There's never a dull moment in web3. Compared with other established industries such as tech or finance, the people and rate of change in web3 is phenomenal. I wrote about this in my book, but having just returned from EthDenver last week it’s reinvigorated that feeling of just how vibrant this whole ecosystem is.
What bear market?
EthDenver is notable as being the event that kicks off conference season each year. It consists of a hackathon followed by a conference and web3 #BUIDLers and companies flock en mass to connect with other technologists, companies and investors at the event.
This year there were thought to be around 25,000 people attending the conference, which is huge. Every time I got in an Uber the driver would ask me if I was there for this crypto conference and tell me they'd just dropped someone off for it!
Once upon a time (5+ years ago) one could feel the pulse of web3 simply by checking in on Reddit. Now there's just way too much going on to keep up with everything — even in just the Ethereum ecosystem. However, there were some very clear themes at the conference.
There were mini summits during the week covering many areas of web3, but those that really stood out were:
There were others, but being a developer conference, these are the big themes right now that provide a snapshot of where we are with respect to the evolution of this ecosystem.Interoperability and wallets have been discussed for years within web3, however, the progress being made here is significant.
Last week saw the launch of EIP-4337 Account Abstractions for Ethereum. This was big news for anyone interested in wallets and UX. It removes the need for user seed phrases. Instead, smart contract wallets on Ethereum provide verification logic that can be associated with accounts. This could be using 2FA, social recovery and various other mechanisms. As these wallets exist as smart contracts they are programmable, so there's a much wider surface area for innovation.
Interoperability is an interesting area, as all the various alt-layer one blockchains want to find seamless ways to transfer assets between one another, especially Ethereum.
There are various types of interoperability between networks. The common theme we are seeing is that almost every blockchain network wants to support Ethereum with the ability to execute EVM bytecode.
These networks then achieve greater performance by creating layer 2 networks on them that are secured by a base chain. Assets can be transferred between layer 2 networks using the base chain as an intermediary — they all benefit from the underlying security of the base chain.
The most significant challenge lies in transferring assets between non-native networks — i.e. from one layer one network such as Ethereum to another such as Polkadot. This typically involves an intermediary that bares much of the risk associated with assets going between chains and is a significant honeypot for attackers. As attractive as this type of transfer is, it's still questionable if an efficient solution can exist that can remove the requirement for a trusted intermediary to manage the infrastructure facilitating the cross-chain transfer of assets. The ideal would be to do this at the protocol layer, but solutions do not exist to bridge across different layer one protocols currently.
Scaling Ethereum is super-hot right now, especially off the heels of the BASE network launch, and with a number of ZK-EVMs due to be launched imminently, 2023 will be remembered as the year of scaling.
Whilst at EthDenver there was a real buzz about all the activity taking place here, how long the "layer 2 wars" go on is likely to be dictated by the adoption of ZK-EVMs that we see over the coming months.
The teams working on this technology all have significant runway, but I don't envisage a future where we have many different layer 2 technologies being used. For instance, at the current time, the lion’s share of total value locked in layer 2 networks is across Arbitrum, Polygon and Optimism.
Which protocols dominate layer 2 longer term will likely change, but the Rule of Three remains just as relevant here as in other industries.
Zero-knowledge technologies may be underpinning the next generation of ZK-EVMs that are about to be launched, but they're also considered a crucial privacy-enabling technology for web3.
In the context of the ZK-EVM, they enable zero knowledge rollups to be used to scale Ethereum. This is achieved by validity proofs which are more efficiently verified than their alternative, optimistic rollups. Thus they take up less space on the Ethereum mainnet resulting in a transactions capacity of 10-100x greater in magnitude.
Although zero-knowledge technology is used in ZK-EVM, it isn't used for privacy reasons. Transactions that are taking place on layer 2 networks are not private between participants. Although one could in theory create a private layer 2 network that could hide some of the on-chain activity.
Fully on-chain privacy for all is further away, and something that Aztec Protocol and others are working on. Aztec already facilitates completely encrypted access to a subset of DeFi protocols and has ambitions to roll out a fully encrypted Ethereum network.
This type of privacy will be a game changer for users of blockchain networks, however, it's not as far along as the layer two technologies, and many continue to drive true privacy forward for blockchain networks.
Hence the theme of zero-knowledge technology is likely to continue to gather more momentum in the years to come.
The most incredible takeaway from EthDenver was how vibrant the Ethereum ecosystem is in 2023, especially considering we're in a so-called bear market. I've always loved being at Ethereum events such as DevCon, EdCon, EthCC and others, but had previously looked at EthDenver with a level of FOMO having not attended.
Having had the chance to attend, I believe the FOMO was justified and for anyone on the fence about attending, you should. I promise you won't regret it. Just make sure you come armed with ChapStick and hand cream — the climate there is incredibly dry!