ETH - Ethereum

First Mover Advantages

• the largest and most active communities & developers

• the public chain with the highest DeFi TVL

• well developed ecosystem from DApps to NFTs

  • DApps: fundamental infrastructures like MarkerDAO, AAVE, Curve, Uniswap, Compound

  • NFTs: blupchips like Crypto Punk, Bored Ape Yacht Club, Art Blocks auctioned on Sotheby’s

• first decentralized, stable, robust chain with long term development plan - lots early believers

Proof of stake (POS) consensus mechanism

• first chain establishes POS to achieve distributed consensus

• validators stake Ethereum token into a smart contract of the network

  • algorithm to selected a validator from the pool to validate & forge a block of transactions

  • larger stake gets higher chance to be selected

  • nodes can validates blocks forged, dishonest validators will have fine costs more than earn

• benefits: better energy efficiency, lower validator requirements, decentralized, costly 51% attack

Level 2 Solutions

Level 2 chain is a scaling solution that not scarifying Ethereum chain’s security, but executes transactions outside Level 1 to improve speed & reduce gas cost.

ZK-Rollup - validity proof

• batch of transactions generates a Zero-Knowledge Proof (ZK-SNARK) for the correct state root

• ZK-SNARK proof is:

  • a hash of the state after executing the transactions in the ZK-rollup layer

  • a proof of an underlying piece of data without revealing the data

  • people can verify that the data validity even if they don’t have access to the data itself

• this validity proof is validated against the smart contract before it can be implemented

Optimistic Rollup - fraud proof

• batch of transactions is bundle send to the mainchain, the state root and hash is posted

• assume the state transition is correct and not checking it every time by the smart contract

• if someone discovers an invalid state transition was published to the rollup contract, a fraud proof is posted to the rollup contract on the mainchain

• The fraud proof includes:

  • a proof of pre-state - status before a transaction was applied

  • a proof of post-state - status should have looked after the transaction was applied

  • a proof of the invalid transactions that were applied during a state transition

• contract verifies the proof by comparing post-state, reverts all following batches if mismatch

Plasma - fraud proof

• a ‘child’ blockchains that use the main Ethereum chain as a trust and arbitration layer

• each plasma chain can have its own mechanism for block validation

• fraud proofs ensure whenever any malicious activity, users can report dishonest nodes

Ethereum 2.0 Beacon Chain (coordination layer)

• Beacon chain merges with Ethereum mainnet in ‘the merge’ upgrade

• transition from proof-of-work to proof-of-stake consensus layer

• manage validators’ rewards, penalties & how validators vote on the proposed blocks

• responsible for randomly assigning validators to validate upcoming shard chains

Ethereum 2.0 Shard chains (data layer)

• scale by splitting a database horizontally to increase the size of the existing database

• reduce congestion and increase transactions per second

• validators only process data for the shard they're validating, not the entire network

• more shard, more validators, more decentralized, more secured

• with rollup L2s, transactions are bundle processed off chain to reduce data per transactions