Octopus Network Liu Yi: Why are we not the minimalist of the blockchain industry

Author: Liu Yi, Founder of Octopus Network

Since 2020, the most eye-catching change in the blockchain world is that Ethereum has been unable to maintain its dominance due to scalability limitations. Various new public chains and Layer 2 networks have continued to emerge, some of which have already acquired a large number of Use and carry a huge amount of encrypted assets, and at the same time make more and more people believe that the future pattern of the blockchain world is not One Chain Fit All, but is composed of many blockchains Internet of Blockchain.

When it comes to the blockchain Internet, the contributions of Cosmos and its founders cannot be ignored. In 2015, Jae Kwon and his collaborators created Tendermint, a PoS-based BFT consensus protocol that allows anyone to quickly create a blockchain. At that time, they had already foreseen that as a large number of purpose-specific blockchains continue to emerge, they must be interconnected to support the free flow of assets and data, forming a decentralized next-generation Internet (Web3.0) infrastructure.

In the Cosmos blockchain Internet blueprint, there is a special type of blockchain whose function is to connect as many blockchains as possible as an interoperability hub (usually called a cross-chain hub), so it is called a Hub. Cosmos Hub is the first such blockchain and IRIS Hub is the second. Compared with Hub, other blockchains are called Zone.

The designers of Cosmos followed the End to End Arguments of the Internet architecture design, that is: Many functions of the network, such as encryption, compression, verification, response, retransmission, etc., require applications at the edge of the network It can be done only with the knowledge and assistance of the system, so it is meaningless to implement them in the communication network.

The blockchain Internet version of the end-to-end principle is called hub minimalism, which is the design philosophy of the Comos network architecture. That is to say, the functions of the Hub should be as few as possible, which brings three benefits: one is that the Hub code is simplified, and the security and reliability are higher; the other is that the Hub can use the limited transaction processing capacity (unit is tps) to process cross-chain Transaction to achieve efficient and low-cost cross-chain; the third is to avoid the overlapping of Hub and Zone functions. Since Hub is the core of the ecology, if Hub and Zone compete, it will inevitably inhibit Zone’s innovation.

In 2020, someone proposed that AMM DEX should be deployed on the Cosmos Hub as a basic DeFi service for the entire ecosystem. This proposal obviously violated the principle of hub minimalism and sparked fierce controversy. The result of the argument was that pragmatism prevailed. After 1 year of development and testing, Gravity DEX will be launched in mid-2021. However, the Cosmos community has not given up on hub minimalism, and only regards Gravity DEX as a special case. But the question is: So why is there such a special case as Gravity DEX? Perhaps the more general question is: Are there boundaries to pivotal minimalism?

Just look at the interconnection topology of the real blockchain world, and you can easily find that Ethereum is at the center of the hub-and-spoke network and has bridges with all important blockchains. For every public chain, layer2 or special purpose blockchain, the first requirement for cross-chain interoperability is to connect to Ethereum. The motivation for all blockchains to connect to Ethereum is not because Ethereum is the most “simplified”, but precisely because Ethereum is the most “fat”, accommodating the most application layer protocols, the most encrypted assets, and the most users. Ethereum has become the “de facto hub” of the blockchain Internet and the fattest hub.

Polkadot and Cosmos have always been called cross-chain duo. Although not using the same terminology, Polkadot also pursues hub minimalism. As a hub, Polkadot Relay does not have application layer services and cannot deploy smart contracts. Moreover, Polkadot is working to transfer basic functions other than shared security, including DOT issuance, on-chain governance, etc., to the “system parachain”, which is more radical than the minimalism of Cosmos Hub.

The minimalist Polkadot Relay means that decentralized applications including DeFi can only be carried by parachains. Polkadot’s DeFi ecological development relies on the composability between parachains. However, the realization of interoperability between parachains faces two obstacles: First, the cross-chain protocol XCMP in the Polkadot network has an undetermined launch date. Without XCMP, a parachain is actually an isolated chain, which can neither interoperate with other parachains, nor can it be interconnected with other public chains such as Ethereum through a public cross-chain bridge.

The second is the uncertainty caused by the slot auction mechanism. The source parachain needs to consider the following additional factors when considering the agreement combination with the target parachain: How long is the current slot lease period of the target parachain? Can I win the auction again before it expires? Once the counterparty fails to renew successfully, the parachain will be downgraded to parallel threads, and its activity will be greatly reduced, which may cause the agreement combination to fail.

Octopus Network is the third noteworthy multi-chain network protocol after Cosmos and Polkadot. Its design goal is to safely and efficiently start and run a large number of independent blockchain-based Web3.0 applications-application chain. The core difference between the three multi-chain network protocols lies in the way the sub-chain (Zone/Parachain/Appchain) obtains security. In the Cosmos network, Zone is an independent Tendermint consensus blockchain, which is secured by its own PoS. Polkadot is a heterogeneous sharding blockchain. Parachains are not independent consensus blockchains, but shards. The relay chain guarantees them the same level of security.

The application chain of the Octopus Network is an independent consensus blockchain similar to the Cosmos Zone, but the PoS of all the application chains are entrusted to the Octopus Relay, using the original token OCT of the Octopus Network as the exclusive collateral. The application chain can independently determine its own security level by adjusting the number of block rewards provided to verification nodes that have pledged OCT. The cross-chain hub of Octopus Network is not an independent layer1 public chain, but a set of smart contracts running on Near Protocol. Before we discuss the Octopus Network design logic in depth, we need to talk about the relationship between DeFi and non-financial Web3.0 applications.

Every Web3.0 application is a decentralized market protocol coordinated by encrypted tokens. A variety of participants including protocol developers, investors, validators (miners), service providers, and community advocates contribute to the establishment and prosperity of the market and receive token rewards. Encrypted tokens must be in the encrypted asset market to have a price, and to complete the process of capital formation and reinvestment. For example, the validator obtains legal currency by selling encrypted tokens, and pays the IT cost and labor cost of the validating node. Therefore, the development of Web3.0 applications is inseparable from the support of DeFi.

The core advantage of the application chain is to focus on specific application scenarios to achieve the best user experience. It cannot and should not try to build its own DeFi protocol ecosystem, but should use existing DeFi facilities that are rich in content, fast innovating, and have good liquidity. It’s like whether it is a factory, amusement park, or a farm, it will not build its own financial market, but will issue stocks and bonds in the existing market.

The basic protocol of Octopus Network can be regarded as a decentralized incubator. Every once in a while, Octopus Network will start the application chain that has the most support from the community, and support the application chain for Skyward IDO. In order to help the application chain project obtain more funds and establish an economic bond with the application chain community, the Octopus network will directly airdrop OCT tokens to the application chain IDO investors. The first 10 application chains each received 200,000 OCT airdrops, and the 11th-100th application chains, OS-IDO, received 100,000 OCT airdrops. After Skyward IDO ends, the application chain project will establish a trading pool in Ref.finance, inject initial liquidity, and provide incentives for liquidity providers as needed.

It can be seen that all octopus network application chains will establish a close symbiotic relationship with DeFi on the NEAR blockchain from the first day of their birth. Moreover, in the Octopus network, the interoperability requirements between the application chain and the DeFi protocol of the NEAR platform are much more important than the interoperability between the application chains. In the past few months, several high-profile IDOs have been conducted on the Skyward platform. The number of participants in Ref.finance IDO is close to 2,000, the number of IDO participants in Octopus Network is close to 4,000, and the number of participants in the most recent Paras IDO exceeds 4,000. This does not mean that Paras is more valuable than Octopus or Octopus than Ref.finance. Instead, every IDO with value recognition is expanding Skyward’s user base and helping subsequent agreements complete a more successful IDO.

OCT’s TVL in Ref’s trading pool reached USD 7 million. Imagine that the Octopus Network will connect hundreds of application chains in the future, generating thousands of FTs and millions of NFTs. These assets will enter Ref.finance and other NEAR platforms’ DeF protocols or be traded. Or act as collateral. The essence of the so-called ecosystem is that partial development will promote overall prosperity.

Vitalik said at this year’s EthCC conference: The Ethereum ecosystem cannot always create tokens. Its function is to trade other tokens. The role of the financial system is to efficiently allocate capital for social production. If capital cannot flow into the production sector to create utility, then the financial system will be useless except to export bubbles. Application chain is a decentralized production-oriented digital economy. Their relationship with the DeFi agreement is like the relationship between the real economy and the financial system. On the NEAR platform, under the coordination of Ocotpus Network, DeFi and non-financial Web3.0 applications will have an unprecedented benign interaction.

There is only one Internet in the world. Even after decades of development, the connotation of the Internet is still changing rapidly. For such a single instance, the induction method usually does not work well. The end-to-end principle is not a priori principle of the Internet, but should be seen as a reflection on the Internet architecture. As stated in the classic paper “End-to-End Principles in System Design” published in 1981: “The principles of functional placement discussed in this paper have been used for many years, but they may not be clearly understood and determined.” The habitual translation of “to-end principle” is very problematic. In fact, it is not a principle (principle), but an argument (argument), and there are enough counterexamples and reflections.

The so-called “blockchain internet” is more a metaphor than a definition. This metaphor has helped many people build an intuitive impression of multi-chain networks. But the assertion that “blockchain Internet is the Internet” or “multi-chain network is a communication network” is not reliable. Without a deductive basis, the application of hub minimalism to multi-chain networks is not a logical inference, but merely an analogy.

More and more people in the crypto circle, including Cosmos researchers, compare crypto networks to cities. The shape of a successful metropolis is not the result of top-down design, but the product of historical evolution. Places with convenient transportation and abundant water sources gradually developed bazaars and evolved into commercial and commercial centers. Eventually, very few commercial and commercial centers developed into financial centers, serving vast areas and numerous industries. In the real world, all financial centers are transportation centers, and all transportation centers are business centers.

For the new public chain to occupy a place in the future blockchain Internet, the key is to develop into a financial center that gathers a large number of DeFi protocols and encrypted assets. In the two multi-chain networks of Cosmos and Polkadot, the hubs that have gathered the most resource support and community consensus, Cosmos Hub and Polkadot Relay, have abandoned the prospect of becoming a financial center, and can only rely on Terra, Osmosis, Acala, and Moonbeam. , Astar and other ecological projects.

NEAR Protocol provides a user experience close to Web2.0 and has a solid foundation for decentralization. It is gathering the resources and consensus of the entire ecosystem and is rapidly emerging as the financial center of the blockchain world. Given that NEAR Protocol has almost unlimited expansion potential based on sharding, it can accommodate hundreds of thousands of times more encryption protocols and encrypted assets than Ethereum layer1, making it the fattest blockchain Internet hub. The Octopus Network is becoming a satellite city belt surrounding NEAR and the best habitat for non-financial Web3.0 applications.

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