Learn more about Paradigm's new $9 million project, Shadow

Author: Deep Tide TechFlow

Retail investors in the secondary market are actively making inscriptions, and VC in the primary market are still insisting on investing in infrastructure.

Recently, an infrastructure project called Shadow publicly announced that it had received a $9 million seed round led by Paradigm.

Infrastructure is indeed important in the crypto field, but the general feeling is that there is still a lot of infrastructure and a lack of applications.

This begs us to wonder why venture capitalists tend to invest heavily in infrastructure projects, and what problems do these projects solve that are not obvious to most users, but are critical to the crypto industry as a whole.

Infrastructure projects often have a lot of technical details in their design, and there is a certain threshold to understand, which is even more obvious after looking at the relevant materials of the Shadow project.

The project’s official website is full of code and data, and it is difficult for the average user to understand what problems it solves.

At a cursory glance, Shadow is an innovative blockchain infrastructure project that aims to simplify and reduce the engineering time and cost of on-chain data indexing and analysis, but there is no more standard answer to how and why to do it.

As a rising star in top-tier VC Pardigim investments, Shadow naturally has its share of strengths.

Therefore, after conducting a certain degree of research, the author tries to interpret the pain points and unique solutions captured by Shadows, and delves into the core value of Shadow and its potential impact in the crypto field.

On-chain data analysis is important, but it’s expensive to use

First of all, the direction that the Shadow project aims at is the field of on-chain data analysis.

On-chain data analytics is crucial in the cryptocurrency space, not only providing in-depth insights into market dynamics, but also being a key factor in optimizing trading strategies, strengthening security measures, and promoting technological innovation.

However, please note that the on-chain data analysis mentioned by Shadow is not the same as the on-chain analysis tools such as Dune, Nansen, and Arkham that we remember.

On-chain analysis tools are actually “data processing for you to use”, while on-chain analysis is “data processing”.

It’s a bit like the difference between the dishes and ingredients in a restaurant.

You use on-chain data tools, free and fast, because the restaurant has already prepared the dishes for you to eat, while in the back kitchen, processing ingredients (raw on-chain data) can be a time-consuming and labor-intensive task.

What is a time-consuming and labor-intensive method? The existing on-chain data analysis is faced with high cost and technical complexity:

Event log generation for smart contracts requires a high gas fee

Real-time tracking and analysis of data requires huge computing resources

While on-chain data is open and transparent, their structure and format can make parsing and effective use a challenge

As a result, existing data analytics solutions often struggle to meet the needs for real-time, cost-effectiveness, and flexibility, highlighting the urgent need for a more efficient and cost-effective approach to data processing.

This demand may not be the end-user’s demand, as mentioned in the restaurant metaphor above, it may be the restaurant’s need to handle raw materials. Therefore, the Shadow project is more for project parties, developers, and professional data analysts, rather than for end users.

Shadow, creating a “shadow” for expensive ontologies

Since the cost of utilizing and organizing on-chain data is high, a viable solution is:

Make a copy of the “forked” version of the on-chain data, and then analyze and modify it as much as you like in this fork.

This is also a hint of the name of the Shadow project. Instead of directly invoking resources on the main chain for analysis, a “shadow” version of the same is generated for processing.

It’s easy to think of the fork button on Github.

Someone else has a repository, and I think it’s fine, but I don’t want to make a mess by moving around in someone else’s repository, so the best thing to do is for me to fork someone else’s repository and clone it on my own computer to modify it at will.

Similarly, you can compare the shadow fork of Shadow to forking someone else’s repository on GitHub. On Shadow, you can create a shadow version of the main chain for data analysis and custom event log additions, without affecting the main chain itself.

As such, shadow forks are off-chain read-only execution environments designed to mirror the state of public blockchains in real-time and are highly optimized for data access.

Shadow provides a new solution for on-chain data access and indexing through its unique shadow fork technology.

This technology can be likened to creating a perfect simulated environment in the real world. In this virtual environment, users are free to add or modify the event logs of smart contracts without paying high gas fees.

It’s like building freely in a sandbox city, unconstrained by real-world costs and rules. In this way, Shadow dramatically reduces the cost of data processing while increasing flexibility and efficiency.

Not only does it make data indexing faster and richer, but it also makes in-depth data analysis easy. In addition, Shadow’s approach opens up new possibilities for smart contract development and testing, allowing developers to test and optimize their contracts without impacting the mainnet.

What exactly can be done?

Currently, there are four possible use cases for using the protocol in Shadow’s official materials:

Save on gas fees and contract size: By placing event logs on the shadow fork instead of mainnet, contracts can be significantly optimized and different data needs can be met. This approach can reduce gas fees per transaction by up to 12% while increasing the visibility of the contract.

Enhanced protocol analysis: Shadow allows users to customize events for any contract, even if the events on mainnet are missing or incomplete. Users can directly access the mainnet state data for subsequent data analysis.

Build a fast indexer: Speed up the data indexing process by emitting data-rich shadow events, reducing RPC calls, traces, and complex data merging.

Full Logging Suite: Shadow allows users to issue private logs in any contract for monitoring, testing, debugging, and analyzing contract execution for actual mainnet transactions.

These features are too hardcore for the average user, but who else might use them?

Shadow’s primary user base includes blockchain developers, data analysts, and researchers, who may be more in need of efficient, low-cost on-chain data access and analysis tools.

Working with Shadow is fairly simple and straightforward. With just a few lines of code, developers can create and test new event logs and smart contracts in their own shadow forks. This process requires no complicated setup, and users can easily create shadow forks and add custom event logs through the user-friendly interface provided by Shadow.

This simplicity means that users who don’t have to be blockchain experts can quickly start taking advantage of Shadow’s aforementioned features.

Opportunities and challenges

With the continuous development of cryptocurrency and Web3 technology, Shadow faces great opportunities and challenges.

From an opportunity perspective, with the increase in blockchain applications, the addition of more external organizations, and the increase in bull market trading volume, there is a growing demand for efficient and low-cost on-chain data processing. Shadow’s above-mentioned technology has the potential to become a leader in this field.

However, there are also challenges, including competition with other technology solutions, keeping the technology advanced and secure (open source), and whether it can be scaled to more blockchain platforms.

But on the whole, the main problem with this type of project is that it is too far away from the end user to be perceived and generate Fomo emotions.

From the perspective of industry observers and practitioners, one more project like Shadow is one more weapon for in-depth analysis of the industry, but from the perspective of retail investors and users, it may not matter whether there is such a tool or not, they are more concerned about whether there are airdrops, how to participate and interact and so on to win rewards.

Amid the concerns and sentiments of the separation between the primary and secondary markets, the author believes that Paradigm’s investment in Shadow is not only a support for a single project, but also a vote of confidence in the development of the cryptocurrency infrastructure sector.

VC Today’s crypto market is more like an open bazaar, with participants of different sizes focusing on their own buying and selling in different booths.

But in the end, the more lively and prosperous the market, the better it is for everyone.