Author: Moledao

The Web3 series of courses jointly organized by Moledao and OGBC officially started on January 16, 2023! The first week is Infrastructure Week, covering the basics of blockchain, Ethereum, Layer 2, Layer 0, and storage.

Today, let's review the "Layer 0" course by mentor Chase Wang on January 19, 2023! The course recording has been uploaded to Moledao's Bilibili:

Week 1: Infrastructure Week | Layer0

Now, let's study the notes from the "Layer 0" course together!

Mentor Introduction

Mentor Chase Wang is a former Chainlink European analyst, head of research for AvatarDAO and the Beard Coin Community, co-founder of Pepper Ventures, with a 6-year background in WEB2 investment, now all-in on WEB3.

Learning Outcomes

In this class, Mentor Chase explained the structural differences between Web2 and Web3 products, the positioning of Layer 0, introduced the Layer 0 project Cosmos, and compared Cosmos with another Layer 0 project, Polkadot.

I. Analysis of Web3 Products | Product Structure and Layer 0 Positioning

Structural Differences Between Web2 and Web3

Web2 Structure:

Users connect to the internet through a browser, then connect to the application's front end, back end, and database. The structure is very simple.

Web3 Structure:

In Web3, there is a Signer present during the user's connection to the internet (this role is typically played by a wallet). Users connect to the front end through the Signer, and then connect to the underlying blockchain through a Provider (the service provider running the nodes). The leftmost part of the diagram shows Layer 2 and sidechain solutions. The graph is a search tool. The right side's IPFS is the storage component.

Layer 0 Data Transmission, the Bottom Layer of Blockchain

II. Layer 0 Project Cosmos

Core Components of Cosmos

Tendermint Core BFT: A Byzantine Fault Tolerant consensus algorithm.

Cosmos SDK: A toolkit for developers to build their own blockchain platforms.

Cosmos IBC: A communication protocol within blockchains, enabling communication between them.

Note ⚠️: Compared to Ethereum or the EVM virtual machine, Cosmos SDK is more suitable for building blockchains for specific applications.

Cosmos Project

In the image above, the hexagonal blocks represent different public chains. Different chains connect to the Cosmos Hub via IBC. The goal is to establish a shared underlying architecture that allows various blockchains to communicate. Cosmos SDK is a set of out-of-the-box consensus and execution tools that allows anyone to create their own PoA or PoS blockchain. Note that Cosmos is not Layer 0 of Ethereum, which is Layer 1.

The premise of Cosmos is that the flexibility, sovereignty, and performance of a smart contract-based virtual machine are limited. Therefore, Cosmos encourages each use case to create a separate blockchain. This allows developers more flexibility during development. However, the downside is a longer development cycle and increased costs.

In the image above, about 150 Validators work together to run the Tendermint consensus. The Cosmos Hub is supported by the Tendermint consensus.

Cosmos Staking Token $ATOM

The token has an unlimited issuance until January 14, 2023. The circulating supply is 280 million, with a total market cap of approximately $3.6 billion. After the V2 version upgrade (green line in the image), the issuance will decrease from 10 million per month to 300,000 per month over 36 months, effectively reducing the inflation rate of ATOM to 0.1%.

The idea behind the Interchain Allocator is to turn the hub into a decentralized VC fund and make the ATOM token an IBC index, providing ATOM investors with a share of the growth of the entire Cosmos ecosystem. This way, developers can focus on product development without worrying too much about tokens and funding.

III. Comparison of Cosmos and Polkadot

Advantages of Application Chains

• Can meet the high throughput and low fee requirements of Dapps. Applications that require Web2 performance in a permissionless Web3 environment should consider application chains as the first implementation option. For example, Gamefi applications often require extremely high throughput to support user interactions, and transaction fees should be relatively low.
• If a Dapp requires a specific technology not available on the platform chain, it can be achieved by building an application chain. For instance, zero-knowledge proofs, such as zk-Snarks or zk-Starks, require zk proofs for privacy-focused Dapps, and generating zk proofs requires significant computation, which is too costly to execute on-chain. A good approach is to implement the required technology on the application chain.
• Building applications on an application chain can improve token economics. When teams build applications as smart contracts on the platform chain, users pay two types of fees to the Dapp:
• Native Dapp fees. For example, trading fees on exchanges or the spread in lending protocols, which essentially serve as revenue streams for the Dapp. These revenues are often used as incentives for users to continue developing the Dapp.
• Gas fees. Paid by users to the validators of the platform chain, these do not contribute to the Dapp's economy and represent a loss of economic value extracted from the Dapp, paid in the form of rent to the platform chain. Although this rent is essential for ensuring the security of the Dapp, the ideal situation is to retain this economic value within the Dapp's economic system to reward users; application chains support this scenario.
• Gas fees on application chains can be used to reward participants in the Dapp. Yuga Labs splitting the BAYC ecosystem into an independent chain is also for this reason; during the NFT minting period of the project, the BAYC community paid hefty fees to the Ethereum network, and transferring transactions to their ApeChain would keep these fees within the BAYC economic system.

Disadvantages of Application Chains

• Low security. In application chains, security largely depends on the adoption of the Dapp and the price of the Dapp's native token.
• High development costs. Launching an application chain requires building a significant amount of additional infrastructure and coordinating with validators.
• Lack of composability in application chains, where each Dapp is isolated from others, requiring cross-chain bridging or messaging for interaction.
• Cross-chain risks.

IV. Cosmos Ecosystem

The Cosmos ecosystem is now quite rich, with various facilities relatively complete.

Currently, the largest projects in the Cosmos ecosystem include Cronos (under Crypto.com), Thorchain, Kava, and Osmosis. Notably, the green section in the right image represents Terra, which collapsed, leading to the immediate rise of Cronos. Because both Terra and Cronos used the same SDK for development, the project could be transferred to Cronos at almost no cost, which is the benefit of Layer 0.

V. Acknowledgments

Thanks to the following organizations for their support of this public welfare course!

Sponsor Support:

One Global Blockchain Centre (OGBC)

OGBC is a leading incubator for Web 3.0, collaborating with emerging cryptocurrency startups to build the infrastructure of the future. By leveraging OGBC's expertise, network, and resources in the cryptocurrency field, companies and projects can maximize their potential and strive to develop innovative and valuable solutions for an increasing number of users in the blockchain industry.

Other Partner Support:

VI. About Moledao

MoleDAO is a blockchain developer community for all blockchain enthusiasts to stay updated on the latest developments in blockchain and grow with the help of experienced blockchain pioneers and innovators, contributing more innovative ideas to build the Web 3 ecosystem.

We aim to bring blockchain concepts to everyone and develop the blockchain ecosystem by building a community for blockchain enthusiasts to exchange ideas, providing support for blockchain projects, hosting global hackathon series, assisting in talent matching for projects, and offering project sponsorship and guidance.

Our vision is to become a carefully curated one-stop blockchain ecosystem. Whether you are a blockchain enthusiast, developer, institution, or investor, you can find your suitable positioning at Moledao.