We are excited to unveil the next milestone of Arcana Network, a user-centric chain abstraction protocol to remove the complexities of dealing with assets and gas fees across 100s of chains today and 1000s of blockchains tomorrow. A universally smooth, multichain experience for users from any blockchain ecosystem.

Arcana’s driving product design philosophy has been to abstract away web3 complexities. Starting with Arcana Auth which abstracted wallets through its MPC-based Embedded Wallets as a Service SDK, then abstracting Gas Fees through Account Abstraction with its Gasless SDK, and now abstracting away chains with its Chain Abstraction protocol. 

This is made possible with Arcana’s Modular Layer 1 for abstractions, slated for release in the latter half of 2024.

Before we dive into Arcana’s Chain Abstraction, why is it important?

With the proliferation of chains (L1s, L2s, L3s, Rollups, Appchains, Sidechains…), User Experience and Liquidity are fragmented. The modular chain thesis and its growing ecosystem are leading to the exponential growth of chains, further exacerbating the problem of UX and liquidity fragmentation.

Today, there are dozens of leading Layer 2s and Layer 3s just in the EVM ecosystem that compete for users and liquidity.

Broadly, this problem manifests in 3 specific forms:

1. User Experience Inefficiencies

   

   • Imagine you have a bank account with HSBC Bank and have some $USD.

   • You usually shop on Amazon with your HSBC Bank debit card.

   • You hear about the Black Friday Sale on Alibaba and want to buy some products from there.

   • You pick your items and then proceed to checkout. But Alibaba tells you they only accept payments from Citibank cards. Furthermore, they only accept €EUR for payment.

   • This implies you need to open a Citibank account, convert your $USD to €EUR and then deposit the €EUR before going back to make your purchase, only to realise the sale is over.

   • This obviously does not happen in real life. Fiat payment rails, a combination of payment gateways, Visa/Mastercard, Clearing Houses, and the Swift network abstract away all complexities and allow the user to make banking transactions simple.

   

   
   This, however, is the state of crypto today. Even trying out an app requires an insane set of transfers, bridges, swap transactions, and new gas tokens, which is at best, annoying and at worst, simply impossible.
   
   

2. Developer Experience Inefficiencies

   

   • The proliferation of chains with well-capitalised foundations and a clear mandate to grow the user base and liquidity on their respective chains results in incentives for users to transact on these various chains.

   • Apps are now forced to chase users and liquidity by building and maintaining clones of their apps across these chains.

   • With each of these chains being separate state machines, interoperability between chains and consequently, on the different instances of these apps, is either problematic or simply impossible, leading to inefficient workarounds and further fragmentation.
     
     

3. Capital Inefficiencies

   

   
   As the team at Everclear describes in their insightful blog post, for every $1 bridged into a chain, $0.80 is bridged out. This implies:

   • Far more liquidity than needed is bridged into any specific chain.

   • Far more bridging transactions happen than are needed.

   This results in significantly greater gas and time spent on bridging funds that were already available.

Solution: Arcana Network’s Chain Abstraction Powered By A Modular Layer 1

Arcana's approach to addressing the 3 pronged problem:

Unified User Experience

• Present a unified balance to the user showing an aggregate of balances held across chains.

• Allow the user to instantly spend this balance on any chain.

• Abstract away the need to switch or add chains.

• Abstract away the need to hold gas tokens of a specific chain.

• Support all types of wallets without forcing steep learning curves on users 

Low Footprint Developer Experience

• Developers do not need to chase liquidity and users on different chains. Users can use the app without needing to bridge

• Developers can choose chains based on tech and business requirements.

• Developers aren’t presented with high-effort and high-commitment integrations

High Capital Efficiency

• Utilise existing liquidity on the user’s target chain to reduce the need for unnecessary bridging transactions.

• Netting before rebalancing to improve capital efficiency, distribute the gains to all stakeholders and generate real yield for all the token holders and LPs/Solvers.

• Seamless support for new chains and tokens by LPs/Solvers

Overview of Arcana’s Modular Layer 1

Arcana’s Modular Layer 1 is a decentralized network of nodes capable of:

State Machine:

• Tracking and maintaining the state of each user account.

• Track current balances, spends, and unrealised collections.

• Help present the current unified balance of the user account across chains.

Distributed Key Generation (DKG):

• A real multi-dealer, Distributed Key Generation scheme

• Multiple nodes participate in the creation and storage of key shards, enabling decentralisation and eliminating central points of failure

MPC-TSS:

• A Multi-Party Computing scheme capable of performing Threshold Signatures

• Threshold signatures are conditional, based on verification checks such as “Does the user have necessary funds, (i.e. balance minus unrealised collections) to perform a transaction?”

Netting:

• Tracking all user spends, collections and liquidity positions in vaults allows the network to net the spends across various chains and issue netted rebalancing instructions to LPs/Solvers.

Arcana Vault:

Vaults are smart contracts deployed on individual chains that:

• Holds liquidity of tokens supported by the Arcana Network and the gas token of the specific chain.

• Supplies the liquidity to the client in need based on instructions from the Arcana network of nodes.

• Sweeps funds from users based on instructions from the Arcana’s network of nodes.

• Verifies the instruction signature to ensure the transaction request originated from the user.

LPs/Solvers:

A network of 3rd party liquidity providers that compete on fees to fulfil liquidity requirements of different assets across different vaults on each chain.

Clients:

Wallets, Apps, and other interfaces where user intents originate.

Built on principles of great user experience, developer experience, and high capital efficiency, Arcana’s chain abstraction will work across:

1. All Web3 Apps - From DEXs like Uniswap to marketplaces like Opensea, from day 1 of launch. 

2. All Supported Chains - Chains and developers can focus on serving users from day 1 without worrying about liquidity

3. All Types of Wallets - Users can come with their existing wallets and assets and get started. Users can bring in EOA wallets, MPC wallets, and Smart Contract Wallets, to experience chain abstraction. 

Once the network goes live on the mainnet, these core offerings will allow users to experience unparalleled Web3 UX. 

We are excited to start onboarding users and partners to a new web3 experience, made possible with Arcana’s modular chain, over the next few months as we roll out our Modular chain to testnet and mainnet in Q3 and Q4.

To stay updated and get early access to Arcana’s Chain Abstraction: Join Waitlist

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