The past decade has been quite exciting for global markets; things may have started on a rough patch following the global financial crisis in 2009, but this setback is what triggered the debut of the crypto ecosystem led by Bitcoin. Today, the total digital asset market cap is close to $2 trillion, featuring over 13,000 cryptocurrencies.
While Bitcoin is still king, Ethereum’s launch in 2015 ushered in a new paradigm; Decentralized Finance (DeFi) and Non-fungible tokens (NFTs). Built on smart contract infrastructure, DeFi and NFTs have been the talk of the crypto community for the past three years. However, these two upcoming niches face a big challenge - interoperability.
Most of the existing DeFi and NFT applications are limited to one blockchain network, making it quite hard for users to initiate cross-chain transactions. This lack of interoperability has slowed down the adoption of fundamental crypto projects, not to mention that users are also locked out of diversification opportunities.
Given the growing interest in Web 3.0 infrastructures, we decided to seek more insights from Victor Young, the CEO and Co-Founder of Analog (a layer-0 interoperability solution). The University of Waterloo computer science graduate and serial investor had a few things to share about the future of Web 3.0 and interoperability solutions;
Hi Victor, could you take us through a brief walk through of your career and how you ended up in Web 3.0?
I’m a computer scientist and serial investor with decades of experience in guiding early-stage startups (web 2.0/web 3.0) into successful companies. I’ve indeed been in the startup ecosystem for several years, having first-hand experience with challenges and the success factors that upcoming companies—especially in the web3 space—face. While working on various algo-trading bots in DeFi, I stumbled upon a problem that gave birth to Analog.
What if we could have time-driven smart contracts in algo-trading platforms to trigger actions for efficient signal trading automatically? After conducting extensive research and sharing my thoughts with other colleagues, I realized that validated event data is crucial for algo-trading platforms and other DeFi and metaverse protocols.
Besides fixing these platforms with validated event data, we noted that the Blockchain sector is in dire need of interoperation. The problem with many current platforms is they sacrifice at least one of the key properties of security, decentralization, and scalability. Together with interoperation, these problems led us to create the proof-of-time (PoT) consensus mechanism as the current solution for the sector post-2020.
What if you don’t necessarily need to bridge and pool assets together on one super chain? If you can see what is happening on each chain, you can automate transactions on multiple chains; then, you can trade multi-chain via a centralized order book that queries data from Analog. For example, I can be on Uniswap (Ethereum), and you can be on Serum (Solana), and we should be able to trigger automatic transfers between two chains.
I understand that Analog was launched as an interoperability solution to Web 3.0. How is the platform different from existing cross-chain networks such as Polkadot?
I believe that the single biggest challenge that bedevils most cross-chain ecosystems face today is centralization and insecurity. This problem is prevalent because most of these solutions leverage proof-of-authority (PoA) or proof-of-stake (PoS) consensus that is characterized by high barriers to entry.
For example, while Polkadot has a novel architecture that allows parachains to exchange value across the Relay Chain seamlessly, the NPoS limits the number of validators that can participate in an interoperability process. Only those nodes that have staked a large number of tokens participate in the consensus process.
I see the same problems with Cosmos, which is constrained by the IBC protocol and Tendermint BFT consensus and cannot provide interoperability beyond its ecosystem. In my view, a truly decentralized consensus protocol—backed by sufficient security guarantees—is the single most essential attribute of any interoperability process.
That’s why we built our own proof-of-time (PoT) consensus mechanism from the ground up, using the ranking score (inspired by Google’s PageRank algorithm) as a variable to determine who becomes a validator.
Through PoT, we’re creating a consensus mechanism where all users have fair opportunities to participate in the interoperability consensus on our network, as opposed to typical PoS- or PoA-based bridges that have high barriers to entry. We’ve also incorporated threshold cryptography with very high thresholds where a group of tesseracts partially signs the fetched event data.
Can you further elaborate the fundamentals of the Proof-of-Time (PoT) protocol and Validated Event Data in Web 3.0 interoperability?
PoT is a decentralized consensus protocol that selects block proposers and confirmers based on their ranking scores and fixed stake. PoT is unlike proof-of-work (PoW), where users expend high computational resources, or proof-of-stake (PoS), which favors users with the highest staked tokens.
The protocol is fair in the sense that any user can participate in the consensus process provided they have a higher ranking score and have staked an equal amount of tokens in their accounts. Every confirmed block on the Timechain reveals a new random and unpredictable selection seed—computed through an incremental verifiable delay function (VDF).
These variables determine which nodes should participate in the next slot of the block proposal and confirmation process. When a new block gets confirmed to the Timechain, every node becomes aware of the generated variables. Each user can then secretly compute a VDF proof to determine if they have been selected to propose and confirm blocks in the next slot.
There are two main reasons why we built PoT from the ground up:
- We want to achieve a completely decentralized interoperable platform. Any node can participate as a tesseract and fetch event data/relay messages. Any node can join and propose/confirm blocks without being hindered by the hardware or money.
- We want to achieve secure, interoperable mechanisms between Blockchains through decentralization.
How many blockchain ecosystems will Analog’s Validated Event Data support? Also, will the data publishers and subscribers be required to run nodes?
Our ultimate goal is to onboard virtually any chain—whether that chain is EVM (ie. Ethereum, Avalanche, BSC, Polygon, Fantom, Arbitrum, Optimism) or non-EVM (ie. Cosmos, Solana, Terra, Algorand, Polkadot)—because we are chain agnostic. We’ll initially start with EVM-based chains and progressively incorporate all other chains. Publishers and subscribers will not need to run any nodes. However, any publisher/subscriber that wants to run as a tesseract or time node will be expected to run the Analog Client.
Do you think Web 3.0 ecosystems have the potential to shape the future of finance and other sectors such as gaming?
Blockchain has fundamentally altered the internet landscape as we knew it, changing the way we run businesses, financial systems, and societies. It’s on this basis that DeFi—a sector that was non-existent a few years back—has now metamorphosized into a full-blown industry worth hundreds of billions of dollars, and it keeps on growing every day.
Blockchain also stands to make virtual in-game marketplaces a fair, secure, thriving, and transparent affair since all the in-game transactions can be accessed publicly and seamlessly via the technology. This can potentially save billions of dollars by mitigating the chances of fraud or cyber-attacks, besides the obvious benefit of creating a safe environment for gamers.
However, despite the benefits associated with DeFi and Blockchain-based gaming, we’re still stuck in the “early majority” phase due to the lack of an interoperable framework. We have already seen multiple Blockchain platforms and layer two scaling solutions joining the space. At this pace, the current web3 and DeFi space is in danger of balkanization, where interoperability is sacrificed as organizations race to demonstrate their own Blockchain’s superior features and use cases.
In our view, the opportunity in the DeFi industry hinges on seamless interoperability among all the Blockchain networks. It is only by ensuring that all DeFi applications interoperate—whether unrelated or fiercely competitive with one another—that the capabilities of the technology can be realized.
Looking into the future, what can the Web 3.0 community expect from Analog?
As an omnichain interoperable platform, Analog enables all parties i.e., platform builders, DApp developers, and users to capture value for themselves. Here’s how the platform is beneficial to various stakeholders:
-Platform builders: They can easily plug in their chains to all other networks. They only need to set up a threshold account to plug into these chains.
-DApp builders: They can host their DApps anywhere and communicate with other applications on different platforms via the Analog’s decentralized API.
-Users: Users can interact with all DApps across the entire Blockchain ecosystem directly from their Analog wallets.
Conclusion
Currently, the bigger share of Web 3.0 innovations are still in their beta stages; this is not to say they lack a fundamental value proposition. As the ecosystem grows bigger, it is evident that interoperability will be instrumental in cross-chain transactions. This interview paints a picture of what the future might look like; an interoperable decentralized web powered by Layer-0 omnichain networks such as Analog.
