Fuel Network: A Modular Revolution in Ethereum Scalability and Smart Contracts

Over the years, Ethereum has sought to address its challenges of transaction throughput, transitioning to Proof of Stake to enhance scalability. In this context, the Fuel Network project stands out as a novel alternative, evolving from FuelV1 to FuelV2 with smart contracts based on the UTXO model.

What is Fuel?

🔹 FuelV1

The beginnings of Fuel lie in FuelV1, launched in 2020, touted as the first Optimistic Rollup for Ethereum. Initially focused on peer-to-peer payments, FuelV1 has been operational on the Ethereum mainnet since 2020. It stands out as the only rollup with fraud proofs, immutable smart contracts, and permissionless block production. But who has actually used @fuel_network as an L2? Nobody, agreed.

🔹 Transition to FuelV2

The major evolution towards FuelV2 marks a turning point in the project. This version promises Ethereum smart contracts based on the UTXO model (which we’ll see later in the thread). By leveraging Ethereum/Celestia technology for settlement, data availability, and consensus, FuelV2 aims to offer a more advanced and flexible experience.

🔹 Modularity of Fuel

First, let’s consider Ethereum’s case. If we were to break down this Layer 1 into several sub-layers, here’s what it would look like:

➮ Execution layer ➮ Data availability ➮ Settlement ➮ Consensus

Up until now, you’ve been following me. This is where Fuel Network comes in, positioning itself as a modular execution layer, allowing developers to configure the network according to their needs by changing a few modules in the client. This approach offers great flexibility while maintaining security, making it an adaptive solution to the changing requirements of the Ethereum ecosystem.

🔹 Ethereum/Celestia Support

Fuel is not limited to its own ecosystem but uses Ethereum/Celestia for settlement, data availability, and consensus.

Let’s take an example to illustrate the point: Fuel could easily partner with Celestia to use its data availability. Thus, the combination of the two would provide the first two “sub-layers” mentioned above: the execution layer (with Fuel) and data availability (with Celestia). Ethereum could then handle the last two layers: settlement and consensus. This would form a chain using Fuel Network, Celestia, and Ethereum.

A simple way to visualize Fuel is to imagine it as a Lego brick that can be combined with a set of other pieces to build a chain from all sides. We will show you an image to help understand the modularity of Fuel and how it could be used.

FuelVM – Architecture and Functioning

🔹 Introduction to FuelVM

FuelVM, Fuel’s virtual machine, is designed with a modular approach, serving as an execution engine for various blockchains. Its flexible design allows for seamless integration as an L2 rollup on Ethereum while also providing the option for deployment on other blockchains as a Layer 2.

➮ FuelVM draws inspiration from several robust architectures, including WebAssembly (WASM), Ethereum Virtual Machine (EVM), and Solana’s Sealevel virtual machine. This combined approach harnesses the strengths of each technology to deliver optimal performance and security.

🔹 Utilization of the UTXO Model

One of FuelVM’s key features is its use of the Unspent Transaction Output (UTXO) model. Essentially, this allows for parallel execution of transactions by readily identifying non-contentious transactions, thereby promoting efficient utilization of CPU threads and cores to validate transactions concurrently.

FuelVM leverages CPU processing power by enabling parallel execution through the use of CPU threads. Additionally, FuelVM’s shared memory architecture facilitates data exchange between contracts without requiring costly storage. These specific characteristics contribute to the efficiency and speed of FuelVM in processing transactions on the Fuel network.

UTXO Contracts in Fuel

Before delving into this section, let me briefly explain what a UTXO is:

➮ The Unspent Transaction Output (UTXO) model is a fundamental concept in cryptocurrencies, especially on blockchains like Bitcoin. Each transaction consists of inputs and outputs, where each output is a UTXO representing an amount of cryptocurrency associated with a wallet address.

➮ A wallet’s balance is the sum of all unspent UTXOs linked to a public address. When a transaction occurs, some or all of a wallet’s UTXOs may be used to fund that transaction. Spent UTXOs cannot be reused, but those remaining in the wallet can be used later.

➮ UTXO management is crucial for blockchain security and efficiency. Nodes verify each transaction to ensure that the UTXOs used are valid and have not been spent before. Unspent UTXOs also ensure transparency by allowing users to verify the complete transaction history associated with a public address.

🔹 UTXO Data Model and Its Significance in the Context of Fuel

The UTXO (Unspent Transaction Output) data model adopted by Fuel is of crucial importance. It represents the network states, enabling the determination of token ownership. In the context of Fuel, this model offers clarity and ease of transaction parallelization.

🔹 Distinction Between Coin UTXOs and Contract UTXOs

In FuelV2, states are represented by a set of UTXOs. Coin UTXOs, adhering to the classic rule of not exceeding outputs compared to inputs, are distinct from contract UTXOs. The latter, in addition to a balance and spend condition, include code, storage, and a unique contract ID.

Contract UTXOs in Fuel exhibit a unique dynamic. When a transaction consumes a contract UTXO, it creates a new contract UTXO with the same spend condition and contract ID. These spent contract UTXOs in the same transaction can interact with each other, providing flexibility in smart contract management.

🔹 Strict States and Transaction Parallelization

The use of strict state lists in the form of the UTXO model in Fuel facilitates transaction parallelization. This approach allows the network to execute transactions simultaneously, contributing to a significant increase in throughput. The clarity and rigidity of UTXO state lists play a crucial role in the operational efficiency of the Fuel Network.

Sway Language and Forc

🔹 What is Sway?

Sway is the programming language specific to Fuel, positioning itself as a secure and fast solution. Its introduction aims to provide an ergonomic smart contract development experience while ensuring transaction security.

Sway leverages the strengths of 2 languages: • RUST and • Solidity By merging the efficient syntax of RUST with the language paradigm of Solidity, Sway offers a powerful combination for developing smart contracts with high-level integrated contract storage.

🔹 Role of Sway

It can be inferred that the Sway language plays a central role in the innovation brought by the Fuel Network. By prioritizing security and speed, Sway enhances the efficiency of smart contracts on FuelVM, thereby contributing to the overall value proposition of the Fuel project.

🔹 Forc

Forc, also known as Fuel Orchestrator, represents the backbone of the Fuel development ecosystem. As a build system, package manager, and set of tools, Forc simplifies the development lifecycle on Fuel. It offers features such as formatting, script execution, contract deployment, and facilitates the creation, testing, and maintenance of Sway applications.

In conclusion, Fuel Network, with its transition from FuelV1 to FuelV2, stands out as an innovative solution to Ethereum’s scalability challenges. Modularity, FuelVM, UTXO contracts, the Sway language, and Forc converge to form a powerful ecosystem.

This unique approach, combined with flexibility and advanced development tools, positions Fuel Network as a project to closely monitor (especially since they don’t have a token yet…). With the mainnet launch just a few months away, the project promises diverse use cases, thereby strengthening its potential impact in the industry.