoto upgrade, which is expected to occur in 2023 Q4.
The Nakamoto upgrade introduces a number of technological advancements that, in combination with the introduction of the 1:1 Bitcoin-backed asset sBTC, will soon enable Stacks to write Bitcoin in a completely decentralised manner. sBTC is a trust-minimising way to move Bitcoin between L1 and L2. Additionally, unlike earlier sidechain approaches, Threshold wallets are managed by a set of unprivileged, dynamically changing entities that are economically incentivised to maintain pegs, and they can join or leave peg maintenance at will. Using this mechanism, it is possible to issue an asset on the bitcoin layer that always maintains a 1:1 peg with bitcoin. In addition, the Nakamoto upgrade will dramatically reduce execution time from minutes to seconds. The community has previously opened its doors to developers.
The community has previously opened a trial application opening for sBTC for developers and is actively organising community members to learn the key points and use cases of this upgrade.
4. Consensus mechanism: POX
The earliest consensus mechanism of Stacks was POB (Proof of Burn), proposed by Jude Nelson and Aaron Blankstein at the end of 2018.
POB allows Stacks miners to compete by destroying cryptocurrency instead of consuming electricity. Compared to ordinary proof-of-work blockchains, miners on proof-of-burn chains do not require specialized hardware to participate and provide greater transparency to network participants. However, POW, proof-of-burn is also destructive, requiring miners to destroy value in exchange for the security of the blockchain.
Unlike PoS, PoB requires users to permanently destroy their tokens in exchange for mining rights. Users “burn” by sending tokens to an address that cannot be retrieved.
Mining rights are allocated based on a random selection process, and even if users have burned tokens, there is no absolute guarantee that they will be selected for mining.
This process may result in a reduction in the token supply for holders of the original token, but it does create an opportunity for competition with miners.
Since the BTC burned by POB is equivalent to permanent destruction, in order to better balance the interests between miners and currency holders while reducing the impact on the Bitcoin network, Stacks transitioned from the PoB consensus mechanism to PoX.
POX（Proof of Transfer）
POX (Proof of Transfer) is an extension of the burn proof mechanism. PoX uses the proof-of-work cryptocurrency of the established blockchain to secure the new blockchain. However, unlike POB, instead of burning cryptocurrencies, miners transfer committed cryptocurrencies to other participants in the network.
Main Features and Benefits of PoX
Rewards based on underlying chain tokens: The rewards obtained by participants are more stable, underlying chain cryptocurrencies. Compared with the new blockchain’s cryptocurrencies, the rewards of underlying chain cryptocurrencies can better motivate early participants, which helps In attracting early participants, consensus is stronger.Initial value setting: It is thought to be linked to the underlying chain cryptocurrency, so the new token has an initial value that can be referenced.Solve the dependent value spiral problem: PoX helps solve the dependent value spiral problem that may arise in new blockchains by providing participants with underlying chain cryptocurrency incentives.Establish developer funds: PoX can also be used to establish developer funds to support the development of new blockchain ecosystems. These funds can use another cryptocurrency, such as Bitcoin, without affecting the value of the new cryptocurrency.
POX DESIGN
Participants
Miners: miners. Pledge BTC in the form of bidding to obtain the mining rights of the next block → Mining → Obtain the STX tokens produced by mining + platform transaction fees.Stackers: Users who lock a certain number of STX within a certain period of time. Set up different periods of staking STX → Build your own pool or join other pools → Provide an address to receive rewards → Obtain the miner’s BTC based on the amount of STX pledged.

Mining mechanism of miners, Source: Stacks white paper

Participant (network maintainer) incentives, Source: Stacks white paper
Reward Period:
During each reward period, miners transfer funds to the address that receives the reward. Each reward address receives only one Bitcoin from miners during the reward cycle.
Eligibility:
The Stacks wallet has no less than 0.02% of the total unlocked STX tokens, this threshold will be adjusted based on the level of participation in the Stacking protocol;
A signed message is broadcast before the start of the reward cycle, which includes the protocol to lock the corresponding STX token specifying the locking period, specifying the Bitcoin address to receive the funds, and voting for a certain block on the Stacks chain.
Address Validity: Participants need to be able to verify the address receiving funds, as the reward address needs to be confirmed as valid each reward cycle.
Preparation Phase and Reward Consensus: Before the reward cycle, participants go through a preparation phase, where two key things are decided:
Anchored block: During the reward cycle, there is an anchor block that miners need to transfer their funds to the appropriate reward address. This anchor block is valid throughout the reward period.Reward Set: The reward set is the collection of Bitcoin addresses that will receive funds during the reward cycle. This set is determined by the Stacks chain state of the anchor block.
Rules for Selection of Reward Addresses: Different rules apply to the selection of reward addresses depending on whether the blockchain tip established by the miner is a descendant of the anchor block. If a miner builds a blockchain tip that is not a descendant of the anchor block, then all of that miner’s committed funds must be destroyed. If a miner builds a blockchain tip that is a descendant of the anchor block, then the miner must send committed funds to two addresses in the reward set.
5. Technical Architecture
L1 or L2?
Stacks is described as a smart contract layer built on top of Bitcoin.
The initial version (released in 2021) of Stacks has a security budget separate from Bitcoin L1 and is treated as an independent layer (L1.5)
Future Nakamoto versions are planned to rely entirely on Bitcoin’s hashing power, making it a fully affiliated layer (L2) of Bitcoin, meaning that Stacks will have Bitcoin’s security determine the irreversibility of its transactions.
Sidechain?
Stacks is interoperable with Bitcoin to some extent, but it does not meet the definition of a traditional sidechain. Stacks’ consensus mechanism runs on Bitcoin L1 and is closely related to Bitcoin’s finality, and data and transactions on Stacks are automatically hashed and permanently stored on the Bitcoin blockchain. This is different from traditional sidechains, whose consensus runs on the sidechain and does not rely on Bitcoin L1 and does not store data on Bitcoin L1. Therefore, Stacks does not meet the definition of traditional sidechains.
Smart Contract Language — — Clarity
Clarity is a decision-making smart contract programming language designed specifically for the Stacks blockchain with the following features:
Security First: Clarity is designed with a focus on security and predictability to protect against common vulnerabilities and attacks in Solidity contracts. It is specifically designed for security and aims to avoid common problems in the smart contract world.Interpretability: Clarity’s code is interpretive, which means that it will be interpreted and executed line by line when submitted to the chain, unlike other languages (such as Solidity) that need to be compiled into bytecode first. This reduces the vulnerabilities that compilers can introduce and keeps smart contracts readable, because the code of the Clarity contract is the code that is executed, there is no compiled bytecode.Decision-making: Clarity is a decision-making language, which means from the code itself, you can know exactly what the program will do. This avoids problems such as “downtime issues”. Clarity ensures that it does not “run out of fuel” during a call because it guarantees that program execution will end in a limited number of steps.Recursive calls are prohibited: Clarity’s design prohibits recursive calls, which is a situation that may lead to contract vulnerabilities, in which one contract calls another contract and then calls back to the original contract, which can trigger multiple extraction operations.Prevent overflow and underflow: Clarity prevents numerical calculation overflow and underflow situations, which is a common type of vulnerability that may lead to abnormal behavior of smart contracts.Built-in support for custom tokens: Clarity has built-in support for creating custom fungible and non-fungible tokens, which is one of the popular use cases for smart contracts. Developers don’t need to worry about internal asset management, supply management, or the emission of token events, as these features are already integrated into the Clarity language.Post-condition based transaction protection: Clarity supports attaching post-conditions to transactions to ensure that the chain status changes in the expected way after the transaction is completed. If the postcondition check fails, the transaction will be reversed.Forced return response handling: Public calls to the Clarity contract must return a response indicating success or failure. This helps ensure errors are not overlooked, increasing the security of the contract.Composition over inheritance: Clarity adopts the principle of composition over inheritance instead of inheriting other contracts as in languages like Solidity. Developers can define features that are then implemented by different smart contracts, which provides greater flexibility.Access Bitcoin Base Chain: Clarity smart contracts can read the status of the Bitcoin base chain, which means you can use Bitcoin transactions as triggers in smart contracts. Clarity also provides a number of built-in functions to verify secp256k1 signatures and recovery keys.
Gaia Storage System
Gaia is a unique decentralized storage system in the Stacks blockchain that emphasizes user ownership and control of data. Unlike some other immutable storage solutions on the blockchain (such as IPFS and Arweave), Gaia focuses on user control over data rather than emphasizing immutability.
The Gaia storage system consists of Hub services and storage resources on cloud software providers. The storage provider can be any commercial provider such as Azure, DigitalOcean, Amazon EC2, etc. Gaia currently supports S3, Azure Blob Storage, Google Cloud Platform, and local disks, but the driver model allows support for other backends.
Gaia stores data as a simple key-value store. Whenever an identity is created, the corresponding data store is associated with that identity on Gaia. When a user logs into a decentralized application (dApp), the authentication process provides the application with the URL of the Gaia hub, and Gaia then performs storage operations on the user’s behalf. There will be a “pointer” saved in Gaia to the Blockstack chain and Atlas subsystem. When users use the Blockstack authentication protocol to log in to applications and services, this storage location information is passed to the application, and then the application interacts with the Gaia data at the specified location. That is, the cloud storage service provider cannot directly see the user data and can only See the encrypted data block.
The Stacks blockchain only stores identity data, while data created by operations on identities is stored in the Gaia storage system. Each user has profile data, and when the user interacts with the decentralized dApp, the application stores the application data in Gaia on the user’s behalf. Because Gaia stores user and application data outside of the blockchain, Stacks dApps generally perform better than dApps on other blockchains.

Source: stacks white paper
Here are some key features about Gaia:
User Ownership and Control: Gaia is designed with a focus on user ownership and control of their data. This means users decide where their data is stored and are able to modify or delete their data, unlike some other immutable blockchain storage solutions.Connection to Stacks identity: Gaia connects access to data to the user’s identity on the Stacks blockchain. This connection enables users to better manage and access their data while being tied to their digital identity.High performance and high availability: Storing user application data outside the blockchain can provide higher performance and availability, because data reading and writing will not be limited by the performance of the blockchain.
6. Important upgrade
Stacks Nakamoto Upgrade
The Nakamoto upgrade introduces a series of technological advancements that, combined with the introduction of sBTC, a 1:1 Bitcoin-backed asset, will soon enable Stacks to write to Bitcoin in a fully decentralized manner. sBTC is a trust-minimized way to move Bitcoin between L1 and L2. In addition, unlike early sidechain methods, threshold wallets are managed by a group of dynamically changing entities without permissions. These entities are economically motivated to maintain the peg, and they can join or exit the peg maintenance at will. Using this mechanism, an asset can be issued at the Bitcoin layer that is always pegged 1:1 to Bitcoin. In addition, the Nakamoto upgrade will significantly reduce execution time from minutes to seconds.
sBTC: Provides a trustless, decentralized two-way anchoring, introducing BTC liquidity into smart contracts.Bitcoin Finality: Stacks blockchain transactions are considered irreversible once confirmed under a PoX (Proof of Transfer) block.Faster Blocks: Stacks blockchain implements faster block confirmation times, with a confirmation time of 5 seconds per block.

7. Token Economy
The total supply of STX tokens is capped at 1.818 billion, and the current circulating supply is approximately 1.42 billion.
Stacks’ genesis block contains 1.32 billion STX tokens. These STX tokens were issued and distributed multiple times in 2017 and 2019. The 2017 issuance was priced at $0.12 per STX, the 2019 issuance was at $0.25 per STX, and the 2019 SEC-compliant issuance was priced at $0.30 per STX.

Mining rewards are distributed as follows: 1000 STX per block in the first 4 years, 500 STX per block in the next 4 years, 250 STX per block in the next 4 years, and 125 STX per block permanently after that. STX allocated to founders and employees follows a 3-year unlocking schedule.
In October 2020, Stacks changed the minting and burning mechanism of STX tokens. Instead of implementing STX minting and burning, Stacks is reducing token issuance. By 2050, the total supply will reach approximately 1.818 billion coins.

8. Ecological situation
TVL situation

Wallet number trend

Smart contract quantity trend

Ecological map

Wallet
Xverse
Xverse is a crypto wallet built on Stacks and supports the Ordinals protocol. Users can manage both Bitcoin assets (including BTC and Bitcoin NFTs) and Stacks-based assets through the wallet. At the same time, the wallet also has a built-in stack function, and users can earn Bitcoin income by stacking STX.
The UI of this wallet is simple, and the wallet creation process is similar to that of many EVM-compatible wallets. The wallet is also backed up and restored through mnemonic words. For EVM wallet users who are used to the little fox, this undoubtedly lowers the threshold for using the wallet. After the wallet is created, two addresses will be generated at the same time, one is a Bitcoin address, which is used to receive and send Bitcoin assets. The other is the Stacks network address used to manage Stacks-based assets.

Leather
Leather’s predecessor was Hiro Wallet. Hiro is a development tools company that powers developers on the Stacks blockchain. Hiro Wallet is one of the company’s products. Leather is a wallet application built on Bitcoin that currently supports Ordinals and will soon support the Lightning Network. Leather has many convenient built-in functions. Users can directly use credit cards, debit cards or even bank transfers to purchase STX in Leather, and then directly participate in staking in the wallet.
Currently, the wallet supports browser extensions for Chrome, Firefox, and Brave, as well as desktop versions for MacOS, Windows, and Linux systems.
The browser extension version can connect to the application, purchase STX, mint and NFT, and use the Ledger hard wallet. The desktop version allows you to participate in staking to earn Bitcoin and protect assets using a Ledger hard wallet.

DeFi
ALEX
ALEX is a DeFi protocol built on the Bitcoin network through Stacks smart contracts, and draws on the design of Balancer V2 during development. The current mainnet version of the platform features Swap, lending, staking, revenue mining and Launchpad. In addition, with the popularity of BRC20, ALEX also launched the BRC20 order book exchange.

Arkadiko
Arkadiko is an open source, non-custodial liquidity protocol built on Stacks smart contracts, where users can mortgage assets to mint the stablecoin USDA, earn interest on deposits, and borrow assets on Stacks. Arkadiko’s governance token is DIKO, which can be obtained by pledging assets to add liquidity to the pool.

LNSwap
LNSwap is an atomic swap protocol that embodies the foundation of Bitcoin and the security, decentralization, and stability it provides.
Lnswap is composed of three parties: users, liquidity providers and aggregators.
Users are those who want to exchange assets. Their funds are locked in a very basic Hash Time Lock Contract (HTLC) only for the duration of the exchange, and through the use of smart contracts, direct transactions can be made between the two parties without the involvement of a third party.
Liquidity providers are those who use the assets they own to provide funds to the LNSwap protocol to facilitate swaps on our exchange. In return for providing assets, liquidity providers will be rewarded with fees generated by swaps occurring on the platform.
Aggregators essentially collect the data and information exchanged on a protocol and consolidate them for easy reference and access. Currently, LNSwap’s aggregator is a router that forwards exchange information between users and liquidity providers. But in the future, the aggregator will actually be an on-chain contract, which effectively means that anyone can become an aggregator on the platform through a simple front-end. Additionally, liquidity providers will be able to register to multiple aggregators.

NFT
Gamma
Gamma, the NFT market on Stacks, was originally named STXNFT. On April 27, 2022, it was announced that it would be renamed Gamma. Gamma is the third letter of the Greek alphabet and represents the third phase of the web: Web 1.0, Web 2.0 and now Web3.
The platform is designed to bring collectors, creators, and investors together to explore, trade, and showcase NFTs within the Bitcoin ecosystem. The Gamma platform consists of three core products: NFT market, Launchpad and social platform. Gamma.io supports both the primary and secondary markets for Bitcoin NFTs.
Users can use Gamma bot to mint their own unique digital works, collect them or sell them. Users can create a Bitcoin NFT in minutes using a code-free Bitcoin NFT creation tool. Gamma.io solves the technical, complex, and time-consuming pain points of creating NFTs on the Bitcoin network. However, the secondary market still accounts for the majority of platform sales. Each sale includes artist royalties as well as marketing commissions, with percentages varying by artist and collection.

Boom
Boom is Stacks’ native NFT platform, supports Stacks ecological token transfer, and will support Stacks NFT transactions in the future.

9. Competitors
Unlike Lightning Network, which focuses on improving Bitcoin’s scalability, Stacks focuses on introducing new smart contract features. Unlike RSK, Stacks has its own miners and mining process, rather than relying on Bitcoin miners. Unlike Liquid, Stacks is an open, decentralized network that doesn’t just focus on financial applications. Unlike Rollups, Stacks is a solution built on top of Bitcoin rather than a new network outside of Bitcoin.
Why was the value of the BTC ecosystem suddenly discovered this year?
Two important technical updates need to be mentioned here:
The first is the Segregated Witness upgrade in 2017, which is equivalent to expanding the BTC block data from 1MB to 4MB, but the expanded part can only be used to store signatures. Until the Taproot upgrade at the end of 2021, advanced scripts can be written in Segregated Witness for the first time, and complex data can be written on BTC. Since then, BTC has made great progress in programmability and scalability. Some protocols containing complex logic have begun to appear. The BTC ecosystem has finally begun the next phase of milestones. This is the main opportunity for the explosion of the BTC ecosystem in 2023.
Ordinals & BRC20
The emergence of the Oridnals protocol has completely ignited the BTC ecosystem, and its rapid development has also promoted each other with the adoption of Taproot. People can encode the NFT data and write it into the extended space of Segregated Witness (4MB per block).
Soon, new developers improved Ordinals, imitating ERC20 and writing the complete functions of Token into the BTC output script, and BRC20 was born.
Atomics & ARC20
Atomics is another derivative protocol that engraves data on UTXO to implement Token.
Different from Oridnals, which was originally designed for NFT, it rethinks how to issue tokens on BTC in a centralized, non-tamperable and fair manner from the bottom up.
When verifying an Atomics transaction, just query the UTXO of the corresponding sat on the BTC chain. The atomicity of the ARC20 token is consistent with the atomicity of BTC itself. ARC20’s transfer calculations are handled entirely by the BTC base network.
The design of Atomics binding UTXO cleverly avoids the complexities faced by BRC20, making it more decentralized, more native to BTC, and most importantly, more in line with the culture of the BTC community.
Rune and Pipe
Under the general trend of hype, Casey also proposed an inscription implementation method specifically for issuing FT, namely Rune.
Rune was just an idea, and the founders of #Trac wrote the first usable protocol on top of it, issuing $PIPE. Due to Casey’s high popularity, $PIPE took over the hype carried over from BRC20 and quickly completed the first wave of hype.
Rune’s legitimacy is stronger than BRC20, but it is still difficult to be accepted by the BTC community.
Lightning Network
The Lightning Network is the king of legitimacy in the BTC community. Starting in 2016, over a long period of time, more than half of the developers in the BTC ecosystem were involved in the development of the Lightning Network.
The foundation of the Lightning Network is payment channels. This concept was first proposed by Satoshi Nakamoto. Both parties to the transaction lock BTC through multi-signatures, and both parties maintain an off-chain ledger to record the transaction.
Payment channels connected in pairs form a network, and two parties who are not directly connected can also jump to the channel to complete transactions. The Lightning Network has indeed expanded the performance of BTC transfers, giving users a better experience.
The final BTC settlement can only be done on the BTC mainnet, and all currencies are still saved by the public and private key system.
Taproot Assets (Taro)
Unlike BRC20 and others, Taproot Assets only writes the Token information in the UTXO output script of the BTC main network, and does not store the Token’s transfer, mint and other functional codes.
Taproot Assets only regards the BTC main network as a registry of Tokens and does not completely rely on the BTC main network to operate. Therefore, these assets must be deposited into the Lightning Network before they can be traded.
Therefore, the Tokens of Taproot Assets must rely on a third-party storage indexer. Without the storage indexer, these tokens will be lost forever.
RGB
RGB is a smart contract system based on BTC and Lightning Network. It is the ultimate expansion method, but its progress is slow due to its complexity.
RGB converts the state of a smart contract into a short proof and engraves the proof into the BTC UTXO output script.
Users can check the status of the smart contract by validating this UTXO. When the smart contract status is updated, a new UTXO is created to store the proof of this status change.
RGB can be regarded as the L2 of BTC. The advantage of this design is that it uses the security of BTC to guarantee smart contracts. However, as the number of smart contracts increases, the demand for UTXO encapsulated data will also increase, which will eventually become unavailable. Avoid creating a lot of redundancy in the BTC blockchain.
RSK&RIF
RSK can be regarded as the L2 of BTC, which is essentially a smart contract chain with an EVM structure.
RSK just cross-chains the main network BTC to itself through the Hash lock and uses it as network gas.
At the same time, RSK adopts the same POW consensus algorithm as BTC, so BTC miners can also mine in RSK at the same time and earn transaction fees of $RBTC.
BitVM
BitVM is currently the most BTC-native, most promising, and most technically hard-core smart contract expansion solution.
Without modifying the BTC network, Optimistic Rollup runs a VM virtual machine that supports calculations to implement BTC smart contracts. The BTC network is used to run Optimistic Rollup’s fraud proofs.
Using the most basic Hash lock and BTC script operations OP_BOOLAND and OP_NOT, a simple logic gate is implemented. By combining the logic gates of BTC, a circuit that can operate is formed, and fraud proof is processed on the BTC chain through this circuit.
10. Innovation and Risk
Innovation
S (Secured by the entire hash power of Bitcoin): The security of Stacks smart contract layer is supported by the entire hash power of Bitcoin, which means it is protected by the high security of the Bitcoin network and Protection of decentralized features.T (Trust-minimized Bitcoin peg mechanism; write to Bitcoin): Stacks adopts a minimum-trust Bitcoin peg mechanism that can write information to the Bitcoin blockchain. This ensures interoperability between Bitcoin and Stacks while minimizing trust requirements.A (Atomic BTC swaps and assets owned by BTC addresses): Stacks allow for atomic Bitcoin (BTC) swaps while ensuring that assets in smart contracts belong to Bitcoin addresses. This means assets can be securely transferred from the Bitcoin network to the Stacks blockchain and vice versa.C (Clarity language for safe, decidable smart contracts): Stacks uses the Clarity programming language, a language designed for writing safe, decidable smart contracts. The Clarity language is characterized by its ability to reduce errors and uncertainty in smart contracts.K (Knowledge of full Bitcoin state; read from Bitcoin): Stacks smart contract layer has knowledge of the complete state of Bitcoin and can read information from the Bitcoin blockchain. This allows Stacks smart contracts to stay connected to the Bitcoin network, understanding and validating data on the Bitcoin chain.S (Scalable, fast transactions that settle on Bitcoin): Stacks smart contract layer supports scalable, fast transactions that settle on Bitcoin. Despite its faster transaction speeds, Stacks still benefits from Bitcoin’s finality and security.
RISK
Security: Although Stacks transactions are processed in batches and hashed on the BTC main network, there is no doubt about the security of BTC. However, like other blockchains, the Stacks network itself may face security threats, such as security holes and hacker attacks, and some people have questioned it. How decentralized the Stacks network is. These situations can result in financial losses and compromise the security of the network.Complexity: Although Stacks provides developers with an evolving infrastructure, the Clarity language still blocks many good developers. This complexity can lead to potential errors and inefficiencies.Interoperability: Although Stacks and BTC are closely bound, Stacks and other BTC ecological projects are still unable to interoperate efficiently. The ability of blockchain networks to work together seamlessly is critical to the adoption and efficiency of the technology. A lack of interoperability can lead to inefficiencies and hinder innovation.
11. Secondary market liquidity

The candlestick is STX/USDT, and the orange line is BTC/USDT. It can be seen that no matter whether it rises or falls, the performance of STX always lags behind that of BTC, and rises and falls with BTC.

It can be seen from STX/BTC that STX is equivalent to BTC with added leverage.
To sum up, STX always lags behind the trend of BTC, and its rise and fall are greater than that of BTC.

Orange is REN, yellow is BADGER, cyan is RIF, purple is ORDI
It can be seen that the currencies in the BTC ecosystem are strongly related to BTC, often rising and falling at the same time. STX is relatively resilient, and ORDI is more flexible because it is a new currency.
Summary
Stacks is a second-layer solution built on top of Bitcoin with innovative approaches to address scalability challenges and drive the development of new applications. It enhances the functionality of Bitcoin by introducing smart contracts and decentralized applications (DApps) while leveraging Bitcoin’s security and consensus mechanisms. The platform provides a trustless two-way Bitcoin peg and uses Clarity, a smart contract language designed for security and transparency. Stacks provides a programmable asset layer for Bitcoin, unlocking its potential in multiple use cases.
Key developments like the upcoming Nakamoto upgrade position Stacks as a pioneer in the cryptocurrency space. As the broader crypto community recognizes the importance of second-layer solutions to Bitcoin’s future, Stacks is poised to play a key role in the growing industry. Collaboration, technological innovation, and the exploration of new use cases are shaping the Stacks ecosystem, with the goal of unlocking $600 billion in Bitcoin liquidity into decentralized finance (DeFi), providing cheaper and faster ways to trade Bitcoin, and continuing Develop DApps and integrate cutting-edge technologies. This shows the huge potential in the development process of Nakamoto’s version of Stacks.
Reference：
[1] https://hackernoon.com/trust-machine-raises-$150-million-in-funding-from-breyer-capital-dcg-and-hivemind-to-expand-web-3
[2]Trust machine: https://trustmachines.co/blog/hello-trust-machines/
[3]https://decrypt.co/82019/bitcoin-defi-thing-says-stacks-founder-muneeb-ali
https://mp.weixin.qq.com/s/eJ36c6kBV18fgH259XDiMg
https://mp.weixin.qq.com/s/u-i-oZf2bFAuItTUBYxosA
https://mp.weixin.qq.com/s/vFyz4kylLJ2S1yVohbzXTQ
https://mp.weixin.qq.com/s/uxaPnzjPjJlCLmwakPIY_A
https://mirror.xyz/0x0bF07321af1bF1F77b3E96C63628192640A38206/cQl_kK3ETuLaAvo9Gn9mcuI04043GS9bCO7PVFLkTrk
https://www.stackschina.com/stacks-ecosystem-map
https://www.blocktempo.com/the-bitcoin-scalability-solution-stacks/
https://mirror.xyz/arsenal-fc.eth/ujrApyfn40YOBKAZ9mz5sWNCZjWig2x1IZESAn0QvFg
https://mirror.xyz/0x0bF07321af1bF1F77b3E96C63628192640A38206/cQl_kK3ETuLaAvo9Gn9mcuI04043GS9bCO7PVFLkTrk
https://www.stackschina.com/stacks-ecosystem-map
https://www.blocktempo.com/the-bitcoin-scalability-solution-stacks/
https://mirror.xyz/arsenal-fc.eth/ujrApyfn40YOBKAZ9mz5sWNCZjWig2x1IZESAn0QvFg)
sBTC：https://stx.is/sbtc-pdf
https://gaia.blockstack.org/hub/1Eo6q4qLMcSSpkhoUADxRAGZhgUyjVEVcK/stacks-zh.pdf
https://www.theblockbeats.info/news/35143
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Twitter：https://twitter.com/MTCapital_USWebsite：https://mt.capital/

By Severin. Thanks to @0X_IanWu for providing in-depth guidance and advice in this article.
TL;DR
The updated dYdX tokenomics model necessitates that teams, early investors, and other token holders stake DYDX tokens to capture dYdX transaction fee income. This approach will increase the staking rate of DYDX, reduce its circulating supply, prevent large-scale token selling, and enhance DYDX’s value-capturing capability.Migrating dYdX to an AppChain avoids profit redistribution with StarkWare. The performance improvement and increased customization offered by the AppChain also strengthen market expectations for the future performance of dYdX.The recently launched early incentive program by dYdX, the upcoming release of native USDC on Noble, and the significant increase in secondary market liquidity and volatility all bode well for the fundamental development of dYdX.December will see a substantial token unlocking, but we anticipate this won’t result in a significant token sell-off. Teams and early investors might opt to capture dYdX’s growth potential by staking tokens.

Introduction
dYdX recently completed its migration from StarkWare to the Cosmos application chain, finalizing its first transaction on November 13. Alongside this move, dYdX updated its V4 tokenomics model, enhancing DYDX’s value-capturing capabilities. With the combined impact of these two events, we anticipate significant improvements in dYdX’s fundamentals, enabling DYDX to capture greater gains in the secondary market.
The updated tokenomics model empowers DYDX with enhanced value-capturing capabilities
1. dYdX income belongs to token stakers
dYdX founder Antonio announced that dYdX Trading Inc. has officially become a Public Benefit Corporation, and will not generate revenue from the operation or transactions of dYdX V4. All protocol fees, including transaction fees priced in USDC and Gas fees priced in DYDX, on the dYdX Chain will be allocated to validators and stakers. It’s noteworthy that the dYdX team also needs to stake tokens to receive fee rewards, which will mitigate the risk of significant token sell-offs by the team. With dYdX’s current annual revenue at approximately $105.47 million, the distribution of protocol income among validators and stakers will enhance the value-capturing capability of DYDX.

dYdX Daily Fees
2. DYDX Tokenomics Model Update
Previously, DYDX tokens were primarily used for protocol governance, fee discounts, and capturing token inflation incentives through staking. With the changes in the dYdX V4 protocol governance and staking modules, token holders now have expanded governance rights and stakers can capture real yield.
Firstly, DYDX holders can now vote on key parameters and critical functional modules of dYdX, including but not limited to transaction fee rate parameters, trading reward mechanisms, third-party price oracles, and the addition/removal of existing markets. The expanded governance authority empowers DYDX holders to dynamically adjust transaction parameters and protocol functionalities based on market demand, making governance rights more valuable.
Secondly, DYDX token holders staking tokens will receive income derived from both transaction fees and gas fees, replacing the previous token inflation incentives. This change aims to enhance the real yield for stakers. DYDX tokens are transitioning from being just mining rewards to becoming universal tokens on the dYdX Chain, with value-capturing capabilities, wealth effects, and governance rights. As dYdX trading volume increases and fundamentals improve, the rise in fee income for dYdX will amplify the appeal for DYDX holders staking tokens. This process will further reduce circulating DYDX tokens, increase market demand for DYDX tokens, drive token price appreciation, and create a positive growth flywheel.

dYdX Price & Fees
The chart above depicts the performance of DYDX token prices and protocol fees under the yet-to-be modified token model. We anticipate that the new token model will further strengthen the growth of token prices and protocol fees.
The AppChain migration strengthens expectations for dYdX’s future performance
1. Pursuing performance surpassing that of centralized exchanges
One of the significant reasons for dYdX’s departure from StarkWare is that StarkWare’s upgrades, with the existing performance and cost structure, are insufficient to support dYdX’s ambitious growth plans aiming to compete with centralized exchanges (CEX). The bespoke application chain allows dYdX to operate without direct competition from other protocols, enabling exclusive access to the application chain’s performance. This, in turn, reduces on-chain transaction costs and better accommodates dYdX’s high TPS demands for order book and matching engines. Before the migration, dYdX could only process about 10 transactions per second and 1,000 order/cancellation requests per second. After the migration, dYdX can handle up to 2,000 transactions per second. Apart from performance improvements, the independence from StarkWare eliminates the need for profit-sharing, significantly raising stakers’ expectations for future income distribution from the protocol.

Source: https://dydx.exchange/blog#
2. Customized AppChain delivers a superior trading experience
Another significant advantage of migrating to the application chain is that dYdX can achieve higher customizability in the workflows of the blockchain and validating nodes to meet the demands of decentralized derivative trading.
In dYdX V4, each validating node runs an in-memory order book that never reaches consensus off-chain. Order placement and cancellation are propagated through the network, with only trades that match in real-time and receive consensus confirmation being ultimately submitted to the blockchain. This ensures uniformity in the order book data stored by each validating node. Following this operational logic, user actions for placing and canceling orders are considered to be off-chain activities, eliminating the need to pay gas fees. Users only incur gas fees when the matched transactions are successfully completed and submitted to the blockchain.
Additionally, dYdX has collaborated with Skip Protocol to develop an MEV dashboard, to expose harmful/dishonest nodes. By penalizing such nodes through community consensus, dYdX safeguards the fairness of its trading network. Migrating to the application chain allows dYdX to optimize users’ actual trading experience at a deeper level, which will increase user willingness to transact on the dYdX platform.

MEV Dashboard on dYdX
The remaining positives and future risk considerations
1. Early Incentive Program
The dYdX community has approved the launch incentive proposal for dYdX V4, allocating $20 million worth of DYDX from the dYdX Chain community treasury for a 6-month launch incentive program to encourage early adopters. The early incentive program aims to strengthen users’ willingness to cross-chain their funds to the dYdX Chain, fostering an increase in dYdX trading volume and fee income.
2. Native Cross-Chain USDC
The Circle Cross-Chain Transfer Protocol (CCTP) is set to launch on the Cosmos ecosystem application chain Noble on November 28th. This will enable users to seamlessly transfer native USDC from Noble to the dYdX Chain in a single transaction. The introduction of CCTP on Noble simplifies, secures, and streamlines the process of sending USDC to the dYdX Chain, offering users a more straightforward and efficient experience.
3. The substantial token unlocking in December
One of the significant risk events recently faced by dYdX V4 is the substantial token unlocking in December. According to TokenUnlocks data, December 1st will witness the unlocking of 15% of dYdX’s total supply. However, this unlocking event may not necessarily result in a significant sell-off. As mentioned earlier, staking DYDX tokens provides substantial fee and gas fee dividends. In this unlocking, the majority of tokens belong to the team and early investment institutions. Given the recent bullish trend in the secondary market and the impact of changes in the dYdX token model, teams and institutional investors might opt to stake tokens to capture the potential future value growth of dYdX.

DYDX Token Unlocks
In summary, we believe that with the completion of dYdX’s application chain migration and the impact of its upgraded tokenomics model, dYdX’s fundamentals show a steady and improving growth trend, and the DYDX token will also further capture dYdX’s value growth. At the same time, since October 25, the overall crypto market sentiment has warmed up, with significantly increased volatility and liquidity. The significant increase in the DYDX token price also reflects the market’s optimistic expectations that the bullish market sentiment can continue, platform trading volume will keep expanding, and fee income will sustain growth.
Reference
https://dydx.exchange/blog/public-benefit-corporationhttps://www.dydx.foundation/blog/dydx-token-mechanicshttps://dydx.exchange/blog/dydx-chain-official-releasehttps://dydx.exchange/blog/dydx-chainhttps://dydx.exchange/blog/distinguishing-mev-from-expected-noisehttps://token.unlocks.app/dydx
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capital
Twitter: https://twitter.com/MTCapital_US

by Xinwei
TL;DR
With ORDI launching on Binance, the inscription sector of the Bitcoin ecosystem is rapidly evolving, with a wide range of innovative technologies and concepts emerging.The SegWit and Taproot upgrades have provided strong support for Bitcoin’s programmability and scalability, fuelling the rise of projects such as Ordinals, BRC-20, and Atomicals. These technological advances have not only increased the transaction capacity and flexibility of the Bitcoin network, but have also created additional revenue streams for miners.
Introduction
With the ORDI launched the Binance Exchange, we have witnessed the beginning of a new era: a technological innovation and market prosperity led by Bitcoin ecological. From the inscriptions at the beginning of the year to the frenzy again, the rapid development of the Bitcoin ecosystem and the huge growth of its value have aroused widespread attention. But behind this, what is the promotion of the fiery and rapid expansion of the BTC ecology?
Technology
Before exploring this issue, we first need to understand several key technological progress of the Bitcoin ecosystem.
SEGWIT is a key upgrade of the Bitcoin core protocol launched in 2017, which aims to solve Bitcoin’s expansion challenges and specific vulnerabilities. It mainly promotes more transactions through correction transaction extensibility issues and expanding the size of Bitcoin block. Segwit introduces the concept of block weight, replacing the traditional block size limit, making the full -load block that can accommodate about 2,700 transactions, which is significantly improved compared to the previous 1650.
In addition, SEGWIT also brings new encoding methods Bech32 and two innovative script types.

By the end of 2021, the Taproot upgrade, the Bitcoin ecosystem began to support more complex scripts and data types, bringing great progress to the programming and scalability of BTC. This provides a key opportunity for the Big Big Blast of Bitcoin Ecology in 2023.
The Taproot upgrade mainly includes changing the transaction confirmation method and the introduction of the Schnorr signature algorithm. The introduction of Schnorr’s signature provides many benefits, including better privacy protection, especially in multiple signature wallets. It allows all private keys to compile together, so that multiple signature transactions look the same as other transactions, thereby improving privacy. In addition, Schnorr’s signature supports batch confirmation, making the transaction of the entire network cheaper and faster.
Taproot also brings the potential for creating smart contracts to the Bitcoin network. Although it may be more expensive and limited compared to platforms such as Ethereum, it is huge to achieve smart contract interaction on Bitcoin, worth 700 billion U.S. dollars, and may promote the mainstream of smart contract technology.
Interests of Miners
In terms of the interests of miners, recent data shows that with the rise of projects like Ordinals and Atomicals, the Bitcoin inscription market is undergoing an unprecedented prosperity. According to the data on the Oklink Chain, in the past three months, the income of Bitcoin miners has increased significantly, especially in November, the proportion of contributions totransaction fee on the chain rose from 2.4% on August 19 to November 19 23.46% on the 16th. This growth is mainly due to the introduction of the Ordinals transaction. This shows that the development of the Bitcoin inscription market has significantly increased the proportion of miners’ fee income. This proportion may reach 50%when Bitcoin production is reduced in April 2024.

At present, as the US Bitcoin mine is in a state of losses most of the time, and the semiconductor industry is facing process bottlenecks, the competition of mining machine computing power has eased. Therefore, miners may turn to the Bitcoin inscription as a new source of income. For example, for less than a year of ORDINALS, the market has more than 50,000 token issuance, and the number of MINT and transactions has grown rapidly, which has greatly promoted the increase in the income of miners’ fees.
The expansion of the inscription sector has not only promoted the growth of miners’ income, but also may become the main driving force for the Bitcoin inscription sector. However, the miners are more concerned about the increase in the number of transactions, not the fluctuation of the price of the inscription.
The common role of these factors has promoted the rapid development of the Bitcoin inscription sector. But we must also realize that this development is not just a simple market boom, it represents the deep -seated changes and technological progress of the Bitcoin ecosystem. As Bitcoin continues to show its powerful potential in all aspects, we have reason to believe that the Bitcoin Inscription sector will become a key factor to promote the development of the entire cryptocurrency industry.
Ordinals & BRC20
The Ordinals project was initiated by developer Casey Rodarmor in December 2022. Thanks to Bitcoin’s SEGWIT and Taproot upgrades, it improved the flexibility and functionality of Bitcoin script. Ordinals gives each Satoshi unique sequence number and tracks them in the transaction to allow additional data. Ordinals enables users to engrave data (UTXO) , such as images, texts, audio, etc., to realize the concept of asset transfer. Earlier this year, Ordinals officially launched, quickly lit the BTC ecosystem.
The emergence of the Ordinals protocol is complementary with the adoption of Taproot, which promotes the encoding and writing of the NFT data into the Bitcoin block. NFT images are permanently engraved into the BTC block. This method is more decentralized than ETH NFT. It can view and transfer NFT without relying on third parties.
The order theory mainly focuses on the traceability of the smallest unit SAT in Bitcoin. Through design rules, each SAT has a unique number. Based on ordinal theory, the data on the chain can be associated with SATS to form an inscription. The inscription is stored in the Taproot script, which is recognized and displayed by the index node under the chain. Due to the limitations of indexes, it is impossible to operate on the chain. The expansion of the inscription function depends on the development of ORD, such as the inscriptions of the father and the son and the cursing inscription index. The inscription is similar to Colored Coin. They all indicate the data to index under the transaction chain, but the inscription is stored in the input Taproot script, and the Colored Coin is stored in the output.
The implementation of Ordinals rely entirely on the basic function of BTC, and NFT’s transfer is completely processed by the BTC network. Due to its artistic attributes, the development potential of Ordinals is limited, but its emergence is still quickly adopted by the BTC original convention community.

Initially, Ordinals was mainly used to create NFT, but on March 8, 2023, anonymous developer Domo launched a BRC-20 based on the Ordinals protocol. The JSON packet in a specific format is carved on the BTC chain via Ordinals. The deployee of the BRC20 can determine the total amount and name of the token by themselves, and follow the first-come-first-served basis. $ Ordi is the first BRC20 token deployed by DOMO.
The BRC-20 is further developed on the basis of the inscription, realizing fungible tokens, and writing to the BRC-20 indexer of the foundation and transfer of tokens. However, the BRC20 needs to use a third -party indexer to record the ledger under the BTC chain, which increases the additional complexity and becomes the weakness of the system.
The transfer of the BRC20 is not performed on the BTC’s main chain. It needs to be divided into two -step BTC transactions (collecting and re -transfer first), which produces a large amount of junk transactions. Therefore, although the BRC20 is sought after because of its extensive applicability and liquidity, it is controversial due to the lack of support from the BTC core community. Recently, some developers have begun to develop decentralized indexers, such as #TRAC, but this is still limited by the overall framework and it is difficult to achieve breakthroughs. The founder of the BRC-20 founder Domo on Ordinals Summit Invasid-Based Virtual Machines and Rollup concepts indicate that the BRC-20 may move towards the development of the second layer.
With the launch of the BRC-20, the use range of the Ordinals protocol has expanded, but it also aroused dissatisfaction with Casey. The Casey team even required Binance to delete the association with Ordinals from the ORDI token introduction to draw a clear boundary. This shows that although both Ordinals and BRC-20 are promoting the development of the BTC ecosystem, they have significantly different acceptance in the community acceptance and development direction.
Atomicals & ARC20
Atomicals is a optimized project for Ordinals and BRC20. It focuses on fungible tokens and solves the problem of the index under the centralized chain of BRC20. It uses and expands the UTXO model of Bitcoin to use UTXO of each Satoshi (the smallest unit of Bitcoin) as a specific Atomical tokens or digital objects, so as to create and manage complex digital objects and tokens on Bitcoin System (ARC20).
The main features of Atomicals include:
1. Use Satoshi as the basic unit representative tokens.
2. Allow the creation, transmission, and update number objects on Bitcoin.
3. Provide tokenization methods for decentralization and compliance with Bitcoin culture.
4. Use the workingload proof (POW) to increase the fairness and decentralization of the minting process.
5. The purpose is to expand the function of Bitcoin and support more widely used applications.
Atoomicals fundamentally reinterpreted how to centralize, cannot be tampered with and fairly issued tokens on Bitcoin. It uses Satoshi as the basic “atom”, and each Satoshi’s UTXO represents a token. When verifying the Atomicals transaction, you only need to check the corresponding UTXO on the Bitcoin chain. The atomicity of ARC20 tokens is consistent with the atomicity of the Bitcoin itself. The transfer calculation is completely processed by the Bitcoin network.
Compared with the BRC20, the demand for third -party indexers has been greatly reduced, which has greatly reduced the degree of decentralization of the system. The combinedability of UTXO makes the ARC20 token more programmatic. For example, theoretically the exchange between BTC and ARC20 only needs to replace the input and output of UTXO.

After the Atomicals protocol was launched in September, the first token Atom was quickly dug. Compared with the BRC-20, ATOM’s mining process has a more technical threshold and fairness.
Atomicals is mint and spread based on the UTXO of Bitcoin. 1 Token is equal to 1 SAT, which is technically more in line with Bitcoin’s original teachings. The Atomicals protocol has defined the ARC-20s tokens and other use cases.
The Atomicals protocol is highly respected by the community and is considered a complete set of protocols. The ARC-20s tokens are mint and transmitted based on the UTXO of Bitcoin. The ARC-20s to each unit is always supported by 1 SAT, that is, 1 token = 1 SAT. All operations of ARC-20 tokens can be done by Bitcoin network without additional steps.
Atomicals introduced POW during the ARC20 minting process. The mintor must calculate the hash value of a specific preliminary character to mint. This is a more decentralized fair distribution method. The Atomicals protocol provides the prefix parameter settings of Bitwork Mining for the ARC-20, allowing participants to directly dig the inscription/NFT. The ARC-20s tokens are loyal to the principles of Bitcoin’s original teachings. The emergence of related tools in the future will enhance its liquidity.
In summary, Atomicals, as a competitor of Ordinals, focuses on decentralized creation and management of fungible tokens and digital objects. Through the expansion of the UTXO model of Bitcoin, it has achieved more decentralization and more in line with Bitcoin culture. Token system. The ARC-20s token standards are expected to obtain the support of the core community of Bitcoin with their technical advantages and design that conform to Bitcoin’s original teachings, and bring wider application possibilities to the Bitcoin ecosystem.
Rune & PIPE
The Rune protocol comes from Casey Rodarmor, the founder of Ordinals. Casey proposes a concept of a homogenic tokens based on UTXO, which aims to solve the limitations of these solutions.
The main characteristics and design concepts of the RUNE protocol include:
1. Based on UTXO : Runes balance is stored in UTXO, each UTXO contains any number of Runes.
2. Transaction and protocol information : The output of a specific script is deemed to be part of the protocol information, and the transfer and distribution method of Runes is defined.
3. Flexibility : The transfer of Runes is implemented by explaining data push in transactions, providing flexible distribution methods.
4. Distribution mechanism : The second data push is deemed to be issued, allowing the creation of new Runes.
5. Simple and decentralized : Runes protocol is as simple as possible, does not rely on the data or native currency under the chain, and adapt to the UTXO model of Bitcoin.
6. Symbol distribution : Runes can be associated with symbols, but the protocol does not involve the problem of symbolic grabbing to maintain simplicity.
Although Rune only exists in the conceptual design stage, BennytheDev has realized PIPE Protocol on the basis of the technical architecture proposed by Casey. PIPE is an important part of the Trac ecosystem. The ecology also includes BRC20 token $ trac, Bitmap, and BennytheDev’s Ordfi ecological protocol TAP Protocol developed for BRC20, which allows BRC20 to implement DEFI functions such as tokens exchange (SWAP).

Bitmap & BRC420
Bitmap.land is the first metaverse project in the Bitcoin ecosystem. It is based on ordinal theory and bitmap theory.
Ordinals theory numbers the Bitcoin’s smallest unit, Satoshi, and defines Satoscope’s scarcity. This can be understood as a “Satoshi” is a number of boxes. Its scarcity is determined by production time and can be used to load data.Bitmap theory was proposed by Twitter users @blockamoto on June 13, 2023. This theory enters the transaction in the Bitcoin block into a parcel into a plot to form a district or area (district). Different transactions input differences lead to different size of the maps.
Bitmap.land buyers are influenced by Decentraland and The Sandbox, and use the method of dividing land and drawing patterns on the map, similar to the logic of buying land on these two platforms. The user writes the data into Satoshi through the inscription, and obtains the ownership of a specific Bitcoin block, similar to a free coin.

On the Bitcoin blockchain, each block is divided into four parts to represent different half -cycles. Users can check the numbers and colors of each block on the BitMap.land website, and different colors represent different sales status.
The release of Bitmap.land is closely related to order theory, similar to the Virtual land on Decentraland and The Sandbox depends on the ERC-721 standard. The preface theory is similar to the principle of early chromosome coins, but in the context of Bitcoin’s current narrative, consensus, ecology, and infrastructure, the two are different. Although the theory of order number is not as innovative as ERC-721, the BRC-20 method is more primitive.
The bitmap theory adds a new explanation to the Bitcoin block and provides a topic, although it lacks practicality. It changed the connection between Bitcoin and the metaverse. By allowing users to own and record a single block, it provides a new dimension for each block of the Bitcoin blockchain and makes it part of the metaverse.
The bitmap theory has attracted the attention of the Ordinals community and inspiring the inscription. Any block on the Bitcoin blockchain can become part of the metaverse through Bitmap, bringing new creation and ownership opportunities to the community.
Bitmap.land blurred the boundaries between Bitcoin and the metaverse universe through the theory of bitmap, and paved the way for ownership, creativity and community development. With the continuation of the inscription boom, this means huge potential for those who seek to occupy a place in the digital field.
The BRC-420 protocol, since November 13, 2023, with the total number of ordinals inscriptions exceeding 40 million, it has become one of the active tokens in the Bitcoin ecosystem. Unlike the traditional token protocol, the BRC-420 focuses on the modularity of the inscription on the chain, creating a new type of assets on Bitcoin. Its first token, commonly known as “Blue Box”, has achieved significant market gains. It has increased from the initial $ 0.15 to $ 1,000. Developers have obtained a significant chain tax income in a short time.
The BRC-420 protocol is based on Bitmap asset protocol. By combining multiple inscriptions into a complex asset, it creates a variety of assets from small characters, pets to complete game scripts and virtual machines. Due to the open source characteristics on the chain, any client can run or check, which fully reflects the spirit of the “Client Agnostic” of the full -chain game. Although RCSV’s Bitmap browser dominates the market, other teams have the opportunity to develop clients to operate BRC-420 assets.
From a market perspective, the number of Holder’s address of Bitmap has exceeded 25,000, surpassing Sandbox, becoming the largest meta cosmic assets with the largest number of Holder. This achievement benefits from its fair launch mechanism and the collective efforts of more than 200 development teams around Bitmap. The market value of BRC-420 has increased with the launch of the Bitmap browser and protocol itself, and it has reached about 30 million US dollars.
The project party of RCSV, BRC-420 is actively promoting the full-chain game program of the Bitcoin ecosystem. The plan emphasizes the assets, gameplay, logic and data on the full chain, and aims to create a truly decentralized Bitcoin chain game ecology. For example, developers can use the “fighting module” on the BRC-420 to quickly develop and release new games, and at the same time, they only need to pay the version tax through the protocol.
RCSV also proposes a capacity expansion solution for the Bitcoin network to solve the capacity limit of the Bitcoin network when dealing with a large number of transactions. The plan aims to migrate assets from the layer 1 to the layer 2, and to achieve a complete virtual machine environment on the next layer of Module. This arrangement aims to provide a low -rate and high -efficiency interactive environment for Bitcoin assets at a maximum of security.
In general, the BRC-420 protocol and related Bitmap projects are inspiring innovation and vitality in the Bitcoin ecosystem. By creating complex and modular digital assets, the BRC-420 is providing new economic opportunities and interactive experiences for creators, developers and users. With the continuous efforts of the RCSV team, the concept of all -chain games and the metaverse of the Bitcoin ecosystem is gradually becoming a reality, showing the broad prospects of Bitcoin technology and applications.
BRC100
BRC-100 is a expansion protocol based on the Ordinals theory, designed for various decentralized applications on Bitcoin Layer 1. This protocol not only undertakes the basic functions of BRC-20 on Bitcoin, such as creating, minting and transactions, but also introduced the concept of decentralized calculation. This means that based on the BRC-100 protocol stack, you can develop various decentralized applications such as DEFI, SocialFi, and Gamefi to bring real decentralization, no trust, resistance, and no license to Bitcoin’s layer 1. Application scenario.
A major feature of the BRC-100 protocol is its interoperability. It not only allows all protocols and applications in its protocol stack to be compatible, but also supports BTC, BRC-20 or other first-layer chains such as Ethereum and Stacks interacts. In addition, the protocol also introduces the UTXO model and status machine model, which enhances its security and computing power.
This protocol also includes a series of innovative characteristics, such as inheritance concepts, application nested, address and application status, authority settings, and decentralized governance. For example, the inheritance concept introduced by the BRC-100 allows the protocol to directly or indirectly inherit the characteristics of the BRC-100. At the application level, applications based on the BRC-100 and its extension protocol can be nested to form sub-applications. At the same time, the protocol also introduced two roles: owners and administrators, which provides a foundation for the decentralized governance of the application.
The practicality of the BRC-100 is manifested in its diverse application cases, from BRC-101 to the automation liquidity protocol BRC-102, as well as functions such as pledge, airdrops, loans and stable coins pools. These expansion protocols make the BRC-100 not limited to token transactions, but also supports more complex financial operations and calculations.
In general, the BRC-100 protocol has opened a new decentralized application field on the Bitcoin chain through its innovative characteristics and strong computing power. It not only inherits the advantages of the BRC-20, but also provides a framework for an open protocol, providing new possibilities for the future development of the Bitcoin ecosystem.
Taproot Assets & NostrAssets
Taproot Assets is a protocol launched by the famous Lightning Labs to create and trade various digital assets on the Bitcoin network and integrate with Lightning Network. Lightning Network has been widely recognized by the Bitcoin community as a mature Bitcoin derivative protocol. Taproot Assets update expands the function of the lightning network from a simple point -to -point transaction payment channel to the point -to -multi -mode that can realize the distribution of asset distribution. The characteristic of Taproot Assets is to record the token information in the UTXO output script of the Bitcoin main network as registration, and the functions such as transfer transactions are implemented in the lightning channel. The biggest difference from the BRC20 and ARC20 is that the distribution method of Taproot Assets is pre -mint and distribute by an owner, not freely mint.
Taproot Assets is supported by Lightning Labs with a large amount of financing background and Jack Dorsey, the founder of Twitter, making it better than other grassroots projects in terms of regularity and community support.
NostrAssets is an open source protocol that introduces Taproot assets and Satoshis to Nostr ecosystem. Users can use NOSTR’s public key and private key to send and receive assets at the NOSTR protocol layer. The settlement and security of assets depend on the Lightning Network, and the NostrAssets protocol itself does not issue assets, but only introduces the assets into NOSTR through the protocol.
The characteristics of NostrAssets include seamlessly integrated Taproot assets and Bitcoin into the Nostr ecosystem, provides developers with tools to create innovative products, enrich the value of Bitcoin and lightning network ecosystems, and achieve seamless experiences from chat to transactions. In the future, NostrAssets plans to introduce Taproot assets from other Daemon University, allowing receiving and sending Taproot assets to enter and exit Nostr.
NostrAssets’s vision is to promote users to join the Bitcoin ecosystem and deliver Taproot assets to global users. By providing modular development tools, NostrAssets aims to promote the construction of decentralized applications, thereby providing user friendly and commercial practicality.

On October 30, Nostr ASSETS conducted airdrops on users participating in its early tasks and distributed the first token Trick & Treat on its platform to celebrate Halloween. At present, the value of these tokens has risen to about $ 2,000.
The total supply of these tokens is 210 million pieces, totaling 420 million. The total amount of airdrops is about 80 million, accounting for about 20%of the total supply.
Nostr Assets also announced that it is about to launch the Fair Mint function, and finds project parties with interest in issuing assets on Twitter to cooperate. This means that once the function is launched, it is expected that a large number of new assets will appear on the protocol, which may attract widespread attention and participation in the community. This series of activities show that Nostr ASSETS is actively expanding its ecosystem and preparing for future development.
Ethscriptions
ETHScriptions is an protocol alternative to smart contracts and L2, allowing users to share information and execute calculations on Ethereum L1 at low cost. It has achieved decentralized calculations by applying the rules to Ethereum to call data to bypasses the storage and execution of smart contracts. In August 2023, EthScriptions introduced virtual machines (ESC VM) to enhance its functions and make it a general computing engine.
The founders of ETHScriptions include MiddleMarch (similar to the Domo of BRC20) and Michael Hirsch. The first protocol tokens were $ ETHS. As the current leading token, the early minting price was only about $ 0.5, and then rose to about $ 3,000 in the market, bringing significant returns to investors. Although this result is not as good as the $ Ordi and $ Sats of the BRC20 sector, compared with other inscription sectors, it has shown significant growth and establishes its position in the thousands of sectors.

In addition to $ ETHS, EthScriptions also has other projects worthy of attention, such as FacetsWap. Facet is a decentralized trading platform developed by MiddleMarch and Michael Hirsch. It was originally called Dumbswap and was renamed FaceTswap. Although the price and market value of $ Facet temporarily lag behind $ ETHS, its potential value may be more obvious after the main network is launched.
IERC20 is a new tokens based on Ethereum, which provides a low -cost tokens ecosystem that allows anyone to deploy, mint and trading tokens on it. $ ETHI, as the first token in the IERC20 ecosystem, was officially supported. This protocol not only provides more choices for Ethereum users, but also promotes the development of the inscription ecology on the Ethereum chain.
In the latest cryptocurrency development, the IERC20 protocol and Binance incubated GAMEFI project Sparkle announced cooperation to introduce INScript NFT and other inscriptions on IERC20, which aims to use the advantages of the inscription to enhance the gameplay game gameplay. This cooperation has attracted widespread attention in the Ethereum community, especially the focus from ETHS to the IERC20 protocol.
The uniqueness of the IERC20 protocol is that it not only develops the SWAP function, but also integrates the EVM cross -chain function, and builds a bridge between the Ethereum inscription and the traditional Layer2. This feature enables the protocol to introduce more mainstream coins and stable coins, thereby expanding the tvl of the inscription ecology, providing more development possibilities for the entire system.
In addition, the IERC20 protocol also plans to introduce the fair mining model of POW and cooperate with other projects to launch new inscriptions, similar to the ATOM protocol mining method. This strategy is expected to bring new impetus to the development of Ethereum ecology.
Although $ Ethi and $ ETHS were launched almost at the same time, due to the low -key early stage, $ Ethi did not quickly gain reputation as $ ETHS at first. However, with the rise of $ ETHS and the increase in market attention, $ ETHI has also begun to receive more and more attention. The detachable split technology of $ ETHI makes it more attractive to retail investors. Although the current market value is still lower than $ ETHS, its development potential cannot be ignored.
In the IERC20 ecosystem, $ ETHI is regarded as an important tool, similar to shovel, providing a special empowerment for the holder. For example, users holding $ ETHI may get inscription airdrops of cooperative projects, such as recent cooperation with Sparkle. In addition, the FOMO emotions in the community are spreading. Many investors are optimistic about the future development potential of $ ETHI. They believe that it is an official tokens recognized by IERC20 and will increase with the launch of the POW mechanism and the continuous development of the inscription ecology.
In general, the ERC20 sector is showing its huge potential, and more miracles may be created after the BRC20. With the addition of more high -quality projects and the development of ecology, this field is expected to attract more users and innovation.
Other Public Chain Inscriptions
As the wealth effect generated by the Bitcoin inscription spread to other public chains, various types of “RC 20” tokens began to cause heated discussion in the community, forming a FOMO phenomenon, including Doge inscriptions, BSC inscriptions, Litecoin inscriptions, BASE inscriptions , Polygon inscription, Solana inscription, etc.

Especially on November 16, the GAS cost of the Polygon network rose sharply, as high as 1800 GWEI, because the community discovered the PRC-20 standard token Pols deployed in May this year. According to the data of [EVM.LINK] , the total circulation of POLS is 21 million.
Inspired by the missed Bitcoin inscription tokens, community members have begun to “play a few defense.” Compared with the high cost of BRC and ERC, the simple and low -cost Pols quickly attracted attention in the community. Users can mint Pols by accessing [EVM.LINK] and pay less than 0.05 matic to mint Pols.
The community also shared the method of collecting a batch gathering function (need to import wallet private key) or script to mint Pols in batches. Polygon’s low GAS expenses are considered as one of the advantages of Pols as the inscription tokens. If 21 million POLS is completely mint, Polygon may become the largest number of inscriptions on all EVM chains including Ethereum. This is naturally reminiscent of the BRC inscription tokens SATS, which has attracted widespread attention from the community due to its significant increase.
Future opportunity
In March 2023, Galaxy Research and Mining predicted that by 2025, the market capitalization of the Ordinals market would reach $500 million, with only 260,000 runes at that time. However, the current number of runes has already reached 33 million, a growth of 126 times in just six months. Additionally, the market capitalization of ORDI has reached $400 million, and the market capitalization of SATS has reached $300 million. This clearly indicates that the predictions for the entire rune market were significantly underestimated.
The sector has seen a plethora of different protocol offerings, with miners being the primary beneficiaries. According to Tokenview’s on-chain data monitoring, the Bitcoin network’s daily transaction fees have reached $11.6 million, surpassing Ethereum for the first time since 2020. As the Bitcoin halving approaches, miners are in urgent need of supplementary income.
The prosperity of the not only brings benefits to miners but also indirectly maintains the security of the Bitcoin network. The reduction in block incentives will increasingly make miners rely on transaction fee revenue to cover operational costs. In the long term, the future of Bitcoin will undoubtedly involve competition among various scaling solutions. The eruption of the current sector and the resulting high transaction fees serve as a catalyst towards that future.
The current BRC20 trading activities are mainly concentrated in OKX and Unisat. With the emergence of various other protocols, different protocols have different trading markets, such as Atomicals Market for ARC20. In the end, the emergence of the leading protocol will definitely be born of a unique trading market, and the competition in the trading market is far from over. The wallet market is also similar. At present, the BRC20’s main wallet is Unisat, but there are still different wallets on the market to launch and access different inscription protocols.
As the funds are constantly pouring into the inscription market, users are no longer satisfied with the hype of Meme, and they have begun to turn their attention to inscription -based applications. The BRC420 mentioned in this article is a typical example. UNISAT also brings innovation to the BRC20. Through the BRC20-SWAP, users can easily exchange BRC20 tokens like AMM DEX. As the first product to improve the ecological liquidity of Ordinals, it is expected to release the potential of the Bitcoin DEFI ecosystem.
In the future, more functions such as borrowing and derivatives may occur. Recently, Unisat has also opened the API interface, which is very friendly for small developers. You can call many functions, such as automatic batch scanning, monitoring inscriptions and automatic MINT, which can produce a lot of tool projects.

ORC20 returned on November 20 and released the Nirvana upgrade, which improved the inscription format to support BTC Defi integration, introduce stable currency support, and provide services to publishers such as USDT and USDC. Compared with the BRC20, ORC20 is obviously more complicated, which can change the initial supply and maximum coin volume, and the naming is no longer limited by four -character words. However, it is also considered to be more centralized by the community, and the upgradedness is also considered by the community to violate the spirit of the blockchain that cannot be changed. It is worried that the project party has maliciously added and insider trading.
Overall, BRC20 stands out as the most original and first protocol to be listed on exchanges. It enjoys the strongest community consensus, and its fair launch has left a positive impression on users. With ORDI being listed on Binance, it signifies that all exchanges are beginning to recognize and support the innovations of the sector. Supporting BRC20 deposits, withdrawals, and building self-indexing capabilities pose significant technical challenges. Therefore, it is expected that BRC20 tokens will continue to be prioritized for listing on exchanges. Moreover, BRC20 tokens are not limited to being mere memes. Project teams have the option to choose an existing BRC20 token with established community consensus as a utility token. This approach not only mitigates regulatory risks but also provides access to an existing community.
Summary and Outlook
The development of the inscription sector shows significant vitality and innovation. The growth of this sector is mainly due to the key technological progress of Bitcoin, such as Segwit, Bech32 encoding, TAPROOT upgrade and Schnorr. Trading efficiency and scalability also increased its programming. With the application of these technologies, the inscription market has gone through rapid prosperity, which not only attracts investors and users, but also promotes the development of various projects and protocols, such as Ordinals, BRC20 and Atomicals.
The growth of this sector also has a positive impact on the interests of miners. With the rise of projects such as Ordinals and Atomicals, the source of income from miners has been expanded, indicating the importance of the inscriptions on the Bitcoin network. In addition, other public chains have also begun to appear inscription sectors, showing its extensive potential and influence.
Looking forward to the future, the inscription sector is expected to continue to witness technological innovation and promote the realization of more complex functions. Market growth is expected to continue, bringing more investment and participation opportunities. At the same time, it is foreseeable that more innovative projects and protocols will appear, further enriching the inscription ecology of Bitcoin and other public chains. Miners’ income may also continue to grow because the inscription sector provides new income opportunities.
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Twitter：https://twitter.com/MTCapital_USWebsite：https://mt.capital/
Reference：
https://twitter.com/blockpunk2077/status/1719321676989771801
https://foresightnews.pro/article/detail/47311
https://www.web5.ink/insc/btc
https://foresightnews.pro/article/detail/47218
https://foresightnews.pro/article/detail/47079
https://plisio.net/zh/blog/what-is-segwit
https://medium.com/@TheSoloprenuer/enter-bitmap-the-first-bitcoin-metaverse-unveiled-a-paradigm-shift-in-digital-real-estate-2c93300c3e35 https://web5page.vercel.app/hotPoint/blueBox
https://www.odaily.news/post/5188506
https://www.theblockbeats.info/news/47414
https://foresightnews.pro/article/detail/47273
https://www.panewslab.com/zh/articledetails/shlj600y.html
https://mp.weixin.qq.com/s?src=11&timestamp=1700197472&ver=4901&signature=KO7lwSorZGyCzU2FNrbWF2aFAPXObLq*LuKCepCObIDQU0WlLSaxhMoqJ5BdevEC0CtlipsdK5n2Te*062O6qeOOw3BkfpgoXshx*OeKIw7dH7c1amNGHmy96QE24gw6&new=1
https://www.techflowpost.com/article/detail_14384.html
https://new.qq.com/rain/a/20231007A04TFL00

By Severin
TL;DR
Chainflip enables native cross-chain value transfer with higher degrees of decentralization, security, and composability.The $FLIP token will likely remain inflationary in the short term, as we expect buybacks and burns from trading volume to be insufficient to make $FLIP deflationary over this timeframe.Chainflip offers better product experience and design compared to Thorchain, but Thorchain’s first-mover advantage, brand awareness and market share are also important competitive strengths. We therefore predict it will be difficult for Chainflip to fully displace Thorchain in the near term.Chainflip has a market cap of about $90M and a fully diluted market cap of $460M. Thorchain has a market cap of $2.1B and a fully diluted market cap of $3B. From a comparable valuation perspective, $FLIP still has close to 8x imaginable upside. However, Thorchain’s market cap is supported by $68B in total transaction volume and recent average daily volume exceeding $100M, while Chainflip has yet to generate any transactions.Overall, we remain cautiously optimistic on $FLIP’s trajectory and will pay close attention to whether Chainflip’s mainnet launch incentives can drive a substantial increase in trading volume.
Chainflip — A Decentralized Cross-Chain Liquidity Network
Native Cross-Chain Value Transfer
Unlike cross-chain solutions that use wrapped assets or require assets to be minted/burned during the process, Chainflip has chosen to enable native cross-chain value transfer. This means there is a native liquidity pool on each chain supported by Chainflip, forming a cross-chain settlement layer to meet users’ needs for transferring assets across chains. The advantages of native cross-chain value transfer are:
Value transfer is chain-agnostic and wallet-agnostic. Chainflip supports users performing value transfer across any chain using ordinary wallets.Value transfer does not involve wrapped assets, synthetic assets or other ancillary assets. Users only need to submit a regular transaction to swap, without facing any other asset risks after the swap is completed.Chainflip does not require additional deployment or execution of other protocols on specific chains. It has higher compatibility and versatility, and aims to put as many computations off-chain as possible to reduce users’ gas consumption.Chainflip’s native cross-chain value transfer can lower the barrier for users, reduce risk exposures, and provide a better user experience.

source：https://docs.chainflip.io
Decentralization
Compared to other solutions, another major advantage of Chainflip is its higher degree of decentralization. Chainflip’s validation network consists of up to 150 validator nodes. The validators maintain network security, participate in consensus, monitor external chain events, and collectively control the funds in system. Becoming a validator does not require any permission. Users only need to stake enough $FLIP and win the auction with the highest bid. The core idea behind Chainflip is to use MPC (multi-party computation), specifically TSS (threshold signature scheme), to create an aggregate key held by the permissionless network of 150 validators. All operations and state changes in Chainflip require consent from over 2/3 of the nodes to ensure higher security. Compared to the cross-chain value exchange of centralized exchanges and partially centralized cross-chain bridges, users do not need to worry about centralized exchange misconduct risks or cross-chain bridge centralized server misconduct risks. By achieving a higher degree of decentralization, Chainflip avoids single points of failure and misconduct risks from individual nodes, thereby significantly improving overall system security.

source：https://docs.chainflip.io
JIT AMM
The cross-chain value transfer calculations are performed by the Just In Time AMM (JIT AMM) on Chainflip’s substrate-based state chain. JIT AMM is built on Uni V3, with the difference being that JIT AMM is not a set of smart contracts across different chains, but rather performs virtual computations solely on the state chain for value transfers. Chainflip’s ledger and computation functions are stripped away to the state chain, while settlement relies on vaults set up by Chainflip across chains. This workflow greatly reduces the complexity of performing cross-chain value exchange calculations, ledgering, and settlement across chains, effectively lowering gas costs for users. Moreover, Chainflip’s state chain can also support more customization needs of JIT AMM. For example, Chainflip allows LPs to place timely, dynamic limit orders in response to incoming orders, preventing MEV bots from front running via LP competition, improving capital efficiency for LPs, and allowing users to get better market prices at lower slippage.

source：https://docs.chainflip.io
Composability
Compared to existing cross-chain bridges, Chainflip also has better composability. Developers can easily integrate Chainflip’s native cross-chain value transfer functionality into existing protocols or products using the Chainflip SDK. Just as Uniswap’s Swap feature is widely integrated into DeFi use cases, higher composability will bring more use cases to Chainflip. With the current explosion of high composability use cases represented by fully on-chain games, as application Lego blocks continue to stack, it will inevitably stimulate demand for underlying cross-chain asset liquidity. However, the current situation is increasingly severe liquidity fragmentation between L1s and L2s. Native cross-chain solutions like Chainflip may become an essential embedded feature for multi-chain projects.
Team Background
Chainflip’s team consists of 26 experienced global talents. Simon Harman is Chainflip’s founder and CEO, and also a board member of the Oxen Foundation. Prior to Chainflip, Simon led teams building products including Session, a messenger app based on the Signal protocol. CTO Martin was previously a founder of Covariant Labs and CTO & CSO of Finoa. The Chainflip team has extensive crypto background experience, with nearly 60% as developers, forming a high-quality overall team composition.
Tokenomics
On November 23, 2022, Chainflip announced its mainnet launch and issuance of the $FLIP token. $FLIP was quickly embraced by the market, with the current price around $5, representing nearly a 2.7x increase over the $1.83 ICO price.
$FLIP is the native ERC-20 token of Chainflip, with an initial supply of 90M following a dynamic token supply model. Currently, Chainflip expects 8% annual token inflation to incentivize validators. Additionally, Chainflip’s trading fees will be used to buyback and burn $FLIP, making $FLIP potentially deflationary. $FLIP is mainly empowered by being used for staking validation and capturing protocol value.

source：https://coinmarketcap.com/currencies/chainflip/
$FLIP Staking for Validation
Similar to most validation networks, since the 150 Chainflip nodes will control all system funds and operations, nodes must stake enough $FLIP as slashing penalty collateral before participating in validation to prevent misconduct. Nodes staking more $FLIP have a higher chance of becoming authoritative validator nodes and earning additional validation rewards. It is currently expected that 7% annual token rewards will be evenly distributed among authoritative validator nodes. Regular backup validator nodes will also receive 1% annual token rewards proportional to their staked $FLIP. Therefore, it is clear that $FLIP staking quantities can significantly impact validation rewards for validators, which amplifies nodes demand to hold and stake $FLIP tokens. Chainflip also expects $FLIP staking rates to account for 37–66% of total supply, as substantial token staking helps maintain token price stability and reduce market selling pressure.

source：https://docs.chainflip.io/concepts/token-economics/incentive-design-emission-and-burning
$FLIP Value Capture
For every token swap made through Chainflip, Chainflip charges a 0.1% fee, collected in USDC, which is used to purchase and burn $FLIP tokens. Similarly, gas fees on the state chain are also used to buyback and burn $FLIP. Chainflip aims to reflect the protocol’s generated value dynamically into $FLIP price through token buyback and burn, rewarding $FLIP holders and enhancing $FLIP’s value capture capabilities. Of course, since $FLIP itself has token inflation, Chainflip needs sufficient daily transaction volume for its buybacks and burns to drive $FLIP price appreciation.
Future Prospects
Potential Market
With the continuous launch of numerous L1s and L2s, the liquidity fragmentation issue across chains is becoming increasingly severe. According to DeFiLlama data, there are currently 71 chains with TVL above $10M. The rise of Rollup-as-a-Service and application chains will further exacerbate liquidity fragmentation. Traditional cross-chain bridges, which suffer frequent hacking incidents, are no longer users’ first choice for addressing cross-chain liquidity needs. Native cross-chain token swap solutions represented by Thorchain and Chainflip may become mainstream. The total value locked across current cross-chain bridges is around $12B, while Thorchain’s TVL is only about $300M, indicating native cross-chain token swap solutions still have tens of times room for growth.
Comparison with Thorchain
Overall, Chainflip’s market positioning is quite similar to Thorchain, but there are some differences in product experience and design:
Product experience: Thorchain requires a specific multi-chain wallet, while Chainflip only needs an ordinary on-chain wallet, making for more convenient user experience. Of course, Thorchain is also working on wallet compatibility to gradually close the experience gap.Decentralization: Thorchain currently has 104 nodes securing its on-chain vaults, while Chainflip’s decentralized validation network consists of 150 nodes. In terms of node count, Chainflip has relatively higher decentralization, but there is no significant gap between them.

source：https://thorchain.net/dashboard & https://scan.chainflip.io/
3. Product design: Thorchain relies on $RUNE as an intermediary asset for both pool formation and swaps, while Chainflip does not depend on any specific token. As a result, Chainflip’s pools and swap process are not exposed to risks associated with a particular token, making it relatively more secure.
In summary, Chainflip currently has slightly better user experience, decentralization, and security compared to Thorchain, but Thorchain’s first-mover advantage, brand awareness and market share are also important competitive strengths. Therefore, we predict it will be difficult for Chainflip to fully displace Thorchain in the short term. It is more likely, as stated in Thorchain’s official tweet, that Chainflip and Thorchain will jointly erode cross-chain bridges’ market share over time.

source：https://twitter.com/THORChain
Currently, ChainFlip has a market cap of about $90M and a fully diluted market cap of $460M. Thorchain has a market cap of $2.1B and a fully diluted market cap of $3B. From a comparable valuation perspective, $FLIP still has close to 8x imaginable upside. However, Thorchain’s market cap is supported by $68B in total transaction volume and recent average daily volume exceeding $100M, while ChainFlip has yet to generate any transactions. Therefore, overall, we remain cautiously optimistic on $FLIP’s trajectory and will pay close attention to whether ChainFlip’s mainnet launch incentives can drive a substantial increase in trading volume.
Reference
https://docs.chainflip.iohttps://medium.com/@TheDeFISaint/chainflips-approach-to-cross-chain-composability-the-jit-amm-revolution-794bb1054ba7https://blog.chainflip.io/just-in-time-jit/https://www.techflowpost.com/article/detail_14648.html
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US

Author: Xinwei, Ian Wu
TL;DR
The Solana ecosystem is on the brink of a full-scale breakout, maintaining strong growth despite challenges such as the bankruptcy of FTX. There is a significant increase in Total Value Locked (TVL) and DeFi Velocity, showing a very high rate of liquidity utilization. Daily transaction volume is steadily rising, far exceeding other public chains.Frequent actions by the Solana Foundation: Steady progress in network stability and decentralization, hosting the Hyperdrive Hackathon to support ecosystem projects, and a strategic focus on the Asia-Pacific market.Ecosystem highlights: Visa launches USDC settlement function on Solana, MakerDAO considers integrating Solana SVM into its system, and the integration of Solana Pay with Shopify.Diverse ecosystem projects: The largest-ever Solana airdrop season is about to begin, with star projects in DeFi, LSD, Meme, Inscription, NFT, and DePIN sectors attracting market attention.

Introduction
After Ethereum’s transition from POW to POS, centralization issues have come to the fore. Competition between Layer2s is becoming more intense, further fragmenting liquidity, with little to commend at the application level.
In the Bitcoin ecosystem, the BRC20 protocol led a variety of inscription protocols to trigger community FOMO, reaching a climax after ORDI was listed on Binance, but has started to correct amidst criticism of “no applications, only Memes.”
After the FTX bankruptcy, Solana’s $SOL plummeted to a low of $8, a drop of over 95%. However, after enduring heavy blows, the Solana ecosystem and community have still maintained positive development in the last two years. The ecosystem has more than one million users and over 2000 developers, with new projects constantly emerging from DeFi to NFT. Jump Crypto’s second node validator for Solana, Firedancer, has also officially entered the test network.
With the recovery of BTC prices, $SOL has skyrocketed by over 200% in two months. The current premium of Grayscale Solana Trust is about 800%, and the performance of GSOL indicates institutional investors’ optimism about Solana.
The out-of-circle effect caused by last bull market’s Stepn is still vivid. As the negative news settles, the next blockbuster application in the Solana ecosystem is bound to ignite the market.
Overview
Since the beginning of 2023, Solana’s Total Value Locked (TVL) has shown significant growth, now reaching $650M, an increase of over 200%.
Ian Wu’s Analysis on Solana and $SOL : “With the recent launch of new assets on the platform, the $SOL plays a central role. $SOL is not only the staking coin in the entire ecosystem, but also the margin and underlying asset in transactions, acting as the key native cryptocurrency of the entire platform.
Furthermore, as $SOL is used to purchase assets like NFTs for participation in on-chain activities and interactions, and for locking purposes, a large amount of $SOL is being locked up in the market, thereby reducing its circulation. This locking effect of $SOL is expected to promote its price increase, creating a positive growth spiral. With the issuance and listing of new assets in the Solana ecosystem, the token lock-up volume of $SOL will gradually increase. This will not only dilute the previously surged profit-taking and selling pressure but also stimulate more holders to stake $SOL due to the positive impact of new assets. Therefore, in the future, the amount of SOL staked in Solana’s nodes and the Total Value Locked (TVL) will become important indicators closely monitored by analysts and investors for $SOL .”

https://defillama.com/chain/Solana
DeFi Velocity (TVL Utilization Rate):
DeFi Velocity, i.e., transaction volume/TVL, is a key indicator for measuring the activity level and adoption rate of blockchain, more informative than just observing TVL.In the recent week, Solana’s 7-day DeFi Velocity ratio reached 3.17. This means that every $1 of liquidity can generate about $3.17 in weekly transaction volume. Compared with other chains like Arbitrum, Binance, Base, Optimism, and Ethereum, Solana has shown the highest TVL utilization rate in the past seven days.

Daily Transaction Volume:
Since 2023, Solana’s daily transaction volume has shown a steady trend, particularly with an increase in the number of voting transactions.Transactions mainly fall into two categories: voting and non-voting. Voting transactions primarily involve validators’ voting accounts.

Comparison of Average Daily Transaction Volume over Six Months with Other Ecosystems:

Despite challenges such as network disruptions and the FTX/Alameda crash, Solana has maintained normal operations, showcasing its adaptability and resilience. The growing TVL, robust DeFi development, and stable transaction data collectively demonstrate its potential as an active economic hub.
Ecosystem Highlights
In September 2023, Visa chose to launch its USDC settlement function on Solana, marking a significant integration between public blockchain and traditional financial entities for payment infrastructures and other applications.In the same month, MakerDAO’s founder considered integrating Solana SVM into Maker’s new native chain as part of its “Endgame” upgrade plan, expected to span 2 to 3 years in five stages.In August 2023, Solana Pay achieved integration with Shopify.
Foundation
Personnel Changes
On April 19, 2022, the Solana Foundation announced leadership changes in its five-member board. Anatoly Yakovenko, co-founder of Solana Labs, stepped down as chairman of the Solana Foundation’s board to focus on launching new applications at Solana Labs, effective from December 2021. To ensure high-quality leadership continuity and welcome the next chapter for the Solana Foundation, Leopold Schabel, a leader at Jump Crypto and co-founder of Certus One, a blockchain consulting firm providing validation services for Solana’s ecosystem and other proof-of-stake networks, was appointed to the board.
New Financial Strategy
The Solana Foundation announced a new funding strategy, including convertible grants and investments. These flexible funding options are designed to meet the needs of diverse projects within the Solana ecosystem, ranging from early development to mature enterprises seeking financial support. The foundation’s convertible grant program provides financial aid to early-stage projects, focusing on development, research, and innovation. These grants are distributed to projects with the potential to significantly impact the Solana ecosystem. For established projects or startups showing a successful path, the Solana Foundation offers investment support to expand their operations and bring innovations to the market.
Retrospective Public Goods Funding (RPGF) Program
The Solana Foundation and OpenBlock Labs innovatively introduced a retrospective funding model to support public goods and open-source projects within the Solana ecosystem. RPGF aims to provide sustainable income for creators behind widely used public goods resources in the community. Unlike traditional forward-looking funding, RPGF incentivizes and rewards past contributions that benefit the broader ecosystem. The first round of RPGF received an enthusiastic response, attracting over 100 project applications, of which about 36 received funding. This process not only rewarded past contributions but also set a precedent for community-led support of public goods.
Hackathons
The Solana Foundation recently successfully held its eighth hackathon event, “Hyperdrive,” an online competition focused on attracting high-impact projects to the Solana ecosystem. The event brought together founders and developers from around the world, with over 7,000 participants submitting 907 projects, making it the largest scale in Solana’s hackathon history. The event covered multiple domains, including infrastructure, mobile consumer apps, payments, decentralized autonomous organizations (DAOs), and artificial intelligence, and received support from notable companies like AWS, Ironforge, UXD, and Magic Eden. Dan Albert, the executive director of the Solana Foundation, stated that nearly 1,000 teams from these events would play a significant role in various fields like AI, finance and payments, physical infrastructure networks, gaming and entertainment, mobile consumer apps, crypto infrastructure, DAOs, and network states, shaping future development trends.
Future Plans
Technically, the Solana Foundation is focusing on several key technical innovations, expected to show results by the end of the year or early next year.
FireDancer on Mainnet: FireDancer is an independent Solana validator designed to enhance the network’s robustness and performance. It is a system capable of reaching 1 million TPS in internal testing, although it may achieve 100,000 TPS in actual operation, sufficient for high-frequency trading applications. The goal is to maintain an independent tech stack, diversifying the blockchain network’s supply chain and reducing exposure to single points of failure. FireDancer employs a deep defense strategy, isolating its components into independent processes, and implementing strict communication protocols to minimize potential vulnerabilities. The development team integrates strong security procedures into its lifecycle, identifying and mitigating security vulnerabilities through ongoing collaboration between security and engineering teams, and using fuzz testing and code reviews. The goal is to launch FireDancer on the Solana mainnet and upgrade security measures, such as external audits and introducing a bug bounty program.Asynchronous Execution/No Bank Leader: In Solana’s no-bank-leader model, the leader does minimal work, enough to produce effective blocks. This design reduces the memory operations required by leaders before bank execution by threefold. Leaders’ responsibilities include verifying signatures in transactions, ensuring fee accounts have sufficient balance, and managing balance caches.Quorum Subcommittee: Solana’s quorum structure is crucial for its security and performance. The network uses quadratic message overhead to ensure classic Byzantine fault tolerance consensus. Solana’s design allows the network to maintain high throughput and low fees while ensuring a high level of security. The size of the quorum and the implementation of voting are key to Solana’s design, ensuring security and performance.Dynamic Storage Pricing and Old State Compression: Solana introduced a state compression solution, significantly reducing the cost of on-chain storage. This technology relies on Merkle trees to compress the verifiability of data trees into a hash. This compression-friendly structure allows developers to store minimal data on-chain and directly update it in the Solana ledger, greatly reducing data storage costs while maintaining the base layer’s security and decentralization.Dynamic Base Fees: In Solana, transaction fees are currently not dependent on the resources consumed by the transaction. Instead, fees are determined by the number of signatures that need to be validated. Rates (e.g., lamports per signature) may vary from block to block. However, transaction fees can still be definitively calculated before creating and signing a transaction.
Focus
Currently, the Solana Foundation is focusing on strengthening and expanding its influence in the Asia-Pacific region, especially after last year’s FTX event. The foundation decided to increase investment in the Chinese-speaking area and the Asia-Pacific market. Recognizing the importance of the Asia-Pacific market in both the labor market (developer market) and the capital market, the foundation is working to establish a more balanced and comprehensive development in the region.
The Solana Breakpoint event is scheduled to take place from September 19 to 21, 2024, in Singapore, highlighting the significance of the Asia-Pacific region in Solana’s strategy. Moreover, the foundation is expanding its influence in India and Europe, particularly in Germany and the UK.
Recent Hot Projects
Mad Lads & Backpack
Mad Lads is an NFT project created by Coral, a Solana framework development company, and launched by Armani Ferrante and Tristan Yver. This project marks a significant innovation in blockchain technology and the NFT domain by Coral. Mad Lads was exclusively launched through Backpack, a versatile wallet application created by Coral. This choice not only demonstrated Coral’s confidence in its product but also highlighted the advanced technology and market potential of Backpack.The main feature of Backpack is that it is built around “Executable NFTs” (xNFTs). These xNFTs are essentially non-fungible tokens embedded with executable programming scripts, making them operable Web3 application platforms. This innovation allows Mad Lads to be more than just a digital collectible; it is a platform capable of running code and enabling more complex interactions, greatly enhancing the functionality and appeal of NFTs. The xNFT series opens up new avenues for program distribution. Game developers can mint entire games as limited-edition xNFTs. A DeFi protocol can distribute early access to a new frontend based on wallet addresses. A two-factor authentication code can be generated as an NFT and automatically updated in cycles. As explained on Solana’s website, these are the possibilities available to xNFT users, adding that artists can create beautiful immersive 3D experiences that cannot be replicated and can run directly in the wallet. The possibilities are nearly limitless.

The success of Mad Lads is attributed to several key factors. Firstly, its innovative xNFT concept brought new vitality to the NFT market. This new type of NFT is not just a digital asset but also has the capability to execute built-in code, offering users more interactivity and practicality. Secondly, Mad Lads’ market performance was very eye-catching. In the first 24 hours, its sales exceeded $8.16 million, surpassing the concurrent Bored Ape Yacht Club. This significant sales achievement was largely due to its uniqueness and high market expectations. Additionally, the floor price of Mad Lads increased by 200% within two weeks, reaching 160 SOL, making it one of the most valuable in the Solana NFT series, highly recognized by the market.

In terms of technology and marketing strategy, the Backpack development team has also demonstrated its originality and ability to cope with challenges. During the re-release of Mad Lads, to prevent market manipulation by bots, the team created two minting portals, effectively distinguishing between real users and bots. This strategy not only effectively prevented malicious actions but also sparked widespread interest and discussion among legitimate users, enhancing community interest and participation in the project.
After the Solana ecosystem lost its well-known NFT projects DeGods and y00ts, which moved to Ethereum and Polygon respectively, a gap was left in the Solana community. The timing of Mad Lads’ launch closely followed the departure of these projects from Solana, providing a perfect opportunity for Mad Lads’ success. We believe that Mad Lads has the potential to become the Bored Ape Yacht Club (BAYC) of Solana.
Nevertheless, with the collapse of FTX, the entire Solana ecosystem faced severe challenges, and part of the Backpack team’s funds were trapped in FTX. In this difficult situation, the Backpack team not only successfully maintained operations but also began to seek new directions for development. The success of Mad Lads is seen as a rebirth for the Solana community, working to mitigate the damage caused by the association with FTX and the ensuing narrative. Backpack is currently undergoing public testing, and the long-term goal is to open it up to the community, allowing anyone to build on it.
In September 2022, Coral raised $20 million in funding, led by FTX Ventures and Jump Crypto, with strategic investors including Multicoin Capital participating.
In October 2023, Backpack announced the launch of a ‘regulated’ trading platform named Backpack Exchange, demonstrating the team’s ongoing commitment to innovation and adapting to market changes.
The stories of Mad Lads and Backpack are about innovation, market adaptability, and seeking new opportunities in adversity. This case fully exemplifies the resilience and innovative capacity of the Solana ecosystem.
Jupiter
Jupiter is one of the largest aggregate exchanges on the Solana chain, and since its inception in 2021, it has become a key protocol in the Solana ecosystem. As the first trade aggregator on Solana, Jupiter aims to offer the best rates to users by integrating all major liquidity markets on the blockchain. To enhance user experience, Jupiter continually optimizes and updates its platform, integrating more mainstream DEXs on the Solana chain, such as Orca, Raydium, and Serum.
Jupiter has also done extensive work in terms of user experience. In addition to integrating mainstream liquidity pools, it provides real-time updated exchange rates and direct access to integrated DEX project websites. For instance, in the process of exchanging SOL for USDC, Jupiter matches multiple trade routes for users, selecting the best path and price, saving users time and money. Additionally, each transaction on Jupiter is highly transparent, including transaction speed, price impact rate, and the minimum amount users will receive post-transaction, facilitating asset planning.
In terms of financing and token plans, Jupiter has also made significant progress. It is preparing to launch its native token, JUP, and announced at the Solana Breakpoint conference that 40% of JUP tokens will be distributed to the Jupiter Exchange community via airdrop, with approximately 955,000 users eligible. Another 20% of the tokens will be distributed through token sales, with the remaining 40% reserved for internal personnel and strategic reserves. As a community-centric initiative, Jupiter announced a retrospective token airdrop plan, with 4 billion out of the 10 billion Jupiter tokens (40%) set to be distributed.
Pyth Network
Pyth Network is hailed as a game-changer in the DeFi oracle space, primarily utilizing the power of top exchanges, market makers, and financial service providers to aggregate and distribute price data for smart contract applications. As an innovative decentralized oracle, Pyth can gather financial market data from over 90 sources (including major exchanges and market makers like CBOE, Binance, OKX, Bybit) and distribute this data across more than 40 blockchains.
Pyth consists of three core parts: data providers (mainly exchanges), the Pyth protocol (aiming to aggregate data from different providers, creating a unified price and confidence interval for each price source every 400 milliseconds), and data users (end-users, such as applications on blockchains supported by Pyth, integrating the aggregated price sources into their smart contract logic).
Pyth Network has raised funds through three rounds of financing, with the latest round completed on January 7, 2022. The token debuted at a market value of $468 million, with 90,000 wallets receiving airdrops. The initial trading price of PYTH tokens was about $0.32, with a circulating supply of 1.5 billion, and the remaining 85% of the total supply is locked for 6 to 42 months.
Moreover, Pyth Network supports over 230 applications, including decentralized exchanges (DEXs), lending protocols, and derivatives platforms. Its infrastructure enables over 65 million updates daily, enhancing the precision and security of smart contract operations.
Jito
Jito launched a referral program at the end of August and a points system in mid-September. Similar to Blaze, Jito increased its attractiveness to users by rewarding JitoSOL holders and enhancing their points in DeFi. The value of SOL locked in Jito increased by 320% over the quarter, reaching 6.67 million SOL. About 35% of JitoSOL was locked in the protocol at the end of the quarter, compared to just 13% at the beginning.
Jito’s uniqueness lies in its ability for users to earn MEV (Maximal Extractable Value) profits. Jito’s staking pool delegates users’ SOL to validator nodes supporting MEV, with MEV rewards distributed as additional APY to the staking pool. Anatoly Yakovenko, CEO of Solana Labs, has also positively appraised Jito.
Jito Labs has raised a total of $12 million in two rounds of funding. The latest round, a Series A, took place on August 11, 2022, led by Multicoin Capital and Framework Ventures.
As of November 30, 2023, Jito reached a new high in TVL of $400M, with 6.67M SOL staked, consistently trending upwards since its launch. Jito is the first staking product on Solana to include MEV rewards.

On November 28, the Jito Foundation announced the launch of the JTO governance token, marking a significant step in the development of the Jito network. The JTO token will give community members direct influence over Jito network decisions and direction.
In governance, the launch of JTO allows token holders to make key decisions, shaping the future of the Jito network so that it continues to develop and thrive according to the needs of its users and the broader Solana ecosystem. These decisions and initiatives might include:
Setting fees for the JitoSOL staking poolUpdating delegation strategies by controlling parameters of the StakeNet projectManaging JTO tokens held by the DAO and fees generated by JitoSOLContributing to the continuous development and improvement of the Jito protocol and products
In terms of tokenomics, JTO has a total supply of 1 billion, with 10% allocated for airdrops, 24.3% directly controlled by token holders through DAO governance on Realms, 25% for ecosystem development, 16.2% allocated to investors (fully locked for one year, unlocked over three years), and 24.5% allocated to core contributors, i.e., founders of Jito and early contributors to the ecosystem (fully locked for one year, unlocked over three years).
The total airdrop amount is 10%, or 100 million JTO tokens. Of these, the foundation will immediately distribute 90 million JTO tokens, with another 10 million unlocking over the next year, all from the 342.857143 million tokens allocated for community growth.
Eligibility for the JTO token airdrop is determined by the user’s contributions to the development and growth of the Jito network. This includes long-term JitoSOL holders, users who use JitoSOL in various DeFi protocols, Solana validators running the Jito-Solana MEV client, and searchers actively using Jito network MEV products.
This airdrop is based on past behavior, with a snapshot of eligibility activities taken on November 25, 2023. As part of this airdrop, the previously announced points program has ended, and points are no longer updated.

BONK
BONK, the first Meme token in the Solana ecosystem, has recently made a significant impact on the market. It initially gained attention through a massive airdrop to the Solana community during Christmas 2022. The token was designed to counter “Alameda-style” tokenomics and restore confidence in the Solana ecosystem and SOL holders following the FTX event. Now, nearly a year later, BONK is active again, not only drawing comparisons to SHIB but also sparking speculation about its potential listing on mainstream trading platforms.
On November 22, Binance introduced leveraged contracts for BONK, offering 1–50x leverage on perpetual contracts denominated in USD. This demonstrates support for this Meme coin. BONK, built on the Solana blockchain and akin to the well-known Shiba, is a new MEME Coin targeted at the general public. 50% of the project’s total token supply has been airdropped to Solana’s Degen and DeFi traders, NFT artists, and developers. This large-scale airdrop distribution has injected more liquidity into the Solana ecosystem.
The BONK team started planning the project on December 9, 2022, and actively called for interaction with other projects in the Solana ecosystem. They conducted a massive airdrop targeting the Solana ecosystem for Christmas. As its anniversary approaches, accompanied by a resurgence in Solana’s value, BONK and related ecosystem tokens have experienced a valuation recovery. However, despite BONK’s explosive growth over the past month, its market capitalization as a meme coin is relatively high, with an increase of over 12 times in just one month.
Orca
Orca is a significant decentralized exchange (DEX) in the Solana ecosystem, recognized for its user-friendly interface and efficient trading experience. As the only DEX on Solana with a pure Automated Market Maker (AMM) function, Orca also has its liquidity pools, offering a simple and composable trading experience, ideal for next-generation DeFi applications.
Described as the most user-friendly DEX on Solana with pure AMM functions and a user-friendly trading interface, Orca enables efficient capital utilization for asset exchange, liquidity provision, and yield earning. Orca emphasizes offering the best swap experience to users, including minimal trading fees and low latency, while ensuring fair pricing.
In terms of technical innovation, Orca continues to innovate according to its development roadmap. For example, it began testing Whirlpools, a concentrated liquidity AMM similar to Uniswap V3, officially launching it on April 25, 2021, marking a significant step in improving capital efficiency.
Furthermore, Orca raised $18 million in its Series A funding in 2021, led by Polychain, Placeholder, and Three Arrows Capital. Sino Global, Collab+Currency, Coinbase Ventures, and Solana Capital also participated in this round. These funds are being used to enhance Orca as a capital-efficient and user-friendly DEX. This investment will help Orca further develop its platform, ensuring competitiveness and innovation in the rapidly evolving DeFi space.
As for its market cap, Orca’s token (ORCA) is priced at $3.27, with a market cap of approximately $143.8 million, a fully diluted valuation of about $326.8 million, a total value locked (TVL) of $85.12 million, and a circulating supply of approximately 43.99 million ORCA tokens. Orca is a key player in the Solana ecosystem due to its technological sophistication, focus on user experience, and strong financial backing.
Drift Protocol
As a derivatives exchange on Solana, Drift Protocol’s total trading volume recently exceeded $1 billion. At the end of the quarter, its TVL grew to $17.3 million, a year-on-year increase of 87%, and an annual growth of 976%.
Drift Protocol has become a disruptor in the decentralized derivatives market on Solana. Drift chose Solana due to its low-latency block times and high bandwidth, enabling minimal trading fees and rapid settlements. In November 2021, Drift launched its V1 version, introducing the concept of a Dynamic Automated Market Maker (DAMM), providing guaranteed liquidity and a superior trading experience, with nearly $10 billion in trading volume in six months. The V1 version introduced limit order functionality and Maker Orders, allowing users to become market makers. In December 2022, Drift launched its V2 version, enhancing liquidity through “Liquidity Trio” and becoming a comprehensive decentralized exchange. V2 introduced robust security measures, was successful, with over $100 million in trades, and a TVL of $10 million. As of September 2023, Drift’s cumulative trading volume reached $1 billion, with a TVL of $19 million. Drift integrates Pyth’s oracle data, offering a diverse market, including SOL, BTC, ETH, etc., ensuring data quality and a low-latency user experience. Pyth’s confidence interval feature also helps Drift promptly detect market fluctuations and unusual price distributions, protecting users and funds.
On October 26, 2021, Drift raised $3.8 million in a seed round, with investors including Multicoin Capital, Jump Capital, Not3Lau Capital, etc.
Zeta Markets
Zeta Markets is a comprehensive cross-margin derivative protocol based on the Solana blockchain. It specializes in offering various trading options, including options trading, regular futures, and perpetual futures, integrated on one platform since November 4, 2022.
As a low-collateral derivatives platform, Zeta Markets features a fully on-chain risk engine and a Central Limit Order Book (CLOB), making it a user-friendly platform for traders interested in leveraged trading in a decentralized environment.
On October 27, Zeta Markets announced the launch of Z-Score (the first step in token launch), allowing users to earn Z-Score points based on their trading activity on Zeta, with 1 Z-SCORE point for every $1 traded. Additionally, a 24-hour profit and loss ranking will determine the reward multiplier. The first season of Z-Score will continue until December 20.
Zeta Markets announced in December 2021 that it had completed an $8.5 million financing round led by Jump Capital, with Race Capital, Electric Capital, DACM, Airtree Ventures, Amber Group, Wintermute, Sino Global Capital, Genesis Block Ventures, QCP Capital, Alameda Research, Solana Capital, MGNR, 3kVC, Orthogonal Trading, LedgerPrime, and SkyVision Capital participating.
Hivemapper
Hivemapper is a blockchain-based map network that launched its global network in 2022. It collects and creates map coverage through dedicated dashcams, storing data on a Solana-based blockchain network. Drivers can now start using Hivemapper-provided dashcams, earning the company’s cryptocurrency HONEY as a reward for contributing to street-level imagery and increasing the decentralized map of the places they visit.
The Hivemapper project started in 2015 and recently completed an $18 million Series A funding round on April 5, 2022, led by Multicoin Capital. Hivemapper’s native token HONEY is used to reward contributors for fresh, updated map information, while map consumers burn HONEY tokens to access the API. Burned tokens are reminted, increasing the token amount for contributors. As a Solana ecosystem token, HONEY has a total of 10 billion, but less than 200 million have been mined due to an incentive-based mining mechanism. In the future, the project plans to control the release pace of token mining to stabilize and grow token value.
The initial token distribution was as follows:
40% allocated to contributors as a reward for participating in building the Hivemapper network.20% allocated to investors, providing initial capital for launching the Hivemapper network.20% allocated to employees of Hivemapper Inc. for building the technology and operating systems required to run the Hivemapper network.15% allocated to Hivemapper Inc. for R&D and operational support of the Hivemapper network.5% allocated to the Hivemapper Foundation to promote the ongoing management and success of the Hivemapper network.
The token’s redistribution mechanism ensures that the number of tokens received by contributors is not limited to 4 billion HONEY. To use data from the network (such as through the map image API), HONEY tokens must be burned in exchange for map points. The net number of burned tokens will be reminted and distributed to contributors based on a net emission model. As more data is consumed,more HONEY is burned, and more tokens are redistributed to contributors.
Inscriptions on Solana
On Solana, there are two inscription projects of note — Sols and Lamp. Sols inscriptions, created by the SPL-20, similar to the Bitcoin Ordinals protocol, have a total of 21,000. Despite the complex minting process, they have been highly sought after due to their innovativeness and multi-stage effectiveness filtering. As of November 28, Sols had a trading volume of 114,000 SOL on the NFT platform Magic Eden, with a floor price of nearly 6.3 SOL. On the other hand, Lamp inscriptions also caused a stir on Solana, with the smallest unit, Lamport, similar to Bitcoin’s Satoshi. Lamp’s floor price is 0.1 SOL, with a total trading volume of over 12,000 SOL and more than 5,400 holding addresses.
Sols quietly launched on the OKX Web3 wallet trading market on November 22, and trading has been opened, leading to a surge in Sols, with the floor price of each inscription rising from about 5.3 SOL to approximately 12.5 SOL.
The heat of the Solana inscription may be related to the strong rise in the price of SOL. With the launch of BRC-20 and the popularity of inscriptions within the Bitcoin ecosystem, the market has been ignited, leading to a significant FOMO effect and liquidity spillover. The inscription market attracts wide participation due to its fairness and independence from pre-mining or VC funding.
Particularly, the emergence of Lamp inscriptions, proposed by Twitter user @babla11001 and following the SPL-20 format, has a total supply of 210,000. The inscription process, involving steps like uploading images, setting transfer rules, engraving NFTs, and verification, garnered significant attention. Due to high website traffic, pages for minting, engraving, and verification often crashed, making participation highly competitive and luck-based.
NFT
Magic Eden, a major NFT marketplace on Solana, recently announced support for Solana’s Compressed NFTs (cNFTs), aiming to provide an economical and scalable option for digital collectible enthusiasts.
Unlike traditional Solana NFTs, cNFTs are compressed and stored off-chain. This method supports mass production due to significantly lower minting costs.
Technical Upgrades: Solana introduced state compression technology in Q2, an efficient way to store data on the chain. This technology, involving hashing data into a Merkle tree and uploading its root hash, has been successfully applied in the cNFT standard created by Metaplex. For example, the cost of minting 1 million cNFTs ranges from 5.3 to 63.7 SOL, much lower than the 24,000 SOL for uncompressed NFTs.
Market Dynamics: By Q3, nearly 45 million cNFTs had been minted, a 316% increase year-on-year.
Magic Eden believes cNFTs are ideal for mass-produced collectibles in industries like gaming, music, events, and metaverse. Reducing NFT production costs could increase NFT adoption, serving as an ideal entry point for NFT newcomers. Lower costs also reduce the financial risk of NFT collection.
cNFT minting, benefiting from Solana’s state compression feature, costs about $110, allowing for up to 1 million NFTs to be minted, much lower than Ethereum costs.
Solana significantly reduces NFT minting costs with solutions like state compression and isolated fee markets.

Source: @flipsidecrypto
For instance, the cost of minting 1 million NFTs on Solana decreased from $253,000 to $113 with state compression, compared to $33.6 million and $32.8 million on Ethereum and Polygon, respectively.

DRiP: Dominated the cNFT market share in Q3 (87.5%), collaborating with artists to mint large numbers of free NFT artworks. In mid-August, DRiP announced a $3 million seed round led by Placeholder.Dialect: A Web3 messaging app utilizing cNFTs, launched a web app in early September, becoming one of the largest NFT collections on the chain.
Other Projects:
Mad Lads: Utilizes the executable NFT (xNFT) standard, representing a new token standard that tokenizes code. xNFTs represent dApps and can be accessed directly from user wallets.Crossmint: Provides infrastructure for developers to build NFT applications.
After major projects like DeGods and y00ts left Solana, Magic Eden opted for multi-chain support, including Ethereum and Bitcoin. Despite setbacks, Solana’s NFT ecosystem is recovering and showing new vitality.

Tensor
Tensor, a professional NFT trading platform based on Solana, offers fast data processing, batch operations, and advanced order types. In the recent month, Tensor surpassed Magic Eden as the leader in the Solana NFT market.

Data Source: The Block
Solana Monkey Business (SMB)
SMB, a veteran project on Solana, launched its third generation, SMB Gen3, becoming a top brand in Solana NFTs. SMB also introduced the NFT DAO Monke Dao and investment portfolio Monke Ventures.
Recent NFT trading hotspots focus on Smart Monkey Business (SMB), an algorithmically generated pixel monkey NFT project, dominating Solana NFT market transactions.
LSD
Comparison of Ethereum and Solana:

Solana’s potential for growth with only 3–4% of SOL in liquid staking compared to Ethereum’s nearly $20.22B.
Risk and Reward Comparison: At similar risk levels, Solana offers almost double the staking returns compared to Ethereum.
Current State of Liquid Staking:
295.7M SOL is staked on the network, but liquid staking derivatives are not widely used yet.During the FTX event, TVL of liquid staking fell from a peak of 12.8M SOL to a low of 5M SOL but later recovered to pre-FTX levels of around 12M+ SOL.
The recently launched Jito staking service has accumulated over $44.86M (2.3M SOL) in TVL since its launch at the end of last November. Growth in cross liquid staking derivatives (LSD) and DeFi use cases is also significant.

Marinade Finance dominates the Solana liquid staking market, with over 5.47M SOL staked, followed by Lido and Jito. Emerging liquid staking protocols like Marinade, Socean, Lido, BlazeStake, and Jito are offering various reward programs to attract SOL staking.
Marinade Finance
As the highest TVL project in the Solana ecosystem, Marinade Finance is a liquid staking platform focused on simplifying the Solana staking process. Its main feature is “liquid staking,” allowing users to convert staked assets into liquidity without waiting for the unlocking period.
In mid-September, Marinade launched a rewards program to catch up with new protocols. Despite a slight decline in TVL on SOL throughout the quarter, a rebound occurred after September 20th. Additionally, Marinade Native, a native staking product launched at the end of July, complements Marinade’s liquid staking services. It’s an automated staking platform, allocating staking to over 100 quality validators without performance fees and smart contract risks.
Marinade recently launched the Marinade Native program, allowing users to delegate staking rights seamlessly while retaining withdrawal rights. Moreover, Marinade announced the Marinade Earn rewards program, running from October 1, 2023, to January 1, 2024. Participants will earn 1 MNDE/SOL during this period. There’s also a referral system where referees earn an additional 1 MNDE/SOL through unique links.
Marinade, a veteran DeFi protocol launched in 2021, had over $1.5 billion in TVL at its peak. Although it has declined from its peak, it remains the top TVL project in the Solana ecosystem. Its token, mSOL, has good liquidity and is listed on major exchanges like Coinbase and Kraken.

BlazeStake
BlazeStake, a new liquid staking protocol launched in 2023, aims to promote decentralization of Solana nodes. Stakers can choose between standard delegation pools or any validator to stake SOL and earn liquid staking returns with bSOL.
Blaze has hinted at airdrops to bSOL holders since last year. In August, it launched a points system and its TokenBLZE, airdropping based on user points. Blaze’s SOL locked value grew by 1,234% during the quarter, reaching 678,560 SOL (valued at $40 million as of November 30, 2023).

DeFi
Several emerging Solana DeFi protocols have grown significantly in recent quarters, defining themselves as “Solana DeFi 2.0.” This term represents a commitment to avoiding predatory and low-liquidity token economic models seen in previous cycles. Most of these protocols have not yet launched their native tokens.
MarginFi
Leading this trend, the lending protocol MarginFi launched a points system on July 3, rewarding users for deposits, loans, and referrals. Its TVL grew 743% annually, ranking sixth in Solana DeFi TVL at $22 million. At the end of the quarter, MarginFi also launched its liquid staking token, LST.
Cypher
The Perps trading platform Cypher launched a points system in mid-July. In early August, Cypher suffered an attack of around $1 million. To help users recover losses, it accelerated its CYPH IDO. Over 50% of CYPH was distributed to the community during the IDO and airdrop.
Solend
In early August, the lending platform Solend launched a points program. Unlike using points for potential airdrops, Solend combined points with its already issued SLND token. The first season’s points program lasted about three months, with a minimum reward pool of 100,000 SLND (valued at $54,000). Driven by the points program, Solend’s TVL grew 43% annually to $57 million.
Raydium
Once the first AMM-style decentralized exchange platform in the Solana ecosystem and a core project of Solana Summer, Raydium faced setbacks due to the FTX bankruptcy and threats to the Serum protocol, with which Raydium shared liquidity. Raydium’s recovery has been slightly slower compared to Orca.
Phoenix
Phoenix, a decentralized limit order book supporting spot markets on Solana, recently completed a $3.3 million funding round. Before officially launching at the end of August, Phoenix had a test launch. Since its launch, Phoenix has performed well in certain trading pairs, with a TVL of $378,000 at the end of the quarter.
Squads Protocol
Squads Protocol, a newly launched comprehensive multi-signature platform, has protected $6 million in assets and $9.5 million in total transaction volume.
Kamino Finance
Kamino Finance, an automated liquidity solution, earns revenue through market-making. In Q3, Kamino’s trading volume exceeded $1 billion, generating $1.25 million in revenue for depositors.
DePIN
DePIN, or Decentralized Physical Infrastructure Network, is leveraging Solana’s efficient technology to cover various sectors from mapping to energy and logistics, providing opportunities similar to the modern gig economy. According to Kuleen Nimkar, head of DePIN at the Solana Foundation, people can earn extra income by contributing hardware to the DePIN protocol.
Helium
Helium network, using Solana’s state compression technology, mints network hotspots in NFT form, thus reducing costs. Helium, a decentralized wireless hotspot network and a pioneer in the DePIN field, dates back to 2013 and initially operated as a Layer 1 network. On April 20, 2023, Helium announced its migration to the Solana network (per HIP 70). Developers prefer Solana for its large ecosystem, integrating numerous developers, apps, and teams, with cost and speed advantages over other chains.
Helium’s native token, HNT, is not pre-mined, with a total supply cap of 223 million. In Helium, the only way to pay for data transmission fees is through data credits (DC) obtained by burning HNT, priced in dollars, non-transferable, and only usable by the original owner.
Following HIP-52 implementation, hotspot network deployment no longer earns HNT rewards, but through IOT and MOBILE protocol tokens for Helium IoT and Mobile networks, respectively. The multi-token model allows each wireless network to govern independently, facilitating better DAO decisions. Each subnetwork manages its Proof-of-Coverage rules, data pricing, and hotspot mining reward distribution.
The IOT and MOBILE tokens earned from deploying or covering the network can be exchanged for HNT, providing a value foundation for network tokens. Currently, Helium has a market cap of around $420 million, making it the largest DePIN project in the Solana ecosystem.
Teleport
With the emergence of decentralized maps, decentralized ride-sharing apps like Teleport have emerged, now available in the Apple Store. Teleport is a permissionless ride-sharing app co-owned and managed by drivers, passengers, and developers. On October 27, 2022, Teleport completed a $9 million seed round led by Foundation Capital and Road Capital.
Founder Paul Bohm notes that existing ride-sharing giants like Uber dominate the shared transportation industry. To address this, Teleport built the shared transportation protocol TRIP, aiming to benefit drivers, passengers, and local economies while achieving autonomy. This protocol will first be applied on the Teleport platform, with participants in the network’s operation and development earning TRIP rewards, some of which may appear in NFT form. TRIP rewards also represent participation and voting rights in the network. The project has not yet released tokens, with the latest information available on its website and Twitter.
Tekkon
Tekkon, a Japanese project, encourages users to photograph local infrastructure or report damages to earn token rewards, simultaneously helping improve the local environment. Launched by Whole Earth Foundation, a non-profit founded by Takashi Kato, previously creator of Fracta Inc., a software company identifying weak points in urban water supply networks.
In the Philippines, Tekkon is warmly received due to token incentives, forming a group known as infrastructure hunters. According to Bloomberg, Tekkon has over 128,000 active users, 90,000 from the Philippines, uploading about 30,000 photos daily.
Whole Earth Coin (WEC) Whole Earth Coin (WEC) is a reward token by Tekkon, which can be exchanged for cash on Line Pay in Japan. The initial issuance of WEC is 300 million tokens, with no upper limit. The token is used for various purposes, including rewarding users and in-app operations. Tekkon plans to enhance the functionality of the token in multiple ways, establishing a more complete and sustainable ecosystem.
Render Network
Render Network has extended its services from the Polygon to the Solana blockchain, allowing individuals to contribute idle GPU power to assist in the rendering of motion graphics and visual effects.
Conclusion
Solana has addressed key challenges through a series of technical innovations. The Breakpoint 2023 conference was held in Amsterdam, attracting over 3,000 developers, investors, traders, corporate leaders, and artists, among others, to discuss ecosystem innovations and future plans for the network. For instance, the launch of the Firedancer validator client is set to increase validator diversity, which is key for Solana’s long-term resilience and decentralization.
The economic activity on Solana is diversifying. Render Network has successfully migrated from Ethereum to the Solana blockchain, introducing new features like real-time streaming and dynamic NFTs, benefiting from Solana’s rapid transaction speed, low cost, and expansive network architecture.
Solana’s decentralization efforts have received crucial support and enhancement. For example, Nikolay Vlasov, a Senior Solutions Architect at Amazon Web Services, announced at Breakpoint that Solana nodes can now be rapidly deployed on AWS, facilitating a global user expansion experience.
Solana has demonstrated its commitment to technological cooperation and innovation. James Tromans, Web3 Lead at Google Cloud, announced that Google Cloud’s BigQuery has now incorporated Solana data, enabling developers, enterprises, and users to query detailed Solana data. This integration highlights Google’s existing infrastructure, making it an ideal company to bring developers into the blockchain space.
Top Solana protocols plan to distribute tokens to their most active on-chain users through airdrops. The subsequent circulation of newly acquired tokens on Solana and the resulting TVL infusion will help enhance the valuation of the entire Solana ecosystem.
With the growth of TVL, DeFi project airdrops, and the maturation of liquidity staking markets, DeFi and LSD products on Solana may attract significant capital. NFT projects, particularly those that integrate with the metaverse and gaming domains, providing unique user experiences and innovations (like xNFT), may become investment hotspots.
In the long run, with a focus on the Asia-Pacific market and global expansion plans, Solana could become one of the world’s leading public blockchain ecosystems, attracting more international users and developers. Solana’s technical innovations, such as high TPS and low latency, will position it as a leader in high-performance blockchain applications, like large-scale gaming and complex DeFi applications. The success of the DePIN project may lead a new trend in blockchain applications, integrating blockchain technology with various real-world scenarios, bringing innovation to traditional industries.
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US
Reference
https://www.theblockbeats.info/news/43689
https://news.marsshare.cc/20231008181622409769.html
https://foresightnews.pro/article/detail/44826
https://www.theblockbeats.info/news/47648
https://www.hellobtc.com/kp/du/10/4746.html
https://solana.com/news/solana-hyperdrive-hackathon-winners
https://pro.nansen.ai/multichain/avalanche
https://foresightnews.pro/article/detail/47546
https://www.chain-times.cn/news/10273
https://www.techflowpost.com/article/detail_11817.html
https://blockcast.it/2023/07/17/solana-after-the-ftx-collapse/
https://foresightnews.pro/article/detail/46393
https://www.odaily.news/post/5191309
https://www.techflowpost.com/article/detail_14702.html

By Severin & Ian, MT Capital
TL;DR
Jito is the first liquid staking protocol on Solana that offers both MEV rewards and staking rewards. Over the past 30 days, its TVL has increased by nearly 70%, positioning it to reshape the Solana staking landscape.Jito will soon launch its governance token, JTO. Early on,JTO’s circulating supply will be limited, with selling pressure coming mainly from airdropped users. JTO has limited use cases and inferior value capture capabilities. Jito needs new incentive programs and ecosystem growth to drive continuous TVL increase, which could ease selling pressure from airdropped users and maintain JTO value stability.With the influx of new assets and users on Solana, coupled with rising trading volumes and extremely low liquid staking penetration, LSD protocols like Jito are positioned to capture more staking TVL. Solana’s enormous MEV potential also gives Jito ample room to grow.Compared to Marinade, Jito’s disadvantages in ecosystem breadth, decentralization, and staking model specificity will diminish over time. Meanwhile, Jito’s core competitive advantage in MEV value capture and distribution will expand dramatically with Solana adoption. We are very bullish on Jito’s future prospects to overtake Marinade as Solana’s top LSD protocol.Jito’s strengthening fundamentals will also boost JTO token prices. Looking at LSD token performance over the past month, we believe JTO could see even more spectacular secondary market gains.
Jito: The First Liquid Staking Protocol on Solana with MEV Rewards
Jito Labs’ Deep Dive into the Solana MEV Realm
Jito Network was launched by the Jito Labs team. Early on, Jito Labs focused on Solana MEV infrastructure. In July 2022, they released the Solana MEV Dashboard, analyzing over 36 billion transactions on Solana for MEV since January 2022. Subsequently, in August 2022, Jito Labs announced a $10 million Series A financing round led by Multicoin Capital and Framework Ventures. The proceeds continue to fund infrastructure optimizing MEV extraction and distribution.
Jito Labs then rolled out products like the Jito-Solana validator client and Jito Block Engine to become a major Solana MEV infrastructure provider. Jito Block Engine links relayers, searchers and validators through off-chain auctions to alleviate MEV issues.
First, Jito Block Engine receives transaction orders from relayers and forwards them to searchers.Next, searchers submit transaction bundles with bidding prices.Finally, Jito Block Engine simulates different transaction combinations to find the optimal bundle to forward to validators for processing.

source：https://www.jito.wtf/blog/jito-block-engine-expands-access-to-all-solana-mev-traders/
According to the Validator Health Report: October 2023 released by the Solana Foundation, about 31.45% of Solana validators currently use the Jito-Solana validator client by Jito Labs. This underscores Jito Labs’ technical capabilities in the MEV domain.

With increasing adoption of the Jito-Solana validator client, more MEV rewards are captured on Jito-Solana, laying the groundwork for Jito to launch liquid staking modules with MEV rewards.

The First Solana LSD Protocol with MEV Rewards
Ill-timed launch leading to lackluster JitoSOL performance: In November 2022, right before FTX imploded, Jito Labs officially launched the Jito staking service to ride the popularity of liquid staking protocols. Similar to other LSDs, users receive JitoSOL tokens as liquidity tokens after delegating SOL to validators. JitoSOL prices appreciate over time to reflect earned validation rewards. Thanks to Jito Labs’ early efforts in Solana MEV, Jito also distributes MEV profits to stakers for extra yields. Unfortunately, right after announcing liquid staking, FTX collapsed due to customer fund misappropriation. The closely-tied Solana ecosystem also took a heavy hit with massive liquidity outflows. Thus, despite launching staking modules, lack of market confidence and liquidity demand kept Jito TVL lukewarm.
Points Program bolstering Jito revival: As the Solana ecosystem recovered in the second half of 2023, Jito’s TVL also started picking up gradually. Concurrently in August 2023, Jito launched Jito Points program to incentivize adoption of JitoSOL. Users earn points through activities like staking with Jito, holding JitoSOL, using JitoSOL in DeFi, and referring friends. Points represent contributions to the Jito community and serve as an important benchmark for future airdrops. The launch of the loyalty program markedly steepened Jito TVL growth.

Lido withdrawal accelerating Jito growth through market share capture: Around the same time in October 2023, the Lido DAO community voted to stop supporting new SOL staking deposits, with node operators set to exit the staking market starting November. With Lido bowing out, nearly $6M worth of stSOL needed to find new staking avenues. Jito, offering combined staking and MEV rewards plus a loyalty program, opportunistically onboarded large amounts of stSOL. This further catalyzed Jito TVL growth, propelling Jito to become one of the top 2 LSD protocols on Solana.

source：https://lookerstudio.google.com/u/0/reporting/b41835bc-fafb-46c8-9ade-b012f28a41b2/page/p_7dnjjzu6uc
More Decentralized Jito — StarkNet
To make the underlying validator pool and staked asset allocation more decentralized, Jito proposed the future roadmap for Jito StarkNet. Jito StarkNet is a self-sustaining, transparent, decentralized protocol for intelligently managing validator pools. It consists of three modules — Keepers, Validator History Program, and Steward Program.
The Validator History Program stores historical data for each validator over the past ~3 years, including participation and accuracy in consensus, fee rates, MEV extraction value, total stake value, and staking ranking.The Steward Program calculates a score and optimal staking allocation for each validator based on on-chain historical records.The Keepers Network executes staking allocation based on calculations from the Steward Program.
In the Jito StarkNet network, validators’ historical behaviors serve as the sole benchmark for staking allocation to incentivize benign competition and better staking experiences. Also, allocation management no longer relies on centralized governance. Instead, the Steward and Keepers programs autonomously adjust allocations in a more decentralized fashion.

Tokenomics
On November 28th, the Jito Foundation announced the release of JTO governance token. The launch of JTO is a crucial step in Jito’s development, as it will be utilized to reward early contributors through airdrops and empower users with governance capabilities over the protocol.
Token Distribution: Total supply is 1 billion JTO, allocated as:
10% Airdropped to early users24.3% Community pool governed by the DAO24.5% and 16.2% to the Jito team and early investors, with a 1-year cliff and 3-year vesting25% Ecosystem fund

Token Utility: JTO holders can decide on key parameters and governance initiatives like:
Setting fees for the JitoSOL staking poolTuning parameters in Jito StarkNet to adjust staking allocation strategiesManaging the DAO’s JTO treasury and fees captured from JitoSOL
Airdrop Incentives: Early Jito adopters stand to earn JTO token airdrops. Specifically,
80% of tokens are airdropped to JitoSOL holders and users15% of tokens are airdropped to validators running the Jito-Solana client5% of tokens are airdropped to Jito MEV searchers

Given the token allocation, there will be limited circulating supply initially, with selling pressure coming mainly from airdropped users. As for utility, JTO use cases are currently limited with inferior value capture capabilities. Jito needs new incentive programs and ecosystem growth to drive continuous TVL increase, which could ease selling pressure from airdropped users and maintain JTO value stability to some extent.
Jito’s Future Outlook
Explosive Solana Growth
After lying low in the fallout from FTX’s bankruptcy, Solana is finally seeing signs of recovery. Starting September 2023, Solana TVL kickstarted exponential growth, recently approaching $700M. Moreover, in the latest bull run, top 10 chain monthly TVL increased 14.8% versus a whopping 85% on Solana — far outpacing peers. The influx of assets bodes well for driving up SOL staking demand.

Aside from surging TVL, Solana also hit peaks of nearly 400M in daily transactions. The heightened trading volumes should increase network fees as well as MEV profits to stimulate staking demand for protocols like Jito.

Additionally, Solana also saw increases in new and reactivated users, further expanding the addressable market for LSD protocols like Jito.

Huge Runway for Solana LSD Growth
Despite 70.07% of SOL already staked, liquid staking only accounts for 3–4% — leaving ample room to run. Compared to regular staking, liquid staking offers superior capital efficiency by letting users enjoy staking yields while participating in other DeFi activities with liquidity staking tokens. As depicted below, liquid staking saw explosive growth with the Solana revival. We expect liquid staking to displace more generic staking avenues over time given higher capital efficiency for DeFi activities.

Enormous MEV Potential on Solana
Since Jito distributes MEV profits to JitoSOL holders, higher MEV yields on Solana translate to higher staking rewards for JitoSOL. The boosted APR makes JitoSOL more enticing for users. Over the past year, Solana saw $14M in MEV profits, with ample optimizable MEV left on the table.

As the Solana network thrives, Jito also accumulates higher MEV takings over time. We expect this trend to continue with Jito capturing incrementally more MEV from burgeoning Solana activity to distribute to JitoSOL holders.

Jito Has its Unique Competitive Advantages Compared with Marinade
Marinade, as the earliest LSD protocol in the Solana ecosystem, once disrupted TVL, reaching a peak of 1.7 billion and standing as one of Jito’s major competitors. When compared to Marinade, Jito faces the following key competitive disadvantages:
The ecosystem network of Marinade’s LST is more diverse than that of Jito’s LST.Marinade has a higher number of validating nodes, resulting in a higher level of decentralization compared to Jito.Marinade offers additional staking options beyond LSD.
In response to competitive disadvantage 1, as illustrated in the following diagram, JitoSOL is continually expanding its ecosystem use cases and has already integrated with over 10 mainstream DeFi protocols. Moreover, with the solid support of Multicoin, a dedicated player in the Solana ecosystem, Jito is well-positioned to effortlessly expand its ecosystem partnerships in the future.

In response to competitive disadvantage 2, Marinade currently boasts approximately twice the number of nodes compared to Jito, resulting in a significantly higher level of decentralization. This presents a challenge for Jito to surpass in the short term. However, Jito is actively transitioning towards Jito-StarkNet, offering the potential for a substantial increase in protocol decentralization in the future.
In addition to the competitive disadvantages, when compared to Marinade, Jito also possesses the following competitive advantages:
JitoSOL has the ability to capture additional MEV rewards, with staking rewards slightly higher than Marinade.Under similar incentive programs, Jito can attract a larger number of active users in the current wave of Solana’s recovery.

Jito’s ability to capture and distribute MEV value stands as a core competitive advantage for long-term success. As the Solana network becomes more active, the MEV value will increase, making Jito’s advantage more pronounced. The fact that Jito can attract a larger number of active users also indicates that Marinade has not yet established a monopoly over the LSD market. Similar LSD protocols, including Jito, still have significant room for development.
In summary, compared to Marinade, Jito’s disadvantages in ecosystem breadth, decentralization, and staking model specificity will diminish over time. Meanwhile, Jito’s core competitive advantage in MEV value capture and distribution will expand dramatically with Solana adoption. We are very bullish on Jito’s future prospects to overtake Marinade as Solana’s top LSD protocol.
The stable fundamentals of Jito are expected to drive an upward trend in the secondary token, JTO. Considering the price trends of LSD protocol tokens over the past month, we believe that JTO will also demonstrate a robust performance in the secondary market.

Reference
https://www.jito.network/docs/jitosol/overview/https://www.jito.network/blog/https://solana.com/news/validator-health-report-october-2023https://foresightnews.pro/article/detail/48090https://www.techflowpost.com/article/detail_14335.html
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US

By Xinwei
TL;DR
Integration of DeSci with Web3 and Blockchain: DeSci integrates blockchain technology to improve key aspects of scientific research such as peer review, funding sponsorship, intellectual property management, and data transparency.Impact of DeSci on Scientific Research: DeSci is expected to enhance the transparency, efficiency, and democratization of scientific research, while providing new opportunities to address global issues.Challenges and Future Outlook: Includes improving peer review mechanisms, challenges in funding support, protecting data privacy, and enhancing diverse participation and the integration of DeSci with traditional scientific fields.
What is DeSci
DeSci’s development is closely linked to the rise of Web3 technology, especially blockchain technology. It represents a new approach to scientific research, focusing on using blockchain technology to address fundamental issues in traditional scientific research. DeSci’s development focuses on improving peer review, funding sponsorship, intellectual property management, and enhancing data transparency and scrutiny, which are key elements in the traditional scientific research process.
Key features of DeSci include:
Peer Review and Publishing Process: Traditional scientific publishing is managed by journals, usually involving lengthy peer review and editing work. Blockchain technology, especially smart contracts, can be used to streamline this process. The construction of decentralized communities and the introduction of reputation systems can improve the efficiency and transparency of the process. For example, VitaDAO is an organization that applies blockchain technology in peer review and reputation systems.Funding Sponsorship: Traditional scientific funding models often involve lengthy application processes and are prone to biases from the review bodies. Blockchain technology provides an alternative way, allowing direct funding of scientific research through crowdfunding. For example, Molecule is a blockchain-based funding market that connects patients, biotech companies, or investors with scientists, driving the development of the open research market.Intellectual Property Management: In the DeSci field, the introduction of intellectual property NFTs (IP-NFTs) allows researchers to share ownership and future outcomes of research projects. Molecule is a pioneer in this area, enabling scientists, biomedical researchers, and biotech companies to more easily obtain funding and commercialize through IP-NFTs.Data Transparency and Scrutiny: The application of blockchain technology also increases data transparency, allowing scientific research data to be stored and accessed in a decentralized environment. This helps break data silos and promote collaboration in projects and research.
Impact and Prospects of DeSci:
Simplification of Industrial Transformation: The process of transforming academic achievements into commercial products is usually long and complex due to the ownership of intellectual property rights and complicated procedures in universities or research institutions. DeSci provides new opportunities for the transformation of academic achievements into commercialization, simplifying this process. By building intellectual property NFTs and other innovative mechanisms, DeSci helps researchers more directly transform their scientific findings into commercial products. Additionally, DeSci also helps VCs discover “under the table” projects, i.e., those that are not yet widely known but have potential.Breaking Traditional Boundaries: DeSci is not limited to the field of scientific research; its concepts and tools are equally applicable to the arts, humanities, and even indigenous knowledge systems. This interdisciplinary collaboration and knowledge sharing are among the key features of DeSci.Stimulating New Forms of Collaboration: Thanks to its decentralized nature, DeSci promotes global collaboration, especially for projects that require global environmental data and multidisciplinary input. In this way, DeSci hopes to address some of the most urgent global issues, such as climate change and public health crises.
Key Technologies and Applications of DeSci
Blockchain and Smart Contracts: Blockchain plays a core role in DeSci, especially smart contracts. Smart contracts are automatic code segments that can be used to automate various aspects of the scientific publishing process, such as peer review. These contracts ensure transparency and efficiency of the process, also reducing the time and cost of traditional publishing.Decentralized Peer Review and Publishing Process: DeSci eliminates intermediaries in the traditional publishing process through blockchain technology, such as journal coordination, thereby increasing accessibility and transparency of research findings. For example, Ants Review uses smart contracts to directly involve authors and reviewers, with tokens as incentives to improve the efficiency and quality of peer reviews.Community Fundraising for Research: Blockchain technology is also used for crowdfunding, allowing scientists to connect directly with patients, biotech companies, or investors, fueling the open research market. This funding model allows scientists to bypass traditional funding channels and receive support directly from the community. For example, Molecule uses NFTs and DAOs to raise funds for scientific research such as drug development.Intellectual Property Management: In DeSci, NFTs are used to manage and develop intellectual property, such as scientific data or articles. This makes the sharing and transformation of intellectual property more efficient, while also providing a new source of income for scientists and researchers. For example, Molecule uses IP-NFTs to share ownership of research projects and their future outcomes.Data Transparency and Scrutiny: Data hosted on the blockchain increases the transparency of scientific research, allowing scientists to easily access and store databases related to their research, thereby making more accurate research decisions. DeSci uses a unique feature of blockchain technology — the “permanent network”. This means that once data is uploaded to the blockchain, it is almost impossible to delete or modify. This feature is particularly important for scientific research, as it ensures that scientific data and discoveries remain unchanged and accessible even in the face of political or social pressure. This is especially key in protecting the integrity of scientific research and combating censorship, ensuring the freedom and objectivity of scientific research.Decentralized Research Tools and Publishing Platforms: DeSci provides multifunctional decentralized platforms, like DeSci Node and LabDAO, to support the research process, including seamless integration of various formats of reports, charts, codes, and external APIs.Establishment of Reputation Systems: To build a high-quality and trustworthy DeSci community, platforms need to establish comprehensive reputation systems, tracking user interactions on decentralized platforms, such as likes, comments, and posts, to help establish credibility and expertise. Through blockchain, scientists’ contributions — whether in peer review, sharing research data, or participating in professional training and mentoring — can be recorded and certified by issuing NFTs. These NFTs not only serve as direct evidence of scientists’ contributions but also as a measure of their reputation in the scientific community. This system encourages scientists to participate in community building and knowledge sharing, while providing a more objective and transparent way to assess and reward their work.Academic Social Platforms: ResearchGate in web2 has raised over 100M in funding. In contrast, web3 platforms offer a new way for scientists, researchers, and other stakeholders to communicate and collaborate. Through such social platforms, scientists can share research findings, seek partners, and also provide a channel for VCs to discover and invest in potential scientific projects.
DeSci Ecosystem Projects
MoleculeMolecule is a decentralized biotechnology research fundraising platform, currently hosting about 40 scientists seeking funding for their projects. Inspired by the citizen science movement and the openization of drug development, its original idea came from the patient community, aimed at advancing and funding early-stage drug development. Molecule is built on Ethereum and includes two main systems: Molecule Discovery and Molecule Finance. These systems create an active ecosystem for decentralized modular drug development. Molecule uses a combination of smart contracts and legal contracts to form intellectual property NFTs (IP-NFTs), a new mechanism that allows anyone to share ownership of research projects and their future outcomes, such as intellectual property, royalties, data, etc. Molecule is not limited to the basic functions of its own website, but has built a complete and vast ecosystem, allowing patient collectives and drug development DAOs to maintain, manage, and interact with real-world intellectual property.Data LakeData Lake is an innovative medical data donation platform built using blockchain technology, aimed at supporting medical research and the development of artificial intelligence. It establishes a bridge through Polygon and its own token system ($LAKE), connecting patients willing to donate medical data with researchers who need these data. The goal of this platform is to promote the discovery of disease treatment methods and new therapies, thereby improving healthcare services and patient treatment outcomes.Data Lake operates by obtaining access to medical data from donors’ healthcare providers, then anonymizing this data so it can be safely used by researchers. Additionally, the platform allows hospitals and data donors to share the economic returns generated by medical data, thereby incentivizing more individuals and institutions to participate in the sharing of medical data. Through this approach, Data Lake not only protects individual privacy but also promotes the advancement of medical research.

GenomesDAOGenomesDAO is a biotechnology decentralized autonomous organization (DAO) focused on the monetization of genomic data. It combines decentralized finance (DeFi) concepts to ensure the security, privacy, and audibility of genomic data. The main features of GenomesDAO include:
Target Audience: GenomesDAO caters to individuals and organizations, offering individuals whole-genome sequencing services, personalized genomic reports, and secure personal DNA vault storage. For organizations, it provides technical support to create secure, participant-owned genomic databases.
Research Support: It provides researchers with access to high-quality genomic datasets, helping them understand disease causes and develop new drugs.
Token Usage: GENE tokens are used to pay for whole-genome sequencing services and as an incentive mechanism for querying their encrypted DNA data vaults.
GenomesDAO aims to promote the development of genomics research and drug innovation while ensuring the privacy of individuals. Through its platform, GenomesDAO transforms individual genetic data into valuable resources, while ensuring data security and privacy.

HairDAO
HairDAO is a decentralized organization dedicated to the treatment of hair loss, adopting an open-source investment and operational model. It aims to advance the research and development of hair loss treatments in a democratic manner and provide funding support for early-stage hair loss research and related companies.
Some features of HairDAO include:
Diverse Participation: HairDAO encourages the involvement of people with various skills, whether technical or specific domain expertise.Reward Mechanism: Through its token $HAIR, HairDAO rewards those who contribute to solving the problem of hair loss. Users can earn $HAIR as a reward by uploading their anonymous, encrypted genomic data.Cultural Characteristics: Although focused on scientific research, HairDAO exhibits a light-hearted and humorous style on its website and Twitter, contrasting with traditional scientific projects. Its content expression and design style are eclectic, even with a certain humor characteristic of silent old movies.Meme Quality: In the DeSci field, HairDAO stands out with its “hair loss” theme and light-hearted, humorous image. Its Twitter even uses barbershop emoji symbols, enhancing its meme coin characteristics.

VitaDAOVitaDAO, initiated by Molecule, is a decentralized biotechnology DAO for drug development and community management, leading in longevity research and development. As the world’s first biotechnology DAO, VitaDAO’s main goal is to advance longevity research, extending human lifespan and health span.
Some core features of VitaDAO include:
Community Governance: VitaDAO is governed by community members holding $VITA tokens, focusing on funding early longevity research projects.Funded Projects: It has provided funding for over 20 research projects, totaling over $6 million, covering research on age-related diseases and the exploration of new therapies.Scope of Research: Supports research projects ranging from basic research to preclinical studies.Voting Rights of Token Holders: $VITA token holders participate in VitaDAO’s decision-making process, including the selection of funded projects, financial management, and governance activities.To encourage funding for early-stage longevity biomedicine research, VitaDAO combines innovative governance frameworks and financial tools like DAOs, NFTs, and AMMs. Running on Ethereum, VitaDAO not only jointly funds research but also digitizes research results into IP NFTs. VitaDAO’s Token VITA can be earned by contributing work, capital, or other resources (such as data and IP) to VitaDAO. Members holding VITA not only participate in VitaDAO’s democratic governance, guiding its research direction, but can also profit from its data repository and manage its intellectual property portfolio. This model promotes the innovation and democratization of scientific research, while providing community members with direct opportunities to participate in and benefit from scientific decision-making.

ResearchHub
ResearchHub, founded by Coinbase co-founder Brian Armstrong, is a platform intended to change the traditional scientific journal publishing model. The platform recently completed a $5 million Series A funding on June 15. ResearchHub has created an alternative to traditional journals with its “Hub” system, allowing scientists or scholars to publicly publish and discuss scientific or academic content directly in these centers, bypassing the traditional publishing review process, accelerating the dissemination of information, and undergoing peer review post-publication.Activities on ResearchHub can earn ResearchCoin (RSC) rewards, an ERC-20 cryptocurrency issued on the Ethereum platform for scientific research. RSC is intended to incentivize the scientific community to share, review, and curate information. Users can earn RSC rewards by:Sharing PDFs of research papers (provided it does not infringe on copyrights)Commenting and discussing scientific researchPeer reviewing scientific papersReceiving RSC tips from other usersDeveloping open-source featuresAdditionally, users can set RSC bounties for peer reviews, paper abstracts, or new methods in the lab. They can also fund research by pre-registering projects, raising cryptocurrency in forum posts before the research work begins. According to ResearchHub, activities on the platform continue to grow over time, especially peer review activities being most active and promising.

Challenges and Future Outlook of DeSci
Current technical and operational challenges in the DeSci field
Peer Review Mechanism: In DeSci, peer review remains a critical quality control step. For example, Ants-Review proposed a blockchain-based incentive protocol aimed at addressing the costly, inefficient, and centralized issues in traditional peer review. However, this system still faces key challenges such as determining reviewer qualifications, preventing malicious behavior, and cheating.
Project Funding: Although blockchain provides a new “crowdfunding” model, funding for large scientific projects remains a challenge. Small projects can address funding issues with NFT (Non-Fungible Token) models, but large projects often require national-level investment.
Privacy Protection: In DeSci, finding a balance between promoting transparency and collaboration and ensuring data confidentiality is crucial. Zero-knowledge proof (ZKP) technology plays a key role in this regard.
Diverse Participation: The composition of the DeSci community reflects the existing demographic characteristics of the crypto and scientific fields, with underrepresentation of women and other minority groups. This extends beyond gender differences to include diversity in race, geography, and economic background. This lack of diversity could lead to bias and limitations in research directions, restricting the range of problems DeSci can explore and solve. To increase inclusiveness, DeSci projects need to actively attract and encourage wider group participation. This might include providing educational resources, establishing partnerships, and ensuring that a variety of voices are heard in the decision-making process.
Long-term impact and potential development paths of DeSci
Innovative Fundraising Methods: Platforms like Gitcoin offer funding for projects through new mechanisms like quadratic funding.
Intellectual Property Management: For example, the Molecule project has created a new way to manage intellectual property by building IP-NFTs (Intellectual Property Non-Fungible Tokens).
Development of Data Markets: Open data markets will stimulate new forms of collaboration. Innovative database structures like DBDAO allow individuals to benefit from their data.
Importance of Emergency Fundraising: DeSci’s ability to raise research funds during emergencies, such as the COVID-19 pandemic, is particularly important. Traditional government funding is often allocated based on fiscal year budgets, which are not flexible or quick enough in face of emergencies. In contrast, DeSci leverages its decentralized nature to rapidly mobilize resources and focus funds on critical research and response measures. This speed and efficiency are unmatched by traditional fundraising methods. This rapid response in fundraising may become a key tool in responding to global public health emergencies in the future.
How to promote the integration of DeSci with traditional scientific fields
Transparent Funding Use and Management: Drawing on DeFi experience, DeSci can achieve more efficient fund utilization.
Optimization of Resource Sharing: Through smart contracts, scientific equipment and other resources can be shared more conveniently, promoting efficient use of resources.
Facilitation of Global Collaboration: Decentralized science can promote global collaboration, especially for projects requiring global environmental data.
Application of AIGC Technology: Artificial Intelligence Generated Content (AIGC) can be used to improve the productivity of scientific texts, helping to better present research results.
Promoting Open Science and Interdisciplinary Collaboration: DeSci supports and strengthens the concept of open science, making scientific research and data accessible to all, increasing transparency and accessibility. This helps improve the quality and impact of scientific research. The DeSci environment encourages collaboration between different disciplines, breaking down traditional barriers with blockchain and smart contract technology. Interdisciplinary collaboration is particularly important for solving complex problems, such as climate change and public health crises.
Conclusions and Recommendations
- For research institutions and investors, DeSci provides a novel method of scientific funding and project management. For example, the case of VitaDAO shows that through the DeSci model, scientific projects can receive funding from specialized DAOs and be managed through votes by DAO members. This model offers transparency in the funding allocation process and allows funders to participate directly in the decision-making process.
- DeSci’s current main goal is to address funding, organization, and transparency issues in scientific research. Utilizing the transparency and immutability of blockchain technology, DeSci offers a new model for scientific research funding and management. This model could promote closer cooperation between different research institutions and private funders, helping bridge the “valley of death” between basic research and clinical research. It also could provide more opportunities for young scientists to support non-traditional research.
- DeSci greatly enhances the efficiency of academic publishing. By decentralizing the peer review and publishing process, it reduces publishing time and complexity, allowing scientific knowledge to be disseminated more quickly. DeSci, by providing an open and transparent platform, mitigates the monopoly problem in the traditional academic publishing market. This helps increase publication diversity, offering more researchers opportunities to publish, thereby promoting the diversification and democratization of scientific research.
Reference
https://ethereum.org/zh/desci/https://foresightnews.pro/article/detail/16382https://foresightnews.pro/article/detail/22045https://www.odaily.news/post/5182369https://www.thepaper.cn/newsDetail_forward_22259911?commTag=truehttps://www.panewslab.com/zh/articledetails/o82w6dx81n41.htmlhttps://a16zcrypto.com/posts/article/what-is-decentralized-science-aka-desci/
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US

By Severin，MT Capital
TL;DR
Messari expressed strong optimism for the theses of Solana, DePIN, AI + Crypto, and Perps in their report.Looking at Messari analysts’ portfolio allocations, internally Messari remains most bullish on Solana and the AI + DePIN theses.
Key Investment Theses
Solana
The rapid launch of new products on Solana, the surge in on-chain liquidity, and the increasing availability of developer tools have always been exciting.
From a technical perspective, upgrades like Local Fee Markets, QUIC, and Stake-Weighted QOS have significantly reduced the occurrence of Solana outages, making Solana more robust. Technologies like cNFT have greatly reduced the cost of minting and managing NFTs on Solana, allowing protocols like Helium and Render to leverage cNFT to significantly reduce expenses and promote the prosperity of the Solana DePIN ecosystem.

For 2024, market expectations for Solana are focused on the following aspects:
Achieve more than 10 times throughput and performance improvements through Firedancer and the Sig client. Firedancer enables Solana to process 1 million transactions per second. Improvements in user experience can attract more developers to participate in using and developing on Solana, enriching Solana’s thriving ecosystem.

2. Through Tinydancer, develop light clients that allow validators to validate at lower costs, achieving greater decentralization.
3. Deploy the token-22 standard to expand Solana’s token capabilities. For example, token-22 will support interest-bearing tokens, allow complex contract logic to be triggered when tokens are transferred, etc.
Solana’s Local Fee Markets and state compression technologies make the following applications “only possible on Solana”:
DePIN: Projects like Helium, Hivemapper, Render have migrated to Solana. Render abandoned its own blockchain for Solana’s compressible cNFTs, faster transaction speeds, and composable on-chain order books.Payments: Solana has partnered with Visa so users can make transactions on Shopify with Solana USDC at lower costs and faster speeds through the Solana Pay plugin.Consumer apps: Extremely low-cost cNFTs can boost emerging consumer apps centered around NFTs. For example, DRiP partners with artists to distribute free NFTs to subscribers. Since late March, it has minted over 78 million cNFTs to 1.6 million wallets, with each NFT costing about $0.00036.DeFi: Extremely low transaction fees and faster settlement finality allow Solana DeFi protocols to create fully on-chain order book models, providing users with smoother experiences not possible on other blockchains.
DePIN, DeSoc, DeSci
In non-financial areas, Messari pays more attention to the future development of DePIN, DeSoc, and DeSci. These three fields have huge potential market sizes and can make more practical changes to the flaws in real-world business processes.
Messari is particularly focused on the following four segmented DePIN areas:
Decentralized Storage: The current cloud storage market has an $80 billion market size and continues to grow at 25% annually. And although decentralized storage services cost 70% less than cloud providers like Amazon S3, decentralized storage still accounts for less than 1% market share, leaving huge market opportunities for decentralized storage.

2. Decentralized Databases: Decentralized databases have long suffered from performance and latency issues, which are expected to be solved in 2024. The emergence of applications like DeSoc, gaming, dynamic NFTs, ML, AL will greatly increase the demand for decentralized databases.

3. Decentralized Wireless Network: DePIN projects represented by Helium Mobile have gradually found their own PMF, driving continuous user growth. Take Helium Mobile as an example, it initially attracted users by providing low-cost service and tokens, then user growth further drove token price growth, attracting more users and payments, spinning the growth flywheel.

4. Decentralized AI Compute: The development of artificial intelligence is currently facing computing bottlenecks and a lack of collaboration. However, DePIN projects focused on AI can well solve these two problems. Gensyn can provide sufficient decentralized compute for AI model training, Bittensor allows individuals to participate in open-source AI model training. DePIN and AI have natural combination scenarios.

In addition to DePIN, Messari also pays extra attention to DeSoc and DeSci. Similarly, creators contribute $230 billion in revenue to social media platforms but only a small portion of creators get income sharing. Friend.tech shared $500 million in revenue with its creators in just months after launch. Messari believes DeSoc could recreate the wave of DeFi Summer 2020.
On the DeSci side, blockchains can effectively optimize key scientific research processes like peer review and funding, and promote key research areas through DAOs and token sales.
Although DeSoc and DeSci have not yet achieved breakout potential like DePIN, Messari remains bullish and looks forward to applications from DeSoc and DeSci that can lead to mass adoption.
AI & Crypto:
Messari believes the advancement of AI will increase demand for crypto solutions, and cryptocurrencies like Bitcoin are naturally suitable for AI payments.
AI and Crypto have the following combination scenarios:
AI agents can use crypto infrastructure to pay and access digital resources autonomously.Innovations like zkML allow smart contracts to safely orchestrate AI models, supporting more complex application logic.Tokens provide a way to incentivize individuals to tune models and collect valuable real-world data, naturally suitable for combining with DePIN.

Perps
Messari explicitly stated in its report that if you are going to focus on one DeFi subsector this year, it should be Perp DEX.
With dYdX migrating to a custom Cosmos application chain, dYdX’s centralized order book can provide a trading experience closer to CEXs. And considering regulatory pressures on CEXs, the gap between dYdX and CEXs may narrow further.
In addition to Solana’s ecosystem Perp DEXes (Drift and Jupiter), Synthetix is also worth extra attention. With the launch of Synthetix Andromeda, Synthetix will introduce full collateralization, support new collateral types, and various improvements around trading, liquidation, etc. Synthetix also removed years of token inflation and may shift to deflation. In terms of token price, Synthetix is also the 4th best performing DEX year-to-date.

ETH
ETH is currently in a dilemma. Its appeal to institutions is not as strong as Bitcoin’s digital gold narrative, and other competing L0s, L1s, and L2s are gradually eating into Ethereum’s transaction volume. Although ETH currently looks not suitable for investment, Ethereum’s Cancun upgrade is still worth paying attention to. Ethereum’s Cancun upgrade can reduce Rollup transaction costs by 90–99%, making Rollups as cheap as other Alt L1s. The delivery date of the Cancun upgrade is one of the most important dates to mark.

Analyst Holdings
The most interesting part is Messari’s published analyst holdings. The chart below shows the distribution of analysts’ largest gainers in 2023. It can be seen that analysts’ main profits come from the Solana ecosystem and the AI + DePIN thesis. This also reflects that analysts have caught on well to the leading narratives of this bull run.

The chart below shows the current token holdings distribution of Messari analysts (removing tokens that appeared only once). Analysts’ major holdings are similar to their top gainers in 2023, still concentrated in Solana and the AI + DePIN thesis. Interestingly, for other sectors analysts are bullish on, such as DeSoc, DeSci, Perps, etc., analysts do not hold any related tokens.

The chart below shows Messari analysts’ favored sectors (removing sectors that appeared only once). Similar to before, Solana and the DePIN thesis still dominate. However, decentralized derivatives overtook AI to become one of analysts’ favorite sectors, and the ZK concept also reached equal importance with AI.

Reference
https://messari.io/crypto-theses-for-2024
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US

By Xinwei, Ian
TL;DR
In recent years, the blockchain industry has undergone tremendous changes, particularly in the methods of token distribution. From the simple Initial Coin Offerings (ICOs) to complex DeFi structures, and now to today’s Fair Launch and community-driven models, these innovations have not only reshaped the pattern of asset distribution but also attracted widespread attention from market participants. Next, we will delve into several representative projects, each demonstrating innovation and progress in their unique token distribution methods.
This article analyzes key projects ranging from Inscription’s retail-driven model, Blast’s incentive innovations, ZKFair’s focus on fairness, to Analysoor’s distribution method innovations, and Binance’s redefinition of token economics with Fair Mode. These projects showcase the diversity of the cryptocurrency ecosystem and reflect the growing market demand for transparency and fairness.
Ian, Investment Director at MT Capital, comments: “In experiments with projects like #BRC20, #Blast, #ZERO, #ZKFair, we’ve witnessed a great innovation — fair distribution for everyone. They rely neither on platform tokens nor investors; the earliest participants complete the project’s investment, distribution, marketing, and evangelism. This is similar to the liquidity mining in DeFi Summer, where the project’s inherent liquidity incentives created prosperity for the entire chain. Fair distribution greatly enhances the enthusiasm of community participants, reaching unprecedented heights.”
Inscription
The rise of Inscription, similar to the DeFi Summer, centers on the concept of Fair Launch. This idea was very popular during the DeFi Summer, mainly referring to the practice where project developers do not reserve any shares at the initial token distribution. For example, Andre Cronje, the founder of Yearn (YFI), claimed that he did not pre-mine, reserve tokens, or notify insiders in advance. This practice greatly enhanced his reputation and brought substantial Total Value Locked (TVL) to Yearn.
However, as DeFi Summer gradually faded, the market witnessed the emergence of more projects, and the cryptocurrency ecosystem became more mature. During this period, capital started entering the market, initiating a VC-driven project launch model. In this model, projects with large financing amounts and prestigious investment institutions attracted more market attention. This also gave rise to users mainly surviving on “airdrop farming” and those eager for airdrops from star projects.
In this context, the emergence of Inscription brought about a new change. It is viewed by some as “the era of retail investors,” as all chips are entirely minted by retail investors themselves. Although Inscription is criticized by some as having only meme coin attributes and lacking long-term practical application scenarios, it provides more opportunities for retail investors. As more Inscription projects are born and end their asset distribution phase, the Bitcoin ecosystem is expected to enter a new stage of application construction.

https://geniidata.com/ordinals/index/brc20
Blast
Since its launch on November 21, Blast has quickly become a focal point in the cryptocurrency market, demonstrating innovation and attractiveness in the Layer2 network domain.
Blast is a Layer2 network, launched by Blur founder Pacman. Based on Optimistic Rollups technology and compatible with Ethereum, Blast offers a convenient access for developers and dApps. The rapid growth in Blast’s TVL and the number of users is noteworthy, with its TVL already reaching $1 billion.
Additionally, Blast has completed a $20 million funding round participated in by Paradigm and Standard Crypto.
One of the primary ways Blast attracts users and developers is through airdrops and incentive mechanisms. An airdrop is planned for May 2024, aiming to reward early members and developers. Users can earn points by depositing assets and inviting new users to join the Blast L2 network, directly influencing the amount of airdrop they receive. This mechanism incentivizes user participation and promotion.
The core appeal of Blast lies in the combination of its staking mining and additional rewards. Users deposit funds into Blast and stake on the Ethereum mainnet using Lido, earning not only staking returns but also additional Blast rewards. The fundamental purpose of this strategy is to increase TVL and attract more users for extra Blast rewards. Blast’s success relies on its innovative Layer2 solution and the incentive mechanisms to attract users and developers.

https://dune.com/0xramen/blast-stats
ZKFair
ZKFair (ZKF) is an innovative Ethereum-based project focused on establishing a fair and community-driven Layer2 network. As the first ZK-Rollup on Ethereum utilizing Polygon CDK and Celestia DA technology, ZKFair’s core goal is to lower the high entry barriers for current Layer2 networks. In the current market, many ZK-L2 projects led by VCs have high valuations, making it difficult for ordinary users to reap substantial returns. These projects also encourage users to pay high transaction fees, but the token incentives are distributed slowly, making them unfriendly to regular users.
ZKFair aims to change this situation by creating a fairly launched, community-driven network. This network is not only technologically advanced but also supported by Lumoz RaaS. The native token $ZKF of the project adopted a 100% fair launch method, reserving no portion for investors, pre-orderers, or early miners. All tokens are planned to be airdropped to the community after the mainnet launch, with a total supply of 10 billion, 7.5 billion of which are designated for Gas fee airdrops and the remaining 2.5 billion for community users.
ZKFair’s notable appeal lies in its unique market positioning and distribution strategy. Market analysts are generally optimistic about its opening potential, expecting a 5–10 times appreciation. It uses the stablecoin USDC as Gas, and combined with its low market cap and novel chip distribution model, the project offers investors an attractive story and fair distribution mechanism. Regarding token acquisition, rules state that addresses that have interacted with platforms like zkSync, Scroll, ZKSpace, Polygon EVM, Linea, etc., within a specific time frame are eligible for the airdrop. Additionally, the project has set detailed processes and restrictions for burning Gas to obtain ZKF tokens, as well as strategies for quickly consuming Gas through interactions with Dapps.

L2BEAT — The state of the layer two ecosystem
Analysoor
Analysoor is the first Meta Protocol on the Solana chain, introducing an innovative method for creating and distributing NFTs and tokens. Its core uses block hash values as a random number generator, selecting one winner per block, effectively mitigating the impact of bots in the $ZERO and Index ONE NFT minting process.
Analysoor’s fair launch mechanism focuses on fairness and liquidity orientation, with no pre-sales, whitelists, team allocations, or GAS fees paid for early transactions. This means every participant starts on an equal footing, and differences in capital size do not affect the minting competition. The minting fees do not flow to the project or miners but are used to increase liquidity, supporting the ecosystem and community.
Analysoor is building strong community consensus, and its value and potential are increasingly recognized. Developers are also working hard to adopt more innovative methods to combat potential bot behavior, ensuring the long-term maintenance of fairness, where AI algorithms and machine learning will play a significant role.
Compared to mainstream Launchpad projects on other public chains, Analysoor’s current market cap may be underestimated. Considering the absence of a leading Launchpad protocol in the Solana ecosystem, Analysoor has the potential to become this role and achieve significant value growth in the future.
The market’s growing demand for fairness and transparency means the Fair Launch mechanism will become a trend. Especially on high-performance public chains like Solana, 2024 might be a breakout year for Meta Protocols. As a pioneer of Fair Launch on the Solana chain, Analysoor has tremendous potential and a strong vision, possibly expanding into a multifunctional Launchpad in the future.

https://medium.com/@GryphsisAcademy/analysis-0-1-innovating-fair-launch-with-random-hash-4a36ad6a0437
Fair Mode
Binance’s recently introduced Launchpool mode, “Fair Mode,” represents a significant innovation in the token economic system. The core of this mode lies not just in the projects themselves but in rethinking the token economic system, aiming to promote the long-term healthy development of projects. Fair Mode introduces a 27% long-term development fund, whose tokens cannot be consumed or sold and will not enter market circulation. Instead, they are used for staking and participating in the ecosystem, supporting the project’s continuous growth. Additionally, this mode fairly distributes up to 21% of tokens to retail investors in its 25% initial circulation, including Binance launchpool and airdrops. This not only increases the community’s influence in project decisions but also stimulates their willingness to cooperate with the project.
By increasing initial circulation and reducing future unlock amounts, Fair Mode reduces market pressure, laying the foundation for the long-term stability of token value. Simultaneously, by reducing the token share of teams and investors, this mode reduces their ability to manipulate the market, helping to maintain the token’s healthy value. Binance, through the introduction of Fair Mode, demonstrates its deep understanding of the industry and may lead a new trend in token economic system innovation. This mode emphasizes the reasonableness and fairness of token distribution, likely to be a significant factor in advancing blockchain technology and the token economy.

https://twitter.com/heyibinance/status/1737813180141666324
Summary
In summarizing this brief insight, we can observe the significant evolution and innovation in the blockchain domain regarding the methods of token issuance. From the initial ICOs to DeFi, and now to today’s fair launch and community-driven models, these changes have not only redefined the means of asset distribution but also attracted widespread market attention. Specific projects like Inscriptions, Blast, ZKFair, Analysoor, and Binance’s Fair Mode, which continuously adopt a fair distribution model, have received positive market and principal feedback. The successful attempts of these projects not only showcase the diversity and maturity of the cryptocurrency ecosystem but also emphasize the importance of community participation and fair distribution in the future development of blockchain technology. With the advancement of these innovations, the blockchain industry is expected to continue playing a significant role in the global finance and technology sectors, opening up new possibilities for future developments.
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US
Reference
https://coinvoice.cn/articles/31134
ZKFair Net Flow (dune.com)
https://medium.com/@senlonlee/blast是什么-如何参与blast的空投-blur-layer2未来的发展前景如何-21930e908ec4
https://share.foresight-news.com/article/detail/50365
https://www.panewslab.com/zh_hk/articledetails/c6to2clm.html

By Severin，Ian Wu，MT Capital
TL;DR
One of the core aspects of the Dencun upgrade is the introduction of a new data structure called blob through EIP-4844. This structure stores transaction data submitted by L2 to Ethereum, significantly reducing transaction costs and increasing through put in the Ethereum L2 space, benefiting the L2 ecosystem.Dencun upgrade also introduces a new transient storage opcode through EIP-1153, enabling smart contracts to read and call data from transient storage. This helps in reducing Ethereum’s storage costs and gas consumption, enhancing the scalability of the mainnet, and benefiting applications within the mainnet ecosystem.According to the Shadowfork test report released on December 19 and the Ethereum Core Developers’ Meeting #178 held on January 4, the testing progress for the Ethereum Dencun upgrade is favorable. There are expectations that the mainnet upgrade will be completed by the end of February.Dencun upgrade is expected to stimulate the prosperity of the L2 ecosystem and drive demand in infrastructural segments such as decentralized storage, DA, and RaaS. Additionally, application-layer segments like Perps, LSD, ReStaking, and FOCG are also anticipated to benefit from the Dencun upgrade.
Dencun Upgrade
Background of Dencun Upgrade
On December 28, 2023, Vitalik published an article “Make Ethereum Cypherpunk Again”, freely discussing his vision of cryptography. Vitalik emphasized that one of the core reasons why blockchains are currently limited to asset speculation is the rise in transaction fees. The high network transaction fees have turned people from users of blockchain networks into speculators on them. To realize the application value of blockchains, the transaction fees of blockchain networks must be reduced by another order of magnitude. Although the emergence of L2 has reduced network fees compared to the Ethereum mainnet, this is still far from enough.
Similarly, the takeoff of the Solana ecosystem network at the end of 2023 is also closely related to its extremely low network transaction fees. Compared to the Gas cost of up to $0.5 on Ethereum L2, Solana’s Gas fee as low as 0.0005 is negligible. The extremely low network Gas has promoted the prosperous Meme speculation, DeFi application interaction and DePIN application migration on Solana. In particular, cNFTs on Solana can reduce the minting cost by 1000 times compared to NFTs on Ethereum, which has also led to the prosperity of some DePIN projects and creator economy projects with NFTs as the economic core. It can be seen that low network transaction fees have a significant boost to network transaction activities and ecosystem application prosperity.

Of course, Ethereum has long been aware of this problem. In Ethereum’s upgrade roadmap, the next upgrade “The Surge” after “The Merge” aims to increase Ethereum’s TPS and reduce transaction fees in the Ethereum ecosystem network. The upcoming Ethereum Dencun upgrade is part of “The Surge”, aiming to further improve Ethereum’s transaction throughput and scalability by introducing Proto-Danksharding.

One of the core aspects of the Cancun upgrade is the introduction of the Proto-Danksharding module. Proto-Danksharding is also in preparation for Ethereum’s eventual sharding scaling. Ethereum’s earliest scaling plan was to split Ethereum into different shards, distributing the mainnet’s computing load across shards, with each independent shard storing a subset of transaction data occurring on Ethereum and processing transactions in parallel to improve Ethereum’s TPS. The original ETH2.0 plan ultimately shards the mainnet into 64 shards to achieve 100,000+ TPS.

However, developing sharding itself has high complexity and slow progress. In contrast, scaling solutions that offload transaction execution to layer 2 while relying on Ethereum for settlement, consensus and data availability have evolved extremely quickly, achieving lower transaction costs and higher throughput, meeting some of Ethereum’s scaling needs to some extent. This has led Ethereum to gradually abandon the sharding-centric scaling path and adopt data sharding for Rollups.
Compared to traditional sharded chain sharding, Danksharding’s scaling approach is relatively simpler. One of the core aspects of the upcoming Dencun upgrade is introducing Proto-Danksharding, which primarily introduces blobs into the block space, optimizing data availability costs through blobs and improving L2 scalability. The Proto-Danksharding introduced in Dencun will also be the first step towards Ethereum’s full scaling, laying the groundwork for further realizing full Danksharing, separating block proposers and builders, and enabling data availability sampling.
Dencun Upgrade Kernel
Proto-Danksharding
Proto-Danksharding, also known as EIP-4844, is the most critical module in the Dencun upgrade. It is named after the two researchers who proposed this scaling approach — Proto Lambda and Dankrad Feist, taking part of each of their names. Proto-Danksharding introduces a new data structure called blob to reduce L2 costs and optimize L2 performance.
blob-carrying transaction
Previously, all L2 transactions were stored in L1 Calldata. However, Calldata itself has limited space, and all data on Calldata is processed by Ethereum nodes and stored permanently on chain, resulting in high data availability costs. In theory, L2 transaction data does not need to be permanently stored on expensive Ethereum L1, only needing to be stored for some time to meet fraud proof and other validation requirements. In other words, Ethereum L2 transactions previously lacked suitable storage space. From a data perspective, 80% of L2 transaction costs and gas fees come from expensive data storage costs in Calldata.

source: https://dune.com/optimismfnd/optimism-l1-batch-submission-fees-security-costs
Proto-Danksharing will introduce a new data storage structure in Ethereum blocks: blobs. Blobs will be dedicated to storing L2 transaction data submitted to L1.

Each blob introduced by Proto-Danksharing is 128 KB in size, with each Ethereum block planned to contain 3–6 blobs (0.375 MB — 0.75MB), gradually expanding to 64 in the future.

source: https://a16zcrypto.com/posts/article/an-overview-of-danksharding-and-a-proposal-for-improvement-of-das/
In contrast, the amount of data that each Ethereum block can currently accommodate is less than 200KB. After introducing blobs, the amount of data that an Ethereum block can accommodate will increase significantly.

After introducing blobs, L2 transaction data submitted will no longer need to compete for Calldata storage, but will be directly submitted to blobs for storage. Also, blob data will be automatically deleted after about a month, further reducing unnecessary storage overhead. The introduction of blobs means L2 transaction fees will be greatly reduced (~90% reduction), and since blobs effectively expand block space for L2s, the transaction throughput L2s can simultaneously submit will also increase significantly. If the average goal of attaching 3 blobs per block is achieved after the Cancun upgrade, L2 throughput will increase by close to 2 times. If the ultimate goal of attaching 64 blobs per block is achieved, L2 throughput will increase by close to 40 times.
Additionally, blobs have an independent fee market. Proto-Danksharing also introduces a new type of Gas called Blob Gas. The Blob Gas fee mechanism in EIP-4844 is rooted in the EIP-1559 mechanism introduced earlier, where blob storage space will be auctioned according to its own fee market. This means the blob fee market is completely independent of block space demand, thereby improving the flexibility and efficiency of network resource allocation. The data storage cost in blobs is approximately 1 data gas per byte, while Calldata is priced at 16 data gas per byte. In comparison, blob data storage costs are significantly lower than Calldata data storage costs.

After introducing blobs, the operational flow of the L1, L2 blockchain networks will also change. First, the L2 needs to publish its commitment to the transaction data on-chain. Then, the L2 needs to submit the actual transaction data to the blob. At the same time, nodes can check if the commitment is valid and verify the data. Consensus layer nodes attest that they have seen the data and that it has propagated across the network. After about a month, nodes will delete the data in the blob, which can be stored in other DAs.

KZG Commitments
EIP-4844 also introduces Kate-Zaverucha-Goldberg (KZG) commitments as part of the blob validation and proof generation process. KZG commitments are a polynomial commitment scheme that enables submitters to commit to a polynomial using a short string, and enables verifiers to confirm the claimed commitment using the short string. In short, KZG can simplify the verification of large amounts of data to the verification of small cryptographic commitments.
Data blobs can be represented as polynomials, and then used with polynomial commitment schemes to commit to the data. Generating commitments to the data using polynomial commitment schemes allows efficiently verifying specific properties of the data blob without needing to fully read its contents. The implementation of KZG commitments also paves the way for data availability sampling (DAS) in Danksharding. With DAS, validators can verify the accuracy and availability of data blobs without downloading the entire blob, improving efficiency and scalability.
Other EIP Upgrades:
In addition to EIP-4844, the Dencun upgrade also includes the following four key EIP improvement proposals:
EIP-1153: EIP-1153 introduces a new storage state: transient storage. Previously, all storage on Ethereum was permanent, with permanently stored data not only occupying block space but also consuming gas fees. However, for some unnecessary data, such as data that is only valid during a single transaction, permanent storage is unnecessary and wasteful. Therefore, EIP-1153 introduces transient storage opcodes that allow smart contracts to read and invoke data in temporary storage. Once the complete transaction execution cycle ends, the storage of that data will be cleared, thereby reducing Ethereum’s storage costs and gas consumption.

source: https://consensys.io/blog/ethereum-evolved-dencun-upgrade-part-4-eip-7514-and-eip-1153
EIP-4788: EIP-4788 introduces beacon block roots into each EVM block. Previously, the EVM and beacon chain operated independently, with the EVM unable to directly access beacon chain data and state. EIP-4788 essentially introduces a protocol-level oracle, relaying consensus state to the Ethereum mainnet. It adds a “parent_beacon_block_root” field in block headers, allowing the EVM to derive consensus layer state and data in a minimally trusting way, reducing security risks and reliance on external oracles.EIP-5656: EIP-5656 introduces the MCOPY opcode to optimize copying memory during execution. Rather than using MSTORE and MLOAD, MCOPY combines them into one opcode, reducing the gas costs for copying 256 bytes of memory from 96 to 27. This allows faster and cheaper memory operations.EIP-6780: EIP-6780 restricts the SELFDESTRUCT opcode. By limiting self-destruct capabilities, Ethereum can better manage state size for more stable and predictable performance. This simplifies future upgrades.
Status of Dencun Upgrade
12.19 Shadowfork Test Report
According to the Shadowfork test report released on the 19th, the testing of the Ethereum Dencun upgrade is going well so far, with the Ethereum Foundation continuing intensive testing across additional Shadowfork splits over the next two weeks. Goerli, Sepolia, Holsky nodes will also welcome tests at three time points on 1.7, 1.30 and 2.7. If testnet runs well, the Dencun upgrade on mainnet is expected to be completed within February.
Looking at the Shadowfork test report, node resource usage, overall network usage, network health, blob distribution and propagation were as expected during testing.
In terms of CPU and RAM usage, there were no major fluctuations in resource utilization before and after the Cancun test fork, remaining stable overall.

In terms of network usage, compared to the Shadowfork baseline, network usage increased as expected after Dencun testing. With good Blob usage, network usage is expected to increase by about 200kbps.

During testing, the overall network remained stable, with no client crashes and smooth client operation.

During testing, most blocks contained 3 blobs, consistent with the target number of blobs.

During testing, blobs propagated to 95% of nodes in under 2s, with most blobs fully propagating across the network in an average of 500 milliseconds. Ideally, block propagation time is expected to increase by about 250 milliseconds.

1.4 Teleconference
On the evening of January 4th, the 178th Ethereum Core Developers’ Meeting was held online. During this meeting, the upgrade schedule for the Dencun testnet was finally confirmed. Developers unanimously agreed to conduct upgrade tests for the Goerli, Sepolia, and Holesky testnets on January 17th, January 30th, and February 7th, respectively.
Simultaneously, in order to promptly address and resolve any issues that may arise during the testnet upgrade process, developers decided to convene the 179th meeting on the day after the completion of the Goerli testnet testing on January 17th. They will discuss the test content and decide whether it is necessary to update the testnet upgrade schedule based on the situation.
Although developers have not reached a final consensus on the upgrade schedule for the mainnet, based on the current stage’s Shadowfork test data, testnet testing arrangements, and the timeline, there is a high probability that the Dencun upgrade for the Ethereum mainnet will take place at the end of February.
Potential Opportunities and Bullish Tracks
L2
One of the most direct bullish tracks resulting from the Dencun upgrade is in the Layer 2 (L2) domain. The introduction of blob significantly reduces transaction costs on L2, leading to a substantial increase in throughput. Dencun’s stimulus to L2 lies in enabling it to compete more fiercely with other alternative Layer 1 (Alt L1) solutions, attracting high-quality projects and a vast user base with lower cost expenditures and superior performance.
While the Dencun upgrade is favorable for all Ethereum-based L2 solutions, we will focus on observing which L2 projects possess more unique competitive advantages to capitalize on the dividends brought about by the Dencun upgrade.
L2 Ecosystem
Arbitrum
Currently, the leaders in the Ethereum L2 space remain Arbitrum and Optimism, each with slightly different competitive advantages and directions. Arbitrum excels in the diversity of protocols based on Arbitrum One, while Optimism leads in the cross-chain ecosystem diversity based on OP Stack.
Arbitrum continues to be the most diverse L2 across all protocol types. According to incomplete data from DeFiLlama, there are approximately 520 protocols on Arbitrum, far surpassing Optimism’s 216. According to L2beat data, Arbitrum’s Total Value Locked (TVL) is currently around 11.26 billion, occupying almost half of Ethereum Rollup’s total TVL.

Additionally, network transaction activity on Arbitrum has been thriving. Looking at the ranking of network transaction volume in the past 30 days, Arbitrum boasts approximately 36 million in transaction volume, ranking just below zkSync, which is still undergoing significant token distribution activities. If we exclude L2 solutions with airdrop interactions and focus solely on the issued tokens, comparing Arbitrum with Optimism, Arbitrum leads by a significant margin with a network transaction volume three times higher than Optimism.

In summary, Arbitrum, with its highest network transaction volume, is evidently poised to benefit more from the reduction in transaction fees, and the optimization of Transactions Per Second (TPS) is advantageous for the prosperity of high-performance protocols like GMX and GNS on Arbitrum. From a network fundamentals perspective, Arbitrum is undoubtedly one of the primary beneficiaries of the Dencun upgrade. Additionally, Arbitrum is actively promoting Arbitrum Orbit and Stylus language, enabling developers to build Rollups based on both the Ethereum Virtual Machine (EVM) and WebAssembly Virtual Machine (WASM VM) simultaneously, thereby creating a network effect based on Arbitrum.
Optimism
In contrast to Arbitrum, Optimism’s competitive focus is more centered around building the Optimism SuperChain network based on the OP Stack. The value of Optimism is more dependent on the network value of Optimism SuperChain.
Since the release of OP Stack, numerous projects such as Base, Lyra, opBNB, Redstone, Zora, Mode, Debank, and others have built their own L2 solutions based on OP Stack. The Bedrock version upgrade of OP Stack further optimizes aspects such as transaction costs, transaction processing within blocks, and node performance, making building L2 based on OP Stack even more attractive. According to the plan for Optimism SuperChain, all Rollups using OP Stack will be integrated into a standardized OP chain. These chains can communicate directly through a cross-chain messaging protocol, sharing a common Ethereum cross-chain bridge and sequencer network.
While the Dencun upgrade is a positive for all L2 solutions, the upgrade premium enjoyed by Optimism is the combined network value of all ecosystems within Optimism. If the Dencun upgrade leads to the emergence of more new L2 solutions, the upgrade premium for Optimism will be the adoption of more L2 chains built using OP Stack. Optimism is also getting closer to the ultimate vision of the Optimism SuperChain super ecosystem.

Decentralized Sequencers
Metis
The competition between Arbitrum and Optimism revolves more around protocols, network activity, and ecosystem value. However, another pressing issue that needs to be addressed is the decentralization of L2 Sequencers, which has become the proverbial elephant in the room. With the surge of more L2 solutions due to the Dencun upgrade, the problems associated with centralized sequencers, such as single points of failure, malicious arbitrage, capturing MEV value, and the potential for scrutinizing user transaction spaces, may become increasingly severe.
Metis has taken the lead in addressing this issue and may become the first Ethereum L2 to operate a decentralized Proof-of-Stake (PoS) sequencer.
Metis has disrupted the centralized pattern of sequencers, allowing nodes that stake at least 20,000 METIS tokens to enter the sequencer pool as sequencer operators. Sequencers in the pool are responsible for determining the order in which transactions are packaged and require the signatures of at least 2/3 of the sequencers to upload data to the L1 mainnet. Additionally, to further prevent malicious behavior by sequencers, Metis has introduced the role of validators to randomly sample and inspect blocks, ensuring that sequencers correctly order transactions.
Metis has chosen to proactively share profits, giving the most lucrative sequencer revenue to staking nodes. As more staking protocols for sequencers emerge in the future, we can anticipate broader user participation in sequencer staking, allowing users to share in sequencer revenue. Metis’ innovations in decentralizing sequencers and empowering the METIS token have contributed to the rise in METIS token prices, staking rates, and the inflow of funds into the Metis network. As the Metis network’s ecosystem flourishes, sequencer income grows, and more METIS is staked to sequencer nodes, the circulating supply of METIS decreases. This scarcity may drive increasing demand for METIS in the market, fostering a positive feedback loop for Metis and the METIS token in terms of Total Value Locked (TVL), ecosystem growth, and token price. The competition for decentralized sequencers may well become a central theme in the competition among L2 solutions post the Dencun upgrade.

Token Empowerment
Another critical factor determining the price of L2 tokens is their empowerment. Currently, almost all Ethereum L2s use ETH as the gas token, and their native L2 tokens serve little purpose beyond governance. Without stable value consumption scenarios, these tokens can become disposable assets at any time. Tokens with actual empowerment, such as METIS, are more likely to follow a positive spiral of L2 fundamentals and token price.
In addition to METIS being used for decentralized sequencer staking and sharing sequencer revenue, another noteworthy example is ZKF. The token ZKF of ZkFair serves not only as a gas token but can also be staked to share in the gas income of the ZkFair network. Similar to METIS, token empowerment through staking dividends is likely to stimulate a positive spiral in the market price of ZKF. Furthermore, Arbitrum Orbit has introduced the capability to support custom gas tokens.
As mentioned earlier, all Rollups that share OP Stack will share a common sequencer network. Imagine if Optimism also follows Metis by introducing staking modules for OP to become a decentralized sequencer on OP Stack, this could bring significant market demand and buying power to OP. The rising token price would, in turn, attract more funds and users to applications within the ecosystem, contributing to its prosperity. The empowerment of tokens in the context of Ethereum L2 post the bumpy Dencun upgrade is a crucial topic that demands attention.
Others
As previously discussed, the reduction in transaction fees and the increase in L2 TPS resulting from the Dencun upgrade will benefit every Ethereum L2. Apart from the projects discussed earlier, there are other projects whose performance is also worth anticipating.
Base can be considered one of the best-performing L2s in 2023. Its strong association with Coinbase allows Base to attract a significant number of users and funds from Coinbase, making it the third-ranked Ethereum L2 in terms of TVL. Base’s rise is closely related to the hype around popular projects on Base, such as Friend.tech and FrenPet. One significant characteristic of these projects is the high interaction frequency and relatively low single interaction earnings. They also attract a relatively large number of users, demanding higher performance. The positive impact of the Dencun upgrade aligns well with the requirements and characteristics of such projects. We may witness the emergence of more social and gaming-oriented lightweight applications on Base, bringing in more users and funds, and stimulating the ecosystem’s vitality.
Additionally, there are still many L2s like Manta and Blast, which have not yet launched. These L2s are accumulating strength, attracting users to participate in ecosystem interactions through coin issuance expectations and overlapping revenue marketing strategies. The Dencun upgrade can significantly reduce the cost of user interactions, further promoting the prosperity of activities on these L2 chains. However, it’s important to note that the direction these L2s will take after airdrops is unclear, and caution should be exercised with optimism in the current stage.
Data Availability Layer
One of the core modules introduced in the Dencun upgrade is the incorporation of blob for storing L2 data submitted to L1. However, blob data storage is not permanent; the stored data will be discarded after approximately one month. Nevertheless, this data still holds potential value for retrieval and analysis. Therefore, the storage of this data is expected to drive the demand for decentralized storage services.
ETHStorage
EthStorage is the first second-layer solution that provides programmable dynamic storage based on Ethereum data availability. It can extend programmable storage at a cost ranging from 1/100th to 1/1000th, catering to storage needs reaching several hundred terabytes or even petabytes.
ETHStorage is tightly integrated with Ethereum. The client of EthStorage is a superset of the Ethereum client Geth, implying that nodes running EthStorage can seamlessly participate in any Ethereum processes. A node can serve as both an Ethereum validator node and a data node for EthStorage.
Moreover, ETHStorage exhibits enhanced interoperability with the Ethereum Virtual Machine (EVM), ensuring perfect compatibility. For instance, when minting an NFT image, if the image is stored on Arweave, minting it as an NFT image on Ethereum would typically require three smart contract operations. In contrast, ETHStorage achieves the same result with just one operation.

ETHStorage adopts a key-value storage paradigm and supports complete CRUD operations (Create, Read, Update, Delete storage data). Positioned as the first storage Layer 2 in the Ethereum ecosystem, ETHStorage is poised to take on the L2 state data discarded by blob. Thanks to its seamless interoperability with the EVM and cost-effective storage, ETHStorage is expected to seamlessly integrate the discarded L2 state data.
Covalent
Another noteworthy decentralized storage project is Covalent. Anticipating the business opportunities in data availability after the Dencun upgrade, Covalent launched the “Ethereum Wayback Machine (EWM)” in November 2023 for long-term storage of L2 state data discarded by blob.
However, merely storing data has limited value for Covalent. Therefore, Covalent goes beyond simple storage and integrates L2 data into its existing decentralized data analytics infrastructure services. Covalent facilitates seamless user access to blockchain data, providing data service support for specific user groups such as arbitrageurs, MEV researchers, AI researchers, blockchain data websites, and more.
Regardless of how the future unfolds for modular blockchains, execution layers, settlement layers, consensus layers, and short-term data availability layers, Covalent aims to be the long-term data availability layer for all projects. It provides permanent data storage and availability services.
With the implementation of the Dencun upgrade, the data storage and availability track is expected to attract a new wave of attention. Backed by prominent exchanges like Binance and Coinbase, as well as top-tier investment firms such as 1kx and Delphi Digital, and with a solid business foundation, Covalent is well-positioned to thrive in the competitive landscape.

Filecoin, Arweave, Storj, and Other Decentralized Storage Projects
The Dencun upgrade is expected to bring more practical decentralized storage business demand to established projects like Filecoin, Arweave, and Storj. It is anticipated that these projects will also handle some of the L2 state data discarded by blob. Since this data is valuable only to specific user groups oriented towards data analysis research and does not require frequent state changes, Arweave, which emphasizes one-time payment and permanent storage, may attract more growth in L2 state data storage business compared to others.
Taking a long-term perspective, L2 also needs a dedicated data availability layer. In the future, the data stored in blob may not be the data and state submitted by L2 but rather the Merkle root of the computations in that part. This would relieve Ethereum from any additional data storage burden, returning to the fundamental consensus mechanism.
EigenDA
EigenDA is a promising solution for decentralized availability. EigenDA decouples data availability from consensus. First, Rollup needs to encode the Data blob using erasure codes and publish a KZG commitment. Subsequently, EigenDA nodes, consisting of re-stakers, need to validate the KZG commitment and provide final consensus confirmation. Only after consensus confirmation is the data submitted to the Ethereum mainnet. EigenDA’s core lies in reusing Ethereum’s consensus, abstracting the validation and final consensus confirmation stages in DA, and completing this part of the process through the reused consensus.

Polygon Avail
Polygon Avail is a project proposed by Polygon that focuses on addressing data availability in the Ethereum scaling roadmap. Avail aims to provide data availability services for various scaling solutions such as L2 and sidechains. Avail supports EVM-compatible Rollups in publishing data to Avail. Avail efficiently sorts and records transactions, offering data storage and validity verification.
In terms of validity proofs, Avail adopts KZG polynomial commitments, which, compared to Celestia, can provide more concise proofs and reduce node memory, bandwidth, and storage requirements. Avail has been designed from the beginning to align with Ethereum’s upgrade and scaling roadmap, allowing developers to store data on Avail and choose to settle on the Ethereum mainnet.
In the trend of modular blockchains, Avail is poised to become an underlying data availability service provider for more EVM Rollups.

source: https://blog.availproject.org/the-avail-vision-reshaping-the-blockchain-landscape/
RaaS (Rollup as a Service)
RaaS providers abstract the complex technicalities of building blockchains and assist users in rapidly deploying L2 with simple, user-friendly tools, and even in a no-code fashion. As mentioned earlier, the Dencun upgrade is expected to trigger the surge of L2. The improvement in L2 usability and performance will facilitate the emergence of more L2 solutions, thereby benefiting the underlying Rollup as a Service infrastructure.
Within the current RaaS solutions, there is an ongoing discussion about whether to choose an Optimistic (OP) or a Zero-Knowledge (ZK) approach. OP-based solutions offer better compatibility, a richer ecosystem, and lower entry barriers. ZK-based solutions provide higher customization and greater security. While in the long term, ZK-based solutions offer higher customization and unique capabilities in terms of functionality and performance, and can provide projects with a competitive edge, in the short term, OP-based solutions can leverage their low entry barriers and high compatibility to amplify the cost and performance advantages brought by the Dencun upgrade to L2. This allows for the rapid reuse of existing comprehensive Ethereum Virtual Machine (EVM) infrastructure, achieving early user and capital expansion, with more evident short-term leverage.
Caldera
Caldera is a RaaS service provider built on the OP Stack, supporting users in quickly establishing an Optimism L2 in a no-code manner. L2 issued using Caldera achieves full EVM compatibility, significantly lowering the development threshold for developers. This compatibility is advantageous for directly reusing existing EVM ecosystem projects, providing a more comprehensive infrastructure for L2. In addition to L2 itself, Caldera also configures a range of blockchain infrastructure for users, such as blockchain explorers, testnet faucets, etc., further reducing the cost and usage barriers for launching, making it plug-and-play.

source: https://foresightventures.medium.com/foresight-ventures-what-is-raas-which-type-of-raas-will-win-the-market-b010006f5cd
Altlayer
Altlayer is another noteworthy Rollup as a Service (RaaS) solution within the Optimism ecosystem. Altlayer supports no-code deployment of L2, allowing developers to rapidly create a Rollup chain through simple graphical interface operations. Additionally, AltLayer also supports Elastic Rollup — Flash Layer.
In scenarios where there is a sudden surge in demand on the mainnet, such as popular NFT projects starting minting or popular DeFi projects distributing airdrops, developers can quickly deploy a Rollup chain through Altlayer to respond to the short-term increase in performance demands. When the event concludes, and states and assets are transferred back to the base chain, the Flash Layer can be directly removed. Altlayer provides an instantaneous scaling solution that avoids resource waste, catering to more complex business requirements.

Lumoz (formerly Opside) is a RaaS (Rollup as a Service) solution built on Zero-Knowledge (ZK), supporting developers in deploying their own ZK-Rollup with a customized zkEVM application chain. The proliferation of numerous ZK-Rollups also leads to a significant demand for computational power for Zero-Knowledge Proof (ZKP) calculations.
Lumoz has constructed a decentralized ZKP marketplace that supports ZK mining, generating zero-knowledge proofs for ZK-Rollups. In terms of practical usage, developers don’t need to understand any knowledge related to ZK; they can quickly deploy a ZK-Rollup through simple frontend operations. The computational power demands during the operation of ZK-Rollup can be addressed by Lumoz’s ZK-PoW service, significantly reducing operational barriers and costs for project operators. Notably, Lumoz also supports contracts with 0 Gas Fees, providing users with a smooth DApp experience without interaction costs. The recently popular ZKFair is one of the L2 solutions built on Lumoz.
Application Layer
Previously, we thoroughly discussed the benefits of the Dencun upgrade for the Infrastructure tracks such as L2, DA, and RaaS. The improvements in L2 costs and performance brought by the Dencun upgrade are expected to drive the development and innovation of the application layer. Next, we will briefly analyze the application layer tracks that are expected to significantly benefit from the Dencun upgrade.
Perps
Overall, interactions in the DeFi space have a characteristic of low interaction frequency but high single-point interaction returns. Therefore, in a sense, DeFi does not particularly rely on higher performance, as the returns from single DeFi operations can well cover the costs of interaction. However, decentralized derivatives deviate from this norm, as the limitations in performance and the flaws of excessively high network transaction fees can be magnified exponentially in the operation of decentralized derivative protocols.
Due to the performance limitations of L2 networks, Perps-type projects find it challenging to run an on-chain order book efficiently and respond to real-time order matching needs. Additionally, the excessively high network fees greatly restrict the high-frequency trading of liquidity providers and professional traders. The existence of these issues results in lower efficiency in Perps trading, relatively higher slippage, an inability to attract deep liquidity, professional trading users, and the failure to provide users with a trading experience comparable to centralized exchanges (CEX).
We believe that the Dencun upgrade can address these issues to some extent, with the improvement in performance being crucial for derivative trading. Compared to point to pools and AMM models, the Dencun upgrade is more favorable for L2 Perps, such as ApeX Protocol, Aevo, Vertex Protocol, which employ order book models for decentralized derivatives exchanges. Similarly, the reduction in network transaction fees will further stimulate more mature point to pool model Perps like GMX, Synthetix, GNS, facilitating their trading activities.
LSD
In addition to EIP-4844, the Dencun upgrade also includes the introduction of EIP-4788. EIP-4788 will introduce the beacon block root into each EVM block. This allows the Ethereum mainnet to obtain data from the Ethereum consensus layer in a trust-minimized manner, eliminating the dependence on external oracles, thereby reducing potential security risks, oracle failures, and manipulation risks. The introduction of EIP-4788 can further enhance the security of staking protocols. Although not directly impacting users, this improvement represents a potential significant advantage for the LSD and ReStaking tracks. EIP-4788 enables liquidity staking protocols like Lido, Rocketpool, Swell, and re-staking protocols like Eigenlayer to directly access critical data such as validator balances and states from the consensus layer, significantly improving their security and operational efficiency. We still have high expectations for the development of LSD after the Dencun upgrade, especially for the ReStaking track represented by Eigenlayer. Eigenlayer has recently made frequent moves, supporting various LSTs, collaborating with Altlayer to launch Restaked Rollups, the ecosystem’s re-staking protocol Renzo is already live, and EigenDA has initiated the second phase of its testnet. Eigenlayer’s Total Value Locked (TVL) has also reached 1.7 billion and continues to rise steadily. The narrative of re-staking is just beginning, and EIP-4788 will provide a solid underlying security guarantee for re-staking.
FOCG
Full-chain gaming is one of the significant beneficiaries of the Dencun upgrade. Unlike games where only assets are on-chain, and the game logic remains in a Web2.5 environment off-chain, full-chain games have all aspects, including game content, logic, rules, and assets, on-chain. The on-chain gas fees determine the interaction costs of each gaming operation, and on-chain performance dictates the user experience for players. Clearly, due to performance limitations, previous full-chain games were limited to relatively simple turn-based strategy games. The high interaction costs and the demand for high-frequency interactions in games also made many players hesitant.
The Dencun upgrade can visibly improve the development dilemma of existing full-chain games and even give rise to more types of full-chain games. We anticipate more full-chain games built on full-chain game engines like Mud, Dojo, running on L2 solutions like Redstone and StarkNet. Existing full-chain games such as Sky Strife, Loot Survivor, Issac, Influence may capture more real players due to the improved user experience brought by the Dencun upgrade.
The landing of the Dencun upgrade will inject new vitality into the Ethereum ecosystem. Of course, besides benefiting the mentioned tracks, the Dencun upgrade will also reduce the attractiveness and core competitiveness of certain tracks such as sidechains and non-EVM scaling solutions. The significant reduction in costs for EVM ecosystem L2 and L3, along with performance improvements, will further overshadow sidechain solutions like Polygon, and non-EVM scaling solutions like BSC will also lose some appeal due to cost and performance advantages. The Dencun upgrade will refocus the market on the core of Ethereum, which is L2 and L3.
Conclusion:
As part of Ethereum’s upgrade roadmap, Dencun upgrade, a part of “The Surge,” aims to further reduce the usage costs and enhance the scalability of the Ethereum ecosystem. The upgrade introduces EIP-1153, which includes the transient storage opcode, reducing storage costs and gas consumption on the Ethereum mainnet, thus improving scalability. Additionally, Dencun upgrade introduces EIP-4844, significantly lowering transaction costs on Ethereum L2 by introducing a new data structure called blob, enhancing L2 transaction throughput.Based on the current Shadowfork test reports and the recent 178th Ethereum Core Developers’ meeting, the testing situation for Ethereum’s Dencun upgrade looks promising. The three major testnets are expected to undergo Dencun upgrade testing from January to early February. If the testnet tests proceed smoothly, the mainnet Dencun upgrade is likely to be completed in February.The Dencun upgrade will further boost the prosperity of the L2 ecosystem, with a special focus on Optimism, Arbitrum, and Metis. It will also drive demand in infrastructure tracks such as decentralized storage, DA, and RaaS. Projects like EthStorage, Covalent, EigenDA, Polygon Avail, Caldera, Altlayer, Lumoz, among others, are worth monitoring for their development.The Dencun upgrade will stimulate innovation and development in the application layer. Order book model Perps, represented by ApeX Protocol, Aevo, and Vertex Protocol, will benefit significantly. EIP-4788 will improve the underlying security of LSD and ReStaking protocols, especially driving the development of the re-staking track represented by EigenLayer. Full on-chain games will also provide users with a better interactive experience due to the Dencun upgrade.
Final Note: MT Capital is highly optimistic about the revolutionary changes that the Dencun upgrade will bring to the EVM ecosystem. We welcome early-stage projects and entrepreneurs in the ReStaking, DA, L2, Perps, FOCG, and other tracks to reach out to us anytime. (Twitter: @0X_IanWu, @Severin0624, MT Capital Email: deck@mt.capital)
Reference：
https://vitalik.eth.limo/general/2023/12/28/cypherpunk.htmlhttps://www.datawallet.com/crypto/ethereum-cancun-upgrade-explained#:~:text=Ethereum Cancun EIPs,-The imminent Ethereum&text=The Cancun component of the,costs%2C efficiently using block space.https://ethereum-magicians.org/t/a-rollup-centric-ethereum-roadmap/4698https://www.eip4844.com/#howhttps://a16zcrypto.com/posts/article/an-overview-of-danksharding-and-a-proposal-for-improvement-of-das/https://hacken.io/discover/eip-4844-explained/Ethereum Evolved: Dencun Upgrade Part 3, EIP-4788EIP-4844 Unveiled: Paving the Way for Proto-Danksharding in EthereumEIP-4844: Shard Blob TransactionsAn explanation of the sharding + DAS proposalEthereum’s Cancun-Deneb (Dencun) Upgrade: another milestone after the Shanghai UpgradeRecapping the Rollups RoadmapEthereum: Dencun Upgrade and Proto-DankshardingUnlocking Ethereum’s Evolution: The Cancun Advancementhttps://hackmd.io/@vbuterin/sharding_proposal#ELI5-data-availability-samplingdencun-gsf-1 analysishttps://foresightnews.pro/article/detail/28606https://foresightnews.pro/article/detail/40103https://foresightnews.pro/article/detail/51220https://bitpush.news/articles/5743354https://www.techflowpost.com/article/detail_15286.htmlhttps://foresightnews.pro/article/detail/43926https://foresightnews.pro/article/detail/35645https://www.techflowpost.com/article/detail_15313.htmlhttps://foresightnews.pro/article/detail/20033https://www.techflowpost.com/article/detail_12801.htmlhttps://foresightnews.pro/article/detail/51217https://docs.eigenlayer.xyz/eigenda-guides/eigenda-overviewhttps://docs.altlayer.io/altlayer-documentation/rollup-types/flash-layer-rollupshttps://foresightnews.pro/article/detail/27148
MT Capital
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By Severin, MT Capital
bitSmiley Fills the Stablecoin Gap in the BTC Ecosystem
Since the second half of last year, the fervor around Ordinals has brought a huge influx of capital and user traffic to the Bitcoin network, propelling the evolution of the Bitcoin ecosystem. The demand for inscription transactions gave rise to numerous Bitcoin wallets and inscription market infrastructure. The limitations on Bitcoin network transaction throughput and excessively high gas costs have also led developers to gradually shift their focus to Bitcoin scalability solutions. The massive amount of capital locked in inscription needs new use cases and yield opportunities, while other ecosystems are eager to capitalize on the inscription bull run, giving rise to various cross-chain projects.
As of now, although the Bitcoin ecosystem as a whole remains in a very early stage, it has nurtured a batch of high-quality infrastructure that fills market gaps. For example:
Wallets: Unisat, Alby, OKX Wallet, Wizz Wallet….Marketplace: Unisat, OKX BRC20 Market, idclub, Dotswap swap, Alex lab….L2/Scalability: B² Network, Merlin Chain, BounceBit, BEVM, Bison Labs, SatoshiVM….Bridges: MultiBit, TeleportDAO, Ordinifinity, Ordbridge….DA: Nubit, B² Network, Babylon….

source: MT Capital
The excitement around the Bitcoin ecosystem is reminiscent of Ethereum’s DeFi Summer. However, compared to Ethereum, the Bitcoin ecosystem still lacks quality DEX, lending and stablecoin projects. In particular, the crown jewel of DeFi — native stablecoins — remains a major gap in the Bitcoin ecosystem. As BTC L2 solutions continue to emerge, the L2 ecosystem needs stablecoins to leverage BTC DeFi and unlock liquidity from the Bitcoin mainnet. As the inscription frenzy gradually cools down and the market becomes more rational, the funds remaining on the Bitcoin network also need new yield and utility, for which stablecoins are the obvious choice. Therefore, we have our eyes on bitSmiley, the first bitRC-20 overcollateralized stablecoin project on the Bitcoin ecosystem. bitSmiley has the potential to fill the stablecoin gap and become a core component in the next wave of BTC ecosystem growth.
BTC’s “MakerDAO + Compound”
bitSmiley consists of two core components: the overcollateralized stablecoin bitUSD, and the fully decentralized P2P lending protocol bitLending. Its business model, combining stablecoin issuance with decentralized lending, is often referred to as the “MakerDAO + Compound” of the Bitcoin ecosystem.

source: https://medium.com/@bitsmiley_labs/who-we-are-92e02a0c4b27
bitUSD
bitUSD is the cornerstone of the bitSmiley ecosystem. Due to the limited functionality of Brc-20, bitSmiley optimized Brc-20 into an enhanced version called bitRC-20 to meet the needs of running a stablecoin. bitRC-20 is backwards compatible with Brc-20, with additional Mint and Burn operations to facilitate stablecoin minting and burning.
The overall minting logic of bitUSD is similar to MakerDAO. First, users need to overcollateralize BTC on the Bitcoin mainnet. Then, the oracle will relay the information to L2. The bitSmileyDAO deployed on L2, after receiving and validating the oracle information via consensus, will send a Mint bitUSD message to validators on the Bitcoin mainnet, thus minting bitUSD on the mainnet.

source: https://github.com/bitSmiley-protocol/whitepaper/blob/main/BitSmiley_White_Paper.pdf
The redemption logic is similar to the minting logic. When users retrieve their collateral, the corresponding bitUSD will also be burned accordingly.

source: https://github.com/bitSmiley-protocol/whitepaper/blob/main/BitSmiley_White_Paper.pdf
If the collateral ratio drops below the threshold, bitSmiley will also initiate liquidation to auction off the collateral assets. Similar to MakerDAO’s liquidation mechanism, bitSmiley’s liquidation uses a Dutch auction model where the bidding starts high and gradually decreases. bitSmiley will also allocate 90% of the stability fees and auction proceeds to a liquidation buffer to safeguard the overall system’s security. Beyond that, when the liquidation buffer is still insufficient to cover the debt, bitSmiley will use the platform’s future revenue as collateral for debt auction to minimize bad debt as much as possible, thus better protecting the platform from extreme market volatility.

source: https://github.com/bitSmiley-protocol/whitepaper/blob/main/BitSmiley_White_Paper.pdf
MakerDAO’s decentralized overcollateralized stablecoin design has been validated by the market. bitSmiley cleverly references MakerDAO’s approach, while innovating more delicately on the token standard and liquidation mechanism to better meet the stablecoin needs in the Bitcoin ecosystem.
bitLending
In addition to stablecoin needs, bitSmiley also keenly noticed Bitcoin users’ demand for liquidity lending. So bitSmiley can also provide native decentralized lending services on Bitcoin.
The implementation of bitLending is similar to other P2P lending protocols on other ecosystems. Lenders can post loan offers on bitLending, specifying the type and amount of bitRC-20 tokens offered, loan terms, and interest rates. Borrowers can accept loan offers they like. Upon matching, bitLending will generate a multisig address for fund transfer. The borrower and lender need to transfer assets to the multisig address and wait for on-chain confirmation. After confirmation, the borrower can withdraw the loan.
Due to the Bitcoin network’s long block times, bitLending cannot rely on oracles for liquidation like other lending protocols. If the collateral asset price of the borrower drops significantly, the borrower may default, exposing the lender to major losses. To solve this, bitLending introduces loan insurance. Both the borrower and lender need to transfer an insurance fee to the multisig address before transferring the loan and collateral. Insurers can collect the fees in the multisig address and opt to insure the lender’s losses. If the borrower defaults, the insurer’s funds in the multisig will be used to compensate the lender, thus protecting the lender’s interests.

source: https://github.com/bitSmiley-protocol/whitepaper/blob/main/BitSmiley_White_Paper.pdf
bitSmiley also plans to further optimize bitLending’s lending mechanism to support order splitting and merging to improve capital efficiency. Additionally, bitSmiley plans to introduce CDS (credit default swaps) tailored to bitLending, bringing more sophisticated traditional finance plays into the Bitcoin ecosystem.
In summary, bitSmiley not only introduced stablecoins and lending to the DeFi ecosystem, but also made delicate optimizations to the stablecoin and lending protocols based on Bitcoin’s uniqueness. With the launch of BTC L2s and the gradual maturation of bitSmiley’s products, its combined stablecoin and lending model has the potential to become the liquidity hub of the Bitcoin network, aggregating liquidity, improving capital efficiency, and injecting ecological vitality. bitSmiley’s first mover advantage may establish bitUSD as the hard currency for value exchange on Bitcoin, and continue expanding its network effects to build ecosystem moats and achieve dimensional reduction impact on competitors.
Recent Progress
In addition to its strong founding team and product capabilities, bitSmiley’s marketing, community building, and operational strengths are also noteworthy. Recently, bitSmiley has ramped up promotions — announcing investors, partners, organizing AMAs and Twitter Spaces, increasing community discussions and followers. To further strengthen community engagement and reward early supporters, bitSmiley has launched a series of NFT campaigns.
Firstly, bitSmiley issued 100 OG NFTs called bitDisc-Gold exclusively to Bitcoin OGs and industry leaders. bitDisc-Gold holders get invited to a private Bitcoin OG club, priority access to bitSmiley products, and more future benefits.
Secondly, bitSmiley launched 10,000 bitDisc-Black NFTs to reward regular users, early supporters and contributors. bitDisc-Black holders also enjoy product trial access, potential airdrops, and other perks.

source: https://medium.com/@bitsmiley_labs/btc-leading-protocol-introduces-og-nft-bitdisc-6b3684a59615
Currently, bitSmiley has snapshotted 1,999 early community followers, and the remaining whitelist spots will be given out through future campaigns. Major KOLs on Twitter have also started retweet campaigns for whitelist giveaways. Additionally, bitSmiley kicked off a new whitelist giveaway campaign for active Discord members — users can join bitSmiley’s Discord and actively participate in discussions to earn whitelist eligibility.
Conclusion
After in-depth research and analysis, MT Capital is very bullish on bitSmiley’s growth potential and has participated in bitSmiley’s latest funding round. bitSmiley has keen insights into the market gaps for stablecoins and lending products in the Bitcoin ecosystem. By launching innovative native Bitcoin overcollateralized stablecoins and decentralized P2P lending, they have achieved perfect product-market fit. Moreover, bitSmiley’s stablecoins not only provide new value anchoring and transfer capabilities to the Bitcoin network, but its lending products also create new use cases and value capture opportunities for the stablecoins. We believe that with its first-mover advantage, bitSmiley will quickly build powerful ecosystem network effects and become a leading DeFi product in the Bitcoin ecosystem.
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US

By Xinwei, MT Capital
TL;DR
The necessity of Parallel EVM lies in its solution to the efficiency issues of traditional EVM’s sequential transaction processing. By allowing multiple operations to execute simultaneously, it significantly enhances network throughput and performance.Implementations of Parallel EVM include scheduler-based concurrent processing, multi-threaded EVM instances, and system-level sharding, while facing technical challenges such as unreliable timestamps, blockchain determinism, and validator profit orientation.Monad Labs, through its Layer 1 project Monad, aims to significantly enhance blockchain scalability and transaction speed with unique technological features. These include processing up to 10,000 transactions per second, 1-second block time, parallel execution capabilities, and the MonadBFT consensus mechanism.Sei V2, a major upgrade to the Sei Network, aims to become the first fully parallelized EVM. It offers backward-compatible EVM smart contracts, optimistic parallelization, a new SeiDB data structure, and interoperability with existing chains, aiming to greatly improve transaction processing speed and network scalability.Neon EVM, a platform on Solana, aims to provide an efficient, secure, and decentralized environment for Ethereum dApps. It allows developers to easily deploy and run dApps while leveraging Solana’s high throughput and low-cost advantages.Lumio, developed by Pontem Network, is a Layer 2 solution that innovatively addresses Ethereum’s scalability challenges by uniquely supporting both the EVM and the Move VM used by Aptos, elevating the Web3 experience closer to Web2 levels.Eclipse is an Ethereum Layer 2 solution that accelerates transaction processing using SVM. It adopts a modular rollup architecture, integrating Ethereum settlement, SVM smart contracts, Celestia data availability, and RISC Zero fraud proofs.Solana uses its Sealevel technology for parallel smart contract processing. Sui enhances throughput with Narwhal and Bullshark components. Fuel achieves parallel transaction execution through the UTXO model, and Aptos uses the Block-STM engine to enhance transaction processing capabilities. All demonstrate different implementations and advantages of parallel technology in the blockchain field.The main challenges of adopting parallelism include resolving data races and read-write conflicts, ensuring compatibility with existing standards, adapting to new ecosystem interaction models, and managing increased system complexity, especially in terms of security and resource allocation.Parallel EVM demonstrates tremendous potential in enhancing blockchain scalability and efficiency, marking a significant shift in blockchain technology. It improves transaction processing capacity by executing transactions simultaneously on multiple processors, breaking free from the constraints of traditional sequential transaction processing. While Parallel EVM offers immense potential, its successful implementation requires overcoming complex technical challenges and ensuring widespread adoption in the ecosystem.
Basic Concepts of Parallel EVM
Introduction to EVM
The Ethereum Virtual Machine (EVM) is a core component of the Ethereum blockchain, acting as its computational engine. It is a quasi-Turing-complete machine that provides an execution environment for smart contracts on the Ethereum network, crucial for maintaining trust and consistency across the entire Ethereum ecosystem.
The EVM executes smart contracts by processing bytecode, a more basic form of smart contract code typically written in high-level programming languages like Solidity. This bytecode consists of a series of operation codes (opcodes) used to perform various functions, including arithmetic operations and data storage/retrieval. The EVM operates as a stack machine, processing operations in a last-in, first-out manner, and each operation in the EVM has an associated gas cost. This gas system measures the computational work required to execute an operation, ensuring fair resource allocation and preventing network abuse.
In Ethereum, transactions play a vital role within the functionality of the EVM. There are two types of transactions: one that leads to message calls and another that leads to contract creation. Contract creation results in a new contract account containing compiled smart contract bytecode, which is executed when another account makes a message call to the contract.
The architecture of the EVM includes components like bytecode, stack, memory, and storage. It has a dedicated memory space for temporarily storing data during execution and a persistent storage space on the blockchain for indefinite data preservation. The EVM’s design ensures a secure execution environment for smart contracts, isolating them to prevent reentrancy attacks, and incorporates various safety measures, such as gas and stack depth limits.
Furthermore, the influence of the EVM extends beyond Ethereum, reaching a broader scope through EVM-compatible chains. While these chains differ, they maintain compatibility with Ethereum-based applications, enabling seamless interaction with Ethereum’s foundational applications. These chains play a key role in various domains like enterprise solutions, GameFi, and DeFi.

The Necessity of Parallel EVM
The necessity of Parallel EVM (Ethereum Virtual Machine) stems from its ability to significantly enhance the performance and efficiency of blockchain networks. Traditional EVM processes transactions sequentially, which is not only energy-intensive but also places a heavy burden on network validators. This method of processing often leads to high transaction costs and inefficiency, considered a major barrier to the widespread adoption of blockchain technology.
Parallel EVM revolutionizes the consensus process by allowing multiple operations to execute simultaneously. The ability to execute in parallel greatly increases the network’s throughput, thus enhancing the performance and scalability of the entire blockchain. With Parallel EVM, blockchain networks can process more transactions in a shorter amount of time, effectively addressing the common congestion issues and slow processing times of traditional blockchain systems.
Parallel EVM has significant impacts on various aspects of blockchain technology:
It provides a more energy-efficient and effective method for processing transactions. By reducing the workload of validators and the network as a whole, Parallel EVM contributes to building a more sustainable blockchain ecosystem.The increased scalability and added throughput directly lead to reduced transaction fees. Users will enjoy a more economical experience, making blockchain platforms more attractive to a broader audience.Processing multiple transactions simultaneously rather than sequentially means that dApps can run more smoothly, even during periods of high network demand.

Implementation Methods of Parallel EVM (Credited to Siyuan H.)
In the current EVM architecture, the most granular read and write operations are sload and sstore, used for reading from and writing to the state trie, respectively. Therefore, ensuring that different threads do not conflict on these two operations is a straightforward entry point for implementing parallel/concurrent EVM. In fact, in Ethereum, there is a special type of transaction that includes a special structure called the "access list," allowing transactions to carry the storage addresses they will read and modify. Thus, this provides a good starting point for implementing a scheduler-based concurrent approach.
Regarding system implementation, there are three common forms of parallel/concurrent EVM:
Multithreading of a single EVM instance.Multithreading of multiple EVM instances on a single node.Multithreading of multiple EVM instances across multiple nodes (essentially system-level sharding).
The differences of parallel/concurrent processing in blockchain compared to database systems include:
Unreliable timestamps make timestamp-based concurrency methods difficult to deploy in the blockchain world.Absolute determinism on blockchain systems to ensure that transactions re-executed by different validators are identical.Validators’ ultimate goal is higher revenue, not faster transaction execution.
So, what do we need?
A system-level consensus is required where faster execution leads to higher rewards.A multi-variable scheduling algorithm considering block limitations, capable of capturing more revenue while completing executions more quickly.More granular data operations, including opcode-level data locking, memory caching layers, etc.
Major Projects and Their Technologies
Monad Labs
Monad is an EVM Layer 1, aimed at significantly enhancing the scalability and transaction speed of the blockchain through its unique technological features. A key advantage of Monad is its capability to process up to 10,000 transactions per second with a block time of just 1 second. This is made possible by its MonadBFT consensus mechanism and compatibility with EVM, enabling it to process transactions efficiently and swiftly.
One of the most notable features of Monad is its parallel execution capability, which allows it to process multiple transactions simultaneously. Compared to the sequential processing method in traditional blockchain systems, this greatly increases network efficiency and throughput.
Monad’s development is led by Monad Labs, co-founded by Keone Hon, Eunice Giarta, and James Hunsaker. The project has successfully raised $19 million in seed funding and plans to launch its testnet in mid-Q1 2024, followed by the mainnet launch.
Monad has optimized in the following four main areas, making it a high-performance blockchain:
MonadBFT:
MonadBFT is the high-performance consensus mechanism of the Monad blockchain, used to achieve consistency in transaction ordering under partially synchronous conditions in the presence of Byzantine actors. It is an improved version based on HotStuff, utilizing a two-phase BFT algorithm, featuring optimistic responsiveness, linear communication costs in common cases, and quadratic communication costs in timeout scenarios. In MonadBFT, the leader sends a new block and the previous round’s QC (Quorum Certificate) or TC (Timeout Certificate) to validators each round. Validators review the block and send a signed “yes” vote to the leader of the next round if they agree. This process aggregates 2f+1 validators' "yes" votes into a QC through threshold signatures. In common communication cases, the leader sends the block to validators who then send votes directly to the leader of the next round. MonadBFT also employs pairing-based BLS signatures to address scalability issues, allowing signatures to be incrementally aggregated into a single signature, proving that shares associated with public keys have signed the message. For performance considerations, MonadBFT adopts a hybrid signature scheme, where BLS signatures are only used for aggregatable message types (votes and timeouts). The integrity and authenticity of messages are still provided by ECDSA signatures. Due to these features, MonadBFT can achieve efficient and robust blockchain consensus.
2. Deferred Execution:
This is a key innovation that decouples the execution process from the consensus process. In this architecture, the consensus process involves nodes agreeing on the official ordering of transactions, while execution is the actual process of executing these transactions and updating the state. In this design, the leading node proposes a transaction order but does not know the final state root when proposing the order; validators also do not know whether all transactions in the block will execute successfully when voting on its validity.
This design allows Monad to achieve significant speed improvements, enabling a single-shard blockchain to scale to millions of users. In Monad, each node independently executes the transactions in block N while reaching consensus on block N+1. This method allows for a larger gas budget, as execution only needs to keep up with the pace of consensus. Additionally, since execution only needs to average up to the pace of consensus, this method is more tolerant of specific variations in computation time.
To further ensure state machine replication, Monad includes a Merkle root delayed by D blocks in the block proposal. This delayed Merkle root ensures consistency across the entire network, even if there are node execution errors or malicious behaviors.
In MonadBFT, finality is single-slot (1 second), and the execution results typically lag less than 1 second on full nodes. This single-slot finality means that after submitting a transaction, users will see the official order of the transaction after a single block. There is no possibility of reordering unless a supermajority of the network behaves maliciously. For users who need to know transaction results quickly (e.g., high-frequency traders), running a full node can minimize delays.
3. Parallel Execution:
It enables Monad to execute multiple transactions simultaneously. This approach might initially seem different from Ethereum’s execution semantics, but it is not. Blocks in Monad are the same as in Ethereum, both being linearly ordered sets of transactions. The results of executing these transactions are the same between Monad and Ethereum.
In the parallel execution process, Monad uses an optimistic execution method, i.e., starting the execution of subsequent transactions before earlier transactions in the block are completed. This sometimes leads to incorrect execution results. To address this issue, Monad tracks the inputs used in the execution of transactions and compares them with the outputs of previous transactions. If differences are found, it indicates that the transaction needs to be re-executed with the correct data.
Additionally, Monad employs a static code analyzer to predict dependencies between transactions during execution, avoiding invalid parallel executions. In the best-case scenario, Monad can predict many dependencies in advance; in the worst-case scenario, it reverts to simple execution mode.
Monad’s parallel execution technology not only improves network efficiency and throughput but also reduces the occurrence of transaction failures due to parallel execution by optimizing execution strategies.
Ecosystem Projects
Tayaswap
TayaSwap is an AMM DEX based on Monad, supported by SubLabs, allowing asset trading without traditional order books or intermediaries. AMMs rely on mathematical formulas and smart contracts to facilitate token exchanges, determine prices, and enable peer-to-peer transactions using smart contracts.
Ambient Finance
Ambient (formerly CrocSwap) is a decentralized trading protocol allowing combined centralized and constant product liquidity on any pair of blockchain assets through a bilateral AMM. Ambient runs the entire DEX within a single smart contract, where individual AMM pools are lightweight data structures, not separate smart contracts.
Shrimp Protocol
Shrimp is a (3,3) DEX with a flywheel token economy, supporting real-world assets, set to launch on Monad.
Catalyst
Catalyst is a permissionless liquidity solution between modular blockchains, built to connect all chains, aiming to enable access to any asset anywhere. Catalyst allows developers to automatically connect to all chains, gaining access to users in a unified ecosystem, while its simple, decentralized, and self-custodial design ensures safe, seamless access to liquidity.
Swaap
Swaap is a market-neutral Automated Market Maker (AMM). It combines oracles and dynamic spreads to provide sustainable returns for liquidity providers and cheaper prices for traders. The protocol significantly reduces impermanent loss and offers multi-asset pools.
Elixir
Elixir is a decentralized market-making protocol that interacts with centralized exchanges using market-making algorithms through API calls, bringing liquidity to long-tail crypto assets.
Timeswap
Timeswap is an AMM-based decentralized money market protocol that operates without oracles or liquidators. Unlike Uniswap, which allows real-time asset trading, borrowing on Timeswap involves trading tokens until repayment. Lenders provide Asset A for loans, simultaneously “insuring” a certain amount of Asset B used as collateral by borrowers. Users can adjust their risk profile, obtaining higher rates with lower collateral ratios, and vice versa.
Poply
Poply is a community-based NFT marketplace, specifically for the Monad chain, showcasing and empowering NFT collections created specifically for this chain. It attracts individuals interested in unique NFTs for ERC-721 token trading through AI-generated art and user-friendly interfaces.
Switchboard
Switchboard is a permissionless, customizable, multi-chain oracle protocol for general data feeds and verifiable randomness. By allowing anyone to push any form of data, regardless of type, it offers a one-stop solution for users and helps drive the development of the next generation of decentralized applications.
Pyth Network
Pyth Network, developed by Douro Labs, is a next-generation price oracle solution aiming to provide valuable financial market data on-chain to projects, protocols, and the public, including cryptocurrencies, stocks, forex, and commodities. The network aggregates first-party price data from over 70 trusted data providers and publishes it for use by smart contracts and other on-chain or off-chain applications.
AIT Protocol
AIT Protocol is an artificial intelligence data infrastructure offering Web3 AI solutions. AIT’s decentralized marketplace provides a unique and extensive opportunity for millions of cryptocurrency users to engage in “train-to-earn” tasks, a concept allowing them to earn rewards while actively contributing to the development and advancement of AI models.
Notifi
Notifi offers a universal communication layer for all Web3 projects, planning to embed notification and messaging functionalities into decentralized applications for interaction with users across digital and on-chain channels. The Notifi API allows developers to unlock complex communication infrastructures through simple APIs, providing native user experiences for applications worldwide; Notifi Center offers users a customized notification experience, allowing them to view and manage all messages in the Web3 world from mobile and web endpoints; Notifi Push enables marketers to create cohesive multi-channel engagements, driving business growth and retaining their user base.
ACryptoS
ACryptoS is an advanced crypto strategy platform, a multi-chain yield aggregator optimizer, and DEX, offering a range of unique products including automated compounding single token vaults, dual token LP vaults, unique liquidity vaults, Balancer-V2 branch DEX, and stablecoin exchange. Initially launched on the BNB chain in November 2020, ACryptoS has now expanded to 11 chains, deploying over 100 vaults, aiming to support DeFi users and protocols.
MagmaDAO
MagmaDAO is a DAO-controlled liquidity staking protocol aiming for fair token distribution through ecosystem competitive airdrops. It is the first distributed validator outside Ethereum, built on the fastest, cheapest, and most censorship-resistant EVM L1 Monad.
Wombat Exchange
Wombat Exchange is a multi-chain stablecoin swap with open liquidity pools, low slippage, and one-sided staking.
Wormhole
Wormhole is a decentralized universal messaging protocol, enabling developers and users of cross-chain applications to leverage the advantages of multiple ecosystems.
DeMask Finance
DeMask Finance is an on-chain AMM protocol for trading between NFTs and ERC20 tokens. DeMask Finance supports creating NFT collections and NFT launchpads: paired with ETH and other tokens. NFT decentralized exchange: supports ERC-1155 NFTs or other tokens paired with ETH and ERC-20 tokens. The DeMask protocol aims to increase liquidity in the NFT market, providing an interface for seamless exchanges between ERC20 tokens or native tokens and NFT collections. DeMask is an interconnected system of smart contracts where all users can create and own liquidity pools and trade in a fully automated way. Each pool holds a pair of assets, including a token and an NFT, providing fixed prices for instant trading. This also allows other contracts to estimate the average price of both assets over time. Users owning liquidity pools are rewarded when exchanging asset pairs.

Sei V2
Sei V2 is a significant upgrade to the Sei network, aiming to become the first fully parallelized EVM. This upgrade will endow Sei with the following capabilities:
Backward Compatibility with EVM Smart Contracts:
This means that developers can deploy already-audited, EVM-compatible smart contracts on Sei without any code changes. This is extremely important for developers as it simplifies the process of moving their existing smart contracts from other blockchains like Ethereum to Sei.
Technically, Sei nodes will automatically import Geth — the Go implementation of the Ethereum Virtual Machine. Geth will be used to process Ethereum transactions, and any resulting updates (including state updates or calls to non-EVM related contracts) will go through a special interface created by Sei for EVM.
2. Optimistic Parallelization:
It allows the blockchain to support parallelization without the need for developers to define any dependencies. This means all transactions can run in parallel, and when conflicts arise (e.g., transactions touching the same state), the chain will track the storage parts each transaction touches and re-run these transactions in order. This process will continue recursively until all unresolved conflicts are resolved. As transactions are ordered within a block, this process is deterministic and simplifies the developer workflow while maintaining chain-level parallelism.
3. SeiDB:
It will introduce a new data structure called SeiDB to optimize the platform’s storage layer. The main goal of SeiDB is to prevent state bloat, the issue of the network becoming data-heavy, and to simplify the state synchronization process for new nodes. This design aims to enhance the overall performance and scalability of the Sei blockchain.
Sei V2 achieves this by transforming the traditional IAVL tree into a dual-component system — state storage and state commitment. This change significantly reduces latency and disk usage, and Sei V2 also plans to transition to using PebbleDB to improve read-write performance for multi-threaded access.
From a performance perspective, Sei V2 will offer a throughput of 28,300 batch transactions per second, along with a block time of 390 milliseconds and finality of 390 milliseconds. This enables Sei to support more users, provide a better interaction experience, and offer cheaper transaction costs per transaction compared to existing blockchains.
The main upgrade progress of Sei V2 is currently nearing code completion. After the review is completed, this upgrade will be released in the public testnet in Q1 2024 and deployed to the mainnet in the first half of 2024.
Neon
Neon EVM leverages the capabilities of the Solana blockchain to provide an efficient environment for Ethereum dApps. It operates as a smart contract within Solana, allowing developers to deploy Ethereum dApps with minimal or no code changes, and benefit from Solana’s advanced features. The architecture and operations of Neon EVM focus on security, decentralization, and sustainability, offering Ethereum developers a seamless transition to the Solana environment. Utilizing the advantages of Solana’s low fees and high transaction speed, it enables parallel execution of transactions, high throughput, and reduced costs. The key components of the Neon EVM ecosystem include:
Neon EVM Program:
It is an EVM compiled into Berkeley Packet Filter bytecode, running on Solana. It processes Ethereum-like transactions (Neon transactions) on Solana, following Ethereum rules. Neon EVM is configured through a decentralized multi-signature EVM account, with participants able to change Neon EVM code and set parameters.
The process of Neon EVM handling transactions involves several key steps. Firstly, users initiate Ethereum-like transactions (N-tx) through Ethereum-compatible wallets. These transactions are encapsulated into Solana transactions (S-tx) via the Neon Proxy and then passed to the Neon EVM program hosted on Solana. The Neon EVM program decapsulates the transactions, verifies user signatures, loads the EVM state (including account data and smart contract code), executes the transaction in the Solana BPF (Berkeley Packet Filter) environment, and updates Solana’s state to reflect the new Neon EVM state.
2. Neon Proxy: It enables Ethereum dApps to be ported to Neon with minimal reconfiguration. Neon Proxy packages EVM transactions into Solana transactions, offered as a containerized solution for ease of use. Operators running Neon Proxy servers facilitate the execution of Ethereum-like transactions on Solana, accepting NEON tokens as gas fees and other payments within the Solana ecosystem.
3. Neon DAO: The DAO provides custodial services for the Neon Foundation and guides future research and development. It operates as a series of contracts on Solana, providing a governance layer to control Neon EVM functions. NEON token holders can participate in DAO activities, including proposing and voting on decisions.
4. NEON Token: This utility token serves two primary purposes — paying for gas fees and participating in governance through the DAO.
5. Integrations and Tools: Neon EVM supports various integrations and tools for development and analysis. These include block explorers like NeonScan, ERC-20 SPL wrappers for token transfers, NeonPass for transferring ERC-20 tokens between Solana and Neon EVM, NeonFaucet for test tokens, and compatibility with EVM-compatible wallets like MetaMask.

Eclipse
Eclipse is a Layer 2 solution for Ethereum that significantly accelerates transaction processing by leveraging the Solana Virtual Machine (SVM). Designed for speed and scalability, Eclipse adopts a modular rollup architecture and integrates key technologies such as Ethereum settlement, SVM smart contracts, Celestia data availability, and RISC Zero security.
Specifically, Eclipse Mainnet combines the best modular stack components:
Settlement Layer — Ethereum: Eclipse uses Ethereum as its settlement layer. At this layer, transactions are finalized and secured. Utilizing Ethereum means not only leveraging its robust security and liquidity but also using ETH as the gas token for paying transaction fees. This setup allows Eclipse to inherit Ethereum’s strong security features.Execution Layer — SVM: For smart contract execution, Eclipse employs SVM. This contrasts with the EVM’s sequential transaction processing, as SVM can handle parallel transaction processing. Its Sealevel runtime feature allows parallel processing of transactions that do not involve overlapping states, enabling Eclipse to scale horizontally and increase throughput.Data Availability — Celestia: To ensure timely and verifiable data availability, Eclipse adopts Celestia. Celestia provides a scalable and secure platform for data publication, supporting Eclipse’s high throughput.Fraud Proofs — RISC Zero: Eclipse integrates RISC Zero for zero-knowledge fraud proofs, eliminating the need for intermediate state serialization, thus enhancing the system’s efficiency and security.

Eclipse’s design goal is to provide a genuinely scalable and general-purpose Layer 2 solution for Ethereum. It aims to address the limitations and resulting isolation and complexity brought by specific application rollups, which could degrade user and developer experiences. Through its modular rollup system and integrated technology components, Eclipse offers an attractive option for building scalable and high-performance dApps on Ethereum.
Lumio
Lumio is a Layer 2 solution developed by Pontem Network, designed to address Ethereum’s scalability challenges and bring a Web2-like experience to Web3. It stands out as a unique rollup in the blockchain space because it supports both the EVM and Move VM used by Aptos. This dual compatibility allows Lumio to process transactions on Aptos while settling on Ethereum, providing a versatile and efficient solution for dApp developers and users. Its key features include:
Dual Virtual Machine Compatibility: Lumio uniquely supports both the EVM and Aptos’s Move VM. This dual compatibility enables Lumio to seamlessly integrate the functionalities of Ethereum and Aptos, enhancing flexibility and efficiency in dApp development and execution.High Throughput and Low Latency: By leveraging high-performance chains like Aptos for transaction ordering, Lumio significantly enhances transaction bandwidth. This integration ensures that Lumio can efficiently handle a large volume of transactions while maintaining Ethereum’s security and liquidity features.Optimistic Rollup Technology: Lumio uses open-source OP stack and adopts optimistic rollup technology. Optimistic rollups are known for their efficient transaction processing and lower costs, suitable for scaling Ethereum-based applications.Flexible Gas Fee Economic Model: Lumio introduces an application-centric gas fee economic model. This model allows app developers to directly benefit from network usage, potentially incentivizing more innovative and user-friendly dApp development.Interoperability and Integration: Lumio’s ability to process transactions on Aptos and settle on Ethereum demonstrates a high degree of interoperability between different blockchain ecosystems. This feature allows developers to fully utilize the strengths of both Ethereum and Aptos in their applications.Balance of Security and Scalability: Combining Ethereum’s robust security and Aptos’s scalability offers developers an attractive solution for building high-performance, secure dApps. Lumio’s architecture is designed to effectively balance these two key aspects.

Lumio is currently in a closed testing phase, with plans to gradually roll out to selected users. This approach allows for comprehensive testing and improvements to the platform based on user feedback, ensuring a robust and user-friendly platform when released more broadly.
Other Parallel Projects in the Industry
Solana
Solana’s Sealevel technology is a key component of its blockchain architecture, designed to enhance the performance of smart contracts through parallel processing technology. This approach significantly differs from the single-threaded processing of other blockchain platforms, such as EVM and EOS’s WASM-based runtime, which handle one contract at a time and modify the blockchain state sequentially.
Sealevel enables the Solana runtime to process tens of thousands of contracts in parallel, utilizing all the cores available to validators. This parallel processing capability is possible because Solana transactions explicitly describe all the states that will be read or written during execution, allowing non-overlapping transactions to be executed concurrently, and transactions that only read the same state.
The core functionality of Sealevel is based on Solana’s unique architecture, including components like the Cloudbreak account database and the Proof of History (PoH) consensus mechanism. Cloudbreak maps public keys to accounts, with accounts maintaining balances and data, while programs (stateless code) manage these accounts’ state transitions.
Transactions in Solana specify an instruction vector, each instruction containing a program, program instructions, and a list of accounts the transaction wishes to read and write. This interface is inspired by low-level operating system interfaces to devices, allowing the SVM to sort millions of pending transactions and schedule all non-overlapping transactions for parallel processing. Furthermore, Sealevel can sort all instructions by program ID and run the same program simultaneously on all accounts, a process similar to SIMD (Single Instruction, Multiple Data) optimizations used in GPUs.
Sealevel in Solana offers several benefits, including enhanced scalability, reduced latency, cost efficiency, and improved security. It enables the Solana network to handle a significantly higher number of transactions per second, provide almost instant transaction finality, and reduce transaction fees. Even during parallel processing, smart contract security is maintained through Solana’s robust security protocols.
By achieving high-speed parallel processing and increased transaction throughput, Sealevel makes Solana a powerful platform for decentralized applications.

Sui
Sui’s parallel technology features make it a highly efficient, high-throughput blockchain platform suitable for various Web3 applications and use cases. These significant features work together to enhance the efficiency and throughput of its network:
Narwhal and Bullshark Components: These two components are crucial to Sui’s consensus mechanism. Narwhal, acting as a mempool, is responsible for accelerating transaction processing and improving network efficiency, ensuring data availability when submitted to Bullshark (the consensus engine). Bullshark is tasked with ordering data provided by Narwhal, utilizing Byzantine Fault Tolerance mechanisms to validate transactions and distribute them across the network.Asset Ownership Model: In the Sui network, assets can be owned by a single owner or shared among multiple owners. Assets owned by a single owner can move quickly and freely within the network, while shared assets require validation through the consensus system. This asset ownership system not only improves the efficiency of transaction processing but also enables developers to create various types of assets for their applications.Distributed Computing: Sui’s design allows the network to scale resources as needed, functioning similarly to cloud services. This means that as demand for the Sui network increases, network validators can add more processing power, maintaining the network’s stability and keeping gas fees low.Sui Move Programming Language: Sui Move is Sui’s native programming language, specifically designed for creating high-performance, secure, and feature-rich applications. Based on the Move language, it aims to address shortcomings in smart contract programming languages, enhancing the security of smart contracts and the efficiency of programmers.Programmable Transaction Blocks (PTB): PTBs in Sui are complex, composable sequences of transactions that can access any public on-chain Move functions in all smart contracts. This design offers strong assurances for payment or finance-oriented applications.Horizontal Scalability: Sui’s scalability extends beyond just transaction processing to include storage. This allows developers to define complex assets with rich attributes and store them directly on-chain, without resorting to indirect off-chain storage to save on gas costs.

Fuel
In the Fuel network, “parallel transaction execution” is a key technology that enables the network to efficiently process a large volume of transactions. This parallel execution is fundamentally achieved through the use of strict state access lists based on the UTXO (Unspent Transaction Output) model, a basic element in Bitcoin and many other cryptocurrencies.
Fuel introduces the capability of parallel transaction execution within the UTXO model. By utilizing strict state access lists, Fuel can process transactions in parallel, thereby leveraging more CPU threads and cores that are typically idle in single-threaded blockchain systems. As a result, Fuel can offer more computational power, state access, and transaction throughput than single-threaded blockchains.
Fuel addresses the concurrency issues in the UTXO model. In Fuel, users do not sign UTXOs directly, but instead sign contract IDs, indicating their intention to interact with a contract. Hence, users do not directly alter the state, leading to the consumption of UTXOs. Instead, block producers are responsible for processing how various transactions in a block affect the overall state, which in turn impacts contract UTXOs. The consumed contract UTXOs create new UTXOs with the same core characteristics but updated storage and balances.
To facilitate parallel transaction execution, Fuel has developed a specific virtual machine — the FuelVM. The design of FuelVM focuses on reducing wasted processing found in traditional blockchain virtual machine architectures, while offering developers more potential design space. It incorporates lessons learned and improvements from years in the Ethereum ecosystem, improvements that could not be implemented in Ethereum due to the need for backward compatibility with previous versions.

Aptos
The Aptos blockchain utilizes a parallel execution engine known as Block-STM (Software Transactional Memory) to enhance its transaction processing capabilities. This technology allows Aptos to execute transactions in a pre-determined order within each block and allocate the transactions to different processor threads during execution. The core idea of this method is to record the memory locations modified by transactions while executing all transactions simultaneously. After all transaction results are verified, if it is found that a transaction accessed a memory location modified by a previous transaction, that transaction will be invalidated. The aborted transaction is then re-executed, and this process is repeated until all transactions are completed.
Unlike other parallel execution engines, Block-STM maintains the atomicity of transactions without needing to know the data to be read/written in advance. This makes it easier for developers to build highly parallelized applications. Block-STM supports richer atomicity than other parallel execution environments, which often require breaking down operations into multiple transactions (breaking logical atomicity). By reducing latency and increasing cost efficiency, Block-STM enhances user experience.
Additionally, Aptos employs a consensus mechanism known as AptosBFTv4, a rigorously proven correct production blockchain BFT protocol. This protocol optimizes responsiveness, capable of delivering low latency and high throughput, fully leveraging the advantages of the underlying network. AptosBFTv4 employs a pipeline design similar to processors, ensuring maximum utilization of resources at every step. Therefore, a single node might participate in many aspects of consensus, from selecting transactions to be included in a block, to executing another set of transactions, writing the output of another set of transactions to storage, and certifying the output of another set of transactions. This means that throughput is limited only by the slowest stage, rather than the sequential combination of all stages.

Challenges
Technical Difficulties
Generally, the core challenge of adopting parallel or concurrent approaches is the issue of data races, read-write conflicts, or data hazards. All these terms describe the same problem: different threads or operations trying to read and modify the same data simultaneously. Implementing an efficient and reliable parallel system requires solving complex technical problems, especially ensuring predictable, conflict-free execution of parallel operations across thousands of decentralized nodes. Additionally, the challenge of technical compatibility lies in ensuring that new parallel processing methods are compatible with existing EVM standards and smart contract code.
Ecosystem Adaptability
For developers, they may need to learn new tools and methodologies to maximize the advantages of parallel EVMs. Moreover, users might need to adapt to potential new interaction patterns and performance characteristics. This requires a certain level of understanding and adaptability to new technologies by all ecosystem participants, including developers, users, and service providers. Furthermore, a robust blockchain ecosystem relies not just on its technical features but also on broad developer support and a rich array of applications. New technologies like parallel EVMs need to establish sufficient network effects to attract participation from developers and users for market success.
Increased System Complexity
Parallel EVMs require efficient network communication to support data synchronization across multiple nodes. Network latency or synchronization failures can lead to inconsistent transaction processing, adding to the complexity of system design. To effectively leverage the advantages of parallel processing, the system needs to manage and allocate computing resources more intelligently. This might involve dynamically distributing load among different nodes and optimizing the use of memory and storage. Developing smart contracts and applications that support parallel processing is more complex than traditional sequential execution models. Developers need to consider the characteristics and limitations of parallel execution, which can make the coding and debugging process more challenging. In a parallel execution environment, security vulnerabilities might be amplified, as a security issue could affect multiple transactions executing in parallel. Therefore, more stringent security audits and testing processes are required.
Future Outlook
Parallel EVMs demonstrate tremendous potential in enhancing the scalability and efficiency of blockchains. The mentioned parallel EVMs represent a significant shift in blockchain technology, aiming to enhance transaction processing capabilities by executing transactions simultaneously on multiple processors. This approach breaks free from the traditional sequential transaction processing method, allowing for higher throughput and lower latency, which are crucial for the scalability and efficiency of blockchain networks.
The successful implementation of parallel EVMs largely depends on the foresight and skills of developers, especially in the design of smart contracts and data structures. These elements are crucial in determining whether transactions can be executed in parallel. Developers must consider parallel processing from the start of the project, ensuring their designs facilitate independent, uninterrupted operation of different transactions.
Parallel EVMs also maintain compatibility with the Ethereum ecosystem, which is vital for developers and users already involved in Ethereum-based applications. This compatibility ensures smooth transition and integration of existing dApps, a challenge for systems like DAG, which often require significant modifications to existing applications.
Developing parallel EVMs is seen as a key step in addressing the fundamental limitations of blockchain scalability. These innovations hold promise for preparing blockchain networks for the future, enabling them to keep up with growing demands and becoming the cornerstone of the next generation of Web3 infrastructure. While parallel EVMs offer immense potential, their successful implementation requires overcoming complex technical challenges and ensuring widespread adoption in the ecosystem.
References
https://github.com/hsyodyssey/awesome-parallel-blockchain
https://www.techflowpost.com/article/detail_15290.html
https://amberlabs.substack.com/p/parallel-power-unlocked
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MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US

By Severin.
TL;DR
Essentially, a Fren Pet can be understood as a mining machine that continuously mines a portion of all players’ expenditures in the game as its revenue.Compared to friedn.tech, Fren Pet has done more design in terms of product vitality and user retention, but Fren Pet’s wealth creation effect is significantly weaker than friedn.tech, which may become a hidden danger for user growth.Base and Fren Pet have achieved mutual accomplishments. It is expected that more FrenX projects will become popular on Base in the future.
On November 17th, as soon as Base’s official tweet about Fren Pet came out, it quickly blew up the community, with people rushing into this blockchain-based digital pet game. Thus, the curtain was quietly raised on a mythology regarding the wealth creation effects surrounding this digital pet game.
Introduction to Core Gameplay
In Fren Pet, players first need to spend 100 $FP to Mint a digital pet. Then, players need to spend $FP in the store to buy various kinds of food to reset the pet’s death timer, avoiding the pet’s death and increasing the pet’s points. Each pet gets one free spin on the wheel every day for a chance to obtain items like points, shield, etc. Every 15 minutes, each pet can also bonk other pets; there is a 40% probability to defeat the other pets and obtain 0.5% of their points as a reward. In addition, players can also join a dice game battle between players, taking higher risks for higher point rewards. Finally, the pet’s points will decide the distribution of the ETH reward pool. If a player chooses to claim rewards, the pet’s points will be reset to zero and the game ends.
Fomo Design in Fren Pet
Whether it is gameplay, UI design, player interaction experience, or server quality, Fren Pet is not considered to be a high quality game. It can even be described as a crudely made game. After being reposted by Base’s official Twitter account, Fren Pet even experienced server overload due to the surge in traffic, causing interruptions to the gameplay. At this stage, Fren Pet relies more on its fomo gameplay design to attract new players to join.

source：https://twitter.com/frenpetonbase
Gameplay
Not Free to Play but better than Free to Play: The premise of playing Fren Pet is that players need to spend 100 $FP to Mint a digital pet. However, every time a new player enters and Mints a pet, Fren Pet will refund the 100 $FP Mint cost to the previous player. From a $FP perspective, this is equivalent to Free to Play. But from a USDT perspective, as long as there are continuous players entering and consuming in the game, the price of $FP is expected to rise. Players can actually profit from the Minting behavior, which is equivalent to Give to Play. This increases players’ willingness to participate, stimulates existing players to Mint more pets, and encourages new players to actively join the game. (Minting a pet just costs 10 $FP now, and the $FP from mints will go to a multi sig contract to be distributed to long term active players, encouraging user retention.)

source：DEXTools
Guiding players towards frequent and high spending to expand economic benefits: Food in Fren Pet has two attributes, survival time and point earnings. Generally, the higher the price of food, the greater the point earnings, but the shorter the survival time. This requires players to balance between survival time and point earnings. Moreover, points are linked to player earnings. Therefore, Fren Pet players aiming for maximum ETH rewards need to purchase relatively expensive food with high point earnings. However, such food has a shorter survival time. This prompts players seeking high returns to frequently buy relatively expensive food, contributing significant revenue to the game. In this process, players’ input costs stack up, compelling them to continuously purchase food to avoid cost losses due to pet deaths. The design of food with a maximum survival time of 2–3 days also increases user interaction with the game, enhancing user engagement.

source：https://dune.com/browse/dashboards?q=frenpet
Providing users with low-cost future profit expectations, incentivizing positive social diffusion: Each pet has a daily opportunity to spin a roulette wheel, offering rewards ranging from 1 to 2000 points, including the possibility of special rewards like shields or nothing at all. The free roulette spin gives users a low-cost expectation of future rewards, capitalizing on the psychological appeal of lottery-like experiences, motivating continuous player engagement, and increasing user interaction with the game. Moreover, the free roulette spin encourages positive social diffusion. When users win substantial rewards, they are inclined to share their success on social media, bringing Fren Pet additional new traffic.

source：Fren Pet
Exploiting users’ gambling tendencies enriches gameplay and enhances user retention: Every pet can bonks other pets every 15 minutes, with a 40% chance of successfully stealing rewards. The winner gains 0.5% of the loser’s points. This mechanism encourages players with a gambling inclination to continuously launch attacks, seeking to win point rewards from other players. Simultaneously, more rational players may choose to enhance their pet’s points, adopting a passive defensive stance to passively gain points from the failures of challengers with a higher success rate. Additionally, Fren Pet introduces a more gambling-oriented dice game, where players can use a 100 $FP ticket to potentially win up to 500 $FP in rewards.

source：Fren Pet
Claiming rewards results in a points reset, blocking users’ early withdrawals: The Ponzi model is most vulnerable when early participants rapidly exit the game. In Fren Pet, once a player chooses to claim their reward, the pet’s points are reset to zero. This mechanism encourages players seeking long-term returns to delay claiming rewards as much as possible, keeping players engaged in the game for an extended period. It also, to some extent, hinders players from withdrawing and selling, preventing potential damage to the in-game economy.
Tokenomics
Invite cashback incentivizes players for self-promotion: Similar to exchange cashback programs, in the game, 10% of the $FP used by players is automatically sent to their referrer. This incentivizes players to actively promote and share their Fren Pet referral codes, creating a continuous source of income from new player spending.Token burning creates future deflation expectations: The total supply of $FP is fixed, and 90% of the tokens used by players in the game are directly burned. This creates an expectation of token deflation, encouraging players to hold and purchase $FP tokens earlier.Token reward reinvestment for players creates future profit expectations: Whenever a user buys or sells $FP tokens on BaseSwap, a 5% tax is imposed. When the smart contract accumulates 1000 $FP tokens from taxes, it will automatically convert $FP into ETH, with 2% proportionally distributed to leaderboard players, 2% to developers, and the remaining 1% replenishing the $FP liquidity pool. The 2% reward reinvestment serves as players’ future profit expectations, motivating continuous player engagement in the game.

source：https://dune.com/whale_hunter/fren-pet
The fomo game mechanics and token economic design have attracted an increasing number of players to Fren Pet. However, this game is not expected to last because the motivation for players to continue paying is not derived from the game’s playability but rather from their expectations of future profits. In essence, Fren Pet’s pets can be understood as mining machines, continuously extracting a portion of all players’ expenditures as income. When players’ expectations of returns decrease, rational players will begin to exit Fren Pet, leading to player attrition, reduced $FP trading activities, decreased reward reinvestment, declining profit expectations, and a vicious cycle of further player loss. If the game cannot sustain player payments through its playability or introduce positive external economic benefits, Fren Pet may face an inglorious conclusion.
Comparison to Friedn.tech
Fren Pet and friend.tech share quite a few similarities, including a strikingly similar name. Essentially, both Fren Pet and friend.tech rely on users’ expectations of future profits, leveraging social virality to guide players in self-promotion, creating community FOMO, and attracting a significant influx of new players. Early adopters, relatively speaking, can capitalize on lower initial costs to gain increasing future returns as more players join, thereby enticing user retention.
However, Fren Pet distinguishes itself by incorporating unique design elements within the gaming scenario to enhance the product’s vitality and user retention. For instance, the pet feeding mechanism encourages sustained user spending, ensuring a lasting revenue stream for the application. Features like the roulette draw and the ability to initiate pet attacks every 15 minutes guide users toward higher-frequency interactions, strengthening their inclination to stay engaged. Additionally, the design of reward claiming leading to point resets can also help delay early player exits.
However, Fren Pet’s pet development model somewhat restricts the ‘get-rich-quick’ effect compared to friend.tech. Unlike friend.tech’s Bonding Curve, which reflects significant price fluctuations through simple Keys trading, Fren Pet’s pet points growth and the accumulation of rewards take time. Consequently, users may find it challenging to accumulate substantial wealth gains in the short term. This could potentially result in Fren Pet’s narrative lacking attractiveness, posing a growth challenge by not being as enticing to users. So we anticipate that Fren Pet won’t attract a large number of users quickly in the early stages, as friend.tech did through an exaggerated wealth effect. It also won’t experience rapid user loss or collapse due to designs like the Bonding Curve. Fren Pet is more likely to remain in a lukewarm state over the long term.
Base needs more projects like Fren Pet
The skyrocketing success of Fren Pet is undoubtedly attributed to the retweets from Base. In fact, Base and Fren Pet mutually contribute to each other’s success. Fren Pet relies on Base for increased exposure to a larger audience, triggering users’ FOMO psychology. At the same time, Base also needs more projects like Fren Pet to bring in additional funds, traffic, real users, and revenue to the Base chain.
Similar to friend.tech, both Fren Pet and friend.tech, in their respective gaming and social scenarios, rely on users’ expectations of future profits to guide them in high-frequency interactions and trading operations. This contributes to a more vibrant on-chain user ecosystem for Base and accelerates the expansion of on-chain gas revenue. At its peak, friend.tech, single-handedly, contributed to nearly half of Base’s daily gas expenditures. In comparison to friend.tech’s simple buying and selling of Keys, Fren Pet incorporates more high-frequency interaction scenarios within the game, such as feeding and bonking. While users engage in frequent operations, they also incur more gas fees, contributing to Base’s actual revenue.

source：https://dune.com/whale_hunter/fren-pet
In the increasingly homogeneous landscape of Layer 2 solutions, Base has differentiated itself by channeling massive user traffic through popular applications, carving out a distinctive path from other Layer 2 platforms. It is anticipated that in the future, more FrenX applications with FOMO attributes and high-frequency interaction scenarios will emerge on Base, consistently injecting fresh vitality into the Base ecosystem. While FrenX applications may not necessarily bring users enormous wealth effects, Base indeed stands out as the ultimate winner reaping tangible rewards behind the scenes.
Reference：
https://docs.frenpet.xyz/category/overviewhttps://foresightnews.pro/article/detail/47536https://www.techflowpost.com/article/detail_14596.html
MT Capital
Transforming Visions into Value, We Empower the Next Generation of Crypto Innovations.
( Momentum Capital ) MT Capital’s vision is to emerge as a globally leading investment firm, focused on backing early-stage technology ventures that generate substantial value. We are not just investors, we are the driving force behind founding teams. We believe that the bond and trust built between a fund and its portfolio companies are essential to mutual success.Website: https://mt.capitalTwitter: https://twitter.com/MTCapital_US