Key takeaways
On-chain abstraction refers to the idea of simplifying the use of blockchain applications and services by removing friction and technical processes from user experience (UX).
On-chain abstraction can make applications more attractive to end users and help developers create more efficient DApps that enable cross-blockchain interactions.
On-chain abstraction faces challenges in the form of centralization risks, security risks, and potential interoperability issues.
Introduction
Blockchain interactions can often be confusing and difficult, especially for newcomers. In this article, we'll explore on-chain abstraction, how it works, some of its benefits and challenges, and common misconceptions about it.
What is chain abstraction?
On-chain abstraction is NEAR's idea of simplifying the way users interact with blockchain technology by separating it from user experience (UX). The goal is for users to be unaware of the specific blockchain they are interacting with or even aware that they are using a blockchain.
How does chain abstraction work?
Efficiency
Imagine if you could only send messages from iPhone to iPhone, but not to Android phones. This would be inefficient and impractical. Likewise, users should be able to interact with decentralized applications (DApps) on different blockchains without unnecessary obstacles.
The goal of on-chain abstraction is to remove or hide the complexities of blockchain technology, allowing users to focus on the features and benefits of the DApps they use. For example, if Sarah wants to use a new DApp called XYZ, she shouldn't have to worry about the blockchain it's built on. From the user's perspective, she just wants it to work well and serve its purpose.
Similarly, millions of people use the Internet every day, but only a smaller percentage understand the underlying technology and how it works. As long as it works as expected and adds value to users, there is no reason for the average user to fully grasp its technical details.
Transactions
Imagine using a DApp that allows you to easily transact across multiple networks and navigate different services. For example, imagine Sarah opens the XYZ app on her phone, orders a coffee, and sees a discount for her favorite clothing store. She buys a pair of shoes and earns rewards which are stored in the form of non-fungible tokens (NFT) on Ethereum. Later, she notices a special offer related to her reward and purchases event tickets, which are also NFTs, but on the BNB Smart Chain (BSC).
All of these transactions can be done in one app, saving Sarah the hassle of managing multiple wallets, switching networks, or dealing with transaction fees directly. This level of inter-blockchain interaction is the ultimate goal of on-chain abstraction.
Benefits of Chain Abstraction
Liquidity defragmentation
Liquidity is often isolated within specific blockchains, making it difficult for users and developers to access and use it. On-chain abstraction solves this problem by allowing access to liquidity on various blockchains.
Imagine that John wants to lend his tokens to earn interest. If liquidity is isolated, it will need to find a platform on the specific blockchain on which its tokens are located. However, thanks to on-chain abstraction, John could lend his tokens on a platform that integrates the liquidity of several blockchains. This can result in more users for the platform and more competitive interest rates for John.
Simplified development
For developers, on-chain abstraction provides the flexibility to create DApps without being limited by the constraints of a specific blockchain.
A developer can use Ethereum for its smart contract capabilities while using Polygon for its low cost. For example, Decentraland uses the Polygon network to allow its users to claim, buy, sell and trade clothing for their avatars, without transaction fees. It is important to note that Decentraland uses several features to completely remove fees. Transactions on Polygon have small fees, but are not completely free.
The challenges of on-chain abstraction
Risk of centralization
On-chain abstraction could be implemented by creating an interface that would allow users to interact with all kinds of blockchain applications from a single place, thereby improving the user experience. However, there is concern that this interface could become a single point of failure.
Security risks
Each blockchain has its own security protocols. If they are combined into a single interface, it is difficult to ensure that all security measures are followed. If not implemented carefully, the new on-chain abstraction interface could lead to risks for individual blockchains.
Interoperability issues
Ensuring interoperability between different blockchains is another challenge. Different blockchains have unique consensus algorithms and smart contract languages, which makes it difficult to create a single interface that works seamlessly across all networks. For example, a smart contract written for the Ethereum network is not directly compatible with Solana due to differences in their programming language and underlying technology.
Common misconceptions about chain abstraction
On-chain abstraction eliminates blockchain differences
Although on-chain abstraction involves simplifying inter-blockchain interactions, the unique characteristics of each blockchain remain intact. On-chain abstraction simplifies and automates technical processes to improve user experience, but does not directly modify blockchain infrastructures.
On-chain abstraction only concerns cross-blockchain transactions
Facilitating transactions between different blockchains is an important feature of on-chain abstraction, but not its only use. On-chain abstraction also involves simplifying the use of DApps, the deployment of smart contracts and the retrieval of data on blockchains.
Conclusion
On-chain abstraction refers to the simplification of interactions between different blockchain networks. The benefits of on-chain abstraction include liquidity defragmentation and simplified development. This faces challenges in the form of centralization and security risks, as well as potential interoperability issues. Nonetheless, it could pave the way for interoperable and user-friendly blockchain ecosystems.
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