19A/ Let's Talk About Layer 1

From IIW

Let’s Talk About Layer 1

Thursday 19A

Convener: Richard Esplin

Notes-taker(s): Stephen Curran

Tags for the session - technology discussed/ideas considered:

Ledgers, Layer 1

Discussion notes, key understandings, outstanding questions, observations, and, if appropriate to this discussion: action items, next steps


Richard - Evernym

  • Recent investigation with cheqd on different ledger implementations

    • Chose Cosmos

    • There were a lot of options - Polkadot, Ethereum, etc.

    • There were new options

  • Evernym plans to support several ledgers

  • What are the other ledgers that people plan to support?

Rouven: Difference in terminology -- Ethereum/Bitcoin terms Layer 1 and Layer 2.

  • Different from ToIP Layers 1 (DID layer)

  • Contrast - Ion is a ToIP DID Layer 1 that uses Blockchain Layer 2

Context to start here -- where do you want to anchor DIDs? But could lead to discussions of tokens, governance, payments etc. Rouven questions if those are the same problem, or at least have the same solution. Separate DID rooting from tokens/payments -- separate ledgers.

Richard -- networks often want to be all-included, but application developers might prefer to pull features from various locations. Assembly is likely: DIDs in Sovrin, Ethereum tokens, Google Doc for Governance, etc.


  • Evernym

    • Indy (Sovrin, ID Union)

    • cheqd

    • Ion

    • Ethereum


    • KERI tunnel to Indy network (ATTRIB points to key event log)

    • Pilots for Ethereum and Quorum

    • Instead of Witness pool, uses a ledger as registrar to the ledger

      • Essentially, KERI is the Blockchain Layer 2, anchored to the ledger

      • KELs are the Layer 2

  • Rouven

    • Ethereum, Layer 2

    • Polygon (Ethereum) — PoS (“Proof of Stake” vs. other meanings) instance of Ethereum

      • Compatible to Ethereum with different tradeoffs

      • Bridges are easier to use

      • Other versions of these are Layer 2 networks rooted in Ethereum

        • Do transactions, etc. at Layer 2

        • But can always go back to Layer 1 to access tokens

        • Layer 2 Computations offchain, ZKP put on Layer 1

    • Ion — easiest, scalable

    • Vision:

      • Don’t have to trust a Layer 2 vendor (e.g. MS), but can create your own transactions to anchor to Layer 1 Blockchain.

  • Other Indy Networks

    • ID Union

      • Currently setting up an external endorser.

      • Currently it requires a number of signatures to join the network — paper-based.

      • Working on automated alternative.

    • Governmental ones

    • (I missed some, please add)

  • Token is “great for Governance” — Richard

    • Why?

      • Sovrin Governance is by people and documents

      • Token incentivized — pay for play for proposals

        • Submit stake with proposals

          • If accepted, get reward

          • If rejected, lose stake

          • Voting is with the token.

        • Example - cheqd

          • Starts centralized, but as more join, becomes decentralized.

      • For technical operations for securing the network — goal is to have a global network with incentives built into the network vs. paid out.

  • Performance — Cosmos is higher performance because of Consensus

    • Order of magnitude performance (TPS) and larger (number of nodes) vs. Indy

  • With Layer 2 protocols, can optimize for different metrics.

    • E.g. optimizing the writing and reading of DIDs

  • Funding the Utility

    • Incentivized development of the utility to increase token value

      • If you have tokens, you want more — e.g. startup mentality, those in early want to drive up the token price over time

        • Economic mechanisms shift over time, impacting the security model — e.g. Bitcoin

        • Management trick is how to keep moving without spending your tokens

      • Voting to pay utility providers

    • Incentivized operation of the network

  • Evernym/cheqd — reviewed a number of ledger implementations, set criteria and evaluated to make their decision to use Cosmos.

  • Question from Rouven — why build token into network for storing DIDs vs. keeping payments separate?

    • Kaliya — SAFts are driving that — those that funded launching Indy/Sovrin (2017) and now cheqd (2021).

      • Lots of ugliness behind the scenes as a result of that.

    • Richard — cheqd is offering a single network for all capabilities in a single place is a valuable business. Makes it easier for some that want that “all-in-one” vs. going to multiple places.

  • Operators can become a challenge for global networks where liability can increase as use builds up and geo-political issues come up. Is the risk worth the benefit?

  • What about other DID methods?

    • Anyone using them?

    • did:web is important to leverage existing infrastructure / DIF “Well Known”

      • Starting place for company/organization IDs

    • did:key — everyone using

      • Just sending public keys ;)

    • Hadera

    • Kilt (Polkadot)

    • Cosmos Cash — intended to be the default DID Method on the Cosmos inter-blockchain

    • did:evan (public permissioned ethereum based network + polkadot + IPFS )

  • Business Partner Agent (BPA) — public profile VCs — publish information

  • Rouven draft mental model of Layer 1/2 on Blockchains:


    • L2 enables optimizing for extreme performance for metrics of an execution and/or storage — data, TPS, etc.

    • For DIDs, that means doing things like all the content and logic is on L2 and the only checking is the “who is allowed to update” — that security layer enables.

    • Polkadot does that separately. Cosmos combines onto the same ledger.

  • Discussion on the state of Ethereum L2 approaches by reviewing l2beat.com

    • Most popular with Finances and the technology used:

  • [[File:./output/media/image2.png|624x325px]]

    • Risks associated with the various L2 implementations.

  • [[File:./output/media/image1.png|624x325px]]

  • Per Rouven — expectation is that L2 will become “the way” to use the networks and only the L2s will be using the L1, with ability to access tokens at L1 if necessary. L2s are optimized for cost, storage etc.

    • The only thing that L1 is for is the token update and signature checking, with tiny proof that the L2 is correct.

    • L2 can’t steal your money — they can block you, but if they do, you can access L1 to get your tokens. But those txns you have to pay the full price. When using L2, the L1 txn costs are distributed across the participants in the L2 transaction.

    • NFTs are using L2s to eliminate the cost of gas from the transactions.

    • Question — is there a concern about spam if no gas? Do you control who can use it?

      • Totally up to the L2 implementation — optimized for the use case.

      • Incentives and disincentives can be applied.

      • Don’t have to worry about security, because users can go to L1.