XION: A Chain Abstraction-Focused L1 Blockchain for Web3 Mainstream Adoption

Author: Gary Ma

With the rapid evolution of blockchain technology, a growing number of projects have emerged across multiple chains, including main L1s, application-specific chains, and Layer-2 scaling solutions. This diverse blockchain ecosystem has increased both flexibility and choice for users and developers but has also introduced significant challenges, such as liquidity fragmentation, the complexity of cross-chain operations, and a suboptimal user experience. Consequently, users in the Web3 world face even more complex operational processes compared to Web2.

Chain Abstraction has emerged as a key approach to address these challenges. By abstracting the underlying differences between blockchains, chain abstraction allows users to engage seamlessly across various chains without concerning themselves with the intricacies of each blockchain’s specific architecture. As a leading example of chain abstraction innovation, XION is committed to lowering barriers to Web3 adoption through its Generalized Abstraction technology, which provides a wallet-free experience. By abstracting accounts, signatures, gas fees, and interoperability at the protocol level, XION improves user experience (UX), removes entry barriers for new users, and avoids the fragmentation challenges developers often face in other ecosystems. Additionally, through interoperability abstraction, XION extends seamless UX across all integrated chains, enabling novel use cases.

This article delves into the background of the XION project, exploring its innovations in blockchain user experience, how it addresses UX challenges through generalized abstraction, and how it enhances cross-chain interaction. The article also examines XION’s tokenomics design and the competitive landscape of the chain abstraction sector.

Project Background

XION was founded by Burnt Banksy, whose name originates from his act of burning a Banksy artwork titled “Morons.” This event highlighted the concept of digital scarcity and the potential of blockchain technology. However, he also realized that mainstream blockchain users face numerous obstacles due to technical complexity. With this in mind, he founded XION, aiming to create an L1 blockchain designed for mainstream audiences, enabling true digital ownership through simple, accessible dApps.

XION has gained support from renowned investors across several funding rounds:

● On May 6, 2021, XION completed its seed round, raising $3 million from investors including Injective, Multicoin Capital, Mechanism Capital, Tribe Capital, Solana Foundation, and Alameda Research.

● On January 17, 2022, XION raised $8 million in its Series A round, with major investors like 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 funding from Circle Ventures, though the specific amount remains undisclosed.

● On April 1, 2024, XION raised an additional $25 million from investors including Multicoin Capital, Animoca Brands, Arrington Capital, Sfermion, and Spartan Group.

These rounds reflect the substantial interest and support for XION in the blockchain and cryptocurrency sectors, providing a strong capital foundation for its continued development.

Generalized Abstraction: Simplifying Complexity to Build User-Friendly L1 Experiences

The complexities of blockchain operations are often concentrated in areas such as account management, signatures, payment, and gas fees. Traditional blockchain systems depend on private key management, address generation, and require users to pay gas fees in the chain’s native token, with fees subject to considerable fluctuations. Additionally, cryptocurrency prices are volatile, and when products and services are priced in crypto, it creates an unpredictable user experience, often alienating new, non-crypto users.

To eliminate the complexities users face in blockchain interactions, XION developed a “Generalized Abstraction” solution at the protocol level, which abstracts concepts such as accounts, signatures, gas, interoperability, pricing, devices, and payments.

● Account and Signature Abstraction: XION implements a “meta-account” system, enabling users to log in via familiar methods (e.g., email or biometric authentication) and securely access their accounts across devices without handling complex private keys. Meta-accounts support various login methods (e.g., social accounts, Face ID) and include flexible permission management features such as private key rotation and custom rules, enhancing account security.

● Gas Abstraction: XION abstracts gas fees completely, allowing users to pay transaction fees in any supported token. XION automatically converts these fees into the platform token, providing a transparent fee settlement process for users. Additionally, through the PlatformSend mechanism and FeeGrant feature, XION enables developers to cover transaction fees on behalf of users, reducing the financial burden of blockchain operations.

● Device Abstraction: XION removes the need for users to store and manage private keys, indirectly eliminating the security risks and complexities traditionally associated with using accounts across multiple devices. XION users can interact with their meta-account across various devices (e.g., PC, smartphone, tablet). This multi-device architecture significantly simplifies UX, lowering barriers to entry and enhancing accessibility for all applications on XION.

● Pricing and Payment Abstraction: XION’s abstraction supports payments in stablecoins like USDC, allowing users to make payments without worrying about token volatility or complicated conversions. This design improves UX by aligning blockchain applications with mainstream payment habits, making them more accessible to a wider user base.

Through these layers of abstraction, XION provides users with an intuitive experience similar to traditional applications, significantly lowering the barriers to Web3 adoption.

Interoperability Abstraction: Solving Liquidity Fragmentation Across Chains

Beyond providing a smooth blockchain experience on the current chain, XION is committed to interoperability abstraction for cross-chain interactions. Through a “Package Forwarding Middleware,” XION allows users to interact with other public chains from a central control chain (like XION). By integrating this middleware with the generalized abstraction framework, XION provides a simplified, protocol-level interface. Users can execute operations seamlessly on any chain integrated with XION, experiencing uniform, smooth interactions.

XION’s interoperability abstraction effectively addresses account fragmentation across multiple chains. Users can link accounts from different blockchains to their XION meta-account, consolidating asset management across all chains through a “central account.”

To achieve this, XION utilizes various symmetric communication methods, constructing reliable, orderly, and authenticated communication channels between different blockchains. This interoperability abstraction opens possibilities for new cross-chain applications, enabling multi-chain users to enjoy a cohesive, unified experience.

Tokenomics Design

XION, built on the Cosmos SDK as a Proof-of-Stake (PoS) blockchain, leverages its native token, $XION, with multiple functions, giving the ecosystem broad utility:

● Network Fees: Transactions on the XION network incur fees, which are innovatively used to offset the minting of new tokens. As network usage increases, this mechanism could even lead to token deflation.

● PoS Security: XION, as a PoS network, relies on validators to maintain network security. $XION holders can delegate their tokens to validators or stake tokens to operate their own validator nodes. XION’s inflation is based solely on staked tokens, which significantly reduces overall inflation, supporting sustainable network economics.

● Governance: $XION holders can participate in network governance through proposals and voting, impacting key decisions in the ecosystem.

● Medium of Exchange and Collateral: In the XION ecosystem, $XION serves as native liquidity and collateral, supporting peer-to-peer transactions across applications and accounts.

Among these, the mechanisms of “network fees offsetting token inflation” and “inflation based solely on staked tokens” are notable adjustments by XION to address inflation challenges. Over recent years, some new chains have attracted validators and stakers with high staking rewards. However, this practice often results in hyperinflation, leading to rapid token depreciation and impacting network stability. To counteract inflation, XION has implemented two key adjustments through an expanded Cosmos mint module:

● Offsetting Inflation with Fees: XION offsets newly minted tokens by using network fees collected within each block. For instance, if inflation requires minting 1,000 tokens and block fees amount to 600 tokens, only 400 additional tokens need to be minted, reducing overall supply pressure. This mechanism is expected to further mitigate inflation as user activity increases, possibly even creating deflation.

● Inflation Based on Staked Tokens Only: Unlike Cosmos Hub’s inflation model, XION calculates inflation solely based on staked tokens. This approach stabilizes the annual percentage yield (APY) for stakers, unaffected by fluctuations in unstaked tokens, thereby attracting long-term participants and discouraging short-term speculation.

Additionally, XION recently announced the adoption of USDC, issued by Circle, as its primary transaction currency, making it the first blockchain priced in USDC. All products built on XION will be USDC-denominated, with gas-free transactions. This design minimizes market volatility risk, offering users a more predictable and secure transaction experience. Not only does it reduce concerns about crypto market fluctuations, but it also simplifies transactions, making XION more accessible to mainstream users.

Competitive Landscape in Chain Abstraction

Chain abstraction aims to address two major challenges in the blockchain industry. First, blockchain UX is often unfriendly, with a high conceptual threshold for understanding accounts, gas, and other crypto concepts, deterring new users. Second, the multi-chain landscape inevitably fragments liquidity and users, creating isolated ecosystems.

Different projects approach chain abstraction from varied perspectives:

● Simplifying User Operations: Projects like CoWSwap and UniswapX, which optimize user interaction, fall within this category.

● Cross-Chain Interoperability: Early interoperability protocols like Cosmos and Polkadot, and more recent cross-chain messaging protocols like LayerZero, Wormhole, and Axelar, are also key players in this field. Specific ecosystems, such as the OP superchain, offer interoperability within specific ranges.

Despite addressing elements of chain abstraction, these solutions remain limited by the industry’s current phase of development. At present, the main players can integrate solutions for both UX and interoperability, though they prioritize one aspect over the other. Here, we focus on comparing Particle Network, NEAR, and ZetaChain with XION.

NEAR Protocol: A Chain Abstraction Solution Focused on Account Aggregation and Multi-Chain Signatures

NEAR, a sharded Proof-of-Stake Layer 1 blockchain, offers three core chain abstraction features:

● Account Aggregation: NEAR enables users to consolidate multiple operations within a single account, simplifying cross-chain management, wallet integration, and gas fees. Additionally, NEAR supports user-friendly account names (e.g., wu.near), providing a more intuitive approach to account management than traditional blockchain systems. NEAR’s FastAuth system further lowers entry barriers by allowing email registration combined with biometric authentication, replacing complex private key management and greatly enhancing UX.

● Multi-Chain Signature Support: Through the NEAR MPC (Multi-Party Computation) network, NEAR supports accounts with remote addresses on other chains, allowing transactions to be signed and executed from these addresses. MPC network signature nodes operate without explicit private keys, using a threshold signature protocol to support key sharing and dynamic node adjustments, enabling continuous cross-chain access.

● Meta Transactions (NEP-366): NEAR enables meta transactions via NEP-366, allowing users to execute transactions without needing to hold gas tokens in advance.

ZetaChain: Cross-Chain Asset Management with Omnichain Smart Contracts

ZetaChain focuses on cross-chain asset and transaction management using Omnichain Smart Contracts to streamline asset flow and contract operations between chains. Users can directly call smart contracts on other chains through ZetaChain, simplifying cross-chain transactions and asset management.

In the ZetaChain 2.0 upgrade plan, the team has proposed various potential upgrades to enable the first universal Ethereum Virtual Machine (EVM) and omnichain abstraction, including omnichain accounts that allow ZetaChain contracts to interact with native contracts on connected chains.

Particle Network: Cross-Chain Account and Liquidity Integration via Universal Accounts

Particle Network uses Universal Accounts and Universal Gas to allow users to manage assets across multiple blockchains with a single account, avoiding account and balance fragmentation across chains. Universal Gas also enables users to pay cross-chain transaction fees with any supported token, significantly reducing the complexity of gas fees for users.

Particle’s solution primarily emphasizes multi-chain interoperability and liquidity integration. Universal Accounts function similarly to a multi-chain wallet, abstracting away the complex cross-chain operational concepts to optimize UX.

Based on current documentation, Particle Network’s L1 acts mainly as a coordination and settlement layer for cross-chain transactions, serving as middleware rather than an ecosystem-enabling L1 like NEAR or XION, which support diverse application development and ecosystem expansion. This middleware positioning allows Particle Network to focus on enhancing cross-chain accessibility and interoperability rather than building a full ecosystem, marking a significant distinction from other ecosystem-oriented L1 blockchains.

Differentiating XION

Compared to these projects, XION’s distinctions become clear. XION emphasizes its role as an L1 blockchain designed specifically to address Web3 adoption challenges. Its goal is to remove technical barriers in UX, allowing non-technical users to participate in Web3 applications directly. Through generalized abstraction, XION abstracts accounts, signatures, fees, and interoperability at the protocol level, eliminating the need for users to understand complex concepts like private keys and gas fees.

Positioned as an L1 chain for consumers, XION aims to attract a broad audience beyond the current crypto users, encompassing domains like retail, gaming, social finance, crowdfunding, and payments. One notable example is the EarnOS application, which leverages blockchain technology to revolutionize the trillion-dollar advertising industry. In Q2 2024, EarnOS launched its test version, securing over $12 million in pledged spending, attracting 500+ creators, and forming partnerships with over 40 global brands and institutions. Notable brands such as UberEats, Baskin Robbins, Sunglass Hut, and The North Face have collaborated with EarnOS, achieving over 950,000 task completions.

Conclusion

As a frontrunner in chain abstraction, XION has made substantial strides in simplifying UX through generalized abstraction, achieving significant advancements in account management, signature, payment, and interoperability. XION’s mission is to break down the high entry barriers of blockchain UX, offering a Web2-like smooth experience that lowers obstacles for mainstream users joining the Web3 ecosystem.

Nonetheless, the chain abstraction sector faces challenges, such as the potential for “empty infrastructure” led by providers with unclear market demand. Currently, most chain abstraction projects are focused on building generalized protocols, but they often struggle with practical usability and market alignment. Additionally, chain abstraction may exacerbate resource imbalances between mainstream and long-tail chains, impacting the decentralization of the ecosystem. Therefore, as XION continues to lead chain abstraction innovation, it must also navigate the balance between UX, market demand, and technical scalability to establish lasting value in the chain abstraction sector. This approach outlines a new direction for chain abstraction: not only advancing technology but also fulfilling user needs to drive true blockchain adoption.

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