DAO Tokyo — Foundations of Multichain Governance

The fifth panel of DAO Tokyo (and our last event report) delved into the intricate world of governance in Layer 2 (L2) scaling solutions

The fifth and final panel of DAO Tokyo explored the foundations of multichain governance, specifically examining the governance models employed by Layer 2 (L2) scaling solutions built on the Ethereum blockchain.

The panel featured Anthurine (Head of Product, Ethstorage), Jacob (Head of Governance, Matter Labs), Terry (Founder, Eclipse), and Fran (Founder, Tokyo FinTech) as the moderator.

The panelists kicked off the discussion by introducing their respective projects and highlighting their unique contributions to the Ethereum ecosystem.

Ethstorage emerged as a key player in addressing Ethereum's storage limitations. Operating as a decentralized storage layer specifically tailored to Ethereum, Ethstorage functions on two levels. Firstly, it serves as an L2 solution itself, offering a platform for storing and managing data directly on the Ethereum blockchain. Secondly, it extends its capabilities beyond its own platform, acting as a storage provider for other L2 and Layer 3 projects that require efficient and secure data storage solutions.

Anthurine acknowledged the distinct nature of Ethstorage compared to typical L2 solutions. Instead of aiming for higher Transactions Per Second (TPS), E-Storage focuses on enhancing Ethereum's Layer 2 capabilities and providing storage solutions for other Layer 2 and Layer 3 projects. She mentioned that E-Storage was still under development on the public testnet and highlighted the ongoing design process for their governance framework. Antoine also emphasized their active involvement in the OP (Optimism) governance and their intention to leverage lessons learned from OP's experience.

Next up was Matter Labs, which is focused on advancing privacy and scalability through its flagship project, zkSync. A zero-knowledge rollup, zkSync employs a sophisticated cryptographic technique that bundles transactions off-chain while maintaining verifiable proof of their validity on the Ethereum main chain. This allows for significantly higher transaction throughput while inheriting the security guarantees of Ethereum.

Jacob elaborated on zkSync's three-pronged governance approach, comprising Token Delegates, a Security Council, and Guardians. He explained that Token Delegates, who hold the zkSync token, have the power to submit and vote on proposals, while the Security Council and Guardians, composed of individual members, hold special or emergency powers to oversee and manage the network's operations.

Matter Labs also distinguishes itself through its strong commitment to the principles outlined in the ZK Credo, a document that serves as the project's philosophical foundation. This credo champions user privacy, censorship resistance, and decentralization as core values, shaping the development and governance of zkSync.

The final project showcased on the panel was Eclipse, which takes a different approach by bridging the capabilities of the Solana blockchain to Ethereum. Eclipse is building the first Solana Virtual Machine Layer 2 on Ethereum. This innovative project enables developers to leverage the high performance and low transaction fees of Solana while benefiting from the security and decentralization of Ethereum.

Terry highlighted the challenge of liveness in L2 solutions, especially in scenarios with a single sequencer failure. He explained how a single point of failure in the sequencer could potentially lead to chain downtime, citing the example of Arbitrum's optimistic rollup. To mitigate this risk, Terry proposed a decentralized sequencer set coupled with a governance mechanism that allows for the removal of existing sequencers and their replacement with governance-designated entities to prevent collusion and ensure continuous operation. Additionally, he suggested implementing guardrails around the bridge's upgradeability, similar to a security council, to safeguard against potential vulnerabilities.

Eclipse's project unlocks a new realm of possibilities for DApps, allowing them to combine the strengths of both blockchains. This opens doors for highly scalable applications that can handle a large volume of transactions without compromising security.

After the project introductions, the conversation transitioned to the core theme of the panel: governance in L2 solutions. Fran skillfully framed the discussion by pointing out the distinct stages of each project. ZkSync, with its live chain, represented a real-world example of governance in action, while Ethstorage, in its testnet phase, provided a perspective on governance design and planning. Eclipse, nearing its launch, offered insights into the considerations and challenges faced during development.

Continuing on the topic of governance, Anthurine introduced Web3 Protocol, a decentralized HTTP protocol, as one of Ethstorage's products aimed at enhancing the security and resilience of decentralized applications (DApps). She explained that many DApps, despite being decentralized in their core functionality, still rely on centralized components like DNS and infrastructure for their front-end, making them vulnerable to attacks. Web3 Protocol addresses this issue by enabling the decentralization of these components, allowing DApps to store their front-end in smart contracts, thereby enhancing security and making them resistant to typical DNS attacks.

Fran then delved deeper into the role of Security Councils, drawing attention to the perceived distrust in token holders' ability to make sound decisions regarding capital allocation. He referred to Terry's earlier statement about Arbitrum's misallocation of $200 million for gaming incentives, a decision driven by token holder voting