Lava Network Explained: Modular Data Network for Scaling Access to Any Blockchain
A dive into the principles of decentralised RPC and a detailed breakdown of the Lava Network
Disclaimer: The content presented in this article, along with others, is based on opinions developed by the analysts at Dewhales and does not constitute sponsored content. At Dewhales, we firmly adhere to a transparency-first philosophy, making our wallets openly available to the public through our website or DeBank, and our articles serve as vehicles for self-expression, education, and contribution to the ecosystem.
Dewhales Capital does not provide investment advisory services to the public. Any information should not be taken as investment, accounting, tax or legal advice or as a recommendation to purchase, sell or hold or to pursue any investment style or strategy. The accuracy and appropriateness of the information is not guaranteed by Dewhales Capital.
1. Introduction
2. Lava Network introduction
3. Lava Network and RPCs overview
4. How Lava and the Lava SDK work in general terms
5. Lava Network design and architecture
- Look at the benefits of Lava's decentralised design
- Lava architecture in outline
- Participants in the Lava Network
6. Lava Network restaking
7. Competitor landscape
8. Lava Tokenomics
9. GitHub
10. Backers and integrations
11. Conclusion
1. Introduction
As noted in recent research by Dewhales, projects have lately been moving towards true modularity akin to Web2. Over the past decade in Web2, there has been an explosion of external libraries, frameworks, and containers. Previously, modules in Web3 could be likened to frameworks that were difficult to integrate and required makeshift solutions for combining them. Now, it is more similar to Web2 with libraries, where one program can call upon many different libraries. In Web2, the abundance of libraries often leads to significant bloat in application sizes, where a banking app that should ideally be 20-50 MB can end up being 500-800 MB due to libraries. However, in Web3, things currently operate a bit differently.
Web3 is now moving away from the Fat Protocols paradigm, which provided developers with extensive SDKs. These comprehensive products often resulted in developers getting "a little bit of everything" rather than tools with truly extensive functionality. Additionally, judging by trends over the past few years, where the pendulum in crypto swings from centralized to decentralized solutions, the current major development vector is directed towards genuine decentralization, thanks to the expanded capabilities in Web3 development. Lava Network is one of the building blocks laying the foundation for a truly distributed and decentralized Web3.
2. Lava Network introduction
To get a general understanding of Lava and its goals, consider the following analogies:
Lava is a postal system, while other providers are independent mail carriers. If there is only one mail carrier in a city, they might get sick, leaving no one to deliver the mail. If there are many mail carriers from different companies, competition arises, and it becomes difficult for consumers to choose a specific one. In Lava, anyone can join the "Lava" collective of mail carriers and deliver mail in any way—by bike, car, or on foot. You make one payment, and the Lava algorithm selects the best mail carrier to help you send letters according to your needs. You don't have to choose your own mail carrier or maintain relationships with multiple different providers simultaneously.
Lava is a marketplace, while other providers are individual stores. Currently, in Web3, there is no infrastructure aggregation service, and this part of the stack is becoming increasingly fragmented with the launch of new blockchains and combinations. For each rollup deployment on Celestia, developers must use a new provider or set up a node to use it. Lava eliminates the need for developers to manually select individual providers. When a developer connects their application to Lava, the protocol not only connects them to the most efficient node available for obtaining responses but also routes their request to the correct provider—by chain, protocol, and API interface.
3. Lava Network and RPCs overview
The Lava Protocol is designed to provide decentralised and scalable access to blockchain data. The Lava is a fast, reliable and decentralised RPC network for every blockchains that solves the problems inherent in centralised blockchain data providers (Infura, Alchemy, etc.). Also on Lava, there are incentive pools which blockchains can create for bootstrapping infrastructure development. This is used to pay providers, while users/developers get the RPC for free. Read more about the shortcomings of the current solutions in the 'competitors' section. Apart from this, the team separately emphasises that Lava will support more features and modules in the future.
Today, the first service module on Lava is RPC, which the network supports across 30+ chains. In the future, modules can be permissionlessly added for subgraphs, oracles, MEV-resistant APIs and more.
What is RPC: RPC (Remote Procedure Call) is a method that allows programs to call procedures (functions) in another program. In a blockchain context, they are complete nodes that facilitate read/write access to the blockchain for other network participants to connect to. RPC nodes are often used by those who do not or cannot run their own full node or light client, greatly reducing friction when accessing the blockchain. Any user connected to an RPC provider implicitly trusts the integrity of the provider, as no self-checking work is done.
What RPCs are for: RPCs are necessary for users to connect to any blockchain and do ANY of the basic actions: minting, trading, transacting, sending, deploying smart contracts. In the case of Dapps, RPC allows Dapps to interact with any blockchain network. For example, the Dapp can use RPC to send transactions, read data from the blockchain (gas prices, account balances, etc.) or subscribe to certain events on the network. RPC also allows Dapps to interact with the blockchain network without having to disclose their private keys.
And on the one hand, it seems like the description of Lava might be similar to something like a router or relayer. But in fact Lava as RPC penetrates all aspects and components of web3: different ISPs, services, dApps, many different processes that are invisible to users. So next we need to delve deeper into how exactly Lava works.
4. How Lava and the Lava SDK work in general terms
1. Chains and rollups create an incentive pool on Lava, consisting of their native token or stablecoins or even memecoins
2. Chains and rollups define the desired infrastructure services by writing simple specifications (”specs”) and adding them to Lava, so providers can serve the infrastructure
3. Providers join Lava to serve infrastructure defined by specs and to earn rewards from the incentive pool. This is especially beneficial for newly launched or pre-launch chains which are not yet supported by the small handful of major providers
4. Lava aggregates providers and optimally routes requests based on geolocation and provider quality of service. Users do not need to manually research and pick the best providers; Lava is highly dynamic to user needs on a request-by-request basis
5. Users and developers get free infrastructure
6. Every month, providers are paid based on the compute they provider and the quality of their service
7. Developers can purchase subscriptions for higher rate-limit services (e.g. more RPC requests). Subscription payments are also paid to providers monthly.
The problems of current onchain data providers are that there is a lot of fragmentation of such solutions and there is no one who can offer all the functionality in one place - each provider lacks some feature or support for a certain network. Because of this, it is necessary to work with several solutions at once to cover the necessary data stack. Lava separately emphasises the problem of centralised infrastructure failure.
Lava operates as a marketplace and settlement layer for accessing blockchain data with dynamic market driven pricing. Payment settlement, conflict resolution and pairing are all done on-chain. To ensure competitiveness, communication is done directly between suppliers and consumers, with data and requests going offline (i.e. not through the Lava network). Lava intends to make it possible for users to access not just RPC, but also RPC in different locations around the world for better speed and user experience.
Technically, Lava offers a PoS-based blockchain solution developed using the Cosmos SDK and the Tendermint kernel. This might look logical in the context that Cosmos is positioned as a hub that allows different networks to connect with each other. But this raises the problem that Cosmos is actually a rather expensive solution for connecting to different networks via IBC technology. The fact is that the current IBC transport layer requires paired lightweight clients between each chain. Running a full light client is prohibitively expensive in most EVM-based chains, which limits IBC access to high-bandwidth, low-cost chains. Validator requirements are standard for Cosmos:
The emphasis in onepager is on Cosmos, but in fact if we go to Gateway Lava we see quite a number of supported chains (including some with RPC in testnet available). As of mid-June, only 16 chains were available; as of 7 July, 24 chains were available:
Lava also offers the SDK, a powerful JavaScript/TypeScript library designed for developers that allows developers to integrate plug & play RPC multichain by adding a simple js library to their code. It provides decentralized access to all the chains supported by the Lava ecosystem and can be used in both server and browser environments. By importing Lava-SDK into their projects, developers can easily interact with different blockchains and create decentralised applications with ease.
The tools that Lava offers:
Gateway - Easy-access web UI for online project management and URL-based API access on all supported chains and APIs.
SDK with Badge Server and integrations An SDK with an innovative badges system used to obscure and protect private keys for front-end dApps. SDK also supports native integrations with viem, web3.js, ethers.js, CosmJS and more soon.
Server kit - Concurrent, high-throughput binary useful for constructing gateways or servicing multiple consumers in an enterprise setting.
5. Lava Network design and architecture
Now let's take a look at the benefits of Lava's decentralised design:
Consensus-based data accuracy. Clients use a threshold algorithm for free to sample API endpoints and probabilistically minimise response conflicts. Consensus is built around the data in the network, with plans for easy clients in the future to further eliminate assumptions about trust. Developers don't have to worry about outdated or inaccurate data.
Network redundancy to scale with traffic spikes - applications interact with a list of providers, which increases uptime and service coverage. Networks can also run their RPC nodes quickly, creating a new Lava Network specification for providers to connect and offer services.
Connection to many providers = high uptime - Customers are paired with a list of providers and rated on latency, freshness and availability in a peer-to-peer system that determines the provider's reward. Providers are rewarded according to their QoS per session, which means that users get the best possible experience with no downtime.
Specifications that can support any chain, any API - With Lava as your provider, developers can change their configuration to access any chain and any API currently served by the network. DAOs and contributors can quickly implement new support for the network using open source, so developers don't have to spend time searching for new providers that meet their needs. All the RPCs that developers need are available through one open source protocol.
Lava architecture in outline:
But if we look under the bonnet not through a small glass window, through which we can see only part of the engine, but by opening the bonnet - everything looks much larger and more complex:
Participants in the Lava Network:
Validators that protect the chain, and earn LAVA for securing the chain. Validator nodes are responsible for securing the Lava blockchain by offering blocks, voting on blocks and validating state.Formation of rewards for validators is discussed further in the Tokenomics section.
Delegators stake LAVA to providers and validators on the network. This makes the network more secure and allows delegators to partake in providers’ and validators’ risk in exchange for rewards
Providers that manage services for Consumers. Providers serve retransmission requests by staking on the network and running RPC nodes in the retransmission chains requested by consumers (e.g. Cosmos, Etherium, Osmosis, Polygon, etc.). A provider, in many, but not all, cases, will also be a node runner for a specific blockchain. They receive payment in the form of LAVA from Consumers for service requests. Depending on the performance of the RPC service, suppliers can be rewarded, penalised, excluded from the chain. However, contrary to validators, providers earn rewards from:
1) Subscription payouts from serviced consumers,
2) ipRPC rewards for serviced ipRPC specifications - as described above in ipRPC pools
3) Delegation Rewards - as described below in Restaking
4) Rewards Boosts
Provider payments are derived from CU and paid in LAVA. Each provider receives a portion of a serviced consumer’s subscription price. The portion received of a subscription is derived by dividing the amount of CU a provider serviced for that consumer by the total amount of CU a consumer used in a subscription. This gives the exact percentage of serviced CU which is attributable to the provider in question.Champions earn LAVA for creating, maintaining, servicing, and supporting specifications on the Lava Network. Many champions create specifications and propose them on-chain, maintain existing specifications in light of necessary updates or changes, or write software that serves specifications (node clients, API clients/ indexers, or other innovations). A portion of rewards is reserved for Champions.
Consumers is anyone who consumes web3 APIs using Lava Protocol. Examples include developers, wallets, dApps, exchanges, indexers, and more. They use the LavaSDK, ipRPC endpoints, Gateway Endpoints, or Server Kit to retrieve data. Consumers initiate relay requests. They interact with the relay chains and participate in the Lava network to make reliable RPC calls. Lava facilitates decentralised interaction with blockchains, allowing consumers to maximise privacy, transaction speed, data reliability, censorship and node availability. Consumers on the Lava network are divided into developers and the applications they create.
Corporate customers that can use the Lava Server Kit - is a GO language reference implementation that provides self-hosted gateway access to blockchain APIs, designed as a solution for running as a backend server. It is capable of accepting raw RPC queries, wrapping them up with the protocol layer, and sending them directly to providers on our network in a decentralized manner. The Lava Server Kit is more concurrent and performant than Lava SDK and is used in enterprise-grade applications which require high throughput and effeciency in scaling.
Specifications are a foundational component that provides multichain support for Lava, laid out in JSON format. These so-called specifications define the minimum requirements necessary for the efficient operation of a specific chain's API on Lava. Using these specifications, Lava determines the supported chains and methods, and sets the corresponding costs, prerequisites, and checks.
Lava Gateway is a web platform for developers, providing instant access to blockchain data. The gateway utilizes the Lava Server Kit to offer a hosted entry point for developers needing RPC through the Lava network. This setup allows users to manage and customize Web3 APIs with convenient controls directly from the browser.
6. Lava Network restaking
The topic of restaking has been on everyone's lips for a long time, but in the case of Lava, it's turned from an unexpected direction and in a more complex way. But in the case of Lava, the approach is different from the usual restaking of LSTs and native tokens for AVS. With restaking in Lava Network, token holders can delegate their tokens to a specification served by a provider to claim a portion of rewards awarded to the selected provider. All restakers are eligible for a portion of the profits of that provider.
LAVA delegations to Validators can be restaked. LAVA tokens can be restaked to providers without introducing additional collateral, earning more rewards at the cost of higher risks. In the reverse, whenever a provider stakes tokens, an equal amount is restaked to a validator. In other words, a provider stake is both self-delegation (to oneself as a provider) and standard delegation (to a validator).
The purpose of restaking:
- Gives delegators a way to help select the best providers and earn rewards for it
- Provides additional yield for validator delegators
- Accomplishes lower security fees on the network
7. Competitor landscape
In fact, there are now quite a few RPC providers - according to Alchemy, there are 29 of them. The main ones are Infura, QuickNode, Alchemy. But compared to them, Lava Network offers a completely different product.
What are the disadvantages of centralized RPC providers:
Wallets can censor countries, providers can block transactions for certain dapps, and gateways can return inaccurate data, sometimes maliciously.
Due to a bug in the release of the test network earlier this year, Solana Foundation RPC endpoints went offline. Although this did not affect the ability of the network to create new blocks, it meant that users had to rely solely on private RPC providers, while publicly available RPC was no longer available.
RPC providers often faced catastrophic configuration problems, such as when providers in the Ledgerwatch Erigon project recently experienced problems when their endpoints went down and the HTTP endpoint URL was permanently closed, as recorded in the project logs.
Optimsim airdrop showed that the token lost 60% of its value due to a failed airdrop after pre-emptive traffic overloaded their public RPC.
Also - the big providers on serve a handful of chains. Lava makes it permissionless for any chain to give fast and reliable RPC to their users/developers. via incentive pools (Incentivized Public RPC). Also, RPC endpoints can go offline at times of high load, and centralised providers are not responsible - this is also one aspect of the GTM strategy Lava Network.
From the Getblock research: Thus, for this analysis we can assume that 1 GetBlock request equals 1.7 CU of QuickNode or 20.2 CU of Alchemy. This metric is designed to measure the amount of computing power required to execute a given blockchain query. Since some methods (commands) are more difficult to execute than others, executing them requires more CU from the user's balance.
In other words, we see quite a wide variation in many parameters. And it's still worth finding out how the Lava performs in comparison. Feedback suggests that using RPC Lava improves application performance by a factor of about 10, even on Arbitrum, due to the lack of downtime of other RPCs. And team says that in general - the CU/ price is define by the ecosystem, and Lava will be able to serve unlimited amount of them due to the Specs novelty - define in-demand modules according to the supply/demand.
Another competitor, when viewed from a different perspective, could be EigenLayer. This is not only due to the use of the restaking idea (albeit from a different angle) but also in terms of the protocol's architecture and principles. The thing is, while EigenLayer enables bootstrapping of the network (AVS), Lava Network provides bootstrapping for creating its own RPC infrastructure through a mechanism called Incentivized Public RPC. Similarly, to how EigenLayer uses LST and native ETH for scaling crypto-economic security, in Lava Network, chains and rollups create an incentive pool on Lava consisting of their own tokens, stablecoins, or even meme coins.
8. Lava Tokenomics
The Lava token has direct utility through a subscription model and staking on provider nodes (specifications), ensuring the integrity and continuity of their service. Additionally, Lava Network has validators who also stake tokens. Token holders can delegate their tokens to providers, and validators, and participate in governance.
There are other aspects of forming financial flows as well: Chains contribute incentive tokens to Lava, rewarding providers and stakers for offering specifications to their developers and users, while developers (Champions) can earn rewards for creating, developing, and maintaining RPC and API specifications and software.
In addition, the Lava token is an integral part of the protocol's expansion. This is because it is used in Incentivized Public RPC Pools, where tokens from other platforms implementing Lava RPC can also be utilized alongside Lava tokens. The ipRPC pools can hold native Lava tokens (LAVA) and tokens wrapped in IBC from any blockchain.
For access and connectivity, incentivized pools rely on the Server Kit/gateway interface. Selected consumers with special subscriptions act as sponsors for end-users. These special subscriptions enable consumers to distribute rewards from the ipRPC pool among providers when end-users consume data. As a result, providers servicing the ipRPC specification receive rewards beyond regular network servicing rewards.
As in other blockchains, validators are staking to earn rewards. Validators with stake get rewards from four sources:
1) Block rewards from the Rewards Reserve
2) Block rewards from subscription commission
3) Block fees from transactions on the network
4) Delegation rewards (as written above in the “Restaking section”)
LAVA has a fixed supply, and no more tokens will be minted. Moreover, Lava has developed a new deflationary mechanism to attract providers during the initial stages of the Mainnet. 6.6% of the supply is allocated to "Provider Drops," a monthly reward distribution mechanism to incentivize provider participation. Monthly rewards vary based on the paid demand for services on Lava; higher paid demand typically results in greater rewards for early-joining providers. As the network attracts more consumers, the need for Drops will diminish, as providers will benefit from subscription payments.
At the end of each month, all undistributed Validator rewards are burned.
Lava will have 1,000,000,000 tokens at Genesis with no inflation to token supply.
25% - Public Allocation, Future initiatives and Rewards Reserve (Provider Drops and Validator rewards). Fully unlocked at Launch. Except rewards reserve: unlocks continuously from launch to year 4.
31% - R&D & Ecosystem, Protocol Maintenance & Development; Programs for Providers, Validators, and Champions. 25% unlocked at launch. Remaining 75% unlocks continuously from year 1 to year 4.
17% - Investors, 33% unlocked at year 1. Remaining 67% unlocks continuously from year 1 to year 3.
27% - Contributors, Early contributors, Core Team, Advisors, & Others. 33% unlocked at year 1. Remaining 67% unlocks continuously from year 1 to year 3.
9. GitHub
GitHub is very active, it can even be considered a role model for what a truly active GitHub should look like. In this research, we would like to highlight the activity in the Lava Network repository separately, as this clearly shows a lot of activity in the project work, especially in the dynamics since July 2023.
https://github.com/lavanet/lava - is the main repository. There are 44 contributors (23 as of July 2023) working on this repository, written using Go as the main language, also Shell, Phyton and others. The frequency of commits is very high since June 2022, all Pull requests are on the case, the activity is not synthetic. New releases are active, the first of which was in November 2022 and there have been 115 releases in less than a 1,5 year (33 as of july 2023), which is a very good figure:
There is currently one open issue titled Contribution - Provider rewards persistency on shutdown. The presence of issues suggests that the maintainers are responsive to problems and actively working to resolve them. In terms of code, the repository looks decent, the code is written with well-known tools and libraries (Cobra).
https://github.com/lavanet/lava/tree/main/ecosystem/lava-sdk - Lava SDK repository, also quite active, this repo has fewer contributors (6) and a lower commit rate, but still much higher activity than most crypto projects even in the main repos (as of July 2023, this repository is currently included in the main lava repository). The SDK (Software Development Kit) is designed to allow developers to access the Web3 API via the Lava Network. It is implemented in JavaScript/TypeScript and designed to run in browsers, providing multi-chain peer-to-peer access to the blockchain API.
https://github.com/lavanet/docs - documentation repository, is also actively updated and has a large number of contributors (43 43 at the end of May 2024 and 6 as of end of July 2023):
https://github.com/lavanet/cosmos-omnibus - This repository is a fork of one of the Akash Network repositories and is designed to run nodes. In other words, you can say that Lava nodes are based on Akash technology. The attributes of this repo are not labeled.
https://github.com/lavanet/lava-providers - another interesting repository that has been actively worked on in recent months. It contains a resource for the Lava Access SDK to discover the first providers to connect to access initial Pairing data. That is, this repository contains the json that Lava uses to offer a decentralised solution for connecting new consumers to the network via vendor nodes, providing a reliable and controlled connection to the network.
10. Backers and integrations
Lava also announced backers in the 2024 round, which included: Haskey, Tribe Capital, Jump, Quiet, Node.capital. Finality, MH Ventures, Alpha Lab, Chorus One, YTWO, kommune, Protocol Labs, Alliance, Kepler, Dispersion Capital, Chainlayer, Compa, Galileo, Anagram, Caladan, Interop Ventures.
Lava Foundation has closed $11m to grow the Lava ecosystem and fund protocol development. Also Lava closed $15m seed round with Tribe, Jump and Hashkey as lead.
Also Lava is already running Incentivized RPC campaigns with NEAR, Evmos and Axelar with hundreds of thousands distributed in node runner rewards to provide reliable infrastructure. Other partners include (or projects that use Lava):
Learn web3DAO - conducts educational programs, and has conducted a hands-on workshop on the Lava SDK for developers.
In addition to Learn web3DAO, Lava spoke at Solana Hacker House, which is positioned as an environment for developers and learning.
Caddi - By using Lava, Caddi users can get more accurate gas prices across multiple networks. Caddi allows for optimised swap pricing and in addition to DEX allows for the connection of centralised exchanges via API. But judging by the available social media metrics, this app is not very popular yet.
ZyberSwap, a DEX on Arbitrum that plans to launch further on Optimism and zkSynk, has a small TVL of $4.18m according to DeFiLama.
Arcadeum - online casino, which supposed a large number of different gambling games on their website.
Chorus One - provides users with a Stake-as-a-Service (SaaS) solution at the launch of Lava's core network.
Also distinctive in establishing partnership relations for Lava is the launch of the Incentivized Public RPC Campaign. Specifically, within this campaign, Lava has partnered with Union Labs to incentivize public Remote Procedure Call (ipRPC), boasting a reward pool of $100,000 USD tokens. Union Labs is an independent compatibility layer providing secure bridges using zero-knowledge proofs to connect any application chains, L1, and L2. Following the scheduled mainnet launch of Union in summer 2024, node operators will have the opportunity to become Union RPC providers through Lava, simplifying the process for developers by consolidating providers into a single access point. Campaign participants receive a share of the reward pool over three months from the anticipated initial launch date.
Additionally, mention was found of Axelar's participation in this program on the Axelar community forum. Their Incentivized Public RPC endpoint has become a primary RPC on Axelar. At the time of posting, Axelar's main and test networks had serviced over 7 billion RPC requests, distributed over 31,000 AXL tokens among high-quality Axelar node operators. Support for archival data and CosmWasm API has also been added, significantly improving performance through enhanced caching features. CUs for Axelar reached already 11.4B compute units in April, which shows the direct usage and demand for Lava RPC.
In addition to Near, Axelar and Unioin, Evmos also participated in this programme. And for Near, the CUs reached 39.2B compute units in April.
11. Conclusion
Based on all the above, we have a project whose team clearly understands the technical aspects of Web3 and the importance of business development (BD) in the context of strategic partnerships and integrations. Lava Network has a product that can offer strong competition to traditional RPC providers due to its decentralized and varied infrastructure for consumers and also the main difference is it is permissionless to add any chain on Lava. Additionally, Lava Network boasts a technically strong team that is steadily and consistently implementing its vision.
Therefore, Lava Network has the potential to become a foundational component of a truly modular Web3 world, offering decentralized execution of one of the most critical parts of blockchain technology—RPC. This could create new economic incentives and enhance resilience and trust. However, Lava faces a crucial test: user acceptance of its service costs compared to centralized competitors, as token price fluctuations could be significant. Preliminary forecasts suggest that Lava’s services should be cheaper than centralized solutions, especially considering that Lava effectively creates a peer-to-peer market where participants can natively set fair prices. But in any case, the CU rates achieved in the chains that have joined the ipRPC programme show quite a high uptake of the Lava Network solution.
Lava Network links:
Website | Twitter | Discord | Blog | Documentation | GitHub |Whitepaper
To help us improve and provide you with the best content possible, we'd appreciate it if you could share your thoughts and opinions on the article you just read. Your feedback is very valuable to us and won't take more than 1 minute.
Also, this post is public so feel free to share it post as well
Thank you so much! ❤️