Gavin Wood's Personal Letter: Polkadot's 2023 Annual Roundup

As the Northern Hemisphere’s evenings lengthen, soma.fm’s Christmas music special is back on my house radio, and we’re back to the time of year when I write my annual diary on behalf of Polkadot. With the pandemic largely gone and our memories gone, we could see the global return to normalcy and the consequent resurgence of in-person activities. This year, conflict and artificial intelligence became one of the most prominent topics in the news cycle, and at the same time, there are some curious people who want to know how they are changing the world with Blockchain.

And this year is also a special anniversary for me, and I am writing these words at this moment, just as I wrote my first crypto financial code ten years ago. So, what does 2023 bring?

Industry Events

Given that my position in the industry may be close to that of a Crypto Veterans, it seems to me that we have a seasonal system. Our new “Crypto Assets Winter” has been underway for some time. Web3, or more precisely Crypto Assets, often appears in the news, but often under more negative rhetoric than the more upbeat headlines of a few years ago. (Indeed, a more pertinent review in The Economist magazine found some similarities with the ancient pest, the cockroach.) This Crypto Assets winter, while likely inevitable, has been aided by the unsuccessful efforts of some individuals who seem to believe that Web3 can be messaging and marketing outside of its technology and culture. I’m afraid this won’t be the last time we’ll see this kind of behavior in this industry, however, we hope, such behavior provides a constructive and enlightening lesson for everyone.

I’m willing to bet that these negative news reports and the unfairly negative comments that come with them may well have reached the halls of power. At the same time, we’re seeing the regulatory environment in our industry evolving – sometimes sensible, sometimes not. Some significant changes are taking place around the world, notably in the United Kingdom, Switzerland, Japan, the European Union, and the United States, the latter of which is likely to have been informed of some of its progress by the Web3 Foundation, which testified before the US House of Representatives and advised the Liberal Democratic Party of Japan. While each of these judicial changes has its own nuances, we can see an emerging and increasingly clear position that places a strong emphasis on avoiding trust, custody, and Web2 “solutions” based on trust, custody, and Web2, and introducing true trustlessness and decentralization in all areas: stakes, Nodes, and governance. Thankfully, some of the more visionary world regulators seem to admit that not all Crypto Assets are created equal, even if this is only implicitly noted through certain omissions.

Decentralization of Polkadot

The older generation of Web3ers knows that, as stated in the Polkadot White Paper, Decentralization has always been a top priority for Polkadot. The interests of idealism and pragmatism rarely intersect, but the situation is real, and Decentralization is not only a goal we should strive for, but a belief we must achieve.

While there’s still a lot of work to be done to create a truly resilient, decentralization, and self-sufficient system in this Web3 industry, Polkadot is already one step ahead by many metrics. A recent independent report ranked Polkadot at the top of the list of Nakamoto coefficients, a measure used to measure the degree of decentralization of Blockchain networks. This year also saw the Decentralization milestone Kagome, Polkadot’s Relay Chain, joining as a validator Node on the Kusama network.

It seems that the push for decentralization seems to be particularly evident in the recent structural changes of the Parity team. The Parity team’s efforts to Decentralization have meant a significant reduction in the number of its C-suite departments, largely in areas supported by ecosystem activities, and less to do with the Parity team’s historical area – the development of core technologies. Behind this restructuring, the Web3 Foundation announced the launch of the $55 million Decentralization Decentralised Futures fund, which is stated to help our ecosystem strive to further Decentralization and reach a sustainable state where activities contribute to the utility and demand of Polkadot’s Block space (Coretime). The fund is immediately operational, has already received dozens of high-quality applications, and will continue to be active, disbursed in the first half of 2024.

Polkadot ecosystem grows: On Polkadot and Kusama, we have 90 parachains from more than 580 ecological projects, including 300 decentralization applications and 190 blockchains built on the Substrate framework. Polkadot now runs 50 enabled parachain cores, with 17, 000 XCM messages that are trusted and securely transmitted between them each month. On December 22, we saw a single relay chain of Polkadot’s 50 chains process 6.9 million transactions in 24 hours – a sustained rate of 80 transactions per second throughout the day. We can now see that there are more than 2,000 active developers and 83,000 active users in the ecosystem almost every month. We saw a 10x increase in the retail-friendly nomination pool throughout the year, covering more than 180 pools of 10 million DOT.

We saw a total of 324 applications throughout the year in the Web3 Foundation’s grant program, with 135 projects from 54 countries signing agreements, and last month the Foundation reached another milestone – the Foundation’s 600th grant since its inception in 2017.

Moment of truth

Polkadot’s flagship event, Decode, took place in Copenhagen, Denmark in June this year, with satellite events around the world, notably in Hanoi (Vietnam), Buenos Aires (Argentina) and Shanghai (China). The events were attended by 1,500 people (and thousands more online) who heard more than 100 speakers from across the ecosystem. These are hybrid virtual and reality events, with more than 11, 000 online registrations for the event in Copenhagen alone.

Shortly before the Copenhagen event, the Polkadot Summit was held with 150 key decision-makers and developers from within the ecosystem. This has been quite successful in my opinion, and one of the key results has been the introduction of a new Metadata Schema designed to optimize the ability of hardware Wallets to operate trustlessly across the Polkadot ecosystem - due to the flexibility provided by Polkadot’s parachain model and the upgradeability of ingenuity, it is difficult to describe the meaning of arbitrary transactions at any given time. Nonetheless, the integration of transaction metadata (and the human-readable meaning of the transactions associated with it) provides an in-ecosystem solution that can be promoted in the solutions of various well-known Wallets. As we further Decentralization, such a process ensures that the entire ecosystem can work together to create common opportunities in areas such as standardization, infrastructure, and tools.

For the first time this year, the Polkadot developer conference, Sub 0, was held in a hybrid format, with the blessing of live streaming and a variety of facilities for those who couldn’t be physically present. A total of 500 people attended (and hundreds more watched online) and heard from more than 50 speakers on key insights from the foundations of Polkadot’s technology. The content includes core developers discussing the latest advancements, tools, APIs, and processes, and industry technologists talking about their experiences finding solutions through the technology stack.

The Web3 Music Summit, organized by Primavera Sound in partnership with the Web3 Foundation, provides a space to explore Web3 in the context of music. Of particular note is the viability of using DAOs (DAOs) within the music industry to rebalance and optimize the economic incentives of artists by allowing for more direct economic interaction between artists and fans.

Many Polkadot-related conferences have been held both inside and outside the community, including ParisDOT in Paris, France, and Polkadot Pulse in Bangalore, India, in addition to a number of Polkadot satellite events such as ETHDenver, SXSW in Austin, Blockchain Week in Korea, WebX in Tokyo, Token 2049 in Singapore, Coindesk Consensus and Messari Mainnet in New York, which included workshops, booths, and attendees that showcased Polkadot’s unique strengths and vibrant technology community.

Academic Achievement

The Polkadot Blockchain Academy is an ingenious initiative to create a Blockchain course worthy of being taught at a world-class academic institution. The program began last year with a five-week course at the University of Cambridge and continues to be conducted globally this year, such as at the University of Buenos Aires at the beginning of the year and at the University of California, Berkeley in the summer.

Programs at the University of Buenos Aires attracted 790 applicants, competing for 76 places, while being conducted in partnership with 12 universities in the Latin American region. The course is not for the faint of heart, it has a comprehensive curriculum that has been tested by the industry’s top minds, and it is not a matter of course to pass the application, but 80% of the students end up passing.

With 344 applicants competing for 72 slots in a later course, we introduced a new founders course that focused less on the elements of technical programming involving depth and more on the broader technology and its social and industrial implications. We saw a similar pass rate, with one individual passing with honors. Our youngest graduate, who is only 17 years old, is from Eastern Europe and is enrolled in a six-week course.

The Substrate Framework Developer Program is the Parity team’s primary program to support teams building Blockchain using the Polkadot SDK, with 124 projects applying for the program in 2023 and 23 projects reaching their first major milestone from 55 reviews. At the same time, the team launched a sister program, Developer Heroes, which focuses on mentoring individual developers within the ecosystem, with 420 applicants throughout the year. The program currently has over 200 members and 60 mentors.

The power is given to the parachain

This year has seen the launch and further deployment of two major centralized Stable Coin, Tether (USDT) and Circle (USDC). While these are not the panacea for decentralization that we strive to achieve, they provide some significant utility value to several parachain projects and users. USDC alone has $250 million deposited on the Polkadot Asset Hub, and USDT deposits have many more, contributing to the total amount of Stable Coin in the ecosystem.

Kusama’s Asset Hub is now fully integrated with direct Token Conversion. The miracle of this cross-chain interaction magic is by introducing a system-level DEX exchange that provides a neutral and easily accessible liquidity pool for DOT/KSM to various tokens. In addition, this Liquidity Pool is fully integrated with the fee payment system, allowing all these tokens to be easily used to pay for the Asset Hub and exchanged through the XCM language without going through a third party. This greatly simplifies Cross-Chain Interaction and reduces complexity for users, collators, and developers.

Within this ecosystem, the environment in which user tools are used is constantly evolving, and many well-known products have undergone significant improvements. Parity Signer, an app designed to transform any old Android or iOS device into a fully functional ultra-secure isolated Wallet, has now been rewritten and released as Polkadot Vault. While I’m still involved in setting the direction of the product, maintenance is being moved from the Parity team to the Novasama team (which will be more substantially notified when it is finalized). Recently, Polkadot Vault has added features designed to be tightly integrated with the team’s new Spectr Wallet. For those who don’t know, I’d like to say that this is a fund-backed, Open Source project that aims to be a non-commercial, neutral desktop Wallet for hobbyists and advanced users. With good integration, worries on Vault devices are reduced to almost zero, and the recovery and upgrade process for Vault becomes pleasant.

This year also saw the launch of Smoldot 1.0, a fund-backed project that exists in a proper decentralization manner. Although experimentally integrated into well-respected Polkadot.js applications in compatibility mode, it has played an important role in applications built directly for it, such as Novasama’s Spectr power user Wallet, and middleware built specifically for it, Polkadot-API (PAPI), which is becoming the first fully functional example.

With the passage of time

The Polkadot network has been able to move forward at an impressively seamless rate of upgrades and improvements at an unprecedented rate thanks to its Webassembly-based meta-protocol foundation and its indispensable Canary Network, Kusama.

2023 is the year that Polkadot’s three main codebases will finally merge into a single codebase. Substrate (a general-purpose blockchain development framework primarily used by Polkadot, but now also used by Cardano’s Midnight, Mandala, and Polygon’s Avail), Polkadot Node (Substrate-based Relay chain node software), and Cumulus (software for building Cross-Chain Interactions using Substrate) are now single The Polkadot-SDK (i.e., Software Development Kit for building other software of a specific type) codebase. This merger greatly simplifies and optimizes the development process.

While this merger itself doesn’t help decentralization, as they are still managed by the Parity team on GitHub, further changes taken this year have contributed to decentralization: a portion of the codebase, the production runtime that defines business logic specific to Polkadot and Kusama, is no longer hosted under Parity’s GitHub organization; instead, is now managed by the Decentralization Polkadot Fellowship organization (more on this below).

Second, the various components of the Polkadot SDK are now released on the Rust ecosystem’s software release service, crates.io, ensuring that teams building the Polkadot-SDK have greater metrics for stability and less reliance on Parity’s internal development processes. Next year, we plan to further improve the stability of the SDK and significantly reduce the workload of the ecosystem team in updating its codebase.

Unusual business

Frame, Substrate’s framework for building business logic components on-chain (similar to Smart Contracts in many ways), will be improved several times in 2024. While some of the improvements are noticeable, others are behind the scenes, but just as important. One of the most important is the message queue system for delivering XCM messages in the ecosystem. Now it’s ready for rollout, which allows for more and more complex messages to be sent between chains. There’s also a new feeless_if API for free transactions, a task API that greatly improves the development experience for on-chain maintenance features, and Default Configs, which allow pallets to have their Config trait projects with default values. Many other improvements have been made, but it is impossible to list them all here.

OpenGov is a major revision of Polkadot’s governance system, announcing that the era of the Polkadot Council and Technical Council has arrived, bringing a leap forward in its Decentralization credentials. In fact, we’ve seen the community come together to turn the tide and resolutely cancel the first malicious referendum on Polkadot.

OpenGov brings the Polkadot Fellowship. It is an entity whose actions and members are governed through complex on-chain code, the first of its kind and one of a series of concrete steps towards Polkadot becoming a fully functional autonomous DAO capable of attracting, retaining, and nurturing the talent and expertise it needs. There are currently about 60 members, with new members joining all the time. The progress of the project is tracked in the new OpenDev Monthly Public Call, with many team members involved (myself included), led by Jay Chrawnna of Kusamarian and moderated by Tommi Enenkel of Mangata. In addition, the Fellowship is responsible for managing the codebase and releasing versions of the business logic (runtime) of Polkadot and Kusama (of course, their governing bodies will still have to perform any upgrades).

We’ve seen OpenGov’s (sometimes acute) fiscal processes spark a lot of online discussions, showing how a variety of insightful groups are competing to have their positions heard and perceived. While this is instructive for functional, inclusive democratic processes, it does not always produce the easiest way to make decisions, nor is it an ideal way to engage rational discussion. Far from OpenGov, this year we’ve seen decentralized governance and enforcement mature into a complex DAO beyond basic stake voting, and with the emergence of the Polkadot Fellowship as the first non-Token element of Polkadot’s decision-making body, others are sure to follow.

At such a groundbreaking moment, the Polkadot network began what it called its first Decentralization, autonomous sovereign wealth reserve, which through OpenGov instructed the network to use fiscal funds to regularly purchase USDT to fund the salaries of the Polkadot Fellowship.

Referendum #231 is using 469, 000 DOT to buy more than two million USD in USDT (probably more at the time of writing) via XCM from the HydraDX Omnipool, which is a high-LiquidityDEX parachain-based platform. The buying mechanism uses on-chain “schedulers” to make purchases in small amounts, averaging around $250 per half-hour. These USDT will be placed in a private network sub-treasury dedicated to self-distribution to members of the Polkadot expert community as part of the Fellowship payroll program. The payroll plan itself is outlined in the manifesto and detailed in Fellowship RFC# 50.

The entire process is approved in a decentralization manner through OpenGov and is being executed autonomously on-chain in professionally audited logical code, written according to pre-published instructions. Throughout the process, no specific individual or entity organization holds any executive privileges or positions. While this is a one-time operation for placing Stable CoinToken purchases in the Fellowship treasury, there is nothing unique about USDT, the Fellowship, or its sub-financials, and the same process can be applied to any Token that has DEX within the XCM range of Polkadot, as well as any fiscal transaction under any collective. Maybe we’ll see a wealth management collective come together to create a decentralization sovereign wealth fund for Polkadot? In any case, I expect to see a series of rules-based collectives hosting their own multi-asset treasury in the future, perhaps with payroll plans that meet the network’s specific needs.

Core Highlights

Agile Coretime is an idea I first came up with at Decoded this year, and after a fast-paced RFC and a tight development cycle, it’s now live on Rococo and is expected to be available on Kusama and Polkadot in Q1 next year. This fundamentally changes the way Polkadot acquires a key resource, parachain Coretime. Unlike unpredictable long-term staking through auctions, Coretime (the name of the resource) is sold at a more predictable price in each monthly sale before use.

In the Agile Coretime model, blocks of Coretime are represented by XCM NFTs, which can be traded, exchanged, advertised, and sold within the Polkadot ecosystem in the same way as any other Non-fungible Token. In addition, these Coretime NFTs can be cut and diced in various ways, and then these smaller Coretime blocks are resold again and ultimately used to support a Cross-Chain Interaction. Several Coretime markets have emerged, such as Lastic, that provide an easy way to trade this new class of resources.

The immediate effect of this is to avoid locking up DOT Token participating in slot auctions (usually funded by crowdloans). This greatly reduces the burden on the new team and also reduces uncertainty for the current team. It works well with the “on-demand Cross-Chain Interaction” model, allowing buyers of Coretime to contribute to a shared pool where ODPs can be purchased as needed.

The road ahead

The new year is going to be quite a busy time for Polkadot. Agile Coretime, On-Demand Parachains, EthereumCross-Chain Interaction Bridges (Ethereum Snowbridge), and Kusama Bridges are the four important infrastructure that will be coming. Elastic Scaling is the fifth technology I expect to see in 2024. I’m also looking forward to the expansion of our DAO, including new teams, multi-asset sub-treasury, expanded XCM, and some exciting new primitives in the works.

Our innovative forkless block-producing Consensus Algorithm, Sassafras, has been formed, and we can expect to start using it on testnets in 2024. Parity Labs is also working on a number of new technologies, and the recent RFC (which was shut down after some major iterations during the prototype phase) called CoreJam may give interested people some idea of where to go.

That’s the end of my little review; All that’s left is to wish everyone a pleasant holiday season and hope that the world will be freer, more peaceful, and happier.

See you next year.

——Gav