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After hundreds of thousands of dollars on R&D, nearly a year of engineering, and 11 testnet demos, Virtual Labs has created the Virtual Rollup V1, the first way for Web3 users to experience decentralization with Web2-style UX.
The Virtual Rollup V1 (VR1) received a perfect security assessment from Halborn on March 15th and was quickly deployed into a dozen partner games, representing the first beta cohort of the technology. These launches have taken the form of Mainnet Madness, which began in early May and features new testnet and mainnet launches every week from our partner DApps.
Abstract
This article will outline the features of VR1 and why Virtual Rollup is significant in creating a seamless blockchain interface. Additionally, the success of the first dozen integrations in the beta cohort will be discussed alongside an examination of the challenges the team discovered and confronted. Finally, this piece will take a look at the aims and objectives of Virtual Rollup V2.
What is VR1?
VR1 is the first Virtual Rollup, which is a ZK State Channel (ZKSC) defined as being signable by N users as opposed to 2, dynamic in entering and exiting the channel, and natively multi-chain.
The N>2 improvement is especially notable as the original state channels were only useful for whale to whale exchanges. Meanwhile, ZK State Channels can support any imaginable DApp from four-player tournaments to hundred-person game lobbies to federated social networks that comprise millions of users. And, like all state channels, ZK State channels enable self-validation, which is more secure and seamless.
With a ZK State Channel powering DApps, users would now not need to experience gas, latency, or wallet frictions. It converts a DApp from Web3-style UX to Web2-style UX. If you would like to learn about more of the architecture and initial design assumptions of Virtual Rollups, you can read our litepaper here.
Because bad UX is one of crypto’s top three biggest problems, alongside reputation and security, making it seamless would mean that the advent of the ZKSC would further consumer adoption of this industry. Therefore in 2023, top venture firms invested in Virtual Labs to realize the vision of ZKSCs and later drive adoption throughout the industry.
I am happy to say that VR1 means Virtual Rollup is live on mainnet, functioning and shifting the infrastructure paradigm. But, this will not be the last Virtual Rollup on mainnet, because due to setbacks, VR1 lacks significant features and capacities to serve as a product that will gain industry adoption. Let’s start with its key features and winnings.
Accomplishments and Features
The Virtual Rollup V1 accomplished two things: (1) it proved the feasibility of ZK State Channels to eliminate common Web3 costs and frictions and (2) it proved PMF for such a technology, with several dozen DApps applying to be in the beta. For reasons that shall be investigated later, Virtual was only able to approve a fraction of the applicants, suggesting that the market for VR1 is significant in scale.
VR1 was able to prove all of this by following through with its three stated eliminations: gas, latency, and wallet frictions. Therefore, a DApp powered by VR1 will beat competitors through increased
- Engagement: A user can complete more actions in a fixed time period with VR1 than a transaction directly on blockchain due to instant settlement
- Capture Rate: The elimination of subsequent gas costs redirects funds previously allocated towards validation, towards the DApp
- Retention: Users are more likely to return to a platform that offers a good experience compared to one that was frustrating
- Decentralization and Security: Many projects opt for centralized platforms to attract users. With VR1, platforms actually settle to blockchains without compromising on experience.
It should be noted that VR1 is a product for DApps, not users. As evidenced by total beta applicants and closed customers, VR1 was a successful product. Yet, it did this while also improving UX for the user: saving them gas, providing instant settlement, and eliminating annoying wallet pop-ups without sacrificing security.
And so, it is also possible to measure features from the user’s perspective:
- ZeroGas
- Instant Settlement
- No Wallet Pop-Ups
- MEVZero: As transactions occur P2P, they cannot be frontrun or sandwiched
- Further Decentralization: Many of Virtual’s beta partners were formerly centralized due to Web3 UX drawbacks
Even more, these features turn the Web3 user experience from a lowpoint to rivaling and surpassing Web2 UX. This is because, with Web3 frictions removed, crypto can offer faster transaction settlement, ownership of your own data, and simplified login information for all of your accounts at once. With Web2-UX, Web3 demolishes Web2.
There are no users in Web3 with poor UX, there will be no users in Web2 once Web3 has good UX.
Challenges and Drawbacks
While Virtual Rollup V1 offered a theory on how Web3 UX could become seamless, it failed to provide a practical product that could accomplish this.
The first reason for this was that while ZK State Channels can support multiple users (N), browser-to-browser communication networks cannot. In other words, Virtual Labs created the telegraph but there are not yet wires between which the machines can communicate. While there is a super promising company called Waku that is building on top of LibP2P to bring out multiparty browser-to-browser communication networks, no solution today exists.
This means the Virtual Rollups can only power games where the user count is less than 8 or 9 (the highest number of devices that can be relayed on a server without causing lag). This cut out first-person shooters, MMORPGs, SocialFi projects, and loyalty point management systems—all types of customers we had already closed—and limited our target customers to small game and gambling platforms. This was especially disappointing as N, not N<9, was one of our main innovations and promises.
The second shortcoming was that the signature schemes, largely Plonky3 and MuSig2, were bespoke to a specific chain. This meant that for each new blockchain, the Virtual Labs team needed to recode the entire architecture to settle properly on that chain. This was limited to only EVM and Near, so Labs was forced to turn away incredible projects on Solana, Avalanche, and Cosmos.
Yet perhaps the largest overall problem was the immense integration timelines and delays. What we once believed was going to be a “plug-and-play” solution turned out to be a weeks-long process that forced us to hire an additional agency to integrate individual projects.
These factors mean that it would not be feasible to onboard the industry with Virtual Rollup V1. So, we formed a small beta to prove the possibility of the product and the realization of PMF. The next step, however, will be to build a Virtual Rollup V2 that solves these development-related shortcomings and also adds new user features.
And still, with the right type of DApp on a supported blockchain and after weeks of integrating, the DApp would genuinely become ZeroGas, ZeroLatency, and ZeroFriction, proving the true utility of Virtual Rollups.
Virtual Rollup V2
The VR2, as it will surely be known, will primarily focus on collapsing integration times down to zero. This will be done by creating a universally compatible signature scheme that can track state updates between existing smart contracts. Essentially, the goal is to make the Virtual Rollup EVM-compatible.
One-click integrations will also expand the types of DApps Virtual can support. For a project to integrate VR1 into their DApp, they must share their codebase so Virtual’s in-house integrations team can hand-stitch VR1 and their DApp together. This means Virtual even gets access to their backend during the intimate partnership. This was a friction in onboarding mature projects that were largely skeptical of sharing their entire code to a new product like Virtual Rollup.
So, the advent of Virtual Rollups with instant integrations will not only extend onboarding potential from three customers per month to unlimited, but further increase the market Virtual can capture.
VR2 will also contain brand new features. One of the most exciting is “Virtual Rollup Passing.” Think of each Virtual Rollup as a self-validated, private blockchain. This means that while all transactions within each Virtual Rollup are ZeroGas and instantly settle, this is not true between Virtual Rollups. This is a problem as it would be far more convenient to allow a user to deposit into a Virtual Balance and use as many DApps as they would like with an entirely seamless experience.
Virtual Rollup Passing enables this by providing a “lock-out” ability to the signature scheme so that a user could exit a live lobby and transfer to another DApp without introducing information asymmetry to either ZK State Channel, or the user.
There are numerous other upcoming features in second and third generations of Virtual Rollup such as gas-optimized contracts, shorter dispute periods, and AutoYield on locked funds.
Finally, as the Virtual Rollup V1 extended past deadlines, it absorbed engineering capacity away from accompanying infrastructures like the Virtual Bridge, which allow users to complete cross-blockchain transactions without even realizing that they operated across multiple ecosystems.
Conclusion
VR1 not only proved that ZK State Channels were possible, but also validated the market need for such a product. Yet, delays and integration timelines demonstrated that the current version lacked the ability to scale, alongside other important features, which were necessary to reach industry adoption.
When VR2 does reach industry adoption, the infrastructure will go far in bringing about mainstream adoption.
