Author | GaryMa
With the rapid development of blockchain technology, more and more projects are emerging across multiple chains. Whether it's main chains, application-specific chains, or Layer-2 expansion solutions, the diversity and complexity of the blockchain ecosystem are continually increasing. Although the multi-chain system offers users and developers greater flexibility and options, it also brings significant challenges, including liquidity dispersion, complexity of cross-chain operations, and insufficient user experience. This makes users face more complex operational processes in the Web3 world compared to Web2.
Chain Abstraction emerged as a key pathway to address this issue. By abstracting the differences in underlying blockchains, users can interact seamlessly without worrying about the details of the underlying blockchain, and chain abstraction technology can greatly simplify the user experience, enabling them to interact across different chains. As one of the innovative representatives of chain abstraction, XION is committed to providing a wallet-free experience through generalized abstraction technology, further lowering the barriers for users to engage with Web3 applications. By abstracting accounts, signatures, gas fees, and interoperability, the user experience (UX) is enhanced at the protocol level. In this process, XION eliminates the barriers for new users to enter while avoiding the fragmentation challenges faced by developers in other ecosystems. By abstracting interoperability, XION can also extend the seamless user experience to all integrated public chains, supporting many novel use cases.
This article will delve into the background of the XION project, analyzing its innovations in blockchain user experience, including how generalized abstraction addresses user experience challenges and how interoperability abstraction enhances cross-chain experiences. Additionally, the article will dissect the token economics design of XION and interpret the competitive landscape of the chain abstraction arena.
Project Background
XION was founded by Burnt Banksy, whose name originates from a piece of Banksy artwork he burned called (Morons). Through this event, Burnt Banksy showcased the concept of digital scarcity and the potential of blockchain technology. However, he also realized that ordinary blockchain users face many obstacles due to the poor experience brought about by technological complexity. To address this, he founded XION, aiming to create an L1 blockchain tailored for mainstream audiences, enabling true digital ownership through user-friendly dApps.
XION has received support from prominent investment institutions across multiple funding rounds:
On May 6, 2021, XION completed its seed funding round, raising $3 million, with investors including Injective, Multicoin Capital, Mechanism Capital, Tribe Capital, Solana Foundation, and Alameda Research.
On January 17, 2022, XION completed its Series A funding round, raising $8 million, with major investors including Animoca Brands, Multicoin Capital, Mechanism Capital, Alliance DAO, Sonic, DeFiance Capital, Spartan Group, HashKey Capital, Figment Capital, Tribe Capital, Play Ventures, Valory, Terraform Labs, and Alameda Research.
On October 5, 2023, XION secured strategic financing from Circle Ventures, with the specific amount yet to be disclosed.
On April 1, 2024, XION completed a new round of financing amounting to $25 million, with investors including Multicoin Capital, Animoca Brands, Arrington Capital, Sfermion, and Spartan Group.
These funding rounds demonstrate the widespread attention and support XION has received in the blockchain and cryptocurrency fields, laying a solid capital foundation for its further development.
Universal Abstraction: Encapsulating complexity to create a user-friendly L1 experience
The so-called complex blockchain operation thresholds are often concentrated in areas such as account management, signing, payments, and gas fees. Traditional blockchain systems rely on private key management and address generation, use private keys for transaction signing, and each public chain requires its native token for gas payment, with fees that can vary greatly. Additionally, the price of cryptocurrency is highly volatile, and if products and services are priced in cryptocurrency, the fluctuating prices can lead to a less friendly user experience. All of these factors present obstacles for newcomers from outside the industry.
To eliminate the complexities of encryption that users face when using blockchain, XION proposed the 'Universal Abstraction' solution, implementing universal abstraction directly at the protocol level, abstracting encryption terms such as accounts, signatures, gas, interoperability, pricing, devices, and payments.
Account and Signature Abstraction
XION adopts a 'Meta Account' system, allowing users to log in through familiar methods (such as email or biometrics) and achieve secure access across devices without handling complex private keys. Meta Accounts support multiple login methods (e.g., social accounts, Face ID) and integrate flexible permission management features, such as private key rotation and custom rules, enhancing account security.
Gas Abstraction
XION has fully abstracted gas fees, allowing users to pay transaction fees with any token. XION will automatically convert these fees into platform tokens, achieving a transparent fee settlement process for users. Additionally, through the PlatformSend mechanism and FeeGrant feature, XION allows developers to pay transaction fees on behalf of users, reducing the cost burden for users during blockchain operations.
Device Abstraction
XION eliminates the need for users to store and manage private keys, which also indirectly removes the security risks and complexities traditionally encountered by users when using their accounts across multiple devices. XION users can seamlessly interact with their meta accounts across various devices (including PCs, smartphones, or tablets). This diversified device architecture significantly simplifies the user experience, facilitating the mass adoption of new users by reducing entry barriers and increasing the usability of all applications accessed through XION.
When interacting with applications through XION, users will see multiple login methods, including email, social accounts, Face ID, or they can log in using Web3 wallets (such as Keplr or MetaMask). Therefore, XION can meet the needs of all audiences while retaining a very simple user experience for non-crypto users.
Pricing and Payment Abstraction
XION's abstraction makes it a blockchain supporting payments in stablecoins like USDC. Users can make payments directly using stablecoins without worrying about token volatility or going through complex conversions. This design enhances user experience, making blockchain applications more aligned with mainstream payment habits, facilitating promotion to a broader user base.
Through the design of these abstraction layers, XION provides users with an intuitive experience close to traditional applications, significantly lowering the entry barrier for users to Web3.
Interoperability Abstraction: Addressing the fragmentation dilemma of multi-chain liquidity
In addition to allowing users to enjoy smooth blockchain operations on the current chain, XION remains committed to cross-chain interoperability abstraction. XION primarily achieves this through 'Package Forwarding Middleware', enabling users to operate on any other public chain from the control chain (e.g., XION). With the integration of this middleware and the universal abstraction framework, XION provides a simplified protocol-level interface. As shown in the diagram, XION allows users to seamlessly execute operations on any chain integrated with XION, providing a consistent and smooth experience.
XION's interoperability abstraction effectively addresses the issue of user account fragmentation in the current multi-chain environment. Users can link accounts from different blockchains to their XION meta account, thereby managing all assets across chains with a 'central account'.
To achieve this goal, XION employs various symmetric communication methods to build reliable, orderly, and authenticated communication channels between different blockchains. This interoperability abstraction opens up possibilities for new cross-chain application innovations, allowing multi-chain users to enjoy a seamless, integrated operational experience.
Token Economics Design
XION is a proof-of-stake (PoS) blockchain based on the Cosmos SDK, with its native token $XION having multiple uses, granting the ecosystem broader utility:
Network fees: Transactions on the XION network require payment of fees, which are innovatively used to offset the number of new tokens minted. As network usage increases, this mechanism could even achieve token deflation.
Proof-of-stake security: As a PoS network, XION relies on validators to maintain the network's security. $XION holders can delegate tokens to validators or stake tokens to run their own validator nodes. Additionally, XION's inflation is calculated solely based on staked tokens, significantly reducing the overall inflation rate of the tokens and ensuring the sustainability of the network economy.
Governance: $XION holders can participate in network governance through proposals and voting, influencing significant decisions within the ecosystem.
Transaction medium and collateral: In the XION ecosystem, $XION can be used as native liquidity and collateral, supporting peer-to-peer transactions between different applications and accounts within the ecosystem.
Among them, the mechanisms of 'network fee offset against new inflation tokens' and 'only staked tokens count towards inflation' in the first two functionalities represent XION's innovative adjustments to optimize inflation. In recent years, many new public chains and their ecosystems have attempted to attract validators and stakers through abnormally high staking rewards. However, this approach often leads to malignant inflation, causing tokens to depreciate rapidly, ultimately affecting the network's stability and security. Therefore, XION has made the following two important adjustments by extending the Cosmos mint module to alleviate inflation:
Fee Offset Inflation: XION uses fees collected in each block to offset the number of new tokens minted. For instance, if the inflation requirement is 1000 tokens and the block fees accumulated to 600 tokens, only 400 new tokens need to be minted, thereby reducing the pressure on total supply increases. As user activity increases, this mechanism is expected to further alleviate inflation pressures and may even lead to deflationary effects.
Only staked tokens count towards inflation: Unlike the inflation model of Cosmos Hub, XION calculates inflation solely based on staked tokens. This approach ensures a more stable annual percentage yield (APY) for stakers, unaffected by fluctuations in the quantity of unstaked tokens, effectively attracting participants focused on long-term returns and reducing short-term arbitrage behavior.
Furthermore, XION recently announced that it will use the USDC stablecoin issued by Circle as its primary trading currency, becoming the first blockchain to be priced in USDC. All products built on XION will be priced in USDC, and all transactions will be free of gas fees. This design significantly reduces market volatility risks, providing users with a more predictable and secure trading method, thereby reducing users' concerns about cryptocurrency market fluctuations and simplifying the trading experience, making XION easier to accept and use in the mainstream market.
Competitive Landscape of Chain Abstraction
Chain abstraction aims to address two key issues in the blockchain industry. First, the user experience is not user-friendly, with a high understanding threshold for using blockchain-related services. Concepts like externally owned accounts (EOA) wallets and gas represent barriers that discourage new users, making seamless interaction akin to Web2 applications difficult to achieve. Secondly, the current multi-chain situation inevitably leads to the fragmentation of liquidity and users, forming isolated ecosystems.
Of course, different projects have varying interpretations and entry points regarding chain abstraction.
If we consider simplifying user operations and encapsulating operational difficulty, projects like CoWSwap, UniswapX, and even smart contract wallets can be included in the chain abstraction category.
From the perspective of cross-chain interoperability, early universal interoperability protocols like Cosmos and Polkadot can also be considered track OGs, and more recent ones include cross-chain communication protocols such as Layerzero, Wormhole, and Axelar, as well as interoperability protocols within specific ecosystems, such as OP superchain.
While these solutions can still fall within the chain abstraction concept, they are limited by the developmental stage of their respective industries, and the problems they aim to solve are limited. At the current stage, market participants are generally able to effectively integrate solutions addressing the two key issues of user experience and interoperability, with a focus on either user experience or interoperability. Here, we mainly select Particle Network, NEAR, and ZetaChain for comparison with XION.
NEAR Protocol: A chain abstraction solution centered on account aggregation and multi-chain signing
NEAR, as a sharded proof-of-stake Layer 1 blockchain, has three core abstract functionalities:
Account Aggregation: Allows users to consolidate multiple operations within one account, simplifying the management needs for cross-chain, wallets, and gas fees. Moreover, NEAR supports user-friendly account names (e.g., wu.near), providing a more intuitive account management approach compared to traditional blockchains. NEAR's FastAuth system further lowers the entry barrier for users, allowing email registration and integrating biometrics to replace complex private key management, significantly enhancing the smoothness of user experience.
Multi-chain signing support: Through the NEAR MPC (multi-party computation) network, NEAR supports accounts having corresponding remote addresses on other chains and can sign transactions and perform operations from these addresses. The signing nodes in the MPC network do not rely on explicit private keys but use threshold signature protocols, supporting key sharing and dynamic node changes, thereby achieving continuous access in a cross-chain environment.
Meta Transactions (NEP-366): NEAR implements meta transactions through NEP-366, allowing users to execute transactions without needing to hold gas tokens in advance.
ZetaChain: Achieving cross-chain asset management through Omnichain Smart Contracts
ZetaChain focuses on cross-chain asset and transaction management, solving asset flow and contract operation issues between different chains through Omnichain Smart Contracts. Users can directly invoke smart contracts from other chains on ZetaChain, making cross-chain transactions and asset management more convenient.
In the ZetaChain 2.0 upgrade plan, the officials also proposed a series of potential upgrades to achieve the first universal Ethereum virtual machine (EVM) and full chain abstraction, including full-chain accounts that enable contracts on ZetaChain to interact with native contracts on connected chains.
Particle Network: Cross-chain accounts and liquidity integration based on Universal Accounts
Particle Network enables users to manage assets across multiple blockchains with just one account through Universal Accounts and Universal Gas features, avoiding fragmentation of accounts and balances across chains. Additionally, Universal Gas allows users to pay cross-chain transaction fees with any supported token, significantly reducing the operational difficulty of gas fees for users.
Overall, Particle's solution focuses on multi-chain interoperability and liquidity integration, with Universal Accounts acting like a multi-chain wallet account, hiding the complex concepts of cross-chain and other intricate operations, thereby optimizing the user experience.
Based on existing documentation, Particle Network's L1 focuses more on serving as a coordination and settlement layer for cross-chain transactions, acting as a middleware for cross-chain operations, rather than like NEAR, XION, and other ecosystem L1s that host diverse application development and ecosystem expansion. This middleware solution allows Particle Network to concentrate on enhancing multi-chain accessibility and interoperability, rather than building a complete ecosystem, thus significantly differentiating its positioning from other ecosystem L1 public chains.
Differentiation of XION
When comparing XION with the aforementioned three projects, we can clearly sense some differences between XION and them: XION places greater emphasis on its user experience as an L1 blockchain, and it can even be said to be an L1 blockchain specifically designed to address the challenges of popularizing Web3 applications. Its goal is to eliminate the technical barriers in user experience, allowing non-technical users to directly engage with Web3 applications. Through generalized abstraction, XION achieves the abstraction of accounts, signatures, fees, and interoperability at the protocol layer, thereby alleviating users from needing to understand complex concepts like private keys and gas fees.
XION is positioned as an L1 public chain designed specifically for consumers. In addition to current users in the crypto industry, XION's goal is to attract a large number of newcomers from outside the industry. Therefore, its ecosystem will not solely focus on traditional DeFi financial applications, but will encompass multiple fields such as consumption, gaming, social finance, crowdfunding, and payments, achieving new use cases that were previously difficult to accomplish. Among them, the EarnOS application built on XION is a typical example. EarnOS utilizes blockchain technology to disrupt the trillion-dollar advertising market. The beta version is set to launch in Q2 2024, having secured over $12 million in committed spending, engaged over 500 creators, and established partnerships with more than 40 global brands and institutions. After the beta product launch, EarnOS collaborated with well-known brands like UberEats, Baskin Robbins, Sunglass Hut, and The North Face, achieving over 950,000 completed tasks.
Summary
As a seed player in the chain abstraction arena, XION has achieved substantial breakthroughs in account management, signing, payment, and interoperability through its universal abstraction technology that simplifies user experience. The design goal of XION is to break down the high barriers of blockchain user experience, providing a smooth experience akin to Web2, thus attracting existing Web3 users while also paving the way for mainstream users to join the Web3 ecosystem.
However, the chain abstraction arena, while rapidly advancing, also faces risks dominated by infrastructure-related 'air-based construction' and challenges of unclear market demand. Currently, most chain abstraction projects focus on building universal protocols, but there exists a gap in practicality and market matching, and even compatibility demands have triggered new fragmentation phenomena. Moreover, chain abstraction technology may exacerbate resource imbalances between mainstream public chains and long-tail public chains, affecting the development of decentralized ecosystems. Therefore, while XION leads innovations in chain abstraction, it must continue to explore how to balance user experience, market demand, and technological expansion in the future to solidify its long-term value in the chain abstraction arena. All of this also points to a new development direction for the chain abstraction field: not only enhancing technological advancement but also achieving the true popularization of blockchain around user needs.
