The number one objective rallying the current generation of builders is “the next billion users.” How can we scale both the utility and the technology to support 10x the amount of users and 100x the amount of usage that exists today?

Spanning Labs sees two major themes when thinking about crossing the chasm between early adopters and the early majority.

First, finding true utility. The industry is consistently experimenting to improve use cases for the technology. Outside of financial applications, the industry is seeing traction in gaming, brand management, community/governance, and creative ownership; yet, the staying power of these applications is currently being tested.

Second, technical barriers are severely degrading the user (and developer) experience. Today, Network ecosystems are completely isolated from one another. To access certain applications, users must connect with multiple exchanges, bridges, and wallets, just to engage with a DeFi protocol, NFT project, or Web3 game. The number of users willing to hop through these steps to participate in the existing ecosystem is dwarfed by the potential total addressable market.

Spanning Labs, along with many other institutions, believes the future will unfold in the following way. First, more and more use cases and utility will be unlocked for users, and projects that correctly integrate blockchain technology will gain success. That’s why we’re investing in this space.

Second, as a result, demand for block space will increase and existing networks will not be able to successfully manage the stress on their networks. Instead of the “Network take all” mentality that exists today, networks will optimize for different features such as decentralization, security, privacy, speed, gas savings, etc. Blockchains are already optimizing today — Bitcoin focuses on pure decentralization, Ethereum targets smart contracts that enable DeFi protocols, Solana prioritizes cheap and fast transactions, Cosmos totes interoperability, Polygon Hermes specializes in privacy computation, and IPSF stores NFT images. As this trend continues, there is a need for these specialized networks to interface with one another. That’s what the Spanning Network seeks to solve.

How do we at Spanning Labs define network interoperability?

Interoperability allows multiple blockchain networks to interchange information and leverage data across them.

Interoperability deployed in the right way will decouple user’s experience from the underlying architecture of the application they are utilizing. 99% of Web2 users today don’t know or care which cloud providers or ISPs are powering their favorite application — it just works. Their experience is delightful and their interactions are seamless. The Web3 user experience needs to offer similar experiences for us to successfully onboard the next billion. In this article, we’ll highlight current problems in the space, why interoperability helps solve them, and some examples of interoperability in action.

The Monochain Ecosystem

Up to this point, the industry has only been constructing monochain ecosystems. By monochain ecosystems, we mean that users, developers, marketplaces, and protocols all are deeply, irrevocably tied to the single chain that they are utilizing.

For developers and decentralized applications, when they choose a specific chain, they are also implicitly choosing the users they can reach, auxiliary ecosystem applications (such as wallet providers, DEXs, etc.), and the underlying technology. As projects grow and their needs change, moving to a new chain is effectively like starting from scratch. If they do decide to introduce another network, they are required to redeploy their entire infrastructure on an alternate chain. This limitation would be similar to a Web2 developer choosing to host their app on AWS to access just Comcast users and copying and pasting a version of their app to GCP to reach others.

Users are struggling to participate in the ecosystem as a whole. If an Ethereum user wants to participate in a DeFi protocol built on an L1 in the Cosmos ecosystem, they are required to open new wallets and bridge over assets. If a new Web3 user wants to own a Solana NFT, they may have to head to a centralized exchange, purchase Solana, open a Solana wallet, then transfer it to their new Solana wallet. Users deserve a convenient end experience that should still be able to gain the benefits of decentralized technology and asset ownership without having to manage multiple accounts, send multiple transactions on different applications, nor pay fees to 3rd parties.

For networks, their almost exclusive focus has been to increase TVL and the number of applications built on their network. The goal has been to “win the game”. But as we’ve seen before, those that focus on trying to be the best at everything, end up doing nothing best. In reality, networks predominantly make revenue from the total transaction volume that exists on their network. They are paid based on the number of transactions that flow through their protocol — not the number of users nor the amount of TVL. In a monochain world, users and TVL are effectively the same as transaction volume. However, TVL doesn’t necessarily optimize for transaction volume and revenue. In a multichain world, transaction volume is much more independent, and optimized for users.

What Interoperability Helps Solve

Interoperability allows each chain to continue focusing on what they do best, developers to make architecture decisions that are best for their new use case, and users to maintain one identity across the blockchain ecosystem. In the same way that Web2 developers use MongoDB for storing user data, Stripe for processing payments, and Amazon S3 for storing images, we believe “Web3” applications will be built in the same way. Depending on the end application, teams may care more about decentralization/security over speed/gas savings or they may care about different focuses based on specific features within their application.

For Developers, instead of them being forced to inherit the scalability approach/market/ecosystem applications of the chain they are building on, they can build their solution to scale to their users’ needs. And depending on the interoperability solution that they end up choosing, just deploying a single contract is enough to reach a larger audience.

Users can say goodbye to the days of experiencing fractured liquidity on the assets that they own and managing multiple wallets. This allows them to access the true benefits of the underlying technology such as decentralization, transparency, and community.

For networks, they are allowed to specialize. It becomes less about the sheer number of “users” and more about how many applications with high volume are using their services to process transactions.

How does the Spanning Network approach interoperability?

The Spanning Network is unwaveringly focused on helping teams reach this interoperable future. We’re building for the teams that want to develop multichain applications on Day 1. Those teams that don’t want the chain they deploy on to limit their end users’ experience.

One of the first use cases that we’re working through with existing partners is access to a much larger audience. Applications deploying a multichain Spanning contract from the beginning of their project get access to users from any network across the entire Spanning Network. A contract can be deployed on Polygon network, while an Ethereum user can log in with their Ethereum wallet, mint the NFT paying Ethereum gas, and ultimately own that NFT on Polygon.

Second, many forward-thinking teams are building applications that utilize a multichain service architecture. For example, if you are a gaming company wanting to develop and deploy user avatars for game access on Ethereum, but want most in-game transactions to be processed on a much cheaper & faster network, Spanning supports your multichain development. Your game avatars can trade on OpenSea and collect royalties in ETH, but in-game transactions can be run for a fraction of the gas cost on alternate networks.

The same rings true for gaming companies wanting to build on their own specific sub or side nets who want seamless access to the parent network or even alternate networks in the blockchain ecosystem. We’ll go into more detail in another upcoming blog post featuring our potential gaming infrastructures.

While the Spanning Network is chain-agnostic, all of us on the Spanning Labs team are chain technology evangelists. As chain specialization becomes more mature, it’s critical that teams are thinking about multichain-first protocol development. The next one billion users will come from applications that streamline users’ experiences and appropriately promote the utility of the underlying blockchain technology. The next 1 billion will come from interoperability.

If this sounds exciting to you, join us at our in-person hackathon in San Francisco during SF Blockchain Week. Sign up here.

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