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Scaling and Consensus Migration

Currently, the Fuse Network blockchain relies on the AuRa consensus mechanism, developed for proof-of-authority blockchains. Still, the Fuse team successfully modified it to run one of the first delegated proof of stake (DPoS) forms. As a result, It enabled on-chain governance and delegated staking.

It also helped us to build a payments-optimized yet Ethereum-compatible blockchain. Still, we always researched the best way to achieve scale while preserving our key features and business objectives.

We see many ecosystems looking to achieve similar objectives as Ethereum, like Cosmos and, Avalanch, Polkadot, to name a few. However, after extensive research, we concluded that while other protocols proved advanced, some reached some maturity level.

The Ethereum 2.0 architecture and roadmap align with our network’s objectives. We don’t see ourselves competing with Ethereum but already work closely with the Ethereum ecosystem today and see Fuse as part of the greater vision for the Ethereum technology.

So to give businesses peace of mind when moving assets in and out of Fuse, and providing trust in using the latest best practices, and provide an entirely standard and secure solution for merchants. We believe that migrating Fuse to a PoS consensus is the solution we will push with the community over the next year.

Delegated proof of stake will be replaced with a liquid staking protocol. With liquid staking, users can stake the tokens and receive yield without running a validator node.

Fuse Governance will evolve to fit the objectives. Critical here is that the PoS consensus can be successfully integrated with PVs, and Fuse keeps its unique on-chain governance. It boils down to the amount of community participation we want to foster, as with PoS, some types of voting will become obsolete.

Advantages​

  • Reliability: Ethereum PoS consensus is battle-tested in production with many validators. Currently, there are around 500K validators on Ethereum.
  • Security: Ethereum introduces a better security model in which validators have to split their stake into multiple nodes
  • A roadmap for scaling: Ethereum presents a roadmap to scaling, including items such as Shartding and stateless clients that we can follow.
  • Interoperability: Ethereum PoS puts us interoperable with Ethereum on a consensus level. This can help us:
    • Eventually, improve bridging between the networks.
    • Liquid Staking protocols such as Lido and Rocket Pool should be an alternative to the soon-to-be deprecated delegation mechanism.
    • We are using more innovative protocols such as EigenLayer. How can those items be integrated into Fuse V2?

Disadvantages​

  • On-Chain Governance: Fuse has a unique governance model where the validators can vote on-chain on Consensus logic, validators selection, and block rewards. While the consensus and validators selection logic is moving to the node layer, we would like to see how to keep the governance model working and add new types of voting related to Fuse v2 items, such as PVs.
  • UX for Validators: Validators would have to run multiple nodes, which degrades their UX. On the other hand, Ethereum provides an infrastructure to simplify this process\

Misc Tokenomics​

  1. EIP-1559 - dividing the gas fee into base fee and tip fee, the tip part of the fee will be burned.