Crypto + Axelar = Libertarian WeChat
In the future, users only have one private key. They sign a transaction on their resident blockchain, and Axelar forwards it to the application’s blockchain. Bridges become back-end only tools for devs, and some devs building interop on Axelar will choose to do without them entirely.
Axelar Network allows a user or a smart contract to sign and forward a transaction to any other chain. As the network goes live it will create the fully open, trustless internet of blockchains which we’ve all been dreaming of. The whole of crypto will become one super app at our fingertips.
Super apps now
Imma start with a disclaimer that super apps (such as WeChat) in their web2 form are a powerful source of evil centralisation. Quite opposite to the globally permissionless modular ecosystem we’re trying to build.
On WeChat, A dev in South America can’t permissionlessly build an app that calls functions from a Chinese app, and a French person couldn’t use either.
Behold the illustrious rainbow and unicorn adorned interface of WeChat.
However! There is something incredibly powerful about the shared payment rails and KYC that these super apps offer. It’s better UX for both devs and users. WeChat has a billion users, including a supreme leader, and super apps have proliferated all over Asia.
The problem really lies with ownership of data, like all web2 models. WeChat owns its users and sells them to businesses in a permissioned way. I’m going to argue that Layer 1 and 2 projects lean too heavily on this narrative to argue how they are going to capture value. Interoperability within their “blockchain ecosystems” is celebrated, interoperability between blockchains is ignored.
Layer 1s are hyped as if they’re going to be super apps
Up until now, a good part of the narratives and hype driving alt L1 and Rollup valuations has been the same as this dirty TradFi model: the promise that these Layer 1s and 2s will collect and keep users and applications, and charge them rent for living on chain. The reality isn’t as bad as TradFi, but in practice the free market is hobbled.
Stickiness, a sign of a closed market
Liquidity is currently stickier/more sluggish across chains than within chains. Community loyalty accounts for some of this, but I put it down to three technical limitations.
- The need to bridge assets (Wormhoooole)
- No application modularity across chains (Yearn on Polygon cannot automate Curve on Ethereum)
- Different private key types and signature generation algorithms are used on different chains (7 seed phrases and 5 wallet browser extensions needed)
It’s worth noting that these sources of stickiness don’t apply within a chain. We’ve seen liquidity happily bounce around inside Ethereum like a desert coyote chasing a light-speed thanksgiving turkey.
Degens are getting used to downloading new wallets and using bridges (i.e. rockets, as pictured), but average mass adoptooors just won’t.
1, 2 and 3 are all solved if Axelar Network is successful. Bridges will disappear from UX. It’ll be like sending a message from Whatsapp to a friend’s Signal account without thinking twice. All of a sudden, every application in crypto will be permissionlessly modular with every other.
Axelar unifies crypto
Axelar Network is a decentralised interoperability protocol which has just launched on Mainnet. It uses a combination of smart contracts, a Layer 1 proof of stake network (built with Cosmos) and threshold cryptography to take signed instructions on one chain, and spit out a signature for the same instructions on another chain. Cosmos should be given much credit for this dream, but Axelar brings it to arbitrary consensus layers.
🌄 A private key on any chain can be used to sign a transaction on any other chain 🌄
👼 A smart contract on any chain can call a smart contract on any other chain 👼
🙊 A dev can extend any app on any chain and create services for all data 🙊
One private key
Mass adoptoors will only need to have one private key. I think this is a big deal, akin to iPhoone was for appliances.
Which brings us to the slightly terrifying prospect that users won’t have a clue which blockchain is securing the app they’re using. The wallet they sign with won’t care, because it can always route the transaction through Axelar to the destination app. Instead, users will trust the wisdom of the crowd. Most of us don’t audit smart contracts ourselves, and I can’t imagine normsters judging chains for themselves. I mean we already seen dis re Solana 2021.
The stickiness within L1s that I mentioned earlier was really an innovation gap. One which Axelar is filling. New technology should have a moat, until the rest of the world catches up. I’m still very much long block-space, but I wonder if powerful interoperability will be bad for L1 valuations.
Get ready for the libertarian super app
As Layer 1s argue about sharding, rollups and multi-chain philosophies, Axelar connects all of them whether they like it or not. I can’t help thinking L1s hoarding users is a bit futile. Axelar will turn all of crypto into one super app, accessible with one private key. A decentralised world, centralised only by a user’s observation point, their public key. Art is in the eye of the beholder. Enter the relativity phase of Blockchain physics. I’ll be building cross-chain and you should too 🌱
- Another really interesting project to follow is Entropy, which is a decentralised signing machine with similar implications for crypto. It solves a slightly different problem (decentralised custody), and I can see both Entropy and Axelar existing in harmony. Def check Entropy out too.
- You may be wondering about LayerZero. LayerZero offers a very similar dream, but its technology is more the application layer, than the infrastructure/protocol layer. I’ll do a piece on LayerZero very soon.
- Axelar’s technology will become a centralised attack surface for our ecosystem, so it’s worth tracking this. A bug in Axelar’s tech or a game theoretical asymmetry with the proof of stake network could be catastrophic.
- Two barriers for a user to use an app on another blockchain remain: community, and trust. Lunatics might remain, as they’ve been made rich by the buying LUNA early, but I don’t believe this will be a long term factor. Once blockchain technology matures and we have application devs forking this open source technology for themselves, the L1 may not matter as much, as long as it works and comes from a lineage of good consensus tech and inherits security from a deep, decentralised staking pool. Also, if users don’t need to know which chain an app is running on, the community factor might fade.
- Axelar only supports 5 chains currently, but its technology is generalisable to most consensus methods. Axelar hasn’t released their SDK for developers to build cross chain apps just yet, but will be doing so very soon. You can try out Axelar’s cross chain asset transfer bridge here.
- Axelar requires a couple more block confirmations for a signature to be forwarded, so truly snappy UX may require the user having a private key on certain chains. Traders and gamers, for example, will want faster execution.