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How will Synthetix help ETH 2.0 achieve expansion?

The rise of DeFi has sent a clear signal: Ethereum needs to expand before ETH2.0, but to maintain composability within the DeFi ecosystem, it needs to coordinate on the same expansion plan.

Fortunately, the market is very good at predicting and solving such difficulties. We now have a lot of expansion technologies online. We have had a dialogue with a number of teams of major expansion technology variants, and after evaluating them one by one, I believe Optimistic Ethereum is the most likely to reach a consensus expansion plan in the community.

This article will detail why I believe so, and I will respond to the community’s concerns about Optimistic Ethereum. This article will also give the governance process required to implement the Synthetix variant of OVM on the main network, and explain under what circumstances another expansion technology can replace Optimistic Ethereum. In general, the purpose of this article is to ensure that the community is fully informed so that everyone can reach a consensus on Snythetix’s plan to migrate to Optimistic Ethereum.

[If you haven’t read Vitalik’s article “Rollup-centered Ethereum Roadmap” ( Chinese translation ), this article focuses on its discussion, but Vitalik’s is top-down, and my article is self Bottom-up, focus on what DeFi projects need to expand and why Optimistic Ethereum can meet these requirements. 】

Social consensus

I feel that “you have to choose something” seems to have become my new mantra. But it is right-there is no perfect solution for expansion. Each method has general trade-offs, and each specific implementation has further small-scale trade-offs. All of this is based on a high-risk meta-collaboration mechanism, because it is not enough to choose the right design and trade-offs. We must also adjust ourselves for the solutions that others are most likely to choose. Therefore, expansion becomes not only a technical problem, it is also a social collaboration game.

When I first read about Optimistic Rollups, our gas fee was not very high. It looks like an elegant solution for technical and social problems, but I have realized that no matter which expansion solution we choose, we need to cooperate with other projects. Uniswap’s Unipig demo gave Optimism a good opportunity to gain community consensus because it cooperated with one of the most well-known projects on Ethereum. Therefore, I chose to participate in this solution, not only to provide feedback to Optimism on how to solve the unique difficulties of DeFi, but also to assist them in guiding social collaboration in the community.

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-“You mean, scaling Ethereum throughput is still a social issue?” “Always.”-

Technical factors

For Synthetix, Justin Moses is both its luck and its curse. He has established a rigorous engineering culture for Synthetix that is not easy to compromise, but he is extremely disgusted with the cognitive burden, just like mollusks. This means that deploying Synthetix to Layer 2 requires a delicate balance between minimizing risk and reducing any changes to the code base. Running two parallel and different code bases on Layer 1 and Layer 2 during the migration period. We would never agree to this approach, because the migration will not even be implemented; and if it means rewriting the contract in another language , It is even more unlikely to happen.

Synthetix is ​​one of the most complex smart contracts built on Ethereum, which undoubtedly increases the difficulty of maintaining different code bases. We have personal experience of this, because we have tried to port Havven network to EOS and couldn’t: https://twitter.com/kaiynne/status/1166234541616316417?s=21.

We also need to prove to the community that this technology is feasible and worthy of our further investment of resources, and then try to build a consensus around it as our expansion plan. The OVM transaction demonstration also helps to strengthen this. However, there are still community members who are concerned about this method. Therefore, even if the community consensus has been very obviously biased towards Optimistic Ethereum, we have not yet reached the point where it can be tested with SIP.

But before I start to discuss the specific trade-offs, I am going to talk about the current expansion direction of smart contract execution:

  1. Fast blockchain, the “Ethereum Killer”, other Layer 1 architecture, very fast blockchain
  2. ETH 2.0, see you in 2032 (just kidding)
  3. Status/payment channel, that is, “you can send tokens, what else do you want?”
  4. Side chain, the xDAI set
  5. Plasma, represented by Omisego, is also called “Late but Arrived”
  6. Use zero-knowledge ZKrollup and other solutions, that is whether you really love solidity.
  7. Optimistic Ethereum Optimistic Rollup, high-energy warning
  8. Lightning, smile without speaking

If there are other solutions that I have missed, I am sorry, and I look forward to seeing their news on twitter. Due to the need to maintain the same code base during the migration phase, most of the above solutions were eliminated. Of course, many solutions claim to be compatible with EVM, but this is not as simple as it sounds-although Optimism breaks through this limitation, a small amount of contract modification is required. But based on this we can quickly rule out these solutions: fast blockchain, ZKrollups, Lightning, state channels, and Plasma. Even though ZKrollup is progressing rapidly, all current variants require a new language to rewrite the contract. This is not insurmountable, but the tools of these languages ​​are still very immature, which will greatly increase the risk of implementation. There may be some fast blockchain supporters who see this and are dissatisfied. Indeed, some of these projects are compatible with EVM and support the deployment of Solidity contracts, but most of the solutions have other problems that make us feel that they are not feasible. Including those very novel consensus mechanisms have not been repeatedly tested to prove their feasibility, so the security is also a serious loss. Considering the difficult requirements shown by the status quo, #2 is also out. Yes, I put Eth2.0 in second place because we really considered it. Currently, universal computing is the second difficult requirement for state/payment channels and Plasma. Then only the side chain and Optimistic Rollup are left. We excluded side chains like xDAI because we need to provide protection for assets worth hundreds of millions of dollars, which will increase by several orders of magnitude in the future. If there is any objection, feel free to break with me. After reading all the options, we feel that the trade-off presented by Optimistic Ethereum is the best, and their team is also very capable of executing their roadmap.

Optimism in stages

Obviously, Optimistic Ethereum has not yet been launched, so there is still a major execution risk, which is why I haven’t submitted the SIP to close Synthetix on Layer 1. However, in the above options, combined with trade-offs and risks, we believe that Optimism proves that it is worthy of Synthetix’s investment in migration and other projects that drive DeFi to participate. This is why I decided that we need to take advantage of our position as one of the oldest DeFi protocols and take the risk of early implementation. I know this will help build consensus in the community. So far, the general acceptance of the community is high, and no one has objected to the allocation of resources to Optimistic Ethereum. However, as we get closer to a possible mainnet migration, we raise three major concerns. 1) Fraud proof 2) Centralization 3) The most critical technical problem with withdrawal delay is fraudulent state transition. Some people say that the current implementation stage does not include fraud proofs. In fact, fraud proofs are included, but automatic fraud submissions are not yet supported. The Optimism team chose a phased testing approach to test specific functions like deposits and withdrawals before adding complexity. However, this can be stated in the testnet roadmap to avoid user confusion. Although before the mainnet goes online, the function of automatically submitting fraud proof will be launched. In the case of incomplete fraud proof functions, it is obvious that no funds on the mainnet can be deposited into the Optimistic Ethereum network. Personally, I will vote against any SIP that proposes to migrate to a low-security network, and I encourage everyone in the community to do the same. This is one of the reasons why xDAI and other POA (Proof of Authority) networks are considered unavailable, that is, low security. Another major concern is that Optimistic Ethereum appears to be decentralized, but it has a centralized part. I believe this view is misguided, but this concern is justified. In the past few years, the community has invested a lot of time and resources to improve the degree of decentralization of the protocol. Now it would be a bad choice to go back for gas fees and throughput. But this is not the case, the sequencer greatly improves the user experience with the least sacrifice. These worries stem from people’s concerns about Optimistic Ethereum Misunderstanding of sorters in the network. Everyone needs to know that Optimistic Ethereum is not only accessible through the sorter, the sorter exists only to improve the user experience. Many people think that a sorter means a single point of failure. This situation is not ideal, but it is not the case. The only problem is that our existing Layer-1 experience is too bad. Of course, the block time for returning to Layer 1 is not ideal, but there are many potential solutions, including if the active sequencer fails or is attacked, the backup sequencer can replace it. All these worries are only temporary, because the goal is always to transfer to a network of sorters as soon as possible. The last major worry is the impact of withdrawal delays on cross-layer composability-this worry will be faced by all expansion plans except for other Layer 1 architectures. These delays mean that funds will be locked in the Layer 2 network during the challenge period, but there are still several flexible ways to deal with it. One is to build a network of validators, provide funds for both sides of the bridge, and assume the risk of providing timely withdrawals to earn fees (Translator’s Note: Fast withdrawal scheme based on liquidity providers). In fact, Connext has already started work in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP of “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months. Ethereum, the sorter exists only to improve the user experience. Many people think that a sorter means a single point of failure. This situation is not ideal, but it is not the case. The only problem is that our existing Layer-1 experience is too bad. Of course, the block time for returning to Layer 1 is not ideal, but there are many potential solutions, including if the active sequencer fails or is attacked, the backup sequencer can replace it. All these worries are only temporary, because the goal is always to transfer to a network of sorters as soon as possible. The last major worry is the impact of withdrawal delays on cross-layer composability-this worry will be faced by all expansion plans except for other Layer 1 architectures. These delays mean that funds will be locked in the Layer 2 network during the challenge period, but there are still several flexible ways to deal with it. One is to build a network of validators, provide funds for both sides of the bridge, and assume the risk of providing timely withdrawals in order to earn fees (Translator’s Note: Fast withdrawal scheme based on liquidity providers). In fact, Connext has already started work in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months. Ethereum, the sorter exists only to improve the user experience. Many people think that a sorter means a single point of failure. This situation is not ideal, but it is not the case. The only problem is that our existing Layer-1 experience is too bad. Of course, the block time for returning to Layer 1 is not ideal, but there are many potential solutions, including if the active sequencer fails or is attacked, the backup sequencer can replace it. All these worries are only temporary, because the goal is always to transfer to a network of sorters as soon as possible. The last major worry is the impact of withdrawal delays on cross-layer composability-this worry will be faced by all expansion plans except for other Layer 1 architectures. These delays mean that funds will be locked in the Layer 2 network during the challenge period, but there are still several flexible ways to deal with it. One is to build a network of validators, provide funds for both sides of the bridge, and assume the risk of providing timely withdrawals in order to earn fees (Translator’s Note: Fast withdrawal scheme based on liquidity providers). In fact, Connext has already started work in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months. The block time is not ideal, but there are many potential solutions, including if the active sequencer fails or is attacked, the backup sequencer can replace it. All these worries are only temporary, because the goal is always to transfer to a network of sorters as soon as possible. The last major worry is the impact of withdrawal delays on cross-layer composability-this worry will be faced by all expansion plans except for other Layer 1 architectures. These delays mean that funds will be locked in the Layer 2 network during the challenge period, but there are still several flexible ways to deal with it. One is to build a network of validators, provide funds for both sides of the bridge, and assume the risk of providing timely withdrawals in order to earn fees (Translator’s Note: Fast withdrawal scheme based on liquidity providers). In fact, Connext has already started work in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months. The block time is not ideal, but there are many potential solutions, including if the active sequencer fails or is attacked, the backup sequencer can replace it. All these worries are only temporary, because the goal is always to transfer to a network of sorters as soon as possible. The last major worry is the impact of withdrawal delays on cross-layer composability-this worry will be faced by all expansion plans except for other Layer 1 architectures. These delays mean that funds will be locked in the Layer 2 network during the challenge period, but there are still several flexible ways to deal with it. One is to build a network of validators, provide funds for both sides of the bridge, and assume the risk of providing timely withdrawals in order to earn fees (Translator’s Note: Fast withdrawal scheme based on liquidity providers). In fact, Connext has already started work in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months. Work has already begun in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months. Work has already begun in this area, here are more details. This does not completely solve the problem of composability, because the transfer of funds still needs to be confirmed on the chain before you dare to send another transaction, but this is basically essential for all expansion plans, and we cannot escape. This is why I think that all major DeFi protocols should have their parallel versions online on Optimistic Ethereum as soon as possible. This will cause almost all current DeFi transactions to occur on Layer 2. It is very likely that the pledge contract will be completely migrated to Layer 2, and the transaction contract will continue to run in parallel on Layer 1 and Layer 2. What needs to be clear is that before the SIP “Start Optimistic Ethereum Mainnet Migration” is proposed, all information about the fully functional mainnet needs to be made public. I am personally confident that this condition will be met in the next few months.

After the mainnet migration

There is still community debate on how Synthetix should migrate to Optimistic Ethereum. First, we have to decide whether to release a parallel, limited-featured version of Synthetix on a Layer-2. After reaching a consensus, we need to evaluate the results of this mainnet release and formalize other parts of the migration. Although Synthetix’s DAO is likely to provide funding in the first few weeks after the mainnet migration, we will need a SIP proposal to allocate 1% of the final agreement reward to Optimistic Ethereum. If we distribute part of the agreement rewards to this parallel network, we can monitor adoption and allow the market to price migration risks. It is expected that the revenue will be lower than in Optimistic Ethereum due to the reduced gas fee, but it is also possible that platform risks will lead to higher revenue, because most SNX holders will choose to migrate later. My opinion is that there is little difference between staking SNX minting sUSD on Optimistic Ethereum and the current SNX minting sUSD escrow. We decided to allow sUSD to be minted through managed SNX to maximize the value of available collateral. For those SNX that have been migrated to Layer 2, if you want to move them back to a certain point, this is achievable, which means that these SNX will be treated as valid collateral in the network, just with the SNX status on Layer 1. different. Therefore, the sUSD minted on Layer 2 and the sUSD on Layer 1 should be interchangeable. Of course there are objections to this, and the reasons include that the implementation will be very complicated. We must adopt the method that is most reasonable for the entire community. If this migration is effective, we will have a very powerful lever to affect the other parts of the migration: we only need to continue to transfer a larger proportion of inflation rewards until all are sent to Layer 2 and all active, pledged SNX All happened on Layer2. At that time, we of course need to support the exchange of Synth on Layer1 and Layer2. Therefore, there are a large number of interrelated dependencies that need to be dealt with in this process. I have publicly stated that I believe Optimistic Ethereum will be The way out for DeFi between the launch of Eth2.0. If everyone in the Synthetix community believes so, we need to plan how to join the network and migrate completely from Layer1. Of course we should be cautious, but the Warriors of Synthetix have never flinched in an uncertain bet. I believe this is one of our biggest challenges. In order to perform this work, we will need a series of SIP and SCCP, listing the changes proposed in each release and the reasons behind them. This will ensure maximum transparency and the consent of all coin holders.

Backup plan

Generally speaking, the expansion of Ethereum and the competition of smart contract platforms are multi-billion-dollar undertakings. In this high-stakes game, there are a lot of competing teams, so although we have confidence in Optimism, there may be other teams that offer better solutions than them. If this happens, we must first be prepared to switch our center to this more competitive technology, especially when we find that many DeFi projects have reached a consensus to withdraw from Optimistic Ethereum, Migrate to this alternative. We must prepare for the worst case scenario, that is, the release of Optimistic Ethereum failed or aborted. In this case, we must quickly transfer resources to carefully research other solutions, while also optimizing the existing Layer1 system. In fact, we have already begun preparations for emergency situations. The rapid implementation of the debt snapshot SIP is an example of optimization. This optimization has been shelved for many months, but in order to solve the urgent gas problem on Layer 1, we speeded up the implementation. Fortunately, we got a temporary relief, but it cannot last long. If for any reason we cannot reach a consensus on migrating to Optimistic Ethereum, I think our community must gather together to choose another expansion plan and unite to advance it. Although I think it is unlikely, it would be too light to pretend it is impossible.

in conclusion

The original intention of this article is to answer some questions raised by the community, but I also hope to explain how we got here and what stage we are in the entire migration process. Nothing is unchangeable, even a SIP that has been passed and implemented may be rolled back due to changes in circumstances. However, I firmly believe that if we reach a consensus on SIP and hope to build the most feasible network for DeFi expansion, the entire community needs to do its best to promote it. I am confident that our community can achieve this. We are stronger than ever and look forward to 2021. Of course, Synthetix will be able to run on a fully functional Optimistic Ethereum mainnet.

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