XION: A L1 blockchain focused on chain abstraction, helping Web3 mainstream adoption

Original title: XION: L1 blockchain focusing on chain abstraction, boosting mainstream adoption of Web3
Original author: GaryMa

With the rapid development of blockchain technology, more and more projects are emerging on multiple chains. Whether it is the main chain, application-specific chain or Layer-2 expansion solution, the diversity and complexity of the blockchain ecosystem continues to increase. Although the multi-chain system provides users and developers with greater flexibility and choice, it also brings significant challenges, including decentralized liquidity, complexity of cross-chain operations, and insufficient user experience. This makes users face more complex operation processes in the Web3 world than in Web2.

Chain Abstraction came into being and became a key path to solve this problem. By abstracting the differences of the underlying blockchain, users do not need to care about the details of the underlying blockchain. Chain abstraction technology can greatly simplify the user experience and enable them to interact seamlessly on different chains. As one of the innovative representatives of chain abstraction, XION is committed to providing a wallet-free experience through generalized abstraction technology, further lowering the threshold for users to use Web3 applications. By abstracting accounts, signatures, gas fees, and interoperability, the user experience (UX) is improved at the protocol level. In the process, XION eliminates barriers to entry for new users while circumventing the fragmentation challenges that developers encounter in other ecosystems. By abstracting interoperability, XION can also extend seamless user experience to all integrated public chains and support many novel use cases.

This article will delve into the project background of XION and analyze its innovations in blockchain user experience, including how to solve user experience problems through generalized abstraction and how to use interoperability abstraction to improve cross-chain experience. In addition, the article will analyze the token economics design of XION and interpret the competitive landscape of the chain abstraction track.

Project Background

XION was founded by Burnt Banksy, and the name comes from a Banksy artwork called "Morons" that he once burned. Through this event, Burnt Banksy demonstrated the concept of digital scarcity and the potential of blockchain technology. However, he also realized that the average blockchain user faced many obstacles due to the poor experience caused by the complexity of the technology. To this end, he founded XION to create an L1 blockchain for mainstream audiences, making digital ownership truly accessible to everyone through simple and easy-to-use dApps.

XION has received support from well-known investment institutions in multiple financing rounds:

· On May 6, 2021, XION completed a seed round of financing with a financing amount of US$3 million. Investors include Injective, Multicoin Capital, Mechanism Capital, Tribe Capital, Solana Foundation and Alameda Research.

· On January 17, 2022, XION completed a Series A financing with a financing amount of US$8 million. Major investors include Animoca Brands, Multicoin Capital, Mechanism Capital, Alliance DAO, Sonic, DeFiance Capital, Spartan Group, HashKey Capital, Figment Capital, Tribe Capital, Play Ventures, Valory, Terraform Labs and Alameda Research.

· On October 5, 2023, XION received strategic financing from Circle Ventures, and the specific amount has not been disclosed.

· On April 1, 2024, XION completed a new round of financing of US$25 million, with investors including Multicoin Capital, Animoca Brands, Arrington Capital, Sfermion, Spartan Group, etc.

These financing rounds show that XION has received widespread attention and support in the field of blockchain and cryptocurrency, and have laid a solid capital foundation for its further development.

General Abstraction: Encapsulate Complexity and Create a User-Friendly L1

The so-called complex blockchain operation threshold is usually concentrated in account management, signature, payment and Gas fees. Traditional blockchain systems rely on private key management and address generation, and on private keys for transaction signatures. Each public chain also needs to use its own native tokens for Gas payments, and the fees are uncertain. At the same time, the price of cryptocurrencies fluctuates greatly. If products and services are priced in cryptocurrencies, the erratic prices will also create a less friendly user experience. These are barriers that keep new users out of the circle.

In order to eliminate the encryption complexities that users need to face when using blockchain, XION proposed the "universal abstraction" solution, which directly implements universal abstraction at the protocol level, abstracting encryption terms such as accounts, signatures, Gas, interoperability, pricing, devices, and payments.

Account and Signature Abstraction

XION uses a "meta-account" system, which allows users to log in through familiar methods (such as email or biometrics) and achieves secure access across devices without having to deal with complex private keys. Meta accounts support multiple login methods (such as social accounts, Face ID), and integrate flexible permission management functions such as private key rotation and custom rules to enhance account security.

Gas Abstraction

XION completely abstracts Gas fees, and users can pay transaction fees with any token. XION will automatically convert these fees into platform tokens, thereby achieving a transparent fee settlement process for users. In addition, through the PlatformSend mechanism and FeeGrant function, XION allows developers to pay transaction fees on their behalf, reducing the cost burden of users in blockchain operations.

Device Abstraction

XION eliminates the need for users to store and manage private keys, which indirectly eliminates the security risks and complexity that traditionally arise when users use their accounts on multiple devices. XION users can seamlessly interact with their meta accounts across a variety of devices, including PCs, smartphones, or tablets. This device-diverse architecture significantly simplifies the user experience, promoting mass adoption by new users by reducing barriers to entry for new users and improving ease of use for all applications accessed from XION.

When interacting with an application through XION, users are presented with multiple login methods, including email, social accounts, Face Id, or can log in using a Web3 wallet such as Keplr or MetaMask. As a result, XION is able to meet the needs of all audiences while retaining a very simple user experience for non-crypto users.

Pricing and Payment Abstraction

XION's abstraction makes it a blockchain that supports stablecoin payments such as USDC. Users can complete payments directly with stablecoins without worrying about token fluctuations or cumbersome exchanges. This design improves the user experience, making blockchain applications closer to mainstream payment habits and easier to promote to a wider user base.

Through the design of these abstract layers, XION provides users with an intuitive experience close to traditional applications, significantly lowering the threshold for users to enter Web3.

Interoperability Abstraction: Solving the Dilemma of Multi-Chain Liquidity Fragmentation

In addition to allowing users to enjoy smooth blockchain operations on the current chain, XION still spares no effort in cross-chain interoperability abstraction. XION is mainly implemented through "Package Forwarding Middleware", which enables users to operate any other public chain from a control chain (such as XION). With the integration of this middleware and the general abstract framework, XION provides a simplified protocol-level interface. As shown in the figure below, XION allows users to seamlessly perform operations on any chain integrated with XION, with a consistent and smooth experience.

XION's interoperability abstraction effectively solves the problem of decentralized user accounts in the current multi-chain environment. Users can link accounts on different blockchains to the XION meta account, thereby managing assets on all chains with a "central account".

To achieve this goal, XION uses a variety of symmetric communication methods to build reliable, orderly and authenticated communication channels between different blockchains. This interoperability abstraction makes it possible to innovate new cross-chain applications, allowing multi-chain users to enjoy a smooth and integrated operating experience.

Token Economics Design

XION is a Proof of Stake (PoS) blockchain based on the Cosmos SDK. Its native token, XION, has multiple uses, giving the ecosystem wider utility:

· Network fees: Transactions on the XION network require fees, which are innovatively used to offset the number of new tokens minted. As network usage increases, this mechanism may even achieve token deflation.

· Proof of Stake Security: As a PoS network, XION relies on validators to maintain the security of the network. XION holders can delegate tokens to validators, or stake tokens to run their own validator nodes. In addition, XION's inflation is calculated only based on staked tokens, which significantly reduces the overall inflation rate of the token and ensures the sustainability of the network economy.

· Governance: XION holders can participate in network governance through proposals and voting, and influence important decisions in the ecosystem.

· Transaction medium and collateral: In the XION ecosystem, XION can be used as native liquidity and collateral, and supports peer-to-peer transactions between different applications and accounts in the ecosystem.

Among them, the "network fees offset the newly added inflation tokens" and "only staked tokens are counted in inflation" mechanisms in the first two functions represent the innovative adjustments made by XION to optimize inflation. In the past few years, many new public chains and their ecosystems have tried to attract validators and stakers through abnormally high staking rewards. However, this practice often leads to hyperinflation, causing tokens to depreciate rapidly, and ultimately affecting the stability and security of the network. Therefore, XION makes the following two important adjustments to alleviate inflation by expanding the Cosmos mint module:

· Fees offset inflation: XION uses the fees collected in each block to offset the number of new tokens minted. For example, if the inflation demand is 1,000 tokens and the block fees accumulate 600 tokens, only 400 tokens need to be added, thereby reducing the pressure on the total supply. As user activity increases, this mechanism is expected to further alleviate inflationary pressures and may even bring deflationary effects.

· Only staked tokens are counted for inflation: Unlike the inflation model of Cosmos Hub, XION only calculates inflation based on staked tokens. This approach makes the annualized rate of return (APY) of stakers more stable and is not affected by fluctuations in the number of unstaked tokens, thereby attracting participants who focus on long-term returns and effectively reducing short-term arbitrage.

In addition, XION officials recently announced that they will use the USDC stablecoin issued by Circle as the main trading currency, becoming the first blockchain priced in USDC. All products built on XION will be denominated in USDC, and all transactions will be free of gas fees. This design significantly reduces the risk of market volatility and provides users with a more predictable and secure way to trade. It not only reduces users' concerns about crypto market volatility, but also simplifies the trading experience, making XION more acceptable and usable by the mainstream market.

Chain abstraction track competition pattern

Chain abstraction aims to solve two key problems in the blockchain industry. The first is that the user experience is not friendly, and the threshold for understanding blockchain-related use is high. Various cryptographic concepts such as externally owned accounts (EOA) wallets and Gas are all barriers that discourage new users, making it difficult to achieve seamless interaction like Web2 applications. Secondly, the status quo of multiple chains inevitably leads to the dispersion of liquidity and users, forming isolated ecosystems.

Of course, different projects have different understandings and entry points of chain abstraction.

From the perspective of simplifying user operations and encapsulating the difficulty of operations, projects such as CoWSwap, UniswapX, etc., which are biased towards intentions, or even smart contract wallets, can be included in the category of chain abstraction.

From the perspective of cross-chain interoperability, the industry's early general interoperability protocols such as Cosmos and Polkadot can also be considered track OGs. More recent ones include cross-chain communication protocols such as Layerzero, Wormhole, and Axelar, and even interoperability protocols within a specific ecological range, such as OP superchain, which can all be considered track players.

Although these solutions can still be included in the concept of chain abstraction, they are limited to the development stage of their industry. At the current stage, the track players can basically integrate the corresponding solutions of the two key issues of user experience and interoperability, but they focus on user experience and interoperability. Here we mainly select Particle Network, NEAR and ZetaChain for comparison with XION.

NEAR Protocol: Chain abstraction solution with account aggregation and multi-chain signature as the core

NEAR is a Layer 1 blockchain of sharded proof of stake. Its core chain abstraction functions are as follows:

· Account Aggregation: Allows users to integrate multiple operations in one account, simplifying the management requirements of cross-chain, wallets and gas fees. In addition, NEAR supports user-friendly account names (for example, wu.near), providing a more intuitive account management method than traditional blockchains. NEAR's FastAuth system further lowers the user's entry threshold, allowing users to register with email addresses and combining biometrics to replace complex private key management, which greatly enhances the smoothness of the user experience.

· Multi-chain signature support: Through the NEAR MPC (multi-party computation) network, NEAR supports accounts with corresponding remote addresses on other chains, and can sign transactions and perform operations from these addresses. The signing nodes in the MPC network do not rely on explicit private keys, but use a threshold signature protocol that supports key sharing and dynamic node changes, thereby achieving continuous access in a cross-chain environment.

· Meta Transactions (NEP-366): NEAR implements Meta Transactions through NEP-366, allowing users to perform transactions without holding Gas tokens in advance.

ZetaChain: Cross-chain asset management with Omnichain Smart Contracts

ZetaChain focuses on cross-chain asset and transaction management, and solves asset flows and contract operations between different chains through Omnichain Smart Contracts. Users can directly call smart contracts of other chains on ZetaChain, making cross-chain transactions and asset management easier.

In the ZetaChain 2.0 upgrade plan, the official also proposed a series of potential upgrades to realize the first universal Ethereum virtual machine (EVM) and full-chain abstraction, including full-chain accounts that enable contracts on ZetaChain to interact with native contracts on the connected chain.

Particle Network: Cross-chain account and liquidity integration based on Universal Accounts

Particle Network uses Universal Accounts and Universal Gas to allow users to manage assets on multiple blockchains with just one account, avoiding the fragmentation of accounts and balances between multiple chains. At the same time, Universal Gas allows users to pay cross-chain transaction fees with any supported tokens, greatly reducing the difficulty of users in operating Gas fees.

Overall, Particle's solution focuses on multi-chain interoperability and liquidity integration. Universal Accounts is like a multi-chain wallet account, hiding those complex cross-chain and other complex operation concepts, thereby optimizing the user experience.

Based on existing documentation, Particle Network's L1 focuses more on serving as a coordination and settlement layer for cross-chain transactions, acting as a cross-chain middleware, rather than carrying diversified application development and ecosystem expansion like ecological L1s such as NEAR and XION. This middleware solution enables Particle Network to focus on improving the accessibility and interoperability of multiple chains rather than building a complete ecosystem, and therefore has a significant difference in positioning from other ecological L1 public chains.

Differentiation of XION

Comparing XION with the above three projects, we can clearly feel some differences between XION and them: XION emphasizes its own user experience as an L1 blockchain. It can even be said that it is an L1 blockchain designed specifically to solve the problem of popularizing Web3 applications. Its goal is to eliminate technical barriers in user experience and allow non-technical users to directly participate in Web3 applications. Through universal abstraction, XION realizes the abstraction of accounts, signatures, fees, and interoperability at the protocol layer, so that users no longer need to understand complex concepts such as private keys and gas fees.

XION is positioned as an L1 public chain built for consumers. In addition to the current crypto industry users, XION aims to attract new users outside the industry. Therefore, its ecosystem will not be like the current public chain's uniform DeFi financial applications, but will cover multiple fields such as consumption, games, social finance, crowdfunding, and payment, and realize new use cases that were previously difficult to achieve. Among them, the EarnOS application built on XION is a typical example. EarnOS uses blockchain technology to disrupt the advertising market worth more than one trillion US dollars. In the second quarter of 2024, EarnOS launched a beta version, which has received more than $12 million in committed spending, attracted more than 500 creators to participate, and reached cooperation with more than 40 global brands and institutions. After the launch of the beta product, EarnOS teamed up with well-known brands such as UberEats, Baskin Robbins, Sunglass Hut and The North Face, and achieved more than 950,000 task completions.

Summary

As a seed player in the chain abstraction track, XION has achieved substantial breakthroughs in account management, signature, payment and interoperability with its general abstraction technology that simplifies user experience. XION's design goal is to break the high threshold of blockchain user experience and provide users with a smooth experience similar to Web2. It not only attracts existing Web3 users, but also clears the way for mainstream users to join the Web3 ecosystem.

However, while the chain abstraction track is advancing rapidly, it is also facing the challenges of "air infrastructure" risks dominated by infrastructure and unclear market demand. Most current chain abstraction projects focus on the construction of general protocols, but there is a gap in practicality and market matching, and even new fragmentation phenomena have been triggered due to compatibility requirements. In addition, chain abstraction technology may also aggravate the resource imbalance between mainstream public chains and long-tail public chains, affecting the development of the decentralized ecosystem. Therefore, while leading the innovation of chain abstraction, XION also needs to continue to explore how to balance the relationship between user experience, market demand and technology expansion in the future to consolidate its long-term value in the chain abstraction track. All of this also points out a new development direction for the chain abstraction field: not only to improve the technological advancement, but also to achieve the true popularization of blockchain around user needs.

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