introduce
In the context of Ethereum's Rollup-centric roadmap, the number of blockchains is exploding, and the proliferation of Rollup and application chains validates the theory of multi-chains. While multi-chain scaling has its advantages, it also creates a silo effect, causing liquidity and users to be dispersed across multiple environments. This makes users and developers face more difficulties when using blockchain.
Source: Thanefield Research
For example, a typical user would encounter the following challenges when operating on three blockchains. First, they need to find a safe, affordable and fast bridge to transfer assets. If a bridge is poorly designed, users may pay exorbitant fees or the asset may be frozen for a long time during the transfer process.
In addition, users will need enough native tokens to pay transaction fees on each blockchain. This adds additional complications if the user is using a non-native asset (such as a stablecoin). They also need to store and manage each mnemonic phrase separately, which further increases friction and security risks.
Likewise, developers face increased complexity in ensuring inter-chain interoperability, effectively managing cross-chain liquidity, and integrating various infrastructure layers, which significantly increases development time.
Without significant user experience improvements like chain abstraction solutions, these complexities will only increase as the number of blockchains and rollups increases.
We believe chain abstraction is the key to solving these challenges. By simplifying the user and developer experience, it unifies decentralized environments and makes blockchain more accessible and efficient for billions of people around the world. Based on this idea, this article will explore various projects in the abstraction industry that are helping to realize this vision.
High level concept of chain abstraction
Conceptually, the chain abstraction aims to simplify the complexities of financial interactions with on-chain, hiding these complexities from facing these problems from end users and developers.
From a developer perspective: The goal of the chain abstraction is to enable developers to quickly and securely build chain-agnostic applications that run seamlessly on all Rollups without worrying about underlying execution complexities.
From a user perspective: The vision of the chain abstraction is to enable users to interact with decentralized applications without having to understand the cryptographic concepts behind them. The aim is to remove all technical complexity and provide an intuitive user experience.
A common analogy is how we interact with computer applications today. Although the Internet is ubiquitous in daily life, most users do not understand the technical details such as HTTP and TCP/IP. Likewise, when building web applications, most developers don't need a deep understanding of communication protocols because the browser environment already abstracts much of the underlying work.
However, for today’s crypto users, funds on one chain cannot access applications on another chain without clear cross-chain access. Likewise, which blockchain a developer chooses to deploy on remains significant.
Therefore, the current state of encryption is similar to the early days of consumer computing. Chain abstraction will be a key force in advancing it to a seamless user experience on the modern web.
Eliminating existing user experience friction and simplifying the interaction between end users and developers with on-chain applications will bring a new wave of growth for cryptocurrencies. This will drive mass adoption and expand the user base beyond the currently siled Web3 native community to reach billions of users around the world.
Early signs of this vision are evident in Telegram, which has 900 million users who can easily join cryptocurrencies through a familiar interface. Similarly, Base users can set up smart wallets using cryptographic keys, avoiding the need to securely store a 12-word mnemonic phrase or pay gas fees because their transactions can be sponsored by Coinbase.
While both ecosystems are still in their early stages, their progress shows that this vision is closer to reality than it seems and is entirely achievable.
Components of the chain abstraction
Source: Thanefield Research
Achieving this high level of abstraction requires breakthroughs at multiple infrastructure levels. Below we'll first break down the building blocks of the abstraction stack, then dive into each category and highlight the important items within it and their design choices.
Source: Thanefield Research
Account abstraction
Account Abstraction (AA) introduces the concept of smart contract wallet in order to improve the blockchain user experience. It aims to simplify the complexity of using blockchain wallets for users, such as no longer needing to manage public and private key pairs. The concept of AA emerged in the Ethereum community as early as 2016, as core Ethereum developers were dissatisfied with the limitations of existing wallets. AA is now part of the Ethereum roadmap, with the ultimate goal of achieving fully native AA. Although the implementation may differ on different blockchains, we will mainly discuss the account abstraction in the context of Ethereum and EVM.
On most EVM-compatible chains, there are two types of accounts: externally owned accounts (EOAs) and smart contract accounts. EOAs are traditional wallets such as those accessed through MetaMask. They are controlled by private keys and are used to sign messages and interact with the blockchain. EOAs have several limitations that can significantly impact the average user's Web3 experience, including the ability to manage private keys, the need to pay gas fees in native tokens, and the inability to perform atomic transactions.
The smart contract wallet is fully programmable and addresses these user experience issues by introducing Web2 design principles such as a social login system and account recovery. The method of implementing smart wallet functionality depends on the design of the blockchain and the infrastructure on top of it. In Ethereum and most EVM chains, the network currently does not support native account abstraction, meaning that only EOAs can sign messages.
Currently, two smart wallet standards have become widely adopted and deployed to millions of accounts: Safe, a pioneer in this industry, and ERC-4337, a relatively new standard that relies on intent and additional off-chain infrastructure. Upcoming Pectra upgrades will also include EIP-7702, which advances the existing account abstraction architecture and is nearing the final stage when EOAs will be able to transition to smart contract accounts.
Safe
A pioneer in the account abstraction industry and the most commonly used smart wallet provider, Safe (formerly Gnosis Safe) began as a multi-signature wallet. Today, it has evolved into a comprehensive smart wallet solution and an important part of the Ethereum and EVM infrastructure. Safe currently has nearly 10 million wallets deployed and protects approximately $90 billion in assets across various EVM chains and rollups.
Source: Thanefield Research
Safe adopts a modular architecture. Core components are integrated into the battle-tested Safe{Core} stack, while Safe modules introduce custom functionality and enhance overall functionality. This modular approach is similar to the hooks used in Uniswap v4. The Safe module ensures strong security at the core layer and simplifies customization and integration for developers. Developers can create modules that meet specific needs or integrate existing modules. For example, users can add or remove modules that facilitate password key authentication or balance management. Additionally, Safe includes an ERC-4337 module, making it compatible with this newer account abstraction standard and its associated infrastructure.
ERC-4337
ERC-4337 is the standard currently used on Ethereum and most EVM chains, and was implemented on the Ethereum mainnet in March 2023. It serves as an intermediate step in the development of account abstraction and can be implemented without modifications to the consensus layer protocol. Instead, it leverages a concept called pseudo-transactions (user actions) that are intent-based and combined with on-chain and off-chain infrastructure to facilitate and execute these actions.
ERC-4337 provides significant improvements to the user experience:
Source: Thanefield Research
ERC-4337 Transaction Process
ERC-4337 introduces a new transaction flow without changing the consensus layer. This approach incorporates a number of infrastructure components that differentiate it from the traditional EOA transaction cycle. The main difference lies in the steps before the transaction is signed, while the process after remains the same. Key elements include UserOps, paymasters, alt mempools, bundlers, and EntryPoint contracts.
In the ERC-4337 transaction cycle, users express their intention to perform specific operations on the chain through UserOp instead of directly signing transactions. UserOps are managed in an alternative memory pool (Alt mempool), which is dedicated to UserOps and is different from the public memory pool. Bundlers are similar to block builders, monitoring alternative mempools and selecting UserOps for inclusion in their bundles based on priority fees. These packages are signed by the packager and submitted to the EntryPoint contract, a global contract on Ethereum dedicated to all ERC-4337 operations, for execution. If necessary, Paymasters can use ERC-20 tokens to sponsor transactions or pay for gas. Afterwards, the transaction proceeds as usual and is executed on-chain.
To see a visual representation of this process, this diagram from Blocknative is very helpful:
Source: Thanefield Research
ERC-4337 Adoption Status
Since its deployment in 2023, ERC-4337 has seen widespread adoption across Layer2 solutions and sidechains, particularly on Base and Polygon. To date, more than 5.5 million ERC-4337 wallets have been created, with an average of approximately 800,000 successful user operations per week.
Source: Thanefield Research
Coinbase is at the forefront of driving the development and adoption of smart wallets. On June 5, Coinbase launched Coinbase Smart Wallet, a new product based on the ERC-4337 standard. This smart wallet offers several notable features, including cryptographic key authentication, sponsored transactions for selected DApps on Base, and multi-account ownership functionality. As Coinbase strategically focuses on bringing new users to the Base platform, smart wallets are likely to quickly become the dominant wallet type on Base. Biconomy, Pimlico, and Alchemy are also emerging in providing key components of ERC-4337 infrastructure, especially on the packager and paymaster side. The table below shows dominance in terms of number of user actions performed and paid for.
Source: Thanefield Research
Despite these encouraging figures, ERC-4337 wallets have yet to achieve widespread adoption on the Ethereum mainnet, with only two to three hundred active wallets per week. Safe wallets remain the main standard for smart wallets on Ethereum. One of the main limitations of the ERC-4337 design is that it does not allow existing EOA wallets to be converted into smart wallets. Additionally, the relatively high gas fees on the Ethereum mainnet make certain features, such as sponsored transactions, economically unfeasible.
EIP-7702
Following ERC-4337, EIP-7702 takes an important step towards fully native account abstraction. The proposal, drafted by Vitalik Buterin, quickly emerged as a response to the controversial EIP-3074, which had issues with compatibility with future EIPs in the Ethereum Account Abstraction (AA) roadmap. Unlike ERC-4337, which operates at the infrastructure level, EIP-7702 proposes changes directly at the protocol level. The proposal is expected to be included in an upcoming Pectra upgrade, sometime between Q4 2024 and Q1 2025.
EIP-7702 is considered one of the most important user experience improvement proposals in the history of Ethereum. It enhances the ERC-4337 architecture by introducing key features such as transaction batching, gas sponsorship, and temporary permissions for EOAs. Specifically, it introduces a new type of transaction that allows EOAs to temporarily adopt smart contract code during the transaction and revert to the original state after the transaction is completed. The proposal ensures forward compatibility with existing ERC-4337 implementations and is consistent with the long-term goals of the Ethereum AA roadmap.
Case Study: Worldcoin
Worldcoin is developing a protocol called "Human Authentication" that is designed to enable applications to verify that users are real humans and not AI-driven bots. This verification is achieved through World ID, a digital passport issued after the user scans their iris using an Orbs (a specialized device). Once acquired, World ID can serve as a universal authentication tool for a variety of apps and services. In addition to identity verification, users receive bi-weekly $WLD subsidies, which are distributed on-chain.
Worldcoin has successfully issued more than 4.5 million World IDs, allowing users to verify their identities without any prior knowledge of blockchain technology. When registering, World App will automatically generate a Safe smart wallet on the Optimism network for each user in the background. This process completely abstracts the blockchain layer, providing a user experience similar to Web2 features such as facial authentication, social recovery, and detailed account management.
Source: Thanefield Research
Both $WLD grants and World IDs are stored in a self-hosted manner, ensuring users retain control of their digital assets. In the case of Worldcoin, Safe-powered smart account users are able to enjoy a Web2-like user experience while reaping the benefits of self-hosting and financial incentives offered by cryptocurrencies. As a result, Web3 adoption has been impressive, with large numbers of first-time Web3 users joining the Web3 space.
Interoperability, Liquidity Aggregation and Intent
As Ethereum's Rollup-centric roadmap and application-specific chains gain popularity, the number of different blockchain platforms will increase rapidly. This expanded functionality emphasizes the need for robust cross-chain communication.
Some ecosystems have developed native interoperability solutions that provide standardized security models and achieve a certain level of chain abstraction within their domain. Notable examples include Polkadot’s shared security architecture and Cosmos’ IBC protocol. In the context of Rollup, synchronous cross-chain messaging and atomic cross-chain interactions can be achieved through the use of a shared sequencer, which is responsible for processing and ordering transactions and managing state. Optimism, for example, has adopted this approach for its Superchain vision.
Despite these advances, cross-chain communication, especially outside these established ecosystems, remains a significant challenge due to a lack of native interoperability and widespread standardization. In this section, we explore various architectural designs for interoperability in terms of chain abstractions. In addition, we will highlight leading projects in each vertical industry to show how they are promoting the development of blockchain connectivity.
messaging system
The classic approach to blockchain interoperability is to leverage a common messaging system, often relying on a set of external validators. In this design, users specify the desired results, and off-chain entities construct precise execution paths across multiple chains. This path is executed by a coordinated set of smart contracts and relays. However, achieving atomic execution across multiple chains is inherently challenging as each chain is constantly generating blocks and changing its state. Even with a strong data availability layer to maintain the state of all integrated chains, there are significant complexities in navigating a route through multiple chains.
The design and architecture of messaging systems vary widely. They can be modular or monolithic, permissioned or permissionless, support various chains, and operate based on minting and burning mechanisms or liquidity pools. Developers face numerous trade-offs when choosing messaging systems to integrate when creating a chain abstraction stack, each providing different levels of security assurances and user experience. This diversity in design and functionality may hinder the adoption of common standards, leading to further fragmentation of the industry.
Currently, cross-chain aggregators such as Li.Fi and Socket use simple messaging systems. These platforms integrate with numerous bridges and DEXs to simulate suggested routes for users. Once a route is chosen, it will be executed in strict order.
Intent-based design
In intent-based interoperability design, users only need to express the desired results without specifying a specific execution path like traditional blockchain transactions. These intentions are auctioned to Solvers (off-chain entities) who bid for the right to execute these intentions. The specific solvers intended are not important; they can be a partial or complete match, or be populated from the Solvers' own inventory. In this system, users specify outcomes, and experts compete to provide the best execution plan.
A key advantage of this approach, especially in the context of cross-chain asset transfers, is that it deals directly with native tokens rather than IOUs, thus providing native security guarantees and enhancing overall security. Currently, intent-based applications mainly exist in bridges (such as Across and Synapse) and decentralized exchanges (such as Cow Swap, Uniswap X, and 1inch Fusion).
Recently, Across and Uniswap collaborated to propose the cross-chain intent standard ERC-7683, which is the first attempt to create a unified architecture for intent-based systems to standardize cross-chain operations. Other notable developments include the recent release of Socket with a focus on cross-chain modular order flow, and the announcement of intent-based primitives by Everclear (formerly Connext), managed using a solver network and EigenLayer-based Optimistic Rollup Liquidity between blockchains.
However, implementing intent-based solutions comes with significant challenges. First, users need access to a cross-chain account—a smart account that manages keys in the background and enables cross-chain transactions. In addition, standardization is a major obstacle; currently, each intent-based application must develop its infrastructure independently, including intent aggregation, matching, and auction models. This lack of standardization leads to fragmentation and inefficiency throughout the ecosystem.
Chain abstraction is a concept that has no technical specification, so it can be implemented from many different perspectives. In our opinion, some of the most interesting efforts include Anoma’s intent-centric architecture, Polygon’s aggregation layer, and NEAR’s full-stack chain abstraction solution. We’ll explore these attempts in depth.
Case Study: Anoma
Anoma is a privacy-focused, intent-focused protocol designed to enable decentralized counterparty discovery, resolution, and atomic multi-chain settlement. This platform is architecturally unique: Unlike traditional blockchain systems that require users to specify execution processes, Anoma only requires users to define the final states they are willing to accept, which are expressed through programmatic commitments called intentions. Anoma is unique in that these intentions are composable and can be addressed collectively, regardless of their origin.
Anoma’s transaction structure includes the following steps:
Universal Intent: Anoma’s architecture can handle any intent and is not limited to specific applications or special cases. This flexibility allows for a wide range of applications and interactions.
Counterparty discovery: This is a decentralized process where individual intents are propagated across the network, making them accessible to potential resolvers.
Resolve: In this stage, resolvers collaborate to combine and compute intents to find an efficient solution, i.e. a transaction that can be executed and settled across chains.
Settlement: The solution is verified and finalized on-chain. Anoma’s intent-centric architecture supports settlement on its own sovereign Layer1 chain, other Layer1 chains, or any Rollup that settles on Layer1.
Source: Thanefield Research
Case Study: Polygon AggLayer
Polygon's AggLayer is a system based on zero-knowledge (ZK) proofs, designed to solve the interoperability and fragmentation issues between different Rollups and Layer1. This approach provides unified cryptographic security and atomic composability by aggregating the ZK proofs of all participating chains.
AggLayer brings the connectivity environment to Ethereum through a unified cross-chain contract. Each connected chain maintains a copy of this unified cross-chain root, enabling seamless cross-chain transactions. In addition, AggLayer features a message protocol bridge that establishes message queues for each chain, allowing them to maintain local outbound message queues protected by ZK proofs. This eliminates the need to lock tokens on one chain to interact with another chain. By publishing ZK proofs of events across multiple chains on Ethereum, AggLayer enables a seamless user experience similar to a single ecosystem.
Source: Thanefield Research
Polygon CDK allows projects to launch ZK-based interconnected Layer2 or connect existing Layer1 to AggLayer, maintaining liquidity, users and state. The first component of AggLayer went live in February 2024, marking a major step for Polygon in creating an aggregated network of sovereign chains.
Case Study: NEAR Chain Abstraction Stack
NEAR is developing a comprehensive chain abstraction stack for its blockchain and its surrounding ecosystem. The stack includes the following components:
Security Aggregation Stack: This part includes NEAR DA (Data Availability), which collects the status of the supporting chain. Additionally, it integrates zkWASM, developed in partnership with Polygon, and takes advantage of the fast finality provided by EigenLayer to speed up transaction processing.
Account Aggregation: Based on multi-party computation (MPC), this component enables NEAR accounts to interact with external blockchains by requesting signature verification. The private keys of these third-party chain accounts are managed by the NEAR network’s verifiers as a decentralized signing service. This setup effectively ties accounts across different networks into a central NEAR "master account" that can securely manage all associated accounts.
Intent layer: This layer contains relayers that execute complex cross-chain intentions, facilitating more complex transactions and interactions across blockchain networks.
Application layer: This layer integrates various Web3 services into a user-friendly application, simplifying access and interaction with decentralized technologies.
A visual representation of NEAR's account aggregation architecture is shown below:
Source: Thanefield Research
Application layer
Looking from the back to the front, the application layer is the final stage of chain abstraction, where the infrastructure is integrated and presented consistently to developers and users.
In an ideal world, developers can easily build protocols that are not tied to a specific blockchain without having to integrate various modular layers, which can reduce a lot of work. This means developers don’t need to think about blockchain choice, management of cross-chain liquidity, and choice of data availability solutions.
From a user perspective, the ideal is for interacting with blockchain applications to be as smooth as using other digital services, without having to worry about encryption-related hassles such as gas fees and seed phrases. This requires simplifying the user interface, optimizing the onboarding process, and eliminating the need for users to understand the underlying technology, which are currently major obstacles. Removing these barriers will significantly improve user experience and promote mass adoption.
Before this vision can be realized, tools need to be developed to integrate disparate infrastructure into a unified interface. Therefore, we believe that chain abstraction is critical to a good user experience.
Whoever masters the front end has the most direct contact with users and can extract the greatest value from their order flow. While most attention and investment is currently focused on infrastructure, we believe the focus will shift to higher layers of the stack in the future.
in conclusion
There are currently nearly 300 chains with significant liquidity and on-chain expressivity, ranging from Layer1 to Layer3 solutions. This number is growing and shows no signs of slowing down.
Source: Thanefield Research
One of the main reasons driving this growth is the need for applications to have scalable functionality and sovereignty, which can be achieved by having their own execution stack and economy. For example, ENS, Aave, and dYdX recently launched their own Rollups. Open source technology like OP Stack also makes building, deploying and operating Rollup cheaper and easier, and Rollup-as-a-Service providers like Conduit and Caldera further reduce operational and technical overhead. Ironically, deploying a Rollup today is generally cheaper than transacting on Ethereum in the 2021 cycle.
For today's users, managing cryptocurrency is already often confusing and cumbersome, involving protecting seed phrases, signing multiple transactions for simple tasks, handling assets on different chains, crossing these assets across chains, and managing various Tasks such as finding the best price on a DEX. While Rollups offer the potential to expand functionality without sacrificing security and decentralization, their popularity increases complexity from both user and developer perspectives. Simply implementing it will only make the user experience worse.
Modern chain abstraction tools solve this problem, making cryptocurrencies simpler and more feasible for a wider audience. The winners in this industry will capture a lot of value due to the proximity of these tools to the users. As on-chain applications generate more and more revenue, the market will realize the importance of having a front-end.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Deep Wave TechFlow"
Original author: Thanefield Research
