Author: Xangle

Translated by: PANews

Key Highlights

• Aptos is a PoS blockchain developed by the former Meta Diem team, focusing on speed and reliability. The design goal of Aptos is to achieve theoretical throughput of over 100,000 and sub-second latency. It supports the Move programming language and provides a stable, fast, and flexible development environment.

• Technology itself does not guarantee success. Aptos adopts two key strategies to ensure sustainability and survive in the L1 wars: 1) Implementing a future-oriented network through scalability, 2) Expanding its ecosystem through Web2 partnerships. This approach involves introducing validated products and services and leveraging the intellectual property and user base of Web2 companies. It is also a bet on the future of the blockchain industry, predicting that the future of the blockchain industry will be driven by global heavyweight companies rather than Web3 startups.

• Aptos is likely to build its own ecosystem around the gaming space. It is one of the few public blockchains that can technically support AAA games. Aptos is also actively collaborating with METAPIXEL to build the infrastructure and tools required for Web3 game development, leveraging their wealth of game development expertise. We expect the currently in development features, including token object model, proxy gas fee payment, VRF, and game SDK to streamline the development process for game companies. In addition, the highly anticipated "Gran Saga: Unlimited" (GSU) will incorporate NPIXEL's famous IP and is scheduled to launch in January next year.

1. Introduction

The ultimate goal of all L1 blockchains is to become a global database infrastructure that can accommodate tens of millions of users accessing simultaneously by solving the blockchain scalability trilemma. In the 13 years since the birth of Bitcoin in 2009, no blockchain has been able to solve this problem. Existing blockchains face limitations and often require trade-offs, such as compromising decentralization or slowing down speed, which leads to a range of issues including network congestion, congestion shutdowns, and high gas fees.

For this, the blockchain industry has proposed a modular architecture in recent years, with different chains handling consensus, data availability, settlement, and execution separately. The main advantage of modular architecture is that each chain can specialize in a specific role, reducing the load on nodes and improving the overall performance of the blockchain. Many blockchains, including Ethereum, Avalanche, and Cosmos, are currently adjusting their roadmaps around modular architecture.

However, modularization also has its limitations. It weakens the interoperability and composability between dApps, fragments liquidity, and hinders user experience. Most importantly, modularized blockchains face a wider range of attack surfaces and raise security concerns compared to single blockchains. Aptos is a new PoS-based blockchain designed within an overall architecture to address such security challenges. It aims to provide stable, fast blockchain infrastructure for users worldwide.

2. Aptos Internal: Technology and Features

2-1. Technology: Achieving High Scalability through Efficient Consensus and Parallel Processing

A major challenge for permissionless public blockchains is scalability. Scalability is primarily related to the processing speed of the blockchain, typically measured through throughput and latency. Currently, Aptos has relatively low actual demands for blockchain space, averaging 6-7 TPS (transactions per second), but the technology theoretically can achieve 100,000+ TPS and sub-second latency. Considering that VISA and Mastercard process approximately 3,000 to 4,000 transactions per second, this is undoubtedly an impressive number. Aptos achieves such high scalability largely thanks to the adoption of technologies such as Quorom Store (Narwhal), State Delta Synchronization, and Jellyfish Merkle Tree (JMT). Its core lies in its own consensus mechanism (AptosBFT v4) and parallel processing engine (BlockSTM).

AptosBFT v4 is a consensus algorithm based on DiemBFT, developed by Meta's pre-blockchain project Diem (formerly known as Libra). It has the characteristics of low network load and fast consensus speed, which is a significant improvement compared to the previously popular PBFT consensus mechanism. The credit should be given to: 1) linear communication and connection technology that improves latency and network efficiency, 2) fast synchronization between validators achieved through efficient timeouts, and 3) a reputation system that quickly filters out unqualified validators in the leader node selection process.

BlockSTM is a parallel execution engine for smart contracts that utilizes software transactional memory (a technique that extends the ACID properties of database transactions to parallel programming). Unlike existing mechanisms that require transaction processing in block order, BlockSTM distributes independent transactions to multiple threads for parallel execution. By predefining the order, pre-execution, post-validation, and consensus can be achieved. This means that the introduction of BlockSTM can solve the bottleneck problem of blockchain and achieve breakthroughs in transaction processing speed.

2-2. Language: Building a Stable and Flexible Development Environment with Move

With Ethereum becoming a major component in the cryptocurrency field, "EVM compatibility" has become a powerful narrative. In fact, only a few non-EVM L1s do not use Solidity, namely Solana on Rust, Cosmos on Cosmwasm, Stacks on Clarity, and Sui and Aptos on Move. However, it is no longer a secret that the EVM environment and Solidity are vulnerable to attacks. Over the past few years, many hacker attacks have exposed such vulnerabilities. According to data from Chainalysis, from 2016 to 2022, in the past seven years, hacker attacks have caused nearly $9.9 billion in losses to the crypto industry.

It is difficult to modify smart contracts after deployment. That's why projects need to go through multiple rounds of technical audits before releasing dapps. However, the difficulty lies in the dynamic dispatch of Solidity contracts, as unforeseen variables cannot be predicted before execution. With the growing demand for safer programming languages, developers are increasingly attracted to the security and advantages of Move and MoveVM.

Move is an open-source programming language based on Rust, developed by Meta. It is known for its stability superior to Solidity and can accelerate the process from development, testing to deployment. This is due to several key features of Move: 1) support for first-class assets to prevent arbitrary issuance and deletion of assets; 2) support for static dispatch to enhance code validation; 3) reduced validation time through provers; 4) ensuring code works as expected by developers; 5) providing memory safety similar to Rust, making memory management easier. These features together make Move a reliable and efficient development environment for developers.

2-3. Ecosystem: Thriving with Full Support from the Aptos Foundation

Since the mainnet launch in October 2022, Aptos' growth has been steadily increasing. According to Aptoscan data, a total of 4 million wallets have been created, with an estimated 50,000-100,000 new wallets created daily. The average daily transaction volume remains around 500,000. As of June 13, 2023, the Aptos ecosystem has seen 275 projects launched, including 113 NFT projects, 67 infrastructure and middleware projects, 46 DeFi projects, and 18 gaming projects. In terms of Total Value Locked (TVL), the DeFi market is dominated by Pancakeswap, Thala (Thalaswap, ThalaCDP), and Liquidswap, which collectively account for 95% of Aptos' $44 million TVL.

One game project that has garnered significant attention in the gaming sector of the Aptos ecosystem is METAPIXEL, the Web3 gaming platform by NPIXEL. Especially noteworthy is "Gran Saga: Unlimited," an MMORPG blockchain game that incorporates the popular NPIXEL game "Gran Saga" IP, making it one of the most anticipated games.

However, Aptos is currently still significantly smaller compared to other well-known blockchains such as Ethereum, Polygon, Arbitrum, and BNB Chain. The ecosystem currently lacks killer dApps or highly anticipated NFT projects. The Aptos Foundation is well aware of this and actively carries out various funding programs, including hackathons. Earlier this year, Aptos concluded its Phase 1 funding program, providing $3.5 million to over 50 projects including Apscan, Bruhbears, and Intu.xyz. This was followed by the launch of the Phase 2 funding program, which consists of two categories: the Artists Grant Program and the Aptos x Google Cloud Accelerator Program.

2-4. Token Economics: Longer Maturity and Stable Inflation Rate

The following are some key data about the native token $APT of Aptos:

• Maximum Supply: Infinite

• Total Supply: 1,038,484,105 $APT (100%)

• Current Circulating Supply: 200,288,451 $APT (19.3%)

• Inflation Rate: 5.6% (decreasing annually, lowest around 2.6%)

• Staking Ratio: 860,195,091 $APT (82.8%)

The staking rewards of $APT start at 7% per year and decrease by 1.5% annually until reaching 3.25%. The estimated initial inflation rate is around 5.6% and is expected to decrease to 2.6% over time. As over 50% of the initial supply will be in circulation in approximately two years, $APT carries some potential risks. However, compared to other L1 tokens, $APT has a relatively low initial inflation rate due to its 10-year release schedule. For example, according to Xangle Analytics, the inflation rate of Ethereum hovered above 10% from 2016 to 2017 but gradually decreased to 4% after the merge. Additionally, $APT has a lower inflation rate than most other L1 tokens, which typically experience high inflation rates exceeding 10% in the early stages of the mainnet launch (BNB: 16%, AVAX: 800%, MATIC: 80%, NEAR: 200%).

Currently, the collateralization rate of $APT is about 82.8%, exceeding the percentage of circulating supply. This is due to the design of Aptos, which allows for the staking of locked tokens. Although some members of the community have expressed their concerns, this design may have a positive impact on the network if the inflation rate is not too high, because: 1) the security of the PoS chain is proportional to the value of the staked tokens, 2) protocols wishing to join the Aptos ecosystem can utilize locked $APT tokens to enjoy staking rewards.

3. Aptos' Vision for the Future

Aptos' core strategy involves two key aspects: 1) ensuring the network is future-oriented through scalability, 2) leveraging extensive capital and networks to attract Web2 enterprises.

3-1. Growth Strategy (1): Building a Future-Oriented Network through Scalability

Aptos intends to leverage its scalability to build a future-oriented network capable of accommodating 1 billion users. Unlike other blockchains such as Ethereum, Solana, and Cosmos, which usually deploy major protocol updates every six months to a year, Aptos aims to become the most powerful blockchain in the long run through its fast and efficient upgrade system. In fact, within eight months since the mainnet launch on October 12, 2022, Aptos has already passed 24 AIPs, including core layer upgrades such as AIP 4, AIP 17, and AIP 26 (Quorum Store).

AIP 17 will be implemented in March 2023 with the aim of reducing transaction execution costs by separating the Gas fee logic related to storage and execution of transactions. The idea is to allocate absolute values for the storage Gas fee based on transaction types, while retaining the existing fee market mechanism for execution Gas fees. Through this approach, Aptos is able to reduce the Gas fees for transaction types such as UnlockStake, RotateConsensusKey, Transfer, and WithdrawStake by approximately 99%. Quorum Store, also known as AIP 26, is a NarwhalBFT consensus specifically designed for the Aptos architecture. Its purpose is to address existing consensus bottlenecks such as waste of node bandwidth and redundant propagation of identical transaction data during the block consensus process. Aptos has tested Quorum Store on Previewnet and reported a throughput increase of over 3 times. Recently, Aptos has been researching Shoal, a framework that introduces pipelining and leader node reputation mechanisms. The introduction of Shoal is expected to reduce the latency of Narwhal-based consensus algorithms such as Bullshark, Tusk, and DAG-Rider by approximately 40-80%.

Aptos is capable of supporting fast and instant upgrades thanks to its modular architecture, which allows protocol upgrades without hard forks and facilitates on-chain governance systems for real-time release of upgrades. These features ensure that Aptos experiences no downtime during AIP updates.

3-2. Growth Strategy (2): Expansion of Ecosystem Centered around Web2 Companies

Unlike most L1 projects that prioritize ecosystem development with Web3 projects, Aptos' ecosystem expansion will focus on large enterprises. The goal of this approach is to launch reliable products and services, as well as introduce the intellectual property and user base of Web2 companies.

Aptos is strategically using its funds and network to attract Web2 companies. Last year, Aptos completed seed and Series A financing, with a total funding of $3.5 million, including investments from a16z, Paypal Ventures, Apollo Global Investment, Tiger Global Management, Griffin Gaming Partners, Multicoin Capital, and Jump. Considering that Aptos has committed to allocate 51% of the $APT issuance to ecosystem development, it seems to have provided sufficient funding for its partners.

Aptos co-founder Mo Shaikh has worked at BlackRock, BCG, Consensys, and Meta, while co-founder and CTO Avery Ching has been a software engineer at Yahoo, Meta, Novi, and Apache Software Foundation. In addition, its experienced team and network of well-known investors are advantageous for maintaining company engagement.

Aptos' primary target markets are the four key markets: 1) gaming, 2) finance, 3) media and entertainment, and 4) social networks. Aptos is currently collaborating with Mastercard and Google Cloud to establish a foundation for growth. In the Korean market, with investments from Hashed, Irongrey, Hybe, YG, as well as significant partnerships with NPIXEL, Aptos seems well-prepared to enter the gaming and media/entertainment markets.

3-3. Long-term plan to provide dedicated block space for the company

Among the major Korean companies recently announced to enter Web3, such as Nexon, SK Planet, Com 2 uS, Neowiz, and NPIXEL, only NPIXEL has chosen a single chain. For those hesitant about building their own L1, the primary advantages of these L1s are the availability of development infrastructure (such as SDK) that can simplify the process of building a mainnet.

The main motivations for building their own mainnet are 1) network control and 2) their own block space. In the former case, Aptos may be a viable option, depending on the company's scale and business model, as it eliminates the burden of operating a mainnet, including time, cost, and development resources.

In the latter case, for companies with a significant demand for dedicated block space, a full blockchain may not be the direct choice. This is because in the operating structure of a full blockchain, all participants must compete for the same resources. It is worth noting that the high scalability of Aptos allows all services to share the same block space, but potential risks of building their own blockchain, such as security, reliability, fragmentation of liquidity, and data availability, should not be overlooked.

Solana launched a proof-of-stake (PoS) with weighted voting last year as an alternative solution to provide and guarantee network bandwidth based on the proportion of SOL staked. Aptos takes a different approach by incorporating sharding into its solution. A demo version will be released within the next 6 months to a year.

4. The gaming industry will drive ecosystem growth

4-1. Ecosystem growth driven by METAPIXEL

As part of the strategic partnership established with NPIXEL in November 2022, Aptos will exclusively host games produced by NPIXEL's blockchain division. NPIXEL, founded in 2017, is a South Korean game developer that completed a 100 billion KRW Series B investment in 2022, becoming a unicorn in the gaming industry in the shortest time. One of its flagship games is the globally popular mobile game "Gran Saga" with over 4.2 million downloads and accumulated revenue of 180 billion KRW, with a monthly ARPPU (Average Revenue Per Paying User) of 200 USD. METAPIXEL is a Web3 game ecosystem based on the Aptos public chain developed by NPIXEL. Its first game, "Gran Saga: Unlimited," will be launched in January 2024. As an extension of NPIXEL's flagship IP, "Gran Saga: Unlimited" achieved a retention rate of 70% to 80% among 500 participants in its initial closed beta testing.

In addition to "Gran Saga: Unlimited", METAPIXEL is also developing and operating the Pixelcraft and Catcha projects. Pixelcraft is a 2.5D casual pixel art RPG game, expected to be launched in the first half of next year. "Knight Survivor" is a mini-game within Pixelcraft, with a daily income of 1.5 million Korean won and an average of 7-8 thousand daily active users (DAU). The success of this game helped METAPIXEL reach 80,000 subscribers in the first half of 2023, and may become a triggering factor for further development of the Aptos ecosystem.

4-2. The gaming industry is expected to drive the flourishing development of the ecosystem

In the foreseeable future, the gaming industry may become the main catalyst for the exponential growth of the Aptos ecosystem. Aptos is one of the few public chains with the ability to support 3A game technology. Aptos also collaborates with METAPIXEL to build the necessary infrastructure and tools to simplify the Web3 game development and publishing process.

When choosing a blockchain platform to build projects, speed and reliability may be the primary considerations for game companies. Depending on the extent to which the gaming experience is implemented on the chain, a fully on-chain MMORPG that applies blockchain technology to all goods and items will involve thousands to tens of thousands of transactions per second. Naturally, Aptos becomes the choice for game companies.

In addition, Aptos is collaborating with METAPIXEL to develop various game-related infrastructures and tools to make it easier for game developers and players to join the blockchain ecosystem. Currently, one of the biggest challenges in developing blockchain games is the poor development environment. Aptos and NPIXEL are jointly developing standardized implementation values to facilitate a smoother transition for game companies from Web2 to Web3, such as:

• Token objects (AIP 11): METAPIXEL has improved the following areas by transitioning from Aptos' initial token v1 model to an object model (token v2):

• ...

NFT is at the same level as user accounts: In order to handle resources more intuitively and directly, NFT is identified by a 32-byte address, just like user accounts.

• Enhanced ownership identification: The owner field of an object can easily identify the owner of the NFT. It simplifies the ownership verification and transfer process, and promotes composability.

• Efficient storage usage: Grouping objects and related resources, as well as the previously defined ObjectCore, can effectively utilize storage space, thereby reducing storage costs.

• Dynamic and flexible NFT: Through the Token Object model, game assets can be managed dynamically and flexibly. A single Token object can be used to mint game NFTs, grant Soulbound status, and upgrade attributes.

• Proxy gas fee payment: To achieve a user experience comparable to Web2 games, Aptos is building an open-source proxy gas fee payment system. This system includes two key features: 1) Multi-proxy transactions that can activate multiple operations in a single transaction; 2) Remote signing process that allows remote signing of game players' transactions.

• Verifiable Random Function (VRF): One of the greatest benefits of incorporating blockchain technology into games is transparency. METAPIXEL and Aptos Labs have developed VRF to enhance the transparency and reliability of the gacha system.

• Stackable (TBD): Developing a new token standard to achieve semi-fungible NFTs similar to ERC-1155.

• SDK: Aptos plans to develop an SDK to simplify the process of building games on its network.

4-3. Promising future, long-term observation needed

The Aptos mainnet has only been launched for about 9 months, and almost all indicators lag behind some established L1s, including infrastructure, TVL, developer community, and user count. Ethereum, as the leading blockchain, continues to dominate not only due to its superior infrastructure but also the continuous influx of capital and talent (including developers and researchers): Ethereum's TVL is 615 times higher than Aptos', the number of full-time developers is 26 times more, and the Github repository is 49 times more than Aptos'. Therefore, investors and stakeholders need to be patient and observe the long term, although comprehensive growth might start to manifest next year with the launch of the aforementioned game infrastructure and development tools in the second half of this year.