Explore 10 groundbreaking concepts shaping the future of the blockchain ecosystem

Author: Mona Tiesler, Translation: Vernacular Blockchain

Blockchain technology continues to develop, breaking through the possibilities in the field of decentralized systems. In this article, we’ll explore 10 groundbreaking concepts shaping the future of the blockchain ecosystem. From account abstraction to parallelizing the EVM, every idea plays a vital role in enhancing scalability, security, and user experience.

1. Account abstraction

Account abstraction is a paradigm shift in blockchain design, aiming to separate the control of accounts from their ownership. Traditionally, blockchain accounts are owned and controlled by private keys. Through account abstraction, ownership and control rights can be distinguished, thereby achieving more flexible account management and quickly improving security and user experience.

In the traditional space, the ability to have an external account (EOA) is somewhat limited and does not actively encourage or promote the next generation of users to join. The challenges associated with managing private keys discourage some users from taking on the responsibility of protecting their keys. Take MetaMask, for example, which is a widely used browser-based wallet that serves as an EOA. However, since it cannot execute smart contracts, its usefulness is limited to application interactions where users must give up control of their accounts.

This restriction is in sharp contrast to contract accounts. Contract accounts can deploy smart contracts to enrich wallet functionality and customization. The introduction of the account abstraction simplifies the development of smart contract accounts designed for the express purpose of defining and overseeing user accounts. This innovative approach brings many advantages, including establishing adaptable security protocols, performing batch transactions, and the ability to recover accounts without the need for a seed phrase.

Such a concept significantly enhances the customization of account functionality, paving the way for innovative use cases and decentralized applications (dApps).

2. Blockspace as a commodity

Blockspace is a basic commodity in the field of blockchain technology. It is a unique and popular "product" that has changed the digital landscape. Dynamic. Unlike traditional commodities, blockspace is not produced by individual businesses; instead, it originates from decentralized networks, such as the ones that govern Bitcoin and Ethereum.

The scarcity of block space has fueled debate about its value, with consumers paying billions of dollars each year for its use. Gas price is a signal of demand for block space (itself a fusion of computing, storage and bandwidth resources), and all L1, L2, sidechains, etc. are producers and sellers of it. Notably, the network effects surrounding seller block space drive higher pricing, creating similar effects to virality observed in social media applications. The market share of the block space is constantly changing, as shown by the rapid growth of Ethereum fees, but also relatively speaking, on platforms such as Avalanche, Polygon, Arbitrum, and Optimism.

Nowadays, applications on the blockchain can run with zero overhead once deployed because users pay the operating costs, unlike the traditional model where enterprises bear the cost of infrastructure. However, as mentioned above, account abstraction may reverse this, causing future applications to bear the gas cost of users, thereby returning the cost of block space to startups and enterprises. The continued development of blockspace as a commodity marks a key development in the digital economy and has profound implications for the future of decentralized technology.

3. Blobspace

Blobspace emerged as a transformative solution that facilitates off-chain storage of large data sets, thereby reducing the burden on the blockchain and improving applications efficiency and affordability. Its integration with the Ethereum EIP 4844 upgrade (Decun) is a key shift in the L2 landscape. Unlike traditional block spaces, Blobspace introduces a novel resource market on Ethereum that goes beyond the traditional block sales model and adopts a more dynamic structure involving "blob" transactions. These blobs are essentially temporary blocks of transactional data and represent a more flexible and efficient approach to information processing.

The origins of Blobspace can be traced back to Danksharding, a conceptual design proposed by Ethereum researcher Dankrad Feist that redefines the concept of sharding as different blockchains and sharding as intra-block of multiple data blobs. This innovative approach not only revolutionizes decentralized data storage, but also establishes a dedicated space for managing large, unstructured off-chain data. By optimizing on-chain transaction costs and enhancing network scalability, Blobspace opens the door to storing different data types, including complex application data on the Ethereum Layer 2 ecosystem.

4. L3 (Layer 3 scaling solution)

The Layer 3 scaling solution constitutes a comprehensive set of technologies designed to effectively solve the security issues in the blockchain network. Scalability challenges. Unlike Layer 1 scaling, which involves updates to elements such as block size, consensus mechanism, or database partitioning, and Layer 2 scaling, which employs methods such as bundling transactions, parallel processing, or processing transactions off-chain, Layer 3 solutions (L3) Go beyond these traditional methods. By focusing on innovative approaches such as state channels, sidechains, and sharding, L3 aims to significantly increase transaction throughput without compromising key aspects of decentralization and security.

Meanwhile, Layer 3 protocols are strategically built on top of Layer 2 infrastructure as a hosting platform for application-specific decentralized applications. This integrated approach not only addresses scalability but also various issues such as interoperability and customization. Nonetheless, the lack of L3 standardized infrastructure still poses some problems. Notable examples of layer 3 protocols include Orbs, Arbitrum Orbit, and zkSync Hyperchains.

5. MEV (Miner/Maximum Extractable Value)

MEV is a concept that recognizes the economic incentives for miners to reorder, delay, or review transactions to maximize profits. This phenomenon often leads to inefficiencies and increased transaction costs. To offset the potential adverse effects of MEV on actual protocol users, blockchain projects are actively seeking to implement strategies such as consensus algorithm enhancements and MEV recovery mechanisms. These measures aim to democratize revenue sharing and achieve equitable distribution among participants. Additionally, work includes optimizing transaction ordering by advocating for the decentralization of sequencers, adopting MEV extraction protocols, and capturing cross-chain MEV.

UniswapX’s cross-chain technology plays a crucial role in realizing cross-chain MEV capture. In order to deal with the potential negative impact on real protocol users, measures such as fair distribution, privacy protection, and off-chain order matching are being taken. Modularization and decentralization of MEV participants are integral components of the Ethereum roadmap and help create a stronger and more secure MEV ecosystem. The democratization of MEV income involves exploring areas such as anti-MEV DEX to transfer profits to trading users and create a positive trading environment. A fair market competition environment, efficient benefit distribution mechanism and decentralized structure are crucial to cultivating innovation and ensuring the healthy development of the on-chain transaction ecosystem. The neutral nature of searcher and block building technologies emphasizes the importance of responsibly leveraging their impact on the wider trading environment.

6. Token-bound account

The Ethereum improvement proposal ERC-6551 introduces the concept of Token-bound account (TBA), which essentially has its own address and is controlled by a specific NFT Managed smart contracts. Think of it as a mini wallet tied directly to the NFT, enhancing security while also providing a mechanism to precisely control access and permissions.

Essentially, TBA extends the functionality of ERC-721 and ERC-1155 Tokens (the typical limited standards for NFTs) to have their own smart contract accounts. This enables NFTs to own and interact with digital assets (fungible or non-fungible) while interacting more seamlessly with decentralized applications (dApps). For example, artists can link their artwork NFTs to a TBA that contains all other artworks, allowing them to manage multiple Tokens in a single account.

In the DeFi field, TBA enables NFT to participate in liquidity mining or provide liquidity. Additionally, in-game assets represented by NFTs gain the ability to own other assets or participate in additional in-game smart contracts. In the context of the DAO, NFTs symbolize voting rights, and TBAs have the right to directly participate in proposal voting. This scalability makes NFT more flexible and versatile in different scenarios, providing a wider range of application possibilities.

7. Validity Proof

Validity proof plays a vital role in ensuring the integrity of data on the blockchain. Arguably, they have a fundamental advantage over fraud proofs in that they ensure that nothing but the correct state transition will be accepted. Proofs of validity are cryptographic proofs that allow network participants to verify the correctness of transactions or calculations without re-executing them. They improve the efficiency of blockchain networks by reducing redundancy and improving the overall auditability of on-chain data, and are currently focused on L2. The main disadvantage is that every state transition requires a proof of validity, not just when such a transition is contested, which affects scalability.

zk-Rollups utilizes validity proofs to prove valid state transitions to the parent chain - often used in conjunction with proof systems such as SNARK and STARK. (However, please note that these proof systems (e.g., SNARK, STARK) can be used as fraud proofs or validity proofs. A proof system is how we prove, while fraud or validity is what we prove.)

Re-mortgage refers to the process of reinvesting mortgage assets to obtain additional rewards. This concept plays a crucial role in incentivizing long-term participation in blockchain networks. Liquid Restake goes a step further and allows users to trade or use their staked assets without waiting for the unstaking period. This flexibility enhances liquidity and promotes a more vibrant ecosystem.

Restaking is becoming increasingly important in the blockchain space, especially with the upcoming launch of EigenLayer. With over $1 billion deposited in EigenLayer contracts, there is fierce competition among entities vying for a key role in the EigenLayer ecosystem. This competition is expected to expand to Liquid Restake Token (LRT), surpassing the previous battle for Liquid Stake Token (LST). LRT promises to provide returns from native ETH staking, as well as additional returns from re-staking networks like EigenLayer. These tokens are associated with EigenLayer’s security model and help fine-tune access control and permissions in blockchain networks.

Spurred by the ongoing wave of airdrops, there could be a boom in light rail in 2024, as two airdrop opportunities could theoretically be exploited simultaneously. Projects like Swell and Puffer are considered contenders to watch, with unique features like additional slash protection and collaboration with industry experts making them key players in the growing space of Liquid Restake Tokens.

9. Data Availability Layer

The Data Availability (DA) layer solves the challenge of ensuring off-chain data availability in decentralized systems. These layers ensure that data related to smart contracts or decentralized applications remains accessible and verifiable. The data availability layer helps improve the overall reliability and efficiency of the blockchain network by preventing data unavailability issues.

DA has been likened to a bandwidth layer that has the potential to transform the cryptocurrency landscape from slow and expensive to fast, cheap, and abundant—all without compromising decentralization. DA is considered a major bottleneck that limits blockchain networks from reaching their full potential in terms of resource costs and throughput levels.

An exciting development in this space is the upcoming launch of EigenDA, EigenLayer’s first Active Verification Service (AVS). As an additional source of revenue, EigenDA is ready to contribute to the aforementioned Liquid Restake Token (LRT), thereby enhancing the overall utility of the EigenLayer ecosystem.

EigenDA differentiates itself from Celestia, another well-known competitor in the DA field, by adopting a unique network structure. EigenDA is unique in that it uses staked ETH rather than alternative layer 1 solutions, providing it with protections that more closely align its DA properties with Ethereum. Not only does this reduce some of the security assumptions, but it also makes it viable as a comprehensive option that requires more DA than Ethereum layer 1 can provide. While Celestia and EigenDA currently lead the way in the data availability tier, other competitors are entering the market.

Notably, NEAR leveraged insights from sharding research conducted over the past few years to incorporate DA functionality into its chain. This shows the continuous development and competition in this field, with all parties working hard to provide more advanced solutions.

10. Parallelized EVM (Ethereum Virtual Machine)

By implementing parallelization of EVM, smart contracts can be executed and multiple transactions processed at the same time, thereby significantly improving throughput and achieving A breakthrough in scalability. Solana is a pioneer in this field, pioneering the parallelization of the Solana Virtual Machine (SVM).

SVM exhibits some advantages over the traditional Ethereum Virtual Machine (EVM) by being able to process multiple transactions concurrently (if they do not affect the same state). This unique feature has sparked a surge in parallel virtual machine projects, with many trying to replicate Solana’s scalability benefits on Ethereum’s second-layer solutions and new first-layer blockchains.

One such project is Eclipse, which leverages Solana's SVM to build a convergence layer on Ethereum and provides data availability through Celestia. Another project is Monad, which focuses on parallelizing the EVM itself, moving from single-threaded execution to multi-threaded execution. Despite the considerable challenges, the potential rewards are huge – imagine having the speed, scale and cost efficiency of Solana with the robust ecosystem of Ethereum.

The "Solana speed and Ethereum distribution" strategy has surpassed Monad and Eclipse. Sei recently revealed its commitment to becoming a parallel EVM chain in a key announcement, in line with a winning strategy. Investors have taken notice of SEI’s price surge as it became the token of choice for exposure to parallel EVMs.

As parallel EVM develops more and more momentum, Monad is expected to become a replacement for Ethereum Layer 2. The open source nature of Monad's EVM makes it a highly sought-after piece of software in the Web3 space. Alternatively, Monad may also explore a dual strategy, operating as an independent Layer 1 and simultaneously establishing an Ethereum Layer 2 presence to maximize its competitive reach.

The rise of parallel EVM marks a critical moment for blockchain scalability, ushering in a new era of efficiency and speed. As various projects enter the race for parallel virtual machines, the blockchain ecosystem is poised for transformative growth to achieve unparalleled scalability.

11. Summary

All in all, these concepts demonstrate the industry’s commitment to solving fundamental challenges as blockchain technology continues to advance. From enhancing scalability and security to introducing innovative staking mechanisms, the blockchain space is actively shaping a more powerful and user-friendly future. By staying abreast of and embracing these cutting-edge concepts, participants in the blockchain ecosystem can contribute to the continued development of decentralized technology.