Former Microsoft Engineer Predicts a Gradual Shift in Blockchain Development Focus Toward Vertical Scaling

While wrapped digital assets have enabled the bridging of assets and expanded their utility, their perceived need for custodianship reintroduces centralization risks and trust dependencies. This contradicts the decentralized ethos of blockchain technology, according to Chris Li, founder and CTO of Ava Protocol.

Attaining Utility While Preserving the Core Principles of Decentralization

Li told News that he views wrapped assets as transitional solutions. He also predicts that emerging solutions like atomic swaps, cross-chain bridges, and zero-proof technology will likely supersede wrapped assets. These solutions, he argued, achieve the same objective of preserving the core principles of decentralization and trustlessness.

Turning to efforts by various projects to simplify blockchain processes, Li, a serial entrepreneur, emphasized the “significant” progress made in making protocols faster and cheaper to use. However, he acknowledged that there is still “a long way to go” in building the entire infrastructure and perfecting the user experience.

Li nevertheless predicts that the focus of blockchain development will gradually shift away from horizontal scaling to vertical scaling in the next five years. He cites the development of smart wallets and multi-signature solutions as some of the developments to watch for. In his written answers sent via Telegram, Li also offered his thoughts on the so-called blockchain trilemma and how Ava Protocol is overcoming this challenge.

He also discussed how developers can make blockchain processes simpler to attract more users. Below are Li’s answers to all the questions sent. News (BCN): Blockchain interoperability, privacy, and security of transactions remain key topics in the Web3 ecosystem. Many emerging solutions are focusing on making native blockchains, such as Ethereum, scalable. Meanwhile, other developers are seeking ways to simplify the processes involved in blockchain development to accommodate everyday users. How do you rate developers’ performance so far in their attempt to make blockchain processes more simplified? What else do you think needs to be done to accommodate even more everyday users?

Chris Li (CL): In the past five years, significant progress has been made in terms of blockchain scalability, making transactions faster and cheaper. This can be attributed to Ethereum layer-2 solutions like Arbitrum and Optimism, as well as new consensus mechanisms in blockchains such as Solana, Near, and Aptos. Looking back, the landscape has changed dramatically. In 2018, a single game like Fomo3D could halt the entire Ethereum network, whereas today, such incidents are rare. Even a few hours of congestion on Polygon can make headlines, highlighting how much the ecosystem has improved.

Zero-knowledge proof (ZKP) technology has also made great strides. Zk-rollups solutions for Ethereum layer-2 can now prove their commitments on the mainnet within minutes, eliminating the need for the lengthy 7-day challenge period required by optimistic rollups. Additionally, private transactions are becoming available on blockchains like Aleo, though there is still a long way to go in building the entire infrastructure and perfecting the product user experience.

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Given the recent achievements in horizontal scaling, I believe the horizontal scaling solution space has become quite saturated, making it increasingly challenging to achieve significant improvements. In the next five years, I expect the focus of blockchain development to gradually shift towards vertical scaling. This involves not only making transactions faster and more affordable but also enhancing the capabilities of each transaction.

A prime example of this is the development of smart wallets and multi-signature solutions, which significantly enhance user experience and empower them to accomplish more. At Ava Protocol, we are working on building super-transactions that allow users to schedule actions based on time, price, or custom smart contract events. Users should be able to do this using their MetaMask or Coinbase wallets, without relying on manual scripts and bots to manage private keys and execute pre-signed transactions.

BCN: Many existing barriers hinder blockchain adoption, despite the introduction of innovative solutions aimed at simplifying the technology. For example, projects in recent years have introduced wrapped assets to facilitate cross-chain transactions. Although this approach is seen as effective, it presents the challenge of trusting custodians and introduces a degree of centralization into an environment that is otherwise decentralized. What are your opinions on wrapped assets, and what alternatives could mitigate the associated risks and limitations?

CL: In my opinion, wrapped assets are a not-so-perfect intermediate solution that addresses many needs at the time. The concept of wrapped assets essentially involves holding your ETH in custody under a smart contract to enable additional functionalities. Once wrapped, you are at the mercy of the developers of the wrapped smart contract, which is responsible for implementing complex logic through custom Solidity code. While this approach has been effective in enabling bridging assets and expanding the utility, its custodial component inherently reintroduces centralization risks and trust dependencies, which run counter to the decentralized ethos of blockchain technology.

I consider these intermediary solutions because today, similar logic can be achieved using off-chain storage and other advanced techniques. For instance, using an EigenLayer AVS (Actively Validated Services) allows for complex transaction logic without requiring custody of your assets. This method leverages the trust and security of ETH restakers, eliminating the need for centralized custodians and reducing the associated risks of wrapped assets.

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Moreover, as the blockchain ecosystem continues to evolve, we are likely to see more sophisticated solutions that minimize the need for trust and centralization. Technologies like atomic swaps, cross-chain bridges utilizing decentralized oracles, and advancements in zero-knowledge proofs offer promising alternatives. These solutions can provide the same, if not greater, functionality as wrapped assets while preserving the core principles of decentralization and trustlessness.

BCN: At the core of enhancing blockchain effectiveness is the acceleration of transaction speeds. However, achieving faster transactions often compromises the protocol’s decentralization and security. Many projects have purport to have solved this challenge also known as the blockchain trilemma. In your opinion, to what degree have these projects succeeded? How has the Ava Protocol approached this challenge, and what have been the results?

CL: The blockchain trilemma—balancing security, scalability, and decentralization with limited resources—poses a significant challenge. It is difficult to enhance all aspects simultaneously without compromising others. However, by allocating more resources to one dimension, it is possible to improve one aspect without directly diminishing the others. In computer science, a common approach is to trade space for time and vice versa. For example, Ethereum layer-2 solutions achieve scalability, or more block space, by providing users with additional network operators and storage, while still committing and finalizing results on Ethereum.

Similarly, zk-rollup scaling solutions generate proofs of transactions by adding significant computational power, thereby reducing finalization time on the Ethereum mainnet. Ava Protocol addresses this blockchain trilemma by leveraging the network of EigenLayer’s trusted operators to achieve scalability through the addition of both computational and storage resources. This approach makes transactions through Ava Protocol more cost-effective and enhances functionality, allowing users to build custom workflows with chained actions triggered by a variety of events.

BCN: One significant limitation of blockchain technology is the necessity for users to grasp additional technical knowledge. Comprehending and utilizing fundamental protocol elements, such as private keys, may deter the average user. Therefore, if prioritizing adoption, developers must innovate to reduce the entry barrier. Are there methods to develop efficient blockchain protocols that reduce associated complexities, such as the frequent use of private keys?

CL: There are various solutions aimed at tackling this problem. Argent wallet pioneered the concept of social recovery, and more recently, several projects have proposed the concept of Multi-Party Computation (MPC). While these new solutions enrich wallet utilities, they need to make trade-offs between security and product complexity, for example, MPC wallets aim to completely replace your Metamask EOA wallet and introduce dependencies on multiple parties to manage the keys. This can potentially increase the risk of vulnerabilities and reduce the level of control an individual user has over their assets.

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Ava Protocol has embraced the Ethereum native approach of ERC-4337 and extendedly ERC-6900, which focus on smart wallets. Smart wallets are designed to manage user accounts with minimal authorized access. They are naive, allowing users to keep using their Metamask wallets; agile, enabling creation without gas fees; and composable enough to connect to traditional Web2 authentication methods like Google accounts or 2FA. For example, Coinbase Wallet uses a smart wallet with iCloud Keychain backup and biometric information for access. We believe this is the most native approach for Web3 users, enabling them to work with various applications using their existing Metamask wallets, switch access on and off as needed, and even revoke or delete the smart wallet without changing their own wallet.

BCN: As a long-time developer and serial entrepreneur, you must have come across certain deficiencies in the industry that inspired you to create Ava Protocol. Can you share with us your motivation towards creating it, what you expect to achieve in terms of user benefits, and your plans on how it could become widely adopted across the blockchain and wider technological ecosystem?

CL: When we started the journey of Ava Protocol, we drew inspiration from Keep3r Network and Chainlink Automation, which were among the first generation of automation solutions in web3. These early solutions leveraged centralized components or bot networks to some extent, which worked at the time but couldn’t deliver the most user-friendly experience. We learned from their experiences and spent years researching and experimenting, leading to the development of specialized on-chain data storage to properly store and trigger user workflows.

We launched our Automation Hub on testnet and received very positive feedback from the community. Today, we continue to make incremental improvements to that product. As we move into the third generation of automation solutions built on Eigenlayer, we have accumulated enough experience to understand user needs and build a product for mass adoption. For example, developers have built drag-and-drop visualization tools for creating custom workflows. In the near future, any developer will be able to integrate our workflow engine into their products, allowing users to build DeFi, NFT, or RWA workflows with ease, without any coding experience. We are excited to make these dreams a reality.

What are your thoughts on this interview? Share your opinions in the comments section below.

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