High costs and limited privacy functionality are pain points for Web3 users today and represent major barriers for the next waves of adoption and innovation. Soaring fees render many of today’s most popular decentralized applications inaccessible for large numbers of would-be consumers. Similarly, the fully transparent nature of most blockchain systems leave their applications unsuitable for any users that harbor sensitivities around their data. At Espresso Systems, we are building the scaling and privacy solutions that will unlock new possibilities for Web3 applications and usher in the next generation of users.

Espresso Systems is developing Espresso: a layer 1 blockchain system that combines proof-of-stake consensus and a ZK-Rollup mechanism to achieve high throughput and low fees. Espresso has also developed Configurable Asset Privacy for Ethereum (CAPE), an application that can run on any EVM blockchain (and will eventually run on Espresso natively). CAPE enables asset creators to offer users customized privacy guarantees.

Read more below about the way we are thinking about both scaling and privacy and how we are building the systems that will transform the possibilities of Web3. You can check out our first release of CAPE which will soon be live as a demo on Ethereum’s Rinkeby testnet. We have also open sourced Jellyfish, our library for zero-knowledge proofs and other cryptographic tools. 

Decentralized ZK-Rollups

Espresso’s approach to scaling throughput involves a careful integration of ZK-Rollup for the EVM with a decentralized proof-of-stake consensus protocol. A ZK-Rollup is an emerging scaling technique, typically implemented as a layer 2 on top of an existing consensus protocol. A server aggregates a large number of transactions into a single summary transaction and produces a succinct zero-knowledge proof (zk-SNARK) of their validity, which is subsequently sent to the consensus system. This rollup proof compresses both the amount of information and the computation that the consensus protocol needs to validate the transactions, thus increasing the throughput. Several rollup solutions are in development for Ethereum, however, there is a caveat of the existing design space: the data availability problem. Users need data in order to construct new transactions. While a zero-knowledge proof can convey the validity of a transaction block without revealing its raw data content, it does not guarantee the availability of the data which is needed to build future transactions. To address the issue, existing rollups either include the raw transaction data within the summary transaction sent to consensus, or use a centralized data availability committee to sign off that it has seen the data. Neither is satisfactory: the first has limited compression and thus limited scaling, while the second undermines decentralization.

What is needed is an approach that can maximize throughput while maintaining decentralized data availability. At Espresso Systems, we are developing a solution to this by tightly integrating the ZK-Rollup scaling mechanism with our proof-of-stake consensus protocol from the start. The fact that the Espresso ZK-Rollup is natively integrated with consensus—and does not need to treat it as a black box—is what will enable Espresso to avoid the trade-off of other designs which approach the rollup as a separate modular component agnostic to the underlying consensus protocol.

Configurable Asset Privacy on Ethereum

CAPE (Configurable Asset Privacy for Ethereum) is a smart-contract application developed by Espresso Systems which enables digital asset creators to determine who can see what information about the activity in the tokens they mint.

Digital assets on CAPE, from stablecoins to NFTs, can be customized to balance transparency, a noted benefit of Web3 products, with privacy, wherever it is required by users. While CAPE transactions appear anonymous and indistinguishable to normal viewers, hiding even the type of asset being transacted, the creator of an asset can configure a viewing policy, which ensures that select parties can decrypt select information about transactions for that asset.

CAPE can be used to create new assets or to wrap assets that already exist on Ethereum, endowing them with privacy properties. Wrapping an ERC-20 with CAPE requires the specification of a wrapper type, which configures who can see what and who can maintain specific controls regarding the assets in question. Wrapping locks the asset in the ERC-20 contract and creates a corresponding CAPE asset of the specified type, while unwrapping burns the CAPE asset and releases the lock.

While CAPE can be used by anyone looking to create or wrap assets, the protocol was designed with stablecoin providers specifically in mind. Stablecoin providers today generally want to maintain avenues to be able to address fraud, theft, and dispute resolution, demanding that they retain insights into the ledger of activity for their assets as well as controls like freezing capabilities. Prior to CAPE, there were no solutions for these types of asset creators to offer privacy-enabled versions of their tokens to users while being able to meet needs around visibility and dispute resolution. With CAPE’s viewing and freezing policies, this is now possible. In addition to empowering asset creators with these abilities, CAPE empowers users to be aware of and to actively opt in and out of what data they are sharing and who has insights into and control over their transactions.

CAPE is open sourced here. While CAPE can be run on any EVM blockchain, we will be deploying it soon as a demo on the Ethereum Rinkeby testnet with ultimate plans to migrate the application to Espresso and enable interaction with Ethereum assets via a token bridge.

What's Next

To make all of this a reality, we are thrilled to share that Espresso Systems has raised $32mm in funding led by Greylock Partners and Electric Capital with participation from Sequoia Capital, Blockchain Capital, and Slow Ventures. Espresso Systems also includes major industry players as backers, including Polychain Capital, Alameda Research, Coinbase Ventures, Gemini Frontier Fund, Paxos, and Terraform Labs.

This funding will provide the resources necessary to grow the team researching, building, and implementing the infrastructure and products that will make Web3 ready for broad adoption. The funds will also go towards bringing these products to market through a range of channels: distribution of native end-user products, developer adoption, and partnerships with entrepreneurs, startups, and enterprises.

Over the next few weeks, we will be deploying CAPE on the Ethereum Rinkeby testnet and releasing a graphical user interface for the application. We will also be sharing more about our scaling solution.