What Is Dymension?
Dymension is a blockchain specialized solely for settlement and introduces a new primitive: RollApps. It handles state and communication between RollApps built on its tech stack. RollApps leverage modular architecture and are application-specific chains. Ethereum allows anyone to deploy a token permissionlessly; Dymension allows anybody to deploy a rollup permissionlessly.
Key Takeaways
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Dymension is a TenderMint-based Cosmos SDK chain and represents the next evolution of the app-chain thesis.
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Dymension provides a settlement layer and unlocks IBC communication between all RollApps built on its stack.
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RollApps are the new primitive, and the aim is to scale a network of networks.
Ethereum is introducing EIP-4844, a new data availability highway for rollups in the Dencun upgrade. Solana will get Firedancer, a next-gen client designed by Jump Crypto. And Cosmos is following its modular roots to the next evolutionary step. All the big three are undergoing a metamorphosis and converging on the blockchains of tomorrow today.
Dymension is a new settlement layer for the Cosmos ecosystem, delivering the best possible UX to spin up and bootstrap new chains. The time for modular architecture has arrived, and the stakes are high. Network effects in crypto make becoming a dominant player in the modular stack everything to play for, and Dymension is a multi-layer blockchain protocol staking its claim to become the settlement layer for the next generation of application-specific rollups.
.@dymension is a bet on human ingenuity
— Yishay (@yishayRL) January 10, 2024
The era of expensive and scarce blockspace is firmly in the rearview mirror.
What Are RollApps? Introducing A New Primitive
A RollApp is an application-specific blockchain built using Dymension’s RollApp Development Kit (RDK), leveraging Dymension Hub for settlement and a Data Availability (DA) solution. Notably, RollApps are DA agnostic, and any DA solution connected to the Inter-Blockchain Communication Protocol (IBC) can be used.
RollApps post data to their selected DA layer and post state to Dymension Hub. This all sounds relatively complicated, and the important thing to realize is that under the modular architecture framework, blockchains are being divided into distinct components, and each element is undergoing optimization.
Projects like Celestia handle data availability and consensus, Dymension Hub acts as the settlement layer, and the RollApps handle execution off-chain reporting state to Dymension. Instead of a single chain fulfilling all these roles, developers can now use modular building blocks to create customizable chains. What is the advantage? Custom execution environments tailored to specific applications and massive increases in scalability.
The RollApp Development Kit
The Cosmos Software Development Kit (SDK) features pre-built modules developers can leverage to speed up the process of spinning up an application-specific chain. The Tendermint consensus engine is the other part of the Cosmos stack and how blockchains validate transactions and sync.
What differences does the RDK introduce?
RDK retains several core modules from the Cosmos SDK:
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Bank: Facilitating token transfers
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Gov: Onchain proposals and voting
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Upgrade: Handling software upgrades
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IBC: Bridging protocol
The RDK integrates new smart contract frameworks, including EVM smart contracts, which will allow for EVM RollApps. It introduces Epochs and elastic block production; Sequencers, creating an account to reward RollApp operators; Mint, a time-based mint module for token creation; Dist, a method of allocating rewards between Sequencer, members, and community pool; and Staking, a wrapper on the existing Cosmos SDK staking module.
Dymint replaces Tendermint. Instead of each app-chain operating an independent validator set, they inherit security from Dymension and operate a sequencer instead. This is the major breakthrough and Dymension’s biggest contribution to the modular narrative. Dymint takes responsibility for communication, messaging, and block production and leaves all execution decisions to the RollApp operator.
Introducing a Sequencer is the move that ensures everybody can win. RollApps can use their own token as gas and collect rewards (essential financial incentives to make operating a RollApp attractive) while benefiting from Dymension’s security. This has always been a hole in the Cosmos ecosystem; even things like Interchain Security leave much to be desired. Dymension’s solution keeps financial incentives while removing complications and bootstrapping costs: using the RDK and Dymint tech stack is speedrunning the blockchain creation process.
Dymension is the parent chain for a new generation of app-specific Layer 2 chains in the Cosmos ecosystem, enshrining itself as the settlement layer. It abstracts away trust assumptions, creates minimum effort for deployment, and maximizes security.
Dymension is an internet service provider for app-chains and is fully unlocking human capital by allowing anybody, literally anybody, to spin up a RollApp.
Understanding the Difference Between Rollups and RollApps
Crypto has descended into a mess of complicated definitions for rollups depending on where they post data and their specific validity proofs. RollApps, again, are a different beast. But the defining difference between rollups and RollApps is that rollups are scaling a single network, whereas RollApps are scaling a network of networks.
A rollup is an execution module processing transactions off-chain and returning summary data to the parent chain. A RollApp is an app-specific chain situated in the IBC landscape with full interoperability leveraging a DA solution and Dymension’s security. Rollups aim to scale Ethereum and increase its transactional throughput. RollApps aim to scale ideas and allow for the seamless deployment of app-chains.
Rollups on Ethereum move forward, building from an imperfect start. Dymension has taken a step back from a more meta-perspective to improve the foundations for scaling and RollApps. Instead of building based on a wonky foundation, Dymension reorganizes the ground layer to deploy a clean slate for a larger move upwards.
The Cosmos App-Chain Thesis Evolves
Cosmos is the spiritual father of the modularity movement. It has always separated consensus (Tendermint) and application (Cosmos SDK), and now this division has been fine-tuned. IBC has never been exploited, and this standardized messaging and communication protocol allows the permissionless flow of assets between an internet of blockchains. The app-chain thesis has always posited the importance of creating blockchains specialized for specific use cases and provided the toolkit to make this a reality. Dymension is the next iteration of this thesis.
DA solutions make data availability cheaper than it has ever been. Dymension offers Dymension Hub for settlement and pre-built modules from its RDK to streamline chain construction and deployment. The driving impetus behind Dymension is to make deploying an app-chain as easy as possible and tapping into the vast wealth of human capital.
Dymension is the only blockchain that functions solely as a settlement layer, and it has incorporated the IBC standard, creating open communication and transfer channels between all RollApps. Fragmented liquidity and relying on third parties to move funds no longer exist under this vision. And now, devs can build chains without having to think about creating validator sets.
The Dymension experience is doing the same thing to chain deployment as Ethereum once did to token deployment. Devs deploy chains, and users deposit capital. This is the frontline iteration of the app-chain thesis.
Dymension and An Internet of RollApps
Dymension is currently live on testnet, and there are 1,164 RollApps listed. Again, driving home the point, Dymension really is a bet on human ingenuity. When the barrier to entry is so low as to be practically non-existent, anyone with an idea can spin up a RollApp. Dymension’s economic incentives make it appealing to do so for all parties. Sequencer earns fees aligned with the popularity of their RollApp, and DYM stakers earn fees for providing security to all these RollApps.
As the internet moved forward, it became progressively more modular, and blockchains exhibit many of the same characteristics today. Dymension’s RDK and Dymension Hub are providing the infrastructure much in the same way that Web2 businesses use Amazon Web Services (AWS) instead of maintaining their own infra.
All of these RollApps benefit from IBC, which eradicates the composability issue, and genuinely, crypto has reached a point where the basis of competition is switching to performance. The infrastructure to build almost anything exists. The pendulum of onus steadily swings towards devs and builders to create the killer app to onboard the next generation of users.
DYM Tokenomics
The team behind Dymension has had their heads down building for approximately three years. On the 6th of February, the DYM airdrop took place, coinciding with the mainnet release. Seventy million DYM tokens (7% of the total supply) were distributed, with the central tag zones being Celestia stakers (2%), Layer 2 users (1%), Cosmos Hub and Osmosis stakers (1.75%), Solana users (1%), and holders of the Pudgy Penguins, Mad Lads, Tensorians, and Bad Kids NFT collections (1.25%).
Celestia is ripping, market conditions are buoyant, and people have an appetite for the modular money narrative. It was a well-timed and executed launch. Native AMM has been deployed, and incentives are already in the pipeline. RollApps are coming to mainnet soon, and there are no large unlocks until next year (FDV is a meme until it isn’t). So far, so good.
How does DYM accrue value? At a high level, the alignment is nice for stakers. Dymension’s central function is to provide settlement and security to RollApps alongside modular building kits. Naturally, it aligns that the providers of this security (DYM stakers) accrue value. They are the obvious privileged party more so than on other chains that have to compromise regarding value distribution.
Central value accrual mechanisms include a burn funded via validating bridging fees and protocol swap fees. Transaction fees- blockspace comes with a fee distributed to validators and their stakers. And the big one is a token sink. RollApps have to bond DYM to operate; they can either stake DYM or their native token and DYM as an LP token. According to the protocol, the ‘‘minimum bond requirements for sequencers are dynamically determined onchain by the Total Value Bridged (i.e. IBC bridge on Dymension) to the RollApp. In a multi-sequencer RollApp the size of the bond a sequencer posts determines their allocated block production time relative to other sequencers.’’
Yes. DYM sink requirements increase as the value of the RollApp grows and bond sizing grants privilege regarding block production time. More good news for DYM stakers, especially if demand for RollApps grows.
Another significant part of the demand for DYM is potential airdrops. There is a settlement layer where thousands of RollApps are going to launch. Naturally, DYM stakers will be a primary target for airdrops in much the same way that DYM targeted TIA stakers.
DYM is modular money, and the pairing of Celestia and Dymension is starting to create a powerful flywheel. Reverting to becoming a core part of the stack and the composability between RollApps paints lovely shades for future potential. Layer 2s on Ethereum lack composability, and monolithic chains such as Solana lack the ability for developers to create custom execution environments.
The modular stack rests at the bottom of future applications, and this cycle could see tens of thousands of RollApps deployed. Dymension beats the Cosmos SDK and Tendermint because RollApps do not need validator sets, and with each new RollApp and the growth of the network, it becomes more appealing for the next developer to join the hub. Additionally, due to the nature of Proof of Stake, Dymsension’s offered security will grow as token price appreciates and more RollApps join the network.
The Bull Case For Dymension
The bull case for Dymension would be it becoming the dominant settlement layer of the modular stack, and a wave of successful consumer RollApps get launched. Modular architecture becomes the dominant construction-build for this bull cycle in much the same way alternative layer ones dominated the last cycle. Dymension’s offered security and network effect grows with each new RollApp, leading to a situation where the incentive is too good to turn down for anybody looking to spin up an optimized chain. Massive token sink leads to low circulating supply, more revenue, and a higher price for DYM allows Dymension to spend more on incentives attracting new devs and RollApps. The modular settlement flywheel activates.
The Bear Case For Dymension
The bear case for Dymension is that the Rollups-as-a-Service (RaaS) vertical is already congested with other players such as AltLayer, Gelato, and Saga offering quasi-identical services, and development frameworks from giants like Arbitrum (Orbit) and Optimism (OP Stack) becoming more widely adopted. Dymension’s $6 billion+ FDV is relatively hard to justify, and the supply overhang is a cause for concern. To date, the testnet has seen no truly impressive RollApps. The airdrop meme is also very real. If no decent airdrops fail to materialize, it opens the door to a mass unbonding event. And if this occurs and no new buyers are available at the trading price, DYM could quickly start to stumble.
The Modular Future
In synopsis, Dymension is a Tendermint Cosmos SDK chain building out a network of networks or layer twos within the Cosmos ecosystem. Dymension positions itself as the dominant settlement layer for app-specific chains, which, due to the nature of their construction, have greater scope for interoperability and scalability than existing layer twos on Ethereum.
The modular money season has begun, and Celestia and Dymension are core components of this stack. They remain the only liquid vehicles for exposure to the modularity narrative, and the addressable market size is obscene. Welcome to the app-chain-centric future, and remember that Dymension is a bet on human ingenuity.
Looking to get started with Dymension and DYM? Find out how to add Dymension to MetaMask.
This article is only for educational and informational purposes and should not be taken as financial advice. Always do your own research into crypto protocols before investing any capital.
Kofi J has been active in DeFi since the 2020 summer explosion and has been rugged more times than he can remember. He hopes to make the decentralized economy a little bit more accessible through his prose. Follow the author on Twitter @k_pangolin
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