Author: Louis

Written by: MiX

At 10 PM Beijing time on October 25, Louis, the founder of Octopus Network, delivered an opening speech at the NEAR ecological annual conference Nearcon in the metaverse venue, discussing the "cross-chain hub design philosophy" of Cosmos, Polkadot, and Octopus Network, and proposed the concept of a "fat hub" for multi-chain networks.

The role of Octopus Network in the fat hub is to "provide a continuous stream of application chain assets," which can be utilized by DeFi protocols on Near, thereby helping Near to grow. The most critical and irreplaceable aspect is that the value foundation of application chain assets is not "Trading," but "Utility." This makes the "fat hub" "substantially fat," rather than merely "artificially fat."

I believe that the NEAR Protocol will become the fattest blockchain internet hub. Octopus Network is becoming the satellite city belt around NEAR, the best habitat for "non-financial Web3.0 applications."

Internet of Blockchain

Internet of Blockchain

Since 2020, the most notable change in the blockchain world is that Ethereum, constrained by scalability, can no longer maintain a monopoly, and various new public chains and Layer 2 networks continue to emerge. Some of these have gained significant usage and carry vast amounts of crypto assets, leading more and more people to believe that the future landscape of the blockchain world is not a "One Chain Fit All," but an interconnected network composed of numerous blockchains (Internet of Blockchain).

When it comes to the Internet of Blockchain, the contributions of Cosmos and its founders cannot be overlooked. In 2015, Jae Kwon and his collaborators created Tendermint, a PoS-based BFT consensus protocol that allows anyone to quickly create a blockchain. They foresaw that as a large number of purpose-specific blockchains continue to emerge, they would inevitably interconnect, supporting the free flow of assets and data, forming the decentralized next-generation internet (Web3.0) infrastructure.

Hub Minimalism

Following the end-to-end principle of internet architecture

In the blueprint of the blockchain internet of Cosmos, there is a special type of blockchain that serves as an interoperability hub (commonly referred to as a cross-chain hub) connecting as many blockchains as possible, hence called a Hub. Cosmos Hub is the first of such blockchains, and IRIS Hub is the second. Other purpose-specific blockchains are referred to as Zones.

The designers of Cosmos adhered to the end-to-end principle of internet architecture design, which states that many functions of the network, such as encryption, compression, verification, acknowledgment, and retransmission, require the knowledge and assistance of application systems at the network edge to be completed, making it meaningless to implement them within the communication network.

The blockchain internet version of the end-to-end principle is called hub minimalism, which is the design philosophy of the Cosmos network architecture. This means that the functions of the Hub should be kept to a minimum, bringing three benefits:

1. Simplified Hub code, leading to higher security and reliability;

2. The Hub can dedicate its limited transaction processing capacity (measured in tps) specifically to handle cross-chain transactions, achieving efficient and low-cost cross-chain operations;

3. Avoid overlapping functions between Hub and Zone. Since the Hub is the core of the ecosystem, competition between Hub and Zone would inevitably stifle innovation in the Zone.

In 2020, someone proposed to deploy an AMM DEX on Cosmos Hub as a foundational DeFi service for the entire ecosystem. This proposal clearly violated the principles of hub minimalism and sparked intense debate. The outcome of the debate was that pragmatism prevailed. After a year of development and testing, Gravity DEX went live in mid-2021. However, the Cosmos community did not abandon hub minimalism; it merely regarded Gravity DEX as an exception. But the question is: why does such an exception as Gravity DEX exist?

Polkadot has always been regarded as a counterpart to Cosmos in the cross-chain arena. Although it does not use the same terminology, Polkadot also adheres to hub minimalism. As a hub, Polkadot Relay does not have application layer business and cannot deploy smart contracts. Moreover, Polkadot is working to transfer basic functions, except for shared security, including DOT issuance and on-chain governance, to "system parachains," which is even more radical than the minimalism of Cosmos Hub.

The minimal Polkadot Relay means that decentralized applications, including DeFi, can only be hosted by parachains. The development of Polkadot's DeFi ecosystem relies on the composability between parachains. However, achieving interoperability between parachains faces two obstacles:

1. The launch date of the cross-chain protocol XCMP within the Polkadot network is uncertain. Without XCMP, parachains are effectively isolated chains, unable to interoperate with other parachains or connect with other public chains like Ethereum through public cross-chain bridges.

2. The uncertainty caused by the slot auction mechanism, where the source parachain needs to consider additional factors when contemplating protocol composition with the target parachain: How much longer is the current slot lease of the target parachain? Can it win the auction again before expiration? If the counterpart fails to renew successfully, the parachain will downgrade to a parallel thread, significantly reducing its activity and likely causing protocol composition failure.

Perhaps the question we should pursue more is: does hub minimalism have boundaries?

Fat Hub

The most applications, assets, and users

Just by looking at the interconnected topology of the real blockchain world, it is easy to see that Ethereum is at the center of a hub-and-spoke network, bridging with all important blockchains. For every public chain, layer 2, or purpose-specific blockchain, the primary demand for cross-chain interoperability is to connect to Ethereum. The motivation for all blockchains to connect to Ethereum is not because Ethereum is the most "minimal," but precisely because Ethereum is the most "fat," accommodating the most application layer protocols, the most crypto assets, and the most users. Ethereum has become the "de facto hub" of the blockchain internet and is the fattest hub.

Octopus Network is the third notable multi-chain network protocol after Cosmos and Polkadot, designed to securely and efficiently launch and operate a large number of independent blockchain forms of Web3.0 applications—application chains.

The core difference among the three major multi-chain network protocols lies in how the sub-chains (Zone/Parachain/Appchain) obtain security:

• In the Cosmos network, Zones are independent Tendermint consensus blockchains secured by their own PoS.

• Polkadot is a heterogeneous sharded blockchain where parachains are not independently consensus blockchains but shards, secured by the relay chain to ensure they have the same level of security.

• The application chains of Octopus Network are independent consensus blockchains similar to Cosmos Zones, but all application chains' PoS is delegated to the Octopus relay, using the native token OCT as exclusive collateral. Application chains can autonomously determine their security level by adjusting the block rewards provided to the validating nodes that have staked OCT.

The cross-chain hub of Octopus Network is not an independent layer 1 public chain, but a set of smart contracts running on the Near Protocol. Before we delve into the design logic of Octopus Network, we need to discuss the relationship between DeFi and non-financial Web3.0 applications.

Every Web3.0 application is a decentralized market protocol coordinated by crypto tokens. Various participants, including protocol developers, investors, validators (miners), service providers, and community promoters, contribute to the establishment and prosperity of the market and receive token rewards. Crypto tokens must exist in the crypto asset market to have a price and complete the process of capital formation and reinvestment. For example, validators obtain fiat currency by selling crypto tokens to cover the IT and labor costs of validating nodes. Therefore, the development of Web3.0 applications is inseparable from the support of DeFi.

The core advantage of application chains is their focus on specific application scenarios, achieving optimal user experience. They cannot and should not attempt to build their own DeFi protocol ecosystem but should utilize existing, rich, rapidly innovating, and well-liquid liquidity DeFi facilities. This is akin to how factories, amusement parks, or farms do not build their own financial markets but issue stocks and bonds in existing markets.

The foundational protocol of Octopus Network can be seen as a decentralized incubator. Periodically, Octopus Network will launch the application chains that receive the most support from the community and support these application chains in conducting Skyward IDOs. To help application chain projects secure more funding and establish economic ties with application chain communities, Octopus Network will directly airdrop OCT tokens to IDO investors of the application chains.

The top 10 application chains will each receive an airdrop of 200,000 OCT, while application chains ranked 11-100 in the OS-IDO will receive an airdrop of 100,000 OCT each. After the Skyward IDO concludes, application chain projects will establish trading pools on Ref.finance and inject initial liquidity, providing incentives to liquidity providers as needed.

Octopus Network

Helping NEAR become a fat hub

Providing utility-driven application chain assets

From the very first day of their inception, all application chains of Octopus Network will establish a close symbiotic relationship with DeFi on the NEAR blockchain. Moreover, in Octopus Network, the interoperability needs between application chains and NEAR platform's DeFi protocols are far more important than interoperability among application chains themselves. In the past few months, several notable IDOs have taken place on the Skyward platform. The number of participants in the Ref.finance IDO approached 2,000, while the Octopus Network IDO had nearly 4,000 participants, and the recent Paras IDO exceeded 4,000 participants.

This does not mean that Paras is more valuable than Octopus or that Octopus is more valuable than Ref.finance. Rather, each valuable IDO recognized is expanding the user base of Skyward, helping subsequent protocols achieve more successful IDOs.

The TVL of OCT in the Ref trading pool reached $7 million. Imagine that Octopus Network will connect hundreds of application chains in the future, generating thousands of FT and millions of NFTs, all of which will enter DeFi protocols on Ref.finance and other NEAR platforms, either for trading or serving as collateral. The essence of an ecosystem is that localized development drives overall prosperity.

Vitalik said at this year's EthCC conference: the Ethereum ecosystem cannot always create tokens that serve to trade other tokens. The role of the financial system is to efficiently allocate capital for social production. If capital cannot flow into the production sector to create utility, then the financial system serves no purpose other than to output bubbles. Application chains are decentralized production-oriented digital economies. Their relationship with DeFi protocols is akin to that of the real economy and the financial system.

On the NEAR platform, under the coordination of Octopus Network, DeFi and non-financial Web3.0 applications will generate unprecedented positive interactions.

There is only one internet in the world. Even after decades of development, the connotation of the internet is still rapidly changing. For such a singular entity, inductive reasoning often performs poorly. The end-to-end principle is not an a priori principle of the internet but should be seen as a reflection on internet architecture.

As stated in the classic paper "End-to-End Arguments in System Design" published in 1981: "The principles of function placement discussed in this paper have been used for many years, yet they are not necessarily clearly understood or defined." Moreover, the habitual translation of "end-to-end principle" is problematic. It is not a principle but an argument, and there are enough counterexamples and reflections.

The so-called "Internet of Blockchain" is more of a metaphor than a definition. This metaphor helps many people form an intuitive impression of multi-chain networks. However, assertions like "the Internet of Blockchain is the internet" or "multi-chain networks are communication networks" are not reliable. Without a deductive basis, applying hub minimalism to multi-chain networks is not a logical inference but merely an analogy.

More and more people in the crypto circle, including researchers from Cosmos, compare crypto networks to cities. The forms of successful metropolises are not the result of top-down design but rather the product of historical evolution. Places with convenient transportation and abundant water sources gradually develop into markets, evolving into commercial center cities, and eventually, a few commercial center cities develop into financial centers serving vast regions and numerous industries. In the real world, all financial centers are transportation hubs, and all transportation hubs are commercial centers.

For new public chains to secure a place in the future blockchain internet, the key is to develop into financial centers, gathering a large number of DeFi protocols and crypto assets. In the two multi-chain networks, Cosmos and Polkadot, the hubs with the most resource support and community consensus, Cosmos Hub and Polkadot Relay, have given up the prospect of becoming financial centers, relying instead on ecological projects like Terra, Osmosis, Acala, Moonbeam, and Astar to take on this heavy responsibility.

The NEAR Protocol offers a user experience close to Web2.0 while possessing a solid decentralized foundation. It is gathering the resources and consensus of the entire ecosystem, rapidly rising to become the financial center of the blockchain world. Given that the NEAR Protocol has nearly unlimited scalability potential based on sharding, it can accommodate hundreds or thousands of times more crypto protocols and crypto assets than Ethereum layer 1, becoming the fattest blockchain internet hub. Meanwhile, Octopus Network is becoming the satellite city belt around NEAR, the best habitat for non-financial Web3.0 applications.