In-depth interpretation of the Aptos ecosystem: Will game infrastructure and tools become growth engines?

Original Author: Xangle

Original compilation: PANews

Key Quick Facts

• Aptos is a PoS blockchain developed by the former Meta Diem team with a focus on speed and reliability. Aptos is designed to achieve a theoretical throughput of over 100,000 with sub-second latency. It supports the Move programming language and provides a stable, fast and flexible development environment.
• Technology alone does not guarantee success. Aptos employs two key strategies to ensure sustainability and survive the L1 war: 1) implementing a future-proof network through upgradeability, and 2) expanding its ecosystem through Web2 partnerships. This approach involves introducing proven products and services and leveraging the intellectual property and user base of Web2 companies. It’s also a bet on the future of the blockchain industry, which it predicts will be driven by global heavyweights rather than Web3 startups.
• Aptos will likely build its own ecosystem around the gaming space. It is one of the few public blockchains that is technically capable of supporting AAA games. Aptos is also actively working with METAPIXEL to leverage their extensive game development expertise to jointly build the infrastructure and tools required for Web3 game development. We expect the features currently in development, including token object model, proxy gas payment, VRF, and game SDK, will simplify the development process for game companies. Additionally, the highly anticipated Gran Saga: Unlimited (GSU), featuring NPIXEL's renowned IP, is scheduled to launch in January next year.

1 Introduction

The ultimate goal of all L1 blockchains is to become a global database infrastructure capable of simultaneously accessing tens of millions of users by solving the problem of the impossible triangle of the blockchain. In the 13 years since Bitcoin was created in 2009, no blockchain has solved this problem. Existing blockchains run into limitations, often requiring trade-offs such as compromising decentralization or slowing down, which leads to a host of issues such as network overloads, shutdowns, and excessive gas fees.

To this end, the blockchain industry has proposed a modular architecture in recent years, with different chains handling consensus, data availability, settlement, and execution, respectively. The main advantage of a modular architecture is that each chain can specialize in a specific role, reducing the load on nodes and improving the overall performance of the blockchain. Many blockchains, including Ethereum, Avalanche, and Cosmos, are currently aligning their roadmaps around modular architectures.

But modularity also has its limitations. It weakens interoperability and composability between dApps, fragments liquidity, and hampers user experience. On top of that, modular blockchains face a wider range of attack vectors than single blockchains, raising security concerns. Aptos is a new PoS-based blockchain designed under the overall architecture to address such security challenges. It aims to provide stable and fast blockchain infrastructure for users around the world.

2. Inside Aptos: Technology and Features

2-1. Technology: High scalability through efficient consensus and parallel processing technology

One of the big challenges of permissionless public blockchains is scalability. Scalability is mainly related to the processing speed of the blockchain, usually measured by throughput and latency. Currently, the actual demand for Aptos block space is relatively low, averaging 6-7 TPS, but the technology is theoretically capable of 100,000+ TPS and sub-second latency. This is certainly an impressive number considering that VISA and Mastercard process approximately 3,000 to 4,000 transactions per second. Aptos' ability to achieve such high scalability is largely due to the adoption of technologies such as Quorom Store (Narwhal), State Delta Synchronization, and Jellyfish Merkle Tree (JMT). At its core lies its own consensus mechanism (AptosBFT v4) and parallel processing engine (BlockSTM).

AptosBFT v4 is a consensus algorithm based on DiemBFT, developed by Meta's former blockchain project Diem (formerly Libra). It has the characteristics of low network load and fast consensus speed, which is a significant improvement over the previously popular PBFT consensus mechanism. Credit should go to: 1) linear communication and linking techniques that improve latency and network efficiency, 2) fast sync between validators with efficient timeouts, and 3) reputation system that quickly analyzes on-chain state filtering during leader node selection Drop unqualified validators.

BlockSTM is a parallel execution engine for smart contracts that leverages software transactional memory (a technology that extends the ACID properties of database transactions to parallel programming). Unlike the existing mechanism that needs to process transactions in block order, BlockSTM distributes independent transactions to multiple threads for parallel execution. By pre-defining the order, pre-execution, post-verification and consensus can be achieved. This means that the introduction of BlockSTM can solve the bottleneck problem of the blockchain and achieve a breakthrough in transaction processing speed.

2-2. Language: Use Move to build a stable and flexible development environment

"EVM compatibility" has become a powerful narrative as Ethereum has become a major component of the cryptocurrency space. In fact, there are only a few non-EVM L1s that don't use Solidity, namely Solana on Rust, Cosmos on Cosmwasm, Stacks on Clarity, and Sui and Aptos on Move. However, it's no secret that EVM environments and Solidity are vulnerable. Numerous hacks over the past few years have exposed such vulnerabilities. Hacking has cost the crypto industry nearly $9.9 billion over the past seven years, from 2016 to 2022, according to Chainalysis.

Smart contracts are difficult to modify after deployment. This is why projects go through multiple rounds of technical review before releasing a dapp. However, the difficulty lies in the dynamic scheduling of Solidity contracts, because other unexpected variables that may occur cannot be predicted before execution. As the demand for safer programming languages continues to grow, developers are increasingly attracted to the security and advantages of Move and MoveVM.

Move is a Rust-based open-source programming language developed by Meta. It is known for its stability over Solidity and speeds up the process from development, testing to deployment. This is due to several key features of Move: 1) Supports first-level assets to prevent arbitrary issuance and deletion of assets; 2) Supports static scheduling and enhances code verification; 3) Reduces verification time through certifiers; 4) Ensures that codes are developed according to 5) provides memory safety, similar to Rust, and makes managing memory easier. Together, these features make Move a reliable and fast development environment for developers.

2-3. Ecosystem: Thriving with the full support of the Aptos Foundation

Since the mainnet launch in October 2022, the growth of Aptos has been on a steady upward trend. According to Aptoscan, a total of 4 million wallets were created, with an estimated 50,000-10,000 new wallets being created every day. The average daily transaction volume also remained at around 500,000. As of June 13, 2023, 275 projects have been launched in the Aptos ecosystem, including 113 NFT projects, 67 infrastructure and middleware projects, 46 DeFi projects, and 18 game projects. In terms of TVL (total value locked), three projects, Pancakeswap, Thala (Thalaswap, ThalaCDP) and Liquidswap dominate the DeFi market, accounting for 95% of Aptos' $44 million TVL.

Among them, in the game field, NPIXEL's Web3 game platform METAPIXEL has gained huge attention in the Aptos ecosystem. Especially "Gran Saga: Unlimited", which is an MMORPG chain game that incorporates the IP of NPIXEL's popular game "Gran Saga", is one of the most anticipated games.

However, Aptos is currently still significantly smaller than other prominent blockchains such as Ethereum, Polygon, Arbitrum, and the BNB chain. The ecosystem currently lacks killer dApps or high-profile NFT projects. The Aptos Foundation is well aware of this and is active in various funding programs, including hackathons. Earlier this year, Aptos closed its Phase 1 grant program, awarding $3.5 million to more than 50 projects, including Apscan, Bruhbears and Intu.xyz. This was followed by the launch of the second phase of the funding program, which consists of two categories: the artist funding program and the Aptos and Google Cloud Accelerator programs.

2-4. Token economics: longer redemption period and stable inflation rate

Here are some key stats about Aptos native token $APT:

• Maximum supply: infinite
• Total supply: 1, 038, 484, 105 $APT ( 100% )
• Current circulation: 200, 288, 451 $APT ( 19.3% )
• Inflation rate: 5.6% (decreasing year by year, the minimum is about 2.6%)
• Staking rate: 860, 195, 091 $APT ( 82.8% )

$APT staking rewards start at 7% per year and decrease by 1.5% per year until reaching 3.25%. Initial inflation is estimated at about 5.6 percent and is expected to fall to 2.6 percent over time. Since more than 50% of the initial distribution will be in circulation in about two years, $APT will have some potential risks. However, since $APT has a release period of up to 10 years, the initial inflation rate of $APT is not high compared to other L1 tokens. For example, Ethereum’s inflation rate hovered above 10% in 2016-2017, according to Xangle Analytics, but has gradually declined to 4% post-consolidation. . Additionally, $APT has a lower inflation rate than most other L1 tokens, which typically experience high inflation rates of over 10% during the initial stages of mainnet launch (BNB: 16%, AVAX: 800%, MATIC: 80%, NEAR: 200%).

Currently, the collateralization ratio of $APT is about 82.8%, which exceeds the percentage of the circulating supply. This is due to the design of Aptos, which allows the staking of locked tokens. While some members of the community have voiced their concerns, provided inflation is not too high, the design could have a positive impact on the network because: 1) the security of the PoS chain is directly proportional to the value of the staked tokens, 2) Protocols wishing to join the Aptos ecosystem can utilize locked $APT to enjoy staking rewards.

3. Future vision of Aptos

Aptos' core strategy involves two key aspects: 1) Future-proofing the network through scalability, and 2) Leveraging extensive capital and network to attract Web2 businesses.

3-1. Growth strategy (1): Building a future-oriented network through scalability

Aptos intends to use its scalability to create a future-proof network capable of accommodating 1 billion users. Unlike other blockchains like Ethereum, Solana, and Cosmos, which typically deploy major protocol updates every six months to a year, Aptos aims to be the strongest block in the long run through its fast and efficient upgrade system chain. In fact, Aptos has passed 24 AIPs in the eight months since its mainnet launch on October 12, 2022, including core layer upgrades, namely AIP 4, AIP 17, and AIP 26 (Quorum Store).

Implemented in March 2023, AIP 17 aims to reduce transaction execution costs by separating the gas fee logic associated with storing and executing transactions. The idea is to assign an absolute value to storage gas fees based on transaction type, while preserving the existing fee market mechanism for enforcing gas fees. In this way, Aptos was able to reduce the gas fee of UnlockStake, RotateConsensusKey, Transfer and WithdrawStake types of transactions by about 99%. Quorum Store, also known as AIP 26, is a NarwhalBFT consensus designed specifically for the Aptos architecture. Its purpose is to solve existing consensus bottlenecks, such as waste of node bandwidth or repeated transmission of the same transaction data during the block consensus process. Aptos tested Quorum Store on Previewnet and reported a more than 3x increase in network throughput. Recently, Aptos has been working on Shoal, a framework that will introduce pipelining and leader node reputation. The introduction of Shoal is expected to reduce the latency of Narwhal-based consensus algorithms such as Bullshark, Tusk, and DAG-Rider by approximately 40-80%.

Aptos is able to support fast, instant upgrades thanks to its modular architecture, protocol upgrades without hard forks, and an on-chain governance system that facilitates real-time release of upgrades. These features ensure that Aptos does not experience any downtime during AIP updates.

3-2. Growth strategy (2): Ecosystem expansion centered on the entry of Web2 companies

Unlike most L1s that prioritize Web3 projects for ecosystem development, Aptos' ecosystem expansion will revolve around large enterprises. The goal of this approach is to launch solid products and services and bring in the IP and user base of Web2 companies.

Aptos is strategically using its funding and network to attract Web2 companies. Last year, Aptos completed its seed and A-round financing, with a total financing of $3.5 million. Investors include a16z, Paypal Ventures, Apollo Global Investment, Tiger Global Management, Griffin Gaming Partners, Multicoin Capital, and Jump. Considering that Aptos has pledged to allocate 51% of the $APT issuance to ecosystem development, it appears to have provided enough funding for its partners.

Aptos co-founder Mo Shaikh has worked at BlackRock, BCG, Consensys, and Meta, and co-founder and CTO Avery Ching was a software engineer at Yahoo, Meta, Novi, and the Apache Software Foundation. In addition, his experience A rich team and a network of well-known investors will be very beneficial in keeping the company engaged.

Aptos' main target markets are four key markets: 1) Gaming, 2) Finance, 3) Media & Entertainment, and 4) Social Networking. Aptos is currently working with Mastercard and Google Cloud to lay the groundwork for growth. In the Korean market, Aptos appears to be well-positioned to enter the gaming and media/entertainment market given its investments from Hashed, Irongrey, Hybe, YG, and a key partnership with NPIXEL.

3-3. Long-term plan to provide companies with dedicated block space

Among the major Korean companies that have recently announced their foray into Web3, such as Nexon, SK Planet, Com 2 uS, Neowiz, and NPIXEL, only NPIXEL has opted for a single chain. For those who are hesitant to build their own L1s, the main advantage of these L1s is the availability of development infrastructure (such as SDK) that can simplify the process of building the mainnet.

The main motivation for building your own mainnet is to have 1) network control and 2) your own blockspace. In the former case, Aptos may be a viable option, depending on the size of the company and its business model, as it removes the burden of operating a mainnet, including time, cost, and development resources.

In the latter case, a monolithic blockchain may not be an immediate choice for companies with significant demand for dedicated block space. This is because all participants in the operating structure of the overall blockchain must compete for the same resources. It is worth noting that the high scalability of Aptos allows all services to share the same block space, but the potential risks of building their own blockchain, such as fragmentation of security, reliability, liquidity, and data availability, do not should be ignored.

Solana launched stake-weighted PoS late last year, offering an alternative to provisioning and guaranteeing network bandwidth in proportion to the staked SOL. Aptos has taken a different approach, incorporating sharding into its solution. A demo version will be released within the next 6 months to a year.

4. The gaming industry will lead the growth of the ecosystem

4-1. METAPIXEL driven ecosystem growth

As part of a strategic partnership with NPIXEL starting in November 2022, Aptos will exclusively host games produced by NPIXEL's blockchain division. Founded in 2017, NPIXEL is a Korean game developer. It will complete a B-round investment of 100 billion won in 2022, becoming a unicorn in the game industry in the shortest possible time. One of its flagship titles is the globally popular mobile game Gran Saga, which has been downloaded 4.2 million times, accumulating 180 billion won in revenue and $200 in ARPPU (average revenue per paying user) per month. METAPIXEL is a Web3 game ecosystem based on the Aptos public chain developed by NPIXEL. Its first game, Gran Saga: Unlimited, will launch in January 2024. An extension of NPIXEL's flagship IP, Gran Saga: Unlimited achieved a retention rate of 70% to 80% among 500 participants in its first closed beta test.

In addition to Gran Saga: Unlimited, METAPIXEL is developing and operating the Pixelcraft and Catcha projects. Pixelcraft is a 2.5D ultra-casual pixel art RPG game, which is expected to be launched in the first half of next year. Knight Survivor, a mini-game within Pixelcraft, has a daily revenue of 1.5 million won and an average daily active user (DAU) of 7-8 thousand. The game's success helped METAPIXEL reach 80,000 subscribers in the half-year period from January to June 2023, and could be a trigger for further development of the Aptos ecosystem.

4-2. The game industry is expected to promote the vigorous development of the ecosystem

The gaming industry is likely to be a major catalyst for the exponential growth of the Aptos ecosystem for the foreseeable future. Aptos is one of the few public chains capable of supporting AAA game technology. Aptos is also working with METAPIXEL to build the necessary infrastructure and tools needed to simplify the Web3 game development and publishing process.

Speed and reliability are likely to be top considerations for gaming companies when choosing a blockchain platform to build their projects on. Depending on how well the gaming experience is realized on-chain, a fully on-chain MMORPG that applies blockchain technology to all commodities and items will involve processing thousands to tens of thousands of transactions per second, and Aptos is a natural choice for gaming companies.

Additionally, Aptos and METAPIXEL are collaborating to develop various game-related infrastructure and tools to make it easier for game developers and gamers to join the blockchain ecosystem. Currently, one of the biggest challenges in developing blockchain games is the poor development environment. Aptos and NPIXEL are working together to develop standardized implementation values to allow gaming companies to transition more smoothly from Web2 to Web3, such as:

• token objects (AIP 11): METAPIXEL has improved the following areas by transitioning from Aptos' initial token v1 model to an object model (token v2):
• NFTs are at the same level as user accounts: For a more intuitive and direct handling of resources, NFTs are identified by 32-byte addresses, just like user accounts.
• Enhanced ownership identification: The owner field of the object can easily identify the owner of the NFT. It simplifies the ownership verification and transfer process, facilitating composability.
• Efficient storage usage: Grouping objects and related resources, as well as the previously defined ObjectCore, can effectively use storage space, thereby reducing storage costs.
• Dynamic and flexible NFT: Through the Token Object model, game assets can be managed dynamically and flexibly. A single Token object can be used to mint game NFTs, grant Soulbound status, and upgrade attributes.
• Proxy gas fee payment: In order to achieve a user experience comparable to Web2 games, Aptos is building an open source proxy gas fee payment system. The system consists of two key features: 1) multi-agent transactions, which enable multiple actions to be activated in a single transaction, and 2) remote signing processes, which allow gamers' transactions to be signed remotely.
• Verifiable Random Function (VRF): One of the biggest benefits of bringing blockchain technology to games is transparency. METAPIXEL and Aptos Labs developed VRF to increase the transparency and reliability of the gacha system.
• Stackable (TBD): A new token standard is being developed to enable semi-homogeneous NFTs similar to ERC 1155.
• SDK: Aptos plans to develop an SDK to simplify the process of building games on its network.

4-3. In the ascendant, the prospect needs long-term observation

The Aptos mainnet has only been live for about 9 months now, and lags behind some other established L1s in almost every metric, including infrastructure, TVL, developer community, and user numbers. The key to Ethereum’s continued dominance as the leading blockchain lies not only in its superior infrastructure, but also in the continued influx of capital and talent, including developers and researchers: Ethereum’s TVL is 615 times higher than Aptos’, 26x more full-time developers and 49x more Github repositories than Aptos. As such, Aptos' budding state will require patience and long-term observation from investors and stakeholders, although full-blown growth will likely begin to emerge next year as the aforementioned game infrastructure and development tools roll out in the second half of this year.