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In the decade since Ethereum co-founder Gavin Wood introduced the term “web3,” we’ve witnessed the rise of a new digital landscape. Cryptocurrency has evolved into a trillion-dollar staple of the global economy; NFTs have become integral to high-stakes art and investment trades; blockchain-based financial services have moved from novelty to norm.
For all of this, we can credit the developers and visionaries who created solutions that consumers didn’t even know they needed. Their creative determination has built our web3 ecosystem, which now includes tens of thousands of dApps and a wide variety of DeFi services.
The question is, will that same creativity be its downfall?
Web3 Proliferation is Undercutting User Adoption
In theory, web3’s innovative explosion should boost user adoption. As offerings multiply, the ecosystem becomes more appealing. However, user adoption rates are not proportional to web3’s apparent value proposition.
Why? We have a fragmentation problem. As of January 2024, over 1,000 distinct blockchains were operational. The Ethereum ecosystem alone has over 50 Layer 2 (L2) solutions today, with more anticipated to launch soon, all competing for users and liquidity.
This fragmentation impacts user experience. Users often need to switch between networks within their wallets, leading to confusion and potential errors. L2 and L3 chain proliferation forces users to keep various assets and gas tokens in their wallets to sample emerging applications. Each blockchain comes with its own set of rules, transaction fees, and functionalities, adding to the complexity.
Given these challenges, it’s no wonder mainstream consumers hesitate to jump into web3. To unlock widespread user adoption, we need to deliver more seamless, intuitive user experiences.
Improving Cross-Chain Compatibility and Interoperability
The intuitive solution seems to be encouraging developers to enhance cross-chain compatibility and interoperability. However, relying on individual developers to provide global interoperability is unrealistic. The scale of the challenge makes it nearly impossible.
Chain Fragmentation is Constraining Blockchain Developers
Today, the web3 ecosystem features a thousand active blockchains, and this number could increase tenfold in five years. Blockchains are proliferating rapidly as innovators build chains for specific industries, interests, or business use cases. Given the early success of blockchain modularity, this fragmentation is likely to intensify.
But even if chain proliferation was significantly slower, developers could never keep up. Unlike web2, where innovators can build once and attract users globally, web3 developers often need to deploy their apps on multiple chains to chase users and liquidity. This forces developers to spend time on inefficient cross-chain solutions rather than improving their core value proposition.
Instead of expanding web3’s reach and resources, developers are reduced to patching cracks and digging connective tunnels.
Chain Abstraction is Essential for Web3’s Future
Imagine a world where fragmented chains were abstracted away. Developers could build a single instance of their app on their chosen chain, attracting users across any chain without interruption. Users wouldn’t need to know which chain an app was built on or worry about asset compatibility.
To build this functionally abstracted ecosystem, several requirements must be met. User balances need to be unified and accountable across all chains, allowing users to spend freely without hassle. Developers should not need to incorporate complex integrations to facilitate cross-chain accessibility.
An abstracted web3 ecosystem won’t be built overnight, but we need to start building today. Prioritizing abstraction is essential to unlock mainstream adoption. We owe it to web3 architects and innovators to ensure their work receives the recognition and utilization it deserves.
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Mayur Relekar is the co-founder of Arcana. A former chief products officer at Wow Labz, Mayur co-founded Arcana to simplify blockchain complexities and enhance user experience. The company is backed by top industry funds and angels, including Balaji Srinivasan, Polygon Ventures, Republic Crypto, and Woodstock Fund.
