Cover Image Aptos cofounders Avery Ching (left) and Mo Shaikh

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Intro

Top investment, star team, and successor to Diem, Aptos has attracted a lot of attention; but can it lead a new round of high-performance public blockchain narratives and take a place in the fierce public blockchain competition?

In brief

The main highlights of Aptos are: 1. Adopt the Move language to improve the security of on-blockchain assets and improve the development efficiency; 2. Set up the node reputation system and improve the communication method between the leader node and the ordinary node to improve the network stability under the premise of high TPS. The shortcomings are as follows: 1. The centralization problem caused by the team holding a large number of tokens; 2. There is a lack of high-quality projects on the blockchain, and the ecology is insufficient.

As the first public blockchain using the Move language, Aptos has technological innovation advantages over established high-performance public blockchains, and first-mover advantages over latecomers such as Sui and Linera. Aptos has the potential to lead the next round of high-performance public blockchain narratives, but the threat to Aptos from later public blockchains such as Sui cannot be ignored.

With the continuous upgrade of Ethereum towards higher TPS, the Layer 2 multi-blockchain network based on the ecologically sound Ethereum in the future may have a dimensionality reduction attack on high-performance public blockchains. The living space of high-performance public blockchains with only high TPS and lack of other differentiation will be squeezed.

1. Introduction to Aptos:There are many improvements but lack of revolutionary innovation

1.1. Aptos Highlights - Security and Stability Improvements

The founder of Aptos is a member of the previous Meta Libra project team and has strong development capabilities. Aptos has received investment from a16z, FTX, Softbank, and Samsung, with a total financing amount of 350 million (the strategic investment amount of Binance and Dragonfly is not disclosed), and the A round valuation is 2.75 billion US dollars. The most significant advantage of Aptos compared to other public blockchains is the security improvement brought by the Move language and the on-blockchain stability enhancement brought by the improvement of the leader node mechanism.

The Move language brings increased financial security to Aptos. Move is an evolution of Rust, emphasizing security and flexibility, and is known as the most suitable programming language for blockchain. In the Move language, the token is defined as a resource type, which can only be transferred (Move), stored but not copied, which fundamentally eliminates hacking incidents such as unlimited Token issuance. This is also the biggest advantage of Move over Solidity and Rust, which is why the Move language is named. In addition, the Move language also has the advantages of simple syntax, lower learning barriers, and higher development efficiency.

Aptos improves the leader node rotation and node communication mechanism, which maintains the stability of the system while ensuring high performance on the blockchain. At present, the trilemma of decentralization, security and scalability is still restricting the development of public blockchains. For mainstream high-performance public blockchains, they often put scalability in the first place at the expense of decentralization. For example, Solana, known as the Ethereum killer, chose to set up a leader node to be responsible for producing blocks in order to improve TPS to reduce the communication redundancy of the system, but This makes the stability of the system greatly depend on the leader node. When the network is active and concurrency is high, the leader node is prone to paralysis, which will lead to the downtime of the entire blockchain network. Aptos adds a node reputation system, which records the activity and effectiveness of nodes, and selects leader nodes from qualified nodes. When the leader node is interrupted, the reputation system will also quickly find a new leader node to avoid the entire network downtime caused by the leader node's own problems to the greatest extent. At the same time, the leader node of the Aptos network only needs to package the transaction sequence for broadcasting and does not need to record all transaction information. The detailed transaction information is grabbed from the memory pool by the execution node according to the transaction order, which greatly reduces the workload of the leader node and avoids the need for a network At high concurrency, the leader node is overloaded and prone to failure.

1.2. Current shortcomings of Aptos - centralization and incomplete ecology

Regarding the centralization of public blockchains, Changpeng Zhao once expressed his opinion that decentralization is a means rather than a goal, and the real goal of human beings is freedom, security and ease of use. Centralization and decentralization are not binary issues. In the context of current technology, economy, and ideas, decentralization should be a step-by-step process rather than an overnight success. Centralization has advantages in terms of efficiency, security, economy, etc. In the past development of the Web3 world, there are many examples of centralization defeating decentralization, such as ETH and ETC, CEX and DEX. But for Aptos:

The centralization problem is still what Aptos criticizes for the community. Currently, Aptos only has 102 network nodes, which is much lower than other mainstream public blockchains, and all of them need to be licensed by Aptos Labs or Aptos Foundation, and there are no license-free validators. At the same time, Aptos Labs and Aptos Foundation currently hold a total of 73.5% of APT (community hosting share is included), which distorts the Nakamoto coefficient of Aptos network, and the entire network is currently under the control of Aptos Labs and Aptos Foundation. After the gradual release of 51% of the community's share, the degree of decentralization of the Aptos network will gradually increase, but whether the verification nodes can release permission-free access remains to be seen in the future.

Aptos currently lacks ecological development and lacks high-quality projects. About 200 dApps have been deployed on the Aptos testnet, but since the Aptos mainnet was launched, the deployment of ecological projects has slowed down, and the Rug phenomenon of early Defi projects (such as Mojito and Arco Protocol) has further dampened user confidence. The current online NFT projects are seriously hyped, prices have skyrocketed and plummeted, and there is a lack of continuous build. From the perspective of TVL, the current TVL on the Aptos blockchain is only 35.75 million US dollars, which is a huge gap compared to the old high-performance public blockchain. Aptos currently needs to speed up the framework of the mature Defi ecological basic disk, complement stablecoins, exchanges, lending, derivatives, liquidity pledges and other ecological niches, and at the same time incubate high-quality blockbuster projects to drain traffic to the public blockchain, increase user interest and attention.

1.3. Aptos Token Economic Model - 51% of the community quota, which will be unlocked linearly within ten years

Aptos community allocation is 51.02%, and the early circulation ratio is 13.00%. The initial issuance of APT is about 1 billion, of which the community accounts for 51.02%, core developers account for 19.00%, foundations account for 16.50%, and investors account for 13.48%. The 51.02% token share allocated by the community is designed to stimulate the sustainable development of the Aptos blockchain ecosystem, of which 41.02% is hosted by Aptos Foundation and 10% is hosted by Aptos Labs. Aptos Foundation is mainly responsible for the ecological development on the blockchain, and Aptos Labs is mainly responsible for the construction of the infrastructure on the blockchain. At present, two products, Petra wallet and ANS domain name, have been launched.

The initial circulation of Aptos is 130 million, accounting for 13% of the initial total, consisting of 125 million issued by some early incentives from the community and 5 million unlocked by the Aptos Foundation. The remaining community and foundation shares are unlocked linearly over ten years on a monthly basis. The share of core developers and investors will not be unlocked from January to December, 1/16 of each month from 13 to 18, and 1/48 of each month from 19 to 48, for a total of four years. APT is additionally issued through block rewards and destroyed through on-blockchain fees. The block reward is determined by the pledged APY. The current network pledge yield is 7%, and it will decrease by 1.5% every year in the future, and finally drop to 3.25%. On-blockchain fees are determined by on-blockchain activities. The current APT inflation rate is about 5.6%.

2. Can Aptos lead the next round of high-performance public blockchain narrative?

Compared with the previous high-performance public blockchains, Aptos wins in technological innovation and upgrades but temporarily lags behind in ecological development; compared with latecomers such as Sui and Linera, Aptos has a first-mover advantage as the first public blockchain to use the Move language. Once a network effect is formed among developers, users, and investors, it is difficult for latecomers to pose a sufficient threat to Aptos without major innovations.

The Move language is not exclusive to Aptos, but at present, Sui and other latecomers are less differentiated than Aptos. Sui and Aptos are highly similar in terms of team, capital and technical routes. Aptos has the fastest development progress, and it has attracted a large number of developers and has enough market attention. It is extremely difficult for Sui and other Move-based public blockchains to achieve post-production control.

The centralization problem faced by Aptos is not uncommon. Solana, BSC, Cosmos, etc. all face this problem. This is the inevitable result of the public blockchain trilemma. Ecological development on Aptos takes time to nurture. From the perspective of token distribution, the 51% ecological incentive quota is much higher than previous high-performance public blockchains such as Solana.

Overall, Aptos has a good position. As the first public blockchain of the Move series, its technical advantages are remarkable. Compared with Sui and other latecomers, the first-mover advantage has also been initially established, and its future development is worthy of attention. But the threat of Sui and Linera to Aptos cannot be ignored either.

3. Can high-performance public blockchains have an impact on the status of Ethereum?

From the perspective of on-blockchain ecology, the king of public blockchains is still Ethereum. From the perspective of TVL, the development of Ethereum Layer 2 such as Optimism and Arbitrum is no longer inferior to that of high-performance public blockchains such as Solana. With the transformation of Ethereum POS, the current development focus of Ethereum has been switched to expansion led by Layer 2. Layer 2 network technologies such as zkSync, Starknet, Arbitrum, Optimism, and Arbitrum have been continuously upgraded, and the ecology has been continuously improved. Vitalik has publicly stated that Ethereum will reach 100,000 TPS after five upgrades are completed. At present, the rapid development of Ethereum Layer 2 is beyond expectations, and the technological upgrade of Ethereum itself is also steadily advancing. In the future, the Layer 2 multi-blockchain network based on the ecologically sound Ethereum will form a dimensionality reduction attack on high-performance public blockchains.

From the perspective of the economic model, Ethereum is based on the rich on-blockchain ecology, reducing the supply through POS upgrades and combining the destruction of EIP-1559 to achieve a dynamic balance of the total supply of ETH. However, high inflation is still a problem faced by high-performance public blockchains. The high inflation of high-performance public blockchains is essentially because the fee income of the network is not enough to cover the security cost of the network, so it is necessary to issue additional tokens to network nodes in the form of block rewards to attract pledges to ensure a high margin of safety pledge rate. If the Byzantine fault-tolerant consensus Aptos is used, the security of the network can be guaranteed when the normal nodes are larger than 2/3.Therefore, if the current pledge rate is higher than 66%, it is not enough for malicious nodes to collect all secondary market liquidity to attack the public blockchain, and it is necessary to "reverse" the current pledge nodes, which is undoubtedly extremely costly. So the pledge rate is an important indicator to measure the security of the POS public blockchain, and the method to ensure a high pledge rate is to provide high pledge income, but it is usually difficult for high-performance public blockchains to achieve this goal through the on-blockchain fee income, and the insufficient reward It can only be achieved through additional issuance, which leads to high inflation of public blockchain tokens. The high inflation of tokens is usually accompanied by the instability of the currency value, and it will also hurt the development of the ecosystem on the blockchain. The paradox of security and high inflation is one of the pain points in the long-term development of high-performance public blockchains. At present, the only public blockchain that can solve this problem is Ethereum.

From the above two perspectives, in the short and medium term, the current high-performance public blockchain still has a window period for development. But in the long run, with the continuous upgrading and improvement of Ethereum, the living space of high-performance public blockchains with only high TPS and lack of other differentiated high-performance public blockchains will be threatened. In such a market environment, by holding an investment portfolio of APT and other high-performance public blockchain tokens in the opposite position to hedge the beta risk from the track and macro, to gain the alpha return of Aptos itself may become a strategy worth studying. (No investment advice)