Ethereum, the second-largest cryptocurrency by market capitalization and the most popular platform for decentralized applications (dApps), is facing several challenges and opportunities as it evolves and grows. Among them are scalability, interoperability, and innovation, which are essential for the development and adoption of the Ethereum ecosystem.
In this article, we will explore how three projects, Arbitrum, Chainlink, and Fetch.ai, are addressing these issues and contributing to the future of Ethereum.
Arbitrum: Scaling Ethereum with Optimistic Rollups
One of the main challenges that Ethereum faces is scalability, or the ability to process more transactions per second (TPS) at lower costs and faster speeds. Currently, Ethereum can only handle about 15 TPS, which is far from sufficient to meet the growing demand for dApps and DeFi (decentralized finance) services.
Moreover, the high network congestion leads to high gas fees, which are the costs of executing transactions and smart contracts on Ethereum. These fees can sometimes exceed the value of the transactions themselves, making them impractical and unaffordable for many users.
To solve this problem, several scaling solutions have been proposed and developed, such as sharding, sidechains, and rollups. Among them, rollups are considered to be one of the most promising and effective techniques, as they can increase the throughput of Ethereum by orders of magnitude while maintaining its security and decentralization.
Rollups are essentially layer-2 networks that bundle or roll up many transactions into a single transaction that is verified and settled on the main Ethereum layer-1 network. This way, rollups can offload most of the computation and storage from layer 1, reducing the network load and the gas fees.
There Are Two Main Types of Rollups: Zero-Knowledge Rollups (ZK-rollups) and Optimistic Rollups (ORs).
ZK-rollups use cryptographic proofs, called zero-knowledge proofs, to verify the validity of the transactions on layer-2, without revealing the details of the transactions.
ORs, on the other hand, use a different approach, based on the assumption that most transactions are valid unless proven otherwise. ORs allow anyone to submit a fraud-proof, which is a challenge to the validity of a transaction, within a certain time period, called the challenge period. If the challenge is successful, the transaction is reverted and the challenger is rewarded. If the challenge is unsuccessful or no challenge is submitted, the transaction is finalized and settled on layer 1.
One of the leading projects that is implementing ORs is Arbitrum, a web3 services platform that aims to provide the most advanced blockchain scaling technology in the industry. Arbitrum was founded in 2017 by a team of researchers from Princeton University and has received funding from prominent investors, such as Coinbase Ventures, Pantera Capital, Mark Cuban, and Polychain Capital1.
Arbitrum launched its mainnet beta in May 2023 and has since attracted over $2.5 billion in total value locked (TVL), making it the largest Ethereum layer-2 network by TVL2. Arbitrum has also integrated with many popular dApps and DeFi protocols, such as Uniswap, Aave, MakerDAO, SushiSwap, and Curve, offering users lower fees and faster transactions.
Arbitrum’s OR technology, called Arbitrum Nitro, is designed to boost throughput, lower transaction costs, and achieve compatibility with Ethereum, all while upholding Arbitrum’s security standards. Nitro exists in two different variants, Arbitrum Rollup and Arbitrum AnyTrust.
Arbitrum Rollup is the main product of Arbitrum, which leverages Ethereum’s security and reduces transaction fees by an order of magnitude, making scalability possible.
Arbitrum AnyTrust is a variant of Arbitrum Rollup, designed for apps that require low transaction costs, such as gaming and social projects. AnyTrust chains rely on a Data Availability Committee that settles on Ethereum, making secure web3 gaming and social finally possible.
Arbitrum also offers another product, called Arbitrum Orbit, which allows users to launch their own chain into Arbitrum Orbit, an interconnected universe of customizable chains that settle to Arbitrum One or Nova. Orbit chains are fully permissionless, with dedicated throughput, increased gas fee reliability, and more.
Orbit chains can also leverage Arbitrum’s interoperability features, such as the Cross-Chain Interoperability Protocol (CCIP), which enables seamless communication and data transfer between different blockchains, including Ethereum, Bitcoin, and others.
Arbitrum has recently faced some challenges, such as network outages, user complaints, and declining network usage metrics. Between Sept. 9 and Sept. 11, the price of Arbitrum (ARB) tokens experienced a sharp decline of 14.5%, marking its lowest point in history. Moreover, Arbitrum’s daily active users (DAUs) and daily transactions have decreased significantly since its peak in early September, indicating a loss of user interest and activity.
However, Arbitrum’s team has been working hard to resolve the issues and improve the user experience, such as launching a new campaign, called Odyssey, to incentivize users to explore and use Arbitrum dApps, and announcing new partnerships and integrations, such as with Chainlink and Fetch.ai.
Chainlink: Connecting Ethereum with the real world
Another challenge that Ethereum faces is interoperability, or the ability to communicate and exchange data and value with other systems, such as other blockchains, traditional databases, cloud services, and real-world events.
Interoperability is crucial for the development and adoption of the Ethereum ecosystem, as it enables more use cases, functionality, and innovation for dApps and smart contracts.
However, Ethereum, like most blockchains, is designed to be isolated and self-contained, meaning that it cannot access or verify any data or information outside of its own network. This limits the potential and utility of Ethereum, as it cannot interact with the vast amount of data and resources that exist in the real world.
To solve this problem, several solutions have been proposed and developed, such as bridges, oracles, and cross-chain protocols. Among them, oracles are considered to be one of the most essential and widely used techniques, as they can provide reliable and secure data feeds to smart contracts, enabling them to execute based on real-world conditions and events.
Oracles are essentially intermediaries or agents that connect blockchains with external data sources, such as market prices, weather data, sports outcomes, and more. Oracles can also perform the reverse function, by sending data from blockchains to external systems, such as triggering payments, notifications, and actions.
One of the leading projects that is providing oracle services to Ethereum and other blockchains is Chainlink, a decentralized blockchain oracle platform that aims to create a fairer world by unlocking the vast potential of hybrid smart contracts.
Chainlink was founded in 2017 by Sergey Nazarov and Steve Ellis, and has received funding from prominent investors, such as Google, Oracle, SWIFT, and Binance.
Chainlink is the most widely used oracle network in the industry, with over 1,000 integrations, including dApps, DeFi protocols, blockchains, enterprises, and data providers. Chainlink is also the most secure oracle network, with over $35 billion in total value secured, and over 1,000 independent node operators that provide high-quality and tamper-proof data feeds.
Chainlink’s technology enables the creation of hybrid smart contracts, which are smart contracts that combine on-chain code with off-chain computation and data, creating more advanced and powerful applications that can leverage the best of both worlds. Chainlink’s technology consists of several components, such as:
- Chainlink Core: This is the software that runs on Chainlink nodes, which are the entities that provide oracle services to smart contracts. Chainlink Core allows nodes to connect to any blockchain, any API, and any external system, and to perform any computation or task required by the smart contract.
Chainlink Core also allows nodes to form decentralized oracle networks (DONs), which are groups of nodes that collectively provide data feeds or perform computations, increasing the security, reliability, and scalability of the oracle service.
- Chainlink Decentralized Data Model (DDM): This is the framework that defines how data is sourced, aggregated, and delivered by Chainlink nodes and DONs. The DDM allows users to customize and optimize their data feeds according to their needs and preferences, such as data quality, cost, latency, and frequency.
The DDM also allows users to access a variety of data sources and types, such as market data, weather data, gaming data, and more.
- Chainlink External Adapters: These are modules that extend the functionality and compatibility of Chainlink nodes and DONs, by allowing them to connect to any external system or API, regardless of the format, protocol, or authentication method.
External adapters enable Chainlink nodes and DONs to access and provide any data or service that exists in the real world, such as cloud computing, random number generation, verifiable credentials, and more.
- Chainlink Price Feeds: These are pre-built and ready-to-use data feeds that provide high-quality and up-to-date market data for various assets and pairs, such as cryptocurrencies, fiat currencies, commodities, stocks, and more. Chainlink Price Feeds are powered by DONs that aggregate data from multiple independent and reputable sources, ensuring data accuracy, reliability, and security.
Chainlink Price Feeds are widely used by many dApps and DeFi protocols, such as Aave, Synthetix, Uniswap, and more, to power various functions and features, such as lending, borrowing, trading, and derivatives.
- Chainlink VRF (Verifiable Random Function): This is a service that provides provably fair and verifiable randomness to smart contracts, enabling them to generate random outcomes that are unpredictable, unbiased, and tamper-proof. Chainlink VRF is powered by DONs that use cryptographic proofs to verify the randomness generation process, ensuring its security and transparency.
Chainlink VRF is widely used by many dApps and gaming platforms, such as PoolTogether, Axie Infinity, Gods Unchained, and more, to power various functions and features, such as lottery draws, loot drops, breeding, and more.
Chainlink has recently announced some major developments and achievements, such as:
- Launching the Chainlink Cross-Chain Interoperability Protocol (CCIP) on Arbitrum One, a layer-2 scaling solution for Ethereum, giving developers access to Chainlink’s solution, which taps into Arbitrum’s high-throughput, low-cost scaling.
The CCIP is a universal standard that enables seamless communication and data transfer between different blockchains, including Ethereum, Bitcoin, and others. The CCIP allows users to access any data or service from any blockchain, regardless of the network or protocol, creating a more connected and interoperable blockchain ecosystem.
- Reaching a new milestone of over 1,000 integrations, making Chainlink the most widely used oracle network in the industry. Chainlink has integrated with many leading dApps, DeFi protocols, blockchains, enterprises, and data providers, such as Aave, Synthetix, Uniswap, Polygon, Google, Oracle, SWIFT, and more, providing them with reliable and secure data feeds and services.
Chainlink has also integrated with many innovative and emerging projects, such as Fetch.ai, a Cambridge, U.K.-based artificial-intelligence lab with a penchant for crypto that has launched a service to combat the risk of losses across the experimental decentralized finance (DeFi) space.
- Launching the Chainlink 2.0 whitepaper, which outlines the vision and roadmap for the next generation of Chainlink, which aims to create a decentralized meta-layer that abstracts away the complexity and limitations of blockchains, and enables the creation of universally connected hybrid smart contracts.
Chainlink 2.0 introduces several new concepts and features, such as:
o Decentralized Services Networks (DSNs): These are networks of Chainlink nodes and DONs that provide various services and functions to smart contracts, such as data feeds, computation, storage, randomness, and more. DSNs are modular, composable, and customizable, allowing users to create and access any service or function they need, and to optimize them according to their preferences and requirements.
o Chainlink Keepers: These are services that monitor and trigger smart contract functions based on predefined conditions and events, such as time, price, or state changes. Chainlink Keepers enables smart contracts to automate and coordinate their operations, such as rebalancing, liquidating, harvesting, and more, without relying on centralized or unreliable third parties.
o Chainlink Decentralized Identity (DID): This is a service that provides verifiable and self-sovereign identity to smart contracts, enabling them to prove their identity and attributes, such as ownership, reputation, or credentials, without revealing their private information or relying on centralized or trusted authorities. Chainlink DID enables smart contracts to access and provide more personalized and secure services and products, such as KYC, AML, credit scoring, and more.
Chainlink has also faced some challenges, such as competition, criticism, and controversy. Chainlink competes with other Oracle projects, such as Band Protocol, API3, and The Graph, which also aim to provide data and services to smart contracts, and claim to have some advantages over Chainlink, such as lower costs, higher performance, and better governance.
Chainlink has also been criticized for its centralized and opaque nature, such as its reliance on a single token, LINK, for its operations and incentives, its lack of transparency and accountability for its node operators and data sources, and its vulnerability to attacks and manipulation.
Chainlink has also been involved in some controversy, such as the Zeus Capital report, which accused Chainlink of being a fraud and a scam, and attempted to short-sell its token, resulting in a legal dispute and a backlash from the Chainlink community.
Fetch.ai: Innovating Ethereum with AI and multi-agent systems
Another challenge that Ethereum faces is innovation, or the ability to create new and novel applications and use cases that can attract and benefit more users and developers. Ethereum, as the most popular and established platform for dApps and smart contracts, has a large and diverse ecosystem of projects and communities, covering various domains and sectors, such as DeFi, gaming, NFTs, and more.
However, Ethereum also faces some limitations and drawbacks, such as complexity, rigidity, and inefficiency, which hinder its potential and utility. Ethereum needs to constantly innovate and improve, to keep up with the changing needs and expectations of its users and developers, and to maintain its competitive edge and relevance in the industry.
To solve this problem, several solutions have been proposed and developed, such as layer-2 networks, cross-chain protocols, and alternative platforms. Among them, one of the most innovative and ambitious projects that is building on and enhancing Ethereum is Fetch.ai, a Cambridge, U.K.-based artificial-intelligence lab with a penchant for crypto that has launched a service to combat the risk of losses across the experimental decentralized finance (DeFi) space.
Fetch.ai is a platform that combines blockchain, AI, and multi-agent systems, to create a decentralized digital world, where autonomous software agents can perform useful economic work on behalf of individuals, machines, and organizations.
It was founded in 2017 by a team of experts in AI, machine learning, and blockchain, and has received funding from prominent investors, such as Outlier Ventures, Binance, and Bitmain. Fetch.ai has also partnered and collaborated with many leading companies and institutions, such as Bosch, Cambridge University, IOTA, Ocean Protocol, and more, to explore and develop various applications and use cases for its technology.
Fetch.ai’s technology enables the creation of a decentralized network of intelligent agents, which are software entities that can act independently and autonomously, without human intervention or supervision.
Intelligent agents can represent themselves, or any data, device, service, or resource, and can interact and cooperate with other agents, using AI and machine learning, to achieve their goals and objectives. Intelligent agents can also access and provide any data or service that exists in the real world, such as market data, weather data, transportation data, and more, using oracles and external adapters.
Meanwhile, it can perform any computation or task that is required by its users or themselves, such as optimization, prediction, classification, and more, using decentralized computation networks.
Fetch.ai’s technology consists of several components, such as:
- Fetch.ai Agent Framework: This is the software development kit (SDK) that allows developers to create and deploy intelligent agents on the Fetch.ai network, or any other compatible network, such as Ethereum. The Agent Framework provides various tools and libraries, such as agent languages, protocols, skills, and behaviors that enable developers to customize and optimize their agents according to their needs and preferences.
The Agent Framework also allows developers to access and use various services and functions provided by the Fetch.ai network, such as discovery, communication, negotiation, and execution.
- Fetch.ai Collective Learning: This is a service that allows intelligent agents to collaboratively train and improve machine learning models, without compromising their data privacy or security. Collective Learning enables agents to share and aggregate their local data and model updates, using secure and decentralized protocols, such as federated learning, differential privacy, and homomorphic encryption.
Collective Learning enables agents to create and access more accurate and diverse machine learning models that can benefit various domains and sectors, such as healthcare, finance, and energy.
- Fetch.ai Autonomous Economic Agents (AEAs): These are a special type of intelligent agents that can perform economic work on behalf of their users or themselves, such as buying, selling, trading, and investing. AEAs can leverage the power of AI and machine learning, to optimize their strategies and decisions, and to adapt to changing market conditions and user preferences.
AEAs can also leverage the power of blockchain and smart contracts, to execute their transactions and agreements, and to ensure their security and transparency. AEAs can benefit various domains and sectors, such as DeFi, gaming, NFTs, and more.
Fetch.ai has recently launched some new products and services, such as:
- Fetch.ai Agent Mettalex: This is a service that allows users to create and deploy AEAs that can trade on Mettalex, a decentralized exchange (DEX) for commodities and crypto derivatives. Mettalex is powered by Fetch.ai and Binance Smart Chain, and offers users access to various markets and instruments, such as steel, iron ore, gold, and more, with low fees, high liquidity, and no slippage. Mettalex also offers users access to various features and tools, such as leverage, hedging, and risk management.
Fetch.ai Agent Mettalex enables users to automate and optimize their trading strategies and decisions, using AI and machine learning, and to execute their trades and contracts, using blockchain and smart contracts.
- Fetch.ai Agent Framework v1.0: This is the latest and most advanced version of the Agent Framework, which introduces several new and improved features and functionalities, such as:
o Agent Land: This is a web-based interface that allows users to easily create, manage, and monitor their agents, without requiring any coding or technical skills. Agent Land enables users to access various templates, skills, and protocols that can help them customize and optimize their agents according to their needs and preferences.
Agent Land also enables users to access various services and functions provided by the Fetch.ai network, such as discovery, communication, negotiation, and execution.
o SOEF (Simple Open Economic Framework): This is a service that allows agents to discover and communicate with other agents, using a common language and protocol, called OEF (Open Economic Framework). SOEF enables agents to register and advertise their data, services, and resources, and to search and query for other agents that match their criteria and requirements.
SOEF also enables agents to negotiate and agree on the terms and conditions of their interactions, and to execute their transactions and contracts, using blockchain and smart contracts.
o ACN (Agent Communication Network): This is a service that allows agents to communicate and exchange data and messages with other agents, using a secure and decentralized protocol, called p2p (peer-to-peer). ACN enables agents to establish and maintain connections and channels with other agents, and to send and receive data and messages, such as requests, responses, proposals, and acceptances.
ACN also enables agents to verify and authenticate the identity and reputation of other agents, and to ensure the integrity and confidentiality of their data and messages.
Fetch.ai has also announced some new partnerships and integrations, such as:
- Integrating with Chainlink, a decentralized blockchain oracle platform that aims to create a fairer world by unlocking the vast potential of hybrid smart contracts. Chainlink and Fetch.ai have launched the Chainlink Cross-Chain Interoperability Protocol (CCIP) on Arbitrum One, a layer-2 scaling solution for Ethereum, giving developers access to Chainlink’s solution, which taps into Arbitrum’s high-throughput, low-cost scaling.
The CCIP is a universal standard that enables seamless communication and data transfer between different blockchains, including Ethereum, Bitcoin, and others. The CCIP allows users to access any data or service from any blockchain, regardless of the network or protocol, creating a more connected and interoperable blockchain ecosystem.
- Partnering with Festo, a German multinational industrial automation and control company, to explore and develop various applications and use cases for collective learning and multi-agent systems, in the domains of manufacturing, logistics, and energy. Festo and Fetch.ai have created a proof-of-concept (PoC) that demonstrates how intelligent agents can collaboratively train and improve machine learning models, without compromising their data privacy or security, using collective learning and federated learning.
The PoC also demonstrates how intelligent agents can optimize and coordinate their operations, such as production, distribution, and consumption, using multi-agent systems and smart contracts.
Fetch.ai has also faced some challenges, such as adoption, regulation, and education. Fetch.ai has a relatively low adoption rate, compared to other blockchain and AI projects. This is because it has a complex and novel technology that requires a high level of technical knowledge and skills, to understand and use. Fetch.ai also faces some regulatory and legal uncertainties, as it operates in a new and emerging field that is not well-defined or recognized by the existing laws and authorities.
Fetch.ai also faces some educational and awareness barriers, as it needs to educate and inform its potential users and developers, about the benefits and opportunities of its technology, and to overcome the misconceptions and fears that surround AI and blockchain.
The Parting shot
Fetch.ai, Arbitrum, and Chainlink are three of the most innovative and ambitious projects that are building on and enhancing Ethereum, addressing its challenges and opportunities, such as scalability, interoperability, and innovation. These projects are creating a more advanced and powerful Ethereum ecosystem that can enable more use cases, functionality, and innovation, for dApps and smart contracts.
These projects are also creating a more open, transparent, and accessible digital world, where users can access and provide any data or service, from any system or network, using AI and blockchain.
