Dismantling ZetaChain: Why is 2024 said to be a great year for the development of the "chain abstraction" track?

Recently, the launch of the airdrop by the cross-chain interoperable L1 public chain @zetachain has sparked attention in the market towards the “chain abstraction” track. What is chain abstraction and what are the challenges of full-chain interoperability? What are the core features of zetachain? In my opinion, if modularity is a “vertical alliance” strategy, then chain abstraction is a “horizontal alliance” strategy and one of the key tracks to focus on in 2024. Why? Let me explain my understanding:

Whether vertical or horizontal, it is an “alliance” strategy. Modularization is the combination of idle blockchain development capabilities in the form of modular components to counter the monolithic comprehensive public chain, while chain abstraction is the combination of scattered blockchain development capabilities. The mobility between them is connected in the form of interoperability integration to enhance the experience of developers and users.

What is chain abstraction? The co-founder of Near threw out the concept of “chain abstraction”. Simple understanding: modularization separates the different functional layers of the blockchain into settlement layer, DA layer, execution layer, rollup layer, etc. This greatly stimulates the development of the chain construction market. Prosperity, but at the same time, it will make liquidity, applications, users, etc. between chains more dispersed, which will bring huge barriers to ordinary users and even developers.

Chain abstraction is to solve interoperability problems such as cross-chain communication, asset transfer, and cross-chain smart contract calls between different chains by building a general all-purpose smart contract.

There are two main types of common full-chain interoperability issues:

1) Communication issues between non-similar smart contract chains. For example, how to establish effective communication connections between UTXO non-smart contract platforms such as Bitcoin and account smart contract platforms such as Ethereum?

2) The problem of transferring cross-chain assets without using the Wrap method. The Wrap method is a common solution for cross-chain bridges. However, such solutions often result in significant frictional costs and pose a centralized risk in terms of asset multi-signature management.

So, can Zetachain solve these two problems, and how?

Zetachain is a proof-of-stake blockchain built on the Cosmos SDK and Tendermint PBFT consensus engine. It can be regarded as an application-specific blockchain framework for interoperability. In layman’s terms, it is a “chain within a chain”, using a A “blockchain of blockchains” (BOB) approach, in which specific chains are embedded into the full-chain environment to provide a framework for data, network, consensus, incentives and contract layers to achieve interoperability between blockchains.

The core architecture of Zetachain is mainly divided into validators, observers, and signers.

Validators can validate and maintain the consensus of the chain by staking ZETA tokens. For example, when an observer submits a state transition of another chain, it needs to be confirmed by validators through voting. Validators are rewarded with tokens as incentives. Observers are responsible for monitoring the full nodes of external chains to synchronize specific transaction logs, transfer events, and state information, and sync this information to validators who determine the consensus. Signers are mainly responsible for identity verification on external chains. When it comes to asset transfers, signers can participate in asset signing to ensure secure cross-chain asset interoperability.

Based on these basic frameworks, Zetachain can effectively solve the above-mentioned full-chain interoperability issues:

1) When it comes to asset transfers between EVM chains and UTXO model chains, since the Bitcoin network does not have smart contracts, the only effective way is to deploy light nodes and perform MPC multi-party signature operations based on the ECDSA signature algorithm. Since ZetaChain can hold TSS private keys and addresses, it can connect and manage local assets on the Bitcoin network using smart contracts on Zetachain. Throughout this process, ZetaChain’s observers need to effectively track and manage UTXOs on Bitcoin, with the core logic being to use Bitcoin as the asset settlement layer and control and facilitate asset transfers through multi-signature algorithms.

2) The current common cross-chain bridge solutions are based on the logic of locking assets in chain A and issuing additional assets in chain B. This interaction premise will not only lock the liquidity of a single chain, but also cause asset loss during the wrapping process. When it comes to DeFi-related application scenarios, it is often criticized for its asset loss. In response to this, ZetaChain built a full-chain Ominichain smart contract and created the ZRC20 token standard. This enables ZetaChain’s full-chain asset circulation to be based on non-wrapped state. In simple terms, in the cross-chain environment of ZetaChain, it acts as a settlement layer within the chain. When Chain A initiates an asset transfer to Chain B, it is equivalent to settling with ZetaChain first, and then synchronizing the settlement status to Chain B. Chain B will then have the permission to use the corresponding ZRC20 token. This process eliminates asset loss and friction caused by wrapping.

3) Based on the atomic transaction characteristics of smart contract management, the external chain can use native assets. For example, a cross-chain AMM decentralized exchange can be implemented based on this feature. The assets on each chain are first paired with ZETA. If you want to exchange asset X on chain A with asset Y on chain B, you can first Use the fund pool on the A chain to exchange X for ZETA, then transfer the ZETA cross-chain information on the A chain to B, and then convert the ZETA on the B chain into Y through the Y/ZETA trading pair. This is very different from trading on different chains and then trading across chains again. It directly reduces transaction slippage and cross-chain losses, which is of great benefit to the cross-chain deployment and application of DeFi protocols.

In conclusion

Through the technical analysis of ZetaChain, everyone can more or less perceive the significance of “chain abstraction” to the current blockchain ecology. For B-side developers, it can reduce the cost of deploying various protocols across chains and enable global blockchain deployment. Managing liquidity in a chain environment not only unifies market management but also reduces security risk exposure. Especially in the multi-chain era of modular assembly and assembly, the full-chain interactive operability solution will become a necessary supplement. For C-side users, chain abstraction will simplify the relationship between users and various backend protocols into users and DApp applications. Users can even achieve a comprehensive chain interaction experience by directly interacting with wallets, where wallets act as the processing center for users’ complex intent.

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