Before Layer 2 really took off at scale, the first issue before us was probably not DeFi composability, but usability.
It is important to know that users need to pay a lot of fuel costs when transferring assets across the Rollup chain or to Layer 1 smart contracts, especially as they traverse the Rollup chain, they need to pay two gas costs, which reduces the enthusiasm of retail investors to use Layer 2 solutions up to. certain limit. , And capital utilization.
Hermez, who launched the mainnet on March 24, is trying to solve the usability problem. Hermez is a special type of expansion program, based on ZK Rollup building, poly focus "Transfer" scenario, by the introduction of the iden3 team, the hope for "large-scale migration mechanism" Layer2 reduces the handling of interactions.
1. Large scale migration mechanisms
Let's use an analogy to understand Hermez's large-scale migration mechanism.
Suppose Alice decides to go to destination T. Currently, the only means of transportation in front of her are private cars. Therefore, to get to T smoothly, Alice would have to take a private car to go there and pay $ 80 in fare.
At this time, Bob found a business opportunity, and he decided to open a special line (10 seats) to provide services to people in need like Alice. The specific operations are: waiting for passengers who need to go to T at location P, charge each passenger 30 dollars, and get 250 dollars after excluding expenses.
As a result, Alice achieves goal T at a lower cost. During the same trip, changing the means of transportation (from expensive private cars to cheaper buses) will reduce costs.
According to the Hermez mechanism, Alic's funds are transferred independently to a specific contract address, and the gas fee is paid, and then the funds with a common purpose (smart contract) are sent to the target address together, and then the gas fee payment is completed. That is, user assets are aggregated, and Layer 2 interaction costs are reduced by amortizing handling costs. The tools for running Alic's funds have changed from private cars to buses.
In terms of a specific implementation, Hermez points out in its official blog, "First, a Layer 1 smart contract must have a Layer 2 address (the user needs to know the address to transfer funds to this address)."
After that, the Hermez protocol will group and pull Layer 2 transfers received by the same Layer 1 smart contract target address at Layer 2.
The purpose of user funds entering the Rollup smart contract will use the Hermez function to withdraw the total amount from the same transfer group from Layer 1.Although the contract requires payment of a gas withdrawal fee, this fee can be allocated for all transfers in the same batch, so the costs are not high. .
The receiving L2 network coordinator (i.e., node / miner) needs to process the L1 withdrawal transaction, and decipher the flow of funds from that information, and then send it to another Rollup that matches the initial Rollup aggregation account.
In the design of a large-scale migration mechanism, Hermez implements transfers by summarizing the user's assets and dividing the gas fees that users must pay, which is conducive to retail investors participating in Layer 2 interactions.
Hermez believes that this can be achieved because the protocol reconstructs the information required for the original transfer at Hermez Layer 2 and the corresponding account information on the target Rollup.
"The maximum number of aggregate transactions is 2000. Compared to the cost of one token transfer, users can save up to 97% on Gas fees."
2. Donation Evidence Mechanism and Token Economy
In a large scale migration mechanism, we know that the Hermez network has a coordinator who is responsible for processing transaction data and ensuring that the network operates in a decentralized state.
How do I become a network coordinator? Anyone can become, the way is to use HEZ token (Hermez native token) to participate in the auction. In a limited time (about 40 ether block time, about 10 minutes), the person with the highest bid can become the coordinator, entitled to package data, and earn transaction fees.
After winning, the HEZ bidder will enter the smart contract and it is divided into three parts:
1. 30% of tokens destroyed;
2. 40% of the tokens are used for donations Part of this token can be given to the Gitcoin developer funding platform or other donation platforms;
3. The remaining 30% of tokens are used for network incentives to increase adoption rates.
This whole process is called "Proof of Donation".
Since 30% of the bidder's tokens will be burned, this means that the HEZ tokens are deflated. According to the Hermez white paper, the total number of HEZs is 100 million, of which 65% was used for incentives or allocated to strategic partners, 20% was allocated to founders, and 15% was allocated to development teams.
The founders and the Hermez team will unlock all tokens within 3 years (October 2023), and the remaining tokens will be fully unlocked in 2 years (October 2022).
Currently, there are 6,978,722 HEZ in circulation or accounting for around 6.98% of the total, with a market value of US $ 44.66 million.
Fourth, conclusions
In terms of operating mechanisms, Hermez's "large-scale migration mechanism" is friendly to retail investors and improves capital efficiency. The "Proof of Donation" design provides ideas for Layer 2 project development. After all, many projects have not announced how to coordinate network nodes.
At the application level, Hermez, which focuses on the "transfer" scenario, is currently announcing the USDT integration to increase user asset options.
USDT gas consumption rating on the Ethereum network
But in the long term, if Hermez is to develop further, it will need to support more assets and work with the exchange to open up the relationship between the asset side and the demand side. If not, it will likely be an expansion solution independent of a Layer 2 world.