The Baking Sheet - Issue #131

Happy Holidays Everyone | Another great year for Tezos

Welcome to the final Baking Sheet of 2022! Thanks to all of our readers for being on this journey with us and we're ready for a monster 2023.

Looking back on 2022, it was quite a big year for the Tezos ecosystem. For crypto and the blockchain space as a whole, we can come to the same conclusion with the whirlwind of developments we witnessed throughout. 

Let’s get straight to the point and peel back the curtain for some highlights throughout the year and reflect.

Tezos: Reflecting on 2022

Development

I think it goes without saying that 2022 was the year for development within the Tezos ecosystem. Shortly after the year kickstarted, the long awaited plans for scaling were introduced by Nomadic Labs. 

Let’s recap the major upgrades we saw get activated on the Tezos network.

Protocol Ithaca — Introduced Tenderbake, fast and deterministic finality on Tezos. Other features included eliminating the use of “rolls” and reducing the minimum threshold for baking from 8,000 to 6,000 tez, liquidity baking changes, the introduction of prechecking of operations, and more. 

Protocol Jakarta — Emphasized Layer-2 scaling through the introduction of Transaction Optimistic Rollups (TORUs), sapling improvements, a Liquidity Baking toggle vote feature, Michelson interpreter improvements, tickets hardening, and more. 

Protocol Kathmandu — Continued emphasizing new Layer-2 scaling applications through the introduction of Smart Contract Optimistic Rollups (SCORUs), Improved randomness for distribution of baking rights, event-logging, validation pipelining, support for ‘Ghostnet”, and more. 

Protocol Lima — Continued efforts towards pipelining which helped enable higher Layer-1 throughput on Tezos, introduced a new feature enabling enable bakers to change their key used for signing blocks and consensus operations without having to change their public address, improvements towards tickets and more. 

That’s a lot of core protocol development. 

At the beginning of the year we saw a deep focus on improving latency and finality. This was reinforced by the deployment of Tenderbake, dramatically reducing block times and enabling faster finality and latency. Following this, we witnessed the seeds get planted for increasing throughput (TPS). 

Optimistic rollups, pipelining and side chains have helped pave the way throughout the year towards increasing throughput. 

TORUs allowed for the exchange of assets, but not within the execution of smart contracts. So, it made sense to follow TORUs with SCORUs. Gabriel Alfour of Marigold gave a ELI-5 response to what SCORUs are and how they would be beneficial to the core protocol. 

In blockchains typically we batch together sending operations and processing operations. With SCORUs, we split those responsibilities. So, there are two kinds of nodes in SCORUs. On one hand, there are consensus nodes that just send operations and build consensus on which operations are part of the chain. On the other hand, there are rollup nodes which actually process the operations.

An important thing to keep in mind is that you need consensus nodes to be able to run on a Raspberry Pi, so that you can have as many participants as possible. If your consensus nodes requirements are too high, then you will have fewer participants and more centralization.

But a key realization of SCORUs is that you actually need very few nodes to process blockchain operations. Basically, only one honest node for this to work. Whereas, for consensus you’ll need 2/3 or 1/2 out of many.

This in turn means that the requirements on the nodes that process the operations (rollup nodes) can be much higher than the requirements for the typical blockchain nodes (consensus nodes). So, that’s what we’re doing with SCORUs. We’re essentially splitting the current nodes into these two essentially, and benefitting from the performance boost this implies.

Around this same time, validation pipelining was introduced. Imagine if there was a way to get a “free gain” in throughput (TPS) from a Layer 1 optimization? 

That’s essentially what pipelining would enable. 

The basic idea with pipelining is that right now, block producers send blocks in their entirety. Then, when consensus nodes receive these blocks, these nodes execute the blocks in their entirety. The reason behind this is that right now, nodes have to agree on the state of Tezos literally after processing each block, and so you need to execute the blocks to know the resulting state hash.

The problem with that is it slows consensus a lot. There is no reason to wait for the block to be executed before performing consensus operations (spreading blocks, voting on a block, etc.). You can and should be able to do both in parallel. So, that’s the main idea of pipelining. The goal is to have block verification done in parallel with consensus. In the best case, this can result in blocks that are 2 times faster.

In the real world, I’m not sure how much this will help but it will reduce the loads of the nodes on the network. Basically, it’s a free gain. It’s an optimization for Layer-1 and it doesn’t sacrifice anything.

A pretty ingenious way to speed up consensus and reduce the loads of nodes on the network without significant tradeoffs like decentralization, if I do say so myself. 

For side chain development, we saw the release of Deku from Marigold. The first sidechain to go live on Tezos, Deku offers offers a web assembly virtual machine, faster throughput, and a native bridge to Tezos (made possible thanks to Michelson Tickets). 

Daniel Hines of Marigold shared some insight into the motivation behind working on Deku. 

Sure, so Tezos is really cool because it’s this fully decentralized network and uses some pretty novel Proof of Stake design. Especially as of Jakartanet where Tenderbake was introduced, Tezos is quite fast compared to many Layer 1’s. But, even though Tezos is fast; it’s still nowhere near as fast as traditional Web2 centralized technologies.

So, imagine if you were to try to run YouTube on a blockchain. There’s just no way to run internet scale applications when you’re on a maximum transactions per second threshold of about 50. The VISA network is supporting 20–30 thousand transactions per second and until we get there, we won’t be able to handle internet scale applications on blockchains.

Layer 2 applications are addressing this problem of scalability. Now that we have the Layer 1 forming consensus in this fully transparent way, there are interesting ways that we can use that to achieve bigger scale without being bottlenecked by Layer 1.

Layer-2 development has been progressing at lightning speed. We’ll describe more of what’s coming with the recently announced “Mumbai” upgrade later on in the article. 

Adoption 

Despite market sentiment across the board, it’s been a big year for Tezos in terms of adoption. 

NFT sales volume has been making all-time highs on Tezos even as of late. In Messari’s “State of Tezos Q3 2022” for the sixth consecutive quarter, Tezos made all-time highs in terms of NFT sales.

With a vibrant and robust NFT community on platforms such as OBJKT, fxhash, Versum, and more — we’ve seen how powerful the NFT community on Tezos has remained. 

In addition to these communities, the Manchester United NFT drop rolled out recently. Since the rollout, nearly 900,000 unique wallets have been created. If we take the top NFT drops on Tezos we saw throughout the year such as Tezzardz, Dogami, Neonz, and GoGo’s — this has been the biggest NFT drop yet. 

The recent Art Basel event in Miami also showcased Tezos-based artists and communities at large. Marissa Trew of Blokhaus shared some insight on what the event was like after attending and hosting several panels. 

This is the second time Tezos was the exclusive blockchain exhibitor at Art Basel Miami Beach (and the fourth Art Basel this year) and the main thing that struck me the most was how much the conversation had evolved from this time one year ago. Last year, most of the conversations focused around the basics like “what is an NFT?” and “why do NFTs matter?”. This year, it was clear that people had really built more of a concrete understanding of blockchain technology and how it has been applied to the art world. Questions revolved more around understanding what generative art is, how the value of on-chain artwork can be determined (for example, why traits like rarity matter), and what makes the Tezos art community so unique.

Last year, there were a fair amount of skeptics who questioned whether a blockchain should even have a place in the main Art Basel exhibition space. This year, it was clear that much of that skepticism had faded and institutions have started to become more thoughtful of how they can meaningfully get involved. For example, during the Tezos speaker series, there was a perfect mix of blockchain native voices (e.g. fxhash, ClubNFT, Refraction DAO) and established art institutions (e.g. Serpentine Galleries, Whitney Museum of Art, Superblue) that were enthusiastic about engaging with each other in a constructive way. It was extremely encouraging to see.

Combine this with several partnerships to the likes of Team Vitality, Gap, Papa Johns, Evian Water, Ubisoft and more we witnessed throughout the year — this upward trajectory does not seem to be slowing down anytime soon.

What next? 

As we move forward towards the mass scalability plans announced earlier in 2022, the latest Tezos upgrade that’s been announced is aiming to take it a gear further. Protocol Mumbai has been announced, focusing on achieving 1M TPS through the introduction of several new features. 

Yes, you read that number right. 

Mumbai will be one of the biggest upgrades we’ve seen introduced yet on Tezos. Three major developments geared around scalability have been introduced. 

  • Smart Rollups activation 

  • ZK Rollups

  • Pipelining activation

  • Other improvements

Smart rollups will allow anyone to deploy decentralized WebAssembly applications with dedicated computational and networking resources. They have been in use on testnet, with Mumbai additional design and implementation improvements are being made. 

Next, ZK rollups are also being introduced and will be rolled out gradually over several upgrades. Dubbed “Epoxy”, these rollups will allow for applications to be built on Tezos which do not necessarily need to rely on Tezos’ Layer 1 to publish and distribute data. It will enable the building of privacy preserving solutions which rely on keeping data sensitive. 

Lastly, 15 second block times are coming! The last installment of the efforts being made with validation pipelining will be completed in Mumbai. For a detailed list of other changes, be sure to check out Nomadic Labs blog post. 

As we close the year out, let’s reflect back on all the ecosystem teams that have worked hard to continue pushing Tezos as a leader in the blockchain space. If 2023 is to be any similar to this year, it will be another big year for the Tezos ecosystem.