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You and I are both believers in blockchain. Not just blockchain, but Blockchain — bold with a capital B. It’s revolutionary, it’s inevitable, it’s the foundation of a new decentralized world, it’s a new fairness that pushes back against the lottery of what country you happen to be born in. It’s banking the unbanked. It’s taking back our data and identity. It’s a better world that we just know is imminent.
But in reality, blockchain is first generation technology, hobbled by first generation problems. Blockchain is slow. Blockchain is expensive. Blockchain is buggy. Blockchain lacks privacy.
Today we’re dialed in to American Online, with our 56k modem, in an open chat room with the NSA lurking. And we just lost our connection because our mom picked up the phone to call her sister, and now she’s yelling at us because our free trial ended last week and she told us — like ten times — that she wasn’t paying $2.95 an hour for whatever crap we were doing, and just what were we doing, anyway?
I’m saying that blockchain is really exciting, but so new it’s still got the tags attached, and it’s a really shitty experience for everyone.
This is where second layer comes in. Second layer is the projects, platforms, and protocols that sit on top of base blockchain and try to make the technology, and the user experience, better.
We need these second layer projects to succeed. We need smart people to create smart projects that push blockchain to mass adoption. The world is tired, yes, of Big Corp cashing in on our personal data. And of Big Corp controlling our infrastructure. And of Big Corp/Big Gov/Big Dictator controlling our money. But the world also demands the responsiveness, scalability, and ease of use that Big Corp has created on web and mobile. Until blockchain can provide a user experience that is delightful, we won’t see the mass adoption that we hope for. Second layer is the second step to the revolution.
Below I present three second layer projects that have big goals in blockchain and are still in their early stages. You might not have heard of these projects — they are all pre-ICO, pre-hype — but all three are well-funded, technically sound, have exceptional teams, and are looking to expose a better blockchain experience.
Counterfactual is a second layer solution that sits on top of Ethereum. Ethereum, like many first layer blockchains, is groundbreaking, but has first generation issues. Most importantly, Ethereum is expensive (a single transaction costs somewhere around $.20) and slow (it takes several minutes for a transaction to be considered final).
Counterfactual introduces a new concept — generalized state channels — that moves transactions off the blockchain, yet still gives the transactions the benefits of on the blockchain. As a result, Counterfactual transactions are cheap and fast, yet still trustless and final.
These generalized state channels are an evolution of payment channels and app-specific state channels — both of which allow users to interact off-chain over a series of transactions, and then when the users are finished, commit the entire series of transactions to the blockchain in one giant commit. This reduction to one single commit to the blockchain for a group of multiple transactions can save significant time and money.
While these payment channels and app-specific channels are very narrow in focus (currency for the former and specific apps for the latter), generalized state channels are the next step — an open, adaptable version of channels, which allow multiple apps and currencies to all interact on the same channel at the same time, all without incurring the time or cost of the underlying blockchain. You can play Chess, play checkers, pay your friend ETH for coffee, and trade tokens, all on the same channel without incurring any fees, and with instant finality.
Counterfactual is early-stage — their whitepaper was released in June — has a wicked smart team (led by by Jeff Coleman, Liam Horne, and Li Xuanji), and is backed by, among others, Vitalik Buterin, the Ethereum Foundation, and L4 Ventures.
For more details on how Counterfactual works, read my more detailed overview.
Like Counterfactual, TrueBit is out to make Ethereum transactions faster and cheaper. TrueBit, however, is targeted towards complex or large numbers of calculations, moving them off the blockchain and onto the TrueBit network, where the calculations can be solved quickly and cheaply, yet remain decentralized, trustless, and, most importantly, verified.
TrueBit accomplishes this by creating two groups of users on their network — solvers and verifiers. The solvers complete the calculations (and are paid to do so), and the verifiers check the solutions (and are also paid to do so). If the verifiers don’t agree with the solvers, then, and only then, is the underlying blockchain asked to provide a final, binding answer. If the verifiers do agree with the solvers, the result is considered true and the blockchain (and it’s time and cost) is never needed.
The TrueBit team is funded by Polychain Capital (Ryan Zurrer/Olaf Carlson-Wee), has a strong and experienced team (led by Jason Teutsch), and already has products released and working. And I think we can all appreciate the engineer-simplicity of their website.
There are lots of interesting details around how the solvers and verifiers are paid, and how the network ensures that each party is incented to do their work and to tell the truth. To learn more, read my detailed overview of TrueBit.
Agoric is out to solve a different problem — Ethereum smart contracts are buggy, and Solidity (the programming language used to create smart contracts) is difficult to program and known by relatively few developers.
And — by basing the new language on a capabilities security model (called object capability, or ocap) — Agoric creates a programming model that is more secure and easier to control. Traditional security models combine authorization and identity, while ocap separates them. Check out some of the resources on the Agoric website for a more thorough discussion of ocap and its benefits. With this improved security, smart contracts written in the new Agoric language should be less-buggy, more secure, and easier to audit.
While concepts such as ocap have been around for many years, Agoric as a company is very new. There’s no whitepaper yet, and details are scant. But the team has decades of serious experience, and is funded by Zcash(zooko), Polychain Capital (Ryan Zurrer/Olaf Carlson-Wee), and Naval Ravikant.
Those are three of the more exciting, up-and-coming second layer projects. There are many more out there, and the next 12–18 months should be a very exciting time in blockchain as these companies start releasing their projects.
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Michael Bogan is a tech enthusiast with 25 years of technical architecture, founding startups, product launches, and more. I write about blockchain, startups, and sometimes family.