Fuel - The Modular Execution Layer

Fuel is the first Optimistic Rollup deployed on the Ethereum mainnet and is mainly suitable for payment-centered applications. The upcoming Fuel V2 will be based on UTXO’s highly parallelizable minimal execution system and enable smart contract support. It has Ethereum-style interoperable Turing-complete smart contracts, supporting not just simple transfers.

When Odyssey activities were suspended due to on-chain load during Arbitrum Odyssey, the word “modularity” was mentioned increasingly frequently. Today Foresight News is introducing a modular execution layer called Fuel.

Fuel is the first Optimistic Rollup deployed on the Ethereum mainnet. The V1 version was launched on Ethereum at the end of 2020. It provides scalability by using a different execution model from EVM, that is, a highly parallelizable UTXO-based Minimal execution system, supporting ETH and all ERC-20 tokens.

Fuel V1 is initially intended for payment-centric applications. In addition to simple payment, it also supports features such as atomic swap (hash time-locked contract) with HTLC, OP_RETURN-style output (you can write any characters in the transaction), use of any token to pay fees (not just ETH), use of atomic swap to withdraw within 10 minutes, etc.

However, perhaps due to the scarcity of use cases for Fuel V1 and its lack of support for smart contracts, it has yet to gain favour from users after its launch. According to L2BEAT data, the currently locked amount is less than $10, with only 21 transactions in total. Apart from four transactions that occurred two months ago, the last transaction before that was in April of last year.

Shortly after the launch of Fuel V1, the Fuel development team Fuel Labs shifted all development focus to the V2 version and positioned it as a modular execution layer, that is, a verifiable computing system designed for modular blockchain stacks. Before understanding Fuel’s technology stack and architecture, let’s first take a look at the team background behind Team Fuel.

Fuel’s Team and Investment Background

One of the co-founders of Fuel Labs is John Adler, who is also the co-founder of the modular blockchain network Celestia and previously did Layer2 scalability research at ConsenSys. Emily Herbert, the Sway language expert at Fuel Labs, is also a computer scientist. Other contributors to Fuel Labs can be found on the official website.

According to the current public information, Fuel Labs’ funding sources mainly come from three aspects. It received funding from the Ethereum Foundation in 2020 and later received donations from Gitcoin. The donation page is currently closed and unarchived, so the specific donation amount received is not clear. However, according to a tweet from Fuel Labs in early 2021, more than 275 Gitcoin contributors donated to it.

In addition, in September 2021, Fuel Labs received funding support from external investment institutions, completing a $1.5 million financing round. CoinFund led the investment, with participation from Fenbushi Capital, Origin Capital, and others.

Fuel‘s Technology Architecture and Stack

According to Fuel Labs, Fuel (V2)’s technology stack has three core pillars, namely:

1. Parallel transaction execution: Fuel uses a strict state access list in the form of a UTXO (Unspent Transaction Output) model (strict access list), so it has the ability to execute transactions in parallel and has advantages in calculation, state access and transaction throughput).
2. Fuel Virtual Machine (FuelVM): Designed to reduce the wasteful processing of traditional blockchain virtual machine architecture while increasing the potential design space for developers.
3. Developer experience (using Sway and Forc): Fuel uses its own domain-specific language Sway (Inspired by Rust) and supporting toolchains Forc (Fuel Orchestrator) provides a more powerful and smooth developer experience. The development environment retains the benefits of smart contract languages ​​such as Solidity, while adopting paradigms introduced in the Rust tool ecosystem and including syntax to leverage the blockchain VM.

In the first quarter of 2020, Fuel Labs also launched a new Ethereum low-level language, adding various QoL functions to the Ethereum Virtual Machine’s low-level intermediate language Yul (simple and practical syntax). Using Yul+ can be much cheaper than Solidity in terms of transactions.

As described in Fuel V1.1 (current version), users initiate multiple Fuel transactions to Fuel nodes, which then enter the Mempool as unconfirmed transactions. Subsequently, the client combines these transactions into a Fuel block, which is then sent to Ethereum as calldata. At this point, the Fuel block is confirmed.

Fuel‘s node interacts with Ethereum

If a fraud proof is submitted to the contract, the verifiers will parse it to ensure that the maliciously created fraud proof will not be processed, and then the provers will process the fraud proof, that is, prove that fraud occurred.

Fuel V1.1 also provides an optional module that adds more features such as Token Funnels, a contract that can accept direct transfers, eliminating the cumbersome process of needing to agree first when transferring ERC-20 tokens. This not only reduces the risk of double-spend attacks but also prevents users from losing funds if they transfer assets to the contract.

To deposit funds into Fuel, it is simply necessary to send them to the Fuel contract. At this point, the deposit will be added to the state of the Fuel chain.

There are two options for withdrawing money from Fuel. The first standard option requires the asset to be burned on Fuel, and then the withdrawal can be made to Ethereum after a delay of about two weeks; the second fast option uses HTLC (Hash Time-Locked Contract) provides supported atomic swaps, with withdrawals completed in minutes through liquidity providers.

Fuel Labs is also building a blockchain explorer, currently in an early version, that will support Ethereum-based key management in the future (i.e. MetaMask and WalletConnect for account management and transaction signing).

In Fuel V2, in addition to the features beyond V1.1 and the interoperable smart contracts mentioned above, V2 also has functions similar to Bitcoin’s Predicate script which will be able to enable a large number of smart contract applications on Fuel while maintaining the performance improvements of the UTXO data model relative to the account data model.

Fuel Labs stated that in the past, other UTXO-based smart contract systems encountered user contention when trying to interact with the same contract at the same time. However, Fuel benefited from the extensible transaction design and therefore did not have contention issues. Applications on Fuel can interact directly with applications on Ethereum. However, for now, Fuel is a standalone network. However, in the future, it will be fully bridged to Ethereum, first to the testnet and then to the mainnet so that Ethereum assets can be used in the Fuel execution environment.

Fuel Labs launches DEX “SwaySwap”

In late June, Fuel Labs launched a DEX similar to Uniswap - SwaySwap. The DEX is already running on the Fuel devnet and is currently a demo application (non-mainnet deployment). Currently, its functions include exchange and liquidity provision. After testing, we can find that the SwaySwap experience is indeed very smooth. The gas fee required is very low. It only takes three or four seconds to provide liquidity. It takes even less time to exchange. There is no need to perform any further steps (e.g. consent) after clicking on “Swap” or “Add liquidity”.

This is because, in SwaySwap, the assets that are exchanged, transferred, and used to create LPs are native assets, not tokens, which means that users do not need to approve the assets before interacting with the smart contract.

As mentioned earlier, Fuel V2 will be a highly parallelizable minimal execution system based on UTXO. It will also enable smart contract support and have Ethereum-style interoperable Turing-complete smart contracts, not just simple transfers. The newly launched SwaySwap currently exhibits relatively significant advantages in terms of user experience and interaction costs. However, further validation is necessary after its official launch.

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