Possibility to use sharding as a data availability layer

Whenever the situation suddenly deviates from expectations, people start thinking about how to change the existing system.

With the rise of DeFi on Ethereum, people began to think about the block space of Ethereum. Ethereum’s gas price has reached an all-time high. Facing the congestion problem on Ethereum, users and application developers can't help but have questions: Is Ethereum the right choice?

It turns out that this is a very complex problem, we need to consider the following variables:

Some new Layer2 schemes will be launched on the mainnet soon

Eth 2.0 + Sharding Progress

New well-funded Layer 1 chains, e.g. Solana/Near

The Ethereum community is lazy and not very enthusiastic about tool development

Cosmos/Polkadot and other application chains + interoperability technology

Central Bank of Indonesia: The digital Indonesian rupiah will be launched in three stages: Golden Finance reported that according to the Central Bank of Indonesia, its central bank digital currency "Digital Indonesian Rupiah" will be launched in three stages. The first stage will be used by large banks. A wholesale form of central bank digital currency that transfers funds between each other, or with the central bank, and the use of central bank digital currency in the second phase will expand to interbank money markets and currency operations. In the third and final phase, retail consumers will be able to use digital rupiah for funds transfer payments. (coingape) [2022/12/6 21:26:30]

New applications need to balance interoperability with DeFi projects and low fees

As mentioned above, there is a lot to learn! But it doesn't help to know that, because throughout the ecosystem, a lot of good words are driven by financial interests of the narrator.

The asset management agreement Babylon Finance will cease operations, and treasury assets will be distributed to BABL and hBABL holders: Golden Finance News, Ramon Recuero, founder of the asset management agreement Babylon Finance, said that Babylon Finance will cease operations on November 15, and the treasury Library assets will be distributed to BABL and hBABL holders starting September 6th. Ramon Recuero said that Rari Capital’s hacking at the end of April triggered a series of chain reactions: first, the agreement lost $3.4 million, and users also withdrew funds equivalent to 75% of the agreement’s TVL after the attack. Borrowing is allowed as collateral. At present, Babylon Finance does not have enough funds to support continued operations after November, so it will start to distribute treasury assets from September and return all BABL tokens that should belong to the team. [2022/9/1 13:01:33]

Here, I would like to discuss a vision of the future that I am looking forward to: using the ETH 2.0 shard chain as the data availability layer of Layer 2.

Axie Infinity will soft launch "Origin" in stages: On March 18th, the chain game Axie Infinity announced that it will soft launch Axie Infinity: Origin in stages. The team plans to start small and gradually develop and expand from the desktop client to the mobile terminal, and improve the version function within a few months after the initial release. After Axie Infinity: Origin is fully released, it will include SLP rewards, NFT runes and other gameplay. The game content-ethexc includes PVE story mode, training mode and ranking mode, and has an official season. [2022/3/18 14:04:04]

Data availability is a very technical term, and I think that's why it's not as popular as other concepts in popular science articles.

I hope that in the next 5 to 10 years, data availability will become one of the dimensions that people refer to.

Pickle staking rewards have been launched and 35,000 SCRV will be distributed this week: Liquidity mining project Pickle Finance officially tweeted that Pickle staking rewards have been launched, and 35,000 SCRV (not CRV) will be distributed to Pickle stakers this week. [2020/10/8]

"Data availability" is one of those important concepts that most people don't understand. While researchers often refer to this concept, I rarely see it discussed by others.

In this article, I will discuss the concept of data availability, but will not go into specific technical details. If you want to dive into the technical details, there are some very specialized articles to read.

Data availability is one property that blockchains may have. In addition to understanding what it is, it's also helpful to understand what it's not.

Data availability does not guarantee the integrity of on-chain data. For example, knowing whether the sender of a transaction in a block has a sufficient balance requires more than just data availability.

Data availability only guarantees that any user (including light clients) can find all data on the blockchain.

The following is a schematic diagram of a blockchain with data availability:

As shown in the figure above, it is an ordered sequence of data elements, but I don't know what these data elements represent. In simple terms, you can think of it as a permission-free ordered database that can only add data.

For blockchains like Bitcoin and Ethereum, we need not just data availability, but the ability to know which transactions are valid and which are not.

As shown in the following figure, we can put the blockchain with data availability into an "execution environment" that can discern the validity of data blocks for translation:

Suppose we translate this blockchain into "execution environment 1", data block 1 represents valid data, and data block 2 represents invalid data. "Execution Environment 1" can run elsewhere, such as Layer 2.

The beauty of this approach is that it completely separates data from execution. We can build a chain that sorts the data really quickly and handles the execution, and then translates that data through a Layer 2 execution environment like Optimistic rollup.

One possibility for the future of Eth 2.0 is that all but one of the shard chains become high-throughput data availability blockchains for use by Layer 2. The only exception is the shard chain converted from Eth 1.0 to store consensus data.

The schematic diagram is as follows:

All worries that cross-shard transactions are not feasible will be dispelled. Layer 2 can use all shard chains to execute transactions. Ultimately, economic differentiation between shard chains is entirely up to Layer 2.

We don't necessarily have to wait until Eth 2.0 Phase 2 goes live.

Of course, this is just a vision, and it may not come true, but once it does, it will bring great significance.

We are about to enter a world of unknowns as blockchain and scalability technologies try to make their way into the highly congested DeFi space.

Smart people will consider multiple possibilities and keep a close eye on developments in the DeFi space. I hope we can explore together the future scenarios mentioned in this article.

I will explore this in more depth in a future article.

Thanks to Brian Flynn and Aditya Asgaonkar for their comments and review.

https://www.lakshmansankar.com/#/shards-as-data-availability-layers

Author: Lakshman Sankar

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