Weekly Rollup #5

For the week ending March 10th

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šŸ“£ News & Announcements

Celestia Kicks-Off the BlockSpace Race

March 7th marked the official launch of Celestiaā€™s ā€œBlockspace Raceā€, the networkā€™s first incentivized testnet.

Why is this a big deal

Although we are now starting to see the rise of more and more modular blockchains, this was not always the case. In fact, modular blockchains are a relatively new concept, as it wasnā€™t until 2019 that Celestia (or Lazy Ledger as it was known then) first introduced us to the ā€œmodularā€ thesis, following the launch of their first whitepaper.

Traditionally, we were accustomed to seeing monolithic blockchains, which take care of all blockchain duties within the same environment (execution, settlement, data availability, and consensus), however, Celestia introduced the idea of splitting the workload into multiple layers.

More specifically, this whitepaper explained the idea of separating data availability & consensus into its own layer, thereby removing the need to perform execution and settlement altogether, and instead outsourcing these other tasks from other networks.

Considering its been four years now since the release of that first whitepaper, itā€™s no surprise why a huge portion of the modular blockchain community is filled with anticipation.

Aside from that, there are projects that have to wait until Celestia launches before they themselves launch. One example is Eclipse, which is a sovereign rollup built on top of Celestia.

Details of the Blockspace Race

Altogether, about 20K applicants registered to take part in this event, however, only 1K were chosen to participate, which still makes this one of the largest, if not the largest, incentivized testnet launches to date.

The testnet will be broken down into two phases:

  • Phase 1: This phase kicked off the Blockspace Race (testnet) and is dedicated strictly to Celestia validators.

  • Phase 2: This phase is expected to happen a week from Phase 1 launch (probably by the time youā€™re reading this) and allows node operators to start entering the network (this includes light nodes & bridge nodes). This is huge, as itā€™ll be the first time weā€™ll see DA sampling take place in a large-scale network. According to the team, during this phase there will be several tasks and projects that the participants will be able to contribute to, such as working on developer tooling.

Highlights from Blockspace Race Twitter space

Following the kick-off of the Blockspace Race, the Celestia team held a Twitter space to go over the event details, as well as answer any questions from the community. Here were some of our favorite highlights.

IBC will be integrated into the Celestia testnet at launch, allowing users to start experimenting with bridging to and from the network. In fact, during their recent Twitter Space, they challenged anyone to try and bridge to Osmosis (do not try using real tokens!).

Aside from IBC connectivity, another exciting aspect that was mentioned during the Twitter Space was when one of the core Celestia engineers mentioned the development of a new ā€œtransaction typeā€. In short, this new transaction type will help pave the way for someone to build & launch a modular sequencer. This doesnā€™t do this feature enough justice, so if youā€™re interested in learning more about this, feel free to listen to the original recording (skip 28 minutes in).

What is Celestia

Celestia is a modular blockchain whose sole task is to receive, order, and store transaction data. Aside from introducing us to the modular world, Celestia was also popular for solving the ā€œData Availability problemā€, which asked, how can nodes be sure that all the transaction data was published correctly whenever a new block is produced. Specifically, Celestia uses ā€œdata samplingā€ to accomplish this, but weā€™ll save the details about this for a future date.

Congrats to the entire Celestia team! Weā€™re excited to see the continued growth from one of the leaders in the modular space. You can read the entire article to learn more about the Blockspace Race.

Coinbase Launches Wallet as a Service

Coinbase once again proved why theyā€™re one of the best at onboarding new users to web3, as this past week the company announced ā€œWallet as a Serviceā€, which comes just a couple of weeks after announcing ā€œBaseā€, their own L2 chain.

What is WaaS?

Coinbaseā€™s WaaS ā€œis a scalable and secure set of wallet infrastructure APIs, enabling companies to create and deploy fully customizable on-chain wallets to their end usersā€.

This will allow traditional web2 companies (& even web3 ones) to create and integrate their own custom wallets directly on their website, using the teamā€™s own branding, as well as its own set of custom features, such as an added loyalty program. However, unlike the traditional loyalty system that you see today, users will be able to sell/trade these loyalty points to others, thanks to the power of web3.

Seamless Onboarding

As mentioned earlier, Coinbase has been one of the best at onboarding new users into the space, and that doesnā€™t change with WaaS.

WaaS is meant to abstract away the concept of crypto altogether for the end user (they shouldnā€™t know theyā€™re using a crypto wallet). One of the ways they are doing this is by removing the need for a seed phrase, and instead using a simple username and password log-in.

Theyā€™re able to offer this feature because of their use of Multi-Party Computation (MPC). MPC essentially splits a single key into multiple pieces. These pieces are then distributed to multiple parties so that even if one piece of the key is compromised or lost, the user wonā€™t lose access to his/her funds.

So in this case, the key is split between the end user and Coinbase. If the end user loses his/her account, Coinbase can still retrieve access. That said, the end user will also have the option of retrieving his/her assets under their own account, and removing it from the possession of Coinbase entirely.

Potential Use Cases

  • digital storefronts: any existing store would be able to integrate its own custom wallet within its website. Whenever a new user signs up for an account with that particular online store, theyā€™ll be assigned a web3 wallet. As mentioned, each company can add its own custom features, like a loyalty program. Whenever the user buys something from that online shop, theyā€™ll be assigned loyalty points, which can then be used to access exclusive benefits, or can be sold or traded to others.

  • Games: any existing web2 or web3 game can launch its own wallet using WaaS. Again, this wallet can be customized to the branding of each specific game, and will enable players to actually take ownership of their in-game assets. Meaning theyā€™ll be able to sell or trade any character skins, in-game ā€œcreditsā€, and everything else.

To learn all about Coinbaseā€™s new Wallet as a Service, you can check out the complete article.

Scroll Raises at a $1.8 Billion Valuation

On March 6th, Scroll announced a $50M funding round that valued the company at $1.8B. This round included some huge names in the VC space, such as Polychain, Variantfund, The Spartan Group, Sequoia, Bain Capital, and others. According to ā€œThe Blockā€, Scroll had previously only raised $33M in funding across two rounds, making this most recent one the companiā€™s biggest raise yet.

As a reminder, Scroll is an Ethereum L2 network based on the use of zk-technology.

The funds will be used to:

  • progress the companies development into mainnet launch

  • introduce a public goods and grants program

  • continue further research on decentralized provers and sequencing networks

This announcement came just a week after the company announced its testnet launch (you can check out our post from last week to learn more about that), where already they have managed to reach over 790K unique wallet addresses, and over 3.3M transactions.

The crypto industry has had a rough past couple of months, but even in this type of environment, itā€™s amazing to see Scroll raise at such a high valuation. Congrats to the entire Scroll team!

Proven Raises $15.8 Million

On March 9th, Proven announced its $15.8 funding, in a round led by Framework Ventures. According to official reports, the funds will be used ā€œto further expand its development team and scale its world-class zero-knowledge-based technological infrastructureā€.

Proven is a team working on zero knowledge (zk) solutions to help provide services like ā€œproof of solvencyā€ for exchanges. To be more specific, Proven specializes in producing zk-proofs, which are a special type of cryptography that proves something is true, without actually disclosing the contents within the proof.

So for example, exchanges will be able to prove to the world that they own enough assets to cover liabilities (thereā€™s enough money in the bank), without actually having to disclose the assets themselves or who owns what.

While most projects today are using zk-proofs for scaling purposes (StarkWare, Polygon, zkSync, etc.), zk-proofs can also be used to provide privacy-enhancing features. Popular examples of such projects include Aztec, who are working on private peer-to-peer (P2P) transactions, and PolygonID, which is allowing users to prove their personal statements/documents without actually disclosing the content within those statements.

When we think back to all the crypto exchange collapses over the past year, we can see that the reason for their collapse was due to essentially not having the correct amount of customer deposits. However, a lot of these collapsed exchanges ran out of money long before we users actually found out, and this is the problem Proven is trying to help tackle.

Whether itā€™s an exchange like FTX, an investment firm like 3AC, a stablecoin like USDC, or even a traditional bank like SVB, there are tons of use cases for Provenā€™s solutions.

Congrats to the Proven team!

More News & Updates

šŸ“š Discussions & Education

What are sovereign rollups on Bitcoin?

Last week we covered Rollkit (a rollup SDK developed by the Celestia team) enabling Bitcoin as a DA layer option. The announcement post blew up on Twitter, garnering over 1 million views and sparking hundreds of discussions šŸ¤Æ

Letā€™s start with the basics. Whatā€™s a sovereign rollup and what does it mean to be sovereign rollup on Bitcoin?

Celestia walks through the basics of sovereign rollups and does a good job contrasting them with the ā€œclassicā€ rollups you might be used to. They also have a more in depth post on the concept.

Wait a minute - sovereign rollups on Bitcoin? Doesnā€™t the Bitcoin community frown upon ā€œaltā€ assets and other blockchain use cases? Howā€™d rollups come into the picture?

We actually touched on it a few weeks ago, but as a refresher:

  • Inscriptions AKA Bitcoin NFTs brought attention to Bitcoin ā€œblobspaceā€

  • Eric Wall gave a talk on how Bitcoin blobspace can be used to build sovereign rollups

  • This unlocks Bitcoin as a data availability layer

Without getting too technical, hereā€™s how itā€™d work:

So are Bitcoiners on board with this idea?

TBD - they are now open to discussion about sovereign rollups, but itā€™s unclear whether the community will embrace or reject them.

What is clear, however, is that Rollkit has made implementing them much easier.

Do Bitcoin sovereign rollups inherit Bitcoin security?

Daniel from Arbitrum makes a strong statement - sovereign rollups inherit L1 DA guarantees but do not inherit L1 security.

But what exactly does this mean?

Other builders weigh in too, with takes spanning the full range of ā€œno-kinda-yesā€:

So which is it? What do sovereign rollups inherit?

Sreeram Kannan offers an excellent framework to think through the question:

We highly recommend reading his thread, but here are our takeaways:

  • Blockchain security has 4 properties (listed in the above tweet). Itā€™s a more nuanced topic than many people make it seem.

  • An attacker would need to corrupt Bitcoin to mess with the order (a) and availability (c) of transactions. This security is achieved by simply posting transaction data on Bitcoin - pretty straight forward.

  • Censorship resistance (b) is rock solid if the sovereign rollup users can submit transactions directly to Bitcoin. As made clear above, once the transaction hits L1 itā€™s safe and there are ways to make sure it gets executed.

  • Validity (d) is inherited in some scenarios, but not others. If you are running a rollup node, you get state transition security for assets on the rollup. However, you donā€™t get state transition security when bridging assets between the rollup and Bitcoin.

What does Bitcoin look like as a DA layer?

Since Bitcoin can technically serve as a DA layer, letā€™s consider a couple of other questions:

  • Would it make a ā€œgoodā€ DA layer?

  • If it becomes one, are there drawbacks?

The above tweet by Mustafa (whose team built Rollkit!) hints at the answer ā€œnoā€ to the first question, but letā€™s consider the pros and cons.

Pros:

  • High economic security

  • Easy to verify

Cons:

  • Long block times (translates to slower rollup finality)

  • Slow data throughput (again, slower rollup finality)

  • Doesnā€™t support smart contract rollups (canā€™t verify proofs)

What else is there to consider? Other community members (from both Bitcoin and Ethereum) point to drawbacks, even if Bitcoin rollups were to success:

The drawbacks are clearly speculative (and controversial) but worth thinking about in advance.

Either way, Bitcoin is getting more exciting āš”ļø

ETHDenver content

Just a handful of the many awesome panels and presentations from the week

More Discussions & Education

That's all for this week! Thanks for reading šŸ§±šŸŽ¬

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