In The Weeds #16
How Solana compressed NFTs could be the genesis of a new NFT paradigm, Polygon 2.0 architecture, and experimentation in onchain social coordination.
Welcome to Decentral Park’s new research sub-newsletter: In The Weeds.
This weekly instalment explores Solana’s compressed NFT development and how it could change the NFT landscape, Polygon 2.0’s architecture update, and PartyDAOs innovative Ethereum-based social coordination design.
Let’s get stuck into this week’s key highlights.
1: Solana Compressed NFTs
What is it? Solana as an ecosystem continues to thrive and innovate despite relatively poor price action dating back to November 2021, having bottomed out at a ~97% drawdown from ATHs post FTX collapse. This innovation has come in many forms, including its hardware phone, Saga, and Solana Pay.
Today though, we’re turning our attention to compressed NFTs, a Solana feature that could represent a new era for the NFT ecosystem as a whole, with deep implications for the web3 ecosystem.
Compressed NFTs are exactly as they sound, fully functional NFTs with specialised data compression to reduce the onchain burden of NFT storage, minting and transfer. One thing that needs to be made clear here is that they don’t require changes or compression to the original NFT data, and there is no storing of data offchain.
Storage costs are reduced through the use of State Compression and merkle trees. Essentially, instead of storing the metadata associated with an NFT in a Solana account as non-compressed NFTs would, compressed NFTs store metadata within the Solana Ledger. The result of leveraging the Solana Ledger for metadata storage is that compressed NFTs inherit the security and speed of the Solana blockchain, with reduced costs.
There is of course a small amount of data required to be stored within Solana accounts, but this is only a fingerprint, or ‘hash’ of the data. This is where Merkle trees come in, as cryptographic data structures that compress verifiability into a single hash. Solana engineers went as far as developing their own specific Merkle tree implementation, known as concurrent Merkle trees, which can be explored here.
To contextualise just how impactful the compression technology behind these NFTs are, the cost of creating 1m non-compressed NFTs on Solana is currently ~12k SOL, equivalent to ~$250k. Whereas the cost of creating 1m compressed NFT ranges from ~0.31 SOL (~$6) to ~58.7 SOL (~$1.2k) depending on composability. This equates to a 99.52% - 99.99% cost reduction depending on composability level chosen. You can experiment here with the Solana compressed NFT calculator.
Source: Solana
Why is it important? Solana is fast and cheap as a blockchain, and is increasingly developing as an NFT focused ecosystem having reduced the barrier for minting and trading NFTs. However, pre-compressed NFTs were still not economically viable for various NFT use cases in which millions of NFTs are required.
Compressed NFTs change this, and open the door to almost all NFT use cases, by offering a far more economical solution.
The removal in this technological limitation has created use cases such as:
Monstré - NFT compression in conjunction with Solana Pay for redeemable coupons based on payments.
Crossmint - NFT compression in a minting API and loyalty programs.
Dialect - NFT compression for their in-chat sticker packs.
Helium - NFT compression to represent their Helium Hotspots.
Drip Haus - NFT compression for conducting mass airdrops.
Where does it go from here? The removal of the economic barrier to entry for high-volume NFT use cases will ultimately result in mass experimentation on Solana. This opens up a host of high-volume use cases, including ticketing solutions, insurance, loyalty programs etc.
What’s perhaps most exciting about this development is that it expands NFTs beyond being merely artwork and 10k PFP project based. We now have a clear path for real-world use cases to begin experimenting with NFTs, and a potential path for adoption of the technology underpinning real-world use cases.
I expect, given the nascency of this innovation, we will see a boom in experimentation over the coming months. While this may not show up dramatically on Solana activity, given the low storage requirements of compressed NFTs, I will be keeping an eye on various projects experimenting with the technology, as I expect reputable, well-known brand names to be amongst this experimentation cohort.
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2: Polygon 2.0 Architecture
What is it? Last week I introduced Polygon 2.0, Polygon’s strategic vision for the future that outlines how the company will shift to become what it describes as ‘the Value Layer of the Internet.’. This week I’ll be building on this, by diving into the recent Polygon 2.0 Architecture release.
Polygon 2.0 redesigns Polygon’s architecture to consist of four protocol layers, each specialised to enable crucial processes within the network: (i) Staking Layer, (ii) Interop Layer, (iii) Execution Layer, and (iv) Proving Layer.
Beginning from the bottom of the Stack, the Staking Layer is a PoS-based protocol that leverages Polygon’s native token, MATIC, to offer Polygon chains out-of-the-box decentralisation at a validator level. It can be thought of as a highly decentralised validator pool with a built in staking model.
This removes the requirement to bootstrap a decentralised validator set upon chain launch, allowing Polygon chains to focus on use cases and community.
From a validator perspective it follows the standard validator blueprint, in which validators are paid rewards in MATIC tokens for building blocks, while also receiving transaction fee revenue from the chains they validate.
Next, we have the proving layer, which is a flexible proving protocol that essentially proves all transactions across all Polygon chains. This protocol houses providers as well as state machine, and offers efficient proof generation and verification, proof aggregation, definition across various ZK state machines, and cross-chain communication between state machines.
As you may have guessed, the interoperability layer facilitates cross-chain messaging within the Polygon ecosystem. To me, this is one of the more crucial elements of the Polygon architecture, as it acts to unify liquidity across various use cases, and ultimately enables UX that feels like interacting with a single chain, while in reality Polygon will be underpinned by a multitude of specialised chains.
The interoperability layer itself is based on the LxLy protocol currently being leveraged by Polygon zkEVM, and the concept of Message Queues. Message queues are local queues of outbound messages in predefined formats that are kept by each individual Polygon chain. These are included in ZK proofs that each chain generates.
Finally, we have the execution layer, which enables any Polygon chain to produce blocks made up of transactions. This is a fairly standard execution environment design, with P2P, Consensus, a mempool etc.
Source: Polygon
Why is it important? This architecture has been designed to facilitate and remove inefficiencies associated with a multi-chain ecosystem. Polygon’s vision to compete with Optimism’s OPStack and Arbitrum’s Orbit Chains relies heavily on this architecture redesign, and the benefits gained from it.
Where does it go from here? As mentioned, Polygon 2.0 will be rolled out incrementally as a series of proposals, and requires community approval before moving forward.
Additional proposals from here are as follows:
10th July: Token
17th July: Governance
I will cover future updates in my ‘In the Weeds’ publications, to keep you up to date with the design and development of Polygon 2.0.
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3: PartyDAOs Multi-User Ethereum UX
What is it? Social coordination is a major topic within the Ethereum ecosystem, particularly with the rise of Decentralised Autonomous Organisations (DAOs). Social coordination methods consist primarily of multisigs, which have limited capabilities and flexibility, and DAOs, which are time and labour intensive, and typically far more complex social coordination designs than is required.
Enter Party, what can be thought of as multi-user Ethereum UX, or multiplayer for Ethereum. It’s a technical development that allows groups of users, of any size, collaborate on the Ethereum network. By collaboration, I am referring to the use of DeFi, collection of NFTs, playing of games etc.
Essentially, Party creates a unified onchain presence for a collection of users, who are able to make decisions and take onchain actions together, using pooled assets. This can range from creating a nimble group wallet, to deploying smart contracts as a collective.
To-date, PartyDAO has facilitated the creation of over 9,000 parties, across 55,000 unique wallets, facilitating 10,000 ETH worth of transactions.
Source: PartyDAO
Why is it important? While PartyDAO itself is interesting, the concept of more efficient social coordination onchain is what really draws my attention to this innovation.
Social coordination onchain is, in my opinion, crucial for the future adoption of Ethereum as infrastructure, be that within organisations, fund structures, gaming clans etc. This marks the first step in specialised onchain social coordination, beyond the heavy DAO design structure.
Where does it go from here? As mentioned, I anticipate experimentation within this flexible social coordination design structure. As more multi-user coordination methods are developed, we will see innovation in space. One area that seems particularly ripe for crossover is the NFT subsector, particularly with the promise of non-fungible token-bound accounts in Ethereum’s ERC-6551 standard.
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