Intro
It’s the second quarter of 2024—Israel and Iran have just squared off, the SEC is still on the hunt, and Eigen, arguably the most anticipated airdrop of the year, has just shit the bed. Moreso, retail is beginning to understand that half the new tokens coming into the market are VC scams, and there’s barely any exciting thing to look forward to.
The market is as uncertain as a coin toss in a thunderstorm, and it seems that the only good thing to have happened is 0xMaki returning from a lengthy hiatus.
Legends will remember Maki from Sushiswap, but if you are new, Maki is a part of CT Lore —a software developer who prefers to keep his identity under wraps. He's not just any coder, though; he's one of the brains behind SushiSwap. 0xMaki's been pivotal in shaping SushiSwap, with one of his notable achievements being the cleverly orchestrated 'vampire attack’ that siphoned liquidity from Uniswap over to SushiSwap.
Maki and the team are back with something a bit more interesting, and we had to look into it to see if this is worth your attention. But to be honest, anyway, it’s Maki; he cooks, and we have no option than to sit at the dining table.
So if you have your plates out or, like the best of us, minted the Heroglyph NFTs before even figuring out what they are all about —take a seat at the table and let us walk you through our findings.
What are Heroglyphs? Another vampire attack?
Unlike the Sushiswap situation a few years ago, this time around, Heroglyphs is a more complimentary innovation that seeks to protect the Ethereum network from the threat of centralization and censorship. To do this, Maki and team are experimenting with the utilization of the byproducts of Ethereum’s validation process to create a more incentive-aligned net positive environment for decentralization, thereby eliminating or reducing the risks associated with the status quo of Ethereum’s proof of stake validation process. To examine how this will be done, let’s look at the current challenges with the Ethereum validation process.
Liquid staking, restaking, and POS Validation on Vitalik Chain
The Ethereum validation landscape is themed by node providers, 32 ether, and a number of liquid staking protocols that reduce the technical complexity of validation and enhance economic participation via the issuance of liquid staked tokens (LSTs) as a result of the delegation of tokens to node providers.
The pitfall, however, is that this sort of validation, at the core, doesn't decentralize the validation process beyond the democratization of economic rewards from pseudo-participation in the validation process. In fact, it poses centralization risks as the process is left to a few node runners.
Three risks associated with the consolidation of node runners are:
- A decrease in the number of node operators opening up the network to points of failure
- Fewer nodes open up the possibility of uniformity in node running mechanics, leading to a possibility of widespread vulnerability that can harm the network
- Extremely prone to governmental regulation
As such, at the moment, the validation process on Ethereum, inclusive of the themes above, can be referred to as partial validation, which is a situation where there is a consolidation of node operators at the advent of economic participation through middlemen (LSP validators).
Heroglyphs as the solution
So, here's the thing: we've talked about the issue - all that aggregation and centralization stuff - but what's the fix? Well, when you think about it, it's pretty straightforward. To tackle the problem, we need an approach that spreads out node operation more evenly, right?
I mean, if the issue is having fewer node operators due to the offshoot of the current validation process, why not figure out a way to get more stakeholders fully involved in the validation process instead of just partially? And in such a situation where this is the case, the economic and technical aspects of the system will no longer be bifurcated.
Well, this is exactly what Heroglyphs protocol is attempting to fix using a byproduct of Ethereum’s proof of stake validation called “Graffiti” to exclusively incentivize independent complete validators (ICV) in a system that’s reminiscent of the OG Bitcoin proof-of-work validation process based on foundational principles of decentralization, security, and resilience.
To further explain how this works, we will dissect the related concepts associated with heroglyphs.
- Graffiti
- Encoding & Translating
Graffiti
At the center of Heroglyph protocol’s framework, which creates an incentive system for independent complete validators, graffiti exists as a small piece of passive and arbitrary data element included in a block’s header, originally designed to be used for personal messages, identifiers, or random data.
Wait a minute, does this remind you of anything? Aha! Ordinal inscriptions!
Of course, remember that we mentioned earlier that heroglyphs are reminiscent of Bitcoin’s proof-of-work validation process and the offshoots? Yup! We were really standing on business.
For bitcoin inscriptions, images, texts, and audio (ordinals) are inscribed into a spare blockspace and attached to sats. Similarly, graffiti through two modules — an encoder and a translator plays host to value in the form of various on-chain operations and privileges embedded in the header of an Ethereum blockspace. This can range from the creation, emission, transfer, and transformation of NFTs, memecoins, decentralized gaming mechanics, etc.
The Encoder and the Translator
In simple terms, Heroglyphs encoding is the way all those values we talked about earlier are included in the graffiti. It's like embedding important info into the head of a blockspace. This can involve creating a token, setting its properties, defining metadata, and even specifying wallet addresses.
Now, the Translator acts kind of like an operator. It mines the encoded token, whether an NFT or a memecoin, and then transfers it to the recipient according to the encoded distribution or emission schedule. They basically function as smart contracts, translating the encoded information into on-chain action.
To make things even more interesting, the amount of ether needed to be eligible for validation or node operation isn’t the only theme with the 32 numeric. The graffiti is also a 32-byte limit element that can create a dilemma for the validator regarding how it’s used to encode and translate value. This encourages validators to use and manipulate the graffiti judiciously, inflating the importance and significance of the spare blockspace with which the requisite value is created.
It is within this framework that Heroglyphs exist as a form of ‘hieroglyphics,’ which translates to a system of using symbols to represent words or, in this case, using Heroglyphs tickers to represent token values. These tickers or Heroglyphs are embedded into the graffiti to be mined by a miner who translates them into on-chain operations by leasing the ticker through a Herberger leasing model.
Using this model, a ticker is accorded a value by the miner and pointed to an address on a lease, thereby paying a regular tax on that ticker. Another interesting feature of all of this is that the value a miner accords to a ticker is also the value at which another user can take over the ticker. This means that should another user accord more value to a ticker, the former user will end up losing that Heroglyphs ticker.
Long story short, complete validators enjoy the rewards or incentives from this speculation on tickers. It allows them to create special or elite tokens (NFTs or meme tokens) and have users speculate over them, earning an equitable share of fees on this pure, undiluted degenerate act.
You’re probably wondering why larger validators cannot join the fun and poop the party! You’re thinking in the right direction. The thing is, large node operators can actually be kept out of all this stuff pretty easily. That's because their withdrawal addresses are different from those of solo validators, which are usually set up as regular user accounts (EOAs). So, if we exclude validators with addresses set up as contract addresses, the partial validators can be locked out from joining in.
Why Heroglyphs?
The idea is that Heroglyphs will create a level playing field for larger node operators and complete validators through fair launches, as it presents a fairer way to mine and distribute tokens exclusively mineable by complete validators.
Another reason for doing this is to encourage complete validators or solo stakers to join the network. This method helps fix the problem where large node operators have more incentives than complete validators. Often, those with more stakes (large node operators) get picked to validate new blocks and earn rewards, leaving out those with smaller stakes or complete validators.
With Heroglyphs mining, it's about making sure complete validators get rewarded for their stakes and for being active, which gives them more influence over the Ethereum network. It's all about creating a balance where everyone's economic value and access to information are equal among all validators; something, something decentralization.
Our thoughts
Heroglyphs seem really intriguing, especially now when the market could really use some fresh innovation. But with all the excitement, there are a ton of questions popping up, especially about how to strike a balance with it all.
For something that seeks to transform the dynamics of Ethereum validation, we would want to make sure it encourages more solo validators to join the network without leaving room for ghost validators. Even though a veritable argument would be that this won't happen because mining incentives are fairly distributed among complete validators and slashing penalties reduces the chance of ghost validators emerging.
Maki and the team seem confident and capable, even though the project is still in its early phases. It's also intriguing that concerns about centralized validation heightened by the restaking narrative might be dismissed, pretty much like a ‘hold my beer moment’ thanks to Heroglyphs. However, it's important to recognize that Heroglyphs are mostly theoretical until proven otherwise.
Above all, if, by any chance, the Heroglyphs NFTs are still available for minting when this piece is published, feel free to decide on your own whether to mint them or not. Also, if you're interested in learning more about the project, we recommend joining the project's Discord.
