Public chain Lego: Connecting layer 1 and layer 0 blockchains to reshape the market structure

Author: Arain, ChainCatcher

In the past few cycles, whenever Ethereum fell into a "performance" dilemma, there was always an "Ethereum killer" popping up. The “Ethereum killer” refers to the Layer 1 blockchain, and the competitor is the Layer 2 solution proposed by Ethereum.

However, since Ethereum completed the Cancun upgrade this year, the narrative volume of Ethereum Layer 2 has been higher than that of Layer 1, and has even replaced Layer 1 as the mainstream narrative. On the one hand, the competitive landscape of Layer 1 has not changed. From the perspective of market value, (excluding BTC) ETH, BNB and Solana have formed a tripartite situation, with ETH being the dominant one. On the other hand, there is a problem, that is, here Why are there almost no new Ethereum killers emerging in this cycle?

Interestingly, Ethereum also seems to be stuck in Layer 2 troubles. Token Terminal data shows that ETH Layer 1 revenue has dropped sharply, down 99% since March 2024. At the same time, in August this year, Multicoin Capital bombarded Ethereum Layer 2 on Bankless’s program. Later, Ethereum Foundation researchers stated in an AMA that Ethereum is still exploring Layer 1, rather than relying entirely on Layer 2.

As a result, problems that had been obscured by the Layer 2 boom began to surface.

Public chain war: the past of a hundred schools of thought contending

Layer 1 and Layer 2 are blockchain networks at different levels. Layer 1 is the main chain and autonomous chain. Transactions are directly executed and confirmed on it. It provides the necessary infrastructure for the blockchain network and can directly interact with users. . The famous public chains Bitcoin and Ethereum are at this level.

Layer 2 is an off-chain vertical scaling solution that runs on layer 1 blockchains such as Ethereum to improve scalability. Popular projects at this level include Arbitrum, Optimism, etc.

It can be said that there is Layer1 first and then Layer2. With the development of technology and the update of market awareness, in addition to these two levels of networks, the blockchain ecosystem also extends to Layer 0 and Layer 3. Layer 0 refers to the underlying infrastructure that can build multiple Layer 1 blockchains, and Layer 3 refers to the blockchain-based application layer, including games, wallets, and other DApps.

The battle of public chains originated from Layer1. It can be said that in order to break the limitations of Bitcoin, a number of public chains began to flourish. Bitcoin was originally designed as a trustless peer-to-peer electronic cash system, and it is also a Layer 1. Security and decentralization are the biggest advantages. In order to maintain the advantages of these two characteristics, Bitcoin is not suitable for carrying too many Application and development, so the scalability is poor.

Security, decentralization and scalability are important contents of the "Blockchain Impossible Triangle" theory. This theory was proposed by Vitalik Buterin, the founder of Ethereum, which refers to the inability of blockchain networks to achieve security and decentralization at the same time. and scalability.

In 2015, Ethereum was officially launched. Since then, almost at the same time, other public blockchains have emerged, such as Cardano, Polkadot, etc. Among them, Ethereum has become the first widely recognized public chain with a Turing-complete programming language, filling the scalability shortcomings of Bitcoin.

But from a historical perspective, this expansion is a limited expansion. Whenever Ethereum adoption rises, the network becomes congested, and Ethereum developers are reluctant to increase throughput limits in order to avoid the risk of "centralization creep" in the protocol. Therefore, in this case, Ethereum is also trapped in the "Impossible Triangle" problem. The most intuitive feeling is that whenever this moment comes, the use of Ethereum becomes very expensive or slows down. This is a disaster for app creators and users, but it gives competitors a chance to survive.

According to incomplete statistics, in 2018, the number of new public chains in the world exceeded 100, ushering in an era of "all chains coming together". Among them, EOS, TRON, Tezos, Cardano and other blockchains have completed fundraising activities of over US$400 million, US$200 million, US$227 million, and US$117 million respectively, becoming eye-catching projects in the market.

These public chains were once more or less dubbed "Ethereum killers" by the market, but now, some have new categories, some are classified as Layer 0, and some are classified as Layer 2.

From 2020 to 2021, public chain competition will become increasingly fierce, because not only the number continues to grow, but the already online public chains are fighting to seize market share. This can be seen from the data performance of developer activities:

1. Solana's developer activities increased by 223% in 2021. It has become a prominent non-EVM blockchain with its proprietary consensus mechanism and emphasizes the ultimate cost-effectiveness, allowing its applications to develop rapidly. To this day, this Layer 1 blockchain is still quite popular. market competitiveness.
2. NEAR's developer activity increased by 100% during the same period, and its technology Nightshade is designed to achieve faster transaction speeds, lower costs, and higher transaction volumes. Aurora is compatible with EVM, which means developers can easily port their smart contracts from Ethereum to new chains.
3. Avalanche's developer activity increased 46% during the same period. The Layer 1 blockchain consists of three parallel public chains. The C chain is responsible for the functions of smart contract development, deployment, and interaction, and the C chain is compatible with EVM. The project’s validators secure the network through a proof-of-stake consensus protocol, enabling fast and low-cost transaction processing. Note that this public chain is currently classified as a Layer 0 project.
4. Polygon (MATIC) saw a 350% increase in developer activity during the same period. Technically, Polygon is a side chain. It was initially classified as Layer 1 because its experience was close to Layer 1. Because Polygon has a Layer 1 experience and is extremely cost-effective, a large number of developers flocked to Polygon for construction. The current network level classification of the public chain has also changed, and is now classified as Layer 2.

At the end of 2021, as the market entered violent fluctuations and leveraged funds were cleared, some public chains gradually fell behind, thus forming the current pattern.

According to Tokenterminal data, from the perspective of market value, there are only 4 public chains with a weight of more than 1%, namely BTC, ETH, BNB and Solana, which account for approximately 70.23%, 16.92%, 4.84% and 3.84% of the weight.

Judging from the number of core developers, the only ones currently with more than 100 are Ethereum, Cosmos, internet computer and OP Mainnet, followed by Cardano, Kusama and Polkadot, with a group of core developers close to 100. More developers often represent the potential of a project, because from a business perspective, public chains will compete for developer resources through incentive mechanisms and visions. With more developers, there will be more products and users.

From the above data, we can see that the top two in market share almost monopolize the public chain market share. However, the above market value ranking does not match the number of developers, which shows that there are a number of undervalued public chains in the market.

The public chain sitting on the bench: the embarrassment of Cosmos

Before discussing these neglected public chains, we might as well summarize the development models and competitive landscape of several mainstream public chains. Taking star projects as an example, the mainstream public chains currently recognized by developer groups and investment markets mainly include the following types and developments:

1. Multi-chain architecture:

• Ethereum (ETH): As the originator of smart contract platforms, Ethereum ranks first in security, innovation, and number of users, but its scalability, expense, and old architecture are its shortcomings. The latest classification is Layer1+Layer2.
• Polkadot (DOT): It has an advanced architecture and the support of Gavin Wood, but the fee model puts great pressure on developers, and the ecosystem is still in its infancy. The latest classification is Layer0.
• Cosmos: Provides a more advanced architecture and freedom, but the organizational structure is loose, the development threshold is high, and the ecosystem is also in its infancy. The latest classification is Layer0.
• Avalanche (AVAX): Sufficient funds, integrated architecture, and comprehensive ecology, but there is a lack of interactivity between subnets, and there is insufficient consensus on new features in the bear market. The latest classification is Layer 0.
• Polygon: Sufficient funds, extensive layout, and advanced concepts, but the overall network concept is unknown, and there is insufficient consensus on new features in the bear market. The latest classification is Layer2.

2. Single chain architecture:

• Solana: It takes parallel execution and minimizing network communication consumption as its innovation points, but there are problems of decentralization and node performance squeeze. Layer1 network.
• Aptos: uses optimistic execution and is developer-friendly, but if all transactions are related, the efficiency improvement will be limited. Layer1 network.
• Sui: Similar to Aptos, but requires transactions to declare relevance in advance. Layer1 network.
• Fuel: Focus on modularization, only do the execution layer, abandon the consensus and DA layer, but it is currently in the early stage. Layer2 network.

3. Special architecture:

• Near: sharding is the highlight, but the ecological development is slow and the system complexity increases. Layer1 network.
• Ar: A new paradigm public chain built with storage, but its security, decentralization and market acceptance are questionable. Layer0 network.
• BSC: Large traffic, sufficient funds, prosperous ecosystem, but weak technological innovation. Layer1 network.

In the view of some public chain practitioners, fierce competition may cause many projects to adopt conservative strategies in the long-term development due to resource loss, narrative or hot topic changes, and some even abandon past construction achievements. Due to failure to cater to the market, they will eventually This leads to a waste of continuous investment and construction of the public chain. The current embarrassing situation of Cosmos can be said to be the epitome of the public chain group that is gradually being marginalized in the competition.

As a pioneer in the development of cryptocurrency and blockchain, Cosmos builds a concept similar to a "super city cluster" and pioneers the concept of "application chain", allowing it to be implemented through the "Inter-Blockchain Communication (IBC) Protocol" The protocol for securely and efficiently exchanging information and value between different blockchains has had a profound impact on the modular blockchain theory and the concept of blockchain sovereignty.

During 2017’s Ethereum congestion and fee surge, Cosmos attracted a lot of attention as a scalability solution. Moreover, during the cryptocurrency bull market from 2017 to 2018, the market capitalization of Cosmos’ token ATOM was among the top twenty cryptocurrency market capitalizations.

The number of Cosmos Zones is an important indicator to measure the ecological construction of Cosmos. Zones can be understood as application chains, which are independent blockchains built based on the Cosmos SDK. These Zones can communicate with each other through IBC so that Zones and the Hub (the central node of the Cosmos ecosystem) can interact securely and facilitate cross-chain asset transfers. According to the Cosmos browser, there are currently 91 zones, 84 of which are active, which shows the success of Cosmos in ecological construction.

Today, the market value of Cosmos has fallen outside the Top50, and with the evolution of the times, its unique technical solutions can be replaced to a certain extent - the Rollup solution on Ethereum and Celestia provides developers with a solution similar to the Cosmos application chain. Customization options, and a more mature community and liquidity pool.

The Cosmos ecosystem has reached a crossroads.

**Complementing advantages, "Public Chain Lego" activates unpopular star

public chains**

The level of the blockchain ecological network can be changed. Now people have realized that Cosmos is a Layer 0 blockchain, so Cosmos cannot be measured by Layer 1 standards.

Layer0 aims to more effectively solve issues such as scalability and interoperability by creating a more flexible infrastructure and allowing developers to launch their own dedicated blockchains.

The core components of Cosmos include Cosmos SDK, IBC protocol and Tendermint consensus engine:

• Cosmos SDK, a set of open source frameworks and public chain construction toolkits and template libraries, greatly reduces the difficulty for developers to develop blockchain and related applications;
• The IBC protocol allows information exchange and interoperability between different blockchains, allowing various blockchains in the Cosmos ecosystem to form a joint network. Additionally, blockchains built using the Cosmos SDK can
• The Tendermint consensus engine provides an efficient and reliable consensus mechanism, allowing nodes in the blockchain network to reach consensus quickly and fairly;·

Among them, Cosmos SDK plays the role of helping developers quickly build blockchains from scratch. It should be noted that Cosmos provides developers with a consensus mechanism and application development tools (SDK) instead of the traditional execution engine (EVM virtual machine) in order to provide developers with a higher degree of freedom and allow them to develop according to their own needs. Specifications customize the operating environment and transaction types of the application chain, or even a completely independent blockchain. This means that even if you are not a Cosmos ecological project, you can still use this SDK, and projects built using this SDK can exchange tokens and values ​​with other chains in Cosmos through the IBC protocol, thereby creating a "link" with the Cosmos ecosystem. ".

This is like a "traffic portal". But now, there is a problem with this "entrance". In fact, the Cosmos SDK relies on the CometBFT consensus algorithm. When it was originally designed, it was not designed to target high-performance public chains, but focused more on fault tolerance. This consensus algorithm is based on the Practical Byzantine Fault Tolerance (pBFT) consensus algorithm of the 1990s, which seems somewhat "outdated" in today's public chain competitive environment. According to industry insiders, many high-performance public chains initially considered using the Cosmos SDK to build, but during the actual operation, they found that the SDK could not meet the needs, and they had to turn to it.

The needs that these Cosmos SDK cannot meet include the following aspects:

1. Limited scalability and performance. As the number of validators increases, CometBFT does not perform well in high transaction throughput;

2. Inefficient P2P network design. This can cause block proposal voting communications to significantly slow down in large networks with fewer validators;

3. Transaction ordering and status are tightly coupled within the consensus engine, which will actually limit performance and flexibility;

4. EVM compatibility issues. The lack of seamless compatibility with EVM effectively excludes developers who want to use Ethereum tools or connect with the Ethereum community;
5. Validator scalability limitations. Communication and signature aggregation issues prevent the Cosmos blockchain from efficiently scaling beyond 150 active validators, limiting decentralization and network security;

6. Database performance bottlenecks will especially limit high-performance applications and affect transaction processing speed.

Continuing to use CometBFT will limit scalability, performance, and integration diversity, thereby creating business obstacles for many blockchain teams built on Cosmos, which may ultimately affect the long-term development of the Cosmos ecosystem. To push the limits, Cosmos is looking for solutions. In the recently announced SDK v2, Cosmos announced support for the new consensus engine Supernova Core.

Supernova Core is a Cosmos SDK-compatible consensus framework designed to directly replace CometBFT. The current problems of the Cosmos SDK have been effectively and specifically solved:

1. Using Boneh–Lynn–Shacham (BLS) signature aggregation allows the network to maintain high performance even with more than 150 verifiers;

2. The hierarchical network architecture design replaces the P2P network design, reducing delays and ensuring efficient communication, thereby improving overall performance;

3. Based on HotStuff consensus. Compared with traditional pBFT implementation, the network can achieve up to 3 times the throughput while improving fault tolerance;

4. Fully compatible with EVM, allowing developers to enjoy a seamless deployment experience, allowing developers in the Cosmos ecosystem to use Ethereum tools and ecosystem;

5. Allows the separation of transaction ordering and state processing. This architecture allows EVM execution to be independent of consensus and independent expansion, thereby optimizing performance. This may provide better flexibility in the future, and decentralized Layer 2 based on this will be better. performance and greater security.

Meter builds public chain Lego model house

Supernova Core is Layer 1 blockchain Meter’s solution to the problems faced by the Cosmos SDK. Meter was founded in 2018. It is a decentralized Ethereum network expansion solution that integrates the advantages of PoW and PoS. It processes transactions based on the proof of equity of the HotStuff consensus and is resistant to MEV and transaction front-running. It aims to become a decentralized High-level and extremely performant Ethereum sidechains.

Meter founder Zhu Xiaohan said that since 2021, the Meter team has been exploring cross-chain bridges and creating many projects to make efforts on the future evolution and performance improvement of "Public Chain Lego". It is understood that the core code of the consensus engine Supernova Core supported by Cosmos has been implemented on the Meter mainnet and has been running continuously for four years, with a peak daily transaction volume of 8 million. During the peak load period of the network, because many community verification nodes used AWS resource-constrained virtual machines, AWS once randomly shut down about 20% of the verification nodes. Under this situation, Supernova Core can still ensure that the network maintains integrity and performance, showing its robustness, security and efficiency.

In the future, Supernova Core will support parallel EVM execution and optimize database I/O as improvement goals to further improve throughput, efficiency and performance, thereby enhancing user experience.

As project representatives of Layer 0 and Layer 1 respectively, this cooperation between Cosmos and Meter has undoubtedly created an excellent cooperation model for "public chain Lego". In this cooperation case, it can be seen that there is still a vibrant Layer0 ecosystem behind Cosmos, and the integration of the Cosmos SDK with Meter’s Supernova Core is expected to add more conveniences to Cosmos ecosystem members, which helps For more new developers to come to the Cosmos ecosystem.

For Meter, the demonstration effect of the cooperation case will help the market see more of Meter’s proven technical capabilities, and is expected to promote Supernova Core to become the preferred solution for building scalable, efficient and high-performance blockchains, thus promoting regional development. Wider adoption and collaboration among the blockchain community makes high-performance blockchain development easier.

Whether it is a new Layer1 or enhanced Layer2 solution, Meter encourages industry participants to use Supernova Core.

It is worth mentioning that in enhancing Layer 2 solutions, Supernova Core can solve the current problem of Layer 2 centralization. In addition to hotly discussing the Layer 1 and Layer 2 routes, the current Ethereum community is also worried about the lack of centralization of the existing Layer 2 - the centralization of the sequencer will bring risks of possible behaviors such as evildoing, inserted transactions, MEV, etc. The severity is its existence ratio. Ethereum has a larger potential black forest. The existing Layer 2 has no intention of decentralization due to the considerable income brought by the sequencer. Supernova Core can provide a framework for decentralizing Layer 2 without affecting the income of Layer 2 to ensure the long-term development of Layer 2 in the future. .

The Supernova Core test network will be launched at the end of this year, so you can wait and see. Make high-performance Layer 1 and decentralized Layer 2 development no longer daunting – this will be more than just a slogan.

Although today’s market hot spots focus more on Layer 2, it cannot be ignored that Layer 2 projects are more playing games to attract liquidity and lack new value creation. The future trend will still call for several technically powerful Layer 1 to lead the market, and Layer 0 as the startup Layer 1 will provide this hotbed.

As a long-term participant in the market, we still need to focus on the underlying and lower-level technologies - Layer1 and even Layer0. The future lies there.