Weekly Rollup #16
Modular Media
0x061A
June 2nd, 2023

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This week’s issue covers:

  • DeGate Launches on Mainnet

  • More News & Updates

  • Overloading Ethereum consensus

  • Rollups are L1s and L2s(?)

  • More Discourse & Education

📣 News & Announcements

DeGate Launches on Mainnet

A bit late with this announcement, but on May 17th, DeGate launched an application-specific zk-rollup, in what was the first fully non-custodial zk-rollup launch on Ethereum.

What is Degate

DeGate forked the architecture and smart contracts from Loopring v3, an existing Ethereum L2 network, in order to launch their own zk-rollup entirely dedicated to an order book DEX. 

DeGate Products

  • Spot order book trading: “The ZK technology powers a “match node” matching orders between traders, periodically recording the transactions on a mainnet. This ensures a faster, cheaper trading experience that is still secured by Ethereum”.

  • ‘Grid trading: “This replicates the grid trading on a CEX, which enables users to implement a trading strategy based on the ups and downs in a trading pair”. 

Design Principles

  • Decentralized: “In the long term, the goal of DeGate protocol is to implement a standalone open-source client functionality, meaning no single entity will have control over the protocol, and by simply downloading the open-source code on GitHub, anyone will be able to access the protocol directly.” 

  • Trustless: non-custodial storing of assets 

  • Permissonless: Like Uniswap, DeGate is an open protocol where anyone can list whatever token they want while allowing anyone to access the app (except if you’re in the US). 

3 properties ensure decentralization 

  • Zk-rollup DA: A bunch of transactions get bundled together off-chain, and then verified by an immutable open source smart contract. So, a SNARK proof is generated for every batch of transactions, and then gets posted on Ethereum. Also, because transactions are bundled together, fees are split between multiple individuals, ultimately lowering the fees for everyone. 

  • No admin keys: Most of the time, you’ll hear people say Ethereum-based rollups like Arbitrum, Optimism, etc. all share Ethereum’s security. And while this is somewhat true (proofs are posted on Ethereum for finality), there still lie some security concerns. The main one being the use of admin keys. Essentially, admin keys are a way for the rollup deployers to make changes or upgrades to the rollup at some point in the future. Usually, you’ll see rollups secured by a 3/5 multisig or some other variation. This means that there are five sets of keys that can be used for rollup upgrades, and of those five, only three would be needed to make changes. So a 5/7 multisig means you need five of the seven keyholders present or in accordance in order to make a change. In short, you’re relying on these multisig operators to act accordingly and not run away with our funds. DeGate on the other hand doesn’t use any multisigs. Why? DeGate removed all upgradability from the protocol, meaning once a contract is deployed, there is no changing it. It just acts as it was intended for. 

  • Exodus Mode: DeGate is just a protocol, however, there still needs to be an interface us users interact with in order to use the protocol. If for some reason, the operator running DeGate goes offline or decides to withhold our transactions for more than 15 days, then anyone can submit a transaction to enable Exodus Mode. This is an irreversible mechanism that shuts down the oeprators deployment instance for good. Because DeGate is a zk-rollup, users can access historical data on Ethereum. This data can be used to generate a proof of your owned assets in order for asset retrieval. 

DAO-Centric Model

As mentioned, Degate is intended to be completely decentralized and permissionless. As such, the development and future of the protocol will be entirely in the hands of the DeGate DAO, which is comprised of the DG token holders. 

This means the DAO will decide what they do with the protocol revenue, whether they want to introduce some sort of burn mechanism or use the revenue to fund new growth initiatives, it’s entirely up to the token holders. 

While the DeGate protocol itself does not operate with multisigs, the DAO does. That said, it “can be upgraded to an open-sourced DAO management tool through governance”. You can take a look at the DAO treasury here. 

DG Token

DG, Degate’s native token, will have a total supply of 1B, and will be distributed as follows:

You can learn more about the distribution here. 

TVL & Trading Volume

As of today, there is $2.22M in TVL on DeGate (15.62% consisting of its own token, DG). That said, TVL is capped at $3M, and everything will be insured during this beta launch (in the case of any hacks or loss of funds).

In terms of trading volume, the protocol has so far achieved $36M+:

What’s Next 

DeGate DEX officially launched its mainnet beta on May 3rd. While the protocol may be restricted in some regions (thanks for protecting us Gary), for most of the world, the DEX is now open for any and all to test out.

More News & Announcements

📚 Discourse & Education

Overloading Ethereum Consensus

Vitalik writes an article illustrating why the community should not “overload Ethereum consensus”. But what does this mean exactly?

The first thing to understand is that blockchain systems have different types of consensus: technical consensus and social consensus.

  • Technical consensus is likely what you think about when you hear the word consensus. Proof-of-Work, Nakamoto, Proof-of-Stake, heaviest chain, all that stuff.

  • Social consensus sits underneath technical consensus. If the Bitcoin community decided they were cool with 22mm BTC, the software can be upgraded.

The second thing to understand is that the post mostly refers to overloading social consensus. He illustrates the point using clear examples (definitely worth a read) but the bottom line is that we should not expect Ethereum to fork or take special action if something goes wrong at the middleware or application layers.

Note that he is not saying we shouldn’t have high TVL rollups or validators restaking with EigenLayer. Ethereum might very well be doing a lot of work and supporting high value use cases, but we shouldn’t expect the base layer protocol to bail out other projects. In this Chopping Block episode, Sreeram from EigenLayer talks to a useful and timely analogy of banks taking greater risks knowing that the government will bail them out. It can be somewhat of a self fulfilling prophecy, and Vitalik is trying to avoid this turnout.

The timing of this piece is likely not random. Rollup usage and excitement around EigenLayer is accelerating. It’s good that this conversation is being had now.

One other thing worth pointing out is how EigenLayer has handled the discourse. It’s very clear that Sreeram and team have not only thought through these questions in depth but have already set guardrails to account for the mentioned risks. Pretty impressive!

Of course, different perspectives are healthy too, so here are two posts that shine different lights on the situation.

Rollups are L1s and L2s(?)

Jon from DBA breaks CT with yet another controversial rollup post 🌶️

The core argument he makes is that we need better rollup mental models. Subjectively he does a good job poking holes in the “layered” model - and objectively people are confused by the status quo.

Here are a few reactions / threads from both sides of the debate that obviously followed:

Jon also followed up with a summary thread where he unpacked his main objective for the post.

From our view, Jon is less focused on the proposed solution and more emphasizing a “problem to solve”. If we as an industry agree with the problem yet don’t want to mess with the L1 / L2 framework, maybe we can brainstorm together. Let us know what you think! We’d love to feature different perspectives building on Jon’s foundation.

More Discourse & Education

That's all for this week! Thanks for reading 🧱🎬

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