Gavin Wood: Polkadot’s 2023 Annual Summary

As the nights in the northern hemisphere grow longer, soma.fm’s Christmas music special appears on my home radio again, and we have once again come to the time of year when I write my annual diary on behalf of Polkadot. With COVID-19 largely behind us and fading into our memories, we can see a global return to normalcy and a consequent resurgence of offline activities. This year, conflict and artificial intelligence have become one of the most prominent themes in the news cycle, and at the same time, some are curious to know how they, along with blockchain, can change the world.

This year is also a special anniversary for me: As I write these words, exactly ten years have passed since I wrote the first crypto financial code in my life. So, what does 2023 bring?

Industry Events

Given that I’m probably a veteran in this industry, it seems to me that we have a seasonal system. Our new “crypto winter” has been underway for some time. Web3, and more specifically cryptocurrencies, are often in the news, but often with more negative words than the more optimistic headlines of a few years ago. (Indeed, a more pertinent review in The Economist found some similarities to that age-old pest - the cockroach.) This crypto winter, while probably inevitable, has been marked by some unsuccessful efforts of some individuals who seemed to believe that Web3 could be used for messaging and marketing independently of its technology and culture. I’m afraid this won’t be the last time we see this kind of behavior in this industry, but, we hope, such behavior provides a constructive and enlightening lesson for everyone.

I would bet that these negative press reports, and the unfair negative comments that come with them, have probably made their way into the halls of power. At the same time, we are also seeing the regulatory environment in our industry evolve and change—sometimes wisely, sometimes ill-advisedly. There are some significant changes happening around the world, especially in the UK, Switzerland, Japan, the EU and the US; some of the progress in the latter (US) is likely to be well-known to the Web3 Foundation which testifies for hearings at US House of Representatives and gives advice to advising Japan’s Liberal Democratic Party. While these changes in judicial regulations each have their own nuances, we can see an emerging and increasingly clear position that strongly emphasizes avoiding trust-based, custody-based and Web2 “solutions” and introducing truly trustless and decentralization (stakes, nodes and governance) on all fronts. Thankfully, some of the more forward-thinking world regulators seem to acknowledge that not all cryptocurrencies are equal, even if this is only implicitly noted through certain absences.

Decentralization of Polkadot

The older generation of Web3ers know that decentralization has always been Polkadot’s top priority, as stated in the Polkadot white paper. Idealistic and pragmatic interests rarely intersect, but it is real, and decentralization is not only a goal we should strive to achieve, but a belief we must realize.

While there is still a lot of work to be done to create a truly resilient, decentralized, and self-sufficient system in this Web3 industry, Polkadot is already a step ahead by many metrics. A recent independent report ranked Polkadot at the top of the Nakamoto Coefficient, a measure used to measure the degree of decentralization of a blockchain network. We also witnessed a decentralized milestone this year when Polkadot’s relay chain Kagome joined as a validator node on the Kusama network.

It seems that the push for decentralization is particularly evident in recent structural changes to the Parity team. The Parity team’s efforts toward decentralization have meant a significant reduction in the number of people in its executive suite, which has occurred primarily in areas supported by ecosystem activity and less to do with the Parity team’s historical area of ​​development of core technology. Behind this reorganization, the Web3 Foundation announced the launch of a $55 million “Decentralized Futures Fund” with the stated purpose of helping our ecosystem strive to further decentralize and achieve a sustainable future. At this state, activity contributes to the utility and demand of Polkadot’s block space (Coretime). The fund is put into use immediately, which has already received dozens of high-quality applications and will be kept active and be disbursed throughout the first half of 2024.

The Polkadot ecosystem continues to grow: On Polkadot and Kusama, we have 90 parachains from over 580 ecosystem projects, including 300 decentralized applications and 190 blockchains developed based on the Substrate framework. Polkadot now runs a core of 50 enabled parachains, with 17,000 XCM messages trusting and securely transmitting between them each month. On December 22, we saw that a single relay chain within the Polkadot 50 chain processed 6.9 million transactions in 24 hours—a sustained rate of 80 transactions per second over the course of a day. We can now see more than 2,000 active developers and 83,000 active users in the ecosystem almost every month. We saw a 10 times growth in retail-friendly nomination pools throughout the year, covering over 180 pools of 10 million DOTs.

In the Web3 Foundation’s grant program, we saw a total of 324 applications throughout the year, with 135 projects from 54 countries signing the protocol. The foundation reached another milestone last month - the foundation made the 600th grant since its inception in 2017.

Crucial moments

Polkadot’s flagship event, Decode, took place in Copenhagen, Denmark, in June this year, with satellite events held around the world, notably in Hanoi (Vietnam), Buenos Aires (Argentina), and Shanghai (China). At these events, 1,500 people attended in person (with thousands more watching online) and heard from over 100 speakers from across the ecosystem. These are hybrid virtual and physical events, with over 11,000 online registrations for the Copenhagen event alone.

Shortly before the Copenhagen event, the Polkadot Summit was held, consisting of 150 key decision-makers and developers within the ecosystem. This was quite successful in my opinion, and one of the key results was the introduction of a new metadata model designed to optimize the ability of hardware wallets to operate trustlessly across the entire Polkadot ecosystem - since that the model and ingenuity of Polkadot parachain is upgradable, providing flexibility, it is difficult to describe the meaning of any transaction at any time. Nonetheless, the integration of transaction metadata (and the human-readable meaning of transactions associated with it) provides an intra-ecological solution that can be promoted across the solutions of various well-known wallets. As we further decentralize, programs like this ensure that the entire ecosystem can work together to create common opportunities in areas such as standardization, infrastructure, and tooling.

Polkadot Developer Conference Sub 0 was held as a hybrid event for the first time this year, with a live stream and facilities for those unable to attend in person. A total of 500 people attended (with hundreds more watching online) and heard more than 50 speakers provide key insights into the foundations of Polkadot’s technology. Content includes core developers discussing the latest advancements, tools, APIs, and processes, as well as industry technologists talking about their experiences working their way through the technology stack to find solutions.

The Web3 Music Summit, organized by Primavera Sound in partnership with the Web3 Foundation, provides a space to explore Web3 in a musical context. Of particular note is the feasibility of using DAOs (Decentralized Autonomous Organizations) within the music industry to rebalance and optimize artists’ economic incentives by allowing more direct economic interaction between artists and fans.

There are many Polkadot-related conferences held in and outside the community, including ParisDOT in Paris, France, and Polkadot Pulse in Bangalore, India, in addition to many Polkadot satellite events held at the largest industry gatherings around the world, such as ETHDenver, SXSW in Austin, South Korea Blockchain Week, WebX in Tokyo, Token 2049 in Singapore, Coindesk Consensus and Messari Mainnet in New York. These events include workshops, booths and attendee events, showcasing Polkadot’s unique advantages and vibrant technology community.

Academic achievements

Polkadot Blockchain Academy is an original initiative to create a blockchain course worthy of being taught at a world-class academic institution. The program launched last year as a five-week course at the University of Cambridge and continues this year at global locations, such as at the University of Buenos Aires at the beginning of the year and at the University of California, Berkeley, during the summer.

The program at the University of Buenos Aires attracted 790 applicants competing for 76 places and was conducted in partnership with 12 universities in the Latin American region. This course is not for the faint-hearted, with a comprehensive curriculum that has been tested by the best minds in the industry. Success in application is not taken for granted, but 80% of students ultimately get it.

In the later course, with 344 applicants competing for 72 places, we introduced a new founders course which focused less on deep technical programming elements and more on the wider technology and its society and industry influence. We saw similar pass rates, with one individual passing with distinction. Our youngest graduate, aged 17, hails from Eastern Europe and attended the six-week course.

The Substrate Framework Developer Program is the Parity team’s main program to support teams that are building blockchains using the Polkadot SDK. In 2023, 124 projects applied for the program, and 23 projects reached the first important milestone from 55 reviews. At the same time, the team launched a sister program, Developer Heroes, which focuses on mentoring individual developers within the ecosystem, with 420 applicants throughout the year. The program currently has over 200 members and 60 mentors.

Empower parachains

This year has seen the launch and further deployment of two major centralized stablecoins, Tether (USDT) and Circle (USDC). While these are not the panacea for decentralization we strive to achieve, they provide some important practical value to several parachain projects and users. USDC alone has $250 million deposited on the Polkadot Asset Hub, and USDT has even more deposits, contributing to the total number of stablecoins in the ecosystem.

Kusama’s Asset Hub is now fully integrated with direct token conversion. The miracle of this cross-chain magic is to provide a neutral and easily accessible liquidity pool for DOT/KSM to various tokens by introducing a system-level decentralized exchange. In addition, the liquidity pool is fully integrated with the fee payment system, allowing all these tokens to be easily used to pay Asset Hub fees and exchanged through the XCM language without going through a third party. This greatly simplifies cross-chain transactions and reduces complexity for users, collators and developers.

Within this ecosystem, the environment for user tools continues to evolve, and many well-known products have undergone major improvements. Parity Signer, an application designed to turn any old Android or iOS device into a fully functional, ultra-secure isolated wallet, has been rewritten and released as Polkadot Vault. While I’m still involved in setting the product direction, maintenance is being moved from the Parity team to the Novasama team (which will have more substantial notice when it’s finalized). Recently, Polkadot Vault has received a number of new features designed to be tightly integrated with the team’s new Spectr Wallet. For those who don’t know, I’d like to say that this is a funded, open source project that aims to be a non-commercial, neutral desktop wallet for enthusiasts and power users. With good integration, worries on the Vault appliance are reduced to almost zero, and the process of restoring and upgrading Vault becomes a joy.

This year also saw the launch of Smoldot 1.0, a foundation-backed project that exists in a suitably decentralized way. Although experimentally integrated into the venerable Polkadot.js application in a compatible mode, it plays an important role in applications built directly for it, such as Novasama’s Spectr power user wallet, as well as those middlewares (Polkadot-API (PAPI)) built specifically for it. It is becoming the first example with full functions.

As time goes by

The Polkadot network is also able to continue moving forward at an unprecedented and impressive pace by virtue of its seamless upgrades and improvements, thanks to its meta-protocol foundation based on Webassembly and its indispensable canary network, Kusama.

2023 is the year that Polkadot’s three main codebases will finally merge into a single codebase. Substrate (a general blockchain development framework mainly used by Polkadot, but now also used by Cardano’s Midnight, Mandala, and Polygon’s Avail), Polkadot nodes (Relay chain node software based on Substrate) and Cumulus (using Substrate to build cross-chain software) now belong to a single Polkadot-SDK (Software Development Kit for building specific types of other software) code base. This merger greatly simplifies and optimizes the development process.

While this merger, which is still managed by the Parity team on GitHub, itself does little to decentralize, further changes taken this year contribute to decentralization: part of the code base that defines the production runtime for the business logic specific for Polkadot and Kusama, which is no longer hosted under Parity’s GitHub organization; instead, it is now managed by the decentralized Polkadot Fellowship organization (more on this below).

Second, various components of the Polkadot SDK are now published on crates.io, the Rust ecosystem’s software publishing service, ensuring that the teams building Polkadot-SDK have a greater measure of stability and less reliance on Parity’s internal development processes. Next year, we plan to further improve the stability of the SDK and significantly reduce the workload of the ecological team in updating its code base.

Unusual business

Frame is Substrate’s framework for building business logic components on the chain (similar to smart contracts in many ways) and will undergo several improvements in 2024. While some improvements are obvious, others lie behind the scenes but are just as important. One of the most important is the message queuing system used to deliver XCM messages within the ecosystem. Now ready for rollout, this allows for more and more complex messages to be sent between chains. There’s also the new feeless_if API for free transactions, a task API that greatly improves the development experience for on-chain maintenance functions, and Default Configs, which allows a pallet to have its Config trait items with default values. Many other improvements were made, too many to list here.

OpenGov is a major revision of Polkadot’s governance system, announcing that the time has come for the Polkadot Council and Technical Committee, taking a leap forward in its decentralized credentials. In fact, we’ve already seen the community come together to turn the tide and call off the first malicious referendum on Polkadot.

OpenGov brings Polkadot Fellowship. It is an entity whose actions and membership are managed through complex on-chain code, a first of its kind and a step towards for Polkadot to become a Autonomous DAO with full functions and knowledge that is capable of attracting, retaining and cultivating the talent and expertise it needs. There are currently about 60 members, with new members joining all the time. The project’s development progress is tracked on the new OpenDev monthly public call, in which many team members participate (myself included), led by Kusamarian’s Jay Chrawnna and moderated by Mangata’s Tommi Enenkel. In addition, groups (fellowships) are responsible for managing the code base and releasing versions of Polkadot and Kusama’s business logic (runtime) (of course, their governance bodies still have to perform any upgrades).

We’ve seen OpenGov’s (sometimes strident) financial processes spark a lot of online discussion, showcasing a variety of informed groups competing to make their positions heard and felt. While this is instructive for a functional, inclusive democratic process, it does not always result in the easiest way to make decisions, nor is it the ideal way to attract reasoned discussion. OpenGov is far from that, and this year we’ve seen decentralized governance and enforcement growing mature into a sophisticated DAO beyond basic stake voting. As the emergence of the Polkadot Fellowship is regarded as the first non-token decision-making body for the Polkadot element, other agencies are sure to follow.

At such a groundbreaking moment, the Polkadot network began what it calls the first decentralized, autonomous sovereign wealth reserve, instructing the network through OpenGov to use financial funds to regularly purchase USDT to fund the salary for the Polkadot Fellowship.

Referendum #231 is using 469,000 DOT to purchase over two million USD in USDT (probably more as I write this) via XCM on the HydraDX Omnipool, a high-liquidity parachain based Sex decentralized exchange. The purchasing mechanism uses the on-chain “scheduler” to make purchases in small amounts, with an average purchase of about $250 every half hour. These USDT will be placed in a dedicated network sub-treasury specifically for autonomous distribution to members of the Polkadot expert community as part of the Fellowship salary plan. The salary plan itself is outlined in the Declaration and detailed in Fellowship RFC #50.

The entire process is approved in a decentralized manner via OpenGov and is being executed autonomously on-chain in professionally audited logic code, written according to pre-released instructions. Throughout this process, no specific individual or entity held any executive privileges or positions. While this is a one-time operation for placing stablecoin token purchases in a Fellowship treasury, there is nothing unique about USDT, Fellowship, or its sub-treasuries, and the same process can be applied to any tokens on decentralized exchanges that exists within Polkadot’s XCM scope and any financial matters under any collective. Perhaps we will see a wealth management collective come together to create a decentralized sovereign wealth fund for Polkadot? Regardless, I expect in the future to see a series of rules-based collectives hosting their own multi-asset treasury, perhaps accompanied by payroll plans that cater to the specific needs of the network.

Core Highlights

Agile Coretime is an idea I first proposed at Decoded this year. After a quickly written RFC and an intense development cycle, it is now live on Rococo and is expected to land on Kusama and Polkadot in Q1 next year. This fundamentally changes the way Polkadot obtains a key resource - parachain Coretime. Unlike long-term staking that is difficult to predict through auctions, Coretime (the name of the resource) is sold at a more predictable price in monthly sales before use.

In the Agile Coretime model, Coretime’s blocks are represented by XCM NFTs, which can be traded, exchanged, promoted, and sold within the Polkadot ecosystem in the same way as any other NFT. Additionally, these Coretime NFTs can be sliced ​​and diced in various ways, and then these smaller Coretime chunks are resold again and ultimately used to support a cross-chain. Several Coretime marketplaces have emerged, such as Lastic, to provide an easy way to trade this new resource class.

The immediate impact is to avoid locking DOT tokens to participate in slot auctions (usually funded by crowdlending). This greatly eases the burden on new teams and reduces uncertainty for current teams. It works well with the “on-demand cross-chain” model, allowing buyers of Coretime to contribute to a shared pool and ODPs can be purchased as needed.

Road ahead

The new year is going to be a pretty busy time for Polkadot. Agile Coretime, On-Demand Parachains, Ethereum Snowbridge and Kusama Bridge are the four upcoming important infrastructures. Elastic Scaling is the fifth technology I expect to see in 2024. I’m also looking forward to the expansion of our DAO, including new teams, multi-asset sub-treasury, expanded XCM and some exciting new primitives we have in development.

Our innovative forkless block production consensus algorithm, Sassafras, has taken shape and we can expect to start using it on the testnet in 2024. Parity Labs is also working on a number of new technologies. A recent RFC (closed after some significant iteration during the prototype phase) called CoreJam may spark some interested parties’ ideas on the direction here.

My review comes to the end here. I hope you enjoyed it. All that remains is to wish you all a wonderful holiday season and hope that the world can be a freer, more peaceful and happier place.

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