NIP-3: Launch of Status Layer 2 Rollup Chain

Proposals
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Proposal Information

Proposal Name: Launch of Status Layer 2 Rollup Chain

Author(s): Status Core Contributors

Date of Submission: Tuesday, November 7th, 2023

External Discussions: N/A

What is the problem this project is trying to solve?

With the introduction of Status Communities and its token-based interactions, it’s essential to ensure that there is always a low gas fee environment available for users of Status Communities and other Status blockchain-based functionality, so that users are not priced out due to congestion on popular chains.

Who is this problem being solved for?

This proposal primarily targets Status users engaging with Status Communities and other blockchain-based functionality which requires a low-cost onchain transaction environment to facilitate growth and adoption of the platform.

Status is on a transformative journey to become the web3 super app that brings online self-sovereignty to individuals and communities worldwide. The key part of this evolution lies in the Status Communities product, which features tokenised interactions, channel monetisation, token gating, airdrops, token-based admin permissions, NFT minting, and more. Blockchain-based interactions are at the core of this product, which means that high gas prices will hinder or prevent growth and adoption.

In the future, Status aims to build its Community dApp plugin API and its dApp chat plugin SDK to enable dApps to be directly accessed and utilised in Status Communities and Status Messaging contexts. Unlocking highly affordable transaction fees for this functionality is needed to foster a vibrant open ecosystem of 3rd-party Status Communities dApps. This proposal aligns with the broader vision as depicted on the Communities page (Status - Make the jump to web3) on our new website.

Requirements / Constraints

  • The solution must be EVM equivalent or compatible to ensure seamless portability for apps to run on it with minimal to no code changes necessary
  • The transaction fees should target around 1 cent per transaction, enabling a wide range of onchain user interactions.
  • The framework needs to be open-source (MIT licensed or equivalent) and align with the Status super apps’ objectives (reflected in our new website https://status.app/) and with Status’ core principles of open development, open-source, and decentralisation.
  • The team leading the solution should be able to work collaboratively with the Nimbus team at Status.
  • The solution should use Ethereum for data availability.

Key Concepts / Proposal

  • Undertake rigorous technical due diligence to select the most appropriate L2 rollup tech stack partner that meets the outlined requirements and launch this L2 chain for use by Status users and the wider Status ecosystem.
  • Adapt Nimbus to the rollup tech stack so that the Status chain can be powered by Status’ existing Nimbus Ethereum client software.
  • The Status chain will act as a default chain for Status Communities interactions, but the Status apps will support multiple values-aligned EVM chains like Ethereum, Optimism, Arbitrum, and more (including of course Status’ L2 tech stack partner) in the future.
  • If a decision is made to proceed with the SNT staking proposal (https://discuss.status.im/t/nip-1-introduction-of-snt-staking-mechanism/4141), the SNT staking contract could live on Status Chain.

User Journey

Users will transition from experiencing high gas fees and potential exclusion from onchain activities to engaging in tokenised interactions within Status Communities at minimal costs. The proposed Status L2 chain will provide a default setting for these interactions, with the Status app continuing to support other EVM chains. Thanks to integrated bridging, users will be able to move their funds seamlessly between the L1 and all the L2s, including the Status chain.

Benefits

  • Substantially reduced transaction fees for Status users.
  • Increased accessibility of onchain social interactions.
  • Expanded user adoption due to lower costs.
  • Enhanced growth potential for Status Communities.
  • Engagement from external developers to start building on the Status chain.

Risks

  • Not being able to find the right infra partners for this chain, resulting in a delayed or cancelled launch.
  • Potential technical challenges in adapting Nimbus to the new rollup tech stack.
  • Risk of not aligning with user expectations and core Status principles.
  • Possibility of low engagement from external developers in the initial phase.

Relevant Links

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If there is one app that could use a dedicated app chain I can’t think of a better one than Status, so I very much welcome this. Some questions I’m curious about:

  1. What would Nimbus’ role be here? When I think about Nimbus’ reputation as a low-resource staking client and Status core principles I think about being able to run a blockchain node on the same desktop that runs Status. When I think about rollups I think about large centralized sequencers that are beefy machines. What concept am I missing here that bridges the gap?
  2. What is the timeframe here? It seems to me ideally this would launch around the same time as Reborn, i.e. within 6-12 months, but I feel like there is some research risk involved here, just like how building Waku turned out to take multiple years to satisfy Status principles.
  3. Is there an angle here to involve SNT more systematically in this on-chain economy? I know Caldera makes it easy to set your own token as gas token, which would be a great use for SNT here imo. Having this dedicated blockspace is indeed important for good usage of the Status app, but I can imagine bringing this proposal to complete implementation might take a while. Having at least the token value accrual model clear and strong will help keep the community interested to stick around while it’s being built.
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Thank you 86.eth for your questions, and sorry for the delay in answering, I’m just back from Istanbul!

Please find our answers below:

  1. We are currently in talks with different L2 rollup frameworks (mostly zk rollups) that are interested in offering client diversity to their users. Most of them already use Geth and/or Besu for the execution part (the sequencer), but would benefit from adding Nimbus as an alternative - or even default - execution client. Currently Nimbus is only a consensus client on the Ethereum L1, but the team is aiming to release an execution client soon that will be usable directly by the different zkEVM rollups with minimal modifications. And for rollups that are already considering the decentralization of their sequencers set, Nimbus could be used as a consensus client.

  2. The decision regarding the partnering rollup framework is planned for Q1 2024, followed by testnet deployment before Q3 and mainnet launch in Q4 2024 at the latest. We will be trying to deliver as soon as possible, ideally we would like to launch mainnet in Q3 but it’s too early to be able to commit to this date. The focus will be on rollup frameworks already in production, minimizing research risks for Status. The aim is to have the Status Chain mainnet operational by the end of 2024, coinciding with the new version of the Status app.

  3. Regarding the integration of the Status Network Token (SNT) in this onchain ecosystem, the current strategy involves using SNT as a gas token via account abstraction, along with other tokens. Users will also be able to use ETH to pay for gas, which reduces barriers to entry. We can potentially offer significant reductions or even entirely subsidize gas costs on Status Chain for users staking SNT based on a tiered system. This approach is part of the broader SNT staking proposal, which aims to maintain community interest and provide clear utility for the token. You can see our SNT staking proposal here: https://discuss.status.app/t/nip-1-introduction-of-snt-staking-mechanism/4141

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No worries, as you can see I’m not the fastest myself either. Thanks for the answers, they clarified a lot. Also the timeline seems reasonable.

Though I like the fact that SNT holders get some benefits in terms of easier use, I’d like to point out the greater opportunity for a more solid token sink for SNT. If SNT would be the sole gas token, users will always tend to hold a bit more SNT than what they precisely need for transactions. Having many users hold such a SNT budget (thinking on the order of 10s to 100s of dollars worth of SNT based on my and others use of L2s) will have a bunch of network effects. 1) devs will notice this and will build more dapps on this L2 that will accept SNT as main payment. 2) SNT/ETH AMM’s will arise more naturally. 3) users will be more inclined to learn what else they can do with their SNT and will be more inclined to make use of other SNT utilities.

As 2 and 3 are consequences of 1, let’s zoom in on 1 a bit. Having one clear ecosystem token, means that devs will also have an easy choice which coin to build their dapp around. If it’s some kind of defi app, might as well have lend/borrow/swap fees in SNT. Or if it’s some kind of SocialFi app, might as well use SNT for any fees as well. 2) is then a pretty direct consequence of this, as SNT is simply the most useful token on this chain, so pairing AMM pools against it becomes an automatic consequence.

For this reason, even though the Communities feature will outcompete Discord, I feel like on the L2 side, due to the intended development of a chat dapp ecosystem, we’re competing with Telegram and TON. And looking at their ecosystem it’s clear that having TON as their sole gas token has led to pretty much all their dapps becoming centered around TON. Looking at their leading AMM having all pools paired against TON with decent volume, it would be great if SNT could fulfil a similar role on the Status L2.

In terms of barriers to entry, the main one has already been overcome once the user is in the app. The average crypto-native will probably get more enthusiastic about the whole product once they realise SNT is tightly coupled to the main crypto-economic uses of the app, making them more motivated to talk about it to others. I don’t think that the type of person that is unable to press one button to do a token swap, or even directly acquire SNT on a CEX, before bridging in would be able to find their way to or around the app anyway, even with how good the UX is going to get. And if this UX is a concern I think it should be doable to have a bridge or front-end for a bridge that automatically has ETH or any other token to be bridged swapped into SNT in the background right before bridging in. This would lead to slightly higher bridge fees depending on chain of origin, but wouldn’t require additional action by the user.

Tbh I wouldn’t even mind using part of the SNT strategic reserve to airdrop SNT to users on Status L2 to have just enough to swap their bridged in ETH into SNT if it turned out users were actually turned off of swapping their ETH to SNT before bridging. Or even specifically the gas costs for only ETH to SNT swaps could be subsidised as another avenue. The thing is I think there’s only one shot at building this level of user+dev facing network effect until perhaps Nomos, and this L2 is an amazing opportunity to do so, so it should be carefully considered imo.

So the way I see it is, yes there is slightly more friction in terms of a one-time fee upon bridging in, but in return there is a much more interesting network effect that can form around SNT that could get a whole life of its own as a result of being the only gas token from a user and dev perspective.

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Thanks a lot @86.eth for your thoughtful post!

While we recognise the potential benefits of SNT as the sole gas token, our primary goal is to ensure the easiest possible onboarding and initial usage experience for users. Therefore, while we are planning on using SNT as a gas token, it won’t be the only gas token we intend to support. Instead, we’re planning on implementing an account abstraction layer in the Status Wallet that will allow users to pay gas fees in SNT on all networks (including Ethereum Mainnet) as well as on Status Chain. While we anticipate that developers will indeed create products centred around SNT on Status Chain, it’s useful for users to be able to immediately start making onchain transactions using a variety of tokens (including SNT and ETH) to pay gas fees, instead of forcing app users to buy SNT before they can make any onchain transaction.

We appreciate the suggestion that users could adapt to swapping some SNT at onboarding, this is an interesting idea that we will take into consideration as (right at this very moment!) we are working on optimising our onboarding flows. Generally our onboarding strategy is to get out of the way of users and get users into the app as swiftly as possible (and with as few steps as possible) in the OOBE (out-of-box experience) segment of their onboarding journey, and then introduce options to users later once they have landed in the app. We are investigating options to make it easy for users to subscribe to recurring SNT purchases from the open market, so that they have an ongoing supply of SNT to use for things like making purchases in Status Communities, interacting with specific contracts on Status Chain, etc…. Our aim is to attract communities who are completely new to crypto, making the process as seamless as possible. Allowing payments in multiple tokens, including stablecoins, helps achieve this by reducing the necessity for newcomers to be exposed to volatile cryptocurrencies in order to use the app.

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Thanks for the clarifications. I’m not sure though how app users are being forced into anything, as you mentioned the Status app will still support other L2s and even Ethereum Mainnet, so users could still make transactions there. I see the current app allows communities to deploy on Mainnet, Arbitrum, and Optimism, which seems to give enough freedom in this sense.

The only thing that seems to differentiate this L2 from others is that existing SNT holders will be able to directly pay for gas fees, just like stablecoin, ETH, and other token holders apparently will be able to as well. I think this can also be achieved on any other L2 if you set up the relay infrastructure you need for account abstraction anyway, which could save the time and effort of setting up a whole new L2 without the benefit of network effect accrual to SNT.

Is there any SNT utility planned for this L2, the dApp chat plugin system, or the Communities feature (outside of Communities Directory voting)? What would the recurring SNT purchases be used for, since there’s only so much one can spend on stickers? Why would a SNT holder vote in favour of this proposal? There is always the alternative of just focusing all resources on getting the MVP launched asap and be able to quickly respond to and iterate on user feedback post-launch versus the resources spent on this proposal. I see no increased usage or sink of SNT as a result of this proposal (or please help me see it), existing holders of SNT can spend their SNT on gas which gets converted away to ETH in the background (same as it would be with my suggestions), but then have no reason to acquire more of it once spent. They could just use ETH and stablecoin holdings from that point.

Over the years, the phrase “we want to make onboarding as easy as possible” seems to have become the default answer whenever the question comes up if some SNT utility can be incorporated. I agree this is a key consideration, but not the only one. If this was the only consideration, the simplest solution would be to use ETH and stablecoin everywhere and just give up on SNT altogether. Given the complexity of the app and the development process around it (even after transitioning to a DAO), I believe there is a solid moat around the app. The value that can be captured from this moat into SNT should be maximized, especially given how long it has been without substantial utility since ICO. The phrase “we want to make onboarding as easy as possible” should always be weighed against “we want to maximize SNT value as much as our moat and principles of decentralization allow for.” This last paragraph isn’t really only about this proposal but about a common pattern of vagueness around SNT utility throughout the org I wish the cofounders would address more regularly, because I don’t know who else would be responsible for coherently thinking out and publicly communicating the strategic uses and opportunities for the token. Perhaps that could be addressed by @jarradhope on a separate occasion.

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Just chiming in here without any direct insights, but perhaps they are looking to increase the value of SNT by for example distributing a portion of sequencer revenues to SNT stakers? They seem to be also pushing the SNT staking mechanism here…

This would end up being an attractive incentive for holding the token, like with Uniswap turning on the fee switch soon to directly accrue value to tokens instead of promising UtiLiTy (which we all know doesn’t really mean anything).

Also, if gas fees were required to be paid in SNT, this would increase the sell pressure on the token, as Status would have to sell SNT to pay for the costs of operating their rollup. If gas fees can be paid in a bunch of different tokens, then sequencer profit could be used to buy SNT in the open market and this could be distributed to SNT stakers? Honestly just speculating at this point, it’s a bit frustrating to not have a clear answer on this, but they’re probably tied up with regulatory stuff at the moment…

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Yes if this is the case that would significantly improve this proposal. But if this is the intention it should be stated front and center within the proposal itself. Right now there is nothing explicitly stated in this NIP on value capture through SNT.

It would, at most, increase the sell pressure as much as the buy pressure would be increased. Difference is in my scenario there will be more reason to keep more of it at hand for future expenses on the L2, some of which might never be spent. In cyp’s scenario only existing SNT holders will spend their SNT until they’re out of SNT and will have no reason to replenish again (as they can continue paying with their other tokens). Thus there is a bit more of a token sink and much more network effect under my scenario than cyp’s.

Yes this mechanism of buybacks or using SNT as a PoS staking token in a decentralized sequencer setup would improve this proposal. But both of these depend on decentralizing the L2 sequencer given that the team wants no centralized liability. By the time they’ve figured this out (very large research problem) that’ll probably be another IFT spinoff years down the line for which SNT holders will maybe get a fraction of some airdrop. I’d rather have something more concrete and technically feasible for SNT in the mean time.

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This is a great opportunity to take what has been working in crypto adoption lately (L2 launches) and move the space forward in a way that Status has the will and understanding to do so: Decentralize

Arbitrum took the lead simply by being the first L2 to go live. Base gained adoption by being the coinbase L2 with nearly (or actually) free transfers from coinbase to base and back. Blast had $2 Billion in TVL locked in it’s bridge before launch as the only L2 where the native gas token is staked ETH and native stablecoin is yield bearing making holding those assets on the chain yield bearing by default.

All these L2’s have one common issue. They are secured by multisigs.

Status can take what is working and make an L2 that has yield bearing assets by default BUT is not secured/directed by a multisig. It would be the most credibly decentralized L2. This is a feature that differentiates from the other L2s and would drive new user adoption.

I suggest focusing on: a credibly decentralized L2, and not get hung up on all these other requirements. User growth can make up for these other things down the road. Arbitrum doesn’t have an intentional value accrual strategy for ARB, it only uses it for governance and grants in trying to create the best chain for DeFi.

With that ARB has a +$4B token marketcap, this is way larger than SNT despite the frequent discussions of token value. Don’t overthink this: create something used by users and it will be valuable

Ultimately if you have a lot of different goals for this L2 you have none. Pick one thing that will make it standout and move quickly and reliably to execute on that one thing.

Blast was publicly announced in November 2023 and launched in March 2024. Less than 6 months, it wasn’t without some issues but they are alive with $2.3B in assets on the chain.

I have faith Status can move and execute at a similar pace in bringing a new standard in L2’s to the world.

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I think it’s a great idea. I don’t ever think fees on eth will ever be sufficiently low enough.