Coin World Report:
Author: Cycle Network Source: medium Translation: S.O.Ba
TL;DR
The development of chain abstraction has been inspired by centralized exchanges (CEXs) and has gone through stages such as DEX + bridging and intent modeling, ultimately reaching the concept of chain virtualization. This innovative infrastructure provides seamless cross-chain functionality by abstracting the interaction complexity with multiple blockchain networks, while maintaining security and decentralization. Projects like Cycle Network are leading this transformation through technologies such as Verifiable State Aggregation (VSA), providing developers and users with a unified interface and bridgeless cross-chain liquidity. This marks a critical step in the mass adoption of decentralized applications (dApps) and blockchain technology. The transformation of Uniswap to Unichain further demonstrates this evolution, proving that chain abstraction can address bottlenecks in decentralized finance (DeFi) and drive the development of next-generation Web3 applications.
1. Introduction
With the increasing demand for improved user experience, simplified multi-chain development, and unified decentralized liquidity, the concept of chain abstraction became a focus in 2023 and is expected to be a key turning point driving mass adoption. The fundamental idea of chain abstraction is deeply rooted in many important products in the blockchain industry. In fact, we have witnessed the evolution of chain abstraction since 2017. To further elucidate this evolution, I believe it is necessary to explore three ultimate philosophical questions: What is chain abstraction? Where does it come from? Where is it heading?
2. Definition: What is Chain Abstraction?
The rapid increase in the number of blockchains presents fragmented challenges for users and developers. Users must deal with complex cross-chain transaction processes and the multiple cross-chain fees and slippage caused by fragmented liquidity. Developers, on the other hand, need to deploy on multiple chains to cover users on all chains. Incompatibilities such as finality, security models, and verification proofs also limit developers’ ability to innovate in building multi-chain environments. For example, Vitalik emphasized the importance of open standards for cross-L2 transfers and better alignment and open collaboration within the Ethereum ecosystem in a recent article.
To address these issues, the goal of chain abstraction is to abstract and encapsulate the functionality of multi-chain systems, allowing users and developers to interact with blockchains without the need to understand the underlying operations.
For Users:
Chain abstraction can significantly reduce the learning curve for complex cross-chain operations in Web3 applications.
For Developers:
Through a unified interface, chain abstraction can greatly reduce the barriers to creating dApps and greatly improve the portability of dApps across different blockchain ecosystems.
3. Development History: Where Does Chain Abstraction Come From and Where Is It Heading?
3.1 Centralized Exchanges (CEXs): Early Chain Abstraction and Centralization Challenges
As the largest user base in the industry, CEXs remain the most successful application for implementing cross-chain transactions. CEXs provide Web3 users with an economically efficient trading environment, meeting the primary needs of early Web3 adopters. With the emergence of decentralized mining solutions and the expansion of multi-chain ecosystems, CEXs eliminated the need for users to independently manage assets on multiple chains. Instead, they provided simplified access through centralized intermediaries, allowing users to easily participate in on-chain products such as DeFi liquidity mining, PoS staking, and even financial services. It is worth noting that exchanges also once acted as voting proxies in PoS projects.
However, in an industry driven by decentralized technology, most users rely on centralized intermediaries to participate in innovative products, which clearly contradicts the core principles of decentralization.
3.2 DEX + Bridging: Solutions and Challenges in the Multi-Chain Era
With the development of decentralized blockchain networks, DeFi products like Uniswap have emerged, providing convenient and user-friendly interfaces for users to directly participate in on-chain trading. However, the growth of multi-chain ecosystems has brought significant barriers for users to enter the blockchain field. Therefore, the combination of decentralized exchanges (DEXs) and cross-chain bridges has become a widely adopted solution to address the challenges of multi-chain. Users can use DEXs to convert their existing assets into intermediary tokens and then transfer them to the target chain via cross-chain bridges, and convert them into the desired tokens on the destination chain through another DEX.
However, high on-chain gas fees, operational complexity, and associated security risks have led many users to revert back to centralized exchanges (CEXs) as the key intermediaries connecting different blockchain networks.
This raises a key question: How can we provide a seamless user experience similar to CEXs in the DEX + bridging solution, despite the challenges of high gas fees, operational complexity, and security risks? As a result, the focus of the solution has shifted to chain abstraction.
4. Exploration: Where Is Chain Abstraction Heading?
Currently, there are two main approaches to achieving chain abstraction.
4.1 Intent-Centric Solutions: Addressing DEX + Bridging Issues
The first proposed solution aims to address the issues brought by the DEX + bridging combination. In the DEX + bridging scenario, users typically have the following requirements: they want to convert token B on Chain A into token D on Chain C, while paying gas fee A (on Chain A) and gas fee C (on Chain C) to complete the future transfer of token D. This process involves at least three conversions and cross-chain operations, which is highly complex. However, the actual intent of the user is simply to convert B to D. Therefore, an intent-centric intent model allows users to express only their desired end result, while the protocol and application layer handle the complex intermediate steps, providing a near-seamless user experience.
Although the intent model simplifies on-chain operations, the increasing complexity of on-chain requirements (such as LRT redemption and cross-chain MEV) has brought new challenges. The development of infrastructure (such as cross-chain bridges and abstract accounts) aimed at simplifying these operations lags behind the complexity of on-chain activities. In fact, current intent implementations have not significantly reduced the complexity of multi-chain interactions. On the contrary, transaction execution and total costs largely rely on third-party solutions, failing to meet widely adopted standards.
4.2 Chain Virtualization: Inspired by CEX Experience
Another solution is chain virtualization, which addresses the fundamental problem of multi-chain fragmentation and aims to replicate the seamless experience of centralized exchanges.
In the virtualization framework, establishing unified underlying liquidity is crucial. Drawing on the architecture of CEXs, the concept of chain virtualization is proposed. This innovative infrastructure technology aims to abstract the complexity of managing multiple heterogeneous blockchain networks, enabling developers and users to interact with different blockchain ecosystems through a unified interface. This eliminates the need for trust intermediaries such as bridges, allowing developers to focus on innovation and programming without worrying about the complexity of different blockchain protocols. Users can also enjoy a CEX-level seamless user experience on-chain, which is highly advantageous for enhancing user acquisition and driving the mass adoption of blockchain technology.
The concept of virtualization was proposed by core members of Cycle Network in 2019, and by the end of 2022, they launched the development of Cycle Network. In 2023, Placeholder also mentioned the importance of virtual Rollup in an article, validating the prospects of Cycle’s research direction since 2019.
Through Verifiable State Aggregation (VSA), Cycle Network supports bridgeless cross-chain liquidity abstraction, enabling secure and trustless interaction between Bitcoin and EVM-compatible blockchains. This infrastructure changes the blockchain landscape, making it easier to develop cross-chain decentralized applications (dApps) while maintaining cross-chain security and verifiability.
As chain virtualization matures, it can be compared to the development of cloud infrastructure on the traditional internet. Just as cloud technology abstracts the complexity of managing physical servers and drives the explosive growth of internet applications, chain virtualization will accelerate the arrival of true Web3-native generality, ushering in the next wave of dApp innovation and mass adoption.
5. Cutting-Edge Examples of Chain Abstraction
I have chosen the following projects as examples to further illustrate the importance of chain abstraction. Each project represents its unique technological approach.
5.1 Intent Model
5.1.1
Everclear: Improving Efficiency and Decentralization of Intent Solvers
Technical/Product Features
As mentioned above, in the intent model, users specify the desired end result, and the solver (filler, forwarder) executes the intent and receives rewards. In this process, most operations rely on third-party execution, and solvers play a crucial role. However, many solvers are still centralized.
Everclear proposes a solution from the perspective of decentralized solvers, aiming to reduce reliance on centralized entities and achieve a more decentralized intent execution process.
Everclear focuses on addressing issues such as inefficient rebalancing in the intent model. To eliminate the inefficiency of cross-chain costs in rebalancing, Everclear introduces a settlement layer where intents with opposite directions can offset each other, reducing the cost of rebalancing.
Here is its architecture and the steps for solver execution of intent:
Create Intent Messages:
Users generate intents and send intent messages from the source chain to the central domain through the transport layer (Hyperlane) regularly.
Auction:
In the central domain of Everclear Rollup, matching intents become deposits while unmatched intents become invoices. These invoices enter a Dutch auction, gradually discounted (up to a maximum threshold) until they are purchased and settled.
Fill Messages:
When the solver executes the intent, fill messages are sent from the target domain to the central domain, using the transport layer (Hyperlane).
Settlement Messages:
When both the intent and fill messages reach the central domain, settlement messages are sent from Everclear Rollup to the target domain. The solver receives rewards.
Stakeholders
Product Level:
Intent-based dApps aimed at improving the efficiency of rebalancing.
Intent creators and solvers.
Infrastructure Level:
Everclear is an Arbitrum Orbit L2 launched in collaboration with Gelato Network, using Hyperlane as the transport layer and EigenDA as the data availability solution.
Roadmap
2017: Connext founded
March 2024: Connext rebranded as Everclear; Everclear testnet launched
September 2024: Everclear mainnet released
Next Steps:
Rebalancing:
Solvers, liquidity providers, arbitrageurs, and intent-based cross-chain bridges can leverage the settlement layer to improve efficiency and reduce rebalancing costs.
Token Model:
The vbNEXT model aims to incentivize underutilized clearing behavior along the paths.
About Connext: With the launch of Everclear, Connext AMarok system will be phased out gradually. Routers can transition to bridge partners, who will utilize Everclear infrastructure.
5.1.2
Particle Network: User-friendly Universal Account
Technical/Product Features
To address the issue of non-composability and complex user interfaces for cross-chain assets, Particle Network has focused on wallet abstraction since 2022 and expanded to chain abstraction earlier this year.
Wallet Abstraction:
The first phase of Particle Network focused on wallet abstraction, reducing the barriers for Web2 users to enter Web3. Its Wallet-as-a-Service (WaaS) offers the following features:
Embedded Wallet: Wallet and authorization transaction and signing operations are directly embedded in the application, eliminating the need to switch to third-party wallets.
Social Login: In addition to Web3 wallets, users can also use Web2 social accounts (such as Google, Apple, X Account, and email) to log in.
Integration with Account Abstraction (AA): Developers can integrate AA into their dApps to support more advanced features such as gas sponsorship and batch transactions.
Chain Abstraction:
Particle Network further expands to chain abstraction by introducing modular Layer 1 in March 2024 and launching the Universal Account in July 2024.
Two highlights of the Universal Account at the application level:
Universal Account: “One account, one balance, supporting any blockchain.”
Universal Gas: For example, on the Particle testnet, gas fees can be paid using $ETH.
However, the prerequisite for these two features is universal liquidity. Particle Network achieves universal liquidity through the “swap and release” design:
Swap: When users perform cross-chain transactions, their Universal Account (UA) interacts with native DEX to swap existing tokens for intermediary tokens accepted by liquidity providers (LPs), such as $USDT.
Release: LPs receive these assets on the source chain, deduct small fees, and release the corresponding amount of necessary assets on the target chain. This is similar to the resolver in the intent model.
Stakeholders
Product Level: Applications that require easier Web3 login methods, mainly consumer-facing applications such as gaming and social apps.
Infrastructure Level:
Data Availability Partners: Near, Avail, Celestia
Account Abstraction: Biconomy
Roadmap
2022: Particle Network established
2024 Q1: Upgrade from wallet abstraction to chain abstraction and launch Particle Layer 1
2024 Q3: Launch the Universal Account
5.2 Virtualization
5.2.1
Polymer: Bringing Cosmos IBC to Ethereum
Technical/Product Features
Polymer aims to be the “port city” between blockchains by bringing Cosmos IBC to Ethereum, enhancing its interoperability. However, Ethereum itself does not support IBC. Therefore, Polymer proposes a solution called virtual IBC (vIBC).
In the native IBC framework, there are four steps for delivering a packet:
Delivery: Delivering the packet containing the data to the channel.
Update: The relayer fetches the latest state of Chain A and updates the Chain A client on Chain B.
Forward: The relayer forwards the packet to Chain B.
Validate: Chain B validates the packet based on its understanding of the state of Chain A.
However, Ethereum and its Layer 2 do not support IBC, so this design cannot be adopted. Instead, it can outsource the transfer task (IBC-related overhead) to Polymer. Polymer solves this problem with its innovative vIBC solution, which includes the following components:
vIBC Core Layer (Layer 2): This is the smart contract implementation of the IBC processor, similar to an IBC post office, responsible for handling cross-chain messages to make them understandable by Layer 2.
vIBC Relayer: It establishes communication between Layer 2 and the Polymer Hub, acting as a “multilingual courier” fluent in both IBC and smart contracts.
vIBC Module on the Polymer Hub (Layer 2 of Polymer): This module receives vIBC core events on Layer 2 and translates them into a format understandable by standard IBC modules, similar to translating foreign-language letters and informing locals how to act.
Two major differences between native IBC relaying and vIBC relaying:
Stakeholders
Product Level: Layer 2, RaaS providers, and abstraction protocols that require IBC interoperability.
Infrastructure Level: Validation service providers (such as Lagrange, Witnesschain) can integrate with the Polymer Hub, offering different validation schemes to help developers optimize their use cases.
Roadmap
2021: Polymer established
March 2024: Testnet launch
5.2.2
Cycle Network: Virtualization
Technical/Product Features
To truly achieve virtualization between chains (as defined in section 4.2), it is crucial to ensure verifiable and trustless aggregation of states among different chains, which may have incompatible definitions of finality.
Cycle Network proposes a solution for full-chain state based on Verifiable State Aggregation (VSA) and the Off-Chain State Channel Indexer (OSCI). From the perspective of a layered blockchain architecture, Cycle’s framework can be divided into the Security Layer, the Expansion Layer, and the Cycle Layer.
Security Layer: This layer inherits the security and stability of Ethereum. The consensus mechanism ensures state security, guaranteeing that two nodes will not present conflicting results. It also provides guarantees for transactions to be finalized within a finite time.
Expansion Layer: The expansion layer consists of source chains and target chains (such as Layer 2 and application chains). Cycle Network establishes an endpoint on each chain to verify if the received information constitutes a complete set, enabling the decentralized indexer to achieve data availability for these chains.
Cycle Layer: All transactions in Cycle Network, including cross-chain transactions between the security layer and the expansion layer, as well as internal transactions within the Cycle layer, collectively generate the aggregated state of Cycle. The root state of Cycle is generated by zkEVM and submitted for validation on the chains in the expansion layer.
The core module of this design is VSA implemented through OSCI. The following diagram shows how Cycle Network’s state machine transitions as the expansion layer grows.
State Synchronization: The vertical arrows represent how chains in the expansion layer update their state to the Cycle layer. The horizontal arrows within Cycle represent the block production process from left to right. Each block in the Cycle layer is also synchronized to the Ethereum mainnet for validation and finality.
Cycle State Update: When a new chain joins the expansion layer, as shown below, its transactions (white transactions) are processed by OSCI together with transactions from other chains (yellow and red transactions), resulting in state updates in the Cycle VM (green). As long as the transaction order is determined, the final state is determined. With the necessary data available to reconstruct Cycle, third parties can verify all finalized states on Cycle.
Thanks to the verifiability and trustless design of the Cycle layer, chain virtualization is seamlessly achieved through the Rollin and Rollout interfaces, allowing projects to integrate without leaving their original blockchain, gaining cross-chain liquidity. The complexity of dealing with multiple blockchain networks has been simplified to the Rollin and Rollout interfaces, enabling projects to seamlessly integrate in just 30 minutes, accessing cross-chain liquidity without migrating to other chains.
Stakeholders
Product Level:
Layer 1/Layer 2 aiming for long-term ecosystem expansion through increased accessible user count.
Developers looking to significantly improve development efficiency through virtualization.
dApps in need of access to full-chain liquidity.
Assets seeking cross-chain use cases.
Infrastructure Level:
Polygon zkEVM enabling Ethereum scalability, improved performance, and better security through ZK proofs.
Roadmap
2022: Cycle Network established
March 2023: Successful first demonstration
February 2024: Launch of the first testnet StarFish and the first product PiggyBank
April 2024: Connection to BTC testnet
May 2024: Release of PiggyBank V2
June 2024: Launch of the first TG mini-app, attracting over 200,000 users
July 2024: Launch of the second testnet Jellyfish and CuttleFish; Alpha mainnet launch
Q4 2024: Upcoming Beta mainnet release
To date, Cycle Network has completed over 770,000 transactions, connected over 1.57 million wallets, and has more than 300,000 users and over 80 partners. As the first full-chain asset management platform on Cycle Network, PiggyBank has witnessed the issuance of over 250,000 assets.
6. From Uniswap to Unichain: Cross-Chain Based on Rollup is the Future
The development path of Uniswap Labs, from Uniswap v1 to v4, and then to UniswapX and Unichain, is a perfect example of the aforementioned evolution. Over the past six years, Uniswap has consistently followed one principle: identifying and solving bottlenecks in decentralized finance (DeFi).
Analyzing the history of Uniswap, the following key features are worth noting:
Three Eras: From Decentralized Exchange (DEX) to Appchain
With the change in mission, Uniswap’s versions can be divided into three eras. The DEX era laid the foundation for DeFi, the Intention era showcased experiments to improve user experience (UX), and the DeFi chain era indicates that Rollup-based cross-chain solutions might be the most promising way to trigger the future of DeFi.
Inspiring a Batch of Similar Projects
After each new version is released, there are usually many similar projects inspired by its solutions, not limited to the Ethereum ecosystem but also including DeFi in other Layer 1s. For example, automated market makers (AMM) in v1, concentrated liquidity in v3, trading volume handling in v4, and the intention model in UniswapX.
Chain abstraction as a key driver for the next generation of DeFi
While ensuring decentralization and seamless user experience, Uniswap takes chain abstraction as the next step and announces Unichain as the new strategy to address liquidity fragmentation.
The same idea as chain virtualization further proves the feasibility and reliability of chain virtualization to support future Web3 innovation, becoming the foundation of the future of DeFi. For the past two years, Cycle Network has been dedicated to chain virtualization, aiming to enable developers and users on all chains to access chain virtualization through a unified interface without the need to migrate to other chains. The complexity of dealing with multiple blockchain networks has been simplified to the Rollin and Rollout interfaces, enabling projects to seamlessly integrate in just 30 minutes, gaining cross-chain liquidity without leaving their original blockchain.
7. Conclusion
In conclusion, the evolution from CEX-inspired to virtualization marks a significant advancement in blockchain technology. This journey, from CEX-inspired to DEX + bridging and intention models, and finally to chain virtualization, abstracts complexity and empowers developers and users through a unified interface. The evolution from Uniswap to Unichain also emphasizes that virtualization is the key to solving the current bottlenecks in DeFi, laying the foundation for the future “home” of DeFi.
