Launching a Rollup & Appchain: Everything from Idea to its Implementation

1. The Rise of AppChains Driving Scalability, Security, and Performance with Application-Specific Blockchains By Dr. Ravi Chamria, Co-founder Zeeve

2. The Idea of Application-Specific Blockchains • Application-specific blockchains are blockchains customized to operate a single application. • Instead of building a decentralized application on top of an underlying blockchain like Ethereum, developers build their own blockchain from the ground up. • Instead of having the application part of the blockchain be a Virtual-machine and decentralised applications built on top of it, appchains facilitates the development of decentralised application as the application of the blockchain itself. • Now let’s understand why, in many cases, it makes more sense to develop a decentralised application as an application-specific blockchain rather than on top of a Virtual-machine blockchain.

3. The Benefits of Appchains Scalability, customization, and security SECURITY SCALABILITY The attack surface of a Virtual-machine blockchain is large. Most of it comes from the complexity of the Virtual-machine itself. The security analysis is simpler in application-specific blockchains because you only have to consider how the different parts of your application interact with each other. Applications do not have to compete for block space in an appchain system. This improves the performance and throughput of the applications, as well as reduces the congestion and fees on the main network. CUSTOMIZATION In an appchain system, developers are free to choose a consensus mechanism, governance structures, and economic models. This gives developers more freedom and creativity to design their applications.

4. How An Application-Specific Blockchain Be Created? Three common approaches for creating such blockchains. Using Frameworks (Cosmos SDK, Substrate): Leveraging existing app-chain solutions on L1s: Rollups - Optimistic and zk Rollups: Modular tools, customization, interoperability Utilize the parent chain's security with added scalability Utilize the parent chain's security with added scalability

5. • Substrate and Cosmos are popular frameworks for developing blockchain applications. • These frameworks provide fundamental components required to build a blockchain from scratch, and you just need to blend or modify them to match the purpose of your project. Using Frameworks Cosmos SDK, Substrate • They are better compared to forking a blockchain because of their high customization and flexibility. They also have active and supportive communities to help you test your MVP or get a Validator. • Each framework has its strengths and weaknesses. The best project choice will depend on each developer’s requirements and goals. • For example, Cosmos is focused on enabling interoperability between different blockchain systems, while Substrate is focused on providing a flexible and modular platform for building custom blockchain applications.

6. Cosmos SDK: An Overview • Cosmos works as the “internet of blockchains” with the Cosmos SDK and the Tendermint consensus mechanism at its core. Appchains are called “zones” and connect to the Cosmos main chain, creating an interconnected web. of chains. • The Cosmos SDK is a development kit for building the application layer of a Tendermint-based blockchain, composed of a number of generic modules used for a blockchain’s most common functions, such as creating accounts, staking, and token management. • This open-source framework can be used for building multi-asset public Proof-of-Stake (PoS) blockchains, like the Cosmos Hub, and permissioned Proof-of-Authority (PoA) blockchains. • Anyone can create a module for the Cosmos SDK, and integrating already-built modules is as simple as importing them into your blockchain application. • The Cosmos SDK is a capabilities-based system that allows developers to better reason about the security of interactions between modules.

7. Examples of Cosmos-based Appchains Some examples of Appchains built on Cosmos are: dYdX : A decentralized exchange   dYdX is a standalone Cosmos-based blockchain featuring a fully decentralized, off-chain order book and matching engine. Osmosis: Cosmos’ Liquidity Backbone Coreum: A Layer1 Coreum is a Layer-1 blockchain designed for Real World Assets Tokenization. But unlike dYdX or Osmosis, which build a blockchain for just one application, Coreum is a blockchain for multiple applications that are all contained within a sector The largest DEX on Cosmos allows people to swap, earn, and build. As a PoS network, token holders participate in securing the blockchain through staking the protocol’s native token, OSMO $DYDX is the native token of the app chain, which needs to be staked by validators and used as the gas fee payment.

8. Substrate: An Overview Simplicity with the freedom to innovate Substrate offers creative control to build applications using open-source modules and custom. Rust macros. Innovate with low-level primitives. Composing a runtime Each pallet defines specific types, storage items, and functions to implement a specific set of features or functionality for a runtime Fully modular and flexible framework Substrate is a fully modular and flexible framework that lets you compose a chain by selecting and customizing the infrastructure components best sited to your project Building with custom pallets Customize your own substrate runtime with FRAME's modular pallets. Combine open source and custom pallets for specific app features and functionality Building with templates and modules FRAME simplifies Substrate development by offering customizable pallets for common use cases. Choose from a library of modules to build your own runtime.

9. Examples of Substrate-based Appchains or Polkadot Parachains Acala: A DeFi hub for the Polkadot network Ternoa: Evolutionary NFT Blockchain Moonbeam: EVM with Polkadot Security Acala is a decentralized finance hub that offers a multi-collateralized stablecoin, a trustless staking derivative, and a decentralized exchange platform. It is an appchain built on Polkadot using Substrate and parachains. It has its own native token (ACA) and governance model and leverages the security and interoperability of the Relay Chain. Ternoa natively combines decentralization and encryption with TEEs to turn NFTs into secured and private data containers. This design creates “True Ownership” of digital data for users. Multichain by Design Through bridges, mirroring and native Polkadot portability, Ternoa allows users to merge NFTs from all ecosystems in one place. Moonbeam delivers complete Ethereum compatibility within a Polkadot parachain environment, so developers can continue to use the programming languages and tools they’ve grown used to — but within a fast-growing and scalable Layer 1 chain.

10. • This might be the best solution if you want to leverage the benefits of app chains and love the security of L1 public blockchains. • These kinds of Appchains operate on top of existing Layer 1 (L1) blockchains and take advantage of their underlying security. AppChain Solutions by L1/l2 Subnet and Supernets • Such solutions typically have their own token. It is used for staking, as the application’s internal currency, and for voting. • Validators from the main network can help these appchains (if they agree to allocate resources to a particular application). Also, they can have their own validators with specific compliance requirements. • As of now, there are 3 major players in this segment. Polygon Supernet, Avalanche Subnet, and BNB Side chains.

11. Avalanche Subnet A Subnet is a sovereign network that defines its own rules regarding its membership and token economics. • It comprises a dynamic subset of Avalanche validators working together to achieve consensus on the state of one or more blockchains. • Each blockchain is validated by exactly one Subnet, while a Subnet can validate many blockchains. • Avalanche's advantages over other blockchains include scalability, finality, and speed. • – Avalanche has no limit on the number of subnets that can be created – The Snowball Algorithm processes transactions within 1-2 seconds – Avalanche has a high throughput with more than 4500 tps

12. Examples of Subnet-based Appchains Rymedi: A healthcare platform MELD: A DeFi Protocol and web3 Bank Rymedi is a Blockchain based healthcare platform including personal data and clinical management. It has been launched on Avalanche as a subnet. The example of Rymedi can also illustrate the extent of how customizable and flexible subnets can be on Avalanche. MELD is a non-custodial DeFi protocol for web3 finance, providing cross-chain lending, borrowing and staking on the MELD blockchain supporting the six leading blockchains as well as integrated fiat Banking.

13. Polygon Supernet • Supernets operate on the Polygon's Edge consensus client with PolyBFT consensus. • They leverage a native bridge to connect with an associated rootchain, enabling them to inherit its security and capabilities. • Supernets extend the block space available on the rootchain, providing scalability and interoperability for decentralized applications. • The Supernets ecosystem includes the most extensive suite of premium service providers, who offer various node and deployment infrastructure, indexers, explorers, oracles, and many other world-class tools necessary for building and deploying Supernets and their associated applications. (Zeeve is one of them) • Supernets employ a multi-faceted approach that leverages a combination of complementary scaling solutions to achieve maximum scalability. These solutions include layer-2 scaling techniques, parallelization, and, eventually, ZK technology.

14. Examples of Supernet-based Appchains Gnosis Pay/ Gnosis Card: a self-custodial Visa debit card   Gnosis Pay is a decentralized payment network, and Gnosis Card is a self-custodial debit card. They are utilizing a Zk-powered Supernet. It guarantees fast, secure, and scalable transactions on the Ethereum blockchain. OuterLife Utilizing a Zk-Powered Polygon Supernet:   PlayWay, the global gaming giant, has partnered with GameSwift to introduce and launch OuterLife as their entry into the web3 gaming world on Polygon Supernet. OuterLife is a web3 gaming accelerator and incubator, and it will allow PlayWay to integrate blockchain, NFTs into its famous simulator titles such as Animal Shelter, Farming Life, cafe owner simulator, and more.

15. • Ethereum rollups have emerged as a promising solution to the blockchain scalability conundrum. • Rollups offer a way to mitigate these problems while maintaining the network's security and decentralization. Ethereum Rollups OP Stack, zk Rollups • Ethereum rollups are second-layer solutions that bundle or "roll up" multiple transactions into a single proof, which is then submitted to the Ethereum main chain. • This approach allows for a significant reduction in gas fees and an increase in transaction throughput by offloading computation and storage from the main chain. • Rollups retain the security guarantees of Ethereum by using smart contracts to enforce rules and validate data.

16. How Ethereum Rollups Aid Scalability Ethereum • We can post two types of information on most blockchains: transactions and data. The storage of transaction information and on-chain processing can be heavy for the mainnet. • On the other hand, data resulting from a transaction is less heavy and remains the same no matter the number of transactions. proveFraud() execute_L2_tx(s2, tx2) !=s3 Rolled up Rolled up Rolled up • It is similar to how a cheque weighs the same irrespective of the amount on it. • So, instead of storing a whole transaction and processing it, blockchain rollups process and submit more transactions in one single piece of data. Rollup

17. 1 Types of Rollups Optimistic Rollups 2 ZK Two main types of rollups are distinguished by their underlying cryptographic proof systems: Rollups

18. The Idea of Optimistic Rollups • Optimistic rollups rely on the assumption that all transactions conducted outside of the main network are valid. • However, they provide a window for users to challenge invalid transactions by submitting fraud proof. • The invalid transaction is rejected if the fraud proof is verified, and the user who submitted the proof is rewarded. • Optimistic Rollups offer increased throughput and reduced gas fees but have a longer finality due to the challenge period. • This trade-off makes them suitable for specific use cases where instant finality is not crucial.

19. 5 Steps in Optimistic Rollups Off-chain validation Block aggegation Once a certain number of transactions have been validated, validators aggregate them into a single block. This block includes a proof that shows the validators have agreed on the state of the off-chain system. A group of validators check the validity of the transaction. If valid, the validator will include it in a block. Submitting transaction Block submission Once the block is complete, the validators will submit it to the Ethereum mainnet. The block includes a single transaction that updates the state of the Ethereum contract that corresponds to the off-chain system. After the block has been submitted to the Ethereum mainnet, it is finalized and cannot be changed. However, if there is a dispute about the validity of a transaction, anyone can submit a fraud proof to challenge the block's validity. If the fraud proof is accepted, the block is reverted, and the offending validator stake is stashed. Finality and dispute resolution

20. Benefits and Limitations of Optimistic Rollups Benefits: Challenges: Lower Gas Fees By moving computation and data storage off-chain, batching of transactions Fraud Proof Delay The fraud-proof delay, typically a week, impacts user experience and security. • • Higher Throughout Process transactions quickly without the congestion of the Base Layer Data Availability Problem Off-chain data inaccessibility or corruption hinders security • • Faster Confirmation Times Instant confirmations on the L2 chain improve transaction latency Sequencer Centralization Risk A malicious or compromised sequencer could censor, reorder or manipulate transactions, harming users and applications on the rollup. • • Compatibility with Existing Smart Contracts and Tools Support Solidity, EVM, ERC20, Metamask, etc. • Compatibility Trade-Off OP Rollups offer Ethereum compatibility but inherit its limitation like high gas fees for complex computations or storage operations • Security and Decentralization Derive security and decentralization from the base layer and fraud proofs •

21. The Concept of ZK Rollups ZK-Rollups (Zero-Knowledge Rollups) use zero-knowledge proofs to validate the correctness of a batch of transactions. • Zero-knowledge proofs allow one party to prove to another that a statement is true without revealing any information other than the statement's validity. • In ZK-Rollups, a prover generates proof for a batch of transactions that the verifier can check quickly. This process ensures that only valid transactions are included in the rollup, and the main chain does not have to spend resources on validation again. • ZK-Rollups offer fast transaction finality, high throughput, and low gas fees. • However, their main drawback is the complex cryptography involved, making implementation more challenging. •

22. What ZK Rollups Do Differently From Optimistic Rollups To minimize transaction sizes, ZK-rollups represent account indices, which occupy less space than full addresses. This approach allows for the utilization of 3 bytes of memory, as opposed to 20 bytes. Merkle Root Hash Hash Hash Hash Hash Hash Account Account Account Account 0x04b64e95c4f9f7… 0xa7ed2936e78… 0x4ecd2fce4ea3… 0x7a250d5630539 Ethereum Accounts (20 bytes) 0x04b64e95c4f9f7… 0xa7ed2936e78… 0x4ecd2fce4ea3… 0x7a250d5630539 ZK-Rollup Accounts Index (3 bytes) 0x000000 0x000001 0x000002 0x000003

23. Different Components of ZK Rollups Roll-ups Full Nodes: Even though transaction information is stored on the Ethereum network, ZK-Rollups also have full nodes. These full nodes maintain the entire state of the blockchain and enable the use of JSON-RPC API functionally. Layer 2 User Sequencer Prover Initiate transactions on the L2 zkRollup network Receive and aggregate individual transactions from users, batching them together in a specific order to create a single proof. The prover, using cryptographic tools like zk-SNARK or zk-STARKs, generates zero-knowledge proofs for the transaction batches. Rollup Light Client Verifier The Rollup light client on L2 receives the updated state information from the verifier on L1. Verifier is a smart contract on L1 & checks the validity of the zk proofs. Then it updates the contract state on L1 to reflect the latest zkRollup transactions. Layer 1

24. Benefits and Limitations of zkRollups Benefits: Challenges: Lower Gas Fees By generating zk proofs and submitting minimal on-chain data Proof Generation Cost zk Proof costs, influenced by transaction complexity and design, can impact zk-rollups' scalability; efficiency or incentives can mitigate this • • Higher Throughout Process transactions quickly without the congestion of the Base Layer - 100x • Circuit Complexity Circuit complexity, determined by design and transaction type, can impact zk-rollups' scalability; optimization or standardization can help • Faster Confirmation & Finality Instant confirmations and finality on the L2 chain improve transaction latency • Compatibility Issues Zk-rollups have limited Ethereum compatibility, requiring adaptations for developers and users; addressing this needs interoperable solutions and education. • Privacy Features: Enhances transaction privacy by using zk proofs to verify on-chain without disclosing any information • Security and Integrity Derive security and decentralization from the base layer •

25. The Newest Addition to zkRollup Stack: Polygon CDK Polygon CDK is the evolution of Supernets. It offers projects the ability to launch ZK-powered app-specific L2 Rollups for Ethereum. ● Its highly modular and devs can tailor-make chains according to their requirements by choosing Polygon CDK components: ● CDK Component Example Section All chains deployed using Polygon CDK are interoperable through a shared ZK Bridge (LXLY) with automatic access to the unified liquidity of all Polygon chains, and one-click access to the entire liquidity of Ethereum. Virtual Machine zkEVM Mode Validium Data Availability DAC Sequencer Centralized Gas Token Custom

26. Examples of Polygon CDK based App-chains Canto: A neo finance project:   It has migrated to custom ZK-powered Layer-2 designed with Polygon CDK framework. The L2 will allow Canto to achieve permissionless sovereignty and shared liquidity of Polygon chains plus Ethereum via common ZK bridges without compromising the user's security. Wirex: The global leader enabling crypto payments:   It has built an app-chain focused on handling just the payments. Wirex's initial use cases for the CDK chain will be non-custodial visa cards integrated with the Account Abstraction feature. Wirex mentioned the Polygon CDK interoperability, unbounded scalability, and advanced ZK proofs among their top reasons for building with Polygon CDK. **Capx, Aavegotchi, Gnosis pay, and Astar Network are also among the first pioneers building with Polygon CDK

27. The Future Ahead  “It turns out that in this space, oftentimes, it is not just about technology. Sometimes, it’s the network effects – the culture of the community – that is the most important thing.” • zkEVMs are still in their initial testing phase and will likely see significant battle testing through 2023. Scroll, zkSync, Polygon, and Starknet have all launched zkEVMs running in testnet. • But who will win? Justin Drake, a researcher for the Ethereum Foundation, has said,

28. ZEEVE PRODUCT Rollups as a Service (RaaS) Configurations & Flexibility Unlimited flexibility to deploy and manage your Rollup Data Indexing and Data APIs Real-time access to Data APIs with super-fast indexers Enterprise-grade Node Infrastructure Reliable nodes with load balancing, scalability and high availability Global Cloud Coverage Supports 9 cloud providers with 150+ regions across the world White-labeled Block Explorer Integrated white-labeled and feature-rich Block Explorer Node Analytics and 24x7 Proactive Monitoring Advanced analytics and 24x7 Monitoring with Alerts and Notifications Cost-optimized Super Performance Blazingly fast APIs, high throughput and scale-on-demand Production-Ready Stack with all components Faucet, cross-chain bridges, wallet infrastructure, etc Enterprise SLA 24x7 support with 99.9% uptime guarantee Migration Assistance Expert support for migration to your own Rollup infrastructure “Zeeve's strong capabilities in enterprise-grade AppChain deployments and dedication to innovation and excellence resonate well with our values at Polygon.” Sunny Kaiwar - Sr. Solution Architect |

29. Address Zeeve DeepTech Pvt Ltd 1283, ATS Greens, Sector-93A Noida, India 201304 Zeeve Technologies Ltd. 2001, Regal Tower, Business Bay, Dubai, UAE Zeeve Inc. 395 Santa Monica Place, Unit 308, Santa Monica, California - 90405 USA Dubai India Contact Europe UK Email : success@zeeve.io / ghan@zeeve.io Reach us through : www.zeeve.io

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