Ethereum Rollup Hermez Network, to Be Used by Tether, Goes Live

Ethereum Rollup Hermez Network, to Be Used by Tether, Goes Live

Hermez Network – a layer 2 throughput solution for moving tokens and ether on the cheap – is now live on the Ethereum mainnet.

The network – which will be used by stablecoin giant Tether – will initially support five assets including ether, wrapped bitcoin, dai, tether and the hermez token, the team said in a press release. Support for more assets will be added in the coming months.

“As exorbitant gas fees continue to cripple the community, we must bring scalability and cheaper transactions to Ethereum now,” Hermez tech lead Jordi Baylina said in a statement. “We are now inviting developers, projects and users from around the world to join us on this journey towards a significantly cheaper and decentralized future.”

Rollups: Easing transaction bottlenecks on Ethereum

Rollups are quickly becoming the preferred solution for Ethereum’s transaction bottleneck problem, both in the zero knowledge proof (zk-rollup) and Optimistic rollup (ORU) flavors. A recent rise in user activity spiked gas prices throughout the early winter months, prompting a move to rollups.

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These throughput tools increase how many transactions can be settled on the Ethereum blockchain by moving transactions off-chain, bundling them and sending them back to Ethereum for settlement. Andreessen Horowitz-backed Optimism and Union Square Ventures-backed Matter Labs are the industry’s two heavyweights in the field.

Hermez itself is a zk-rollup, meaning it uses mathematical proofs to verify and settle transactions.

How Ethereum’s Governance Process Alters ‘The Merge’

The Ethereum developer community is pushing with guns blazing toward proof-of-stake (PoS). But a few speed bumps remain in the way, especially when reflecting on the Ethereum Improvement Proposal (EIP) process.

Last Friday, Ethereum developers began spitballing possible dates for merging the Eth 2.0 client, the Beacon Chain, and the current Ethereum network, Eth 1.x, also known as Ethpow. One idea circulating among developer communities slates “The Merge” for after July’s London hard fork in the subsequent hard fork, Shanghai.

For context, Ethereum has two more hard forks in the immediate future: The Berlin hard fork in April and the London hard fork. Those two hard forks will introduce technical changes to Ethpow, but are unlikely to include any updates necessary to The Merge. Indeed, as Vitalik Buterin spelled out two weeks ago in the “quick merge” write-up, the Beacon Chain and Ethpow could likely be mushed together with few alterations to either chain.

Slow and steady governance

However, that’s not how governance is done on Ethereum. Proposals take as long as three months to six years for inclusion, EIP editor Micah Zoltu said in a private message. Every proposal requires a “champion” to spearhead the proposal and ample amounts of free time to shepherd the idea into production. In fact, given the hype for PoS, Zoltu said the rate of future EIPs being accepted for inclusion will likely decline as everyone focuses on The Merge.

“It’ll probably slow things down tremendously as everyone will be busy with The Merge,” he said. “Everyone will be focused on The Merge and so the rate at which people get feedback on EIPs will slow.”

In terms of similarly large proposals, EIP 1559 may act as a guiding star for implementing the merge. Both proposals have large support among Ethereum developer and user communities, both proposals introduce outsized changes to the Ethereum blockchain and both proposals have had or will have to jump through numerous hurdles before being included in the code bank.

For context, EIP 1559 was first submitted in April 2019 and took about two years of research and analysis before being selected for inclusion. However, enthusiasm for the proposal was whipped into a fury this past summer, particularly with the emergence of decentralized finance (DeFi).

Similar to DeFi rousing support for EIP 1559, resentment and frustration between Ethereum developers and the mining communities is already proving to be a catalyst for The Merge. So, when will PoS happen? Ethereum developers planned on implementing the change by the end of the year. Yet, if history is any guide, one calendar year is perhaps the best approximation.

Pulse check: Our validator ‘Zelda’ signs a second block

Source: CoinDesk Data Dashboard and beaconcha.in (As of 3/16/2021 @ 20:12 UTC)

If you’re new to Valid Points and the topic of Ethereum 2.0 in general, be sure to check out our 101 explainer on Eth 2.0 metrics to get up to speed about terminology used throughout this newsletter.

Zelda signed her second block this past week, boosting her total income earned since being activated on the Eth 2.0 network by 5% to 0.2354 ETH, worth roughly $392 at time of writing.

Eth 2.0 validators can go days, if not weeks, before being assigned the responsibility of proposing and signing off a block. This is because a single validator is randomly assigned this responsibility at every slot, which means Zelda has a one in 110,000 chance of being chosen. The 110,00 figure is the total number of active validators in the system. The higher this number gets, the lower the probability of being assigned a block.

The rarity of these events is part of what makes them special. The other parts include being able to include “graffiti,” which are custom messages you can write onto Eth 2.0’s immutable blockchain ledger, and earning a 60% higher daily reward for validator operations. Each time Zelda was assigned to sign a block, our daily rewards for that day increased from roughly 0.007 ETH to 0.011.

Zelda’s Eth 2.0 validator responsibilities CoinDesk Data Dashboard

CoinDesk data dashboard

Most days, Zelda’s responsibilities are block attestations, of which there are two main types. The more frequent of the two is known as unaggregated attestations. The Ethereum 2.0 network is split in 64 sections, also known as “subnets” or “sub-networks.” Each time a validator makes a block attestation it publishes the associated data on one of these subnets.

At times, Zelda will perform an extra step after publishing her block attestation. She may also be responsible for aggregating attestations communicated by other validators on different subnets into one succinct message. This message gets pushed up into a higher level of Ethereum 2.0’s network on which blocks are ultimately produced, processed and finalized.

While aggregated block attestations are more infrequent than unaggregated ones, they still happen more frequently than block proposals. Since being activated on Eth 2.0, Zelda has made two block proposals, 960 aggregated block attestations and roughly 7,600 unaggregated block attestations.

Number of Unaggregated and Aggregated Block Attestations By Zelda CoinDesk Data Dashboard

As a final note and fun fact about Eth 2.0, this multi-level system depends in large part on Boneh-Lynn-Schacham (BLS) signatures, which is the cryptography that enables messages from Ethereum’s subnets to be aggregated efficiently and securely every few minutes on the network.

Validated takes

DeFi trader tricks Ethereum miners for $250,000 profit (Article, CoinDesk)

Ethermine adds front-running software to help miners offset EIP 1559 revenue losses (Article, CoinDesk)

Financial watchdogs have DeFi in their sights and have altered wording around NFTs (Article, CoinDesk)

Jack Dorsey’s first tweet sells for $2.9 million as an NFT (Video, CoinDesk)

On covering the NFT hype (Op-Ed, CoinDesk)

Factoid of the week

Open comms

Feel free to reply any time and email research@coindesk.com with your thoughts, comments or queries about today’s newsletter. Between reads, chat with us on Twitter.

Valid Points incorporates information and data directly from CoinDesk’s own Eth 2.0 validator node in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:

Who Created the Ethereum Ecosystem?

Vitalik Buterin, a Russian-Canadian entrepreneur and programmer from Toronto, envisioned second-largest cryptocurrency Ethereum when he was 19 years old.

In 2011, the year Buterin first grew interested in Bitcoin, Buterin co-founded the online news website Bitcoin Magazine, writing hundreds of articles on the cryptocurrency world. He went on to code for the privacy-minded Dark Wallet and the marketplace Egora.

Along this journey, he came up with the idea for the Ethereum ecosystem, a platform inspired by Bitcoin that could go beyond the financial use cases.

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He released a white paper in 2013 describing an alternative platform designed for any type of decentralized application developers would want to build. Many developers were drawn to this idea of creating decentralized applications because they would be accessible to a global audience, be free from censorship and would give users more control over their data than most apps, which have intermediaries in the middle managing users’ finances and data.

To accomplish this, Ethereum makes it easy to create smart contracts, or code that automatically creates an outcome when certain conditions are met. For his work, Buterin was named a 2014 Thiel fellow, winning a $100,000 grant to work on Ethereum.

Buterin FAQs

Who helped Buterin create Ethereum?

After Buterin unveiled the Ethereum white paper, several other developers joined the ranks including CEO of IOG Charles Hoskinson, Decentral CEO Anthony Di Iorio and Akasha Founder Mihai Alisie. Buterin also introduced two new co-founders to the team:

Co-founder Dr. Gavin Wood did much of the early programming and architecting of the platform. He wrote the Ethereum yellow paper, the “technical bible” that outlines the specification for the Ethereum Virtual Machine (EVM), which is responsible for handling the state of the ledger and runs smart contracts.

Co-founder Joseph Lubin went on to found the Brooklyn-based ConsenSys, a startup that focuses on building decentralized apps.

How much money does Buterin have?

Since Ethereum data and transaction information is public, users can track how much money Buterin has stored in ether, Ethereum’s native token.

Buterin’s main address is this one, which shows that he owns 333,348 ether, worth approximately $568 million at the time this article was published.

What was Ethereum like in its early days?

To get the project off the ground, Buterin and the other founders launched a crowdfunding campaign in July 2014 where participants purchased ether, the Ethereum tokens that function as shares in the project.

Raising more than $18 million, it was the most successful crowd sale at that time. It took another year, but the first live release, Frontier, launched on 30th July, 2015. It wasn’t a particularly attractive platform, but the command line interface offered developers a platform for creating their own decentralized apps.

The smart contract platform took off, swelling into today’s ecosystem of hundreds of developers and even drawing the attention of tech giants like IBM and Microsoft.