Table of Contents
- Key Takeaways
- 1. Background - The Growing Modular Ecosystem
- 1.1 The Ever-Growing Number of Dapps and Networks
- 1.2 The Modular Era and the Importance of Oracles
- 1.3 Enter RedStone
- 2. Takeaway - Balancing Rapid Growth and Decentralization
- 2.1 The Oracle for the Modular Blockchain Era
- 2.2 It’s Time to Focus On Decentralization Too
- 3. Resource
Researcher
Related Projects
Key Takeaways
The modular blockchain ecosystem has grown rapidly, with approximately 120 rollups currently in mainnet and another 90 preparing to launch.
To service these blockchains effectively, oracles must be more efficient and universal. RedStone addresses this need through its comprehensive Pull and Push oracle offering and modular structure, which enables creation of bespoke solutions tailored to DeFi builders.
These features have enabled RedStone's rapid growth, and the platform anticipates enhanced decentralization and security through its upcoming token launch and EigenLayer AVS integration.
1. Background - The Growing Modular Ecosystem
1.1 The Ever-Growing Number of Dapps and Networks
1.1.1 The Early Modular Blockchain Ecosystem
The modular blockchain ecosystem has grown at a very fast pace in recent 2 years. Mustafa Al-Bassam, founder of Celestia, published “LazyLedger: A Distributed Data Availability Ledger With Client-Side Smart Contracts” in June 2019, marking the beginning of the modular blockchain concept.
Then, in October 2020, Ethereum creator Vitalik Buterin published a rollup-centric ethereum roadmap, revealing that he considers rollup networks as a medium-term scalability solution for Ethereum. The initial ecosystem includes StarkEx-based projects such as Loopring, zksync 1.0, DeversiFi, and dYdX, as well as Fuel v1, Optimism, Arbitrum, Aztec, and others, marking the beginning of the modular blockchain ecosystem.
1.1.2 L2 SDK & RaaS, A Catalyst for Ecosystem Growth
Source: L2BEAT - The state of the layer two ecosystem
In particular, general-purpose rollups like Optimism and Arbitrum have provided a great UX for existing Ethereum users by performing computation off-chain, and the entire L2 ecosystem has seen significant adoption of around $4-8B TVL during 2022. But the real catalyst for the explosive growth of the modular blockchain ecosystem is the L2 SDK.
While developer tools that make it easy to build L1 networks, such as Cosmos SDK and Polkadot's Substrate, have been popular in the past, L2 SDKs that make it easy to build L2 networks, such as Optimism's OP-Stack, Arbitrum's Arbitrum Orbit, zkSync's ZK Stack, and Polygon's Polygon CDK, have been released one after another.
L2 SDKs make it easy to customize the proof systems, settlements, data availability layers, execution environments, and more, allowing L2 developers to focus on application logic. The modular blockchain ecosystem is at its peak, especially with the emergence of Rollup-as-a-Service (RaaS) projects like Caldera, Conduit, and Gelato, which build on the L2 SDK to abstract the building process to the point where non-developers can deploy L2 networks.
For reference, according to L2beat, out of 49 rollups, 33 are built on the codebase of the L2 SDK, and out of 69 validiums & optimiums, excluding one, all was built with the L2 SDK. This shows how much the L2 SDK and RaaS have contributed to the growth of the modular blockchain ecosystem.
The modular blockchain ecosystem is also growing rapidly outside of the Ethereum ecosystem. The Celestia ecosystem is the most prominent example, and many other L2 networks are adopting NEAR DA, EigenDA, Avail, and others as their data availability layer.
1.2 The Modular Era and the Importance of Oracles
The onchain DeFi activities on a blockchain is closely related to off-chain data. Therefore, it is important for oracles to relay price information and other off-chain information on-chain. In the past, when the number of networks and dApps was small, oracle selection and adoption was less of a challenge. However, thanks to the modular stack, users are now interacting with many Dapps on many networks, and there are more considerations for dApps to take into account when adopting oracles.
1.2.1 Universality
The first key aspect is universality. In the past, each blockchain ecosystem typically had its own dedicated oracle project. Chainlink served the Ethereum ecosystem, Pyth operated in Solana, and Band was built for Cosmos. Each oracle was specifically designed for its respective ecosystem's development environment. However, with today's multitude of networks, oracle projects need the flexibility to deploy seamlessly across any network environment.
1.2.2 Cost-effectiveness
Source: Chainlink Data Streams | Chainlink Documentation
The second is cost-effectiveness. In the past, most oracles were “push oracle” oracles, where data was written periodically on-chain and read by dapps. When data is written on-chain periodically, there is a gas cost. For example, one of Chainlink's oracle nodes, 01node, generates about 2-3 transactions per hour, and recently incurred gas costs of about 0.001-0.01 ETH per transaction.
Although costs may be low when supporting few networks and data feeds, continuously paying gas fees to record periodic on-chain data is inefficient when its future use is uncertain. In particular, as modular blockchain ecosystems grow and need to support multiple data feeds to multiple networks, the cost of periodically uploading data on-chain can become prohibitive. RedStone was created to solve these problems.
1.3 Enter RedStone
1.3.1 Pull Oracle
RedStone emerged with the goal of building a “pull oracle” to solve the problem of low cost-effectiveness of existing push oracles. While Chainlink and Pyth now support pull oracles as well, Chainlink announced its pull oracle service in October 2023 and Pyth in December 2022, giving RedStone a head start, as it introduced the pull oracle concept in January 2022. RedStone maintains an advantage with support for over 60 blockchain networks, compared to Chainlink's limited coverage of only 5 chains in their pull oracle model. Wait, what is a pull oracle and how is it different from a push oracle?
Source: Chainlink Data Streams | Chainlink Documentation
Pull oracles are a way for users and dApps to pull data off-chain when they need it, rather than continuously injecting data on-chain. This means that data can be fetched on-demand, eliminating the inefficiency of gas costs when data is not being used.
The flip side of this is that data can be fetched and written to on-chain at faster intervals when needed. Considering that push oracles typically update data every 10 minutes to an hour, pull oracles can fetch data in seconds.
Pull oracles also have an advantage over push oracles in terms of versatility. Because you can use only the data feeds you need, you can get data from a much wider variety of data feeds. Pull oracles can also be utilized on more types of blockchain networks. Since the data exists off-chain, and you just need to fetch and use it on-chain, you can easily get data regardless of the on-chain execution environment.
1.3.2 Product Overview
Source: RedStone
RedStone is an oracle that provides price data for a variety of tokens, exchange rates, and more, with particular strengths in assets like LST and LRT. As you'll see in more detail below, RedStone's modular design makes it easy to swap out, add, and update components such as data sources, price feeds, validation mechanisms, and data delivery methods.
Users can pull price data from RedStone in two ways: 1) RedStone Pull Model, and 2) RedStone Push Model.
RedStone Pull Model
Source: How Data Flows to the Blockchain | RedStone Documentation
RedStone has the structure of a pull oracle, which is essentially a modular layer. The RedStone Pull Model, as discussed above, is where data is included in a user's transaction on-demand, whenever it is needed. This is more cost-effective and allows developers to handle a wider variety of price feeds and update prices in a faster cycle. The configuration layers are as follows:
Data sources: RedStone pulls data from a variety of sources, including CEXs like Binance, Coinbase, and Bybit; websites like Coingecko and Coinmarketcap; and DEXs like Uniswap, Trader Joe, and Sushiswap.
RedStone oracle nodes: Nodes pull prices from data sources, aggregate them using TWAP, LWAP, and other methods, sign them, and send them to the DDL. If a node's price is too far out of line with other nodes, it will be detected and penalized. To become a node, you need to stake RedStone tokens, but this feature is not yet implemented as the token has not been released yet.
Data Distribution Layer (DDL): The DDL is the off-chain data availability layer of the RedStone oracle. Data signed by oracle nodes is propagated through RedStone's open-source gateway or Streamr's decentralized gateway. RedStone also stores data in Arweave, which allows for inexpensive storage of massive amounts of historical data, and allows dApps to reference historical data via Arweave.
RedStone Push Model
Source: Push Model | RedStone Documentation
The RedStone Push Model is a service built on top of the RedStone Pull Model for use by dApps that want to use a traditional oracle model. Price data is continuously stored off-chain in the DDL by RedStone oracle nodes, and a group of roles called Relayers periodically passes the data from the DDL to the target on-chain, allowing dApps to use the data like a traditional “push oracle”.
The off-chain relayers can be anyone, and the data is validated on-chain anyway, so no additional trust assumptions are added.
2. Takeaway - Balancing Rapid Growth and Decentralization
2.1 The Oracle for the Modular Blockchain Era
RedStone's modular, pull oracle model, which makes it easy to swap out different components, has allowed it to grow rapidly and become the choice of many different networks and dApps. Any project can pull data from the RedStone DDL off-chain and use it, making it easy to utilize on all EVM-compatible networks, as well as non-EVM networks like Starknet, Fuel Network, Tron, NEAR, TON, Casper, and Stacks.
RedStone has the third highest TVS (Total Value Secured) among general-purpose oracles, behind only ChainLink and Pyth, and has grown rapidly in a short time, with 60+ networks and major DeFi protocols such as Pendle, Morpho, Lombard, EtherFi, and Renzo using RedStone.
2.2 It’s Time to Focus On Decentralization Too
Oracles are important for scalability and universality, but they are also important for decentralization. Although there is an element of centralization in the nature of data, if the oracle is centralized, it can create single points of failure, such as censorship, downtime, etc.
Currently, RedStone has five oracle nodes, but they're permissioned. There are also no penalty mechanisms in place yet, such as different slashing for bad data. However, this is expected to improve with the launch of the RedStone token.
Although it hasn't launched yet, according to Doakes, the utility of the RedStone token will be utilized for 1) paying for oracle usage, 2) staking to become an oracle node, and 3) voting to resolve disputes. In addition, RedStone is also planning to launch RedStone AVS, which relies on the strong cryptoeconomic security scale of EigenLayer, and this roadmap will not only support RedStone's rapid growth in the coming years, but also strengthen decentralization for robust security.
3. Resource
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