Talking about the gains of EthCC 2023: Decreased costs at the protocol layer and the emergence of consumer-grade applications.

Original author: David Hoffman

Source: Bankless

Compiled by: Deep Tide TechFlow

So... we are now more than halfway through 2023. Where are we at?

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

Protocols are becoming commodities

With the upcoming Dencun upgrade, the Ethereum community is preparing for a hard fork that will introduce a major scalability upgrade in EIP 4844 (also known as Protodanksharding), enabling Ethereum's Rollup to have a cheaper form of block space on L1 called "blobspace." This long-awaited upgrade finally makes these L2s the most scalable versions.

This upgrade marks a moment in the development of cryptocurrencies where we are approaching the theoretical lowest point of the cost of accessing economic resources. It's not just Ethereum, many different protocols seem to be nearing their final form, where they have minimized the cost of accessing optimized resources.

"Data availability" is a major category, with EIP 4844 and other data availability solutions addressing the type of resource. Ethereum block space is becoming cheap for the first time! But Ethereum is not the only protocol optimizing data availability. Celestia, Avail, and EigenDA are data availability protocols outside of Ethereum, elevating the blockchain's scalability to levels we couldn't have imagined a few years ago!

And it's not just limited to data availability. Espresso Systems received a warm welcome at the largest EthCC side event - the Modular Summit. Through their shared sorting testnet and collaboration with Eigenlayer, Espresso is no longer waiting for L2s to individually build their own shared sorting systems but is focused on one thing: optimizing shared sorting.

In the field of zkRollup, the "prover" is a key component that enables end users to verify zk-proofs of extended zk-rollups. zkSync has released their "Boojum" upgrade, claiming that their proofs can run on mid-range gaming GPUs. The significance here is that provers can now run on consumer-grade hardware rather than highly specialized enterprise machines, meaning that zk-proofs can decentralize these networks in a more meaningful way.

Protocol Fusion and Vertical Integration

Aave, as a money market, now has the 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 in the vertical field for over a year. These three protocols are converging and evolving towards the same landscape, and they are now competing in the same areas: TVL, stablecoin supply, and most importantly, fees.

Just take a look at the launch of UniswapX, which is an order execution protocol based on free market competition. It aims to facilitate optimal decentralized order execution while also serving as a cross-chain abstraction layer that allows the free market to choose its own solutions for executing cross-chain DEX swaps. In other words, if I have token A on chain 1 and want to obtain token B on chain 2, who can give me the fastest and best exchange 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 hosting potential Uniswap deployments increases, the optimization problem of order routing becomes too complex to be controlled by rigid on-chain smart contract systems. UniswapX builds a new vertical field by allowing order execution and fulfillment to be done off-chain and ensuring correctness through minimal viable proofs, addressing any complexity that Uniswap v1-v4 may introduce.

Even after all of this, the L2 ecosystem continues to succeed in rapid fusion of similar design patterns.

• We have the OP Stack from Optimism;

• Then there's Orbit from Arbitrum;

• zkSync has released ZK Stack;

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

Just like L2 itself, they each have their own strategy. They are each pursuing the same vision effectively, that the number of chains generated from Ethereum will eventually be comparable to the number of web pages generated from HTTPS.

So, which standard will promote the explosion of chains in the Cambrian Era?

In this regard, Optimism undoubtedly takes the lead with three large-scale chains and some small-scale chains. Polygon has ImmutableX. Arbitrum has Nova (although it is internally generated), and ZK Stack is still searching for its first large-scale adopter, but there have been many startups reporting that they have chosen ZK Stack to build their custom ZK chains.

With this news, in addition to the expected launch of the Base mainnet in early August, Ethereum is prepared for the L2 Summer that we have been looking forward to since 2021.

Consumer-Centric

If you have read this far, I hope you realize the progress our protocols and infrastructure have made. I am announcing that the problems with cryptocurrency protocols and infrastructure have been solved. Of course, there is still much work to be done in this regard, but exploring and pioneering in this field has become a science. The frontier of cryptocurrency protocol development has reached a mature enough level for us to see the ultimate goal, the first time in the history of cryptocurrencies.

So now that we have solved all these major problems...isn't there anyone willing to develop some applications?

L2 has provided more block space than ever before! Data costs are close to their lowest! Latency and response times are better than ever before! 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 using it. But we shouldn't stop at blockchain applications! Let's take it to the next level and start commercializing these systems! Has no one considered consumers?

Let's build consumer-facing applications. Let's hire those talented user experience/user interface designers whose job is to serve those who don't have private keys or only have funds stored on Coinbase or Kraken. Let's build applications for users who have never been exposed to blockchain.

Our protocols have become cheap enough that their use can be subsidized through user acquisition. As block space becomes increasingly cheaper, new revenue models can begin to subsidize transactions for our increasingly cheap L2 users.

A small number of people have realized the metagame phase we are currently in, and I hope this article can emphasize that and make others aware 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? Take a look at Gnosis—they launched Gnosis Pay and Gnosis Card at EthCC.

In the Gnosis ecosystem, there are now:

• Gnosis Safe (your highly secure encrypted insurance vault);

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

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

• Gnosis Card (financial technology payment built on Gnosis Pay).

Through Gnosis, we now have a world where the front end is traditional payment and the backend is encrypted protocols. This is actually something that has been discussed since the birth of Bitcoin. Gnosis aims to transform it into something uniquely competitive in traditional payment, but it is worth noting that our infrastructure now bridges the gap between Web3 and TradFi.

As Ethereum enters the consumer era, cryptocurrencies are fighting the biggest regulatory battle ever.

Once we have overcome all these regulatory trials... once we finally defeat Gary Gensler, change the SEC, win the right to fair token issuance, and obtain high-quality legislation through Congress, cryptocurrencies will be under the most crypto-friendly regulatory environment ever. Right now, cryptocurrencies are "doing the hard work" on regulation. We will never be embraced by larger participants until we have engaged with regulators and lawmakers and gained recognition.

Modular Summit Vs EthCC

The Modular Summit takes place on the Friday and Saturday after EthCC, and its scale is large enough and knowledge-rich enough to be described as "EthCC's off-site activities."

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

I refer to this corner of the cryptocurrency ecosystem as the cryptocurrency domain that is "barely aligned with Ethereum." Modular infrastructure naturally finds useful positions in the Ethereum environment, but many of these platforms would be very happy to sit on the currency throne (Celestia, Cosmos) if Ethereum doesn't fully occupy that position.

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

Undoubtedly, the modular ecosystem has entered the new technological frontier faster than any other field in the cryptocurrency domain. This makes sense - modularity means concentrating resources on a single problem rather than dispersing them, trying to solve multiple problems in parallel. The rigor expressed by the cryptocurrency domain attracts all the brightest minds in the field. I think you can expect great things to come from the modular corner.