Liquidity Challenges and Solutions in the Multi-Chain Era

After Ethereum shifted to Layer 2 scaling solutions, along with the rise of tools like RaaS, numerous public chains have rapidly developed. Many entities wish to build their own chains to represent different interests and seek higher valuations. However, the emergence of many public chains makes it difficult for the ecosystem to keep pace, leading to many projects experiencing a drop in value at the time of their initial token issuance.

With the help of OP Stack, a trading platform has launched its own Layer 2; leveraging ZK technology, another trading platform has launched its own Layer; many well-known companies have also released their own blockchains. Nowadays, the funding and technical thresholds for building a chain have been significantly lowered, and the monthly cost of operating a chain based on OP Stack is approximately $10,000.

The future will undoubtedly be an era of coexistence of multiple chains. Although these Layer 2 chains may choose EVM compatibility for interoperability, it is difficult for them to build applications and reach consensus on the same chain due to the large number of downstream applications backed by Web2 entities.

The current multi-chain ecosystem has brought new challenges: Liquidity and state dispersion. As the existence of multi-chains is inevitable, interoperability has become a field that must be explored and addressed. There are currently many Liquidity solutions, such as chain abstraction, intent, settlement execution, native cross-chain, ZK sharding, etc., but their core essence is the same.

We use the industry-recognized Cake architecture to introduce the core components of cross-chain abstraction from top to bottom:

1. Application layer: The layer where users interact directly, completely shielding the details of liquidity conversion.

2. Permission Layer: Users connect their wallets to the dApp and request quotes to fulfill their trading intentions.

3. Account management and abstraction layer: Need to adapt to the account management and abstraction system of different chains.

4. Solution Layer: Responsible for receiving and executing users' trading intentions.

5. Settlement Layer: The middleware layer that realizes user intentions on the solution layer, including components such as oracles, cross-chain bridges, pre-confirmation schemes, and data availability.

There are various solutions in the market to address liquidity fragmentation:

1. RaaS-centric: Rollup solutions such as OP Stack.

2. Account-Centric: Build a full-chain account wallet that supports signing and executing transactions across multiple blockchain protocols.

3. Centered on the off-chain intent network: Users send intents to the Solver network, and Solvers compete with quotes.

4. Centered around the on-chain Liquidity network: Build a liquidity layer on which applications can be built to share the full-chain liquidity.

5. Centered on on-chain applications: Build high Liquidity applications by integrating major MM or third-party applications.

Solving the liquidity problem is an important proposition. If an integrated liquidity platform can be built, especially one that consolidates fragmented on-chain liquidity, it will have tremendous potential.

Several typical chain abstraction concept projects and their methods for solving the liquidity fragmentation problem:

1. INFINIT: Build DeFi RaaS services to provide the necessary components for protocols.

2. Khalani Network: Build three core components: Intent-compatible layer, Validity layer, and Universal Settlement layer.

3. Liquorice: Implement a decentralized application for auction-based price discovery and unilateral Liquidity pools.

4. Xion: Based on the Comet BFT consensus protocol, using Cosmos IBC for cross-chain communication.

5. =nil; Foundation: Proposes zkSharding solution, utilizing ZK technology to scale the Ethereum mainnet.

6. ERC-7683: Establishing a universal standard for cross-chain operations across L2 and sidechains.

7. OP Stack: A complete multi-Layer2 solution designed to address information transmission and Sequencer decentralization issues.

Solving cross-chain 流动性 is a complex field with many solutions. The coexistence of multiple chains in the future is an inevitable trend, and addressing the issue of fragmented 流动性 will become a challenge that the industry must face. The integration of full-chain 流动性 presents vast development opportunities and is expected to build important infrastructure for the Web3 era.