The Future of Pontem with Aptos
Table of Contents
Where We’ve Been
The story of blockchains is incredibly short. Though it feels strange to say for those of us who work and live in a crypto-powered world, this technology has existed for barely more than a decade.
It all begins with crypto’s immaculate conception: in 2008, Satoshi Nakamoto’s Bitcoin whitepaper was shared to a cryptography email listserv. In 2011, Litecoin and other alt-coins appeared, bringing iterative improvements to blockchains. In 2014, Ethereum launched, heralding the future of smart contracts, enabling NFTs, DeFi and play-to-earn gaming. A few years later, adoption exploded, with ultra-fast chains like Solana and Avalanche leading the next wave. Now, just 14 years after the Bitcoin whitepaper, we are seeing the next generation of L1 projects like Aptos built with the Move VM, and aiming for mass adoption by finally solving the blockchain trilemma: networks which are decentralized, secure, and scalable. Aptos aims to power a regulated global financial system for billions of people in Web3.
Inspired by this history, we are training our eyes on the future. What barriers to blockchain adoption remain? How will blockchains continue to improve and evolve? Who are their future uses? What are the untapped markets for adoption?
We have spent the past few years building products for the Diem blockchain and its Move programming language. The Diem project, seeded by Meta and others like Shopify and Uber in the Diem Association and later acquired by Silvergate Bank, was designed for global financial inclusion. Aptos, a project created by former Diem and Meta engineers, are picking up where Diem left off, building infrastructure to support billions of users for worldwide adoption. In addition, this project aims to reduce the global unbanked population: people with limited or no access to financial tools and institutions. We continue to believe these goals are incredibly important for advancing the future of blockchains and the values of our space.
To that end, we are paying attention to two key intertwined trends in today’s crypto landscape: 1) global adoption; and 2) scalability and usability. Crypto adoption continues to grow worldwide. However growth is slowing in major financial markets like the US and China, according to Chainalysis. Meanwhile, countries like Vietnam, Pakistan, Ukraine, and Kenya are seeing surges in the amount of value transferred on-chain, especially when weighed by per-capita purchasing power. While the current market hype is dominated by NFTs, collectibles, and play-to-earn gaming, which take up much of crypto’s cultural oxygen, most worldwide growth is actually in easy-to-use centralized platforms like Coinbase and highly lucrative DeFi tools like Uniswap. To us, this suggests a clear way forward for the blockchain industry: simple, scalable tools that use the inherent advantages of crypto to integrate the current centralized landscape with a new decentralized financial system that is inclusive, powerful, and global.
We identify three elements which are needed to continue and expand on this trend:
- Global regulatory clarity that a) nurtures innovation, b) protects individual property rights and privacy, and c) is consistent across borders to enable international operations.
- A full suite of crypto-based financial use cases beyond payments and trading, whose reliability, speed, and affordability compete with and outperform centralized financial tools like Robinhood & Coinbase and traditional financial instruments like stocks & bonds.
- Industry-wide standards for interoperability and security, particularly with regard to smart contract tools, libraries and frameworks.
So what does the future look like? We see an interconnected, decentralized financial system, accessible and useful to everyone with a mobile device. While significant quantities of institutional cash have flowed into crypto, the same can not be said for decentralized applications, or dApps. In this way, we identify an “adoption gap” in the space: the traditional financial institutions have adopted crypto to varying degrees as an investment asset, but have not fully committed to deploying smart contracts for use cases like DeFi, even as retail customers increasingly recognize its potential for yield and cost savings. That means that traditional enterprises, both mission- and profit-driven, aiming for global financial inclusion will engage more fully with the DeFi revolution. Or, DeFi will replace the institutions that don’t adapt to Web3. At Pontem, we intend to provide infrastructure for both possibilities, as we think the world will settle somewhere in the middle of this spectrum.
We believe the Diem blockchain, now Aptos, is the most technically advanced project for the mission of global financial inclusion. Diem aimed to be incredibly reliable, with no downtime between transactions and deterministically fast finality times. They innovated on modern consensus algorithms like HotStuff and also built the Move programming language. Move is purpose-built for highly scalable blockchains, enabling fast transaction times and high throughput. It is also designed to be blockchain agnostic making it ideal for dApps with multichain deployments. Move’s use of the native data type ‘resource’ for tokens instead of smart contracts makes it safer than Solidity. Move resources also make it easy to customize properties for assets. Altogether, these features allow developers to build world-class, institutional-grade dApps on Move.
The venture capital market is betting on the success of this technology. Aptos, founded by a large part of the Meta team that built Diem, is creating an entirely new and independent Layer 1 blockchain focused on Web3 mass adoption. Major industry players are investing in the original mission to bring crypto to billions by enabling new use cases based on Move. With a background at top management consulting firm BCG and an executive strategy role at Consensys, CEO Mo Shaikh brought Diem Association members like Coinbase to Aptos’ $200 million raise, led by a16z crypto and Multicoin. As part of the mission to get to 1 billion users, they are prioritizing “absolute safety, extensible scalability, and credible neutrality” as bedrocks of institutional and individual adoption.
Aptos builds on Diem’s key innovations, including the Diem-BFT, a derivative of the Hot Stuff Byzantine Fault Tolerant (BFT) consensus mechanism used in Cosmos. With this consensus mechanism, along with a block verification system that analyzes validators' reputations and synchronizes their votes, Aptos can achieve sub-second finality times with high throughput. Aptos also emphasizes security by coupling the deterministic Move VM with Move’s safe asset management of tokens as native ‘resource’ data types. This makes writing smart contracts much safer for developers. Additional private key rotation and recovery protocols add to an industry-best user and developer experience.
The Aptos team has also optimized scalability and speed, reaching throughputs of “130k transactions per second with only 32 cores in our execution only benchmark” by isolating and improving the consensus protocol, execution pipeline, and authenticated data structures. Having managed the data infrastructure for billions of users at Meta (previously Facebook), CTO Avery Ching and his team of blockchain and data engineers are the world’s foremost experts in distributed computing, capable of maintaining a reliable and highly available blockchain. Remember the time Facebook went dark for six hours, the only major outage in the last 20 years? It must have been overshadowed by crypto Twitter Apes complaining about forced liquidations during one of Solana’s 48 hour outages.
We anticipate that the market will quickly discover the benefits of security, scalability and usability of the Move VM. This will lead to more demand from app developers who in turn will demand the language be natively integrated into the L1 blockchains they are already deployed to so they can maintain one codebase for their business logic that is deployed across a distributed cloud of blockchain infrastructure which rank differently across the blockchain trilemma of decentralization, security and scalability.
Where We’re Going
The next wave of adoption will be led by enterprises. Centralized organizations are valuable for most mainstream customers using DeFi because it allows regular users to outsource the very important services of safe private key management and maintenance of infrastructure which avoids negative externalities like lost funds, slashing and impermanent loss. This wave will be hallmarked by dethroning one of the most dominant elements of today’s blockchain space: the Ethereum Virtual Machine. While Ethereum and the EVM is a benevolent dictator, the emperor has no clothes. The EVM's vast user base of developers creates a network effect that allows new dApps to launch quickly, but its scalability issues are coming to a head and causing market share loss to new entrants like Cosmos Solana and Polkadot. Although scalability challenges are being addressed by the previous generation of L1s, security, reliability and usability are still large barriers for institutions like governments and companies to trust migrating their mission critical infrastructure like trades to the various public blockchains forming a fragmented cloud of decentralized compute and storage. Liquid staking is how companies like Kraken are first leveraging DeFi on behalf of customers for yield and cost savings. Staking is generally more secure since it is managed by the core protocol. However, the risks of smart contract hacks have to significantly decrease for companies to feel comfortable adopting dApps like AMMs with sufficient liquidity for low slippage trades to extend the cost savings and liquidity staking rewards to their customers.
Simply put, Ethereum is risky for enterprises, largely because of the Solidity programming language. Even Solidity creator and Ethereum co-founder Gavin Woods wanted to move past the EVM to other standards like Rust when he launched Polkadot. Solidity has serious problems, particularly with safety. Once a smart contract is deployed, it is immutable without native access control, meaning bugs and vulnerabilities are nearly impossible to correct. It is also prone to reentrancy attacks, which is what took down the infamous DAO in 2016. This showcased the mutability of Ethereum through the inadvertent birth of the angsty, rebellious Ethereum Classic, during a contentious hard fork. It’s no wonder that the fastest-growing applications (measured by total value locked and users) are on speedier blockchains built on other virtual machines, such as Fantom (Solidly), Avax (JOE), and Solana (Serum).
This is a natural part of the evolution of any technology. Ethereum was first to smart contracts, illustrating the vast potential of generalized computing for use cases beyond transacting and storing value. However, it was also the first martyr, as unintended consequences from early design decisions led to hacks and scalability issues. Now, numerous next generation blockchains have appeared with solutions for its shortcomings, using on-chain governance, proof of stake consensus mechanisms, and no hard forks, among other innovations.
This happens with any technology; it just so happens that blockchains move quickly. The internet took four years to develop and connected only four computers in 1969. It did not take off until the 1990s. Now, 52 years later, the Fortune 500 is dominated by internet companies. Remember that we are just 14 years from the Bitcoin whitepaper. Crypto is moving faster than any technology in history. That means we need to enable innovation at light speed or risk being stuck in the sands of time. We must evolve our existing systems and create new ones beyond what we have previously imagined. Move is now at the forefront of this evolution
What’s Next for Pontem?
The burgeoning ecosystem of Move-based, inclusion-focused infrastructure is where Pontem has a competitive advantage. Over the past four years, our team has developed deep expertise in Move. After working firsthand with the tech developed by Meta and Diem engineers, we knew we had to be ‘first Movers’ on developing a Move Virtual Machine to expand the reach of this incredible technology. Our skill set encompasses the essential building blocks for modern blockchain development and we feel we are not just well-positioned for the future, but also in a unique position to build it. Given this unique position we are in, we will shift our business model to create the first product studios for the Aptos Blockchain. With our skills and experience, we will help grow and develop this nascent ecosystem and capture value across the technology stack by building core primitive dApps necessary for the Aptos L1 to be used by billions of people. We will work with incumbent dApps, infrastructure providers and L1s to help them transition to Move. Where we identify market gaps, we will build the core elements ourselves and make upgrades that stay up to date with innovation
We believe Move is the way forward, so we will support the teams carrying the torch. Through a partnership with Aptos, we will leverage our expertise to bring the first Move-native dApps to market. We will also make our tooling interoperable with all Move language blockchains to build the necessary infrastructure for developers and users to onboard onto Move-based chains and transition to use our protocols on Aptos.
Why Aptos? Aptos is not only the most developed Move-based chain, but it also leverages the best features of Diem built by Meta engineers over many years, such as the upgradeable BFT consensus protocol. They have also done rigorous testing on the Aptos Core client, enabled account safety procedures such as key rotation and recovery, and optimized the Tx execution pipeline leading to high throughput and fast finality. This all leads us to believe that Aptos will be one of the first Layer 1s to capture a billion users (if Bitcoin doesn’t get there first.)
We are going to first build the next generation of dApps with streamlined experiences enabled by Aptos and Move. This will fuel mainstream adoption globally for both customers and institutions. We intend to pick up where Diem left off, joining the people who built it to bring the first billion users to blockchain. This is a staggering leap in scale; only 46 million Americans report owning BTC according to a 2021 poll by NYDIG.
We have already developed a fork of the Diem Move Virtual Machine which can be readily deployed to other modern chains like Polkadot, Cosmos, Avalanche, and more. Our goal is for Move to flourish, so we plan to deploy in the future as the Move dApp ecosystem matures and the need grows for Move environments in other L1s. We will also research developing a new Ethereum VM that is compatible with the Move VM to connect the two technologies and allow dApp developers to enjoy all of Move’s benefits. This will allow them to migrate gradually and carefully, without the risk and expense of doing it in one monolithic app, and be the standard for migrating to Move VM deployments from Solidity on all L1s.
To other Layer 1s, we come in peace. Our mission is to grow the pie for the entire ecosystem. What we are working on benefits everyone. The Move Virtual Machine’s improvements to security, scalability, and usability are essential for all of us as we rely more on blockchain financial infrastructure. We intend to make the Move VM interoperable with other L1s and onboard a new generation of blockchain developers who can build the next wave of mainstream blockchain dApps.
We aim to unite not only the nascent factions of Move protocols, but also the entire blockchain ecosystem to agree on standards for interoperability and backwards compatibility with Move. In the land of Blockchain, where Solidity and Vyper lie, Move is the one language to rule them all, the one to find them, the one to bring them all, and in the transparency of a blockchain, bind them together. We want to spread the word of this new blockchain lingua franca.
So, this is where we are going. We are betting big on Move. We are working with the people who pioneered it to build an ecosystem around it. Move will power the most performant dApps in the world and the decentralized future of finance. And this all serves the mission of providing financial infrastructure and inclusion for all, by onboarding the entire world.
We will aim to launch our first product by the end of year aligned with the mainnet release of Aptos. Expect innovation stemming from our research into Move-compatible AMMs, EVMs and wallets. We will also update our existing development tooling, such as the Move Playground browser editor, to be compatible with Aptos to onboard developers onto Move. Our tooling will be an entrypoint for Move developers and raise awareness for Pontem products deployed on Aptos accessible to enterprises and other protocol developers through easy to use APIs. Long term we also aim to bring Move to L1s like Polkadot and Avalanche to herald standards across the ecosystem that will grow the pie for all the L1s supporting it. Our detailed roadmap will be released soon on our website and community channels, so stay tuned!
What is Pontem building?
Short term, we will focus on deploying the first Move-based applications in this emerging ecosystem, such as AMMs and liquid staking. We also see a big opportunity in a Move-compatible Ethereum Virtual Machine, and the underlying infrastructure and tooling for interoperability.
Later on, we will deploy our WASM Move Virtual Machine to popular L1 blockchains like Polkadot, Cosmos, and Solana to enable applications to manage one move codebase across L1s.
Where will Pontem launch its token first?
What is happening to the Polkadot / Kusama testnet?
The incentivized testnet program will continue until the end of April, but node operators may need to migrate at some point to test our new applications. We will reward all participants in the incentivized testnet program either in their choice of NOX tokens when we launch on Kusama or in a conversion to tokens launched in the future. We will share more details on this in a separate post.
Will there be a Kusama crowdloan?
Likely not this year. We will aim to expand to Polkadot and Kusama once there is enough demand for the Move VM outside of Aptos and Sui. However, to enable this novel tokenomic concept, we are researching a new method that will offer yield through a combination of liquid staking and bridging liquidity to our apps launched in the future. More to come on this soon, but for now, you may do as you will with your KSM.
What will happen to the Nox token?
We are intrigued by the novel concept of a separate token for a canary network implicit in assumption to test “chaos” in applications, so we may launch something like this for Move VM-based networks. But for now, we are putting it on the shelf.