Bankless Insights from EthCC 2023: Protocol Development Becomes Vertical, Consumer-Level Applications Experience Explosion

Original: 《David's Takeaways from EthCC 2023》

Author: David Hoffman, Bankless

Compiled by: Deep Tide TechFlow

So… with half of 2023 gone, where do we stand now?

We took some time to reflect on the countless conversations that took place during EthCC 2023 and summarized some key thoughts and takeaways.

Protocols are Becoming Commodities

With the Dencun upgrade on the horizon, the Ethereum community is preparing for a hard fork that will ultimately introduce a large-scale scalability upgrade in EIP4844 (also known as Protodanksharding), providing Ethereum's Rollups with a cheaper form of block space on L1, referred to as "blobspace." This long-awaited upgrade finally makes these L2s the most scalable versions.

This upgrade marks a moment in the evolution of cryptocurrency, as we are approaching the theoretical minimum cost of crypto-economic resources. Not just Ethereum, but many different protocols seem to be nearing their final forms, having minimized the cost of accessing optimized resources.

"Data availability" is a primary category, addressing the types of resources that EIP4844 and other data availability solutions tackle. Ethereum's block space has become cheap for the first time! But Ethereum is not the only protocol optimizing for data availability. Celestia, Avail, and EigenDA are all data availability protocols outside of Ethereum that have elevated blockchain scalability to levels we never imagined just a few years ago!

This is not limited to data availability. Espresso Systems received a warm welcome at the largest side event of EthCC—the Modular Summit. Through their shared sequencing test network and collaboration with Eigenlayer, Espresso is no longer waiting for L2s to build their own shared sequencing systems but is focusing on one thing: optimizing shared sequencing.

In the zkRollup space, "provers" are key components that enable end users to verify the scalability of zk-rollups through zk-proofs. zkSync released their "Boojum" upgrade, claiming that their proofs can run on mid-to-high-end gaming GPUs. The important implication here is that provers can now run on consumer-grade hardware rather than highly specialized enterprise machines, which means zk-proofs can decentralize these networks more meaningfully.

Protocol Convergence and Verticalization

Aave, as a money market, now has a decentralized stablecoin, GHO. MakerDAO, as a decentralized stablecoin, now also has a money market called "Spark." Frax has been developing its own stablecoin-money market-LSD ecosystem vertical for over a year. These three protocols are converging and evolving towards the same basin, now competing in the same space: TVL, stablecoin supply, and most importantly, fees.

Just look at the launch of UniswapX, an order execution protocol based on free market competition, designed to facilitate optimal decentralized order execution while also serving as a cross-chain abstraction layer, allowing the free market to choose its own solutions for executing cross-chain DEX swaps—meaning, if I have token A on chain 1 and want to get token B on chain 2, who can give me the fastest and best rate?

UniswapX complements Uniswap's automated market maker (AMM).

Each version of Uniswap adds complexity; with the introduction of Hooks in v4, the homogeneity of Uniswap AMM pools is increasingly not guaranteed. As the number of chains potentially hosting Uniswap deployments increases, the order routing optimization problem becomes too complex to be managed by a rigid on-chain smart contract system. UniswapX builds a new vertical by allowing order execution and fulfillment to occur off-chain, ensuring correctness through minimal viable proofs to address any complexities that may arise from Uniswap v1-v4.

Even after all this, the L2 ecosystem continues to achieve rapid convergence on similar design patterns.

• We have the OP Stack from Optimism;

• Then there's Orbit from Arbitrum;

• zkSync released the ZK Stack;

• Finally, with the launch of Polygon 2.0, we now have Supernets.

Like L2 itself, they each have their differences. Each has its own strategies. But they are all effectively pursuing the same vision: the number of chains generated from Ethereum will eventually be comparable to the number of web pages generated from HTTPS.

So, which standard will facilitate the Cambrian explosion of chain generation?

In this regard, Optimism is undoubtedly in the lead, with three large chains and some smaller ones. Polygon has ImmutableX. Arbitrum has Nova (though internally generated), while ZK Stack, although still seeking its first large-scale adopter, has seen several startups report choosing ZK Stack to build their custom ZK chains.

This news, combined with the expected launch of the Base mainnet in early August, has set the stage for the L2 Summer we've been anticipating since 2021.

Consumer-Centric

If you've read this far, I hope you realize how much progress our protocols and infrastructure have made. I declare that the issues of protocols and infrastructure in cryptocurrency have been solved. Of course, there is still much work to be done in this area, but exploring and pioneering this field has become a science. The frontier of cryptocurrency protocol development has reached a level of maturity sufficient for us to see the ultimate goal for the first time.

So now, since we've solved all these major problems… is there no one willing to develop some applications?

L2 has provided more block space than ever before! Data costs are nearing their lowest! Latency and responsiveness are better than ever! It's time to build applications again! Who will consume all the L2 block space? Now that we have ample cheap and secure block space, let's start utilizing it. However, we shouldn't stop at blockchain applications! Let's take it a step further and start productizing these systems! Has no one considered the consumers?

Let's build consumer-facing applications. Let's hire those incredibly talented user experience/user interface designers whose job is to serve those who have no private keys or only hold funds on Coinbase or Kraken. Let's build applications for users who have never interacted with blockchain.

Our protocols have become cheap enough that their usage can be subsidized through user acquisition. As block space becomes cheaper, new revenue models can begin to subsidize user transactions on our increasingly affordable L2s.

A small number of people have realized the meta-stage we are currently in, and I hope this article emphasizes that, allowing others to recognize that our protocols are ready. Let's start doing the hard work of user research, clever abstraction mechanisms, and consumer-facing applications.

Want some examples in this regard? Look at Gnosis—they launched Gnosis Pay and Gnosis Card at EthCC.

In the Gnosis ecosystem, we now have:

• Gnosis Safe (your high-security crypto vault);

• Gnosis Chain (a high-speed L2 zkEVM chain based on Polygon Supernet);

• Gnosis Pay (a payment chain built on Gnosis Chain);

• Gnosis Card (a fintech payment solution built on Gnosis Pay).

Through Gnosis, we now have a world where the front end is traditional payments and the back end is crypto protocols. This is something that has been discussed since the inception of Bitcoin. Gnosis needs to transform this into something uniquely competitive against traditional payments, but it's worth noting that our infrastructure is now capable of bridging the gap between Web3 and TradFi.

As Ethereum enters the consumer era, cryptocurrency is grappling with some of the largest regulatory battles we've ever faced.

Once we get through all these regulatory trials… once we finally defeat Gary Gensler, change the SEC, win the right to issue tokens fairly, and secure high-quality legislation through Congress, cryptocurrency will be in the friendliest regulatory state it has ever been. Right now, cryptocurrency is "doing the hard things" in regulation. We will never be accepted by larger participants until we confront regulators and legislators head-on and gain recognition.

Modular Summit Vs EthCC

The Modular Summit took place on the Friday and Saturday following EthCC, and its scale and depth of knowledge make it inappropriate to describe it merely as an "EthCC side event."

EthCC has always been a welcoming place for the Cosmos ecosystem and the developers it attracts. The same energy has evolved into the modular aspects of cryptocurrency, where Ethereum is both a part of and distinct from cryptocurrency.

I refer to this corner of the cryptocurrency ecosystem as the "reluctantly aligned with Ethereum" crypto space, where modular infrastructure has naturally found a useful position within the Ethereum environment, but many of these platforms would be very willing to sit on the monetary throne (Celestia, Cosmos) if Ethereum did not fully occupy that position.

It is interesting to see different prototypes finding a home in the modular community and resonating more strongly with it than with the 100% pure Ethereum community. It is also fascinating to see these communities come together naturally, as the technological forms fit very well. Ultimately, Ethereum will absorb all the useful modules produced by the modular community—the essence of the system is to aggregate all useful open-source code into a single upper structure.

There is no doubt that the modular ecosystem has entered new technological frontiers faster than any other area in the cryptocurrency space. This makes sense—modularity means concentrating resources on a single problem rather than spreading them out and trying to solve multiple areas at once. The rigor of knowledge expressed in this cryptocurrency space attracts all the smartest minds in the field. I think you can expect great things from this corner of modularity.