OKG Research: User Intent-Driven Transformation of Web3 Applications

Author: Samuel QIN, OKG Research

In the current rapid evolution of the cryptocurrency market, user growth has become the cornerstone of sustainable industry development. The mainstream view is shifting from pure technological exploration to a greater emphasis on application value in driving the industry forward. Although the Web3 ecosystem has developed rapidly in recent years, and the entry of traditional capital has brought new vitality, there are still some noteworthy aspects regarding the expansion at the application level.

The increasingly expansive public chain ecosystem can be overwhelming, and the rapid development of the Web3 ecosystem has created a demand for cross-chain interoperability, allowing for greater value to be realized by leveraging advantageous resources across different chains. This reflects the natural evolution of the industrial ecosystem, akin to the development of e-commerce platforms from a single platform to a fully integrated industry chain.

However, from the perspective of public chain competition, the ecological moat built around killer applications and users is an absolute reliance for ensuring industry advantages. Therefore, setting higher compatibility thresholds and migration costs will be a key consideration. From the perspective of technological development, the different consensus mechanisms and programming languages create numerous challenges for cross-chain technology itself, which also poses technical barriers to value transfer and information exchange between different blockchains.

The contemplation of the relationship between public chains and applications can, to some extent, find inspiration from the different mobile ecosystems of Apple and Android.

Table Source: OKG Research

Apple employs an integrated hardware and software strategy. This strategy ensures a high degree of compatibility between hardware and software, providing a smooth and consistent user experience. In contrast, Android allows multiple manufacturers to use its operating system, resulting in a diverse hardware ecosystem, but also leading to device fragmentation and varying application quality.

This perfectly illustrates two different ecological development approaches: hardware-software integration can better define its own ecological closed loop, where application entry and migration require relatively higher costs; while an open system needs to accommodate a wide variety of devices, and user experience is significantly related to hardware.

As an open environment, a public chain system needs to form its own competitive advantage by minimizing development barriers and enhancing user experience. Currently, the following strategies are typically employed:

• Modular Functional Components: Providing easy-to-integrate modular development tools, such as smart contract templates, SDKs, and API interfaces, to help developers quickly build applications. For example, Ethereum's Truffle framework and OpenZeppelin's smart contract library offer developers rich resources and simplify the development process.

• Improving Underlying Infrastructure: Optimizing the performance and security of the blockchain to ensure high throughput, low latency, and strong security guarantees. For instance, Solana achieves high TPS through its high-performance consensus mechanism, meeting the demands of large-scale applications.

• Enhancing User Experience: Developing intuitive and secure wallets and user interfaces to lower the entry threshold for users. For example, the OKX Web3 Wallet, compared to single-chain ecological wallets or multi-chain wallets that only support a few chains, currently supports over 100 public chains, providing a one-stop user management function and a rich DApp ecosystem, offering users a comprehensive and convenient Web3 experience.

Although the overall user-friendliness of Web3 has significantly improved, for newcomers just entering Web3, understanding the on-chain workflow can be quite a laborious process, while expressing their intentions often takes just a sentence. If at this moment you need to transfer 1 ETH from the Ethereum network to the Polygon network, the specific process can be broken down into:

Flow Chart Source: OKG Research

From the flowchart, we can see:

• Users need to assess their account balance (if insufficient, they need to gather ETH from other wallets to the designated Ethereum wallet)

• Confirm the direction of the transfer

• Confirm the gas fee

• Confirm receipt

If users only need to focus on whether their transfer needs are ultimately met, delegating the remaining cross-chain checks to a specific network or application, then the interaction process will be greatly simplified.

Imagine if you are planning to embark on a journey to different countries, and if you are using an international credit card to shop globally, as a user, you do not need to worry about the currency types of different countries, the exchange rates between currencies, the settlement processes for cross-border payments, or the payment network systems of different countries. You only need to swipe your card, and the entire complex process will be automatically completed at the underlying level. This is a form of "abstraction," hiding complexity and providing a simple user experience.

The previously mentioned "chain abstraction" follows the same principle, with its core value being:

• Simplifying complexity: Users only need to specify the "starting point" and the endpoint.

• Unified interface: The underlying chains or any bridging protocols involved are managed by a single simple interface.

• Smart routing: Automatically selecting the optimal path and the best bridging protocol.

• Error handling: Automatic retries, handling exceptions automatically, and providing unified error feedback.

We can consider chain abstraction as a technical means aimed at solving the fragmentation of assets, liquidity, and accounts in a multi-chain ecosystem. It achieves cross-chain interaction based on user intent through a unified interface and standards, simplifying the user experience so that users do not need to understand the details of the underlying chains to complete cross-chain operations and value transfers. This reduces complexity for users in a multi-chain environment and enhances interoperability.

However, regarding the current development of chain abstraction technology, the existing technical implementations still face numerous challenges, such as delays in cross-chain message transmission, security and cost issues of cross-chain operations. Some projects are attempting to improve these issues through lightweight cross-chain protocols for asset transfers or decentralized gateways for cross-chain communication, but large-scale deployment is still limited.

Currently, mainstream views categorize chain abstraction into four levels: application, permission, solving/execution, and settlement, known as the CAKE Framework, which breaks down user intent layer by layer to obtain specific optimal execution steps.

*Graph Source: OKG Research, https://frontier.tech/the-cake-framework

However, the process involves various issues based on user subjective intent, cross-chain, cross-DApp, trusted execution environments, state confirmation, etc., each of which seems quite challenging to resolve. Currently, many projects in the industry are pushing for the application of chain abstraction technology based on user needs, and they are in a stage of continuous development and iteration. Multi-chain wallet applications, represented by OKX Web3 Wallet, can serve as an important infrastructure in the chain abstraction track. Chain abstraction technology has already shown initial results in OKX Web3 Wallet, manifested as simplified multi-chain asset management and convenient cross-chain interaction. Users can manage assets across different chains on the same interface, avoiding frequent network switches, and can complete cross-chain transfers using a single wallet, significantly reducing the complexity of cross-chain operations. The launched smart contract wallet function has also improved the shortcomings of traditional externally owned accounts (EOA) wallets in aspects such as multi-chain wallet management integration, user authorization, and gas fee consolidation.

In many past discussions, multi-chain wallets and chain abstraction have been compared, with discussions mostly focusing on whether wallet applications that have already significantly improved interaction experiences compared to EOAs still need chain abstraction. Here, I would like to discuss two directions:

• Does user experience need to be significantly improved in the current application context? In the current multi-chain environment, there is indeed significant room for improvement in user experience, but the urgency of demand may not be uniform. Taking cross-chain transactions as an example, current mainstream multi-chain wallets still require users to manually switch networks and pay gas fees, which does not truly resolve the fragmentation issue of the multi-chain ecosystem. However, in practical applications, the flow of funds on-chain often tends to be opportunistic, and users are more inclined to choose known paths or well-optimized applications. Due to the Matthew effect of leading applications, many projects have spontaneously invested in optimizing cross-chain processes. For instance, many DeFi protocols simplify users' cross-chain operations by integrating cross-chain bridges and liquidity aggregators, providing a more convenient experience. For chain abstraction projects, relying solely on enhancing user experience narratives is insufficient to form a strong competitive barrier. Therefore, the value of chain abstraction lies more in its role as infrastructure, gradually achieving seamless interoperability across chains, currently focusing on re-integrating liquidity between chains, and in the future supporting potential large-scale user migrations and cross-chain application scenarios.

• Liquidity integration is an important issue that the current industry cannot avoid, especially in the process of migrating Web2 users to Web3. The continuous influx of incremental users is crucial for future development, but the key to this transition lies in providing a more convenient user experience, especially in the integration of assets, transactions, and payment scenarios in a multi-chain environment. To ensure a smooth migration from Web2 to Web3, it is essential to lower the interaction barriers faced by initial users. Chain abstraction technology helps users reduce cumbersome operational steps in a multi-chain environment through unified interfaces and cross-chain resource integration, allowing Web2 users to seamlessly enter the Web3 ecosystem. For example, chain abstraction can automatically manage the liquidity of multi-chain assets, simplify payment processes, and integrate transaction experiences across different chains, thereby addressing the fragmentation issue in the Web3 environment. This liquidity integration not only enhances user experience but also lays a solid foundation for the widespread application of Web3 and large-scale user migration.

Chart Source: OKG Research

It can be seen that the application scenarios of chain abstraction are actually laying the groundwork for the true maturity of Web3. It not only aims to solve the interoperability issues within the current blockchain ecosystem but also significantly reduces complex operations in a multi-chain environment through cross-chain resource integration and liquidity management.

These improvements are driving the Web3 ecosystem towards a more open and interconnected direction. In the future, chain abstraction is expected to become an important pillar for the large-scale adoption of decentralized applications, providing efficient and seamless infrastructure support, helping more users easily enter the Web3 world and achieve seamless multi-chain interactions.