Getting Started

What is Counterfactual Network?

Counterfactual Network introduces an innovative framework for omni apps, enabling the deployment of genuine cross-chain decentralized applications within the Ethereum ecosystem. This protocol differentiates itself from existing solutions through the following mechanisms:

1. L1 assets are reflected onto an Interstate Execution Layer(IEL) situated on L2, where these mirrored assets generate yield continuously in real-time.

2. By eliminating the need for bridging, the system imposes no limitations on deposits or withdrawals, utilizing only canonical assets for all transactions.

3. States within the IEL undergo regular and automated synchronization across multiple chains, ensuring coherence and efficiency across the network.

This design underscores the potential for enhanced interoperability and seamless asset management across diverse blockchain environments.

Redefining the roles of L1 & L2s

L1 is often slow and expensive but hosts most canonical assets and offers deep liquidity, which supports more stable yield opportunities. In contrast, L2s offer faster confirmation times and lower gas fees but suffers from lower liquidity and fragmented yield opportunities. How can we combine these layers to capitalize on their strengths?

Counterfactual Network redefines the conventional Layered Blockchain architecture by dedicating L1 solely to settlement activities while leveraging L2s for computational tasks. This diverges from the typical perception of an L2 as merely a cheaper and faster alternative to L1. By clearly separating these functions, the network significantly reduces the load on L1 for transactions and token movements, leading to a notable decrease in gas fees. Concurrently, most transactional processing is transferred to L2s, where advanced processing methods enable faster and more cost-efficient operations.

Yield-Accruing Balances on L2s

An key advantage of separating the roles of L1 & L2s is that canonical assets are not transferred but merely mirrored, allowing user balances on L2s to accrue in real time. This ensures continuous yield generation without the need to move assets physically between layers.

In simple terms, it resembles Blast in that user balances accrue in real time, but it is not confined to ETH or a single chain. Counterfactual Network supports any canonical ERC20 assets on Ethereum in a permissionless manner. Moreover, integrated with the Interstate Execution Layer, as described below, it allows any L2s to act as an execution chain.

Further details will be discussed in How it works.

Interstate Execution Layer

In Counterfactual Network, all supported L2s are abstracted into the Interstate Execution Layer (IEL). This abstraction simplifies the network architecture, allowing for seamless interaction and execution across multiple L2 platforms.

The protocol periodically synchronizes the states of all supported L2s, relieving dapp developers of the burden of maintaining consistent states across cross-chain applications. Users have the flexibility to select a specific L2 for execution based on their preferences. However, the financial impact and yield benefits remain nearly identical across different L2 choices, ensuring that the choice of L2 has minimal effect on the overall outcome.

By unifying all Layer 2 solutions into a single execution layer, the network achieves maximum transactions per second (TPS), which is the aggregate of the TPS from all supported Layer 2s, utilizing Layer 1’s canonical assets. This approach embodies Ethereum’s original vision of sharding, offering scalability and efficiency previously unattainable in any other protocol.