Reporter: TechFlow
Interviewee: Pengyu, CEO of Particle Network
introduction
On June 20, Particle Network officially announced the completion of a $15 million Series A financing round, led by Spartan Group and Gumi Cryptos Capital, with participation from SevenX Ventures, Morningstar Ventures, Flow Traders, HashKey Capital and other companies.
Currently, Particle Network is still in the first phase of the testnet, and it is said that about 1.3 million Universal Accounts have been registered. The second phase of its testnet is expected to be launched this week, and the mainnet is scheduled to be launched in the third quarter of this year.
Different from the previous round, we found that in this round of financing, Particle Network seems to pay more attention to the description of the "chain abstraction" positioning. Compared with Particle, which started with wallet abstraction two years ago, "chain abstraction" seems to be a new leap. Not long ago, Particle Network also launched new products such as People's Launchpad.
With curiosity about Particle's latest narrative and the logic and thinking behind the different products launched by the team over the past few years, in this issue, we will have an in-depth discussion with Particle Network CEO Pengyu. From the inside out, we will understand the Particle Network team's own thinking on narrative, the industry, and its own products and business logic.
Key Points
Since its inception, Particle's mission has always been to empower developers and solve the ultimate problem of Web3 UX. Our products are divided into three stages: wallet abstraction, account abstraction, and chain abstraction.
The user experience at different interaction layers is multiplication rather than addition, and UX problems in any link will have a global impact.
The underlying logic of our products is: horizontal full-chain ecology, vertical full life cycle, and we have three product lines internally: main channel products, growth product line, and operation product line.
We are essentially a cryptocurrency project, not an Internet company. We understand that operating a cryptocurrency project is never about doing standardized business to a single group.
We design from the perspective of the entire life cycle of users and developers, and technically each stage fully utilizes the technological accumulation brought by the products of the previous stage.
Chain abstraction is not fabricated, but an inevitable product in the context of chain explosion.
Our chain is positioned as a supporter, coordinator, and enabler, not a new chain that competes with other chains. We do not compete with other chains from the perspective of TVL or developers, nor do we exacerbate the fragmentation of user liquidity.
A good token is a meme with utility.
The claim that the customer acquisition cost of Crypto projects is much lower than that of mobile Internet is incorrect, because forward debts also have costs, unless you default on paying them back.
The entire Web3 technology evolution process is a continuous cycle of long-term integration and division, and long-term division and integration. The sign of long-term integration and division is the rise of L2 and the popularity of modularization, and the core of long-term division and integration is chain abstraction.
I think the problem with current infrastructure is not that there are too many of them, but that the overall penetration rate is too low; the problem with applications is not that there are too few of them, but that the direction is wrong.
Thinking behind it: Accumulate technical advantages and continuously iterate along the entire life cycle of users and developers
TechFlow: First of all, congratulations on completing a new round of financing. I found that this round of financing seems to focus on the direction of "chain abstraction". We have also noticed that many reports related to chain abstraction will cover Particle for research and comparison, but we are more impressed by you as a wallet infrastructure project. Can you briefly talk about how you entered the field of chain abstraction from a wallet infrastructure project?
Pengyu: Particle’s mission since its inception has always been to empower developers and solve Web3 UX problems. The product has three stages: wallet abstraction, account abstraction, and chain abstraction.
Wallet abstraction: Reduce friction for users to enter the chain by providing developers with social login and wallet suites;
Account abstraction: Upgrade the underlying structure of users’ accounts on the chain to improve the efficiency of interaction with the chain;
Chain abstraction: Reduce the fragmented experience of accounts and liquidity caused by the multi-chain ecosystem.
They correspond to the entire life cycle of developers and users respectively: UX issues of entering the chain - single-chain interaction - multi-chain interaction.
Our understanding of UX optimization is that full-lifecycle UX optimization is meaningful. The user experience at different interaction layers is multiplication rather than addition, and UX problems at any link will have a global impact.
TechFlow: The second question may be relatively direct. As you mentioned just now, you have actually gone through several product iterations. At the same time, you have launched People's Alliance and People's Launchpad, and the BTC ecosystem seems to be very popular. From an outside perspective, you may feel that you are not focused and are suspected of being driven by popularity? Can you share the underlying logic of your various products?
Pengyu: The underlying logic of our product is: horizontally full-chain ecology and vertically full life cycle.
It’s not because we are not focused and are one-sidedly pursuing bigness and perfection, but because we are solving UX-related problems, which must be considered globally.
From the perspective of industry development, the trend of multi-chain and cross-chain is irreversible. Users will have accounts and liquidity in different ecosystems. How to make the user experience unified and efficient across various chain ecosystems throughout the entire life cycle is the ultimate problem of Web3 UX.
To give an inaccurate example, in the Internet age, you can't say that accessing Japanese websites is fast, but accessing American websites is slow, right? At the same time, you can't let you play a game and register an account smoothly, but get stuck when recharging.
Based on this idea, let’s return to your question. We have three product lines internally: main channel products, growth product line, and operation product line.
The main product line is our core product line, which is aimed at developers. From a product perspective, there are three stages that I mentioned in the previous question.
The growth product line mainly refers to the growth tool products such as People's Launchpad and People's Alliance that you just mentioned.
The operational product line includes our testnet platform Particle Pioneer, etc.
Why do we need to set up growth product lines and operational product lines in addition to the main product lines?
Because we are essentially a cryptocurrency project, not an Internet company, we understand that operating a cryptocurrency project is never about doing standardized business for a single group. You need to satisfy your customers, investors, community, and end users at the same time. Therefore, the growth product line is oriented to our community, and by keeping up with the hot assets in the market, we can keep the community excited and the frequency of interaction with us.
The operations product line is for our end users. Even though we are an infrastructure for developers, our product solutions are very innovative and unique. The operations product line helps us quickly let the industry know what unique products or features we provide.
As for why operations and growth are not done in an activity- and content-oriented way, this is determined by our team style. We like to solve each problem in a product-driven way and tend to get good results in a standardized + data-based way. Therefore, even in marketing activities, growth, etc., we will launch products that may seem complicated to achieve some of our goals. The result of this may be that it seems that we provide more products.
The popularity of the Bitcoin ecosystem is a result of our strategy of “horizontal full-chain ecosystem”. We are not only working on the Bitcoin ecosystem, we are also making great progress in the Cosmos ecosystem.
I think the reason why the outside world may feel that we are not focused is because we have done well: each product line has a good reputation and has received a lot of recognition. But what we have not done well is to communicate our overall strategy to the outside world, iterate products, and the underlying logic of launching different product lines. I think today is also a good opportunity to talk about our overall thinking.
TechFlow: This iterative approach is commercially self-consistent, but will the constant evolution of your products result in less support for partners who use your products from the previous stage?
Pengyu: This is a very good question. If the iteration of your main channel product has no inheritance relationship in terms of technology, function, and user group, it is easy to cause such problems. But we don’t design product iterations in this way. As I mentioned earlier, we design from the perspective of the entire life cycle of users and developers, and technically each stage fully utilizes the technical accumulation brought by the product in the previous stage.
I can give you some specific examples. For example, our first-phase wallet abstraction product and the second-phase account abstraction product can be used independently or in combination. Developers can use independent third-party wallets such as MetaMask to drive our account abstraction protocol, or they can use the wallet abstraction (social login + built-in wallet) we provide to drive the account abstraction protocol, which is equivalent to changing the dapp's built-in wallet from an ordinary EOA account to an AA account.
Our third-phase chain abstraction product has three core underlying modules: Master Keystore Hub, Decentralized Bundler, and Messaging Network.
The Master Keystore Hub and Decentralized Bundler here are derived from the accumulation of account abstraction products in the previous stage. In essence, they are a decentralized and full-chain account abstraction solution. From the actual experience of developers, they feel that we are constantly adding new features for them to use or choose from. In addition to wallet abstraction, they can use account abstraction to upgrade the original account structure to a smart account. Chain abstraction products allow them to simply expand their single account abstraction product to the full chain.
We have been iterating on how to get more support from our partners. We currently have more than 1,800 dapps (excluding experimental products from various hackerthons) connected to our various products, of which about 1,000 are still active (DAU greater than 0). Last month, our SDK downloads for developers (various npm packages) exceeded 500,000 downloads/month, and are still growing rapidly.
However, we hope to maintain a small operation and large R&D team structure. In this context, our strategy is layering + automation. We will pay more attention to projects with real traffic and on-chain interactions. For projects that simply increase the number of EOA accounts, we will adopt automated support solutions and no longer have dedicated human support.
TechFlow: I have observed that your three product lines have a lot of partners. It seems that they can get a lot of support as soon as they are launched, and they will not face the problems of most Web3 projects starting or growing. How do you do it? Is there anything special about it?
Pengyu: There are mainly several reasons:
Although several product lines have been iterating their products, the cooperation group has not changed: public chain + dApp, which allows us to continue to accumulate cooperation resources.
We only pursue cooperation that can be implemented and ensure that the trust relationship with the partners is real. In terms of cooperation with public chains, we have direct cooperation with nearly 80 public chains, and we will try to implement it from all angles. For example, we have done a very large-scale Consumer Crypto Hackerthon with Avalanche, and the People's Alliance inscription event with Linea. Near and Sei gave us Grants, and Avail has a cross-airdrop plan with us. We are about to launch Co-Testnet activities with Berachain and Arbitrum. We have co-hosted multiple offline meetings with Citrea and BOB, and Merlin has been on our People's Launchpad. Including some chains with independent scenarios, such as Peaq with Depin theme and Xter.io public chain with game theme, their ecological projects almost adopt our various types of technical solutions as a whole.
We have a systematic internal management mechanism to ensure that cooperation can not only be implemented but also be carried out from as many angles as possible. This mechanism includes a self-built CRM system that suits us. We will regularly review the status of the top cooperation projects to ensure that we catch up with key projects at a fixed frequency to understand their needs from various angles besides product cooperation.
New narrative: Chain abstraction is an inevitable product of the background of chain explosion, and it is also the direction of evolution we are most excited about.
TechFlow: Particle's current external positioning is "The L1 Unifying All Chains Through Universal Accounts", aiming at chain abstraction. We have seen a saying that there are too many abstractions in the industry. Is chain abstraction a fabricated narrative? Why do you think the industry needs a new "abstraction"?
Pengyu: First of all, there will be more and more chains, which will help promote this from the perspective of the cost and benefit of chain issuance. The cost of chain issuance and maintenance has been greatly reduced due to the rise of modular infrastructure such as RaaS and DA and the implementation of EIP-4844. Chain issuance has obvious benefits for projects of almost any background: it adds a simple and efficient way to capture the value of tokens and broadens the product operation boundaries of the project.
Currently, there are about 400 chains that can be tracked. It is expected that there may be nearly 1,000 chains by the end of this year, and more than 3,000 chains by the end of 2025. So many chains not only increase the learning threshold for so-called Web2.5 users, but also so-called professional users have already felt the problems brought about by this fragmentation.
Everyone has a similar feeling that their USDT is scattered across many chains, and a lot of purchasing power is actually sunk because of time-consuming transfer or insufficient gas. Therefore, in the context of thousands of chains, providing end users and developers with a unified interaction and development environment must be implemented with a solution.
I think the key to judging whether a narrative is fabricated is to see whether it is solving a specific problem, how high the ceiling is for solving this problem, and whether there is a feasible solution to actually solve this problem. Chain abstraction is not fabricated, but an inevitable product of the background of chain explosion.
TechFlow: There are many other narratives in the industry, with both ceilings and actual products. Why did you choose chain abstraction as the direction of evolution instead of AI or Depin?
Pengyu: Narrative is undoubtedly one of the most important tasks of Web3 projects. Because narrative is essentially a mixture of product evolution direction, technology delivery route, and valuation system of investor community. Especially in the current industry where there is no standardized value discovery path (such as traditional PE multiples and other indicators), narrative = pricing range. But the biggest challenge here is to choose a narrative direction that is suitable for Particle.
I understand that narrative directions can be roughly divided into: mature narrative, open-card narrative, aristocratic narrative, pioneering narrative, etc. For example:
Mature narratives are similar to oracles, cross-chain bridges, etc.
The open-card narrative is new and widely accepted, such as AI or DePin in this cycle;
The Aristocracy narrative is the so-called narrative that most closely follows the Ethereum Foundation, such as ZK, privacy, reputation, etc.
Both have advantages and disadvantages. For example, the advantage of the open-card narrative is that there is no need to educate the track, but proving that you are the leader is the most difficult. The aristocratic narrative is that someone will definitely pay for it, but it is more difficult to get on the table (it requires a high level of team origin and background), and the delivery of products and traction are uncertain. The challenge of the pioneering narrative is that the narrative may be falsified very quickly.
The direction we want is to be able to deliver products, create traction, and make good use of our products, users, and technological accumulation.
All things considered, chain abstraction is the evolution direction we are most excited about.
TechFlow: In terms of the chain abstraction track itself, there are also some other projects working on it, such as Near, Polygon, Everclear (formerly Connext), etc. Is there any difference in the entry point of Particle's chain abstraction solution? What are your unique advantages?
Pengyu: From the perspective of entry point. Particle is from the perspective of universal accounts, Near is from the perspective of decentralized signature calculation, Polygon is a bridge that provides shared liquidity for L2 built on CDK, and Everclear is from the perspective of transaction settlement.
The most unique advantages of Particle's chain abstraction solution from a product perspective are:
1. There is no migration cost for users and developers, which increases the speed of solution adoption.
2. Our solution has a Decentralized Bundler network at the bottom, which can package multiple UserOps into one transaction execution, saving the gas cost of complex multi-chain and multi-step operations.
From a business perspective, our biggest advantage is that all the users and developers we have accumulated in wallet abstraction and account abstraction products can be seamlessly migrated to our chain abstraction infrastructure. In a sense, we have accumulated users and liquidity for our chain abstraction solution before it is officially launched.
TechFlow: The underlying concept of your chain abstraction solution is "designing a new chain". Doesn't this go against the original intention of chain abstraction, which is to "solve the problem of too many chains"?
Pengyu: Our chain is positioned as a supporter, coordinator, and enabler, not a new chain that competes with other chains.
When designing our chain abstraction solution at the bottom layer, we mainly considered security, transparency, marginal cost of chain abstraction services, and sustainability of value capture. After overall evaluation, it is most appropriate to use an independent Layer-1 to carry it.
When a user initiates any transaction through our Universal Account, from the perspective of the value chain, we do not reduce the on-chain Gas consumption of other chains. Instead, all chain abstract transactions are first sent to our chain, and then we coordinate external chains to perform corresponding operations, shielding users from the perception of multi-chain and cross-chain interactions. However, users do not need to cross-chain their assets to our Layer-1 in advance. Therefore, we do not compete with other chains from the perspective of TVL or developers, nor do we aggravate the fragmentation problem of user liquidity.
TechFlow: Particle’s product delivery capabilities have always been strong, but from a commercial perspective, how can this chain abstraction solution achieve a commercial closed loop and maintain sustainable operations in the future?
Pengyu: We understand that the only proven scalable business models in the entire Web3 industry are the native Gas Token of the public chain and commissions on on-chain or off-chain transactions.
The underlying layer of our entire chain abstraction solution is a Layer-1 based on the Cosmos SDK. Any transaction initiated by the user based on the Universal Account provided by this chain (complex cross-chain transactions, or transactions involving only a certain chain) will first send a transaction packaged with the user's UserOps to our chain. The Particle L1 node disassembles, executes, and coordinates the corresponding operations.
Therefore, any transaction on the Universal Account will indirectly or directly consume our L1 tokens. Value capture is natural and continuous.
Token and the future: The issuance of Token will bring help from multiple angles. We hope that Particle can become a lubricant for the entire industry.
TechFlow: Now let’s move on to the topic of Tokens that users are most concerned about. Many users are looking forward to Particle’s design of Tokens. Could you please first tell us in one sentence how you define a good Token?
Pengyu: I think a good token is a meme with utility. The most representative one among them may be SOL.
TechFlow: Why do you have to issue tokens? What is the significance? How can it promote the development of the project?
Pengyu: We internally understand that tokens have several functions: initiator, booster, filter, and revenue generator.
The launcher is in the early stage of the project, and token-related incentives can be used to cold start and obtain some users or community supporters who recognize the concept and direction. But a popular saying before was that the customer acquisition cost of Crypto projects is much lower than that of mobile Internet. This is definitely wrong, because long-term debts also have costs, unless you default on not paying it back, or you think that the token will not have liquidity or value. Therefore, using tokens for launchers in the earliest stage also requires very sophisticated design.
The booster is actually about how to bind interests with core ecological partners when a certain scale is reached, such as the recent cooperation between zkSync and Lens.
The filter exists because there is a cost to purchase and hold tokens. By gradually increasing this cost, long-term supporters can be screened out. However, the biggest challenge here is how the project owner can give long-term supporters excess returns, otherwise the long-term supporters will be PUA instead.
A sustainable revenue generator, if it has a Token-Centric business model, is actually exchanging business growth for profits, but it is reflected in the healthy growth of token liquidity and prices.
Overall, we think that if the token can help the project from the above four perspectives at the same time, it is worth launching.
TechFlow: Let me ask a sharp question. Some teams just lay flat after issuing tokens. What do you think about this issue?
Pengyu: There are actually two types of lying down: active lying down and passive lying down.
Many Web3 teams actually want to continue working after issuing tokens, but they don’t get much recognition in the business later because they are passive. There may be several reasons:
Technical design is separated from engineering practice and cannot be delivered.
The product has no PMF and no one can use it.
Tokens have no ability to capture value, so there is little point in continuing to do business.
The essence of the active flat is that the team believes that the development potential of the current project is limited. No one will refuse to continue to pursue wealth returns. The reason behind the active flat is that the team believes that investing personal energy and wealth in other assets has more potential, and the expected returns from continuing to invest in existing projects are not high.
Back to ourselves, we have not passively faced the challenge of lying flat. From the very beginning, we consider who the applicable objects are and how to ensure that the technology is leading while being delivered in a reasonable time. Our token, as a native gas token of a public chain, is also a rare way of value capture that has been verified to be scalable.
More challenges come from how to continuously expand the ceiling of Particle itself. The entire process of Web3 technology evolution is a continuous cycle of long-term unity and division.
The sign of long-term unity must be divided is the rise of L2 and the popularity of modularization, and the core of long-term division must be united is chain abstraction.
This track occupies a central position in the wave of development of the entire industry. Let alone ideals, from the perspective of efficiency in wealth value creation, we have no reason to slow down.
TechFlow: Web3 is an industry with extremely fast technological evolution and is widely influenced by open source culture. Are you worried that your major innovations in the field of chain abstraction today will become technological standards tomorrow as the industry develops, thereby losing the technological advancement?
Pengyu: These are actually two questions. Will open source products lose their technological leadership? What are the barriers to Particle Chain abstract infrastructure?
The topic of open source products is very broad, and I can only briefly talk about my understanding. The technological leadership of open source products is contrary to intuition. Generally, open source product companies will continue to lead, while companies that are accustomed to magic changes and forks will lose the motivation to break through because there are too many directly available options. Uniswap is actually a good example. Most on-chain DEXs are based on Uniswap optimization, but we see that innovations such as Uniswap V4 are still one of the driving forces behind the on-chain trading track.
The essence of chain abstraction is to establish an interoperability standard across the entire industry as a coordinator.
Any standard is never achieved simply by relying on product or technology leadership. Instead, it is the penetration rate leadership brought by product leadership at the beginning, the scale effect brought by continuous snowballing, and finally a standard is formed. After the standard is formed, it needs to be iterated in an open manner to be sustainable.
Back to Particle's chain abstraction infrastructure, our current product solutions and delivery time are leading, and we can make good use of our past accumulated user scale. From the initial release, it has a relatively good account scale and liquidity scale, and our solution is based on a completely open + empowering logic. We do not compete for TVL or developers.
TechFlow: As far as I remember, you were founded in May 2022, which was the beginning of the bear market, and you experienced the entire bear market. If I ask you to talk about the biggest challenge during this period, what do you think it was?
Pengyu: The biggest challenge lies in the sense of tearing brought about by “balance”.
Small teams need to strike a balance in doing “big” things: The teams of Web3 projects are not large, but they require many aspects of the business of traditional giant companies, such as technological innovation, customer acquisition, brand marketing, international expansion, listing management, investor relations, etc.
1 project, 4 roles to balance: the roles and interests of partners, communities, investors, and exchanges are not completely unified. The balance between narrative flexibility and product accumulation, the balance between Asian traffic and Western communities, etc. Overall, it requires both execution and flexibility, as well as utilitarianism and long-termism. This sense of tearing is the biggest challenge during this period.
TechFlow: What do you think about the future development of the industry? What role do you expect Particle Network to eventually play?
Pengyu: Our ideal Web3 industry is a large-scale consumer industry driven by edge innovation and technology, but the current characteristics of the industry are still a "pseudo" technology industry with financial leverage and relying on attention monetization. The "pseudo" technology industry does not mean that there is no real technological progress, but that there is no standardized value discovery logic for technological innovation.
I think the problem with current infrastructure is not that there are too many of them, but that the overall penetration rate is too low; the problem with applications is not that there are too few of them, but that the direction is wrong.
At this point in time, I cannot judge what the end of the industry will be: maybe everyone will redefine the so-called Mass Adoption, no longer pursue content-based, pan-entertainment Consumer Crypto, and return to simply pursuing the efficiency of on-chain asset issuance and transactions; it is also possible that the industry has broken through the difficulties caused by the lack of standardized business models and created a giant consumer industry at the level of AI multiplied by mobile Internet. However, no matter what happens, all industry users still have to deal with the chain, and how to make the process of dealing with the chain better is an unlimited pursuit.
We hope that Particle can become the lubricant of the entire industry as a coordinator and enabler, reducing the friction for everyone interacting with the chain.