Jun 24th, 2024 | Laobai ABCDE

I really like the WeChat official account “Orange Paper.” Some time ago, they published an article titled “Crypto Impotence.”

“A terrifying boredom is spreading in the Crypto world, like the Black Death. No one knows where it started, but unconsciously, you find this disease is everywhere.”

It’s true when you think about it. Recently, in the circle, there have been no significant technological highlights worth celebrating. The only hot topics focus on memes like Pepe, Trump, and Jenner. The last tech-oriented highlight might have been the semi-fungible of the token “Pandora.”

The primary market is similarly affected. Fortunately, innovation is still happening. Although there’s still nothing groundbreaking from 0 to 1, there are developments from 1 to 10 in various sectors that are still happening.

The previous report mainly focused on new ideas at various layers under the ETH modular narrative. This time, let’s look at the “1 to 10” developments in the BTC, Solana, and Restaking sectors.

I. BTC

Many people had high expectations for Rune, but it didn’t generate the anticipated buzz. If BRC20 or Ordi was a “chaotic surprise,” then Runes was a well-prepared welcoming ceremony, from centralized exchanges (CEX) to decentralized exchanges (DEX) to infrastructure, all ready and just waiting for the final push. However, as the saying goes, “the higher the expectations, the bigger the disappointment,” at least in the short term. In the long run, protocols like Runes, Atomical, RGB & RGB++ have the potential to inject new vitality into BTC asset issuance. The BRC20 upgrade from two months ago also clearly aimed to enhance functionality, making things like native stablecoins based on BRC20 much easier to implement.

In the BTC ecosystem over the past two months, the most noteworthy projects, aside from the UTXO Stack I previously wrote about, are Unisat’s Fractal (@fractal_bitcoin), Arch Network (@ArchNtwrk), and Quarry (@QuarryBTC).

Fractal has a very “peculiar” design philosophy. Essentially, you can think of it as a 100% fork of BTC, but with the block time reduced to 30 seconds.

You might wonder, “What’s the point of this? Isn’t it just a BTC testnet? Litecoin, BCH, BSV, at least have their own distinct features. This is a 99% mirror chain, so what’s the significance? How is security ensured?”

Actually, it has quite a few significant features:

• Fractal uses the same POW and SHA256 as BTC, has market value and incentives, and is much more stable than the BTC testnet (anyone who has used the BTC testnet knows this) while being much faster (30 seconds per block).
• It is merge-mined with the BTC mainnet at a 1/3 ratio (mainnet miners can mine a Fractal block every 90 seconds), theoretically achieving 80–90% of BTC mainnet’s security.
• Since it is 100% consistent with BTC, all XXRC20 assets and infrastructure on BTC can be seamlessly migrated without changing a single line of code.
• It will implement contentious opcodes like OP_CAT and native ZK verification opcodes faster than the BTC mainnet.
• Because of this consistency, it will be possible to implement inscription-based contracts via scripts in the future.
• If someone else were doing this, it might seem odd, but with Unisat, it feels like a perfect fit.

Arch — Compared to the various “aesthetically tiring” BTC EVM L2/sidechains, Arch brings programmability to BTC through an indexer and a decentralized prover-equipped ZKVM. It operates like a layer 1.5 — transactions are triggered through L1, various asset conversion logics are executed in Arch’s ZKVM, and the ZK proof results are broadcast back to the BTC mainnet.

It feels somewhat similar to RGB++, both relying on BTC mainnet transactions to trigger actions. The difference is that RGB++ uses Isomorphic Binding based on CKB cells, while Arch relies on an indexer and ZKVM.

Quarry — Turns BTC-based merge-mining into an infrastructure, effectively creating a version of “OP Stack” + “Eigen Layer” for miners or computing power.

In simple terms, you can quickly launch a POW chain through Quarry, which can merge-mine with BTC miners, using their hashrate to ensure its security. Token rewards are given to participating miners, similar to EigenLayer’s AVS rewards. Unlike EigenLayer or Babylon, which aim for POS security from BTC and ETH holders, Quarry seeks security from miners’ hash power. In a market dominated by POS, it remains to be seen how much share a POW Appchain can capture.

II. Solana

Recently, the most interesting concept in Solana has been “modularity.”

As everyone knows, Ethereum has adopted the modular approach, while Solana has traditionally been a representative of the monolithic chain camp.

However, in the past few months, there have indeed been several projects on Solana exploring modularity.

For example, MagicBlock (@magicblock), Sonic (@SonicSVM), Solforge, Mantis (@mantis), and others.

MagicBlock is focusing on an Ephemeral Rollup — a “use and delete, view once and burn” concept. This idea was first proposed by AltLayer in 2022 or 2023, but it’s no longer their main selling point. As a project centered on a full-chain gaming engine for Solana, this Ephemeral Rollup is likely to be part of their solution.

Sonic is focusing on a Gaming Appchain on Solana. They recently announced their funding, using a HyperGrid Framework architecture that allows games to easily launch an SVM Appchain. Sonic, as the first L2 prototype, could be seen as analogous to XAI on Arbitrum.

Solforge aims to be a general-purpose Appchain Stack, positioning itself as the SVM version of OP Stack or Arbitrum Orbit.

Mantis is an Intent settlement layer SVM Rollup, not limited to serving the Solana ecosystem. OrderBook Flow related to EVM can also settle on Mantis. “Solvers”concept inherently possess some chain abstraction properties.

There are a few interesting points worth observing here:

• Although Solana focuses on high-performance monolithic chains, it’s said that when a game became popular earlier this year, its transactions accounted for as much as 20% of the entire chain, even with only 4,000–5,000 daily active users. It’s hard to imagine the load if daily active users increased or if multiple similar game chains emerged. This may have been a key catalyst for Solana’s ecosystem to consider modularity.
• Toly himself has shifted from opposing modularity last year to a more neutral stance this year, as evidenced by his tweets.
• Many people in the Solana Foundation support modularity, and many developers believe modularity in Solana is inevitable.
• Kyle from Multicoin has always been an advocate for Solana and monolithic chains, and he reportedly still opposes this concept.

The infrastructure developments in Solana over the next 6–12 months should be interesting to watch. Besides the growing narrative around modularity, the streamlined version of FireDancer expected by the end of the year and the full version next year will likely enhance Solana’s TPS and stability, which is also highly anticipated.

III.Restaking

Restaking has undoubtedly been the hottest sector in the past six months.

However, many people don’t fully understand the differences between the two leading projects, Babylon and EigenLayer. Even some project teams we’ve talked to are confused about this, so it’s worth explaining in detail.

In simple terms, EigenLayer has inherent smart contract capabilities, allowing for relatively complex slashing mechanisms. For example, the first prototype, AVS EigenDA, was developed this way. If you wanted to create something similar, like “BabylonDA,” using Babylon, it wouldn’t be feasible because the BTC base layer’s script doesn’t support such complexity.

Conversely, Babylon’s unique technologies, such as EOTS (Extractable One-Time Signature) and the BTC timestamp protocol, are not available on EigenLayer. This gives Babylon the confidence to offer unique Restaking in the BTC ecosystem, focusing on “native BTC Restaking,” which EigenLayer cannot achieve.

Of course, the functions that this native BTC Restaking can achieve are limited to two main aspects: helping POS chains prevent Long Range Attacks via the BTC timestamp protocol and aiding POS chains in establishing or bootstrapping their POS security consensus. In short, you can come to Babylon for chain issuance, but for DApps, head over to EigenLayer.

If you insist on using Babylon to create something like AVS, akin to EigenDA or an Oracle, it’s possible, but you would need an “extension package.” For instance, projects like Chakra (@ChakraChain) or SatLayer (@satlayer) add a layer on top of Babylon. These projects use built-in smart contracts to achieve more complex slashing mechanisms, allowing you to develop DApp streams like DA, storage, or Oracle-based AVS.

Abstractly speaking, in terms of functionality alone, Babylon + Chakra/SatLayer = EigenLayer.

In the Babylon ecosystem, there are projects like the two mentioned above that aim to make Babylon as “complex” as EigenLayer, and others like Solv Protocol and Lorenzo, which are comparable to EtherFi and Renzo in the LRT niche. On the EigenLayer side, because it is inherently “complex enough,” the stack or “extension packages” have reached a higher level. For example, Ethos (@EthosStake) provides an AVS Coordination/Interoperability Layer, and Aethos (@aethosnetwork) offers an AVS Programmable Policy Layer. As EigenLayer’s stack becomes more comprehensive and infrastructure improves, EigenLayer might increasingly resemble AWS. Eventually, you might be able to achieve your desired “security level + infrastructure suite” through simple point-and-click + drag-and-drop actions. Whether you want to start a chain or create a storage or Oracle DApp on top of this is entirely up to you

P.S. Recently, I chatted with a FA who mentioned that he has talked to at least 50–60 VCs recently. Some are looking at infrastructure, some at gaming, and some at Bitcoin. But there is one sector that all the VCs are looking at, without exception! Can you guess which one?

The answer is: Ton…

However, investing in Ton is much more difficult than on ETH or Solana. Just think about it: if Notcoin had approached VCs with a deck or demo six months ago, how many VCs would have decided to go all-in after seeing it?

If there’s an opportunity in the next report, I’ll write more about Ton.

Disclaimer: Some of the projects mentioned above are part of ABCDE’s portfolio, so there may be some conflicts of interest. This is not investment advice, just FYI

About ABCDE

ABCDE is a VC focused on leading investment in top Crypto Builders. It was co-founded by Huobi Cofounder Du Jun and former Internet and Crypto entrepreneur BMAN，who both have been in the Crypto industry for more than 10 years. The co-founders of ABCDE have built multi-billion dollar companies in the Crypto industry from the ground up, including listed companies(1611.HK), exchanges(Huobi), SAAS companies(ChainUP.com), media(CoinTime.com), and developers platforms(BeWater.xyz).

Twitter：https://twitter.com/ABCDELabs

Website：www.ABCDE.com