Gavin Wood: Polkadot 2023 Annual Summary

Written by: Gavin Wood

Compiled by: 0xAyA, Odaily Planet Daily

As the nights grow longer in the Northern Hemisphere, the Christmas music special from soma.fm once again graces my home radio, and we arrive at the annual moment when I write my yearly diary on behalf of Polkadot. With the COVID-19 pandemic largely behind us, becoming a memory, we can see the world returning to normal, along with the resurgence of offline activities. This year, conflict and artificial intelligence have become one of the most prominent themes in the news cycle, while some curious individuals also want to understand how they are changing the world alongside blockchain.

This year is also a special anniversary for me; at this very moment I write these words, it happens to be exactly ten years since I wrote my first piece of crypto-financial code. So, what has 2023 brought us?

Industry Activities

Given my position in this industry, which may be close to that of a veteran, it seems to me that we have developed a seasonal system. Our new "crypto winter" has been underway for some time. Web3, more specifically cryptocurrency, frequently appears in the news, but often under more negative evaluations compared to the more optimistic headlines of a few years ago. (Indeed, a more measured commentary in The Economist found some similarities to the ancient pest—cockroaches.) This crypto winter, while likely inevitable, has been aided by certain individuals' unsuccessful attempts to promote Web3 as something that can be communicated and marketed independently of its technology and culture. I fear this will not be the last time we see such behavior in this industry, but we hope that it provides a constructive and enlightening lesson for everyone.

I bet that these negative news reports and the ensuing unfair negative commentary have likely reached the halls of power. Meanwhile, we have also seen the regulatory environment of our industry evolving—sometimes wisely, sometimes not. Significant changes are happening globally, especially in the UK, Switzerland, Japan, the EU, and the US; the latter's (US) progress is likely known to the Web3 Foundation, which has testified at US House hearings and advised the Liberal Democratic Party of Japan. Although these legal changes have their subtle differences, we can see a forming and increasingly clear stance that strongly emphasizes avoiding trust-based, custodial, and Web2 "solutions," and introducing true trustlessness and decentralization in all aspects: shares, nodes, and governance. Fortunately, some more visionary global regulators seem to recognize that not all cryptocurrencies are created equal, even if this is only implicitly noted through certain omissions.

Decentralization of Polkadot

Old-school Web3ers know that, as stated in the Polkadot white paper, decentralization has always been a top priority for Polkadot. The interests of idealism and pragmatism rarely overlap, but this is indeed the case, and decentralization is not only a goal we should strive for but also a belief we must uphold.

While there is still much work to be done to create a truly resilient, decentralized, and self-sustaining system in this Web3 industry, Polkadot has already taken a step ahead by many metrics. A recent independent report ranked Polkadot at the top of the Nakamoto coefficient (a metric used to measure the degree of decentralization of a blockchain network). This year, we also witnessed a milestone in decentralization with the Polkadot relay chain Kagome joining as a validator node in the Kusama network.

It seems that the push for decentralization is particularly evident in the recent structural changes within the Parity team. The efforts made by the Parity team towards decentralization have resulted in a significant reduction in the number of executives, primarily occurring in areas supported by ecosystem activities, and less so in the historical domain of the Parity team—core technology development. Behind this restructuring, the Web3 Foundation announced the launch of a $55 million "Decentralized Futures Fund," aimed at helping our ecosystem strive for further decentralization and achieving a sustainable state where activities contribute to the utility and demand of Polkadot's core space (Coretime). The fund is now operational, having received dozens of high-quality applications, and will remain active and disbursing throughout the first half of 2024.

The Polkadot ecosystem continues to grow: on Polkadot and Kusama, we have 90 parachains from over 580 ecosystem projects; this includes 300 decentralized applications and 190 blockchains developed based on the Substrate framework. Polkadot now runs 50 enabled parachains, securely transmitting 17,000 XCM messages between them each month. On December 22, we saw one single relay chain among the 50 Polkadot chains process 6.9 million transactions within 24 hours—an ongoing rate of 80 transactions per second throughout the day. We can now see over 2,000 active developers in the ecosystem almost every month, along with 83,000 active users. We have witnessed a tenfold increase in retail-friendly nomination pools throughout the year, covering over 180 pools with 10 million DOT.

In the Web3 Foundation's grant program, we saw a total of 324 applications throughout the year, with 135 projects from 54 countries signing agreements; the foundation reached a milestone last month—the 600th grant since its establishment in 2017.

Key Moments

Polkadot's flagship event Decode was held in June this year in Copenhagen, with satellite events taking place around the world, particularly in Hanoi (Vietnam), Buenos Aires (Argentina), and Shanghai (China). At these events, 1,500 people attended (with thousands more watching online) to hear from over 100 speakers from across the ecosystem. These were hybrid events, with over 11,000 online registrations for the Copenhagen event alone.

Shortly before the Copenhagen event, the Polkadot Summit was held, consisting of 150 key decision-makers and developers from within the ecosystem. In my view, this was quite successful, with one key outcome being the introduction of a new metadata model aimed at optimizing the trustless operation capabilities of hardware wallets across the Polkadot ecosystem—due to the flexibility provided by Polkadot's parachain model and its unique upgradability, it is challenging to describe the meaning of any transaction at any given time. Nevertheless, the integration of transaction metadata (and the associated human-readable meanings of transactions) provides an in-ecosystem solution that can be promoted across various well-known wallet solutions. As we further decentralize, such programs ensure that the entire ecosystem can work together to create common opportunities in areas such as standardized infrastructure and tools.

This year, the Polkadot Developer Conference Sub 0 was held for the first time in a hybrid format, featuring live broadcasts and various facilities for those unable to attend in person. A total of 500 people attended (with hundreds more watching online), hearing from over 50 speakers who provided key insights into the foundational technology of Polkadot. Content included core developers discussing the latest developments, tools, APIs, and processes, as well as industry technologists sharing their experiences of finding solutions through the tech stack.

The Web3 Music Summit, organized by Primavera Sound in collaboration with the Web3 Foundation, provided a space to explore Web3 within a musical context. Notably, it highlighted the feasibility of using DAOs (Decentralized Autonomous Organizations) within the music industry, allowing for more direct economic interactions between artists and fans to rebalance and optimize artists' economic incentives.

Numerous Polkadot-related conferences were held both within and outside the community, including ParisDOT in Paris, France, and Polkadot Pulse in Bangalore, India. Additionally, many Polkadot satellite events were hosted at the largest industry gatherings around the world, such as ETHDenver, SXSW in Austin, Korea Blockchain Week, WebX in Tokyo, Token 2049 in Singapore, Coindesk Consensus, and Messari Mainnet in New York, featuring workshops, booths, and networking events showcasing Polkadot's unique advantages and vibrant tech community.

Academic Achievements

The Polkadot Blockchain Academy is an innovative program aimed at creating a blockchain course worthy of being taught at world-class academic institutions. The program launched a five-week course at the University of Cambridge last year and continued globally this year, such as at the University of Buenos Aires earlier this year and at the University of California, Berkeley in the summer.

The course at the University of Buenos Aires attracted 790 applicants competing for 76 spots, in collaboration with 12 universities in the Latin American region. This course is not for the faint-hearted; it features a comprehensive curriculum that has withstood the scrutiny of the industry's top minds, with application acceptance not being a given, yet 80% of students ultimately passed.

In subsequent courses, 344 applicants competed for 72 spots, and we introduced a new founders course that focuses less on deep technical programming elements and more on broader technologies and their social and industrial impacts. We saw a similar pass rate, with one individual passing with flying colors. Our youngest graduate was just 17 years old, hailing from Eastern Europe, and participated in the six-week course.

The Substrate Framework Developer Program is a primary initiative by the Parity team to support teams building blockchains using the Polkadot SDK, with 124 projects applying to the program in 2023, and 23 projects reaching the first significant milestone from 55 reviews. Meanwhile, the team launched a sister program, Developer Heroes, focusing on mentoring individual developers within the ecosystem, with 420 applicants throughout the year. The program currently has over 200 members and 60 mentors.

Empowering Parachains

This year saw the launch and further deployment of two major centralized stablecoins, Tether (USDT) and Circle (USDC). Although these are not the panacea for decentralization we strive for, they provide significant utility for several parachain projects and users. Just USDC alone has $250 million deposited in the Polkadot Asset Hub, with USDT deposits contributing even more to the ecosystem's total stablecoin supply.

Kusama's Asset Hub is now fully integrated with direct token conversion. This cross-chain magic is made possible by introducing a system-level decentralized exchange, providing a neutral and easily accessible liquidity pool for DOT/KSM to various tokens. Additionally, this liquidity pool is fully integrated with a fee payment system, allowing all these tokens to be easily used for paying fees in the Asset Hub and exchanged via the XCM language without going through a third party. This greatly simplifies cross-chain transactions and reduces complexity for users, organizers, and developers.

Within the ecosystem, the user tools' environment is continuously evolving, with many well-known products undergoing significant improvements. Parity Signer is an application designed to turn any old Android or iOS device into a fully functional ultra-secure isolated wallet, which has now been rewritten and released as Polkadot Vault. While I still participate in shaping the product direction, maintenance work is being transitioned from the Parity team to the Novasama team (more substantial notifications will come when finalized). Recently, Polkadot Vault has added features aimed at closely integrating with the team's new Spectr Wallet. For those unfamiliar, this is a fund-supported, open-source project designed to be a non-commercial, neutral desktop wallet for enthusiasts and advanced users. With good integration, concerns on Vault devices have been reduced to almost zero, and the recovery and upgrade processes for the Vault have become enjoyable.

This year also saw the launch of Smoldot 1.0, a fund-supported project that exists in a suitably decentralized manner. Although it is experimentally integrated into the respected Polkadot.js application in compatibility mode, it plays a significant role in applications built directly for it, such as Novasama's Spectr advanced user wallet, and middleware specifically built for it, namely Polkadot-API (PAPI), which is becoming the first fully functional example.

As Time Passes

The Polkadot network's ability to advance at an unprecedented pace of impressive seamless upgrades and improvements is also thanks to the WebAssembly-based meta-protocol foundation and its indispensable canary network, Kusama.

2023 is the year when Polkadot's three main codebases finally merged into a single codebase. Substrate (a general blockchain development framework primarily used by Polkadot, but now also used by Cardano's Midnight, Mandala, and Polygon's Avail), Polkadot nodes (Substrate-based Relay chain node software), and Cumulus (software built using Substrate for cross-chain functionality) now all belong to a single Polkadot-SDK (i.e., software development kit for building specific types of other software) codebase. This merger greatly simplifies and optimizes the development process.

While this merger itself does not contribute to decentralization, as they are still managed by the Parity team on GitHub, further changes taken this year do contribute to decentralization: a portion of the codebase, specifically defining the production runtime for Polkadot and Kusama's business logic, is no longer hosted under Parity's GitHub organization; instead, it is now managed by the decentralized Polkadot Fellowship organization (which will be detailed below).

Secondly, the various components of the Polkadot SDK are now published on the Rust ecosystem's software release service crates.io, ensuring that teams building the Polkadot-SDK have greater metrics on stability and reduced reliance on Parity's internal development processes. Plans are in place for further improvements to the SDK's stability next year, significantly reducing the workload for ecosystem teams in updating their codebases.

Unusual Business

Frame is the framework used by Substrate to build on-chain business logic components (similar to smart contracts in many ways), which will see multiple improvements in 2024. While some improvements are apparent, others are behind the scenes but equally important. One of the most significant is the message queue system for transmitting XCM messages within the ecosystem. It is now ready for launch, allowing for the sending of more and more complex messages between chains. There is also a new feeless_if API for free transactions, a greatly improved task API for the development experience of on-chain maintenance functions, and Default Configs, allowing pallets to have default values for their Config trait items. Many other improvements have also been made, but cannot all be listed here.

OpenGov is a major revision of Polkadot's governance system, announcing the era of the Polkadot Council and Technical Committee, bringing a leap in its decentralization qualifications. In fact, we have seen the community come together to turn the tide, decisively canceling the first malicious referendum against Polkadot.

OpenGov has brought forth the Polkadot Fellowship. This is an entity whose actions and members are governed by 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 necessary talent and expertise. Currently, there are about 60 members, with new members continuously joining. The development progress of the project is tracked in the new OpenDev monthly public calls, with many team members participating (including myself), led by Kusamarian Jay Chrawnna and hosted by Mangata's Tommi Enenkel. Additionally, the Fellowship is responsible for managing the codebase and releasing versions of Polkadot and Kusama's business logic (runtime) (of course, their governance body must still execute any upgrades).

We have seen OpenGov's (sometimes sharp) financial processes spark extensive online discussions, showcasing various insightful groups competing to have their positions heard and perceived. While this is enlightening for functional, inclusive democratic processes, it does not always yield the simplest decision-making methods, nor is it ideal for attracting rational discussions. OpenGov is far from that; this year we have seen decentralized governance and execution mature into a complex DAO beyond basic equity voting, with the emergence of the Polkadot Fellowship as the first non-token element of Polkadot's decision-making body, with others sure to follow.

At this groundbreaking moment, the Polkadot network has initiated its so-called first decentralized, autonomous sovereign wealth reserve, directing the network to use financial funds to regularly purchase USDT to fund the salaries of the Polkadot Fellowship.

Referendum #231 is using 469,000 DOT to purchase over two million dollars' worth of USDT (possibly more as I write this) through the HydraDX Omnipool's XCM, a high-liquidity decentralized exchange based on parachains. The purchasing mechanism uses the on-chain "scheduler" to make small purchases, averaging around $250 every half hour. These USDT will be placed in a dedicated network sub-treasury, specifically for autonomous distribution as part of the Fellowship salary program. The salary program itself is outlined in the declaration and detailed in Fellowship RFC #50.

The entire process was approved in a decentralized manner through OpenGov and is being autonomously executed on-chain with professionally audited logical code, written according to pre-released instructions. Throughout the process, no specific individuals or entities hold any administrative privileges or positions. While this is an operation to place stablecoin token purchases in the Fellowship treasury, USDT, the Fellowship, or its sub-treasury have nothing unique; the same process could apply to any tokens existing within the decentralized exchanges of Polkadot's XCM scope, as well as any financial matters under any collective. Perhaps we will see a wealth management collective come together to create a decentralized sovereign wealth fund for Polkadot? In any case, I look forward to seeing a series of rule-based collectives managing their own multi-asset finances in the future, perhaps with accompanying salary programs that meet the network's specific needs.

Core Highlights

Agile Coretime is an idea I first proposed this year at Decoded, and after a rapid drafting of the RFC and an intense development cycle, it is now live on Rococo, with expectations to land on Kusama and Polkadot in Q1 next year. This fundamentally changes the way Polkadot acquires critical resources—the Coretime of parachains. Unlike the unpredictable long-term staking achieved through auctions, Coretime (the name of the resource) is sold at a more predictable price in monthly sales before use.

In the Agile Coretime model, Coretime blocks are represented by XCM NFTs, which can be traded, exchanged, promoted, and sold within the Polkadot ecosystem in the same way as any other NFT. Additionally, these Coretime NFTs can be sliced and diced in various ways, and then these smaller Coretime blocks can be resold and ultimately used to support a cross-chain. Some Coretime markets, such as Lastic, have emerged to provide an easy way to trade this new resource class.

The direct impact is the avoidance of locking DOT tokens to participate in slot auctions (usually funded by crowd loans). This greatly alleviates the burden on new teams and reduces uncertainty for current teams. It pairs well with the "on-demand cross-chain" model, allowing Coretime buyers to contribute to a shared pool that ODPs can purchase as needed.

The Road Ahead

The new year will be quite a busy time for Polkadot. Agile Coretime, on-demand parachains, Ethereum cross-chain bridges (Ethereum Snowbridge), and the Kusama bridge are four significant infrastructures on the horizon. Elastic Scaling is the fifth technology I expect to see in 2024. I also look forward to the expansion of our DAO, including new teams, multi-asset sub-treasuries, expanded XCM, and some exciting new primitives we are developing.

Our innovative forkless block production consensus algorithm, Sassafras, has taken shape, and we can expect to start using it in testing networks in 2024. Parity Labs is also working on many new technologies; a recent RFC (which closed after some significant iterations in the prototyping phase) called CoreJam may give interested parties some ideas about the direction here.

This concludes my brief review; I hope you enjoyed it. All that remains is to wish everyone a pleasant holiday season, hoping for a world that is freer, more peaceful, and happier.

See you next year.

------Gav