Big thanks to the folks over at Messari for digging into Waterfall Network. It’s a new Layer-1 (L1) blockDAG that just launched its mainnet in July 2024, after a bunch of research and testing. Think of it trying to fix some of the headaches in crypto, like how slow things can feel sometimes.
- Waterfall Network is a new Layer-1 blockDAG aiming to address scalability and interoperability issues in the crypto space by using a Directed Acyclic Graph (DAG) and Proof-of-Stake (PoS).
- The network features a dual-layer setup with a Sharding Network for transaction processing and a Coordinating Network to ensure finalization, enabling parallel processing and faster speeds.
- The WATER token is central to the network, used for transaction fees and staking, with a supply mechanism that adjusts inflation and deflation based on network activity.
See, one big problem in crypto is scaling. It’s like trying to fit everyone in a city onto one tiny road. Even after years and tons of money spent, blockchains aren’t exactly speed demons compared to, say, Visa, which handles way more transactions per second (TPS). Ethereum and its helpers manage maybe 200 TPS combined, while Visa can do over 65,000. Quite a difference, right?
Then there’s the whole interoperability thing. Some chains, like Solana, are faster than Ethereum, but they don’t play nice with Ethereum’s apps (dApps). So, developers have to pick: go fast but maybe lose access to all those popular apps, or stick with the familiar but deal with slower speeds? It’s a bit of a puzzle.
Waterfall Network is stepping into this space. It’s built on something called a Directed Acyclic Graph (DAG) instead of a straight line of blocks, and it uses Proof-of-Stake (PoS), where people stake tokens to help secure the network. The goal is to be super scalable for dApps while still keeping things decentralized enough. It also aims to be compatible with the Ethereum Virtual Machine (EVM), which means those popular apps could potentially run on it. That’s a pretty neat trick if they can pull it off.
This project didn’t just pop up overnight. It’s based on years of research. The team behind it has some serious experience. You’ve got Ron Resnick, who used to be big at Intel and the Enterprise Ethereum Alliance. Dr. Sergii Grybniak is the research head, a computer science whiz with a fintech startup exit. Richard Wang is a venture capitalist from DraperDragon Fund who’s been in crypto investing since 2015. Jeff McDonald helped start the NEM Foundation, and Michael Terpin is a well-known crypto entrepreneur. They’ve been around the block, literally and figuratively.
They’ve also raised some money to get this going. Back in late 2023, they got $2 million, and then in December 2024, they announced another $11.6 million in funding commitments. The mainnet finally went live in July 2024, putting all that research and funding to work.
How does it work? Well, it’s got this dual-layer setup. There’s a Sharding Network and a Coordinating Network. The Sharding Network is where the transactions get processed and blocks are made, kind of like different lanes on a highway. The Coordinating Network makes sure everything lines up correctly and transactions are finalized, like the traffic control center keeping things from getting messy.
The PoS consensus is key here. Instead of validators waiting in line to add one block after another, the DAG structure lets multiple validators work on blocks at the same time. This parallel processing is what makes it faster. Validators in the Sharding Network propose and check blocks, referencing previous ones in the DAG. The Coordinating Network then takes these unfinalized blocks, sorts them out, and makes them final. This stops things from getting jumbled up.
To be a validator, you need to stake 32,000 WATER tokens. That’s the network’s native token. At the start of each period (they call it an epoch), the Coordinating Network picks validators for different jobs, like proposing new blocks or confirming others. A block isn’t final until enough validators say it’s good. If a validator wants to stop, they have to wait a couple of hours, which helps keep the network stable.
The Sharding Network is where the magic happens for speed. Imagine a regular blockchain like a single checkout line at the grocery store – everyone waits, even if their items are totally different. Waterfall’s sharding is like having multiple checkout lines. Transactions that don’t depend on each other can be processed at the same time in different shards. This gets rid of that single bottleneck and speeds things up a lot.
Each shard is like its own little world, handling its own transactions. Validators within a shard keep the block production going by referencing recent blocks. Once a block is ready, it goes to the Coordinating Network. This network is the boss, making sure all the different shard worlds stay in sync and agree on the order of things. It uses something called topological sorting to figure out the final, unchangeable sequence of blocks and transactions.
The WATER token is what makes the network go. It started with 25 billion tokens. A big chunk (39.2%) is for the network’s growth and development. Another large part (23.3%) is for daily operations. Then there are allocations for grants, founders, investors (Seed and Early Supporters), advisors, and the technical team. Most of these have vesting periods, meaning they aren’t all available at once, which helps manage the supply.
The token supply isn’t fixed forever. It has ways to both increase and decrease. New WATER is created (inflation) to pay validators for securing the network. They use a Minimum Necessary Issuance model, which adjusts how much new WATER is minted based on how much is being staked. If not enough WATER is staked, the inflation rate goes up to encourage more staking. If too much is staked, it goes down. Right now, with less than the optimal amount staked, the inflation rate is pretty high, around 33% annually. That’s designed to get more people staking.
On the flip side, WATER gets burned (deflation). A part of every transaction fee is permanently removed from circulation. Validators can also lose some of their staked tokens if they mess up, like missing votes or trying to cheat. Those lost tokens get burned too. It’s like a little digital bonfire to keep the supply in check.
So, what can you actually do with WATER? It’s used for paying transaction fees, naturally. The fees change based on how busy the network is and how complex the transaction is. The number of validators and the amount staked also play a role in the fee calculation. You need WATER to run a validator node, specifically 32,000 WATER. They don’t have delegated staking built into the network itself, which means you can’t just hand your tokens to someone else to stake for you through the core protocol.
Validators earn rewards for their work. These rewards come from new WATER being minted and a piece of the transaction fees. They get paid for helping both the Sharding and Coordinating Networks. If they propose a block in a shard, they get tips and fees from the transactions in it. If they participate in the Coordinating Network consensus, they get rewards for voting correctly and including finalized votes. The faster and better they are, the more they earn. It makes sense; you want your validators paying attention.
Even though it’s new, Waterfall Network is already showing some impressive numbers. According to Chainspect, it hit a max TPS of 12,700, putting it up there with some of the fastest chains around, even faster than well-known ones like NEAR, Hedera, and Solana in terms of peak performance. Only a few others like Redbelly and ICP have recorded higher peaks.
The number of validators has also grown quite a bit in 2025. It went from about 9,900 at the start of the year to over 46,000 by mid-April. That’s a huge jump! Since each validator stakes 32,000 WATER, the amount of staked WATER has gone up proportionally. By April 15th, over 1.47 billion WATER was staked. That’s a good chunk of the circulating supply.
The ecosystem is just getting started, but there are already some projects launching or planned. There’s Lamb OTC Market, which is an over-the-counter trading platform. AquaStake is a liquid staking platform where you can stake WATER and get a token called JWATER in return, which you can then use elsewhere. AquaDEX and AquaSwap are upcoming decentralized exchanges, and AquaLend is a lending platform, kind of like Aave. They’ve also got a Web3 comic called LightningWorks and a Web3 website builder called Cascadify. Plus, there’s Generative Mind, an AI company doing blockchain analytics. It’s a mix of things, showing the network is starting to attract developers.
Looking back, they spent a few years on research and testnets before the mainnet launch in 2024. They did tests to prove the network could handle lots of transactions and validators, even using Google infrastructure for one big test. They also got security audits done before going live.
For the future, they haven’t published a super detailed plan yet, but they’ve mentioned a few things. In 2025, they want to add support for running nodes on mobile devices like smartphones. Beyond that, they’re looking at increasing the network’s capacity even more through better sharding, improving the consensus mechanism, and adding distributed storage for transaction history. It sounds like they’re focused on making it faster and more efficient over time.
