Bart Hillerich

Blockchain technology has the potential to revolutionize many industries, but scalability remains a major challenge that must be addressed. The growth of user count and transaction volume&nbsp;continues to demand increased capacity from networks, leading to congestion and high fees on many popular blockchains, rendering them impractical for mass adoption in their current form.



One now-emerging solution to the scalability problem is being pioneered by <a href="https://syscoin.org/" target="_blank" rel="noreferrer noopener">Syscoin</a>, an OG crypto project that has been around since 2013 quietly building for the endgame of crypto. The Syscoin team holds the original core values of blockchain—first established by Satoshi Nakamoto—near and dear to their hearts, and they aim to scale them to meet the demands of a global population.



Syscoin is an open-source public project, protocol, and network that combines the best of both worlds from <a href="https://blockworks.co/tag/bitcoin" target="_blank" rel="noreferrer noopener">Bitcoin</a> and <a href="https://blockworks.co/tag/ethereum" target="_blank" rel="noreferrer noopener">Ethereum</a>. It was the first blockchain to implement a proof of data availability (PoDA) solution on mainnet, making it a leading contender for the future of blockchain scalability. This approach involves using two separate blockchains in harmony, each with its own strengths and weaknesses. One chain can be optimized for security and decentralization, while the other can be optimized for speed and scalability.



The Syscoin network also features a number of other innovations that make it well-suited for mass adoption. These include:



<ul>
<li>Merged mining with Bitcoin: Syscoin is merge-mined with Bitcoin, which means that it shares Bitcoin&#8217;s security without requiring any additional energy expenditure.</li>



<li>Rollux: Rollux is a layer-2 scaling solution that uses the industry&#8217;s only layer-1 proof-of-data availability solution to achieve incredible speeds without sacrificing security and decentralization.</li>



<li>Cost-savings: Syscoin has achieved greater efficiency within its ecosystem because it has all been tailor-made by the same team, allowing them to offer more competitive, highly affordable cost-savings for users.</li>
</ul>



On June 28, Sycoin formally announced the launch of Rollux on mainnet, a major milestone in the project’s history that delivers on its “promise of speed, decentralization, security, affordability, and scalability,” according to CEO <a href="https://twitter.com/realSidhuJag" target="_blank" rel="noreferrer noopener">Jagdeep Sidhu</a>.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Friday reminder that <a href="https://twitter.com/RolluxL2?ref_src=twsrc%5Etfw">@RolluxL2</a> is more performant and has the lowest fees of any other blockchain you’re using. <a href="https://twitter.com/search?q=%24SYS&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$SYS</a> <a href="https://t.co/HBIyMWsY2n">https://t.co/HBIyMWsY2n</a>&mdash; Alex | Syscoin Top G (@proguerra) <a href="https://twitter.com/proguerra/status/1677298433684566023?ref_src=twsrc%5Etfw">July 7, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> 
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<h2 class="wp-block-heading">Syscoin provides the foundation for Rollux to shine</h2>



Syscoin is a modular, dual-chain layer-1 that has been designed with security, decentralization, scalability, and interoperability in mind — doing so has resulted in the creation of a blockchain that could bring forth the metaverse, smart cities, and other core pillars of the future of technology.



The dual-chain layer-1 architecture of Syscoin provides incredible benefits that have built a strong foundation for developments like Rollux to be constructed upon, while also providing users with leading-edge tools of both primary blockchain paradigms (UTXO and EVM).



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/KnxnZvfcV5YBIBUAhd26JE5PZCWGYoY1yq6xAC8IuLM24PpR7TR1WZkyfo7Q-7onkV4GTsOKX6Z8yqh9tE5lYcagNgKAtX1jq_T0jRXdsq6W60785PQhHQsjOyFtrLjpq7MgEC_K0_DZMt7h3Vqr_SU" alt=""/><figcaption class="wp-element-caption">Syscoin prioritizes developer flexibility while solving for security, network bloat, and speed | Source: <a href="https://syscoin.org/" target="_blank" rel="noreferrer noopener">Syscoin</a></figcaption></figure>



Syscoin solves the blockchain trilemma using the “most efficient negotiation” with the least trade-offs, as outlined below:



<h3 class="wp-block-heading">Security</h3>



By merge-mining, Syscoin lends greater utility to the Bitcoin network and further incentivizes miners while adding Bitcoin’s leading security to the Syscoin network. The network is further safeguarded against attacks such as selfish mining through multi-quorum chainlocks. Miners and masternode operators are incentivized to contribute to the network by receiving rewards for providing valuable real-world services. Notably, merge-mining Syscoin with Bitcoin does not incur any additional energy costs.&nbsp;



<h3 class="wp-block-heading">Network bloat&nbsp;</h3>



Syscoin&#8217;s modular architecture ensures scalability to cater to the needs of global mass adoption. It is specifically designed to optimize blockchain activity, resulting in ultra-efficiency and minimal data footprint. This design leads to increased capacity, higher throughput, and reduced costs across the board, especially with Layer 1 data availability.



<h3 class="wp-block-heading">Speed</h3>



Syscoin offers a range of tools that ensure speedy asset and smart contract functioning at a minimal cost. These tools are compatible with both blockchain paradigms &#8211; Rollux for EVM-based assets or contracts, and Z-DAG for UTXO-based assets. This compatibility enhances the versatility of the system, as users can choose the best blockchain paradigm for their specific needs.



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<h2 class="wp-block-heading">Rollux brings the vision of Syscoin to life</h2>



Rollux is the culmination of years of R&amp;D, providing unprecedented scalability that sets the stage for mass adoption and the future of the Syscoin ecosystem. It uses layer-2 rollups and the industry’s only layer-1 proof-of-data availability solution to achieve incredible speeds without sacrificing security and decentralization. Each transaction costs a small fraction of a cent, so any developer can cheaply scale their dapp.



<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">🚀Rollux is the next big thing in blockchain scaling. It&#39;s a suite of rollup-based Layer 2 solutions that enable near-instant low-cost transfers, executions, and contract deployments on Syscoin&#39;s Layer 1. <a href="https://twitter.com/hashtag/Rollux?src=hash&amp;ref_src=twsrc%5Etfw">#Rollux</a> <a href="https://twitter.com/hashtag/RolluxOG?src=hash&amp;ref_src=twsrc%5Etfw">#RolluxOG</a> 🧵👇 <a href="https://t.co/IlUiB3vkGv">pic.twitter.com/IlUiB3vkGv</a>&mdash; FutureClub (@_FutureClub_) <a href="https://twitter.com/_FutureClub_/status/1678482708110929937?ref_src=twsrc%5Etfw">July 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Rollux ensures high levels of security and decentralization through merged mining with Bitcoin, making it the only major rollup to follow this strategy. Its arrival is a monumental event for the blockchain industry, as it effectively tackles the persistent blockchain trilemma, paving the way for future growth and mass adoption while retaining the core principles that underpin the value of blockchain.



Prior to the mainnet launch of Rollux, and supplementing a wide selection of third-party dapps by partners, a cohort of incredible first-party projects from SYS Labs, the company behind Rollux, were already developing on it in order to provide a welcoming ecosystem for new users. Here are a few examples.



<h3 class="wp-block-heading">Luxy</h3>



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/KhHPLFvHfb5q_QSH5b0oHH2yaeQ6o3OxYj41MvMrHlF9xR6987jnnEQLOZzUqQ27eNEwZXLRobS8x0POa8A1pxYW9wvLUtp-RXV30X3NduzXFz2AeW2xAL7s91ZZ5O0bEfpaNshkN_7OXUpclAHyd1g" alt=""/><figcaption class="wp-element-caption">Luxy <a href="https://luxy-io.medium.com/luxy-joins-forces-with-sys-labs-building-a-stronger-ecosystem-together-48760c97e0e8">joined forces with SYS Labs</a> in late March | Source: <a href="https://twitter.com/Luxy_io">Luxy official Twitter</a></figcaption></figure>



<a href="https://luxy.io/" target="_blank" rel="noreferrer noopener">Luxy</a> is a Multichain NFT marketplace that allows users full functionality with NFTs (create, buy, sell, etc.), and also enables collection owners to set up automatic royalty distribution across stakeholders in the project. The platform is the first multichain NFT marketplace that is green, scalable, cheap, and fast, all while moving forward with a focus on 3D assets to power Web3 video games and the metaverse.



<h3 class="wp-block-heading">Pegasys</h3>



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/3wTV-dXfqYrms1N_kaozdX98GnYkkvrp9uFQxph2Ie4oL8eqBPaX_YSEgAUZ4oNVnoT7IMtMScJxfx052NUV8Ifv9XhA7oore89asH-CYjAvrgX7-XS6Fy0w52FKnH6txEyCTYcowCOGzpu9aDLiHr0" alt=""/><figcaption class="wp-element-caption">Pegasys V3 <a href="https://pegasys.fi/blog/pegasys-v3/">launched at the end of June</a> | Source: <a href="https://pegasys.fi/blog/introducing-pegasys/">Introducing Pegasys</a></figcaption></figure>



<a href="https://pegasys.finance/" target="_blank" rel="noreferrer noopener">Pegasys</a> is a DeFi protocol that enables users to earn interest on their crypto assets. It offers a variety of features that make it an attractive platform, including:



<ul>
<li>High yields: Pegasys offers high yields on crypto assets, up to 20% APY.</li>



<li>Low fees: Pegasys charges low fees for transactions, making it a cost-effective way to earn interest on crypto assets.</li>



<li>Yield Farming: Pegasys offers a variety of yield farming strategies, including single-asset staking, liquidity mining, and yield farming pools.</li>



<li>Liquidity: Pegasys is a liquid platform, meaning that users can easily buy and sell their assets.</li>



<li>Staking: Pegasys allows users to stake their SYS tokens to earn rewards.</li>
</ul>



<h3 class="wp-block-heading">Pali Wallet</h3>



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/OL18jveRYmAkavdRLtfqKcHpCYubdqjvUFUIvmcqG0aaPRax35pPJL1bGOFPwHow7_zKRDkPUwkw-CkxkdrqxHoHebvgXT2wmHkqckG3CRR2XWaFfbCpM73lLtfNh77bq6x8L1snB2594KmUMffwvBc" alt=""/><figcaption class="wp-element-caption">Pali Wallet launched V2 in early June | Source: <a href="https://twitter.com/PaliWallet">Pali Wallet official Twitter</a></figcaption></figure>



<a href="https://paliwallet.com/" target="_blank" rel="noreferrer noopener">Pali Wallet</a> is a web and mobile (iOS &amp; Android), non-custodial wallet similar to MetaMask, but custom-built to make the most of the Syscoin ecosystem, whether NFTs or its utility token, SYS, on any of the three blockchains (UTXO, NEVM, or Rollux).&nbsp;



Additionally, SYS Labs has a number of products in the works set to make the most of Rollux. So far they have announced:



<ul>
<li><a href="https://superdapp.ai" target="_blank" rel="noreferrer noopener">SuperDapp</a> is an AI-enhanced social dapp akin to Telegram or WeChat with built-in non-custodial wallet, crypto on-ramps and off-ramps, and online retailers like Tryvium Travels. Powered by GPT 4, its AI personal assistant aims to make everyone’s life simpler whether you’re planning a vacation, shopping, or sending crypto to a friend.</li>



<li><a href="https://www.daosys.com/" target="_blank" rel="noreferrer noopener">DAOSYS</a> is SYS Labs’ solution for enterprise. Automate the hyper-efficient allocation of capital to streamline your organization to compete at any scale, from sole proprietor to international conglomerate.</li>



<li>Camada is a regulatory-compliant trading solution for individuals and institutions. Enjoy the promise of Web3 decentralization and self-custody within evolving legal frameworks automatically.</li>
</ul>



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<h2 class="wp-block-heading">Rollux is set to drive the future of Syscoin</h2>



With the mainnet arrival of Rollux now completed, a new benchmark for EVM-rollup solutions has been established, one that surpasses all industry standards in terms of speed, scalability, and affordability. With unmatched throughput capacity and the fastest processing speeds, Rollux offers the most economical user experience, allowing for the lowest transaction fees.&nbsp;



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Thrilled to announce📢 𝗥𝗢𝗟𝗟𝗨𝗫 𝗠𝗔𝗜𝗡𝗡𝗘𝗧 𝗜𝗦 𝗟𝗜𝗩𝗘 🌐 The new age of scalable web3 is here! Low cost, fast, and secured by <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a>&#39;s network.🔒 ✨Begin your journey into the new frontier, fueled by <a href="https://twitter.com/search?q=%24SYS&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$SYS</a>. 🚀💫<a href="https://t.co/D4ppLCl9Xk">https://t.co/D4ppLCl9Xk</a> <a href="https://t.co/7rTOVt1X44">pic.twitter.com/7rTOVt1X44</a>&mdash; ROLLUX (@RolluxL2) <a href="https://twitter.com/RolluxL2/status/1674055458070437890?ref_src=twsrc%5Etfw">June 28, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Click <a href="https://rollux.com/" target="_blank" rel="noreferrer noopener">HERE</a> to get started using Rollux, and be sure to join the <a href="https://discord.com/invite/rollux" target="_blank" rel="noreferrer noopener">Rollux Discord</a> to connect with other ecosystem builders and participants.&nbsp;



This content is sponsored by <a href="https://syscoin.org/" target="_blank" rel="noreferrer noopener">Syscoin</a>.



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L2s rooted in Bitcoin’s PoW could bring global scalability to blockchain’s core values

John Gilbert

John Lee Quigley

Talk and excitement around the zero-knowledge rollup is heating up as layer-1 protocols take significant steps toward implementing the solution at scale. The technology promises to remove a critical bottleneck in the development of Web3: cost and scaling ceilings. Layer-1 blockchains such as Ethereum struggle to meet full user demand because of high transaction fees and congestion, which work in conjunction with one another.&nbsp;



While various types of rollups and layer 2 solutions have been created to address this problem, the ZK rollup hasn’t been tested at the scale needed to open Web3 to the masses. While rollup technology introduces new advantages, it also brings some new challenges in regards to how they manage data availability in a way that is decentralized and censorship resistant. Implementing rollups without first addressing this issue is like putting the cart before the horse. The path to mass adoption needs to lead with decentralization and security first in mind.&nbsp;&nbsp;&nbsp;



Some blockchains are closer than others. For example, <a href="https://syscoin.org/" target="_blank" rel="noreferrer noopener">Syscoin</a> announced a PoDA (Proof-of-Data Availability) solution, which is already working on testnet, that will work hand in hand with rollups once they are deployed on mainnet. Unlike other approaches, its rollup can effectively inherit the security of the base layer, which is Bitcoin in Syscoin’s case, by protecting against censorship and centralization vulnerabilities. But before explaining how they achieve this we need to explain zero-knowledge proofs and the various approaches to ZK rollups.



<h2 class="wp-block-heading">What are zero-knowledge proofs?</h2>



Zero-knowledge proofs (ZK proofs) are a digital verification method where the prover can show that they have access to a piece of information without necessarily revealing it. MIT students Shafi Goldwasser and Silvio Micali introduced the concept in a <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.419.8132&amp;rep=rep1&amp;type=pdf" target="_blank" rel="noreferrer noopener">research paper</a> in 1985.&nbsp;



ZK proofs have evolved significantly since then, finding real-world use cases in developing privacy and security-oriented systems. Unsurprisingly, ZK proofs also enhance cryptography and powers privacy-oriented coins such as Zcash.&nbsp;



However, ZK proofs can do much more for cryptocurrency. They are a fundamental block for building rollups — solutions that significantly improve scalability and performance for blockchain networks.



<h2 class="wp-block-heading">What are rollups, and how do they differ?&nbsp;</h2>



Rollups are layer-2 scaling solutions that bundle millions of transactions into one, which is then submitted on the base layer (e.g., Syscoin) as a single transaction. Rollups spread the single transaction cost across many users, thus making them a cheaper option. Additionally,&nbsp;the off-chain process ensures that rollups offer a faster settlement, thus easing the load on the base layer and unlocking mainstream-level capacity for blockchain networks. There are currently two main types of rollups: Optimistic and ZK rollups. Both approaches solve the blockchain scalability issue but with unique advantages and disadvantages.



<h3 class="wp-block-heading">Optimistic rollups explained</h3>



Optimistic rollups are layer-2 scaling solutions that scale throughput by assuming (optimistically) that each transaction bundled within a rollup is valid. Hence, even though transactions on the layer-2 network are processed instantly, there is a window (usually seven days) for users to contest fraudulent transactions. However, these users are not required to wait 7 days, as there are bridges that front liquidity across the chains that let people exit. Barring any challenges, the network automatically adds the rollup transactions on the parent chain for final settlement at the end of the window.



The waiting period guarantees security as the second layer can reverse fraudulent transactions before updating the state on the parent network. However, it also introduces a significant bottleneck. Users must wait a long while to withdraw deposited funds from the layer-2 network. Further, the model fosters censorship, as the project team or a limited group of validators manages core infrastructure and can potentially reverse transactions. This is true for ZK rollups as well if the sequencer is centralized. Therefore, one must decentralize the sequencer as Syscoin is doing, so it’s not an issue on either type of rollup.



Arbitrum and Optimism are the most popular examples of layer-2 solutions already utilizing optimistic rollups to scale Ethereum. However, another type of rollup – ZK rollups – seems to be the end game for the technology because of the unique capabilities it brings to the table.



<h3 class="wp-block-heading">So what are ZK rollups?&nbsp;</h3>



ZK rollups are another suite of layer-2 scaling solutions that handle computation and process dozens of transactions off-chain before submitting a rolled-up version on the parent chain. The critical difference is that zero-knowledge rollups offer near-instant settlement on both layers, unlike optimistic rollups.&nbsp;



ZK-rollups tap into their zero-proof technology to submit regular validity proofs to associated smart contracts on the parent network, confirming the accuracy of the transactions on the layer-2 network. The reliance on zero-proofs also reduces the volume of shared transaction data,&nbsp; thus making ZK rollups privacy-focused by default.



In addition to privacy, ZK rollups eliminates the need for users to wait several days before withdrawing funds from the layer-2 solution. However, the technology&#8217;s nascent nature is its most significant disadvantage.&nbsp;



ZK rollups are more complex to build, requiring a heavy reliance on a few developers to maintain the entire system. Additionally, the network structure often involves setting up sophisticated and otherwise expensive hardware to validate transactions. And depending on the approach, ZK rollups can present some of the same censorship risks if the validation sequencing is centralized. Because not all ZK rollups are the same, these centralization factors need to be examined independently.&nbsp;



The primary ZK solutions utilized in cryptography are zk-Stark, zk-Snark and Validium. The latter is a novel ZK rollup already pioneered by Syscoin to scale blockchain systems.



<h3 class="wp-block-heading">zk-Snark vs. zk-Stark</h3>



Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (zk-Snark) are proof systems that enable the prover to publicly verify that they own vital information, such as the private key to a cryptocurrency address and the amount they&#8217;re trying to transfer. Once the user provides cryptographic proof, they can transfer funds without disclosing essential details such as the associated addresses, transaction history and balances. The Zcash cryptocurrency project implements zk-Snark to enable anonymous and private transactions for users. Notably, zk-Snark has a fundamental risk. The requirement of trusted third parties to set up the system increases centralization and makes it vulnerable to attacks.&nbsp;



Zero-Knowledge Scalable Transparent Argument of Knowledge (zk-Stark) solves the initial setup risk with zk-Snark by eliminating the involvement of a few trusted parties. It handles off-chain computation and immediately relays only an insignificant amount of secure data on the parent chain for validation. Zk-Stark technology provides excellent scalability, and privacy features which are immensely valuable to smart contract blockchains.



<h3 class="wp-block-heading">Validium on Syscoin</h3>



Validium, a ZK-rollup solution deployed on the Syscoin network, is a unique kind of zero-proof technology with potentially higher throughput than both zk-Stark and zk-Snark. Validium&#8217;s core proposition is its data storage location.&nbsp;



Validium enables Syscoin to handle up to four million transactions per second (TPS), a remarkable feat for a smart contract blockchain. Unlike existing ZK-rollups that store such transaction information on-chain, <a href="https://docs.syscoin.org/docs/intro/syscoin-roadmap/#validium" target="_blank" rel="noreferrer noopener">Validium stores data off-chain</a>. This allows the technology to free up additional space on the base layer.



<h2 class="wp-block-heading">The different ZK rollup projects</h2>



Despite being in their infancy, ZK rollups are seeing broad adoption across the crypto industry because of the immense benefits the system brings to decentralized applications. These applications expand far beyond the Ethereum ecosystem, with more use cases expected to emerge as the technology improves.



For example, zkSync is a popular scaling solution utilizing ZK rollups. The earliest version of the protocol enabled privacy-focused and cheap token transfers and payments. However, the solution recently launched zkSync 2.0 will unlock the ability for developers to deploy dapps on the network.



StarkNet is another ZK rollup project enabling Ethereum-based applications to scale throughput. Leading decentralized protocols like dYdX and ImmutableX already implement StarkNet’s solution, allowing low-cost transactions and fast settlement on their platforms.



Outside of Ethereum, advanced networks like Syscoin harness ZK rollups (and Optimistic) in a way that provides full scalability without sacrificing decentralization by storing data off-chain.&nbsp;The result is unprecedented scaling and a mainstream-ready solution for dapp developers.&nbsp;&nbsp;



<h2 class="wp-block-heading">The data availability problem and Syscoin’s solution</h2>



Blockchain transactions involve significant volumes of data that only grow as the network expands. The data demand especially takes its toll on smart contract blockchains where users perform complex transactions. As the data volume increases, every network faces a data availability challenge.&nbsp;



The challenge involves devising a means for participants (both validators with sophisticated hardware and light-client nodes) to verify that a block producer included all transaction data in a proposed block. This verification is essential to show that the block producer did not censor participants by enforcing any restrictions that would prevent them exiting the rollup. The ultimate goal is to inherit the security of the base layer.&nbsp;



There are several approaches to solving the data availability challenge. Ethereum’s previous, vision was to roll out sharding, a process that practically splits the network into different bits (shards). But after a recent change in their roadmap, their plan is to go a different route that uses KZG commitments to shard data blobs.&nbsp;Reducing the data into smaller segments makes it easier for validators and light-node operators to access the data.&nbsp;



Both the Ethereum and Syscoin dev teams independently arrived at similar solutions around the same time. But while Ethereum sharding is at least a year away from production, Syscoin’s PoDA (Proof-of-Data Availability) is already on testnet. It uses the Syscoin blockchain to verify that the correct execution data was provided and confirmed by the network, giving the opportunity for any person the ability to store it and retain censorship resistant properties. In addition, it will automatically use a committee of trusted safe-keepers as well as decentralized storage options such as filecoin/arweave and others for long-term archiving.This approach frees up the base layer for greater scalability. It also minimizes the data availability challenge since a zero-knowledge implementation generates less data than a public smart contract blockchain.



<h2 class="wp-block-heading">The future of blockchain scalability and virtual machines</h2>



Syscoin offers the most advanced smart contract platform secured by Bitcoin’s impeccable proof-of-work (PoW) through merged mining. Syscoin also delivers remarkable scalability on the <a href="https://syscoin.org/news/nevm-and-related-changes-to-syscoin" target="_blank" rel="noreferrer noopener">Syscoin NEVM</a>, which supports the deployment of Ethereum-native applications.&nbsp;&nbsp;



Syscoin is paving the future of blockchain scalability and virtual machines by implementing secure rollups and increasing data availability. They are implementing scaling solutions that not only account for technical bottlenecks, but also regulatory ones. They integrated a base layer of opt-in regulatory compliance for all smart contract tokens. This will let token issuers provide users the necessary tools to stay compliant — a tool that would prove useful against complaints from regulatory authorities. They have implemented this feature on their UTXO side and are working on it for the NEVM side for compliant rollups. Mainstream-scale blockchain adoption is possible and can be served over secure and high-performant networks that offer a seamless experience for all network users.



This content is sponsored by <a href="https://syscoin.org/news/nevm-and-related-changes-to-syscoin" target="_blank" rel="noreferrer noopener">Syscoin</a>.



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What Are ZK Rollups? The Future of Smart Contract Blockchains

Bitcoin’s novel proof-of-work (PoW) consensus model is a technological marvel. It enabled the world’s first decentralized monetary system and paved the way for new distributed technologies underpinning a $1 trillion industry. However, several factors currently threaten the existence of PoW, leading to historically low levels of bitcoin mining profitability, high energy consumption and concerns about the network&#8217;s long-term survival.&nbsp;



Satoshi Nakamoto and many of the founding members of the bitcointalk forum foresaw these challenges. Satoshi proposed a solution that envisioned a multichain ecosystem operating symbiotically. Merged mining — initially implemented by Namecoin in 2011 — has been used in various consensus mechanisms.&nbsp;&nbsp;&nbsp;&nbsp;



<a href="https://syscoin.org/" target="_blank" rel="noreferrer noopener">Syscoin</a> is one of the first blockchains with smart contract functionality and Ethereum virtual machine-compatibility, to use merged mining. This means that Solidity/Ethereum developers can build on a blockchain with security imported from the bitcoin mining network. Their unique approach solves two critical problems in the fragmented crypto ecosystem. First it offers the Bitcoin network a path toward sustainability and profitability. And secondly, its virtual machine capability provides a base layer of programmability that can scale beyond the constraints and security vulnerabilities of Ethereum’s application network.&nbsp;&nbsp;



<h3 class="wp-block-heading">Why bitcoin mining profitability is in decline</h3>



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="244" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg" alt="" class="wp-image-36837" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-mining-profitability-chart-1-2-1024x244.jpg?w=1600 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Bitcoin mining historial profitability | Source: <a href="https://bitinfocharts.com/comparison/bitcoin-mining_profitability.html#3y" target="_blank" rel="noreferrer noopener">BitInfoCharts</a></figcaption></figure>



Bitcoin mining is at historical levels of unprofitability. Miners currently earn 0.064 USD for one terahash per second, a figure that drops below levels last seen in October 2020. On a broader scale, <a href="https://cointelegraph.com/news/top-3-reasons-why-bitcoin-hash-rate-continues-to-attain-new-all-time-highs" target="_blank" rel="noreferrer noopener">it could take</a> up to 11 months for a large-scale mining operation to break even and 15 months for a retail miner to achieve the same feat.



Despite the decline in bitcoin’s price, miners haven’t stopped or slowed down production — in fact they <a href="https://cms.blockworks.co/bitcoin-mining-economics-explained/" target="_blank" rel="noreferrer noopener">have increased it</a>. When the network adds more computing power, the protocol makes mining more difficult, and therefore expensive.



Increased participation is an indication that miners either believe that the hashrate will eventually drop from miner capitulation — resulting in lower energy costs — or the BTC price will rise to a level profitable to miners, or a combination of both.&nbsp;



For capitulation to occur, the network needs bloated and over-leveraged mining operations to go out of business. In the previous cycle, miner capitulation occurred between November 2018 and January 2019, triggering a sell-off that correlated with a bottom in bitcoin’s price.&nbsp;&nbsp;



The difficulty and hashrate decreased, and profitability spiked later in June 2019. But more importantly, miners who survived that capitulation received the highest returns for the BTC they mined at the bottom of the market.&nbsp;



Miners today believe that surviving these historic levels of unprofitability will result in similar returns in the future. But this trajectory of parabolic growth becomes increasingly difficult to maintain as bitcoin loses market dominance to competing digital assets. And the halving cycle only exacerbates this problem by cutting block rewards in half every 4 years.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



Read more: <a href="https://cms.blockworks.co/bitcoin-mining-economics-explained/" target="_blank" rel="noreferrer noopener">Is Bitcoin Mining Still Profitable? The Economics Explained</a>



If bitcoin is unable to achieve another parabolic rise after the next halving cycle, then miner capitulation may happen en masse, triggering a deleveraging pattern that represents a fundamental departure from the bitcoin mining business model. Instead of trying to be the <a href="https://cms.blockworks.co/bitcoin-mining-economics-explained/" target="_blank" rel="noreferrer noopener">last miner standing in periods of unprofitability</a>, miners will try to avoid the effects of the halving cycle by being the first to leave.&nbsp;



This scenario, though, can be avoided if miners find alternative revenue sources for their mining equipment.&nbsp;



<h3 class="wp-block-heading">Bitcoin’s energy consumption concerns</h3>



Bitcoin has seen increasing backlash for its energy usage following Ethereum&#8217;s switch to proof-of-stake (POS). <a href="https://cointelegraph.com/news/environmental-groups-want-bitcoin-to-follow-ethereum-s-example-in-moving-to-proof-of-stake" target="_blank" rel="noreferrer noopener">Some climate groups</a> have called for Bitcoin to move away from PoW and retire the legacy consensus model.&nbsp;



Many of these criticisms ignore that the need for cheap energy incentivizes greater efficiency over time. And Bitcoin’s POW represents a small percentage of energy compared to the energy consumed by industries like gold mining, paper currency and banking. Despite the overblown concerns, the growing perception around POW puts immense pressure on bitcoin miners. The network needs to address the energy consumption criticisms or risk governments taking significant measures, such as <a href="https://cms.blockworks.co/new-york-passes-bill-restricting-carbon-fueled-crypto-mining-operations/" target="_blank" rel="noreferrer noopener">outlawing mining</a> if energy costs keep rising.



Ideally, bitcoin miners require more favorable dynamics to maximize investment returns. Relying on unlikely scenarios such as miner-friendly government regulations and increased transaction fees on the network does not suffice. Instead, the solution to reduced bitcoin mining profitability and energy concerns could lie somewhere else — in the concept of merged mining.



<h3 class="wp-block-heading">How merged mining solves Bitcoin&#8217;s energy problem</h3>



<a href="https://syscoin.medium.com/the-ultimate-guide-for-merged-mining-syscoin-602a151c9da2" target="_blank" rel="noreferrer noopener">Merged mining</a>, also known as auxiliary proof-of-work (AuxPoW), is a mechanism that allows miners to mine multiple networks without additional energy usage. In the case of Bitcoin, miners can submit proof-of-work already performed on the parent network (Bitcoin) to validate blocks on an auxiliary network.



The auxiliary network inherits Bitcoin’s robust security model and is more resistant to 51% attacks. In return, miners receive lucrative rewards in the form of coins from the auxiliary network, thus subsidizing costs associated with their mining operation.&nbsp;



Merged mining solves Bitcoin’s energy problem by ensuring that computational power is reused to incentivize miners and underpin another network. The auxiliary network is effectively carbon neutral, as miners do not expend additional energy resources.&nbsp;



Merged mining can help prevent major deleveraging by offering miners an easy and reliable second income stream from block subsidies.



When Satoshi Nakamoto<a href="https://bitcointalk.org/index.php?topic=1790.msg28696#msg28696" target="_blank" rel="noreferrer noopener"> first envisioned the concept</a> of merged mining, he described a mechanism that allows a separate blockchain to “share CPU power with Bitcoin.” Fast forward to the present, and about 20%-30% of the global Bitcoin hashrate simultaneously mines Syscoin. This not only provides a second income, but it also provides a base for the network to power other use cases beyond Bitcoin’s primary utility as a worldwide monetary system.



Syscoin, in combination with Jax.Network, is launching the <a href="https://syscoin.org/news/global-merged-mining-alliance-launched-by-syscoin-and-jaxnetwork" target="_blank" rel="noreferrer noopener">Global Merged Mining Alliance (GMMA)</a>, to bring more awareness to merged mining and expand Bitcoin’s network.



Dylan Stewart from Syscoin said, “We believe in merged mining and would like to see wider adoption and consideration beyond ourselves. This also should garner appeal for every mining pool not currently taking advantage of it due to the essentially free income they&#8217;re foregoing by not participating, especially in the wake of many operations currently being unprofitable due to energy costs.”



<h3 class="wp-block-heading">How Syscoin delivers a secure and scalable blockchain application layer</h3>



Syscoin takes a novel approach to solving the famous blockchain trilemma (i.e., decentralization, security, scalability). At the base layer, Syscoin benefits from Bitcoin&#8217;s substantial decentralization and security model through merged mining. Syscoin further implements Chain Locks, an<a href="https://dashnews.org/andreas-antonopoulos-calls-dash-chainlocks-a-smart-way-of-preventing-51-attacks/" target="_blank" rel="noreferrer noopener"> industry-accepted</a> solution that mitigates 51% attacks through independent verification by masternodes.



As an Ethereum virtual machine-compatible network, Syscoin achieves scalability through a native implementation of rollups. Rollups support off-chain computation and chain-state storage, allowing applications to process thousands of transactions per second while posting only minimal data to the mainnet.&nbsp;



Syscoin also scales through <a href="https://ethereum.org/en/developers/docs/scaling/validium/" target="_blank" rel="noreferrer noopener">Valadium</a> – another roll-up-centric solution that can theoretically handle over 9,000 transactions per second per rollup through off-chain data availability. Hundreds, if not thousands, of rollups can run off of the Syscoin network in parallel independence. In addition, they engineered Proof-of-Data Availability, a new standard aimed at making Valadium a more reliable and censorship resistant solution for financial applications.&nbsp;



“Currently, Ethereum is the only other chain we know of to be working on this in the form of Proto-Danksharding, a solution similar to ours we each arrived at in isolation, which speaks to the viability of it,” Bradley Stephenson of the Syscoin Foundation said, “However, Ethereum&#8217;s solution is at least a year away, and given the historical gaps between their roadmap and actual implementation, could very well be much longer whilst our solution is already on testnet.” ​​&nbsp;



These scalability features enable Syscoin to power Web3 use cases, including DeFi primitives, gaming and NFTs.



Syscoin&#8217;s architecture demonstrates that Ethereum&#8217;s POS consensus model does not deliver the most<a href="https://jsidhu.medium.com/blockchain-idealisms-b61c5781ddc3" target="_blank" rel="noreferrer noopener"> environmentally friendly, secure and scalable solution</a>. PoS networks notably have a lower carbon footprint (up to 99%). Yet, at best, they are less decentralized and fail to provide the same level of robust security as a PoW system such as Bitcoin.&nbsp;



“Proof-of-stake models have a tendency towards cartelization or centralization,” Syscoin’s Dylan Stewart explained. “This benefits the wealthiest ETHstakers at the expense of the poorer, a problem compounded by ETH&#8217;s already extremely inequitable distribution stemming from their pre-mine.”



Syscoin enables a carbon-neutral network that preserves Bitcoin&#8217;s time-tested security and decentralized model. It also supports the development of a network that handles transactions in a manner that reflects Satoshi&#8217;s initial vision of scalability.



This content is sponsored by <a href="https://syscoin.org/" target="_blank" rel="noreferrer noopener">Syscoin</a>.



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POW Isn’t Dead: Merged Mining Solves Bitcoin’s Energy Problem

Jack Kubinec

<div id="highlights-block_62d8dff24d48f" class="highlights">
 <ul>
 <li>The announcement represents the first actualized zero-knowledge bridge</li>
 <li>The company says the bridge will be cheap, scalable and capable of performing all the same functions as Uniswap</li>
 </ul>
 
</div>



After a flurry of <a href="https://cms.blockworks.co/tag/ethereum/" target="_blank" rel="noreferrer noopener">Ethereum</a> security-oriented so-called “rollups” were unveiled recently, another layer-1 blockchain has decided to throw its hat in the ring.



Syscoin, a “dual-layered blockchain” merge-mined with <a href="https://cms.blockworks.co/tag/bitcoin/" target="_blank" rel="noreferrer noopener">Bitcoin</a> and running Ethereum-compatible smart contracts, is launching a zero-knowledge cross-chain bridge. The bridge, dubbed ZKCross, will have minimal fees and will facilitate cross-chain decentralized exchange, Syscoin told Blockworks. It is expected to be ready to demonstrate in September.



<a href="https://cms.blockworks.co/cross-chain-bridge-thefts-top-1b-in-2022/" target="_blank" rel="noreferrer noopener">Hackers have stolen</a> more than $1 billion from cross-chain bridges in 2022, leading to a proliferation of proposals meant to put investors at ease when moving assets between chains. The cross-chain bridges hacked in recent years employed multi-signature or multi-party computation (MPC) to validate their trades.



Syscoin’s zero-knowledge mechanism operates an off-chain automated market maker (AMM) that avoids exploitable consensus protocols, and can be used to manage liquidity and trading across multiple chains.



The accuracy of the transactions are verified with a zero-knowledge proof — essentially a fast and private way to authenticate data — before a bundle of transactions are rolled up and compressed to be settled on Syscoin’s base layer.



Syscoin believes the bridge technology allows for economies of scale — with a worst-case security scenario of the AMM going offline and users being forced to exit to the base layer.



“If it’s not this bridge, someone else will release a zero-knowledge bridge and that’ll be the bridge solution everyone is using. I really think this is where things are headed,” <a href="https://www.linkedin.com/in/jagdeep-sidhu-2a7bb76b/?originalSubdomain=ca" target="_blank" rel="noreferrer noopener">Jagdeep Sidhu</a>, lead developer at Syscoin, told Blockworks.



Helping the transition is the (relative) cheapness of zero-knowledge bridging. Sidhu says the only cost to bridge users will be that of their own CPU.



Zero-knowledge technology still has its shortcomings — a lack of decentralization being one of the most prominent. In essence, investors trade scalability and low cost for the risk of censorship.



“All the rollups are centralized right now,” Sidhu said. “We’ll start with a centralized sequencer, but the goal is to create a decentralized sequencer down the road.”



Syscoin hopes to create a zero-knowledge <a href="https://cms.blockworks.co/tag/evm/" target="_blank" rel="noreferrer noopener">Ethereum virtual machine</a> (EVM), the much-hyped proof system for Ethereum smart contracts, like the <a href="https://cms.blockworks.co/polygon-unveils-zkevm-the-holy-grail-of-scaling/" target="_blank" rel="noreferrer noopener">zkEVM protocol</a> launched Wednesday by Polygon. 



Sidhu does not believe anyone in crypto has yet created a “proper EVM” but emphasized that all protocols will need to move into the space eventually.



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Syscoin Takes ‘Zero Knowledge’ Approach To Prevent Bridge Hacks

Ben Strack

<div id="highlights-block_6206b99ef5797" class="highlights">
 <ul>
 <li>PayPal finalized its new crypto advisory council</li>
 <li>21Shares, the largest issuer of cryptocurrency ETPs, hired three senior sales pros to enlarge its US footprint</li>
 </ul>
 
</div>



Bitcoin mining and crypto tech company Bitfury has hired Jonathan Gould as its chief legal officer in the latest instance of a government official to join a crypto firm.



Gould most recently worked as senior deputy comptroller and chief counsel at the US Office of the Comptroller of the Currency (OCC). Before that, he was chief counsel of the US Senate Banking Committee.



Crypto.com has hired Giuseppe Giuliani, previously global head of institutional relationships and services at Kraken, as managing director of the company’s exchange. He will look to expand into new markets and introduce new offerings for institutional investors.



Ken Timsit has been named managing director for the Cronos blockchain. He was formerly chief revenue officer in charge of global sales and marketing at blockchain technology company ConsenSys.



Cronos supports both Ethereum and Cosmos technology, including DeFi, NFTs and metaverse technologies. Timsit will help the blockchain firm scale its DeFi (decentralized finance) and Web3 business by equipping developers with the resources to instantly port apps and crypto assets from other chains.



Sébastien Badault joined digital assets platform Ledger as its vice president of metaverse and Web3. He will oversee the company’s NFT (non-fungible token) division, plus gaming and brand collaborations.



Badault was previously a managing director at Alibaba and also spent more than 10 years at Google, where he ran the company’s French operations. Before Google, he led Amazon’s customer and partner acquisition strategy across the UK, Germany and France.



Crypto prime brokerage FalconX has hired former Carta chief people officer and Bloomberg head of talent Suzy Walther as its head of people, amid a push to fill hundreds of roles across engineering, marketing, HR and customer support.



The company, which <a href="https://cms.blockworks.co/falconx-coindcx-hit-unicorn-status-amid-uncertain-regulatory-environment/" target="_blank" rel="noreferrer noopener">raised</a> $210 million in August, has also hired Sujay Jaladi as its new vice president of security. He was previously chief information security officer at Gusto, Ripple, Harbor, Inc., Earnin and PayPal subsidiary Xoom.



&#8220;Institutional adoption of cryptocurrencies continues to cement the notion that the world&#8217;s economy will be tokenized in 5 to 7 years,&#8221; FalconX CEO Raghu Yarlagadda said in a statement.



TaxBit, a tax and accounting solution for the tokenized economy, hired Nathan Jones as senior vice president of worldwide public sales and government affairs. Jones has worked the last 19 years at IBM subsidiary Red Hat.



The company also brought aboard Miles Fuller as head of government solutions, plus Christi Muoneke as corporate general counsel.



Fuller joins TaxBit after a 15-year stint with the IRS, where he worked in a senior legal role. Muoneke previously spent more than 15 years working at Meta, DocuSign, Microsoft and Avalara.



Charlie Hu, former head of Polygon China, has joined Syscoin, a decentralized, open-source project created in 2014 by the founders of Blockchain Foundry.



As an ecosystem advisor, he will help drive the company’s expansion into untapped markets. While at Polygon, he focused on business development in Asia.&nbsp;



Marathon Digital appointed Raymond Walintukan as vice president of mining operations. He previously served as chief operating officer of Apifiny subsidiary Hash Hive. Before that, he served as the head of operations at Bitmain North America.



The hire comes as Marathon seeks to grow from 3.6 exahashes per second (EH/s) at the start of February to 23.3 EH/s by early next year.



PayPal brought aboard specialists in cryptography, distributed technology, regulation, economics and capital markets to establish a crypto advisory council.



The council includes Peter Briger, Jr., co-CEO of Fortress Investment Group; Chris Brummer, a Georgetown University law professor and faculty director of the Institute of International Economic Law; Dr. Shafi Goldwasser, director of the Simons Institute for the Theory of Computing at the University of California, Berkeley; Timothy Massad, an ​​adjunct law professor at Georgetown University and research fellow at Harvard Kennedy School; Dr. Neha Narula, director of MIT Digital Currency Initiative; and Antoinette Schoar, a finance professor at MIT Sloan School of Management.



Former Domino’s Pizza President Kory Spiroff joined the advisory board of FriesDao.



Spiroff is tasked with bridging real-world operations with blockchain-based governance. FriesDAO plans to acquire and build on-chain membership around popular fast food franchises.



Metaplex Studios, a US organization working to advance Solana NFT protocol Metaplex, tapped Stephen Hess as its CEO.



21Shares, the largest issuer of cryptocurrency ETPs, has hired three senior sales professionals to boost US growth.



Hires include Kayle Watson as US head of sales; Aram Babikian, who will lead US west coast and Latin America business development; and Ches Snider as US head of research sales.



The executives combined have decades of traditional finance experience at firms such as BlackRock, Bear Stearns, Goldman Sachs and Guggenheim Securities.



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