Conversations with Junior Blockchain Developer Part IV

A: Hi
B: Hi!

A: We meet again :)
B: Yes :)

A: I will shot right into… Bitcoiners say that PoW is amazing for unbanked because they can simply mine some and use it in P2P way, in case of PoS this is not possible right, one needs access to an exchange.
B: This is indeed a benefit, there is no perfect system but I don’t think it is as big problem as Bitcoiners are making it. For anything sensible one has to be part of mining pool anyway and nobody is mining without ASICs anyway, it is just too hard (in terms of difficulty). If one can purchase a mining equipment, one can purchase coins via exchange. In fact in countries like Nigeria, Kenia there is access to e.g. blockchain.com and similar platforms. For people with access to free electricity from natural sources and with access to ASIC miners — mining PoW coins such as BTC can be profitable indeed.

A: Bitcoiners are also comparing PoS to things like properties, where you always buy from an owner that bought before, where as in PoW it is possible to create coins oneself (mining).
B: Yes, it is similar but I don’t see this as a big issue, properties are and will be, expensive in some areas but in others they are super cheap.. Nobody has a problem to buy land, flat or house super cheap, they just complain that it is expensive. In addition in most countries (for sure Germany), you have to sell staking rewards for taxes, so it is not that you can just hold forever on to staked coins. Funnily enough in those countries when you do not sell it is as if you were actually buying coins because you will have tax to pay.

A: What do you think of an idea of modular blockchain with separation of settlement and execution layer, data availability layer?
B: There are 3 parts to modularity and concerns, there is consensus layer, execution layer and data availability layer. Ethereum is a non modular blockchain, we call it monolithic because it has all 3 parts, in case of Cardano it is semi-modular. Ethereum community realises this is not ideal and wants to split it somehow.

I think that separation of layers is important, Cardano for instance is semi-modular, there is settlement and execution/data possible on layer 1 but it is possible to split this. Cardano will have M1 EVM execution / data side chain (even two I think are planned — one called Mamba), IELE sidechain and of course Hydra L2 solution. In all those cases there will be different deployable units, in case of M1 by DcSpark it is already confirmed with iBFT 2.0 consensus (trusted) that initially 32 stake pool operators will be chosen — the ones that are the most trusted stake pool operators in the Cardano community, in case of Mamba EVM side chain OBFT consensus will be used.

As for others, Hydra L2 solution, this will be a isomorphic state channel. Initially use cases will be limited but idea is to have a parallel layer two network running with security guarantees of L1 (when some extensions are implemented: hydra heads talk to each other). Note: research on this topic is now completed, paper has been released by IOHK in September 2021, implementation is missing yet though.

In Ethereum there is no isomorphism, L2 layers require a separate EVM compiler.

As for other technologies, this is now industry wide consensus and some blockchains take it to the next lever, they only want to have e.g. data availability (example: Celestia.org). In fact Celestia wants to become data availability layer for others but to my knowledge they also plan L1 solution themselves.

More details on hydra:

but also worth to read:

As for IELE side chain some details are still unclear but I think it will be OBFT consensus layer (most likely also using stake pools as trusted parties, potentially with slashing for bad actors [unconfirmed]) with expected performance of 1.000 TPS, so more than enough I would say, especially that one can have multiple of these side chains.

A: Very interesting, isomorphic state channels, isn’t that Ethereum tried it and completely doesn’t work for DeFi because parties have to be online all the time, etc?
B: Ethereum tried it via so called Raiden Network yes but I am not sure if they got as far as “hydra heads”, this is quite novel that heads are talking to each other and they never explored idea of virtual hydra heads, in case of Ethereum also isomorphism is not possible to the account model instead of eUTxO. Basically the moment somebody has any solution to so called: “concurrency challenge on Cardano”, it will automatically work with Hydra network (with at least hydra heads talking to each other extension) because it is all isomorphic so it has to work — this is my current understanding. More details are in Maladex Team whitepaper: https://docs.maladex.com/whitepaper.pdf

A: What do you think of Zk (Zero Knowledge Proofs) rollups vs Hydra state channels as a way to scale blockchain and DeFi?
B: Ethereum needs Zk Rollups much more than Cardano at the moment, Hydra is a pretty decent solution for eUTxO blockchains. Ethereum has account style blockchains and it makes perfect sense. In fact industry leader StarkWare is planning a deployment of alpha of their Zk rollup solution most likely even until end of 2021. While many so called Ethereum maximalists dismiss state channels, they do this for account based blockchains also cases where there are not stake pools (in Cardano there are) and last but not least they forget state channels where hydra heads talk to each other is not the same as ETH ecosystem had with Raiden Network, apples and oranges comparisons. I expect Cardano eventually will use Zk rollups of some sort, in fact Mitral research for light wallets is progressing very fast and we can expect first light client wallet in 2022. I am not a cryptographer but for me Light wallets and Mithral is beginning of Zk knowledge rollups for Cardano.

A: Isomorphic? Sounds like Chinese, what is exactly isomorphic?
B: If I have a smart contract in Cardano running on L1 layer with eUTxO then I can simply run the same smart contract on Hydra L2 network — even with the same Plutus compiler and with the same runtime, same ledger rules. What I can of course do is modify some parameters, e.g. I can change minUTxO or block size or I can change fee, we can pay in lovelaces instead of ADA, L2 network can be potentially super cheap and what is even more important what cracks some people up is that state (transactions) actually do NOT need to stored on SSD / HDD forever. State can be ephemeral, as long as necessary before commit transaction to hydra head is confirmed by all hydra head participants.

A: What if this is necessary for auditability / compliance to have layer 2 network also track all transactions?
B: It is of course possible, can be change parameter to hydra node on start up

A: Then when you do this, there is no more inclusive accountability right, others cannot check what happened in the past on some side? Only some hydra nodes know state and others do not know, it kinda becomes centralised a bit?
B: When we say hydra is a L2 network with L1 security guarantees we really mean it, this is because in case of a conflict and dispute checker will fall back to L1 to resolve the dispute.

In addition, there is nothing stopping hydra participants around certain hydra head to simply behave like an archiver node and store their records to e.g. BigQuery (Big Data) in GCP (reader: Google Could Platform), so it can be audited later or even develop bespoke archivers or even store permanently on their discs for auditors / governments / compliance reasons.

A: But historical data it could be tampered with when you store it in GCP…
B: Well, as I said, there could be also archivers, blockchain enabled

A: What is the hardest about eUTxO, I see on the Internet a lot smart contract developers people complaining about eUTxO but also Plutus, which is Haskell based?
B: There are two problems here with those complains, one is syntax, second one is semantics. Actually the number of compliant I hear from somebody that is diving into Cardano isn’t even so much syntax based (only maybe at the beginning), it is mostly because of semantics. For eUTxO based leder there are completely different design patterns that have to be developed, many of them are unknown or known to small group of people. There is a lot of education that needs to be done in this era, something like we have 12 factors for deployment or Gang of Four Design Patterns for Object Oriented Programmers we need for eUTxO Smart Contract Developers. Summary: major problem is not syntax but rather semantics, we saw even quite advanced smart contracts developers from Ethereum completely missing the point of eUTxO and I mean like completely. It’s a new paradigm.

A: Why there is so much hate and VCs are not investing in Cardano?
B: They do invest in Cardano but not as much, I think it is mostly due to popularity and they also want ecosystem of DeFi and dapps to flourish first. It is different risk profile for them. Moreover, we can actually see some investments from VC, e.g. VCs invested a lot of money into Ardana or very recently Banter Capital invested in Lovelace Worlds. Ardana is DeFi project and Lovelace Worlds is Metaverse as a Service around topic of NFTs, both building on Cardano. Let’s not forget that VCs have very particular characteristics, did you know that Jeff Bezos for amazon.de was actually prioritising long term decisions and VCs wanted short term profit? This is how VCs work, it is not always the best way but of course without VCs we probably wouldn’t be as species so advanced (overall). Many VCs are also unhappy about Cardano in terms of it’s evaluation, they feel they missed the boat early on and now price is very high relative to it’s fundamentals (e.g. Mike Novogratz expressed such opinion).

A: Have you seen a release of Fuel UTxO smart contract as an L2 solution on Ethereum blockchain ecosystem?
B: Yes, ETH maxis now starting to like UTxO but they hated Cardano because of Charles. There is a lot of hypocrisy in this ecosystem. It is very sad to observe.

A: You are funny and Cardano holders about EIP-1559, Cardano should have fee marketplace long time ago and I see main Cardano influencer accounts criticising on EIP-1559 all the time!!!
B: EIP-1559 is a very specific Ethereum improvement proposal, it is designed so that investors that bought early on are rewarded, considering how much transactions are happening on ETH, it makes ETH a deflationary asset. Objectively speaking from the user point of view (cost of transactions), it is a very controversial feature albeit very much piggy backing on existing network effects. In this sense let’s only say the matters are more complex, there are fundamental differences between values of Ethereum ecosystem supporters and Cardano ecosystem supporters. I dare to say we should have different networks even if technology would be exactly the same. Due to governance and decision makers those ecosystems could and most likely will evolve totally differently. One could compare it only to political parties in a country — left, right, center whatever you prefer.

A: Let’s wrap it up, I hope this is not the last time!!!
B: No, for sure not.

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