October 19, 2022
A short history
Blockchains as we know them are 13 years old. As a nascent technology, characterization of what forms a blockchain has been changing.
At first, cryptocurrencies and blockchains were indistinguishable. To launch a new cryptocurrency, communities had to launch their own blockchains; Litecoin, Namecoin, Monero. While these blockchains brought new functionalities and characteristics, they served the same cryptocurrency use case.
Smart contracts, introduced by Ethereum, were a zero to one innovation; a paradigm shift where many realized that same chain can be used not just to host cryptocurrencies but for many different applications. This is often described as the the world computer vision.
While the world computer has been a tremendous success and the main driver of growth for the industry, in our view, it has strumled upon two main limitations in recent years; sovereignty and scalability. We think modular blockchain networks envisioned by Celestia is the right path forward to overcome these limitations which will unlock new use cases and move the industry forward.
As adoption picked up, one-size-fits-all blockchains got congested, giving room for only use cases with high value transactions such as DeFi and NFTs at the cost of others.
Many scaling solutions have been introduced and used over the course of years. While we think there will be others, fundamental limitations of scalability architectures have become clearer.
At the heart of scalability lies efficient verification. Largely there are 3 ways to verify integrity of transaction execution.
Re-execute all transactions yourself -> this is what full nodes of a monolithic chain do. This is not a scaling solution for obvious reasons.
Rely on a trusted third party -> Third party be can centralized or decentralized, staked or trusted, made up of a dynamic or static set of participants. This is also not a scaling solution because it meaningfully changes underlying security model.
Rely on cryptographic proofs -> Vires in numeris! The promise of fraud/validity proofs is that if properly implemented they can enable 1-of-N security model (we only need a single honest party out of N untrusted parties) However there is one subtle requirement for proofs to work in practice as intended; we must ensure N is not a restricted set. This requires guarantees over data availability.
Data availability is an indispensable part of blockchain scaling. Solutions such as merge mining, channels, side-chains, plasma etc. all make fundamental compromises on security/usability mainly because they form a disparate system without uniform data availability guarantees. Rollups, on the other hand, outsource data availability (and consensus) to a shared base layer. This allows them to operate based on 1-of-N trust models, where N can’t be restricted. This property, combined with others, has positioned rollups as the scaling solution choice for Ethereum and Celestia.
Sovereignty; Ability To Fork
One persistent trend since the inception of blockchains has been forks. We view forking as a positive-sum game. The blockchain industry grew through the abundance of forks.
At their heart, blockchains are social coordination mechanisms. They are powerful because unlike human-consensus, which is slow, unordered and abstract, blockchain-consensus is precise, fast, and deterministic. However this power is useful to the extent that it represents intentions and values of the participants; ie. the social consensus.
When social consensus around what a blockchain is supposed to do is broken, the minority can fork out to form its own consensus. This is what we mean by sovereignty; a paradigm where the majority can’t coerce minority into following their values and rules. Instead, communities can self-organize, unburdened by the status quo.
However the ability to fork doesn’t apply to communities of individual applications residing on the world-computer. By choosing to operate as smart contracts, applications and their communities subscribe to social consensus of the underlying blockchain and sacrifice their sovereignty.
This poses a challenge because interests of applications may not always align with the interests of the social consensus of the underlying blockchain. This is most evident in the case of software bugs. Smart contracts can’t halt or roll back their state to minimize the damage from hacks, without the consent of the underlying chain.
From this perspective, the modular blockchains envisioned by Celestia (which rollups are a subset of) are much closer to sovereign Cosmos app-chains than Ethereum rollups. In Celestia’s modular blockchain stack, execution is completely decoupled from data availability and consensus. This architecture allows rollups on Celestia to fork at will and govern themselves in a sovereign manner without permission of the consensus layer.
Cosmos has pioneered the community computers vision; sovereign communities forming their own consensus around applications they care about and feel attached to. Celestia wants to scale this vision by making community computers efficiently verifiable.
The future we imagine is millions of sovereign communities who coordinate with each other in perfect consistency by orchestrating absence and presence of electrons across their individual computers… perhaps even their smart phones.
Unless otherwise indicated, the views expressed in this blog are solely those of the author(s) in their individual capacities and not the views of Delphi Citadel Partners, LLC or its affiliates (collectively, “Delphi Ventures”). All opinions expressed are further subject to change without notice and may differ from opinions expressed by others.
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