When using the internet we don’t need to know which cloud provider we are interacting with or the various overlapping infrastructure involved in basic tasks. The same simplicity should apply to blockchain interactions. Instead, we are currently faced with a painful and complex bridging experience, along with liquidity fragmentation across an ever-increasing number of L1s, L2s, and L3s. The next major UX upgrade in crypto is chain abstraction, which aims to remove any multi-chain complexity from the user journey. This is being developed at the blockchain, account, and application level. We believe that it is at or just below the user facing level where some of the most interesting developments are being made today.
The most popular mode of accessing crypto now is still via centralized exchanges. One of the reasons for this is the total lack of multi-chain complexity. The on-chain world is now trying to catch up. A large number of players are building across the chain abstraction stack, many promoting their own standard. This has resulted in fragmentation and a dynamic of competitive collaboration as each project vies to become the de facto solution in their respective domains while needing to collaborate due to the extensive interdependencies between the various layers of the CAKE.
Multiple protocols competing and collaborating at all levels of the stack
We believe that the intellectual (and) capital focused on solving this problem means it will be solved. Crypto’s highly capitalistic market incentives make a race to the bottom in fees highly likely, and this period of high experimentation will likely converge on a small number of dominant players.
Intent-Centric Chain Abstraction
Many protocols are taking an intent-centric approach to solving (no pun intended) multi-chain UX, where solvers compete to fulfil their multi-chain orders. While this can unlock significant UX improvements toward a unified chain experience, it also raises new centralization concerns. In order for these solutions to actually work well, there needs to be a sufficient solver ecosystem built around them - otherwise orders won’t get filled → UX will be poor → no adoption. Bootstrapping a sufficient solver ecosystem will be a prerequisite for success and likely a key battleground that determines which solutions survive and thrive. This means that it is crucial for any intent-centric system that there are satisfactory guarantees for solvers to make money. Solutions like OneBalance and Socket essentially lock the assets for a transaction as an economic guarantee for solvers to be rewarded for completing the action. Here’s what this would look like in practice; a user wants to place a $100 bet on Polymarket (on Polygon) with their assets on Arbitrum, the $100 (and solver fee) would be locked in their account and paid to the solver upon completion of the transaction. This way solvers are guaranteed to be compensated for fulfilling the transaction, and users only pay if their request is satisfied. Everyone wins. Right?
Well, the crucial role of solvers underscores the importance that being solver-centric doesn’t become a key vulnerability. This reliance gives rise to very legitimate concerns around censorship risks and predatory behavior. Critics contend that intent-centric chain abstraction is at odds with the ideals of crypto; and that the answer to our UX woes is actually a trojan horse of centralization. This is because solver networks show a tendency to trend towards monopolistic / oligopolistic market structure given that solving is typically a zero-sum game. Systems relying on solvers can then become vulnerable to censorship resistance and other bad things. Further considerations around systems like this could be locks becoming potentially parasitic toward users. For example, the scenario where the solver withholds fulfilment of the execution in order to maximise value from the market (MEV).
So is intent-centric chain abstraction even good for the industry? We think “yes”.
Our more optimistic view is that the space can find solutions to avoid a small number of parties controlling crypto order flow or at least limit their ability to censor transactions and become parasitic to users. Infrastructure that lowers the barriers to entry for solving is clearly very important - and necessary. For example, Khalani is building a network where multiple independent solvers can collaborate, compete, and specialize; and Everclear are simplifying intent settlement across chains. More infrastructure facilitating, simplifying, and lowering barriers to entry for solving networks can avoid a dystopic crypto economy under the tyranny of a solver cabal.
Chain Abstraction via MPC
Near is the most prominent example of a project tackling chain abstraction via an MPC network, allowing users to sign transactions across multiple blockchains using a single Near account—without needing separate keys for each chain.
Near's Chain Signatures launched on mainnet on August 8, 2024, supporting ECDSA chains like Ethereum and Bitcoin (with EdDSA support for chains such as TON and Solana expected later this year). Currently processing about 10 TPS, Near aims to boost throughput to around 300 TPS by year-end, with further improvements planned through sharding. The key risk with MPC is its potential for collusion. Initially, there will be 8 nodes in the MPC network (which could, hypothetically, collude easily), but Near aims to gradually increase this to over 40 nodes. In MPC systems, the cost and time for computation increase with the size of the node set. However, a well-designed and distributed network of nodes can significantly mitigate collusion risks. While these risks are real, various well-designed and implemented mitigation strategies (including hardware security solutions like TEEs) can greatly reduce them. To start, all signature requests are initiated and fulfilled on-chain, providing a clear audit trail for rewards and slashing. Near's significant challenge will be scaling their MPC network massively while minimizing the collusion risk to near-zero. MPC is notoriously complex, but projects like dWallet have designed scalable and non-collusive MPC systems, albeit with different trade-offs.
Extensible v Unified Accounts
While our Metamask or Rabby EOAs give us a multi-chain experience - with the same address across a growing number of EVM-compatible chains - it is disjointed and fragmented. These can be referred to as extensible accounts, but extensible accounts can’t make transactions that aggregate your funds across these chains. The same applies to Near’s multi-chain accounts. This is because the accounts aren’t unified - they are fragmented. Unified accounts is a concept where funds are aggregated across all chains, allowing you to buy an NFT on Solana with a single click using assets spread across chains like Optimism, Base, and Bitcoin. This is key to a chain abstracted experience, and Near can work with other chain abstraction providers to achieve account unification experience. For example, OneBalance accounts (credible commitment machines) could take the form of an MPC network like Near.
Key Distribution Channels as Kingmakers
Integrating with key consumer access points is key to winning.
Most users currently access the on-chain world with EOA wallets; and it’s pretty clear they’re extremely conservative when it comes to changing accounts. Despite Metamask arguably having one of the worst wallet experiences today, it is still by far the most used wallet even though switching costs are minimal. A key GTM strategy for chain abstraction solutions will be integrating with existing wallets / consumer access points that have already solved for distribution. Projects will need to demonstrate themselves secure and sufficiently valuable to users for them to be integrated. But implementation isn’t straightforward. For example, it will be more difficult for an EOA wallet provider (e.g., Metamask, Rabby) to implement a OneBalance credible account and a smart contract account (e.g. Magic-Spend++, Particle) due to the fact that these account types do not access a seed phrase. However, there is progress on this front as Ethereum appears to be finally accelerating towards account abstraction. For example, EIP-7702 (scheduled for Q1 2025) will essentially enable EOAs to behave like smart contract accounts, in which the EOA can temporarily have the smart contract code for a given transaction. This has the effect of giving the EOA the ability to execute smart contract code. Orb Labs aim to create chain abstraction middleware that is compatible with all account types (incl. EOAs), which could stand to be a notable advantage if it can ship its intended product and prove itself to be performant and robust.
But it’s not as simple as whoever Metamask picks will be a likely winner. Despite the deafening echo chamber we exist in, crypto today remains an extremely niche industry, and the wallet experience leaves a lot to be desired. It’s pretty clear that the Future of France isn’t everyone having a Metamask wallet. The wallet experience must be abstracted away. This is already being seen with projects like Infinex, and its clear that mass adoption will come from these abstracted consumer facing entry points rather than EOA wallets as they exist today. It is entirely plausible that on a relative basis the existing wallet kings become largely irrelevant. However, in the intervening period, standards for chain abstraction that get adopted (with wallets being key distributors) will be in good stead. Optimizing for ease-of-integration will be a key competitive advantage to accommodate the masses that (hopefully) onboard to crypto in a totally wallet-abstracted way.
Ethereum Upgrade Dependencies
As mentioned, many chain abstraction solutions benefit from and require Ethereum to continue (and accelerate) towards account abstraction and the acceptance of smart wallets as first class citizens. For example, Magic-Spend++ a proposal by team Socket at present operates as a smart contract account. At present, not all applications have ERC-1271 enabled which enables SCAs to interact with them. Smart contract wallet infrastructure like ERC-4337 is in its relative infancy and is by no means a silver bullet; with compatibility and potential centralisation issues. Users will also need to trust in the robustness of the smart contract code and the safe functioning of the system. In addition, SCAs are typically more expensive than EOAs although this may not be an issue on low cost chains. Ethereum now appears to be accelerating towards account abstraction, with EIP-7702 expected to be implemented in the Pectra upgrade in Q4 of this year or Q1 2025. To dig into EIP-7702 in greater depth, check out this post here by Otim Labs.
Final Thoughts
Beyond solvers and tech, a monumental BD effort is required to get all the ecosystem actors committed to the same vision. The CAKE framework shows the number of actors and components to the transaction supply chain that need to coordinate. The solutions discussed above will have a strong dependency on landing integrations that enable them to reach users. An alternative perspective on widespread crypto adoption envisions the most popular applications functioning as largely siloed ecosystems. For example, a vast global payments network—with the bulk of transactions occurring within these individual chains rather than across multiple chains. While this could easily be true, if one is bullish on crypto then the market for multi-chain interactions will significantly increase regardless.
By 0xomok
Bodhi Ventures
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