Rob Behnke
April 30th, 2024
Heroglyphs are a special type of token that were first proposed in a whitepaper published in April 2024 and later launched on the Ethereum blockchain. It takes advantage of unused space in proposed blocks to unlock a new revenue stream for complete validators.
The goal of this protocol is to improve the decentralization of Ethereum and other blockchains. As these blockchains grow increasingly centralized, their security suffers. Heroglyphs offer stakers that might otherwise take advantage of liquid staking an additional incentive to become complete validators and help to support the Ethereum ecosystem.
Blockchain consensus algorithms are designed to protect blockchain networks against 51% attacks. If the majority of the mining power, staked cryptocurrency, etc. is controlled by a single party or group, then they have the ability to rewrite the history of the network at will.
Blockchain consensus algorithms protect against this by randomizing the process of selecting the next person to create or validate a block. However, while Proof of Work did so by requiring the user to provide computational power for mining, Proof of Stake only requires validators to stake and hold some tokens to be considered for block creation.
In Proof of Stake, the validator selection process is weighted based on the size of a party’s stake. As a result, it’s possible that a small number of validators could have an outsized level of control over the blockchain. This could happen either because they personally have a large stake or because other validators use liquid staking protocols to delegate their stakes to someone who performs validation tasks on their behalf (something that is less feasible or economical with Proof of Work).
Regardless of the cause, centralization weakens the blockchain’s security by placing control over more blocks into the hands of a small number of validators. Heroglyphs are intended to incentivize more stakers to actively become complete validators, boosting blockchain decentralization.
Blockchains like Ethereum and Arbitrum allow anyone to create a new token on the blockchain. All they have to do is create and launch a token contract, a process that is straightforward enough that point-and-click tools exist to do it for you. As a result, blockchain ledgers are flooded with thousands of memecoins and other valueless tokens.
Heroglyphs are designed to add a layer of exclusivity to the process of token minting. Unlike typical systems where anyone can mint tokens, Heroglyphs can only be created by 'complete validators'. These validators independently manage their own stakes and are responsible for creating new blocks when selected by the blockchain's consensus algorithm.
The unique aspect of Heroglyphs lies in encoding token information into 'Graffiti'. Graffiti is a type of data that validators can include in the blocks they propose. This mechanism ensures that only complete validators can generate Graffiti, which encapsulates the Heroglyph data. These Heroglyphs can then be mined like traditional tokens and allocated to designated recipients.
These tokens would work like any other token, allowing the validator to define the supply, emission schedule, and initial distribution. However, the fact that they can only be created by complete validators creates an element of rarity. This sets them apart from other memecoins and, hopefully, improves their value.
By enabling smaller complete validators to create a specialized product, Heroglyphs create another source of income for them. Even if these complete validators are never selected to validate a block (due to their small stake), the ability to create and sell tokens can help to pay for the effort and resources required to be a complete validator rather than taking advantage of a liquid staking protocol.
Heroglyphs are designed to bring the reward mechanisms of Proof of Stake validation more into line with those of Proof of Work, rewarding independent complete validators more than liquid stakers.
Some of the potential benefits that the Heroglyphs protocol offers include the following:
Validation Rewards: Under the current paradigm, liquid staking is an enticing option for many since they can receive rewards for staking cryptocurrency without doing any of the work of validation. Heroglyphs provide users who put in the work to become complete validators with an additional incentive to do so.
Improved Decentralization: Blockchain consensus algorithms commonly become more centralized since the parties with the most staked resources earn the most block rewards, enabling them to create larger stakes and increase their rewards. Heroglyphs are designed to decrease centralization in blockchains such as Ethereum by providing users with a reason not to use liquid staking protocols, which are a major driver of blockchain centralization.
Tiered Tokens: Currently, anyone can create a token and all tokens are created equal, making it difficult to differentiate real projects from scams. Heroglyphs create a higher, more exclusive class of token that can only be created by someone who is actively contributing to the blockchain network. This may mean that it is less likely to be a scam than standard tokens.
Investment Opportunities: The creation of another tier of tokens also might help investors when making their decisions about which tokens to buy. Purchasing Heroglyphs provides indirect support to the blockchain network by supporting the complete validators who maintain it, and these tokens may have a lower probability of being scams due to their links with complete validators.
Heroglyphs are designed to address one of the most common critiques of Proof of Stake: that it centralizes power in the hands of a few validators. By incentivizing stakers to become complete validators — rather than taking advantage of liquid staking protocols — Heroglyphs attempts to further decentralize the blockchain.
This decentralization is essential to the security of the blockchain as a whole. If all of the validation power for Ethereum or other blockchains is centralized with an individual or a small group, then that group has the power to rewrite the blockchain’s history at will. Additionally, this centralization is contradictory to the original goal of blockchain being a decentralized financial system.
Heroglyphs are an independent protocol that requires no changes to the Ethereum protocol as a whole, taking advantage of junk data in proposed blocks. However, they have the potential to dramatically change how consensus works in Ethereum.