Macauley Peterson

Ethereum developers reached consensus on a Thursday developer call for stakeholders on the Ethereum execution layer — the software that executes smart contracts — <a href="https://blockworks.co/news/ethereum-devs-still-want-staking-withdrawals-by-march-ish" target="_blank" rel="noreferrer noopener">reaffirming a March target</a> for the Shanghai hard fork.



In December, developers agreed that enabling the withdrawal of staked ether from validators is the highest priority for the first quarter of 2023, but they hoped to incorporate something else into the upgrade too.



That’s now off the table.



The decision on the Jan. 5 call was to postpone a previously agreed additional feature set, dubbed EOF, and it&#8217;s unlikely it will be replaced with any other new features on this go-round.



EOF is the shorthand for a set of Ethereum-Improvement-Proposals (EIPs) introducing a new contract format for the widely-used Ethereum <a href="https://www.blockworksresearch.com/glossary#a-virtual-machine-vm" target="_blank" rel="noreferrer noopener">Virtual Machine</a> (EVM), which underpins dapps and smart contracts based on the <a href="https://www.blockworksresearch.com/glossary#solidity-programming-language-ethereum" target="_blank" rel="noreferrer noopener">Solidity programming language</a>, alongside associated features.



When deciding what could possibly be included by the March target, EOF won out over a hotly anticipated upgrade, known technically as EIP-4844 and colloquially as Proto-Danksharding.&nbsp;



No, that’s not the action of some sort of magical melee weapon from the Marvel cinematic universe — it’s actually just a conjunction of two of the upgrade’s namesakes: Protolamda and Dankrad Feist.



Most of the discussion in December, which was divisive at times (but completely civil), centered around how long it would take to prepare Proto-Danksharding. 



Most developers were wary of delaying Shanghai — and the eagerly awaited withdrawal feature — although Péter Szilágyi, team lead at the Ethereum Foundation, was more sanguine about letting the target slip, arguing that “scaling Ethereum is significantly more important than withdrawals.”



<blockquote class="wp-block-quote">
“Withdrawals brings absolutely nothing to make Ethereum better,” Szilágyi <a href="https://youtu.be/y8jZ11_CQGo?t=1721" target="_blank" rel="noreferrer noopener">said</a>, “Whereas with 4844 you actually have the capacity to make it better.”
</blockquote>



Proto-Danksharding would introduce a concept of data “blobs,” which, unlike other Ethereum data, only sticks around for about two weeks rather than becoming permanently etched in the blockchain. It’s specifically geared to improving layer-2 <a href="https://www.blockworksresearch.com/glossary#roll-ups" target="_blank" rel="noreferrer noopener">roll-ups</a>, and would bring transaction fees down by orders of magnitude, <a href="https://www.eip4844.com/" target="_blank" rel="noreferrer noopener">according to</a> proponents of the upgrade.



But others on the call worried that coupling 4844 with withdrawals would delay Shanghai by months, and opted to postpone it in favor of EOF, which was seen as more manageable.



<h3 class="wp-block-heading">Getting philosophical about EOF</h3>



Thursday’s call could be seen as a poll for ‘go / no-go’ on EOF — to borrow a phrase <a href="https://www.youtube.com/watch?v=zVf-rehP4b8" target="_blank" rel="noreferrer noopener">from NASA</a>.



Ultimately, it was a lengthy digression from Ethereum co-founder Vitalik Buterin that tipped the scales in favor of ‘no-go.’



After the December call, Buterin <a href="https://ethereum-magicians.org/t/eof-proposal-ban-code-introspection-of-eof-accounts/12113" target="_blank" rel="noreferrer noopener">published</a> thoughts on the EOF upgrade to the Ethereum-Magicians.org forum, proposing to ban so-called “code introspection.”&nbsp;



In the context of the EVM, &#8220;introspection&#8221; refers to the ability of running code to inspect or examine other code that is also running on the EVM. This can be used to build more complex contracts that depend on the properties or behavior of other contracts.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Ideally, we&#39;d like to make the EVM cleaner/simpler but this is hard if we can only ever add to it and never remove things. One of the biggest challenges to remove things is code introspection within the EVM.&mdash; timbeiko.eth (@TimBeiko) <a href="https://twitter.com/TimBeiko/status/1611049632435695616?ref_src=twsrc%5Etfw">January 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Buterin’s suggestion would add to the development time of EOF, but would make it easier to upgrade the EVM in the future.



“In the EVM, it’s much harder to remove things than it is to remove other features,” Buterin <a href="https://youtu.be/SmcMwdHZqg8?t=1484" target="_blank" rel="noreferrer noopener">told</a> his fellow developers on the call. “If we’re going to make a new EVM version, that new EVM version should be designed with the idea in mind of being very forward compatible to all kinds of upgrades that we want to do in the future,” he said.&nbsp;



Marius van der Wijden of the Go Ethereum team agreed with Buterin. “I feel pressured to make a decision on EOF now, and I don’t think that’s good,” he said.



No one strongly advocated for EOF being included in Shanghai, and so it was dropped. Ethereum Foundation researcher Ansgar Dietrichs tentatively proposed that EOF could be bundled with 4844, aiming for a hard fork to take place over the summer, 3 to 4 months after Shanghai.



With EOF out of the picture, developers briefly considered adding something else back in, such as a smaller EIP-1153, favored by the Uniswap team, which is “very well tested and implemented everywhere,” according to Uniswap developer Moody Salem.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">So, EOF was removed from Shanghai. Teams agreed that keeping momentum on this was very important, and that we should be able to couple some version of EOF with 4844 in Cancun. That said, we didn&#39;t make an official decision about Cancun on the call. We&#39;ll discuss that next time!&mdash; timbeiko.eth (@TimBeiko) <a href="https://twitter.com/TimBeiko/status/1611053476192354305?ref_src=twsrc%5Etfw">January 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



But, ultimately, the call concluded with the view that Shanghai would be about withdrawals, and no other major features.



Perhaps that will finally quiet the critics and dispel some of the <a href="https://blockworks.co/news/weth-fud-is-a-joke" target="_blank" rel="noreferrer noopener">Ethereum FUD</a>. It could also decrease the perceived risks associated with staking ether, which currently has a low stake rate relative to other proof-of-stake blockchains, at around 13%, <a href="https://dune.com/blockworks_research/eth" target="_blank" rel="noreferrer noopener">Blockworks Research has found</a>.



That could help new capital flow into the Ethereum ecosystem, Joe Ziolkowski, CEO of digital asset insurer Relm Insurance, told Blockworks. 



“This situation of having your ETH locked up for an unspecified period of time created a tremendous amount of uncertainty for investors, especially those of the institutional variety, because it just wasn’t clear when that unlock period would end,” Ziolkowski said. Around $20 billion in ether is currently staked.



Enabling withdrawals could increase the confidence that users and investors have in the Ethereum network as a whole, he added. ”Indeed, this will be a win-win for the entire digital asset industry.”



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Ethereum Devs Opt For Withdrawals in March — And Nothing Else

Jack Kubinec

<div id="highlights-block_62daeb7403a20" class="highlights">
 <ul>
 <li>Polygon’s open-source zkEVM code is incomplete</li>
 <li>“We’re not at the point where any team has a zkEVM prover that works,” an Arbitrum developer said</li>
 </ul>
 
</div>



Within 36 hours this past week, Polygon, zkSync and Scroll teased their own imminent releases of the <a href="https://cms.blockworks.co/polygon-unveils-zkevm-the-holy-grail-of-scaling/" target="_blank" rel="noreferrer noopener">“holy grail” of layer-2 technology</a> — the zero-knowledge Ethereum virtual machine (zkEVM).&nbsp;



The announcements raised eyebrows. Blockworks has spoken with multiple programmers who’ve questioned how close the space really is to a functioning zkEVM.



ZkEVMs would greatly increase <a href="https://cms.blockworks.co/tag/ethereum/" target="_blank" rel="noreferrer noopener">Ethereum</a> layer-2 transaction speeds over the status quo of <a href="https://ethereum.org/en/developers/docs/scaling/optimistic-rollups/" target="_blank" rel="noreferrer noopener">optimistic rollups</a>. The blockchain’s co-founder Vitalik Buterin has <a href="https://vitalik.ca/general/2021/01/05/rollup.html" target="_blank" rel="noreferrer noopener">hailed the technology as the future of Ethereum scaling</a>.



Zero-knowledge rollups move transactions off-chain for verification before sending a batch of data to be settled on Ethereum. The process relies on a so-called “prover” that can label data as true or false while preserving users’ privacy.



Provers are essential for these kinds of scaling solutions. For some, this week’s zkEVM announcements did not contain sufficient indication any team has created a functioning prover.



“We’re not at the point where any team has a zkEVM prover that works,” said Steven Goldfeder, the CEO of Offchain Labs, the developer behind the optimistic rollup Arbitrum. “What I think is happening is they’re quite far from production.”



Not to mention, layer-2 sequencers are still centralized, and most zkEVM builders have yet to actually make their provers — the core of the technology — open source.



Polygon, the layer-2 giant that recently announced a partnership <a href="https://cms.blockworks.co/meta-trials-nft-display-feature-for-instagram-creators-and-collectors/" target="_blank" rel="noreferrer noopener">bringing non-fungible tokens (NFTs) to Meta</a>, made its zkEVM code public. Polygon believes clarifying its code sets the company ahead of Scroll and zkSync, neither of which has publicly posted its prover.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We support all Ethereum projects, but it&#39;s good to clarify: ✅ Polygon zkEVM is FULL-FEATURED &amp; OPEN SOURCE ❌ Scroll currently supports only a portion of EVM opcodes ❌ zkSync doesn&#39;t have an (open source) prover, so we don&#39;t know much Ignore marketing, ask to see the code. <a href="https://t.co/D5dhwYe8Xx">https://t.co/D5dhwYe8Xx</a>&mdash; Mihailo Bjelic (@MihailoBjelic) <a href="https://twitter.com/MihailoBjelic/status/1549777790114971651?ref_src=twsrc%5Etfw">July 20, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



But, some question if Polygon’s code is as “full-featured” as advertised. The prover code Polygon <a href="https://github.com/0xPolygonHermez/zkevm-prover/blob/main/src/prover/prover.cpp" target="_blank" rel="noreferrer noopener">uploaded to GitHub</a> is not fully functional. Sources familiar with the technology expressed doubt about Polygon&#8217;s code, with one questioning Polygon’s ability to run proofs at all in the program’s current state.



David Schwartz, technical lead at Polygon Hermez, told Blockworks in an email that the code is a work in progress. Commented code sections in the project&#8217;s GitHub are not currently operative. 



&#8220;We are not hiding anything, not in the docs or the code,&#8221; Schwartz said. &#8220;Competitors like Starkware or zkSync are not open-sourcing their [zero-knowledge] networks at all.&#8221;



<a href="https://cms.blockworks.co/tag/starkware/" target="_blank" rel="noreferrer noopener">Starkware</a>, the company behind StarkNet, a zero-knowledge rollup with an open-source prover, emphasized zkEVM technology is not a simple matter.



Building a prover is “a Herculean task in terms of math, engineering and software. We have a team of 100 and have been at it for four years,” <a href="https://www.linkedin.com/in/eli-ben-sasson-9b7959/?originalSubdomain=il" target="_blank" rel="noreferrer noopener">Eli Ben-Sasson</a>, the company’s president, told Blockworks in a phone call from EthCC.&nbsp;



Even assuming zkEVMs do have functioning provers, making the prover code public would move layer-2s closer to blockchain’s decentralized ideal.



“If the prover is open-source, then you could verify what’s being done with funds,” <a href="https://www.linkedin.com/in/daniel-yanev-38604185/" target="_blank" rel="noreferrer noopener">Dan Yanev</a>, chief product officer at the layer-2 money market protocol Rhino.fi, told Blockworks.&nbsp;



“These companies are pressured to have something in the hands of users,” Yanev said of layer-2s.&nbsp;



Still, Yanev called Polygon’s open source prover a “big step” for zkEVMs and remains optimistic that layer-2 networks will decentralize as the technology matures.



On the other hand, Goldfeder, whose company runs on optimistic rollups, believes the high cost of zero-knowledge proofs will prohibit zkEVMs from being financially sustainable in the long run.



“Scaling needs to come from scaling solutions, not from [venture capital] funding,” Goldfeder said.



Scroll and zkSync did not immediately return requests for comment.



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DeFi Is Betting Big on ‘Zero Knowledge’ — Is the Technology Ready?

<div id="highlights-block_62d78acb6e6e0" class="highlights">
 <ul>
 <li>Polygon is taking a multi-side approach to scaling Ethereum with zkEVM, the first rollup with EVM-equivalence</li>
 <li>“Besides The Merge, this is the second-biggest event in terms of technology in the ecosystem in general,” Polygon co-founder Mihailo Bjelic said</li>
 </ul>
 
</div>



When it comes to scaling Ethereum, Polygon has taken an everything-and-the-kitchen-sink approach.&nbsp;



Its logo may be a hexagon, but Polygon already maintains seven discrete teams building an interrelated web of products.



Three of those teams, Hermez, Zero and Miden, have worked together to create zkEVM — a zero-knowledge proof-based rollup which achieves equivalence with the Ethereum virtual machine (EVM), which the Polygon team defines as EVM specification-level compatibility. 



That means developers can easily deploy applications written in Solidity — Ethereum’s smart contract language — and take advantage of the ecosystem’s robust developer tools, just as they do on the Ethereum mainnet.



The move Wednesday, at the Ethereum Community Conference in Paris, heralds the imminent launch of a zkEVM testnet, a goal set by the Hermez team at the same conference a year ago.



“It’s been a long journey — I can talk in personal terms — this has been the project of my life,” said Jordi Baylina, technical lead at Polygon Hermez, during the group’s #PolygonTuesdays weekly Twitter space, last week. “Scaling Ethereum, scaling blockchains, has been the dream since at least 2015 if not before.”



Rollups based on zero-knowledge proofs have several advantages over the optimistic rollups which are already up and running, such as Optimism and Arbitrum — the two largest by total value locked.



Zero-knowledge rollups combine many layer-2 transactions into one — which settle on Ethereum as a validity proof. While computationally intensive, zero-knowledge rollups are much faster and more scalable.



“It makes Ethereum almost technically or theoretically infinitely scalable,” Polygon’s Sandeep Nailwal said during the Twitter space, adding that in contrast to other solutions, only Ethereum itself is needed. “It has network effects. It has developers. It has users, so you know we can take Web3 to the next stage of growth,” he said.



Other projects are working on EVM-compatible or EVM-equivalent zero-knowledge rollups, such as Scroll and Matter Lab’s zkSync, but Polygon has a significant funding edge thanks to its <a href="https://cms.blockworks.co/polygon-closes-450m-raise-led-by-sequoia-india/" target="_blank" rel="noreferrer noopener">$450 million raise in February</a>.



A closed testnet of Polygon’s zkEVM should be available within two weeks with a public permissionless testnet to follow a few weeks later, Polygon co-founder Mihailo Bjelic told Blockworks. The product is expected to reach the Ethereum mainnet by year&#8217;s end. Major Web3 applications such as <a href="https://cms.blockworks.co/tag/uniswap/" target="_blank" rel="noreferrer noopener">Uniswap</a> are planning to deploy on zkEVM.



“A future configuration of off-chain data availability will be able to reduce the fees further,” Bjelic said.



<h3 class="wp-block-heading">Polygon Avail envisions sovereign rollup chains</h3>



While zkEVM is “a proper old-school rollup,” Bjelic said, potentially significant efficiency gains are possible by using an off-chain data availability solution, such as Polygon Avail.



Avail is an entirely new blockchain focused on data availability that fits into a framework for scalability known as “modular” — as opposed to monolithic, such as Ethereum is today, where execution, data availability and settlement all occurs on the same layer.



In a rollup, 70% to 85% of the cost is attributed to storing Ethereum call data, Avail lead Anurag Arjun told Blockworks.&nbsp;



“That component can move to Avail,” he said.



Doing so would transform zkEVM into what’s known as a validium.



“Everyone is really looking for lower transaction fees, if the security can be maintained,” Arjun said. “You will see every rollup — at least in my opinion — will have a rollup version and a validium version.”



ZkEVM is a likely candidate for upgrading the existing Polygon <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/" target="_blank" rel="noreferrer noopener">proof-of-stake</a> chain — the Ethereum-aligned sidechain using the MATIC token that was Polygon’s first foray into Ethereum scaling.



“That’s probably the end goal,” Bjelic said.&nbsp;



A team at Polygon is working on a way to migrate the entire proof-of-stake chain into a future version of the zkEVM in a way which would not require dApp developers or users to take any action. But such a solution is still about a year away.



“Polygon is a multichain ecosystem. We believe there will be probably thousands such chains built on top of Ethereum,” Nailwal said, stressing the open-source nature of all the company’s development efforts. “Cryptography must be open to be safe…Whatever we are building is for the public good and everything will be open source and will be in the public domain.”



This story was updated on July 20, 2022, at 11:31 am ET.



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Polygon Unveils ZkEVM, ‘The Holy Grail of Scaling’

<div id="highlights-block_624b4749c21c1" class="highlights">
 <ul>
 <li>USDN has been trading below $1 since Friday, April 1</li>
 <li>The TVL of the Waves DeFi ecosystem has dropped by $1.3 billion, more than 27%</li>
 </ul>
 
</div>



An emerging stablecoin with a recent market cap approaching $1 billion has diverged dangerously from its US dollar peg — calling its very existence into question.&nbsp;



USDN, the stablecoin of the Waves blockchain ecosystem, is supposed to be worth $1, but as of Monday at 5:15 pm ET, it traded for <a href="https://www.coingecko.com/en/coins/neutrino-usd" target="_blank" rel="noreferrer noopener">just 81 cents</a>.



USDN, or Neutrino USD, is considered an algorithmic stablecoin because its supply can expand and contract by burning or minting WAVES, the native token of the proof-of-stake Waves protocol.



WAVES was on an absolute tear as recently as Thursday, when it was trading up 600% in a little over a month. But now, smashed by USDN’s woes, WAVES is crashing down.


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#681FB2&#8243; assets=&#8221;WAVES-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



Most of the economic activity and total value locked (TVL) in the Waves ecosystem is linked to the use of USDN.



The ability of <a href="https://docs.neutrino.at/" target="_blank" rel="noreferrer noopener">the Neutrino protocol</a> to issue USDN is related to the price of WAVES, because USDN is backed in kind by staked WAVES tokens. The price also impacts the yield users earn on USDN in the <a href="https://vires.finance/" target="_blank" rel="noreferrer noopener">Vires Finance</a> dApp, Waves’ money market protocol — similar to Compound or Aave on Ethereum. As WAVES increases in value, so does interest earned by depositors.



But last week, a pseudonymous DeFi analyst, going by the username 0xHamz, alleged that Waves was using the USDN minting process, combined with Vires, to artificially inflate both the price of WAVES and the supply of USDN.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I will walk you through how the WAVES team is folding leverage to engineering a massive supply squeeze Here is the flow -Deposit USDN on Vires -Borrow USDC on Vires -Transfer USDC to Binance -Buy WAVES with USDC -Convert WAVES to USDN -Start over This is trackable onchain&mdash; 0xHamZ (@0xHamz) <a href="https://twitter.com/0xHamz/status/1509581316689383425?ref_src=twsrc%5Etfw">March 31, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Crypto pseudonyms commonly begin with 0x — the first two characters of all Ethereum addresses</figcaption></figure>



Citing <a href="https://twitter.com/0xHamz/status/1509596635923427332" target="_blank" rel="noreferrer noopener">on-chain data</a>, 0xHamz outlined a pattern of depositing USDN as collateral to borrow other stablecoins, which were transferred to Ethereum and then to the Binance exchange, followed by commensurate withdrawals of WAVES, which go toward minting additional USDN.



A blockchain’s value tends to grow with increased usage, but as 0xHamz pointed out, transactions on Waves have been stagnant or declining since its 2019 peak.



<div class="wp-block-image"><figure class="aligncenter"><img decoding="async" src="https://lh5.googleusercontent.com/Z8j2PZ2KQGu26PbpqwUYExjiO26EK3RvwPNELtsCX-wuhiTbTWFm-gIm-nCciUPYmllntbfrILqcCmyhUpQacnhxjaUzxyV0GzclO82ah_j1l6PXycpDCL5yPEdURFZfLGtD_uWD" alt=""/><figcaption>Total weekly transactions on the Waves platform, with 2019 peak selected | Source: <a href="https://vis.pywaves.org/transactions/" target="_blank" rel="noreferrer noopener">vis.pywaves.org</a></figcaption></figure></div>



Wave’s TVL is almost entirely attributable to Neutrino — a reflection of staked WAVES — and Vires Finance, according to <a href="https://defillama.com/chain/Waves">DeFi Llama data</a>.



A recent “<a href="https://wavestech.notion.site/wavestech/Waves-is-Transforming-1-2-c57b90770e314a5cb3ee6d1d1e6710af">transformation plan</a>” notes that 80% of WAVES are deployed in staking. The roadmap calls for upgrading the blockchain consensus mechanism and adding compatibility with the Ethereum Virtual Machine (EVM).



Waves Founder and Lead Developer Sasha Ivanov is moving to an advisory role with development responsibility shifting to a new US company, Waves Labs, the company said.



Ivanov blamed Alameda Research, alleging price manipulation to profit from a short position in a <a href="https://twitter.com/sasha35625/status/1510589946926673920">Twitter thread on Sunday</a>, a claim Alameda founder Sam Bankman-Fried <a href="https://twitter.com/SBF_FTX/status/1510685533705547783">dismissed</a> as a “conspiracy theory.”



A spokesperson for Waves Labs did not respond to a request for comment.



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Algorithmic Stablecoin Neutrino USD is on the Brink of Failure

Jacquelyn Melinek

<div id="highlights-block_6226535075d81" class="highlights">
 <ul>
 <li>The company will use the capital to grow the team and its products, including its Ethereum Virtual Machine application</li>
 <li>Espresso plans to create bridges between Ethereum and other major chains so the line between layer-1 and layer-2 can be “blurred,&#8221; its co-founder and CEO told Blockworks</li>
 </ul>
 
</div>



A scaling and privacy solution for Web3 applications, Espresso Systems, is making its debut to the public with a $32 million funding round.



“Scaling and privacy solutions are both evolving at a rapid pace, and we are excited to contribute to the progress,” Ben Fisch, co-founder and CEO at Espresso Systems, said to Blockworks.&nbsp;



The investment was led by <a href="https://greylock.com" target="_blank" rel="noreferrer noopener">Greylock Partners</a> and Electric Capital with participation from Sequoia Capital, Blockchain Capital and Slow Ventures. Other groups backing Espresso Systems include Polychain Capital, Alameda Research, Coinbase Ventures, Gemini Frontier Fund, Paxos and Terraform Labs.



Espresso is developing layer-1 blockchain infrastructure that will provide low-fee transactions through its integration of a proof-of-stake consensus protocol with a zero-knowledge (ZK) rollup mechanism, which can use ZK proofs to bundle transactions and lower resources to process them.



ZK-proof technology is among the leading candidates to scale the Ethereum blockchain through solutions such as StarkWare and zkSync. Espresso intends to keep interoperability at the core of its plans, for example, by creating bridges between Ethereum and other major chains so the line between layer-1 and layer-2 can be “blurred” and benefit from its scaling and privacy properties in the future, Fisch said.&nbsp;



The company will use the funding to grow the team and its products. Its first product to be released is an Ethereum Virtual Machine application, known as Configurable Asset Privacy for Ethereum (CAPE). It would enable creators of digital assets, such as ERC-20 tokens on Ethereum, to add a privacy-mode switch to their assets so transactions can be seen by select parties, Fisch said. 



“For example, a stablecoin provider could offer their users the option to hide their stablecoin transactions from public view in a way that still enables the provider to meet their reporting and risk management needs,” Fisch noted.



In general, scaling has already been a necessity for many Web3 applications as transaction demand has driven up prices on networks, Fisch said. But as traffic migrates to more scalable platforms that interoperate with ecosystems, such as Ethereum, fees for Web3 applications should drop, too, he added.&nbsp;



Separately, Electric Capital, one of the co-leads for Espresso’s funding round, raised a <a href="https://cms.blockworks.co/electric-capital-raises-1-billion-to-launch-crypto-venture-token-funds/" target="_blank" rel="noreferrer noopener">$1 billion fund</a> last week to invest in decentralized autonomous organizations (DAOs), non-fungible tokens (NFTs), decentralized finance (DeFi) and decentralized infrastructure and accessibility into Web3. This investment is symbolic of the venture capital firms’ commitment to the last point, as decentralized infrastructure ramps up across the crypto ecosystem. 



“Existing solutions make tradeoffs when it comes to decentralization, and we are excited to push the industry forward with an approach that achieves both low-fees as well as the properties of decentralization this industry is founded upon,” Fisch said.



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ethereum virtual machine