The Rise of DA Narratives, Ethereum Rollups Exit

Forward the Original Title：The Ethereum Rollups (STARKNET) war is over, and a new narrative DA is ready to be launched

Ethereum Rollups (STARKNET) war has concluded, and the new narrative DA is waiting to be launched

1. Everything is modularizing, with Ethereum modularizing itself and Bitcoin being modularized.
2. The narrative halts after the issuance of Rollup tokens, with the narrative economics shifting to the DA layer/chain.
3. Legitimacy and universality have become the main banners, but in reality, fees and token issuance are the keys.

The last video has been made: Understanding Parallel EVM and the Future Development Pattern of Various Public Chains in One Go:https://www.bilibili.com/video/BV1jx4y1y7q6/

Marked by the StarkNet airdrop, the competition among Ethereum Rollups has ended. It’s time to talk about DA. In my view, the term Data Availability (DA) is an incomplete expression, lacking a clear subject and predicate, and merely describes the importance of transmitting transaction data beyond the execution layer. Moreover, the DA mechanism involves the fundamental operating principles of blockchain, which I have detailed in a rune article using Bitcoin as an example.

From inscriptions to runes, the paradigm development of asset issuance standards on Bitcoin

Ethereum’s narrative is weak, DA takes over midway

Modularization is a prerequisite for DA. Horizontal modularization in Ethereum is sharding, and vertical modularization is layering. Rollup is responsible for transactions, while the mainnet handles DA and consensus. The popularity of DA means that the concept of layering has become a consensus. Moreover, the Rollup wars have ended, followed by patching and repairing.

The mainnet’s upgrade plan has become a daily and annual update, which has limited impact on boosting overall market confidence. In this context, it’s impossible to develop the narrative rhythm from the top layer of Rollups and the bottom layer of the mainnet. Therefore, DA becomes the best choice.

Let’s first complete the expression of DA. Data Availability, in a narrow sense, refers to how light nodes, such as wallets, can efficiently verify full node data, with two premises involved.

• Premise one: Light nodes do not download or cannot download the complete data of full nodes, especially when prioritizing user experience;
• Premise two: There might be possibilities of falsification in full node data, with no admission mechanism, whether it’s PoS or PoW, malicious nodes might exist.

DA Originates from Practical Needs

On monolithic chains like Bitcoin, this isn’t a problem because the block header already contains a wealth of verifiable information, and the PoW mechanism ensures that a 51% computing power attack is only theoretically possible. However, the issue becomes complex on modular chains, where transaction execution, settlement, consensus, and DA are not on the same Layer, and might even be on different blockchains.

It’s important to note, according to Vitalik, that data availability ≠ data retrieval ≠ data storage. Instead, it equates to the publication of data without tampering. As for the storage and retrieval after publication, these do not become the focus of DA. The distinction lies in:

• Data publication: On Ethereum, light nodes can directly prove the validity of transactions without having all the data.
• Data recovery: For Ethereum, using Ethereum as DA doesn’t need to worry about security, hence the term “publication” can encompass this. However, for entities like Celestia, they need to prove: the data existing here is equivalent to being stored on Ethereum, so there might be a mechanism for retrieval or recovery.

From Vitalik’s perspective, once data is published on the Ethereum mainnet, the entire process is complete, and subsequent storage and retrieval need not be overly worried about. This makes sense as Ethereum’s security doesn’t need to be proven with technical terms, being second only to Bitcoin in prominence.

However, exceptions exist! If transaction data and consensus data do not circulate entirely within the Ethereum ecosystem, then careful consideration is needed for data publication, retrieval, and even recovery. This is also a key point that Celestia, Near DA, and others need to demonstrate.

DA Narrow Relativity: Everything Can Be Modularized

Modularization is the direct driver behind the narrative of DA. Ethereum has actively chosen to transform itself into a modular public chain, currently in a transitional hybrid architecture state. Bitcoin can be used as a modular layer, as seen in early OmniLayer practices and current BTC L2s.

This concept of modularization is my own definition, referring to outsourcing or being outsourced by a monolithic chain’s functions, considered a form of modularization. This does not equate to Ethereum’s discourse system.

Any public chain can be modularized. Or to understand it this way, past blockchains also faced issues with light nodes, partial nodes, and user-verified full nodes, but these were not major market demands. Only on modular chains do issues such as state synchronization, data storage, publishing, and recovery become significant, primarily because no one wishes to see a second rollback like that after The DAO incident.

First, let’s understand modularization. The earliest practice might be the Lightning Network, proving that “practice precedes theory” with modularization similar to DePIN. By outsourcing some functions or modules of the blockchain, the Lightning Network can be seen as an accounting system with delayed settlement.

For instance, the earliest issuance of USDT on Bitcoin’s OmniLayer also ultimately publishes data on Bitcoin, demonstrating that blockchains with the UTXO model can be modularized.

Blockchains with an account model, such as Ethereum, are easier to modularize. The approach of Near DA and Celestia is similar, arguing that since everything can be decoupled, and since Ethereum’s mainnet does not possess the same sacred status as Bitcoin, it is reasonable to use Bitcoin as a data publishing target or to “assist” Ethereum in data processing.

Without modularization, the concept of Data Availability (DA) would not have gained such attention.

With the end of Ethereum’s Rollup wars and the emerging BTC Layer 2 (L2) solutions, modularization has brought forth leaders in the space. Before the DA concept, Rollups won the scalability war, even spreading to BTC L2. From an extreme perspective, modularization is the ultimate scalability solution, allowing for security, scalability, and decentralization needs to be addressed by detaching them from the mainnet and then integrating them back.

This raises an interesting issue. In the context of Bitcoin, which lacks large-scale scalability solutions, BTC L2 projects are thriving. For example, the B² Network uses fraud proofs to relay data back to the Bitcoin mainnet, adopting a DA layer approach. Alt L1s are aggressively entering the DA market, challenging Ethereum’s dominance with questions of legitimacy and seeking to overthrow and dominate the space, as indicated by Near DA’s stance.

In a sense, Ethereum is an improvement on Bitcoin, differing in Proof of Work (PoW) to Proof of Stake (PoS), UTXO to account model, monolithic to modular, and script to smart contracts. The convergence in their scalability paths is modularization, where Bitcoin’s approach is more passive. Increasingly, L2 solutions treat Bitcoin as a DA and settlement or consensus layer.

It must be acknowledged that “the modular Ethereum created the market demand for Rollup on DA, leading to the popularity of the DA layer.” The implicit premise here is that Rollup is no longer the main character, at least on Ethereum.

It’s worth distinguishing between Ethereum-based DA solutions, like Ethereum, EigenLayer, Celestia, and Near DA, and Bitcoin-based solutions treating BTC as the de facto DA, such as the Lightning Network, OmniLayer, and B² Network.

The difference lies in the focus. For Ethereum, solutions like those from Ethereum itself and EigenLayer still center around ETH and the Ethereum network, ultimately empowering ETH. This is rooted in the economic design of Rollups, where Rollups pay a “toll” to the mainnet for security provided by the ETH PoS network. This toll primarily represents the DA cost, the cost of publishing Rollup transaction data on Ethereum for final processing.

DA Economics

Compared to Bitcoin, things are much simpler. Bitcoin lacks smart contracts and node verification. You are free to write whatever you like into the transaction data, as long as you pay the miner’s fee. However, it is crucial to note that once written, there is no turning back; data cannot be rolled back or any node slashed. The BTC Layer 2 has to resolve transaction conflicts on its own.

While everyone talks about ideals, their minds are on business.

Vitalik initiated a debate on the definitions and classifications of L2 and Rollup, distinguishing between Rollups, Validium, and Sovereign Rollups. The main distinction lies in the choice of DA (Data Availability) solutions. Even centuries after the Middle Ages, we can still see the familiar practice of “excommunication.”

Visa Summary of Rollup Differences

It’s important to remember that the issue of data availability is not just a technical debate but central to the revenue costs of ETH in the PoS era, a matter of real money. The technical debate is just the surface; thus, we will only provide a brief introduction.

Narrowly defined, data availability is about “how light clients can verify full node data.” The logic can be derived as follows, based on papers by Vitalik and the founder of Celestia:

There is a possibility of fraud in full nodes, i.e., the data provided could be problematic.

Among the full nodes, there is at least one honest node that has saved the complete or true data.

Light nodes must have the ability to “discard the false and keep the true,” being able to correct fraudulent data in a timely manner, such as by cross-verifying different data among multiple light nodes, which is a sampling mechanism.

The core here is the proof mechanism. Taking Celestia as an example, fraud proofs are central to the operation of DA, using fraud proofs to correct errors in a timely manner. Moreover, verifying fraud proofs is faster than generating them, allowing light clients to quickly complete verification without affecting user experience.

A deeper discussion on fraud proofs reveals that they are very close to the optimistic verification process of OP (Optimistic Rollup), which assumes truth first and deals with problems later.

The logic behind fraud proofs:

There is at least one honest node among all nodes.

The broadcasting mechanism can work normally, with delays below the network validity upper limit.

A certain number of light nodes can combine to recover complete data or equivalent data proofs.

Under this logic, the security and effectiveness of light nodes are equivalent to that of full nodes.

With OP, there naturally exists a ZK (Zero-Knowledge Proof) route. In fact, both Ethereum and EigenLayer follow the “validity proof” route, where validity proofs are generated and distributed beforehand, although their generation requires significant computational resources.

To summarize, Celestia and Near’s DA solutions combine off-chain fraud proofs (OP-like), cost-effectiveness, and native token DA solutions, while Ethereum and EigenLayer offer on-chain validity proofs (ZK-like), higher costs, and ETH DA solutions.

Comparison of DA solutions

It should be noted that developing a DA solution based entirely on EigenLayer might not be as expensive as directly using Ethereum. Moreover, it’s not guaranteed that EigenLayer won’t issue its own token, but Ethereum’s central position will remain unchanged.

Secondly, the DA fees, according to Near’s calculations at the end of last year, cannot represent real-time or fixed prices, and Ethereum’s ongoing upgrades may also lead to faster transactions and lower fees, but the overall comparison landscape will not change.

From the perspective of Rollups’ interests, increasing income and reducing expenditure are two ways to make money. Transaction fees and issuing tokens are their sources of profit, which they cannot let go of. The only way to increase profits is to cut costs. If they continue to use Ethereum, while security is sufficient, the cost is too high, which is where Celestia and others find their opportunity.

EigenLayer centers around ETH, while Celestia centers around TIA. From Vitalik’s perspective, this is akin to a vampire attack, using Ethereum’s existing ecosystem but ultimately empowering their own tokens.

Legitimacy and Universality: Discussing Bitcoin and Ethereum

It is my view that the fragmented Ethereum lacks legitimacy, yet its Data Availability (DA) layer still possesses the highest level of security, applicable to both Bitcoin and Ethereum. Legitimacy can also be understood as Ethereum’s adaptability and the dependency of scaling solutions on the Bitcoin mainnet.

In terms of universality, the design philosophies of various DAs need to be thoroughly considered. Some DA solutions are inherently specialized L2s or L1s, including Bitcoin L2, L1 EVM chains like Near, and EigenLayer, all of which prioritize EVM compatibility as a crucial development direction. Hence, EVM compatibility serves as a synonym for compatibility.

Celestia stands out as it incorporates off-chain computation mechanisms, theoretically supporting any virtual machine (VM), including EVM. Celestia is actively expanding its ecosystem with plans for cross-chain dApp interactions.

However, the modular and DA approaches of Bitcoin and Ethereum are distinct, aiming for innovation rather than uniformity.

Comparison of DA Solutions

Bitcoin as DA

Strictly speaking, Bitcoin is forcibly treated as a DA layer, emphasizing the importance of data storage on Bitcoin for various applications, including inscriptions and runes.

The Lightning Network and B² Network represent two extremes. The former relies entirely on Bitcoin’s mainnet for settlements without issuing its own token and requires BTC for staking. However, as mentioned in my BTC L2 article, the Lightning Network primarily serves as a payment channel without smart contract support, marking it as a product with high legitimacy but poor EVM compatibility/universality.

In contrast, ETH, EIP-4844 ETH, and EigenLayer share similar legitimacy, with the key difference being their native smart contract capabilities. This indirectly demonstrates Ethereum’s central role not only economically but also in ensuring the long-term development of the ecosystem. A loss in ETH’s value capture could jeopardize the entire EVM ecosystem.

OmniLayer represents an advancement by using Bitcoin’s mainnet for data publication, though it lacks efficient proof mechanisms and support for complex operations. This is a major reason for USDT’s move from OmniLayer to RGB, indicating OmniLayer’s limitations as a DA solution.

RGB++ and CKB are exploring new approaches for BTC L2, which I plan to analyze in a future article.

B² Network exemplifies “new era” BTC L2s by planning the integration of data back-transfer and fraud proofs, similar to Celestia’s approach.

B² Network Technical Architecture

In its design, the B² Network partially separates the Data Availability (DA) role from Bitcoin, with the Bitcoin mainnet taking on more of a settlement layer role. The data storage for the B² Network DA layer requires B² nodes to provide additional incentive mechanisms to cover the costs of decentralized storage.

The EVM (Ethereum Virtual Machine) compatibility of the B² Network does not need to be overly scrutinized, but it is highly likely that it will issue its own tokens. Moreover, the cost of interaction with the Bitcoin mainnet needs to be considered affordable, given the high usage cost of Bitcoin.

Overall, the DA-ization of Bitcoin is still in its early stages, requiring inscriptions, runes, and BTC Layer 2 (L2) to be widely utilized in order to generate real demand. However, it is unlikely to deviate from the path taken by Ethereum practices, though there will be differences in the implementation path, taking into account the dual constraints of scripting languages and storage costs.

Ethereum DA: Encircling Celestia

The concept of DA is now well-known, largely due to its association with Celestia. Vitalik, in 2018, co-authored a paper with Celestia founder Mustafa titled “Fraud and Data Availability Proofs: Maximising Light Client Security and Scaling Blockchains with Dishonest Majorities,” which introduced the mechanism and principles of DA.

Celestia’s fraud proof mechanism, light clients, and minimizing the number of honest full nodes are all demonstrated within it. Subsequently, Mustafa built Celestia’s predecessor under the name LazyLedger.

Unexpectedly, after Celestia’s market launch, it faced resistance from Vitalik, with economic disputes being the core issue, as previously analyzed and not reiterated here.

Celestia, lacking traditional legitimacy, belongs to the DA layer outside of Ethereum. Choosing Celestia as the DA layer for Rollups was demoted, but its cost-effectiveness still attracts more and more diverse projects.

The operation mechanism of Celestia is not complicated, with the core being that light nodes efficiently verify full node data through the Data Availability Sampling (DAS) mechanism.

Celestia’s affordability comes from transferring computations off-chain, not only enabling the DA layer to operate at high speeds but also allowing compatibility with any programming language and virtual machine (VM), making it developer-friendly and conducive to the rapid development of the ecosystem.

Currently, various Rollup solutions, Rollup as a Service (RaaS), Rollup development frameworks, settlement layers, cross-chain bridges, and wallets, among other applications, can be developed in a one-stop manner through Celestia.

Celestia Ecology

Facing the invasion from outsiders, Ethereum emphasizes its capability to act as a Data Availability (DA) layer and that its upgrading process will continuously reduce costs. However, due to its existing architecture, it is not wise for Ethereum to engage in a price war with Celestia and Near. Consequently, EigenLayer has been pushed to the forefront as a line of defense.

Unlike Celestia, EigenLayer is essentially a collection of smart contracts on Ethereum. From this perspective, EigenLayer is Ethereum itself but can also be seen as an abstract virtual chain. This duality allows it to maintain Ethereum’s central role while extending its functionality in various dimensions, such as DA, sequencers, cross-chain bridges, and L2 bridges, with Eigen DA being an example.

In simple terms, EigenLayer’s so-called Liquid Restaking (akin to Lido’s nested doll version) allows ETH to be staked for earnings while being exchanged for stETH for use as a token. This stETH can then be restaked, with the generated tokens serving as both a proof of earnings and having full token utility for everyday use.

After Ethereum’s transition to a Proof of Stake (PoS) mechanism, the amount of ETH staked directly affects the network’s health and security. Currently, about 30 million ETH are staked in the network, valued at approximately 100 billion USD, making the cost of attack second only to Bitcoin.

Since staking ensures Ethereum’s security, the theory of Liquid Staking Derivatives (LSD)/Liquid Restaking Tokens (LRT) could potentially allow for infinite nesting, amplifying the earnings from staked tokens. Based on a foundational price of 100 billion USD, a tenfold increase would only amount to 1 trillion USD, a value that Ethereum can support.

The architecture of Eigen DA is not as crucial as the sustainability of EigenLayer’s economic model. Even if EigenLayer fails, using the Ethereum mainnet would not pose any issues.

Due to space limitations, a detailed interpretation of EigenLayer/ETH/EIP-4844, Near DA, and Avail, which all address the challenge of providing proofs of validity without full node data, will not be provided. Remember, all are involved in addressing this issue.

Conclusion: DA Is a Long-term Competition

1. The Ethereum DA market will continue to face competition for some time. With Celestia already leading by issuing the TIA token, and EigenLayer, centered around ETH, not issuing a token is rare these days. It remains to be seen what will happen next.
2. Although new DA solutions may emerge, the Ethereum DA business has essentially completed its land grab and is unlikely to see much novelty.
3. Bitcoin’s move towards DA is still in the phase of incremental competition, waiting for the outcome of BTC L2 showdowns. In my judgment, the likelihood of Bitcoin being used in a similar role to Ethereum’s DA is not high. The lack of smart contracts is a secondary issue; the primary concern is the prohibitively high cost. Even with data compression by hundreds or thousands of times, the costs are still too high, making Ethereum, let alone Bitcoin, unsuitable for data storage.

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