Charles Dray from Resonance Security continues to organize meetings between me and his company clients when he thinks there will be something interesting for us to discuss. And so last month I had a fascinating and constructive conversation with Max McKendrey from Archway about their blockchain with a difference that benefits smart contract deployers.
Yet another blockchain
Archway is a relatively new blockchain describing itself as “an incentivized L1 that allows developers to capture the value their dapps create, enabling sustainable economic models.”
Normally I am skeptical about new blockchains — there are so many of them out there it is almost impossible to keep track of them all. Very few offer any significant advantage over the older and more established chains, mainly due to the network effect. This is the observation that the more users a system has, the more value it attracts, and the better the tooling and supporting software available for the chain will become.
And Archway has an extra problem for me, which is that it uses CosmWasm for smart contracts, and therefore requires you to know Rust. My previous dalliance with Rust ended in disaster — I’m a software prototyping kind of a programmer rather than one who codes for production. I write code for research purposes, testing, and to produce proof of concept systems to ensure my inventions are feasible and can be implemented.
Compilable strongly and statically typed languages focused on safe and fast memory management hold a very important place in the software industry, but I find them horrible and slow to work with.
So why am I saying that Archway is interesting to me, despite their clunky tagline[1] and incompatible smart contract language choice?
Archway solves a problem in the smart contract space that affects every smart contract developing organization.
How do you make money with smart contracts?
Most organizations are not in the business of providing DeFi services or protocols as a charitable service.
Coming up with a new invention in the DeFi space, coding it up, testing and auditing, and then launching it is not cheap. The smart contract developer has two main on-chain methods for monetizing their work:
The risk with the first approach is that the token may be classified as an unregistered security, and both the first and second approach are vulnerable to vampire attacks.
The other option is off-chain profits by using the reputation your protocol gives you to make money through consultancy and bespoke development.
What is a vampireattack?
A vampire attack is the name given to the practice of copying and deploying an existing DeFi protocol or smart contract service, but offering better rates or more rewards than the previously established and copied protocol, to entice users and investors away.
For smart contracts, trade secrets do not work on the blockchain. The compiled bytecode for the contract needs to be deployed, which means it can be decompiled, and what is worse, the source code probably needs to be provided to “verify” the contract, as no one wants to send vast sums of cryptocurrency to a mysterious contract that you can’t even read.
And so copying a DeFi protocol is usually fairly simple. The protocol maintainers often even provide the code and test suite in a public repository on, for example, Github.
This means that the copycat has no development costs, and can use the savings to undercut the commission charged on the original protocol or offer a larger proportion of the protocol token to investors and users.
The silver crosssolution
Is there a way to compensate smart contract deployers in a manner that:
Yes — hand some of the gas fees for processing transactions to the smart contract deployer or owner. It is that simple.
And that is exactly what Archway does. Tthe gas fees are split 50/50 between the developers and the validators.
You may wonder: if smart contract developers are getting a share of the gas fees incurred by calling their contracts, wouldn’t that incentive them to make the contracts as inefficient as possible?
As it happens, the converse is true. By making your contract as efficient as possible, you reduce or even remove the risk of a vampire attack. If there is no way to reduce the costs associated with a contract providing a particular service, then the means for such an attack are removed.
The Archway design also allows developers to specify a “premium” for their contract, which is a means of hiding a commission for using the contract within the blockchain protocol. However, doing so will run the risk of another party deploying the same contract without the commission and thus executing a vampire attack.
And finally, as with Ethereum, validators get to mint the underlying blockchain token for their validation services, but unlike Ethereum, a quarter of those tokens are distributed among dapp developers.
Conclusion
As I find is always the case with blockchain, whenever you think you’ve seen it all, someone comes up with something new. And sometimes that new think is surprisingly simple yet potentially highly effective.
What Archway has based their value proposition is a concept that I think should have been in Ethereum from the very beginning.
When you think about it, this makes sense. A smart contract blockchain is only as good as the smart contracts running on it. If it is just about transfering value, you might as well use Bitcoin. And yet pretty much all of the chains out there do not explicitly provide rewards to smart contract developers.
I may have a vested interest in saying this, being a bit of a smart contract developer myself, but the contracts you produce should get a share of the value the blockchain creates.
Obligatory disclaimers and disclosures
I am not a financial advisor, and none of the above should be taken as financial advice. I have no opinion on how the underlying Archway $ARCH token will perform, nor do I hold any, and I can make no attestations as to the likelihood of the project succeeding.
I just happen to like the tweak to the incentivization system it offers.
I am also not a beneficiary of the Archway blockchain system, and have not deployed any contracts on it, as you should have deduced from the fact that said contracts would be written in Rust, and I don’t code in Rust.
Sleep tight and don’t let the vampires bite!
Footnote
[1] try something shorter and snappier, like “the blockchain that rewards smart contract developers”
