Moonbeam Strategic Direction Update

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TL;DR

  • Web3 Landscape has changed a great deal since the Moonriver and Moonbeam Network launches
  • Moonbeam Foundation is looking for feedback from the Community to help chart a strategic direction forward
  • Proposal is to explore a potential expansion to the Ethereum ecosystem by building on the research work streams described in the Moonrise product roadmap
  • After collecting feedback from the community, a more concrete proposal will be developed along with a referendum in order to formally ratify community support

Background

A lot has changed in Web3 since the launch of the Moonriver and Moonbeam networks 2.5 to 3 years ago. Even before then, Polkadot and Cosmos had the foresight to begin building interoperable networks of blockchains. While initially dismissed by maxis of other chains, at this point all other major ecosystems have shifted in this direction (eg. Ethereum L2s, Polygon AggLayer, etc). However, each of these ecosystems are seeing varying levels of success in terms of traction, ability to scale and complexity faced by application developers.

Polkadot has indeed achieved a model for scale but this has come at the cost of higher complexity requiring builders to apply asynchronous design patterns that come with UX challenges. This in turn has led to lower levels of traction/adoption. DOT holders are also recognizing that in the current model, value will tend to accrue toward parachains rather than DOT itself. (Interestingly, a similar realization seems to be occurring within the Ethereum community with regards to L2s following the Dencun update - see The Chopping Block episode 692, Bankless episode from September 4.)

This is more or less the thesis laid out in Rob’s Plaza Blog Post and the reason for advocating for a shift in direction for Polkadot toward a vertically integrated architecture which would in theory lead to more value accretion to DOT holders. DOT holders overwhelmingly supported this shift in direction in Referendum 885.

There are some community members that view Plaza as being potentially competitive with Moonbeam and other parachains. Indeed, many ideas have been thrown around within the Polkadot and parachain communities relating to Moonbeam and Plaza’s shared future.

However, Moonbeam and Plaza have fundamentally different design goals. Moonbeam’s focus is full Ethereum compatibility and providing a deployment environment for Ethereum developers with all the tooling they expect and virtually no changes required to their applications. This is primarily achieved by way of the “Frontier” pallet. Meanwhile, Plaza will be based on PolkaVM, optimized for higher throughput. EVM support is achieved using a transpiler resulting in a trade-off of compatibility for performance.

It is the Moonbeam Foundation’s view that while there may be some overlap, there is absolutely a place for Moonriver and Moonbeam alongside Plaza for the foreseeable future. Moreover, the Foundation is committed to a continued spirit of cooperation across the broader Polkadot ecosystem.

What’s Next for Moonbeam

At the same time, we’ve heard from many in the community that Moonbeam must continue to evolve, continue to build traction and seek out new users, communities and use cases. This is why an initiative was included in the Moonrise Product Roadmap to open new research workstreams to extend Moonbeam and bring the Ethereum and Moonbeam ecosystems closer together.

Moonbeam brought Ethereum to Polkadot. Now, it’s time to bring Polkadot technology to Ethereum.

Although still in the research phase, the idea would be to launch some form of the Moonbeam Network in the Ethereum ecosystem with links back to Moonbeam on Polkadot. This could take many forms but ideally would preserve the core technology including the underlying substrate pallets leaving Moonbeam’s key capabilities intact (eg. Fast Finality, Governance, Proxies, special precompiles, etc).

With that assumption, available options begin to narrow somewhat. For example, launching an L2 based on the OP stack would not allow for a porting of the substrate framework and pallets. Instead, the result would be more or less a vanilla EVM with Optimistic finality. Moreover, the L2 space is growing increasingly crowded and without a strong differentiation, it is unlikely that Moonbeam as an L2 would gain significant traction.

The recent Announcement of Tanssi’s partnership with Symbiotic is an interesting development and presents a potential path forward. For example, a Moonbeam runtime could be launched as an AVS (actively validated service) via Tanssi using restaking for security. In this way, the core of Moonbeam would be preserved while leveraging Ethereum validators for security via staking in place of Polkadot validators.

Among the key principles driving the momentum behind AVSes is the need to support services requiring a high degree of decentralization, customization, or interoperability. All three of these characteristics have been foundational for Moonbeam throughout its history.

Moreover, the restaking/AVS ecosystem is still nascent and we believe that there is plenty of room for a Moonbeam deployment to be a key venue for trading and providing utility for LRTs (liquid restaking tokens) through new use cases. A Moonbeam deployment would provide a cheaper venue than Ethereum mainnet while also being a native member of the restaking ecosystem.

Moonbeam’s cross-chain capabilities also provide for an interesting opportunity in the Ethereum ecosystem. At this point, Ethereum is a splintered landscape of varied rollup systems. Each L2 faction is working on some sort of interoperability framework for their particular stack. However, they’re not incentivized to create something interoperable across these stacks, instead preferring to build something proprietary as they fight for a bigger piece of the Ethereum pie.

At the same time, developers choosing a particular layer 2 framework don’t want to limit themselves to a particular segment of the market. With its open standards, cross-chain technology, Moonbeam would allow application developers to build across the landscape of siloed L2 ecosystems in spite of their proprietary nature.

This could be especially valuable to AVS deployments. With its EVM compatibility and cross-chain capabilities, Moonbeam has been the gateway between app-specific, heterogeneous blockchains deployed to Polkadot and the rest of web3. Moonbeam could also play this role in the re-staking ecosystem allowing Actively Validated Services to extend their services and assets out to other chains using open standards and advanced x-chain abstraction frameworks such as Glacis.

Community Call to Action

This represents a bold and ambitious plan, targeting a launch in perhaps Q2 or Q3 of 2025. It would also require the diversion of some resources toward this new project, thus it may come at the expense of some planned initiatives.

At this stage, the community is asked to provide feedback around the strategy to ensure that there is at least directional alignment within the community. Assuming feedback is generally positive, the Moonbeam Foundation would continue to work with our partners to develop a more detailed proposal to present back to the community and ultimately, an on-chain referendum so token holders can formally approve or reject it.

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Not sure if Ethereum is the way to look forward. Ethereum is very over saturated with L2’s, dapps, etc. and it is loosing a lot of chain engagement because of it. There is many other reasons Ethereum wouldn’t have the wanted impact or results. Why not look at other chains, where the current activity is centred, and where the excitement is at.

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I’m a big fan of this idea. Moonbeam has a couple things going for it that Ethereum L2s currently lack:

  • Instant finality
  • True decentralization at the collator level, which means we don’t need to wait for some future tech to be developed to decentralize the sequencer

Our thesis when launching Moonwell was that DOT would be a huge collateral asset - it had a $30 billion market cap at the time and we thought XCM/interop would make it easy to transfer DOT to Moonbeam, however, due to a number of failures this has never materialized. Plaza seems like another misguided effort that will inevitably fragment liquidity even more.

Let’s acknowledge that Parity/Polkadot has dropped the ball by failing to recognize that the primary use case for blockchains is programmable money, better known as DeFi. This is what has made Ethereum so successful at capturing over $90 billion in DeFi TVL and why Ethereum and L2s currently process the most peer to peer stablecoin payments. Solana has also seen a lot of well deserved success by creating an extremely low cost trading environment where launching new tokens and swapping them is almost free.

Sure, these ecosystems also have NFTs, SocialFi, GameFi, prediction markets, etc, but the primary use case is DeFi and stablecoin payments, and Polkadot has completely lost the plot in these two “bread and butter” use cases. When you have a healthy onchain economy, all the other more creative use cases can flourish alongside DeFi, but without a healthy economy, nobody will buy your precious JPEGs or play your game


I’m optimistic that Moonbeam can succeed by bringing the core benefits of fast finality and true decentralization while maintaining full EVM compatibility, but in order to do so, it needs to become more connected to Ethereum mainnet so that liquidity can freely flow back and forth.

I would strongly support a new version of Moonbeam that has the following capabilities:

  • Instant finality with 6 second block times
  • True decentralization at the collator level
  • Secured by Ethereum/Bitcoin/Solana AVS (restaking is not just based on Ethereum now)
  • A native bridge to Ethereum so that liquidity can onramp/offramp without trusting 3rd party bridges

The native bridge is key IMHO - without it people are not likely to trust 3rd party bridges. We could simply fork a well audited bridge like the Optimism bridge and have the collators sign mints of bridged tokens. This would be key to bringing the Ethereum TVL to Moonbeam and giving Moonbeam a fighting chance against the Ethereum L2s that don’t have decentralization yet.

I also think we should consider how implementing AVS might increase the budget. Rather than securing a parachain slot or coretime, the budget could be redirected towards AVS security, however, collators must still be compensated for their valuable efforts in securing Moonbeam, so care must be taken to manage the transition carefully.

In conclusion, I really thank @aaron.mbf and the entire Moonbeam Foundation for doing this important research and polling the community on this effort. We all share the desire for Moonbeam to flourish and reach it’s full potential. I’d love to hear your thoughts, where you agree, or where you disagree. :pray:

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I support Polkadot projects building deeper connections with Ethereum, but I strongly believe that being an EingenLayer AVS is not the way to go at the moment.

Please take 2 days and run the numbers on cost of operations on EigenLayer.

In February, while I still was part of the Mangata team, I had calls with liquid restaking providers to figure out the costs and they were off by orders of magnitude.

The basic mental model for restaked security is to pay an APR on the provided economic security. The numbers might have changed, but back then liquid restaking protocols expected 1.5% in stables or up to 5% if you paid in your native token.

That means if you want to rent 100m USD in economic security, you pay AT LEAST 1.5m USD per year for that. And we haven’t yet talked about the gas costs to write data to Ethereum.

I can’t tell you which solution to persue, but I would suggest to rather explore asserting Moonbeam itself as an L2 and using established bridging mechanisms (Hyperbridge?) for connectivity.

I think the primary benefit of Ethereum is its access to liquidity and users. I don’t think it’s necessary to make compromises on tech when reaching out to them. You need good connectivity and marketing.

If you care about the “but Ethereum tokens need to be Ethereum secured” argument, Mangata developed a concept of having multiple L1s below it, (but did ultimately build on EigenLayer and scrapped this idea), you can find more about it in this article: https://mangata-finance.medium.com/mangata-multi-rollup-interchain-infrastructure-2d88abdb6e0b

I wrote the article based on the concepts of engineers, so feel free to reach out to me to talk about it.

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Do I understand correctly, Moonbeam wants to shift to become another L2 on Ethereum? Value of Ethereum L2 is very questionable now, because gas fees on Ethereum mainnet became low, and there’s too many of L2s already, it’s saturated market. It’s better to be a big fish in a small pond rather than a small fish in a giant pond.

Moonbeam is one of the leading parachains and Polkadot technologies are great, it’s just long-term. My opinion is that Polkadot is not B2C, at least at the current stage, it’s B2B. Rather than chasing mass user, we need to convince existing successful projects which are currently off-chain to migrate to Moonbeam/Polkadot, showing them Mythical as an example. Those projects already have a lot of users.

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Moonbeam’s plan to bring the best of Polkadot’s capabilities: such as cross-chain interoperability, fast finality, and advanced governance - into the Ethereum ecosystem makes strategic sense and could offer significant differentiation in a crowded L2 market

by leveraging Ethereum’s validators through a restaking / AVS model while maintaining Moonbeam’s core substrate architecture, Moonbeam can avoid becoming just another vanilla L2. instead, it can act as a bridge between ecosystems, offering seamless cross-chain functionality and interoperability that neither Polkadot nor existing L2s can provide

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As the post concluded, exploring the AVS ecosystem makes the most sense, and at a quick glance seems to be the most logical path forward. However, it has also to make economic sense in terms of what is paid to restakers and restaking platform as someone mentioned above.

It is definitely the time maybe past due to explore other options and expansion.

thanks @aaron.mbf and team for putting this together.

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The elephant in the room here is Moonriver (MOVR), what will happen to MOVR regardless of Moonbeam’s direction? Will it merge with Moonbeam (GLMR) or will it be abandoned cause it is too resource-consuming to maintain 2 parachain? Will Moonbeam foundation let the 100 million market cap project to die? what is the actual purpose of MOVR ?

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I believe Moonriver can be at the forefront of exploring new approaches as the canary network. from what I see in this post, there’s a similar commitment and vision for Moonriver, so I expect it will start paving the way first

in general, the Moonbeam Foundation remains committed to the Moonbeam and Moonriver deployments on Polkadot and Kusama. any new features to the core protocol will be deployed across all environments

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There are a couple of major pain points in the Polkadot ecosystem that Parity has failed to address.

  1. AssetHub. Try explaining to a new user how to onboard their stablecoin assets to Moonbeam from a CEX. It’s clunky, compared with the smooth experience on Base, Arbitrum, etc.
  • 2 hops
  • How does gas even work on assethub?
  • Existential deposits!?
  • And while Talisman, Subwallet, Nova, etc are perfectly good wallets, many users are used to Metamask or Rabby. The point of Moonbeam is to be seamless, but if you need to touch assethub you need another wallet.

Rather than fix it, making Assethub seamless and invisible to users, they’re instead building Plaza.

Does anyone remember a few years ago when CosmosHub decided the only way it could make money was to build its own dex? I do. After a year of effort they ultimately failed, spun it off as its own sovereign chain, and went back to focusing on creating value via shared security and IBC.

Sound familiar?

  1. Polkadot has a 30 day unbonding period and pays an 18% APR. This kills DeFi, and goes a long way to explaining why Moonwell hasn’t had success listing DOT. Any usage of DOT in DeFi has to earn > 18% to beat staking, and that just isn’t realistic. In the Eth space it’s ~5% if I remember correctly, much more manageable.

So if you’re going to provide liquidity in a pool of (your favorite DOT LSD)-DOT, you need double digit APRs just to break even versus just staking the whole amount. Stellaswap is doing its best and so are others in the ecosystem, but meeting the requirements for a Chainlink feed under these conditions is very challenging.

If we don’t have deep DOT liquidity (staked or otherwise), what’s the value being on Polkadot?

All that aside, I’m curious if the new L2 chain would have a new token? If not, what’s the plan to bootstrap liquidity? If it IS a new token, which L2s do you guys see as the best model to replicate? There have certainly been enough L2s doing this.

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I can’t imagine that instead of admitting their own mistakes for using the Nomad bridge (which was hacked later), the Moonwell and Stellaswap teams turned around and attacked Polkadot quite harshly. I remember that the total value locked in Moonwell at that time (before the hack) was about $250 million and Stellaswap at that time was about $50 million. Remember that Moonbeam and Acala were the biggest driving forces of Polkadot at that time, if they had chosen the bridge more carefully, I’m sure that the Polkadot ecosystem would not have lost its momentum. And now that the Polkadot community is building its own native DEFI ecosystem (after suffering from hacks), they (moonwell and stellaswap) are turning around and blaming Polkadot (staking is demotivating for DEFI development, Plaza is competing with their products, blah blah
). I think Stellaswap should focus on developing their product well after asking for 1 million DOT funding from Polkadot treasury, have they ever thought about why HydraDX, which is almost 2 years behind them, has superior TVL and won the trust of the Polkadot community?

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Believe me friend, nobody wants Polkadot to succeed better than Stellaswap and the rest of the Moonbeam community. These are not “attacks”. These are criticisms, criticisms that have been often repeated. I am not breaking any new ground here.

To your point about HydraDX, according to Defillama over the past week it’s managed $1m in daily trading volume, similar to Stellaswap’s average (per dexscreener).

So we are in the same boat, with the same challenges. Hydra would benefit from changes to the pain points I identified as well.

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“The more things change, the more they stay the same” (in French, “Plus ça change, plus c’est la mĂȘme chose.”) - Jean-Baptiste Alphonse Karr. This quote is relevant to why my initial view supports this expansion, though it takes a few steps to explain how and why I arrived at that support.

After years of working at Tier 1 ISPs, I tend to see many things through the lens of telecommunications, and this includes how blockchain will evolve. One trend in telecom was the commoditization of offerings, with only a short lag between providers when implementing new features and services like L3VPNs and SD-WAN. Much of this was driven by industry organizations like the IETF, which helped set standards across the industry with participation from all the big names. I think that this type of cross-industry collaboration is currently missing in blockchain—but it will come. We are already seeing the beginnings of blockchain commoditization, such as EVM compatibility, L2 scalability solutions, and similarities between cross-chain communication protocols. While it’s very early in this process, and a lot of the different options are still yet to shake out, the different rhymes sure do seem to be sounding more alike.

There’s also been a similar trend in cloud computing. When I first started working on major public and hybrid cloud projects, the focus was on which hyperscaler had the right features in the right locations for the specific workload or app. Over time, as features and footprints converged between providers, the conversation shifted to which option was the cheapest to implement and maintain, (with exceptions, of course, but the trend held). If blockchain follows a similar path, then given that Moonbeam has marketed itself as a chain for cross-chain interoperability and making it easier for builders to onboard web3 applications, expanding to Ethereum makes perfect sense, if done in a sensible way.

I could see part of this direction evolving into doing something akin to what cloud-agnostic IaC tools like Terraform did for cloud deployments, and if Moonbeam can continue to abstract some of the more nuanced differences in the web3 infrastructure layer for builders, then I’m all for it. ‘Multi-chain deployments’ should simply become ‘deployments’ for builders, and retail and end-user consumers of apps will continue to be indifferent to ‘what’s a Polkadot’ or ‘what’s an Ethereum’(which is also why I don’t think putting L0/L1 logos on a sports jersey is a good use of money, other than for the real effect it has on the spirit within a community—but that’s off-topic).

In the past, I did not support a similar move (Deploy Moonbeam On Ethereum As A Layer 2 - #2 by Jim_CertHum). It’s wild for me to look back and think about how much things have changed in just a year. And while I still think costs need to be carefully looked at and assessed compared to the benefits of the expansion, when the facts change, I am open to changing my mind.

Finally, I want to address what I see as flawed logic that seems pervasive in some corners—that if some change or advancement on the surface seems to benefit one chain or chains, it will harm another. If this strategic direction is handled correctly (which I have full faith it will if it goes forward), it will benefit both the Polkadot and Ethereum ecosystems. There are countless users yet to be onboarded and many apps yet to be integrated into web3. If the industry grows as all of us web3 advocates expect, this move won’t take anything away from anyone. Quite the opposite.

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Thank you @aaron.mbf and the foundation for this message.

I took the time to read it multiple times and I find that every word has its importance.

The idea expressed here is in no way a departure from Polkadot. It’s an extension, a DLC for my gamer friends, targeting ETH and above all AVS.

I’m generally in favor of what I’ve read. Nevertheless, this transition is no guarantee of success in itself.

I’m thinking in particular of two aspects that should not be underestimated:

  • What form would this project take in concrete terms? It seems to me that if the added value came back to the GLMR token, it would be a net positive. If a new token were created, I’d probably be much more dubious. I know we’re only at the beginning of the idea, so there are still a lot of things to be defined.

  • How can we distinguish ourselves from the existing offer? You can say what you like about the Polkadot ecosystem, but Substrate technology and XCM are assets, not weaknesses. I’d very much like to see us retain this uniqueness so that we’re not just another chain.

Finally, I’m speaking to the community: the decentralized practice adopted by the Foundation is to be applauded. In many ecosystems, these kinds of strategic discussions take place behind closed doors. Even worse: no one gets to vote on its execution.

Here, we’re involved right from the start of the initiative. It’s up to us to make ourselves heard, to say what we like or don’t like, in line with the Foundation’s strategic decisions, of course. We will have to vote at the end of the process, which is extremely satisfying.

We want change, and this approach makes it possible. What remains to be defined is what this approach really is and how it will contribute to the value of the token.

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I think a 1.5% annual cost to provide economic security is very reasonable compared to what most L1s pay to validators/stakers, especially compared to Polkadot’s security budget for the relay chain, which has been as high as 18%.

Also, to be clear, nobody is proposing settling state transitions to Ethereum L1. We only need a bridge to Ethereum, the decentralization will come from Moonbeam collators, and the economic security will come from a combination of GLMR stakers and AVS. Managing the inflationary budget so that the costs to secure the Moonbeam L1 are in single digit % total annual inflation seems very achievable.

Agreed, this proposal would increase access to Ethereum liquidity and users, without compromising on the decentralization or economic security of Moonbeam as an EVM-compatible L1.

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I don’t believe this is being proposed. If Moonbeam were to shift to being an Ethereum L2 we’d lose all the existing apps and transaction history, which would be undesirable. I would more accurately describe it as an alt-L1 that is EVM compatible, similar to Avalanche C-Chain, but secured by Moonbeam collators and Eigenlayer AVS instead of the Polkadot relay chain.

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:100: I agree with this completely.

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Respectfully, it’s important for ecosystem participants and builders to be able to share their perspectives, including constructive criticism. Implying that contributors from Moonwell and Stellaswap are wrong for raising any concerns / constructive criticism towards Polkadot “because Nomad” is both silly and unproductive. Their feedback should be seen as an effort to share knowledge/perspective and help further innovation within the Moonbeam ecosystem. Let’s focus on improving together rather than pointing fingers or trying to silence those with opposing viewpoints.

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This is one of the biggest challenges facing all apps and parachains today IMHO. Nobody wants to take on smart contract risk if they can earn 18% as the “risk free rate” and Parity/Polkadot’s complete lack of understanding this fundamental economic shortcoming indicates they are going to continue to struggle in the future.

When we created a Polkadot DeFi working group to educate Parity on these issues, I learned that Parity had ~300 employees and not a single employee had any DeFi experience or was chartered with growing the DeFi ecosystem on Polkadot. We even scheduled a meeting with Parity’s new CFO, but they sent interns and contractors to the meeting instead of the CFO and they just took notes and didn’t ever follow up on any concerns we raised (as the largest app, Moonwell, on the largest parachain in Polkadot).

I’m also increasingly of the opinion that early Polkadot founders like Gavin resent the fact that EVM parachains like Moonbeam are the most popular. For people that intentionally left the Ethereum ecosystem to build something better, it must really irritate them that most users and devs still want EVM compatibility. Plaza, with an EVM transpiler, is a late acknowledgement that they need to change, but I predict it will fail because devs want full compatibility, not just “sort of compatible.” Optimism learned this the hard way when their v1 failed to gain adoption due to not being fully compatible with EVM bytecode.

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Just to add to what @turrizt said - Moonriver would continue to be the canary net for both Moonbeam in Polkadot and any expansion. Note that by keeping the core subtrate pallets, this means that new features added to the EVM can be effectively battle tested on Moonriver for all environments because the EVM layer will be consistent across all.

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