Dymension: A Modular Internet of RollApps

Introduction

Dymension's highly anticipated mainnet launch took place recently, followed by an airdrop of its native $DYM token worth $390 million. The airdrop benefitted early users and selected communities across Solana, Ethereum, and others. More importantly, the $DYM token (pronounced "dime") received just over a $5 billion fully diluted valuation on its first day live, according to CoinDesk.

The idea of Dymension was conceived two years ago. For inspiration, the founders looked at Cosmos (the Internet of the Blockchain) and tried to figure out how to take it to the next level. They wanted to add another "dimension" to the Cosmos interchain by building a modular internet of RollApps. Hence, the name "Dymension."

Although the project just launched, behind the scenes, the team has had their head down for the past two years, steadfastly building out the tech. It consists primarily of a network of lightning-fast modular blockchains. Dymension calls these chains "RollApps."

Co-founder and CEO Yishay Harel believes the future of blockchain technology is modular. He envisions a day when users can select their virtual machine, data availability, and settlement layers individually. Yishay was also actively involved in raising approximately $7 million in a seed funding round for Dymension in February 2023.

Vision and Inspiration

Deploying a blockchain is not easy. The team soon learned when creating Dymension that building a blockchain requires coordination between many entities. Having experienced the complexity, they wanted to create a platform that simplified the complex task of building a blockchain to be on par with deploying a token. If a developer desires to transform their server into a crypto blockchain with minimal effort, security, and trust assumptions, Dymension wants to be able to help with the endeavor.

The vision is to build the Internet of RollApps. It was there from the start and hasn't wavered. According to Yishay, the "Eureka moment" came after looking at what Ethereum did for tokens and NFT collections. Dymension wants to do the same for Rollups. However, according to Yishay, they are not looking for the "typical VC play." Instead, the team focuses on creating the best product and opening it up to everybody.

This article will dive deeper into Dymension's inner workings. But before we look at how its architecture will help bring the founders' vision to pass, let's first look at the difference between monolithic blockchains and modular ones.

What Is a Monolithic Blockchain?

Researchers have long struggled with the challenge of creating the optimal blockchain system. They've tried other architectures that either seek to accommodate all users on a single chain or through a network that houses a tightly coupled group of chains.

The first design approach to blockchains was monolithic. The idea was for one blockchain to do everything from processing transactions to getting nodes to consensus. Ethereum is an example of everything getting done on one chain. But, while monolithic blockchains retain the principle of decentralization, they face some challenges.

Monolithic blockchains are limited when trying to scale—especially when trying to serve billions of users around the globe. For these traditional blockchains to increase the number of transactions they can handle, they must absorb the costs of higher hardware requirements for nodes that verify the chain.

Therefore, scaling solutions have progressed to other options, such as Layer 2 solutions or sharding. However, the modular concept of splitting blockchains into separate components challenges the traditional monolithic method of having a single blockchain do everything. And that is what modular blockchains do: They spread functions across multiple specialized chains.

What Is a Modular Blockchain?

Modularity is the next evolution in blockchain scalability. A more optimal system becomes possible by splitting up the blockchain's processes into multiple specialized layers.

With the modular approach, everything gets broken into layers. There are layers for execution, settlement, and data availability. This principle of modular design is the framework behind projects like Dymension. It divides a larger, single system into smaller parts that can be replaced or exchanged.

Thus, a modular blockchain can specialize. Further, combining multiple specialized blockchains can create an even more customizable and scalable system.

Modular blockchains can specialize in the following functions:

1. Execution (processing transactions)

2. Settlement (resolving disputes)

3. Consensus (ordering transactions)

4. Data Availability (ensuring that data is available)

Most blockchains feature execution as their core functionality. However, because of modularity, blockchains can be created for purposes other than execution, thus creating a more scalable and efficient system.

Dymension as the Settlement Layer

Dymension has a unique business model in that it operates as the only settlement layer in the modular stack (see #2 above). Settling doesn't happen in other venues. In a recent interview, Yishay noted this distinct aspect and explained that Ethereum is not a settlement layer. Instead, it has settlement layers (plural). Every settlement layer is a smart contract where users can pull their money from the Layer 2 Rollup. So, Ethereum has various settlement layers.

Presently, there is no other blockchain that settles other blockchains "into the core binary." But Dymension does. It is the only self-proclaimed blockchain that acts as a settlement layer by itself. It does so by enshrining the IBC bridge (see below). Hence, modular settlement is what makes Dymension unique.

Modular Blockchains and Layer 2 Rollups

Modular blockchains keep their focus tight by specializing. Layer-2 solutions like ZK-Rollups process transactions off-chain (on a faster blockchain) before sending them back to the parent chain. In essence, Rollups operate as a type of modular blockchain that specializes in execution. Thus, they can offload other tasks to another specialized modular blockchain like Dymension.

Celestia is another example of a modular blockchain. A big part of validating a chain's state is arriving at consensus, and Celestia provides consensus and data availability functions that Rollups need. Learn more about Celestia's modular blockchain here.

Understanding Dymension's RollApps

Dymension is a delegated Proof-of-Stake (dPoS) blockchain that unifies and secures the modular blockchains in its ecosystem. As mentioned earlier, modular chains are known as RollApps. In fact, Dymension calls itself the "home of the RollApps."

The team has described RollApps as analogous to "front-end web applications," and Dymension is the server that these applications run on. Similarly, it connects applications and supports their backend functions.

RollApps are fast and easy to deploy on top of Dymension. Furthermore, developers can build them with the RollApp Development Kit (RDK). Dymension's RDK comes pre-built with several modules to expedite the deployment process. Thus, creating RollApps begins with the template provided by the RDK. With it, developers can spin up and deploy RollApps quickly with additional customization options.

These RollApps depend on Dymension for security and interoperability between all the other RollApps in the ecosystem. Furthermore, they work with the same communication standard, making it easy to interoperate between them.

In the same way that having different telephone companies whose phones can't communicate with each other would be undesirable, Dymension contends there needs to be one standard bridge to avoid communication breakdowns. Their bridge of choice is the Inter Blockchain Protocol or IBC.

To create a native UX feel, Dymension wants all the bridges to be the same so users don't have to deal with a Starkware bridge over here and a zkSync bridge over there. In other words, they only want bridges that can communicate with each other.

The Dymension Hub

The Dymension Hub serves as a platform designed to unite and service RollApps. It acts as the settlement layer of the protocol and plays a critical role in the Dymension ecosystem by facilitating the following:

1. Consensus Mechanism

The Dymension Hub enables participants to run nodes and contribute to the network consensus mechanism to ensure operational security and decentralized governance.

2. Modular Blockchain Integration

The Hub is a foundational layer that supports RollApps' deployment and operation, enabling them to function seamlessly within the ecosystem​​​​.

3. Interactivity

Users can interact directly with the Dymension Hub, RollApps, and the IBC via the Portal App. It facilitates transfers and communication across the various blockchain network​​s.

4. Liquidity

The Dymension Hub has an embedded liquidity layer that assists with asset pricing, swapping, and efficient token routing throughout the ecosystem. This function maintains asset exchange liquidity and interoperability among the different blockchain platform​s.

It's not beneficial to have thousands of RollApps putting all their data on the Dymension Hub because things would get clogged, and Dymension would face the same data availability bottleneck as other Layer 1 chains. Therefore, users can choose their data availability layer by going modular as long as IBC is connected within the Dymension Hub.

Furthermore, Dymension secures users' funds on the Hub so they can go off-chain to perform their transactions on a Layer 2 Rollup. RollApps are data availability agnostic. Thus, Dymension guarantees that the funds are safe. And if data is required, it uses an IBC bridge to connect to the Dymension Hub.

To sum up, the Dymension Hub resides at the ecosystem's core, providing the necessary infrastructure for developers to create, deploy, and integrate quick and scalable modular blockchains.

Tendermint Consensus

Dymension is a Layer 1 Tendermint-based chain that is EVM compatible. Tendermint is the most mature Byzantine Fault Tolerant consensus and networking engine available. More importantly, it's been around long enough to have its security features battle-tested. It makes sure that everything is synced and agrees on the state.

Above the Tendermint layer, you have the Cosmos SDK. Cosmos is the father of modularity and simplifies the process of building blockchains out of composable modules. Dymension's validators running on the Cosmos SDK secure the RollApps so users can rest assured that their funds are secure.

On the topic of Cosmos, RollApps are like Cosmos App-Chains but outsource consensus to the Dymension Hub. Moreover, RollApp Sequencers submit state root updates optimistically to the Dymension Hub, which can revert a state transition if fraud proofs determine it is invalid. Sequencers are RollApp operators that order, validate, and process transactions. After a transaction is processed, the Sequencer performs an immediate state update.

The Dymension Hub is the source of truth and decides whether a RollApp is in good standing. As such, it intermediates transfers going in and out of the RollApps. And to reiterate, RollApps interconnect with each other through a single IBC connection.

Validators and Delegators

With Tendermint Core, Dymension relies on a distributed set of validators. These validators commit and sign new blocks in the blockchain. They run full nodes and participate in the consensus mechanism by broadcasting votes.

Validators must also bond $DYM and have other token holders delegate their $DYM to them. Then, validators and their delegators can earn rewards (paid in $DYM) for securing Dymension. This mechanism is similar to other Cosmos SDK chains—validators select the commission based on their delegators' rewards. Besides validators, anyone may run a full node to connect to the network and broadcast transactions.

Learn about non-custodial staking here.

Staking DYM Tokens

Dymension has one billion $DYM tokens to allocate. Notably, users have already bonded over 377 million $DYM according to the protocol's staking monitor. All these new RollApps deploying on top of Dymension could potentially airdrop more $DYM tokens to stakers. That is one of the narratives in crypto right now, and the thought of helicopter money could be driving some of the bullishness on staking $DYM.

Summary

Many teams are already building very innovative things on Dymension. Its formula for growth is building a solid product, investing in solid crypto economics, and watching the network effects grow. Satisfying the developer and user experiences is also essential.

Co-founder Yishay Harel describes Dymension as a "bet on human ingenuity." It is another Lego that fits neatly into the modular stack. The goal is to become the "go to" settlement layer in the modular stack—get there first and dominate.

If Dymension has its way, the era of scarce and expensive block space will soon end, and the Web3 ecosystem can become available to the world's population. This positive outcome will be partly due to ZK-Rollups as a Service and modularity. Yishay envisions an explosion of chains that can communicate through the IBC, thus bringing interoperability and unification across the blockchains.

It will usher in an era of abundance, with some of these new projects bringing life-changing applications to the forefront.

About Luganodes

Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 40+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.