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Okay, now let’s dive into today's topics. This is what we have for you today:

• 💡A Deep Dive into the Transition from Message-Based to Asset-Oriented Execution Environments

• 💎 Gem of the Week

TL;DR

• The evolution of execution environments from message-based model to asset-oriented models marks significant progress in blockchain technology.

• Cardano's EUTXO model serves as a basic asset-oriented paradigm in the blockchain space, offering foundational asset modeling & interactions.

• Radix further evolves the asset-oriented paradigm paving the way for secure, and efficient dApps.

• Despite its promise, Radix's asset-oriented model also introduces new complexities. Its real value will be tested by how well users can navigate these challenges in practice.

From Ethereum to Cardano and Radix: Evolution to Asset Oriented Execution Environments

Ok, let’s dive in👇

Ok, let’s dive in👇

Introduction

The Ethereum Virtual Machine (EVM) has played an instrumental role in the rise of Web3, a platform where individuals can own online assets. Diverse applications of Web3, from Decentralized Finance (DeFi) to Decentralized Autonomous Organizations (DAOs), rely heavily on digital assets or tokens and self-executing rules, also known as smart contracts - the core components of the EVM.

However, despite the capabilities of VMs, the blockchain ecosystem continues to grapple with substantial hacks, underscoring the need for more robust tools.

This article embarks on a comprehensive exploration and comparison of the capabilities of different VMs, specifically EVM, Cardano, and RADIX.

EVM: The Dawn of Smart Contracts and Tokens

When it was first introduced, the Ethereum Virtual Machine (EVM) represented a significant shift in the world of blockchain and cryptocurrencies. Its ability to facilitate the creation of smart contracts and tokens on a public, decentralized ledger was a groundbreaking advancement in the burgeoning field of decentralized finance (DeFi).

A smart contract, as facilitated by the EVM, is a self-contained machine that combines data with a set of rules that govern how that data can be manipulated or updated. These rules are executed as part of a transaction and essentially form the logic that drives the smart contract. This was a significant departure from previous blockchain designs and opened up a new realm of possibilities.

In this environment, developers could start using these features to construct tokens, which are digital assets that can represent a variety of things, from cryptocurrencies to digital representations of physical assets. These tokens are created by using data to establish a list of accounts and their corresponding balances, essentially setting up a ledger of who owns what.

EVM: A Messages-Only Virtual Machine

The Ethereum Virtual Machine (EVM), sometimes referred to as a "messages-only" virtual machine, has a unique way of handling transactions involving tokens or assets. These transactions are carried out through messages passed between smart contracts, rather than directly transferring the assets.

Tokens as Digital Creatures in Their Respective Smart Contracts

Imagine tokens as digital creatures living within specific environments or habitats - their respective smart contracts.

For instance, the DAI token can only exist within its own DAI smart contract ecosystem, while a UNI token is confined within the boundaries of its UNI smart contract environment.

The Complexities of Multi-Token Transactions

This specific design leads to an interesting scenario when a user wishes to perform a transaction involving multiple tokens.

For example, if a user wants to exchange 50 units of DAI for an equivalent amount of UNI through a DEX, it isn't as simple as directly swapping the tokens.

Instead, the DEX smart contract acts as a messenger or an intermediary, sending separate instructions to the DAI and UNI smart contracts. These instructions or 'messages' request an update in the user's balance in each of these smart contracts to reflect the completed exchange.

This is why the EVM is often referred to as a 'messages-only' virtual machine. The entire process of asset transfer or state update in smart contracts revolves around this messaging system. The intricate choreography of these messages is a defining characteristic of the EVM, which underscores the responsibility of developers to ensure correct and secure interactions with smart contracts.

EVM: The Root Cause of Multimillion-Dollar Hacks in Crypto

The Ethereum Virtual Machine (EVM), though a pioneer and fundamental component of decentralized finance, is not without its own unique set of challenges.

The 'messages-only' framework of the EVM has implications that create complexity and potential vulnerabilities in the ecosystem, causing regular hacks that result in the loss of hundreds of millions of dollars.

Lack of Asset Control and Unauthorized Token Transfers

In the EVM, tokens are simply elements in a smart contract controlled by a developer. If the developer maintains privileged access to the smart contract, they could alter your balance within it without your consent. To verify whether this is feasible, users must meticulously review every line of the smart contract's code.

Furthermore, anyone can send tokens to your account without your permission, since your account is just an entry in a list of balances within someone else's smart contract.

This poses a significant challenge in coding secure smart contracts, as developers must account for the risk of external and potentially malicious token deposits that could disrupt balance-dependent calculations.

Approval Risks and Complexity

In the EVM, users need to "approve" contracts such as Uniswap to spend tokens on their behalf. This approval system has been exploited as an attack vector in many instances of cryptocurrency hacks.

Moreover, some applications are required to track their account balances in other contracts, such as reserve caches, adding an extra layer of complexity and potential vulnerability to the ecosystem.

Limitations and Complexity of Authorizations

Authorization in the EVM is limited to addresses only, making it challenging to transfer access rights and build complex permissioned applications.

As a result, smart contract developers bear the full responsibility of implementing all asset logic, and any mistake in a token smart contract can lead to hacks or exploits.

The bespoke nature of asset logic in each contract also reduces composability and increases the chances of things going wrong. It makes complex transactions more difficult to manage, as users are unable to stipulate the outcome of a transaction, and have to trust the smart contract's execution.

Understanding the Transactions: The Blind Signings

A distinctive feature of messages-only virtual machines like the EVM is their lack of innate understanding of the assets contained within their smart contracts. To the EVM, an asset is merely data that must follow the logic of the smart contract.

This means that users are unable to instruct the EVM on the desired outcome of a transaction, should anything go wrong. They have to trust solely in the smart contract's logic, signing transactions "blind," without knowing exactly what they are signing.

The inability of the EVM to inherently understand the transaction's purpose also results in users signing transactions without full knowledge of their implications. This blind signing can be exploited by malicious entities.

The Burden on Developers

Lastly, the EVM places a significant burden on developers by requiring them to define Accounts & Tokens themselves and create all Asset Logic. This is due to the platform's lack of intrinsic understanding of what an asset is.

This not only increases the chances of making mistakes resulting in potential hacks and exploits but also adds to the complexity of transactions. Given that the VM lacks an asset-level understanding of the transactions, it forces developers to handle complex logic that routes messages downstream, which can sometimes interact with multiple other smart contracts in unpredictable ways.

Basically, this inherent design of EVM, which lacks an intrinsic understanding of the assets within smart contracts, often becomes the epicenter for serious security breaches. Consequently, the EVM's architectural limitations have been the root cause of multimillion-dollar hacks, leading to substantial financial losses within the ecosystem

Asset-Oriented Paradigm: Cardano’s Extended UTXO Model and Native Assets

Cardano’s unique blockchain architecture, characterized by the Extended UTXO (EUTXO) model and its native assets functionality, is a crucial step towards an asset-oriented model, offering significant benefits over traditional "messages-only" paradigms.

Cardano's Extended UTXO Model

The Extended UTXO model introduces more elaborate and flexible transactions that can embody sophisticated logic, going beyond the scope of ordinary payment transactions. By enabling custom code in transactions, the EUTXO model facilitates complex interactions, making it more suitable for real-world use cases and decentralized applications.

Furthermore, the EUTXO model provides higher security and predictability than account-based models. Transactions are stateless, and outputs depend only on the specific inputs rather than the overall state of the system.

Native Assets on Cardano

Cardano’s implementation of native assets offers another leap towards the asset-oriented model. Unlike Ethereum, where tokens are secondary elements created and managed by smart contracts, Cardano's native tokens are treated at the protocol level. They enjoy the same level of security and functionality as ADA, Cardano’s native cryptocurrency.

The native tokens in Cardano provide numerous advantages including enhanced performance, predictable costs, and the inclusion of metadata. This inclusion of various tokens at the protocol level transforms Cardano's ledger into a multi-asset ledger, able to manage different tokens directly and efficiently.

Cardano’s Leap towards Asset-Oriented Models

By integrating the EUTXO model with native assets, Cardano has created a basic asset-oriented execution environment.

This combination allows for each transaction's logic to be directly tied to the assets it involves, enhancing security and clarity. It marks a significant step away from the traditional 'messages-only' paradigm, where tokens are merely data within smart contracts.

Instead, it is a move towards a more intuitive asset-oriented model, where assets and their behaviors are fundamental constituents of the system.

Limitations of Cardano's Asset-Oriented Model

Cardano’s implementation of native assets provides users with substantial control during the minting and burning process. These native assets are developed on Cardano’s underlying blockchain protocol rather than smart contracts, which provide a high level of security, stability, and interoperability.

However, this level of integration comes with a trade-off. Once the tokens are minted, their behavior cannot be substantially modified or governed, a feature that could be limiting for certain applications.

One reason for this limitation is due to the intrinsic design of Cardano's system. Cardano’s native assets system fundamentally enables users to freely transfer any native asset. Once a token is minted, it becomes a part of the Cardano ecosystem and behaves like ADA, Cardano's native cryptocurrency. This includes unrestricted transfers between accounts. Any constraints would oppose this fundamental design, hence why there is a significant limitation to governing assets post-minting.

Another factor is the nature of the Extended UTXO (EUTXO) model that Cardano employs. In this model, tokens themselves don't carry any specific rules or behaviors. Instead, these rules are built into the transactions that involve the tokens. As a result, tokens on Cardano are somewhat passive - they follow the system's rules and the instructions set in each transaction.

In addition, while Plutus, Cardano's smart contract language, can provide policy scripts that govern the minting and burning of tokens, it doesn’t offer the same level of control for governing assets post-minting. The execution environment for Cardano only permits basic asset features due to these restrictions.

Thus, any dynamic resource governance or advanced smart contract governance on the assets themselves post-minting would be challenging, if not impossible, to implement.

Radix: A Full Asset-Oriented Execution Environment

A full asset-oriented environment refers to a computational framework that inherently understands and manages digital assets.

Instead of treating assets as abstract data values or peripheral concerns, an asset-oriented environment integrates the concept of assets directly into its core logic and functionality.

So what are the core features of a full asset oriented Execution Environment

In a full asset-oriented environment:

• Assets are Native: Assets, such as tokens or digital contracts, are natively recognized and managed by the system. This means they are not simply additional data but integral parts of the system's operational logic.

• Asset Management is Intrinsic: Creating, transferring, and managing assets are primary functions directly supported by the system. This contrasts with environments where these operations must be implemented through additional programming logic.

• Assets are Sovereign: Assets are treated as independent entities with their own sets of rules and permissions. They can have their own logic and behavior, independent of the smart contracts or accounts that created or own them.

• Integrated Asset Logic: The behavior of assets, such as how they can be transferred, traded, or interacted with, is built directly into the system's core logic. This makes the system more secure and reliable, as the behavior of assets is predictable and governed by the system's rules rather than arbitrary code.

• Ease of Interoperability and Composability: As the system has a unified understanding of assets, it's easier for different parts of the system to interact with assets in a consistent way. This results in improved interoperability between smart contracts and easier composition of complex asset interactions.

Now let’s take a look at the capabilities of Radix’s execution environment in detail

Asset Comprehension at its Core

Radix's Virtual Machine (VM) has an inherent understanding of what an asset is. This feature provides several advantages:

Self-sovereign Accounts & Assets: These facilitate asset-based authorizations, providing greater control to users.

Native Asset Logic: By associating logic with assets, programming DeFi applications becomes more straightforward, enhancing security in the process.
- However, it's important to note that technically, this logic is tied to the smart contract that holds the asset or badge, acting as a proxy and permitting the asset to execute the action

Composable Transactions: The VM provides a standard framework for asset movement, enhancing interoperability among smart contracts.

In Radix's ecosystem, an account is essentially a smart contract component on the ledger, housing vaults of tokens. This arrangement contrasts with traditional VMs, where tokens are often dispersed as account-balance line items across various smart contracts.

Token Governance & Custody

Radix conceptualizes tokens as "physical" objects, securely stored within vaults inside smart contract components. Users can quickly discern a token's permissions through a platform-enforced flag, such as the "recallable" status.

This framework allows accounts to control which tokens they receive, thus bypassing the need for approving smart contracts, as assets are directly held within users' smart contract components.

Managing Authorizations with Badges

Radix uses a concept known as "badges"—tokens used within smart contracts to manage authorizations. These badges serve a specific role in authorizing certain actions. This approach enables the creation of complex, permissioned applications. Actions like minting, burning, or altering metadata may require authorization through these badge tokens, reinforcing the versatility and flexibility of the system.

The Radix VM takes on the role of asset logic management, liberating developers to focus on feature development and functionality while providing users with trustworthy asset behavior.

Streamlined Transactions & Enhanced Composability

Radix's "transaction manifest" empowers users to stipulate the necessary outcomes of a transaction. This unique attribute facilitates atomic transactions with multiple contracts and direct asset movements, obviating the need for deploying smart contracts solely for composed calls.

The asset-oriented features of VMs with integrated Resources Finite State Machines (FSMs) significantly improve both user and developer experiences.

Developer Feedback

It seems like multiple devs who are already building on Cardano have good things to say about Radix’s full asset oriented approach.

However, it's vital to note that Radix is still in its early stages, not yet being a battle-tested protocol. Essentially, it hasn't undergone the stringent assessments under varied, real-world conditions that would determine its resilience, security, and overall performance.

Currently in the testnet phase, Radix is subject to experimental trials, allowing developers to troubleshoot any issues without the risk of losing actual value. Like every innovative solution, Radix is on its maturity curve, a path involving a progressive refinement process that could span years before it achieves robust reliability.

Therefore, while we look forward to the potential these emerging ecosystems offer, it's prudent to do so with a balanced blend of curiosity for their potential and skepticism to ensure rigorous examination of their capabilities and limitations.

Conclusion

In conclusion, the evolution from message-based models like the Ethereum Virtual Machine (EVM) to asset-oriented models such as Cardano's Extended UTXO (EUTXO) and Radix's asset-oriented execution model showcases significant strides in blockchain technology.

From what it seems Radix takes a step forward in the asset-oriented paradigm by enhancing the capabilities of asset modeling and interactions. Its design aims to deliver robust asset security while ensuring composability and scalability. By encapsulating assets with distinct capabilities, Radix opens a wide range of possibilities for creating intricate, secure, and efficient DeFi applications.

However, despite its potential, it also poses new challenges, like unfamiliarity of the model and a more complex system architecture. Future adoption and usage will determine if the benefits offered by Radix's asset-oriented approach will outweigh these challenges.

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