Original title: How many abstractions do we need?
Original author: Rapolas
Original source: zeeprime
Compiled by: Echo, MarsBit
Current state of infrastructure investment
Crypto infrastructure is over-invested and has too long feedback loops, making the lack of product-market fit more easily overlooked than consumer crypto applications. Insufficient infrastructure at the protocol level creates surplus value for venture capital to capture returns by investing in a large number of infrastructure and middleware projects. Level 1 (L1) creates a lot of value by leveraging the unlimited total available market (TAM). Subsequently, infrastructure projects want valuations as close to L1 as possible because they have their own network consensus and block production functions.
The memetic effect of crypto infrastructure
This is one of the reasons why the crypto infrastructure category is so memetic. Everyone knows the established strategy that works, and what will happen if you follow it:
1. Claiming you are scaling the blockchain
2. Raising too much money from venture capital firms
3. Announce “partnerships” with other infrastructure projects before your chain goes live
4. Launching a testnet (which crashed), boasting about crazy metrics
5. Launch any token with a FDV range between $1 billion and $10 billion
Confused chain abstract concept
Recently, we’ve observed attempts to further obfuscate step 1. Instead of scaling blockchains, dozens of successful and failed infrastructure projects have turned to chain abstraction. This sounds like the ultimate holy grail, the icing on the cake, the end game for infrastructure. But here’s the thing: if there are no users, who are we abstracting for?
Chain abstraction is the VC solution to the chain fragmentation problem that endless VC money created in the first place. Without a product, chain abstraction isn’t a real solution to a real problem. And it doesn’t even specify a new problem for consumers to solve, like owning a Ford or an iPhone (which is a step change compared to previous consumer experiences).
The gradual evolution of infrastructure projects
Assume that each infrastructure project is created as a result of the previous infrastructure solution:
1. L1 cannot scale, so we will create rollups;
2. Aggregation disperses liquidity, so we will build bridges;
3. There are too many bridges, so we will aggregate them all;
There are many different aggregators, so we will build intents;
5. Intent is hard to interpret, so we will build an intent interpretation layer;
6. …why do you think it will stop here?
Chain abstraction may introduce some form of centralization tradeoff, as a stack is only as decentralized as its weakest component. Abstraction requires coordination around state proofs, solver execution, block confirmations, and cross-chain transaction assurances, so consensus must be reached. There will always be another chain abstraction solution for capital markets that is faster, cheaper, insert buzzwords, and faster than the currently adopted solution.
1.1.1 User experience and infrastructure construction
Building infrastructure is often a response to poor UX, as high fees and slow settlements are part of the UX problem. But poor UX in crypto is a cheap excuse when adoption fails to live up to expectations. Criticizing UX requires a superficial effort, so everyone does it. Every time the crypto cycle turns and enters a state of apathy, people blame it on bad products, forgetting that these products were so exciting and brought us to the top of the market in the first place.
1.1.2 The inspiration of super apps
In the past, we’ve talked about crypto superapps that started with products, not infrastructure. Whether it’s Uniswap, Metamask, Magic Eden, StepN, Blur/Blast, dYdX, or Hyperliquid, it’s clear that the ideals of web3 are being turned on their head. Incentives are such that everyone will build their own stack, rather than collaborate across composable stacks. That’s great. But it also means that chains will be abstracted away by those who don’t portray themselves as chain abstractors; instead, they’ll be the ones building the most popular apps in crypto.
The most popular apps in the cryptocurrency space
Galxe (formerly Project Galaxy) is the most widely adopted web3 application by a wide margin. It has more network traffic than Uniswap, Opensea, or Etherscan. Over 20 million unique addresses have interacted with Galxe. Over 1 million unique visitors use the Galxe website every day.
Before you dismiss this trend as bot farming, consider this:
Every on-chain use case is dominated by bots. Most token trading is done by bots. Crypto games are also played by bots, as they are still heavily driven by economic incentives. NFT market making is done by bots. AI agents (smarter bots) are starting to participate in the on-chain economy. Even our beloved social finance is dominated by a large number of bots, which makes social finance even less social. Crypto is about incentives and resource coordination, and so far, bots have proven to be excellent target users to harvest on-chain incentives. Proxy DAOs and UBI are closer than we think.
But it doesn’t matter whether the users are bots (and anyway, 1M DAUs are actual site visitors, not bots); what matters is how much economic activity there is, and how much value can be captured as a protocol or application.
Galxe had trouble with its airdrop distribution. But it has made great progress since then by building out its identity layer including Galxe Passport (identity) and Galxe Score (reputation).
The most successful businesses are those that create new bundles or unbundle everyone. Galxe aggregates the supply side of projects that aim to build communities and distribute tokens, and the demand side is users who want to earn tokens. By letting projects build communities before TGEs, the former CEX loyalty business becomes a much larger market.
We’ve seen countless early attempts to build identity or data monetization platforms, but they always fail because they don’t start with a product that people want to use (and no, users don’t care about owning their data). Galxe has built a unique use case and provides a strong enough economic incentive for people to reveal their identities. This data will be valuable in ways we can’t currently foresee, especially if policymakers make a sincere attempt to consumerize cryptocurrency.
Nearly 1 million people have created a Galxe passport using their real identity
Aggregating users not only enables building a valuable identity layer, but also consumer type products that otherwise would not succeed as standalone ideas. This includes the Galxe mobile app, offramping and spending, AI-enabled trading products, research centers, etc. Galxe has become the first on-chain stop for many new cryptocurrency users.
The question now is: how many valuable products can Galxe build so that these users never leave its ecosystem?
Galxe spans 34 different chains. This is likely more than any bridge or CEX could integrate. With Galxe’s Smart Balance feature, users can deposit funds into a vault and use the balance to pay for gas fees for Galxe smart contracts to transact on multiple chains without the need for a bridge. Soon, Smart Balances will be upgraded to Smart Savings, enabling users to earn yield on deposited assets.
Many people don’t know that while people are looking elsewhere, Galxe has been abstracting blockchains and accounts. Galxe just announced the launch of Gravity Chain, which will become the largest blockchain by transaction activity, with approximately 100 million transactions per month.
Aggregating user identity, transactions, and controlling blockspace is a combination of achieving chain abstraction. In our opinion, only a few companies in the cryptocurrency space (Galxe, Coinbase, and TON) have the ability to achieve consumer-friendly chain abstraction. While looking at this from different angles, the desired outcome (blockchain onboarding combined with identity) is the same in our opinion.
