Foreword: At the end of 2020, Wanxiang Blockchain launched four major annual review series articles: "Public Chain", "Application", "Serving the Real Economy" and "Supervision", recording a region that rides the wind and waves The year of blockchain development. The following is the annual review series - public chain, author: Wanxiang Blockchain Chief Economist Office. Let’s look at it together, the public chain has been surging this year.
2020 is coming to an end. Although the epidemic has swept the world, it has not affected the progress of the blockchain industry. In the past year, breakthroughs have been made in public chain and ecological applications, and the policies of various countries on blockchain and encrypted assets have gradually improved. This article is a review of the progress of the blockchain industry this year, especially the progress of the public chain, which focuses on the four popular public chains of Bitcoin, Ethereum, Polkadot and Filecoin.
bitcoin
The biggest technical progress of Bitcoin this year is the Taproot/Schnorr upgrade, which was proposed by Bitcoin developer Pieter Wuille and released as Bitcoin Improvement Proposals (BIPs). in the master branch of the code. This is the biggest technological expansion of Bitcoin since the Lightning Network went live.
(1) Schnorr upgrade
The ECDSA signature algorithm currently used by Bitcoin and the upcoming Schnorr signature algorithm are both elliptic curve digital signature algorithms. The elliptic curves they use are both secp256k1 and hash function SHA256, so they have the same security at this level.
The Schnorr signature algorithm mainly has the following advantages.
First, the Schnorr signature algorithm is provably secure. Under the Random Oracle model assuming the difficulty of the elliptic curve discrete logarithm problem, and the general group model assuming Preimage Resistance and Second Preimage Resistance, the Schnorr signature algorithm has options. Strong Unforgeability under Chosen Message Attack (SUF-CMA). In other words, even if there is a valid Schnorr signature for any message, no other valid Schnorr signature can be derived without knowing the private key of the Schnorr signature. The provable security of the ECDSA signature algorithm relies on stronger assumptions.
Second, the Schnorr signature algorithm is non-malleability. The meaning of signature malleability is that a third party can transform a valid signature for a public key and message into another valid signature for the public key and message without knowing the private key. The ECDSA signature algorithm is inherently malleable, a problem addressed by BIP 62 and BIP 146.
Third, the Schnorr signature algorithm is linear, enabling multiple cooperating parties to generate signatures that are also valid for the sum of their public keys. This feature is very important for applications such as multi-signature and batch verification (Batch Verification), which can improve efficiency and help protect privacy. Under the ECDSA signature algorithm, if there is no additional witness data, batch verification is not efficient compared to one-by-one verification.
Finally, the Schnorr signature algorithm is compatible with the current Bitcoin public and private key generation mechanism because it uses the same elliptic curve secp256k1 and hash function SHA256.
(2) Taproot upgrade
The Taproot upgrade can be seen as an application of the Merkelized Abstract Syntax Tree (MAST), which in turn is related to Pay-to-Script-Hash (P2SH).
P2SH is a new class of transactions introduced in 2012 that makes the use of complex scripts as easy as paying directly to a Bitcoin address. In P2SH, complex locking scripts are replaced by their hashes, called Redeem Scripts. When a subsequent transaction attempts to spend this UTXO, it must include a script that matches the hash and unlock the script at the same time.
The main advantages of P2SH include: First, in the transaction output, the complex script is replaced by the hash value, which makes the transaction code shorter. The second is to shift the burden of building the script to the receiver, not the sender. The third is better privacy protection. In theory, no party other than the recipient can be aware of the payout conditions contained in the redemption script. For example, in a multi-transaction, the sender may not know the public key associated with the multi-signature address; the public key is only revealed when the recipient spends funds. But P2SH also has shortcomings: First, all possible spending conditions must eventually be disclosed, including those that are not actually triggered. Second, when there are multiple possible spending conditions, P2SH will become complicated, which will increase the workload of calculation and verification.
However, P2SH is different from the common Pay-to-Public-Key-Hash (P2PKH) in performance, and there are still privacy protection issues. The problem that Taproot solves is to make P2SH and P2PKH look the same on-chain (Figure 1): 1. MAST form for "non-cooperative spending" scripts; 2. Schnorr signature-based for "cooperative spending" scripts Multi-signature algorithm; 3. Combine "collaborative spending" and "non-cooperative spending" into a P2PKH form; 4. "Collaborative spending" behaves like a P2PKH transaction, with a public key and a corresponding private key, Instead of disclosing the underlying MAST, only the existence of MAST needs to be disclosed for "non-cooperative spending", but only the part of the script that was executed.
Figure 1: Taproot
Ethereum
Scalability has always been a problem that plagued the development of Ethereum, especially in 2020 when DeFi applications exploded, and network congestion led to high fees. The lack of performance makes it difficult for Ethereum to meet the requirements of the "world computer" and also affects the user experience. Expansion is the top priority of the Ethereum network. In 2020, the progress of Ethereum mainly focuses on expansion, which is divided into two parts: one is the preparation and launch of Ethereum 2.0, and the other is the development of the Layer 2 expansion plan, of which the Rollup route is the most important. protrude.
(1) The progress and route of Ethereum 2.0
In the development route of Ethereum, converting to a PoS public chain is the goal of the "quiet" stage, which is Ethereum 2.0. After that, the output of ETH will be converted from mining to staking, and 32 ETHs need to be mortgaged to become a staking node. In the original plan, Ethereum 2.0 will be launched in three phases, namely Phase 0, Phase 1 and Phase 2. Ethereum 2.0 is a multi-chain structure of the beacon chain plus shards. All shard chains are connected to the beacon chain. The beacon chain is responsible for the communication between the shard chains and elects verification members for each shard chain. Phase 0 will launch the beacon chain and start staking, and Phase 1 will launch the shard chain. The initial plan is to have a total of 64 shards, but smart contracts and transfers are not supported. Smart contracts will be launched in Phase 2, officially completing Ethereum 2.0 deployment. In the roadmap of Ethereum 2.0, the whole scheme will be completed in 2022.
The starting condition of the Ethereum 2.0 network is that more than 16,384 validators pledge 32 ETH, that is, at least 16,384 nodes are required to participate. The Phase 0 phase of Ethereum 2.0 has been opened on December 1st, and the current number of active nodes is 26861, which will increase in the future. These ETH participating in Staking can only be transferred after the Phase 2 phase of Ethereum 2.0 is completed. Ethereum 2.0 is the long-term strategic goal of Ethereum, but Vitalik, the founder of Ethereum, has repeatedly issued documents to support the application of rollup in Ethereum.
In the recent public speeches of the Ethereum development team and Vitalik, they admitted that the route of Ethereum 2.0 has changed, including the following points: 1. The future roadmap will be centered on Rollup, and Phase 1 will be simplified to available The data sharding used by Rollup has not been realized because the advantages originally envisaged have not yet been realized, so the route of eWASM is no longer emphasized; 2. Simplify the merger of Ethereum 1.0 and 2.0, and store Ethereum 1.0 transactions directly on the beacon chain instead of Existing as shards in Ethereum 2.0, the process of merging will be shortened; 3. Parallelization of work, light client, data sharding and merging of 1.0 and 2.0 are carried out independently, as long as each part is ready can be achieved.
From the changes of Ethereum 2.0, it can be seen that the whole is developing in the direction of faster landing and use. The introduction of Rollup's solution is not only to solve the current urgent expansion needs, but also conducive to innovation. The original route of Ethereum 2.0 is not completely abandoned, it just no longer has the highest priority.
(2) Routes centered on Rollup
The way Layer 2 solves the scalability problem is to transfer the behavior operations on the main chain to off-chain, so as to save the resources of the main chain without affecting the public chain itself. Layer 2 mainstream solutions include state channels, side chains, Plasma and Rollup. However, the first three have encountered various bottlenecks in their development in recent years, such as centralization, complex user operations, no support for smart contracts, and complex exit mechanisms. The implementation of the Rollup scheme is to package the transaction data into one off-chain and transfer it to the chain, while ensuring the same security as Layer 1.
Different teams have come up with different solutions for how to implement Rollup. Optimistic Rollup and ZK Rollup are currently the two most widely used development teams. Optimistic Rollup uses a fraud proof mechanism to ensure that nodes will not do evil, while ZK Rollup uses zero-knowledge proof to ensure the same security as the main network. These two schemes also have their own advantages and disadvantages. Optimistic Rollup supports smart contracts, but the withdrawal period is relatively long, which will affect the utilization rate of funds. The withdrawal period of ZK Rollup is relatively short, but it is difficult to support general smart contracts.
At present, many applications on Ethereum have been or will be tested on different Rollup testnets, such as Curve, Synthetix and Uniswap, etc. There are also some DeFi projects that have been launched based on the Rollup solution.
Polkadot
(1) Technology and Governance Progress
In August 2020, Polkadot launched the DOT transfer function, marking the official completion of the mainnet launch phase. Polkadot is a heterogeneous multi-chain architecture that uses relay chains and parallel chains to cross-chain, allowing interactions between chains and improving scalability, in which the Substrate framework plays an important role. Substrate can be understood as a general template that integrates various functions, and developers can choose to call different modules (pallets) to save development time. At present, Substrate has launched version 2.0, adding more than 70 pallet and off-chain worker functions.
The Kusama testnet still exists after the Polkadot mainnet is launched, serving as the leading network. Kusama’s token KSM has also been retained, and its functions are similar to DOT. Risky functions will run feedback on the Kusama network before launching on the mainnet. For example, the upcoming parachain card slot auction will be launched on Polkadot after it will be launched on Kusama for actual testing. Rococo is a testnet specially launched for testing parachains. At present, the parachain V1.0 version has been launched, which means that it is one step closer to the launch of the mainnet parachain.
In terms of governance, Polkadot's on-chain governance has been turned on, but the problems of large power and low public voting still exist. Polkadot's council is elected by voting. This vote does not conflict with referendums and staking, that is, large households can elect council members who meet their wishes, and then use their DOTs to participate in the referendum. While this approach allows governance outcomes to express the wishes of the largest stakeholders, it will raise the issue of centralization of governance. Also, the turnout of DOT holders in the referendum vote was low. In Polkadot, staking and governance voting do not affect each other. At present, the pledge rate of staking is about 70%, but the voting rate of referendum is around single digits. Low voter turnout affects how distributed governance is and cannot truly reflect the wishes of all. This may be due to the complexity of the repeated operation of voting, or because the user does not understand the content of the proposal and cannot make a choice.
(2) Ecological progress
Although the functions of the Polkadot mainnet are not yet complete, many applications have emerged in the ecosystem. According to PolkaProject statistics, there are nearly 300 projects related to Polkadot, including projects, tools, forums, wallets, etc. developed based on Substrate. Figure 2 below is an overview of the Polkadot ecosystem summarized by PolkaProject.
Figure 2: Overview of the Polkadot ecosystem (Image source: PolkaProject.com)
Polkadot's ecological applications are mainly concentrated in DeFi, which is currently the hottest field in the industry. Others include data, privacy and asset bridges. Compared with other public chain platforms, Polkadot has almost no applications related to games, predictions and social networking. This is related to the fact that Polkadot has just been launched, and because some applications have been falsified on other public chains or have little cross-chain significance. In the DeFi field, liquidity release and DEX are the most popular sectors. DOTs in Polkadot can lock liquidity in various ways, including Staking, governance, and card slot auctions (locking of governance and other functions do not conflict), so there is a release of liquidity. To meet the needs of sexuality, DEX is a necessary application for value exchange on the chain.
At present, almost all of Polkadot's ecological applications need to conduct business based on parachains. Applications that are not on the mainnet also require validators on the Polkadot relay chain to ensure security. Therefore, these projects must participate in the card slot auction of the parachain.
Polkadot's network resources are limited. Currently, it supports up to 100 parachains. To use a parachain, the project party needs to rent a parachain slot. The card slots are officially released by Polkadot in sequence, and one is opened at regular intervals, and the time interval is not fixed. The leased card slot needs to lock the DOT and release it after the lease expires. The DOT locked in the lease will be returned after the end of the lease period, so the lease cost is only the opportunity cost of DOT. Polkadot allows others to deposit DOT for the project party to help the project party win the auction, which requires the project party to set up effective incentives to attract DOT holders.
Generally speaking, the project party will reward its own tokens to users who help it conduct parachain auctions, which is also called Parachain Lease Offering (PLO). Also for users, the cost of participating in PLO is the opportunity cost of locking DOT. The current scenarios of DOT include staking, governance, transaction and parachain leasing, and there will be some application scenarios in the future. For long-term holders of DOT, it will be more advantageous if the value of the token given by the project party is higher than that of participating in staking (currently more than 10%) or some DeFi income.
In the official information, in addition to the initial parachain distributed by auction, Web3 will also sponsor some public welfare chains, including chains with infrastructure or transfer bridges. For example, parachains related to smart contracts may be directly assisted by Web3 in the use of card slots. If the card slot is not successfully obtained, there are several options to participate in the cross-chain, using parallel threads and deploying to other parachains that have already obtained the card slot. If you already have your own main network, you can also transfer through the cross-chain bridge. Received on Polkadot.
(3) Problems in the Polkadot ecosystem
The card slot of the parachain will be leased, which means that most Polkadot projects have to pay the cost (mortgage DOT) in exchange for cross-chain resources on Polkadot, so the threshold for parachain issuance with the help of the security of the Polkadot relay chain has been raised. a lot of. For most projects, only projects that can afford the cost of leasing cross-chain resources can use the security of Polkadot, otherwise they have to deploy nodes themselves, which will increase the difficulty of starting early projects. At present, the PLO solution adopted by the project party will have the problem of sustainability. If the Token distribution is completed, other methods must be used to attract users to assist in the auction. The value capture ability of the project party's Token after the parachain goes online is also at risk. In the case of fierce competition in the auction of parachain slots, the project party must conduct a large-scale publicity campaign before going online, and cold start will be difficult to exist in the Polkadot ecosystem. If the competition is fierce in the future, due to the competition for cross-chain resources, there will be a situation of "survival of the fittest" before the project is launched.
However, there are other cross-chain solutions on Polkadot, such as parathreads or integration into other projects with parachain card slots, or you can choose to issue them on the Kusama network to reduce costs. At present, the difference between the availability of parachains and parathreads, and the burden on the team in other ways to cross-chain also need to be continuously observed after the launch.
The Kusama function of Polkadot and the test network is not very different, so teams pursuing different stability will have different choices, but it will cause users and communities to be scattered. Although the two will not fork when the technology is upgraded, the two communities were separated from the very beginning, which caused the division of the community in stealth.
The goal of Polkadot is the platform of the platform, and the cross-chain between public chains is one of the problems it solves. For public chains, the default cross-chain problem only exists between mainstream public chains. The current solutions are constantly emerging. It remains to be seen how Polkadot will win among the many cross-chain solutions. Polkadot also has the advantage of improving the performance of a single chain. There are also various solutions to improve performance, such as the layer 2 network. The role of Polkadot will also take the test of time.
Polkadot has a large imagination space for cross-chain between enterprise platform and public chain, enterprise platform and enterprise platform, but the cost and significance of cross-chain also need to be further investigated. At present, the connection demand between alliance chain and public chain is not urgent.
Filecoin
Filecoin provides an incentive mechanism for distributed storage IPFS, and the core members also include IPFS members, both of which were created by Protocol Lab and attracted worldwide attention once they were launched. In 2017, it received $257 million in financing with a 10% share, setting a record at the time. The process of going online is far from being as smooth as financing. The testnet and mainnet planned to be launched in 2018 have been delayed again and again, and finally 10 copies will be officially launched in 2020. Although the Filecoin project has been delayed for two years, the related community enthusiasm still exists, especially the miner community.
(1) Current progress
In the Filecoin consensus, the block generation adopts the expected consensus (EC) model, which means that one or more miners are elected in each round to create a new block. The probability of a miner winning the election is proportional to the current storage capacity of the miner . The storage capacity of miners is proved by Proof of Space and Time (PoSt) and Proof of Replication (PoRep). Proof of time and space can use the proof chain and timestamp to prove that miners store data for a certain period of time. Even if the verifier is not online, it can be verified in the future that the miner has generated the proof chain within this period of time, effectively preventing temporary data generation attacks. Proof of replication can prove that data has been created successfully in a specific sector. And guard against three kinds of attacks: one is the witch attack; the second is the external data source attack; the third is the generation attack. Proof-of-replication avoids that miners can use different methods to make their own storage data smaller than the promised storage data in order to obtain additional compensation.
The miner's reward will be released linearly, and the output will be halved every 6 years. At present, the storage capacity of Filecoin has exceeded 1 EiB (Exbibyte), and now it has reached 1.27EiB, and the number of active miners is 789. Although the Filecoin browser shows that the miners are distributed in Asia, Europe, North America, Oceania and Africa, it is not difficult to see from the labels and disclosure information that the participants with the majority of capacity are Chinese miners. In terms of the effective computing power distribution of miners, there has not been a centralized situation similar to that of Bitcoin mining pools.
Figure 3: Miners’ effective computing power distribution (Image source: filfox.info)
(2) Economic mechanism and status quo
There are two markets in the Filecoin economic model: storage and retrieval markets, in which there are clients and miners respectively. In addition to the above two roles, there are developers and investors in the Filecoin economic model ecosystem.
In the storage market, miners can get rewards in three ways: first, transaction fees; second, block rewards; and third, Networking Message Transaction Fees. Transaction fees and network transaction acceleration fees are paid by customers in advance, and block rewards are generated by the system. The difference between Filecoin and the Bitcoin network is mainly in the nature of the services provided: storage is a long-term service, and Filecoin requires miners to maintain the stability of the network for a long time, rather than the Bitcoin network, where miners can freely enter and exit. The storage market has also introduced a pledge mechanism, which is a miner punishment mechanism to ensure that the data of Filecoin storage market customers will not be lost.
In each storage agreement between users and miners, the storage market miners will store the data provided by customers in the network, called sectors. The sector added by each miner will include the content of the storage file and the promised storage duration, ensuring that customers can freely use their own stored data within the agreed storage duration. When a miner adds a sector to the Filecoin network, the miner needs to stake a locked fund. Locked funds consist of two parts: the miner's own FIL tokens and part of the block reward. If a miner goes offline for the promised storage time, he loses a portion of his locked funds. If a miner stops storing completely, he may lose all locked coins. Locked funds are unlocked after miners fulfill the storage protocol, and miners can recover all funds after a short lock-up period.
This means that miners need to stake FIL to obtain block rewards, but FIL tokens are released linearly and gradually. At present, the growth of effective computing power is too fast. In addition, the price of FIL is too high and fluctuated in the initial stage of the launch, and the linear release time period is long. Many miners are reluctant to pay for the FIL required for mortgage at a high level. In the event of "strike", many storage capacity cannot enter the Filecoin network due to insufficient FIL, but this has a lot to do with the oversold miners. The miners had no governance channels, so they chose to confront the project side. The final result was that the project side compromised, changing the mining reward from 180 days of linear release to 25%, and the remaining 75% was released linearly. In addition, in order to solve the shortage of FIL, the official and related service providers in the market are preparing or have launched FIL lending services.
(3) Future development
Due to the high complexity of Filecoin and its corporate centralized decision-making, many miners are dissatisfied, so like other public chain projects, forked projects have been launched, such as Filecash, FileStar, etc.
At present, it is easy to see that the current mining market of Filecoin is relatively hot, and the price of FIL is also related to it. But in the original design, the supply, demand and price of FIL were regulated by market services. Miners need to pledge FIL to obtain block rewards, and FIL tokens are released linearly and gradually, so it is expected that the supply side will grow slowly and the growth rate will decrease exponentially. On the demand side, due to the gradual increase in service demand, it is determined that all market participants must continue to purchase FIL. To maintain the stability of service prices, regardless of whether FIL rises or falls, the price of storage and retrieval transaction fees needs to be anchored to fiat currency or stable currency. When the price of FIL rises, customers will pay less transaction fees and network acceleration fees for FIL units, and the proportion of miners' block rewards to revenue will increase. When the price of FIL falls, customers will pay transaction fees and network acceleration fees for higher FIL units, and the proportion of miners' block rewards to revenue will decrease. Assuming that only the service demand factor is considered, when the price of FIL rises, the rate at which customers purchase FIL in the secondary market will slow down, and when the price of FIL falls, the rate at which customers purchase FIL in the secondary market will increase, achieving the function of regulating the secondary market.
However, at present, the number of miners is far greater than the number of users, and the supply of storage capacity is greater than the demand, and this balance is broken. The participation of Bitcoin PoW miners is determined by profit, so as the price of the currency increases, more and more miners and computing power join the Bitcoin network, which is a gradual process. However, Filecoin has already produced and sold a large number of mining machines before its launch. If the mining machines cannot enter the network for mining, it will be difficult to maintain cash flow. If the mining income is not ideal, it will also affect the interests of mining machine manufacturers. At present, the storage capacity of the Filecoin network is The market is no longer just about customers and miners. The market mechanism in Filecoin can play a role in the future, and whether there are real users still need to continue to observe. Whether the censorship resistance of Filecoin storage will restrict its development in the global market also needs to be observed.
Thinking and Summarizing
At present, in addition to Filecoin involving storage, most public chain projects now adopt a consensus mechanism based on PoS. Their differences lie in the specific implementation method, governance mechanism and economic model of PoS. In the future, Ethereum will also adopt PoS consensus. Although the public chain has no restrictions on application scenarios, the convergence of applications on the chain means that they are in a competitive relationship. The migration of future applications in the Ethereum 2.0 stage and the development of Polkadot ecological applications are the next hot spots in the public chain field.
For the public chain itself, how to balance performance, security, and decentralization is still a problem it faces. For example, there are various difficulties in the Rollup scheme of Ethereum and the scheme of Ethereum 2.0. Finding a balance between the three is still a public link. down the breakthrough.