[Recap] Tezos Q1 State of the Ecosystem

On February 7th, 2024, Joshua Frank (Co-Founder & CEO of The Tie) hosted a call with Arthur Breitman (Co-Founder of Tezos), Fedor Sheremetyev (Head of Core Engineering at TriliTech), and Yann Regis-Gianas (Head of Engineering at Nomadic Labs) to discuss notable developments in the Tezos network's technology and ecosystem.

Watch the full replay below:

Tezos 2.0 is a scaling roadmap designed by the network's core contributors to achieve high throughput, low latency, and a better developer experience on the Tezos blockchain. The upgrade to 2.0 is a collaboration between several developer teams worldwide and a work in progress that will gradually be rolled out. While the network's governance process must approve any changes to the blockchain itself, most of the upgrades will be implemented on the rollup layer, enabling faster and more flexible development.

Arthur and Fedor highlighted several improvements Tezos 2.0 will provide the network's users and developers. Users can expect faster transaction finality and lower latency, and entirely new applications will be available as the network's capacity to support high transaction volumes grows. Arthur highlighted gaming and finance as application categories poised to gain the most from the network's scalability improvements.

For builders, the upgrade will support smart contract development in programming languages, including Javascript, Python, and C#. This will enable new kinds of EVM-compatible applications to be built using environments and frameworks with which developers are already familiar. Arthur noted that the ultimate goal with Tezos 2.0 is to give developers the best possible building experience and "future proof" their applications with infrastructure that can support millions of users.

Tezos’ smart rollups are optimistic rollups that perform transaction execution and regularly post cryptographic hashes to the Tezos layer 1 to inherit its security. Yann noted that smart rollups differ from other rollups in two important ways. First, anyone, not just whitelisted actors, can participate in the fraud detection process, which promotes decentralization and transparency. Second, smart rollups are enshrined in the Tezos blockchain, which enables more sophisticated security mechanisms. As part of the layer 1 protocol, enshrined rollups don’t require a multisig to safeguard against failure, and can rely on the Tezos blockchain’s security.

Arthur noted that he expects most of the activity in the Tezos ecosystem to converge onto a single canonical rollup. The advantage of scaling with optimistic rollups is that they only need a single honest actor to remain secure. The bulk of the security is outsourced to the layer 1, which can be very decentralized because computation is executed on the rollup. Consequently, Arthur suggested that a single rollup may be a logical outcome because it achieves security and decentralization without sacrificing scalability.

Fedor described Etherlink as a critical piece of the Tezos 2.0 roadmap. Etherlink is an EVM-compatible smart rollup on Tezos that supports solidity smart contracts. The rollup is live on testnet and scheduled to launch in March 2024 with a fully decentralized sequencer, providing fair transaction ordering and censorship resistance, robust security, and MEV protection.

In 2023, Nomadic Labs demonstrated Tezos achieving 104 million transactions per second, using 1,000 smart rollups and a data-availability solution. Yann noted that the demonstration was largely symbolic and that latency and responsiveness are the most important features for the average user. However, he highlighted that having an extremely high throughput system gives developers the opportunity to create new kinds of applications that were not previously possible. Looking forward to 2024, Nomadic Labs and other Tezos core contributors are working on a protocol-level data availability layer (DAL) to actualize the network’s potential for ultra-high transaction throughput.

This report is for informational purposes only and is not investment or trading advice. The views and opinions expressed in this report are exclusively those of the author, and do not necessarily reflect the views or positions of The TIE Inc. The Author may be holding the cryptocurrencies or using the strategies mentioned in this report. You are fully responsible for any decisions you make; the TIE Inc. is not liable for any loss or damage caused by reliance on information provided. For investment advice, please consult a registered investment advisor.