Background

Blockchains...

In 2009, Bitcoin created the first blockchain that implemented a peer-to-peer digital payment network. This system was foundational and marked the beginning of the "Web3" industry.

— have the "Cold Start" problem:

While revolutionary, implementing blockchain technology is high barrier in practice:

• It must to be expensive to 'takeover' the network - typically requiring fundraising

• The tech is complex and requires deep understanding to avoid execution failures

• Adoption requires a rich ecosystem with developer tooling and liquidity paths

• The operation requires diverse, experienced Validators to avoid centralization

• The chain needs interoperability features to avoid community isolation

To read more about the challenges of building an L1 - checkout: The cost of independence

Dependent Applications:

In 2013, Ethereum attempted to solve the difficulties of building a blockchain by introducing a network that could support digital accounts capable of executing 'code' and storing 'state'. This innovation enabled the creation of apps hosted on blockchain, commonly known as dApps or Smart Contracts.

Ethereum was able to make blockchain technology more accessible to developers by abstracting away challenges involved with launching a L1.

👉 In doing so - it became the first Security Root: a chain that provides consensus, security, and communication for Nested apps.

For a more comprehensive history: Checkout the history section in our paper

Problematic Impact:

However, Ethereum's success had some unintended consequences to the industry:

• ⚠️ dependent apps were accepted as decentralized 'enough' - despite reliance on host chains

• ⚠️ security greatly centralized as Ethereum is one of few security roots

• ⚠️ innovation was directed at dependent apps instead of independent networks

• ⚠️ sovereign blockchains became increasingly rare

• ⚠️ layered architecture became the default paradigm

• ⚠️ hosts protocols trapping projects in their ecosystem became the norm

Not enough Security Roots:

Because Ethereum exists as the one of few security roots for Web3, it quickly ran into scalability issues. These issues exploded in 2017 when a game about cats overwhelmed the network, bringing Ethereum and its apps to a halt.

⚠ CryptoKitties was not an isolated incident! Checkout the full story in the Canopy whitepaper

The critical failure of 2017 ultimately led to the creation of layered technology (L2s/Rollups) which are dependent frameworks that host dApps to offload the weight of new applications.

However, dApps and layered technology are not acceptable choices for a builder because:

• ❌ can be censored by the host protocol

• ❌ are controlled by the host (centralized governance)

• ❌ lack autonomy (dependent on the host)

• ❌ have single points of failure (host protocol / sequencer)

• ❌ lose value to the host protocols (leak value to host)

• ❌ lack native interoperability with external ecosystems

• ❌ are trapped (escape requires a ground-up rebuild)

• ❌ limited scalability (constrained by the host)

Hint: Checkout Blockchain 101 to see the importance of these shortcomings!

These flaws expose a fundamental question: What makes a dApp or Rollup better than a Web2 application?

The industry ignores that dApps, Rollups, and L2s lack decentralization and sovereignty - at least not in a meaningful way that differentiates them from Web2 in practice.

🚨 IMPORTANT: These weaknesses are not just theoretical:

Read about the Ethereum censorship of Tornado Cash in 2022