🐱‍👤IOSG Insight

Ethereum Foundation and Reddit held a contest for the best Ethereum scaling solution:

Reddit cooperated with the Ethereum Foundation to invite the Ethereum expansion project to show the community how to use the expansion solution to bring community points (Community Points, Reddit forum reward points) to the mainnet. The goal is to find a solution that will support the thousands of community points users on Mainnet today, and eventually expand to all users of Reddit (430 million users per month).

Current situation: The competition has been closed for submission on July 31, and you can see that a total of 22 projects/technical teams have submitted proof of concept (PoC) solutions. All projects have met Reddit’s performance requirements.

Source: IOSG Ventures

IOSG summarizes the performance of transfer performance (TPS) and transfer cost (Cost/TX) of PoC of different projects/teams according to different technology of choice.

Source: IOSG Ventures

Comments:

Reddit community points are a token type with low carrying value and high transaction frequency. Differentiated from governance tokens (low frequency) or tokens with financial attributes (high value), this type of token puts forward higher requirements on the throughput of infrastructure and transaction efficiency. It is worth noting that although the Reddit user group is large, the performance requirements for community points are not sky high. The average transfer requirement per second is less than 1 TPS. However, the peak transfer demand of community points is far higher in the carrying capacity of Ethereum, and the cost of GAS is not what ordinary users are willing to bear. Among the many expansion projects, the projects with outstanding performance mainly come from the projects using Plasma and Zk Rollup. The track with the lowest average single transfer cost comes from Plasma and other Layer 1 projects that can cross-chain with Ethereum.

Plasma builds sub-chains that can process a large number of transactions in parallel. Unlike the roll up solution, Plasma does not need to submit transaction data to the chain. In some scenarios (such as DEX), it can play a role in protecting traders’ strategies. One of the disadvantages of data not being on the main chain is the lack of data security and transparency, but it may be a reasonable choice in the low-value scenario of Reddit community points.
Although Zk Rollup is more secure in terms of decentralization, it needs to pay extra gas for generating zero-knowledge proofs, pushing up the average cost of each transfer. Optimistic Rollup needs to wait for a lengthy challenge phase to reach certainty. It may be necessary to achieve faster confirmation of the main chain through the design of an arbitrage mechanism. However, whether it is acceptable in some scenarios depends on the design of specific economic incentives.
The Layer 1 project does not need to bear the burden of the block generation mechanism of the Ethereum main-net and can be flexibly designed and balanced according to the scenario that they adapt. However, security is not guaranteed by the Ethereum main-net. At the same time, if the ecosystem cannot be integrated and complemented with Ethereum, they will face tremendous pressure in competition for users. Therefore, it is not a surprise to see that the Layer 1 public chain projects participating in the Reddit scaling competition have come up with cross-chain solutions to stay relevant.

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Founded in 2017, IOSG Ventures is a research and community-driven concept.we are focusing on Open Finance, Web 3.0, and cross-chain industry. We have over 60 investments and been actively involved in various developer & DAO communities. We invest in top teams with innovative ideas, operational excellence, and a robust community, and always supportive to IOSG portfolios to grow local communities in China, the US, and Germany.

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