Introduction
With the rise of decentralized finance, the need for cross-chain compatibility is more evident than ever. As the number of blockchain networks and protocols continues to increase, interoperability has become a major challenge in the cryptocurrency industry. In order to thrive in the multi-chain environment of Web3 and meet the needs of the next generation of Web3 users, wallet providers need to provide cross-chain products that provide streamlined and interoperable DeFi functions (such as swaps) among other things, as well as user interface designs that optimize the user experience across multiple networks. Ultimately, the growth of cryptocurrency adoption depends on innovative product and engineering designs that abstract the complexity of individual blockchains and unlock differentiated value for end users.
Interoperability and current limitations
First, we have to answer the question of what blockchain interoperability is and why it’s important. With so many unique blockchains emerging over the past few years, there’s an argument for which blockchain is better, in a minimalist way — which chain is the “best”, offering the most features, protocols, and standards. However, a lot of times, it’s hard to reason about what’s “best.” One chain might offer faster and cheaper transactions, while another might offer better privacy. All of these benefits come with trade-offs. Therefore, the general consensus is to collaborate, mixing across different chains as needed. For example, one chain might be ideal for doing DeFi activities, while another might be more secure for long-term storage of assets. As a result, interoperability has become a very important step forward. While many chains, like Cosmos and Polkadot, have interoperability built into their design, others, like Ethereum and Binance Smart Chain, are siloed. This is where interoperability comes into play.
Interoperability refers to the ability of different networks to exchange and utilize information, or the ability of a system to make sense and work with other systems. Each blockchain has its own unique features, protocols, and standards, which can make it difficult to transfer assets between different chains. Without interoperability, we will encounter problems such as fragmented liquidity, and segmented ecosystems, preventing networks from realizing the full potential of DeFi.
Currently, users must constantly switch between wallets to finalize transactions on different chains. For example, if a user wants to transfer X tokens from one blockchain to another, the user needs to approve the transaction on each chain individually, resulting in a large number of web wallets popping up. The lack of interoperability not only leads to inefficient and insecure user experience and interface, but its complicated process also hinders widespread adoption, especially for beginners who want to break into the decentralized ecosystem.
Cross-chain wallet
Currently, the problem with wallets and interoperability comes from too many steps. In order for a user to use their assets on another chain, they must first find a suitable bridge to use. Let’s say our user wants to leverage LayerZero’s Stargate Protocol — the most popular bridge on DeFi, and the only native asset bridge that guarantees instant finality — as their bridge. They must first go to the Stargate website, log in with their MetaMask wallet, use the Stargate process to bridge their assets to their desired chain, and then wait for the transaction to be completed. All of these steps must be performed to even bridge a token. Once a token is bridged, the user can use it normally. However, instead of forcing users to take several cumbersome steps, why not have the wallet abstract away all the bridging work?
Cross-chain wallets are critical infrastructure to address DeFi's mainstream inaccessibility and lack of interoperability. A cross-chain wallet is a digital wallet that can store multiple types of cryptocurrencies and interact seamlessly with multiple blockchain networks. By using a cross-chain wallet, users can easily transfer assets between different chains, access a wider range of DeFi applications, minimize gas fees, diversify their holdings, and experience the inherent advantages of a variety of different chains. These wallets will fundamentally reduce the churn and friction when users interact with multiple blockchains.
One of the biggest advantages of cross-chain wallets is their ability to reduce friction and increase efficiency. Instead of using multiple wallets or exchanges to manage different assets, users can consolidate everything into one place, abstracting away the complex transactions that users have to manage. This saves time, reduces the risk of errors or mistakes, and lowers the barrier to entry for new users.
Interstellar, and why LayerZero?
As Web3 continues to develop, cross-chain wallets will become an important tool for users. By achieving seamless interoperability between different blockchain networks, cross-chain wallets will achieve a more integrated and accessible ecosystem.
As part of our research, we explored the underlying infrastructure needed to build a world-class cross-chain wallet. To enable value transfer between chains, developers can use a cross-chain messaging protocol that supports arbitrary contract calls on different chains.
When choosing a cross-chain messaging infrastructure for a wallet, application developers should consider: security, ease of implementation, user experience, and supported networks. As part of our research, we looked at multiple messaging infrastructure protocols across these criteria and decided to leverage LayerZero for our wallet MVP.
LayerZero is a cross-chain interoperability protocol that enables communication between various blockchain networks through seamless, lightweight messaging. Using LayerZero when building a cross-chain wallet provides multiple core advantages:
Efficient and Secure Communication — LayerZero enables fast and secure communication between different blockchain networks, which significantly reduces transaction times and leads to an improved overall user experience. LayerZero is the only messaging protocol at scale ($10B+ in value secured) that has never lost user funds. Additionally, all transactions are protected by Pre-Crime, a proprietary security layer that tests all messages locally before running on mainnet.
Developer-friendly — LayerZero is developer-friendly, providing builders with an easy-to-use API to integrate cross-chain messaging directly into their applications. On top of this, the LayerZero team also provides a strong support team to debug issues and review code.
Seamless Integration — LayerZero seamlessly integrates with different blockchain networks, enabling users to manage multiple cryptocurrencies in one wallet without the need for multiple accounts or wallets. Additionally, LayerZero’s integration includes gas abstraction, a feature that allows end users to pay for multi-chain transactions with their native source gas tokens.
Lower transaction fees — LayerZero enables cross-chain transactions at lower fees than traditional cross-chain solutions, which can save costs for users. In particular, Stargate’s unique protocol design utilizes a unified liquidity pool for 1:1 cross-chain swaps of native assets, unlocking cost efficiencies without compromising security.
Broad Network Support — LayerZero supports a large number of networks — currently over 30 EVM and non-EVM — including Ethereum, Polygon, Avalanche, Aptos, BNB, and Optimism Arbitrum, to name a few.
Overall, LayerZero's fast and secure cross-chain information transmission protocol makes it an ideal solution for building cross-chain wallets. It is able to seamlessly integrate with multiple blockchain networks, provides lower transaction fees, and provides higher security and reliability as its ultimate guarantee. Its developer-friendly nature also means that it can be easily integrated into existing applications, making it an attractive solution for building cross-chain wallets.
Competitive Landscape
The competitive landscape of cross-chain wallets is dominated by a few top wallets that have established positive brand image and user sentiment.
Competitive product analysis
MetaMask, Kepler, and Trust Wallet
XDefi、Exodus Wallet 和 Atomic Wallet
Liquality、ONTO Wallet、和 Cross Wallet
Nadox, Coinbase, and CLV
Biport Wallet, Frontier and 03Labs
Benchmarks
User sentiment/acceptance and intuitive UI/UX design
The competitive landscape below shows a cross-comparison of cross-chain wallet vendors across the industry, based on user sentiment/acceptance and intuitive, user-supportive UI design metrics. These metrics were determined by user and industry interviews as well as online presence and average number of users.
Competitive landscape
matrix
matrix
Throughout our market research, we discovered several important characteristics that are key to mainstream adoption and ease of use of wallets:
Simple and intuitive user interface design abstracts the exchange process, simplifies the user experience, and increases the overall adoption of the wallet. Overly complex user interface designs often confuse users during the exchange process, hindering adoption.
An in-app portfolio tracker that enables users to monitor the performance of their digital assets and track their balances across multiple blockchain networks.
“Discover” page to find other coins and dApps outside of DeFi to increase the functional experience.
Onboarding educational videos are helpful in onboarding and retaining new users of Web3.
A list of “favorite” coins allows users to easily access their top currencies when exchanging.
Including coins that have been verified by the wallet provider enhances user trust (the verification is usually displayed visually next to the coin).
Industry Interviews
We conducted in-depth user interviews with 25 users who had different experiences with cryptocurrencies and wallets.
User Demographics
New cross-chain users - 28% (7)
Existing cross-chain users - 32% (8)
Developers - 40% (10)
We decided to mainly interview developers, as they are also considered the end-users of the all-powerful chain/cross-chain wallet. We want to build a product with developers in mind, so that future developers can continue to build and improve this product. We also chose to interview influential people in the cross-chain wallet space, such as Gonzalo, the head of UX at LayerZero. In addition, in order to take into account the pain points of new cross-chain users, we decided to allocate a certain percentage of the interview content to them.
We explored the following roles:
User role positioning
Main takeaways from the interview
Lack of user-friendliness — Some cryptocurrency wallets lack a user-friendly interface, making it difficult for users to understand how to use them. In particular, users are most frustrated by several key issues:
Unclear instructions and feedback when users make mistakes
Slow transaction speed
The user does not know the status of the transaction
Unclear fee structure
Cumbersome onboarding experience
Difficulty determining which coin to use to maximize value during a swap
Complexity — Cryptocurrency wallets can be complex to set up and use, especially for non-technical users. The process of creating a wallet, managing private keys, and performing transactions can be daunting and confusing for many people.
Several applications are needed for various purposes like exchange, storage, etc.
Interstellar
Choice of UI/UX design
From our research, we can see that there are many opportunities to improve the current wallet experience.
Through our designs, we focus on...
Avoid overwhelming users by stripping away any information that isn’t absolutely necessary.
Eliminate the need to rely on multiple services/DApps to complete a task.
Ensuring that users with all levels of understanding of cryptocurrency feel supported and unrestricted in their financial decision-making process.
Human-machine interface design
Home
We chose a design language that was consistent with LayerZero’s brand, while adding our own twist to give the wallet a distinctly outer space theme. We kept the color scheme mostly black and white, only using color sparingly to indicate status and special information.
User Experience Design
1. Abstraction of gas fees
Problem: The current experience of paying gas fees requires users to use multiple services to complete their transactions when they do not own the required assets.
Current User Flow
We wanted to make this process less headache by eliminating the need for multiple services, while providing users with the support they need to make the best decision for their goals. We came up with the following improved user flow:
New user flow
2. Combine bridging and swapping
Problem: Most multi-chain wallets separate the concepts of bridging and swapping into two actions for users to choose from. However, both services serve the same problem: users want to exchange one asset for another.
Our improved design combines these two concepts into one. Users can select both the network and the asset at the same time through a drop-down menu.
What's New
3. Other experience improvements
**Problem:** The way most wallets display current activity is confusing or overwhelming to users. Users are generally overwhelmed by a list of all past activity, which is sometimes buried behind multiple clicks.
Our design highlights only pending transactions, which are the most important transactions that users see first. If users wish to view all past transactions, they can do so from the archive drop-down menu in the top right corner.
**Problem:** The transaction confirmation page includes a lot of information and new vocabulary, which can be very overwhelming for new users. This can lead to paralysis, where the user abandons the transaction, or the user may ignore all the information.
Our improved design only displays transaction rates and fees, hiding all other information under “Advanced Information.” While experienced users can still access this information if they wish, new users will not be intimidated or misled.
Logo design
Backend Development
To better understand the current predicament, our team created our own proof of concept of what a cross-chain wallet could look like. For our development, we found it best to improve upon current wallets rather than create our own, a simple question of why reinvent the wheel. Because of this, we chose to work on a fork of MetaMask, the most popular wallet to date. Much of our work in development revolved around understanding MetaMask’s codebase and then implementing the described bridging and accessibility features into the current architecture to create a more seamless experience for users.
LayerZero and Stargate
Let’s first explore what LayerZero is. If you want to learn more, we highly recommend reading their whitepaper.
At its core, LayerZero is a messaging protocol that enables arbitrary contract calls between chains. The protocol works through a verification system between independent relayer and oracle pairs, which handle communication between endpoints. Endpoints are deployed on every network supported by LayerZero; these are smart contract libraries that are developer interfaces that handle verification. In a network, a relayer is any entity that can retrieve and submit transaction proofs, while an oracle is any entity that can retrieve and submit block headers.
To understand this architecture, we will go through an example messaging flow. For example, let’s say I want to send a message from Ethereum to Polygon. I will first create and send a transaction to the LayerZero smart contract on Ethereum with my message and the recipient address on Polygon. The message is then sent to a validator contract, which sends the transaction proof to a relayer and a network contract, which tells an oracle to get the block header. Once the block header is confirmed, the oracle sends it to the network contract on the Polygon chain. The message is passed to the validator contract, which gets the block header and proof from the relayer to verify the validity of the contract. Once the proof is verified, the payload is sent to the communicator contract to execute. The following diagram shows this interaction:
Figure 4, from LayerZero’s white paper
Stargate is a bridge protocol built on top of LayerZero’s messaging service. The Stargate Protocol is the first protocol to solve the bridge trilemma (instant finality (source), unified liquidity, and native assets). It does this by maximizing the potential of the LayerZero protocol: Instant finality is achieved without the insecure locking and minting process used by other bridges — or the “wrapped token bridge” model — but instead with instant transfers of native assets. This, of course, also solves the native asset problem. A unified liquidity pool that is balanced across the protocol with a proprietary Delta algorithm is key to achieving this. Finally, unified liquidity is achieved through a built-in, self-adjusting process that allows contracts to automatically replenish and provide more or less liquidity to other chains. This approach is known as fractured liquidity.
experience
Overall, working in the MetaMask codebase has been a pretty interesting experience. The codebase is designed into two parts: the backend and the frontend. Most of the work on the backend is contained in the application folder, containing all the scripts needed to pull and push information, making it independent of the frontend. The frontend is contained through a series of components in the UI folder.
For our project, we decided to build most of the functionality on the front end of the app. While it's severely lacking in optimization, we felt it was good enough to serve as a proof of concept. If we were to start from scratch and build a full concept, we would spend more time getting to know the back end, building functionality there, and only calling the back end from the front end, rather than handling everything on the front end.
For our functional experience, we decided to use ethers.js to abstract away the complexity and allow for simpler contract calls, rather than using native built-in methods, by creating a low-level contract call to sign transactions. This worked well with our strategy of building everything on the front-end, allowing for rapid prototyping of user experiences without worrying about low-level complexity.
After we designed our wallet, the building process was relatively straightforward. We first built the bridge page, which allows users to bridge native assets from one chain to another. We decided to work with Arbitrum, Optimism, and Ethereum because Arbitrum and Optimism are Ethereum Layer 2 solutions that use the same native assets. This made testing and implementation much easier because we were able to make more abstract contract calls to Stargate's EthRouter instead of their normal Router. After we completed our bridge page, we moved onto our next endeavor, automatically querying balances when they change and proposing a bridge option when a user does not have enough assets.
Bridge Flow
We started with the first task, querying balances on other chains. This simply involved an API call to the equivalent of Etherscan to see what balance a user had on a specific chain. From there, we simply added checks to the swap, send, and execute transaction flows to check if the user had enough balance to perform the swap, check the user's balance on the other chain, and then recommend a bridge using the bridge method and strategy we defined above.
The majority of the experience was accomplished through integration with LayerZero and their cross-chain bridge protocol, Stargate. Integration was a seamless experience, especially for developers, as their documentation is thorough and concise. Setting up these protocols in our wallet was as easy as sending a transaction using ethers.js. Transaction monitoring is done by querying LayerZero’s custom bridge scanner, and gas fee estimates are built into the contract, allowing for easy querying using ethers. Our team was very impressed with how simple and straightforward LayerZero is in terms of how it works.
The final step was to rebrand the user interface. MetaMask uses a very nice branding system where text and color schemes are defined in constants, allowing for consistent theming across the wallet. The only problem was that these color schemes were defined in an npm package called MetaMask Design and imported into the actual code. Since we were concerned that modifying imported packages would cause dependencies to fail and other issues, we decided to simply hardcode the updated fonts and color schemes into the CSS of the frontend.
challenge
Finally, the biggest challenge our team found was understanding the codebase. While the MetaMask codebase itself is relatively well documented, we had a hard time finding resources online or through relationships to really help us understand what we needed to do and where to start. A large part of our early progress was just trying to understand the nature of how the frontend and backend interacted, and where to actually implement the functionality we needed. In addition, we had a ton of issues with dependencies and environments. Only half of our team was able to actually build a wallet, while the other half had issues with React and Node.js versions/dependencies. This led to a nightmare of coordinating independent tasks and work sessions, and required us to make most of our progress in work sessions where one member had to piggyback off of another.
in conclusion
Overall, we gathered a ton of unique insights from researching cross-chain messaging protocols and current market trends, and built a more seamless wallet to allow for native GAS abstraction between chains. It was extremely insightful to engage with wallet developers and end-users to identify needs and trends in the space; these interviews informed our thesis on the necessary steps to onboard the next million users of cryptocurrency. Wallets are the middleman between the user and the space, so perfecting wallets inherently helps create a better experience for everyone within the blockchain ecosystem. Additionally, it was a great experience to develop the wallet with technical support from the LayerZero team. Despite the challenges we faced, their team was extremely supportive and eager to assist in any way possible.
Ultimately, from our market research, we noticed that most of the wallet market space is controlled by two people: Coinbase and MetaMask. While Coinbase caters more to investors and those who are less familiar with cryptocurrencies, MetaMask is an open-source project that is used by most crypto-native users in the space. Despite this, MetaMask seems to be heading in the wrong direction. From extremely demanding licensing, refusing any form of forks, to very strict and slow updates, and collecting IP addresses, MetaMask seems to be slowly but surely moving away from the ideal wallet. While they want to maintain control, people seem to be starting to understand that there needs to be more competition and better innovation in the wallet space.
However, in our experience, we learned how difficult it is for developers to build competing wallets. Because MetaMask’s license prohibits code reuse or forking, developers who wish to build competing wallets must start from scratch. This can be particularly frustrating for inexperienced wallet developers with new ideas. Furthermore, once a wallet is launched, it will be difficult to compete with MetaMask and Coinbase, who already account for more than 90% of all wallet users. It is even more difficult for new wallets to gain traction due to their extensive integrations and partnerships with most DApps and products.
In summary, the dominance of a few players in the wallet market creates challenges for new entrants and innovation. Despite its popularity among crypto-native users, Metamask’s strict permissioning and slow updates have deviated from the ideals of an open-source wallet. The difficulties faced by new developers and competitors in this space are a hindrance to the growth and mass adoption of cryptocurrencies. The first wallet that can enable truly secure and seamless cross-chain swaps — especially from EVM to non-EVM — will experience a significant competitive moat and play a key role in ushering in a net new user base for DeFi and consumer-facing applications. LayerZero and Stargate infrastructure will play a key role in the development of this industry. The industry must continue to adhere to the principles of open source and decentralized systems that enable new ideas and solutions to emerge and thrive on the existing silos of single chains. Only by adhering to the principles on which cryptocurrencies were founded can we ensure the long-term growth and sustainability of the broader ecosystem.
