Caliber June 11, 2024

Special thanks to the NEAR team for their valuable review and support in crafting this analysis.

Introduction

The pace of Web3 technology development is impressive, but it is also increasing fragmentation across blockchain networks, complicating the user experience and raising barriers to entry. Chain abstraction has emerged as a key solution, providing a cohesive interface that simplifies navigation across different blockchains, thereby enhancing seamless interaction with decentralized applications (dApps).

Chain abstraction reduces the need to manage multiple wallets, handle different gas fees, or connect assets between chains. It allows users to interact with dApps easily, driving greater accessibility and adoption of Web3 technology. The NEAR protocol leads this innovation front by integrating technologies such as Multi-Party Computation (MPC) for robust key management, decentralized interfaces that deliver a consistent user experience, and multi-chain signatures for flexible cross-chain transactions. This approach not only minimizes current fragmentation but also sets the stage for a more integrated and user-centric blockchain ecosystem.

This article will explore how chain abstraction works, show how the NEAR Protocol is leading this change, and discuss how it could revolutionize the use of decentralized apps in the future.

Chain Abstraction in NEAR protocol

Overview

Chain abstraction in NEAR Protocol aims to simplify the user experience by unifying the functionality of various blockchains. This abstraction layer allows users to interact seamlessly with multiple blockchains through a single NEAR account. This unification not only enhances user experience but also expands the potential demand for dApps, bringing up greater adoption and innovation within the Web3 space.

Imagine a scenario where a user wants to buy a token that is only available on a specific blockchain. Traditionally, this would require setting up a new wallet, acquiring native tokens for transaction fees, and understanding the blockchain's interface. Chain abstraction removes these barriers. Users can perform transactions across different blockchains using their existing NEAR wallet and interface, without worrying about the specific details of each blockchain. This concept is similar to how the Internet works—users can visit many different websites without understanding the underlying infrastructure or protocols.

How it works

Account Aggregation

NEAR's account system is designed to manage multiple keys within a single account, enabling users to transact on various blockchains without having multiple seed phrases or private keys. This feature, known as account aggregation, allows a single NEAR account to hold keys for different blockchains, making cross-chain interactions seamless. Users can rotate keys without changing their account address, enhancing security and convenience.

For example, a NEAR account can store multiple keys, each with specific permissions. If a key is compromised, it can be replaced without affecting other keys or the account itself. This flexibility is a significant improvement over traditional EVM chains, where each new key pair requires a new address and the migration of assets.

Multi-party computation

Multi-party computation is the backbone of NEAR's chain abstraction. It ensures that private keys are never fully exposed by distributing key generation and signing processes across multiple nodes. Each node holds only a part of the key, and they collaboratively sign transactions without any single node knowing the entire key. This approach significantly enhances security and reduces the risk of key compromise.

The MPC network in NEAR supports key generation and transaction signing for multiple blockchains, including EVM chains and Bitcoin. When a user wants to sign a transaction, each MPC node generates a partial signature, which is then combined to form a full signature. This decentralized approach to key management is critical for secure and efficient cross-chain transactions.

MPC is particularly useful for cross-chain transactions where multiple approvals are required before any action is taken. The coordination required to manage signing policies and approve transactions happens off the blockchain, which can introduce risks related to centralization. However, the benefits of MPC, such as flexible signing processes and detailed control over who can access and sign off on transactions, outweigh these risks.

Traditional MPC networks often rely on deposit-based or bridge-based models, where users must lock assets in smart contracts to facilitate cross-chain transactions. These models can introduce additional layers of complexity and risk, such as managing multiple blockchain addresses and navigating through bridging processes. In contrast, NEAR's MPC implementation uses an account-based pattern, reducing the complexity for users. By enabling a single NEAR account to manage multiple blockchain addresses, NEAR's MPC network simplifies the process and enhances security.

Chain Signatures

Chain Signatures is a significant innovation of NEAR’s chain abstraction. They enable NEAR accounts to sign transactions on multiple blockchains using a decentralized MPC network and dual quorum security model. This helps users avoid complex bridging mechanisms when interacting cross-chain. With chain signatures, a NEAR account acts as a master account, which manages transactions across various networks, including Bitcoin, Ethereum, Cosmos, and more. The core mechanism involves NEAR validators or MPC nodes signing a payload, such as a transaction intended for another blockchain. This payload, once signed, is sent to the destination chain, facilitating seamless cross-chain transactions.

Multichain gas relayer

The Multichain gas relayer is another key component of NEAR's chain abstraction. This solution simplifies the process of covering transaction costs across different blockchain networks. Users can utilize NEAR or NEP-141 tokens to pay transaction fees on any blockchain network without needing to own native gas tokens. This feature enhances the user experience by providing a seamless and cost-effective way to interact with multiple blockchains.

Data Availability layer

Ensuring that transaction data is reliably stored and accessible is crucial for maintaining blockchain integrity. NEAR’s data availability layer provides a decentralized infrastructure for data storage, ensuring that all transaction data is available and verifiable. This layer supports fast and efficient data retrieval, which is essential for high-performance blockchain applications.

For instance, NEAR's data availability layer allows Ethereum rollups to transfer their execution layer to NEAR, benefiting from lower costs and faster transactions without compromising security. This integration showcases how NEAR's data availability solutions can enhance the performance and scalability of other blockchain networks.

Decentralized sequencers

Decentralized sequencers play a fundamental role in transaction validation and achieving consensus within the network. They eliminate the need for a central authority, promoting transparency and reducing the risk of manipulation. Sequencers receive, organize, and execute transactions, ensuring they are included in blocks in a decentralized manner.

NEAR’s decentralized sequencers are crucial for maintaining the integrity and reliability of the blockchain, as they handle critical tasks without relying on a single point of failure. This decentralized approach enhances the security and robustness of the network, making it more resilient to attacks and failures.

Differences between Chain Abstraction and Account Abstraction

Account Abstraction (AA) in Ethereum aims to enhance the user experience by simplifying account management and transaction execution. Key features of AA include the use of UserOperation objects, multi-factor authentication, and flexible gas payments. This system is compatible with EVM chains like Arbitrum, Polygon,… and is supported by wallets such as Ambire, Safe,... In contrast, Chain Abstraction (CA) on the NEAR protocol focuses on cross-chain interoperability, enabling seamless interactions across multiple blockchains from a single interface. CA simplifies user interactions by eliminating the need for cross-chain bridges, allowing users to manage assets and transact across different blockchains without understanding the underlying technology. It is crucial to discuss AA when analyzing CA to prevent confusion between these two concepts.

Applications and Use Cases

Potential use cases for Chain abstraction

With the power of Chain Abstraction, we can significantly streamline multi-chain decentralized application development and operations, making complex blockchain interactions user-friendly and efficient more with users.

Trading blockchain assets without transactions:

• Using chain signatures, users can trade assets across different blockchains by swapping the ownership of NEAR accounts that control funds on various blockchains. This method keeps native tokens on their respective blockchains and enables atomic trades across chains with faster settlement times.

• Traditional cross-chain asset trading typically relies on bridges, leading to longer settlement times and higher complexity. Chain signatures simplify this process by allowing NEAR accounts to control assets on different blockchains. When users trade, they swap control of NEAR accounts that hold the assets, ensuring atomicity and reducing the time required for settlement. This approach enhances the efficiency and security of cross-chain trades by leveraging NEAR's MPC network for transaction signing and validation.

Delegated Smart Contract Permissions:

• Chain signatures enable NEAR smart contracts to execute actions on behalf of users, such as recovering keys for an app user or rebalancing pools based on specific conditions.

• Delegated smart contract permissions allow for automated and secure management of user accounts and assets. For instance, a social recovery contract can facilitate key recovery by involving a user’s trusted contacts. Similarly, smart contracts can execute predefined actions, such as rebalancing asset pools, without direct user intervention. This automation enhances the functionality and security of decentralized applications by leveraging NEAR’s chain signatures to manage permissions and execute actions across different blockchain networks.

These features not only simplify operations but also open up numerous possibilities for multi-chain dApps across various areas.

Cross-chain zero-friction onboarding:

• Using the unique features of the NEAR account model, such as Keypom, users can experience zero-friction onboarding and transactions on NEAR, which can then extend to other chains through chain signatures.

• Keypom leverages NEAR’s account model to provide a seamless onboarding experience by creating restricted NEAR accounts and funding them for initial interactions. Users receive keys with limited control, allowing them to engage with decentralized applications without managing complex account setups. This model can be extended to other chains via chain signatures, facilitating easy onboarding across multiple blockchain networks and enhancing user adoption through simplified processes.

DeFi on Bitcoin and other non-VM chains:

• Chain signatures enable NEAR smart contracts to control externally-owned accounts on non-smart contract chains like Bitcoin. This allows developers to build DeFi applications for Bitcoin, utilizing NEAR as a smart contract layer.

• By enabling NEAR smart contracts to manage Bitcoin accounts, chain signatures open up DeFi possibilities for non-smart contract blockchains. For example, a decentralized exchange for Bitcoin Ordinals can be built using NEAR smart contracts to manage deposits and verify trades. This approach leverages NEAR’s MPC and decentralized sequencer infrastructure to ensure secure and efficient cross-chain transactions, extending the functionality of Bitcoin and other similar blockchains.

Multichain Decentralized Exchanges:

• One of the most desired but complex-to-build use cases is a decentralized exchange (DEX) that works across most, if not all, chains. Currently, users must default to centralized exchanges for such a multichain experience due to the complexity of bridging, gas, and handling separate wallets. With Account Aggregation, DEX smart contracts can live on NEAR while having deposit addresses across all chains. This means there is no need to bridge assets to a single chain to swap or for the user to bridge to the chain where assets have liquidity. Instead, they can easily swap BTC on the Bitcoin network for OP on Optimism using such a NEAR smart contract.

Multichain dApps:

• Chain abstraction demonstrates its potential to revolutionize multi-chain dApps, extending its capabilities beyond decentralized exchanges to include lending protocols, staking platforms, and decentralized autonomous organizations (DAOs).

• For instance, a developer could build a lending platform on NEAR that interacts with assets on Ethereum, Bitcoin, and other chains, allowing users to collateralize, lend, or borrow assets across these networks seamlessly. Similarly, a DAO could operate transparent governance mechanisms that integrate voting systems from multiple chains, enhancing participation and security for its members. NEAR’s efficient consensus mechanism and low transaction costs further amplify its suitability for complex, high-frequency trading platforms, and financial instruments, making it a practical and attractive option for developers looking to create next-generation dApps that require robust multi-chain functionality.

• Practical examples:

  • Lending protocols: At present, platforms like Burrow utilize the Rainbow Bridge to enable cross-chain interactions. However, the future lies in Chain Abstraction, which will allow even greater simplification and standardization across blockchain interactions. Users can deposit digital assets as collateral on one blockchain and borrow against them on another due to this advanced feature, promoting smooth capital movement and enhanced financial flexibility. This advanced feature also helps developers by streamlining the incorporation of various blockchain protocols, consensus mechanisms, and smart contract languages. The barrier to creating complex multi-chain applications will be significantly lower, reducing both the potential for errors and the complexity involved.

  • Staking platforms: Chain Abstraction aids in creating staking platforms that can operate over multiple blockchains, enhancing user engagement by allowing staking of various assets from different chains, all managed through a single NEAR-based interface. This not only simplifies the user experience but also maximizes the earning potential across different networks.

  • Decentralized Autonomous Organizations: NEAR enhances DAO functionality by allowing decentralized governance activities to span across blockchains, where decisions made on the NEAR platform can directly influence actions on connected chains. This is crucial for DAOs that manage cross-chain assets or projects that require coordinated decision-making across a decentralized network.

  • Decentralized Exchanges: Ref 2.0, powered by NEAR's Chain Abstraction, is redefining the multi-chain DEX landscape. This advanced platform supports trading between multiple assets across different blockchains, incorporating complex features such as liquidity pooling and yield farming, all optimized through NEAR’s fast and low-cost transactions. NEAR's revolutionary approach allows for trustless signing of transactions across chains, eliminating the need for traditional cross-chain bridges.

Web2 Authentication-Controlled blockchain accounts:

• This use case involves managing Web3 accounts using existing Web2 authentication methods, such as passkeys, OAuth, or similar protocols. Users can interact with blockchain applications on multiple networks (e.g., Ethereum, Polygon) by validating their identity with a secure token, which is then used to sign transactions.

• Web2 authentication-controlled blockchain accounts streamline user onboarding by integrating familiar Web2 authentication methods. By using secure tokens to validate identities, NEAR allows users to manage blockchain accounts without dealing with complex seed phrases or key management. This integration enhances security and user experience, making it easier for users to adopt blockchain technology. The NEAR contract that supports secure token authentication ensures that users can interact with various blockchain networks securely and efficiently.

Real-World Applications

SWEAT Economy:

• This application utilizes NEAR’s multichain gas relayer to enable users to send transactions from NEAR to the BNB chain, with gas fees paid using SWEAT tokens. This integration demonstrates how chain abstraction can simplify the transaction process and enhance user experience by removing the need for managing multiple gas tokens.

• The SWEAT Economy’s use of the multichain gas relayer illustrates the practical application of abstracting gas fees across blockchains. By allowing users to pay gas fees with SWEAT tokens, NEAR Protocol effectively eliminates the barrier of acquiring native gas tokens for each transaction, streamlining the user experience and promoting broader adoption. This approach leverages NEAR’s account aggregation and multichain capabilities to facilitate seamless cross-chain transactions, enhancing the usability of blockchain technology for non-technical users.

East Blue:

• Leveraging NEAR’s chain signatures, East Blue pioneers Bitcoin DeFi use cases, allowing users to extend Bitcoin’s functionality through smart contracts. This approach opens new avenues for Bitcoin applications, such as decentralized finance, without compromising security.

• East Blue’s implementation of chain signatures to facilitate Bitcoin DeFi transactions is a significant advancement in blockchain interoperability. By utilizing NEAR’s MPC key generation and decentralized sequencers, East Blue enables secure and efficient cross-chain transactions. This use case highlights the robustness of NEAR’s chain signatures in extending the capabilities of legacy blockchains like Bitcoin, providing secure access to DeFi applications and expanding the functionality of Bitcoin through seamless interaction with smart contracts.

LiNEAR:

• LiNEAR develops a multichain, multi-asset staking framework on top of EigenLayer, facilitating secure restaking of non-ETH assets, including NEAR, for application security. This framework showcases the versatility of NEAR’s chain abstraction in supporting diverse staking mechanisms.

• The multichain, multi-asset staking framework developed by LiNEAR leverages NEAR’s account aggregation and MPC key management to support the secure restaking of assets across multiple blockchains. By integrating with EigenLayer, LiNEAR ensures that staking and restaking processes are secure and efficient, utilizing NEAR’s robust data availability and decentralized sequencer infrastructure. This enhances the security and scalability of staking mechanisms, making it easier for users to manage and stake diverse assets across different blockchain networks.

Mintbase:

• Mintbase enables NEAR-based wallet holders to purchase Ethereum-based NFTs directly, illustrating the seamless interoperability between NEAR and Ethereum ecosystems. This use case highlights the potential of chain abstraction to bridge different blockchain networks and simplify user interactions.

• By utilizing NEAR’s chain signatures and multichain gas relayer, Mintbase eliminates the need for users to switch between different wallets and manage multiple blockchain accounts. This interoperability enhances the user experience by providing a unified interface for cross-chain transactions, demonstrating the practical benefits of chain abstraction in the NFT market.

Future work and open questions

Potential improvements

Enhanced blockchain support:

• NEAR’s MPC currently works with the ECDSA signing scheme, allowing it to function seamlessly on any blockchain that uses ECDSA. It would be beneficial to explore and add support for additional signing schemes such as EdDSA and Schnorr to further improve its chain abstraction capabilities.

• Expanding support to include these additional signing schemes will provide users with more options and greater flexibility in interacting with different blockchain ecosystems. However, supporting multiple signing schemes presents a challenge in managing the same user addresses across different blockchains, as these addresses will no longer be identical due to the use of different schemes. This expansion will need strong protocols for interoperability and full support for different cryptographic signatures, making NEAR a more flexible and inclusive platform.

Advanced data availability solutions:

• Further development of data availability solutions to ensure even faster and more reliable data access and storage.

• Improving data availability solutions is crucial for maintaining the integrity and performance of blockchain applications. NEAR’s focus on advanced data availability mechanisms can enhance the speed and reliability of data retrieval, supporting high-frequency trading, real-time gaming, and other applications requiring quick and dependable access to blockchain data. This involves optimizing decentralized storage systems and ensuring efficient data replication and retrieval protocols.

Refinement of MPC techniques:

• Enhancing the efficiency and security of MPC techniques used in key generation and transaction signing.

• Continuous refinement of MPC techniques is essential to improve the scalability and security of NEAR’s chain abstraction solutions. By optimizing the computational processes involved in MPC key generation and transaction signing, NEAR can reduce latency and enhance the overall user experience. This involves advancing cryptographic algorithms and implementing more efficient multi-party computation protocols to handle increasing transaction volumes and user demands.

Open questions

• Scalability: How scalable are the current chain abstraction mechanisms as the number of validators or MPC nodes and transactions grows?

  • Addressing scalability is a critical challenge for NEAR’s chain abstraction framework. Ensuring that the system can handle a growing number of validators or MPC nodes and transactions without degrading performance requires innovative scaling solutions, such as sharding, improved consensus algorithms, and optimized network protocols. Future research should focus on evaluating and enhancing the scalability of NEAR’s infrastructure to support widespread adoption.

• Security concerns: Are there potential security vulnerabilities in the MPC network or decentralized sequencers that need addressing?

  • Identifying and mitigating security vulnerabilities in the MPC network and decentralized sequencers is crucial to maintaining trust in NEAR’s chain abstraction solutions. Potential attack vectors, such as collusion between nodes or vulnerabilities in the key generation process, need to be thoroughly analyzed and addressed. Ongoing security audits, advanced cryptographic research, and robust security protocols are essential to ensure the integrity and security of the system.

Final thoughts:

Impact of NEAR Protocol’s Chain Abstraction across the ecosystem

• NEAR Protocol's Chain Abstraction makes blockchain development easier by hiding the complex interactions between different blockchains. Developers can focus on building strong applications without worrying about the complicated details of each blockchain. It also makes transactions across multiple blockchains smooth, simplifying development and cutting costs.

• For users, NEAR’s Chain Abstraction offers a simpler and more unified experience. Users can interact with different blockchain platforms through one easy-to-use interface, making it much easier to learn and use. This user-friendly approach is key to wider adoption, potentially boosting trust and the number of transactions in the NEAR ecosystem.

The future of blockchain usability

• While NEAR Protocol is a major player in chain abstraction, it's not the only one making strides in this area. The blockchain world is full of new developments, with many different platforms working towards a more connected and easy-to-use Web3 experience. From Ethereum's improvements in interoperability to newer players introducing innovative solutions, the dynamics of collaboration and competition in this space are driving the development of technologies designed to reduce fragmentation across the blockchain ecosystem.

• Together, these innovations are building a foundation for a future where the complexity of blockchain is effortlessly hidden from the user. This push for chain abstraction is a major step toward making blockchain technology common and easy to use, preparing for a digital world where technology supports user interaction smoothly without being too complex. Looking ahead, the evolution of chain abstraction will likely play a crucial role in the widespread adoption and practical application of Web3 technologies.

References

• Hub, N. B. (2024, April 17). The Power of Chain Abstraction and Chain Signatures on NEAR Protocol. Medium. https://medium.com/@nearbalkans/the-power-of-chain-abstraction-and-chain-signatures-on-near-protocol-2f95b4338a7f

• NEAR Team. (2024, April 25). NEAR - Your Gateway to an Open Web | NEAR Documentation. Docs.near.org. https://docs.near.org/

• Polosukhin, I. (2024, January 24). Why Chain Abstraction Is the Next Frontier for Web3. NEAR Protocol. https://pages.near.org/blog/why-chain-abstraction-is-the-next-frontier-for-web3/

• Polosukhin, I., Millar-Durrant, D., Ravi, G., Ortega, D., & Anderson, M. (2024, February 15). Unlocking Web3 Usability with Account Aggregation. NEAR Protocol. https://pages.near.org/blog/unlocking-web3-usability-with-account-aggregation/

• Ref Finance. (2023, December 13). A Thesis on Ref 2.0 as a Chain Abstracted DEX. Medium. https://ref-finance.medium.com/a-thesis-on-ref-2-0-as-a-chain-abstracted-dex-e79d14fb0112