Author: Deep Tide TechFlow

Retail investors in the secondary market are actively inscribing, while VCs in the primary market are still insisting on investing in infrastructure.

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

Infrastructure is indeed important in the crypto field, but the general feeling at the moment is that there is a concentration on infrastructure and a lack of applications.

This also leads us to start thinking about why venture capital tends to invest heavily in infrastructure projects. What important problems can these projects solve that are not obvious to most users but are crucial to the entire crypto industry?

Infrastructure projects often have many technical details in their design, making them somewhat difficult to understand. After reviewing the relevant information about the Shadow project, this feeling becomes even more apparent.

The project's official website is filled with a large amount of code and data, making it difficult for ordinary users to understand what problems it can actually solve.

Roughly speaking, Shadow is an innovative blockchain infrastructure project dedicated to simplifying and reducing the engineering time and cost of on-chain data indexing and analysis. However, there are no standard answers as to how to specifically achieve this and why it should be done.

As a new star invested by top VC Paradigm, Shadow naturally has its outstanding features.

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

On-chain data analysis is important but expensive to use

Firstly, the direction targeted by the Shadow project is the field of on-chain data analysis.

On-chain data analysis is crucial in the cryptocurrency field, as it not only provides deep insights into market dynamics but is also a key factor in optimizing trading strategies, enhancing security measures, and promoting technological innovation.

However, it is important to 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 are familiar with.

On-chain analysis tools actually "process the data before giving it to you," while on-chain analysis is "data processing."

This is somewhat like the difference between a restaurant's dishes and ingredients.

You use on-chain data tools for free and quickly because the restaurant has already prepared the dishes for you to eat directly, while in the kitchen, processing the ingredients (original on-chain data) may be a time-consuming and laborious task.

How time-consuming and laborious? Existing on-chain data analysis faces the problems of high costs and technical complexity:

• Generating event logs for smart contracts requires paying high gas fees
• Real-time tracking and analysis of data require substantial computing resources
• Although on-chain data is publicly transparent, its structure and format may pose a challenge for parsing and effective utilization

Therefore, existing data analysis solutions often fail to meet the needs for real-time, cost-effective, and flexible data processing, highlighting the market's urgent demand for a more efficient and economical data processing method.

This demand may not be the demand of end users; as mentioned in the restaurant analogy above, this may be the demand for processing raw materials. Therefore, the Shadow project is more focused on serving project parties, developers, and professional data analysts, rather than targeting end users.

Shadow, creating a "shadow" for expensive on-chain data

Since utilizing and organizing on-chain data is costly, a feasible solution is to:

Create a "forked" version of on-chain data and freely analyze and modify it within this fork.

This is also implied in the name of the Shadow project. Instead of directly calling resources on the main chain for analysis, it generates a "shadow" version for processing.

This approach easily brings to mind the Fork button on GitHub.

Someone has a code repository that I find quite good, but I don't want to mess it up by moving things back and forth in their repository. So, the best way is for me to fork a copy of their code repository and clone it to my computer for easy modification.

Similarly, you can liken Shadow's shadow fork to forking someone else's code repository on GitHub. On Shadow, you can create a shadow version of the main chain for data analysis and custom event log additions, and these operations will not affect the main chain itself.

Therefore, the shadow fork is an off-chain read-only execution environment designed to mirror the state of the public blockchain in real time and is highly optimized for data access.

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

This technology can be likened to creating a perfect simulation environment in the real world. In this virtual environment, users can freely add or modify event logs for smart contracts without having to pay high gas fees.

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

It not only makes data indexing faster and more comprehensive but also makes in-depth data analysis simple and feasible. In addition, this approach by Shadow also provides new possibilities for the development and testing of smart contracts, allowing developers to test and optimize their contracts without affecting the mainnet.

What can it specifically do?

Currently, the official materials of Shadow demonstrate four possible use cases for using the protocol:

• Save gas fees and contract size: By placing event logs in the shadow fork instead of the mainnet, contracts can be significantly optimized to meet different data needs. This method can reduce gas fees for each transaction by up to 12% while increasing the visibility of contracts.

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

• Build a fast indexer: By issuing data-rich shadow events, reducing RPC calls, tracking, and complex data merging, the data indexing process can be accelerated.

• Complete logging suite: Shadow allows users to issue private logs in any contract for monitoring, testing, debugging, and analyzing the actual execution of mainnet transactions.

These functions may be too hardcore for ordinary users, but who else might use these functions?

The main user groups of Shadow include blockchain developers, data analysts, and researchers, who may need efficient and low-cost on-chain data access and analysis tools.

Using Shadow is quite simple and straightforward. Developers can create and test new event logs and smart contracts in their own shadow fork with just a few lines of code. This process does not require complex settings, and users can easily create a shadow fork and add custom event logs through the user-friendly interface provided by Shadow.

This convenience means that even non-blockchain experts can quickly start using the above-mentioned features of Shadow.

Opportunities and Challenges

As cryptocurrency and Web3 technology continue to develop, Shadow faces tremendous opportunities and challenges.

From an opportunity perspective, with the increasing number of blockchain applications, more external organizations joining, and the increasing trading volume in the bull market, there is a growing demand for efficient and low-cost on-chain data processing. The aforementioned technology of Shadow has the potential to become a leader in this field.

However, challenges also exist, including competition with other technological solutions, maintaining the advancement and security of the technology (open source), and whether it can be expanded to more blockchain platforms.

Overall, the main issue with these types of projects is that they are too far removed from the end users, making it difficult to be perceived and generate FOMO emotions.

From the perspective of industry observers and practitioners, having a project like Shadow provides a handy weapon for in-depth industry analysis. However, from the perspective of retail investors and users, the existence of such a tool may not be important. They are more concerned about airdrops, how to participate, and interact to earn rewards.

In the fragmented focus and emotions of the primary and secondary markets, the author believes that Paradigm's investment in Shadow is not only a support for the individual project but also a vote of confidence in the development of cryptocurrency infrastructure.

While VCs focus on infrastructure and retail investors focus on applications, today's crypto market is more like an open market, where participants of different sizes focus on their own buying and selling at different stalls.

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

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