Virtualization: Unichain’s Ultimate Chain Abstraction Solution
TL;DR
The journey of chain abstraction was inspired by centralized exchanges (CEXs), and has progressed through stages like DEX + Bridge and the Intent Model, ultimately arriving at the concept of Chain Virtualization. This innovative infrastructure abstracts the complexities of interacting with multiple blockchain networks, providing seamless cross-chain functionality while maintaining security and decentralization. Projects like Cycle Network are leading the change with technologies like Verifiable State Aggregation (VSA), offering developers and users unified interfaces and bridgeless cross-chain liquidity. This marks a critical step towards the future of decentralized applications (dApps) and mass adoption of blockchain technology. The transformation of Uniswap into Unichain further illustrates this evolution, showcasing how chain abstraction can resolve bottlenecks in decentralized finance (DeFi) and enable the next generation of Web3 applications.
1. Introduction
With the increasing need to improve user experience, simplify multi-chain development and unify fragmented liquidity, the concept of chain abstraction went debut under the spotlight in 2023 and is expected to be the critical match point towards mass adoption. The fundamental ideology of chain abstraction has been deeply rooted in many remarkable products throughout the development of blockchain industry. In fact, we have witnessed an evolution of chain abstraction since 2017. To further elaborate this evolution, I feel the necessity to spin up a discussion on the three ultimate philosophical questions: What is chain abstraction? Where does it come from? Where is it going?
2. Definition: What is Chain Abstraction
The rapidly increasing number of chains has posed the challenge of fragmentation to both users and developers. Users have to handle complicated procedures of cross-chain transactions, as well as multiple cross-chain fee and slippage brought by liquidity fragmentation. Developers need to deploy on multiple chains to address all-chain audience. Incompatibility of factors such as finality, security model and validation proof also restrict developers from building multi-chain environment innovation. For example, in the recent article, Vitalik highlighted the significance of open standards like cross-L2 transfers for achieving better alignment and open collaboration in the Ethereum ecosystem.
To address these issues, chain abstraction aims to abstract and encapsulate the functionality of multi-chain systems, allowing users and developers to interact with blockchains without interpreting the underlying operations.
- For users: chain abstraction can significantly flatten the learning curve for interpreting complex cross-chain operations in Web3 applications.
- For developers: through unified interfaces, chain abstraction can significantly lower the development barriers to creating dApps and greatly enhance the portability of dApps across different blockchain ecosystems.
3. Journey: Where does Chain Abstraction Come from and where to Go
3.1 CEX: Early Chain Abstraction and the Centralization Dilemma
As the solution with the largest user base in the industry, CEXs are the first and the most successful application to implement cross-chain transactions up to now. CEXs provided Web3 users with an affordable and efficient trading environment, addressing the primary needs of early Web3 adopters. With the advent of decentralized mining solutions and the expansion of multi-chain ecosystems, CEXs eliminated the need for users to manage multi-chain assets independently. Instead, through the centralized intermediary, they offered streamlined access to on-chain products such as DeFi liquidity mining, PoS staking, and even financial services. Notably, at one time, exchanges acted as delegations for voting in PoS projects.
However, in an industry fundamentally driven by decentralized technologies, the reliance of the majority of users on centralized intermediaries to engage with innovative products presents a clear contradiction to the core principles of decentralization.
3.2 DEX+Bridge: Solutions and Challenges in the Multi-Chain Era
As decentralized blockchain networks have evolved, DeFi products such as Uniswap emerged, providing a convenient and user-friendly interface that enables users to directly engage in on-chain transactions. However, the growth of multi-chain ecosystems has introduced substantial barriers for users entering the blockchain space. Consequently, the combination of decentralized exchanges (DEXs) and cross-chain bridges has become a widely adopted approach to address these multi-chain challenges. Users can leverage DEXs to exchange their existing assets for an intermediary token, which is then transferred to the target chain via a cross-chain bridge, and subsequently converted into the desired token on the destination chain through another DEX.
Nevertheless, the high gas fees and operational complexity on-chain, along with the associated security risks, have prompted many users to return to centralized exchanges (CEXs), positioning CEXs as key intermediaries connecting various blockchain networks.
This raises a key question: Amidst the challenges of high gas fees, operational complexity, and security risks inherent in DEX+bridge solutions, the question arises: How can we attain a user experience that rivals the seamlessness of CEX? The solution and focus therefore comes to Chain Abstraction.
4. Exploration: Where is Chain Abstraction Going?
Currently, the solutions for achieving chain abstraction can be broadly categorized into two main approaches.
4.1 Intent-Centric Solutions: Based on the Bridge+DEX Problem
First, the solution was proposed to address the issues arising from the DEX+Bridge combination. In the DEX+Bridge scenario, users often have the following demand: they want to exchange token b on chain A for token d on chain C, while needing to pay a (the gas fee on chain A) and also have c (the gas fee on chain C) to facilitate the future transfer of token d. This process involves at least three swaps and cross-chain operations, making it highly complex. However, the user’s actual intent is simply to exchange b for d. Therefore, the Intent model, which is centered on user intent, allows the user to express only the final outcome they desire, with the complex intermediate steps being handled by the protocol and application layers, providing an almost seamless user experience.
Although the Intent model simplifies on-chain operations for users, the growing complexity of on-chain demands, such as LRT redemption and cross-chain MEV, has led to the emergence of new challenges. The development of infrastructures like cross-chain bridges and abstract accounts, which aim to simplify these operations, has lagged behind the increasing complexity of on-chain activities. From a practical perspective, current Intent implementations have not significantly reduced the complexity of multi-chain interactions. Instead, transaction execution and the total cost heavily rely on third-party solutions, thus falling short of meeting the criteria for widespread adoption.
4.2 Chain Virtualization: Inspired by CEX Experience
An alternative solution, which addresses the fundamental issue of multi-chain fragmentation to replicate the seamless experience of centralized exchanges, is what I refer to as Chain Virtualization.
Within the Virtualization framework, the establishment of foundational liquidity unification is of critical importance. Drawing inspiration from the architecture of CEX, the concept of Chain Virtualization has been introduced. This innovative infrastructure technology aims to abstract the complexities of managing multiple heterogeneous blockchain networks, enabling developers and users to interact with various blockchain ecosystems through a unified interface. This eliminates the need for trust-based intermediaries like bridges, allowing developers to focus on innovation and programming rather than the intricacies of different blockchain protocols. Users can also enjoy a CEX-level seamless user experience while natively on-chain, which proves beneficial for enhancing user acquisition and fostering the widespread adoption of blockchain technology.
Virtualization was proposed by core members of Cycle Network in 2019, and by the end of 2022, they commenced the development of Cycle Network. In 2023, Placeholder also mentioned the significant importance of virtual rollups in an article, thereby validating the promising trajectory of Cycle’s research direction since 2019.
Through Verifiable State Aggregation (VSA), Cycle Network supports bridgeless cross-chain liquidity abstraction, enabling secure and trustless interactions across networks like Bitcoin and EVM-compatible blockchains. This infrastructure is a game-changer in the blockchain space, making cross-chain decentralized applications (dApps) easier to develop while maintaining security and verifiability across chains.
As Chain Virtualization matures, it can be likened to the development of cloud infrastructure on the traditional internet. Just as cloud technology abstracts the complexities of physical server management, paving the way for a massive surge in internet applications, Chain Virtualization will accelerate the arrival of true Web3-native universal programmability, opening the door to the next wave of dapp innovation growth and mass adoption.
5. Chain Abstraction Frontier Example
I chose the following projects as examples to further illustrate the significance of chain abstraction. Each of them is a representative of their technology approach.
5.1 Intent
5.1.1 Everclear: Making Intent Solver More Efficient and Decentralized
Tech / Product Features
As mentioned above, In the Intent model, users specify the desired outcome, and solvers (fillers, relayers) fulfill the intent and get paid. In this process, most operations rely on third-party execution, with solvers playing a crucial role. However, currently many solvers are still centralized.
Everclear has proposed a solution from the perspective of decentralized solvers, aiming to reduce reliance on centralized entities and achieve a more decentralized process for fulfilling intents.
Everclear focuses on the problems emerged from Intent model such as inefficient rebalancing. To eliminate this ineffective cross-chain overhead, Everclear proposes a clearing layer where intents with opposite directions can be netted so that the cost of rebalancing can be socialized and reduced.
Here is its architecture and the steps for a solver to fill an intent:
- Create Intent message: users generate intents and the Intent messages are dispatched periodically from the source chain to the Hub Domain using the transport layer (Hyperlane)
- Auction: In the Hub domain on Everclear Rollup, intents that can be matched become deposits while intents that cannot be matched become invoices. The invoices will join a Dutch Auction where they will be discounted (up to a max threshold) until it is purchased and cleared
- Fill message: When a solver fills an intent, the Fill message will be sent from Target Domain to the Hub Domain also using the transport layer (Hyperlane)
- Settlement message: when both the Intent and Fill messages arrive in the Hub Domain, the Settlement message will be sent from Everclear Rollup to Target Domain. The solver gets paid.
Stakeholders
About product:
- Intent-based dApp who want to increase the efficiency of rebalancing
- Intent creators and intent solvers
About Infrastructure:
- Everclear is an Arbitrum orbit L2 launched with Gelato Network. It uses Hyperlane as transport layer and EigenDA for data availability
Roadmap
- 2017 Connext was founded
- 2024/3 Connext was renamed Everclear; Everclear Testnet
- 2024/9 Everclear Mainnet. What’s next:
- Rebalancing: Solvers, market makers, arbitrageurs, and intent-based bridges can now tap into the Clearing Layer for greater efficiency and reduced rebalancing costs.
- Token Model: The vbNEXT model aims to incentivize productive clearing behavior on underutilized pathways.
- About Connext: With Everclear live, the liquidity-based Connext Amarok system will be phased out. Routers can transition to one of the bridging partners, who will leverage Everclear’s infrastructure.
5.1.2 Particle Network: User-friendly Universal Account
Tech / Product Features
To address the problems of incomposibility of cross-chain assets and the high entry barrier due to complicated user interfaces, Particle Network has been dedicated to Wallet Abstraction since 2022 and expanded to chain abstraction early this year, according to blog record.
- Wallet Abstraction
The first stage of Particle Network focused on wallet abstraction, which lowers the entry barrier of Web3 for Web2 users. Smart Wallet as a Service (WaaS) has the following features:
- Embedded Wallet: The wallet and hence the actions of authorising transactions and signatures are directly embedded in the application so that users don’t bother moving to a third wallet
- Social Login: In addition to web3 wallet, users can also log in using web2 social accounts such as Google, Apple, X account and email
- Integration with Account Abstraction (AA): Developers can add AA to their dApp, thus support smarter functions like gas sponsorship and batch transactions
2. Chain Abstraction
Particle Network expanded to chain abstraction by introducing the Modular Layer 1 in 2024/3 and Universal Account in 2024/7.
At the application level, Universal Account has two highlights:
- Universal Accounts: The slogan summarizes very concisely, “One account, one balance, any chain”
- Universal Gas: e.g. Pay $ETH as the gas on Particle testnet
However, the necessary condition for these two features is Universal Liquidity. Particle Network achieves Universal Liquidity through a “Swap and Release” design:
- Swap: When a user performs a cross-chain transaction, their UA interacts with native DEX to swap the existing tokens for an intermediary token e.g. $USDT) accepted by Liquidity Providers (LPs)
- Release: LPs receive these assets on their source chains, deduct a small fee, and then release the equivalent amount of the necessary assets at the destination chain. It is analogous to the solver in the intent model.
Stakeholders
About product:
- Apps that need an easier approach for Web3 newbies to log in, mainly consumer-facing apps like games and social app
- Network of liquidity providers (Despite its significant role in Universal Liquidity, there is a lack of information about the value distribution and source of the LP. More information is needed)
About Infrastructure:
- Data Availability Partner: Near, Avail, Celestia
- Account Abstraction: Biconomy
Roadmap
- 2022 Particle Network was founded
- 2024Q1 Upgraded from wallet abstraction to chain abstraction and introduced Particle Layer 1
- 2024Q3 Introduced Universal Account
5.2 Virtualization
5.2.1 Polymer: Bring Cosmos IBC to Ethereum
Tech / Product Features
With the vision of becoming a port city among blockchains, Polymer is designed to introduce Cosmos IBC to Ethereum to enhance its interoperability. However, Ethereum doesn’t speak IBC. Thus Polymer proposed the solution of Virtual IBC.
Natively, in the IBC framework, there are 4 steps in relaying a packet (data)：
- Pass: a packet with data is passed to a channel
- Update: the relayer fetches the latest chain A state and updates with chain A client in chain B
- Relay: the relayer relays the packet to chain B
- Verify: chain B verifies the packet against its view of the state of chain A
However, Ethereum or its Layer 2 does not speak IBC, so can not adopt this design. Instead, it can outsource the transport task (IBC-related overhead) to Polymer. Polymer solves this by its magic wand, Virtual IBC, which consists of:
- vIBC Core on Layer 2
This is a smart contract implementation of IBC handler. It acts like an IBC post office, handling cross-chain messages, so that they can be understood by Layer 2.
- vIBC Relayer
It establishes communication between Layer 2 and Polymer Hub. Like a “bilingual” post man who can speak both IBC and smart contract
- vIBC Modules on Polymer Hub (the Layer 2 of Polymer)
Gets the vIBC Core event on Layer2 and translates for standard IBC Module to understand. Like translating a letter in foreign language and telling local people what to do
There are 2 major differences between native IBC relaying and vIBC relaying:
Stakeholder
About product:
- Layer 2, Raas providers and abstraction protocols who need integration of IBC interop
- Relayers who want to get awarded by relaying packets
About infrastructure:
- Validation service providers: Lagrange, Witnesschain, and similar services can be integrated with the Polymer Hub, to provide developers with different verification schemes that can optimize their use-case.
Roadmap
- 2021 Polymer was founded
- 2024/3 Launched testnet
5.2.2 Cycle Network: Virtualization
Tech / Product Features
To fundamentally achieve virtualization (definition in section 4.2) across chains, it is crucial to secure verifiable and trustless aggregation of states across different chains which may have incompatible definitions of finality.
Cycle Network presents an omni state solution based on Verifiable State Aggregation (VSA) and Omni State Channel Indexer (OSCI). From the perspective of layered blockchain architecture, the framework of Cycle can be represented as the Security Layer, the Extended Layers, and Cycle Layer.
- Security Layer
This layer inherits security and stability from Ethereum. The consensus mechanism guarantees state security so that two nodes will not present conflicting results. It also provides the finality guarantee that the transactions will be finalized within the bounded time.
- Extend Layer
Extend layer consists of the source chains and destination chains, such as Layer 2 and appchains. Cycle Network establishes an endpoint on each chain, which validates that the received message constitutes a comprehensive set, so that the Omni Decentralized Indexer can achieve extended DA for those chains.
- Cycle Layer
All transactions in the Cycle Network, including the cross-chain transactions across Security Layer and Extended Layers, as well as internal transactions within Cycle Layer, collectively generate the aggregate Cycle state. The root state of Cycle is generated by a zkEVM, which is submitted to chains on Extend Layer for validation.
The core module in this design is the VSA via OSCI. The following diagram depicts the state machine transition as the cycle network continuously increases its extended layers.
- State Synchronization
As shown by the vertical arrows, the chains in Extend Layer will have their states updated to Cycle Layer. The horizontal arrows from left to right within Cycle indicate ongoing block production. Each block in Cycle Layer is also synchronized to Ethereum mainnet for verification and finalization.
- Cycle State Update
When a new chain joins the Extend Layer, as shown below, its transaction (white tx) will join those transactions from other chains (yellow and red tx) to be handled by the OSCI together, which leads to the state update in Cycle VM (green). As long as the transaction arrangement is determined, the final state is determined. Because the necessary data to reconstruct Cycle is available, every third-party can verify every state that is finalized on Cycle.
Thanks to the verifiable and trustless design of Cycle Layer, Chain Virtualization is seamlessly achieved through the Rollin and Rollout interfaces, which takes only 30 minutes for developers to integrate. This streamlined process not only enhances development efficiency but also offers bridgeless access to comprehensive cross-chain liquidity, empowering developers with unparalleled capabilities in their projects. Furthermore, the imminent release of the Cycle Application SDK will extend support to a broader array of assets and offer direct access for implementing specific use cases. This advancement will cater to a variety of customized requirements, tailoring solutions to meet specific use cases and development environments effectively.
Stakeholders
About product:
- Layer1/Layer2 that intent to increase the number of addressable users for long-term ecosystem expansion
- Developers who want to significantly increase development efficiency by virtualization
- Dapps who need access to all-chain liquidity
- Assets that are looking for use cases across chains
About infrastructure:
- Polygon zkEVM to enable Ethereum scalability as well as better performance and security by ZK proofs
Roadmap
- 2022 Cycle Network was founded
- 2023/3 First demo worked
- 2024/2 The first testnet StarFish and the first product PiggyBank were launched
- 2024/4 Connect to BTC Testnet
- 2024/5 PiggyBank V2 was launched
- 2024/6 The first TG mini app was launched with 200,000+ participants in one week
- 2024/7 The second testnets Jellyfish and CuttleFish were launched; the Alpha mainnet was launched
- 2024Q4 The beta mainnet is coming soon
- Up to now, there have been 777k+ transactions on Cycle Network, with 1.57m+ connected wallets, 300k+ users and 80+ partners. As the first all-chain asset management platform on Cycle Network, PiggyBank has witnessed the issuance of 250k+ assets.
6. Uniswap to Unichain: Rollup-based Cross-chain as the Future
From Uniswap v1 to v4, to UniswapX and Unichain, the path of Uniswap Labs is a perfect example of the evolution mentioned above. Over the 6 years, it follows a consistent rule: Spot the Bottle Neck for DeFi, and Solve it.
When analyzing the history of Uniswap shown above, the following features are noteworthy:
- Three Era from DEX to Appchain
As the mission changes, versions can be categorized into three eras. The DEX era marked the foundation of DeFi, the intent era showed the experiment to improve UX, while the Defi Chain era indicates that rollup-based cross-chain solution may be the most promising approach to trigger the future of DeFi.
- Inspire a troop of similar projects
Each new version is usually followed by many similar projects inspired by its solution, not only within Ethereum ecosystem but also DeFi in other Layer 1. Examples are AMM in v1, concentrated liquidity in v3, netting transaction in v4, and intent model in UniswapX.
- Target chain abstraction as the trigger to next-gen of DeFi
While ensuring decentralization and seamless UX, Uniswap embraces chain abstraction as the next step and announces Unichain as the new strategy to solve liquidity fragmentation.
With the same ideology as Chain Virtualization, this choice further proves the feasibility and reliability of Chain Virtualization to support future innovations in Web3 and become the home for future DeFi.
Link of Hayden’s post: https://x.com/haydenzadams/status/1844794529658097899?s=46
Cycle Network has been dedicated to Chain Virtualization for two years, with the aim of making developers in all chains accessible to Chain Virtualization with a unified interface without migrating to other chains. The intricacies of handling multiple blockchain networks have been simplified into the Rollin and Rollout interfaces, which can be seamlessly integrated within 30 minutes, granting projects access to cross-chain liquidity while remaining on their original blockchain.
7. Conclusion
In conclusion, the journey of Chain Abstraction from CEX inspiration to Virtualization marks a crucial advancement in blockchain technology. This journey, inspired by CEX, encompassing DEX + Bridge, and intent models, has culminated in Chain Virtualization which abstracts complexities and empowers developers and users through a unified interface. The evolutionary transition from Uniswap to Unichain also emphasizes that virtualization stands as the solution to the existing bottleneck in DeFi, paving the way for the establishment of a Home for DeFi.
After two years of diligent effort in Chain Virtualization, Cycle Network’s infrastructure will drive the blockchain industry into the era of super apps, where cross-chain dApps can scale seamlessly across different blockchain platforms. This innovation will spark an unprecedented level of innovation and growth, just as the cloud did for traditional internet applications, positioning Cycle Network as a foundational player in the decentralized future.
8. Reference
https://dl.acm.org/doi/pdf/10.1145/3319535.3355503
https://developers.particle.network/landing/introduction
https://en.wikipedia.org/wiki/Virtualization
https://vitalik.eth.limo/general/2024/09/28/alignment.html
https://www.cyclenetwork.io/whitepaper.pdf
https://www.placeholder.vc/blog/2023/11/22/virtual-blockchains
https://www.polymerlabs.org/blog/introducing-the-polymer-hub-a-rollup-built-for-interoperability
