The Future is Sovereign - thoughts on the future of blockchain

Introduction

Out of the depths of the previous crypto winter, the seeds of the Layer 2 ecosystem came into full bloom, with tens of thousands of applications launching on Polygon over the past few years, and rollup solutions like Optimism, Arbitrum, and Starknet drawing mass awareness and acclaim from consumers and developers alike.

However, in the midst of the current bear market, we now seem primed for a new paradigm in blockchain infrastructure to emerge. Here are my thoughts on what that might look like.

A Brief History

To understand where we're going, let's first recall where we came from.

At the turn of the previous cycle, the multichain thesis was widely accepted as an optimal path towards scalability, posing that the blockchain ecosystem would need a significant number of alternative base layers operating alongside Ethereum, because blockspace was scarce and any one given chain could only scale so far (through techniques like increased block size, proof-of-stake, or sharding) before throughput and latency inevitably became compromised.

Then, a paradigm shift.

Layer 2s emerged and more-or-less debunked the previous theory by showing us that block space isn’t quite as scarce as we thought - we can actually compute the majority of these transactions in batches off chain, process them into much smaller packets, and then send those packets as data back to the base settlement layer for validation. Voilà. This improved transaction throughput one thousand-fold, enabling the development of hundreds of new applications and marking a significant stepping stone towards solving the blockchain trilemma.

That brings us to today. But ultimately, Layer 2s are still not considered the end game - at least not on their own - and that's because, at the end of the day, each Layer 2 chain still must divide its own limited block space across every application built on top of it. So what are our other options?

Well, in parallel with the Layer 2 movement, another core technology emerged: "Layer 0" protocols like Cosmos and Polkadot, which offer ecosystems on which developers can launch sovereign blockchains (also known as appchains) that serve only their own, independent applications. Compared to their Layer 2 counterparts, these appchains offer significantly better processing speeds due to the lack of competing applications, along with an increased customizability that enables developers to carefully optimize user interactions for their specific apps. Though these networks haven't gained quite as much traction as their counterparts, developer sentiment has undoubtedly begun to shift, demonstrated well by dYdX, who recently migrated from Starknet to a Cosmos appchain in order to capture and process a higher percentage of transactions executed on their exchange.

Despite the advantages though, these networks still face a major drawback, which in my opinion is single-handedly preventing them from becoming the dominant infra solution: high overhead.

Though Tendermint and SDKs make the software part easy, launching and maintaining an appchain requires devs to build a completely new consensus network, including validators and a proof-of-stake token - not to mention the need for a testnet faucet or custom block explorer down the line. In many ways, this part is harder than the software, and makes for a much higher barrier to entry!

So where do we go from here?

The Layer3 Thesis

In my opinion, the long-term mission we should strive for that will enable blockchain to achieve mass adoption can be distilled down into a simple goal: replicating the Web2 digital experience for consumers and developers.

In 1994, Web2 upgraded from http to https to make information exchange over the internet more secure. Around ten years later, Web2 created cloud computing, which dramatically reduced the overhead of launching and scaling websites and web apps.

Web3 has finally begun to do the same.

To improve upon these "Layer 0" networks, new solutions like Celestia, Constellation (edit: now Caldera), and Ankr have emerged, providing:

• Scalability

• Sovereignty

• Ease of Deployment

• Shared Security

through their modular ecosystems, combining the benefits of both their Layer 0 and Layer 2 predecessors, while offering an unprecedented layer of abstraction (via SDKs and developer interfaces) that shatters the technical barrier that previously guarded appchain deployment.

For the first time ever, a web2 game studio can launch performant dApps on its own custom chain at low costs, and a decentralized exchange can instantly handle thousands of transactions per second while owning its own block explorer.

While there's certainly work to be done around composability and liquidity, these solutions seem set to represent the next stage in the evolution of blockchain infrastructure (at least on Ethereum), and I wouldn't be shocked if the aforementioned networks spark tens (if not hundreds) of thousands of new applications (all on their own chains) in the coming years.

Only time will tell.