Chain Abstraction Startups are the Latest Crypto Fundraising Trend

Key Takeaways

• Chain abstraction has become a hot crypto buzzword.
• Venture Capital investors are directing capital toward startups in the space.
• In recent weeks, InvArch, Stripchain and Router Protocol have all raised funding.

While mass adoption means many digital technologies are completely embedded in everyday life, blockchains remain a niche solution and still require a certain degree of specialized knowledge. 

Blockchain abstraction refers to the process of obscuring the underlying technology that powers Web3 applications. But although the concept promises to usher in a new era of blockchain adoption, it isn’t yet clear how abstraction will work and new solutions are emerging all the time.

Making Blockchains Disappear

Over the years, there have been some important victories in the journey toward chain abstraction. 

In the Ethereum ecosystem, account abstraction is streamlining the user experience, making it easier than ever to transact with digital assets.

Meanwhile, multi-chain wallets let users hold assets on different platforms without having to run software for each one individually. 

A growing network of cross-chain bridges and interoperability protocols has been built to solve the problem of blockchain fragmentation. But as fast as these solutions abstract away complexity, new layers of blockchain infrastructure appear, reintroducing the problem all over again. 

The ultimate dream of chain abstraction – a world where users can interact with decentralized applications (DApps) without even knowing which blockchain they are transacting on – is still some way off. But there are plenty of startups working to build that future. And they are beginning to attract more attention from venture capital (VC) firms. 

VCs Back Chain Abstraction

In recent months, a string of chain abstraction startups have secured funding to help build their vision for a more seamless, user-friendly Web3 experience. 

In April, InvArch closed a $1.75 million Seed Round to fund its vision for a blockchain-agnostic interoperability hub that lets users manage assets and execute transactions across any chain from a single account.

A month later, Stripchain raised $10 million to help build its omnnichain execution layer for “hyper-interoperable” applications that deploy across multiple chains.

In the latest chain abstraction funding round, on Tuesday, June 18, Router Protocol announced the completion of a strategic funding round with participation from prominent crypto angels and funds. 

Initially focused on building cross-chain bridges, the startup is now preparing for the mainnet launch of Router Chain – a decentralized bridging solution designed to simplify the process of connecting divergent blockchain ecosystems.

“Router Chain embodies the evolution of our unwavering vision to build the universal interconnectivity layer between fragmented L1/L2 networks,” said CEO Ramani Ramachandran in a press release.

“By abstracting away blockchain complexity, we are laser-focused on delivering the most seamless and intuitive user and developer experience for multi-chain applications. This funding round propels us closer to realising this transformative vision.”

Abstraction vs. Interoperability

In a way, abstraction has inherited the legacy of a previous crypto buzzword: interoperability. 

But whereas interoperability solutions are typically oriented toward moving data and value between chains, usually Ethereum and some other Layer 1, abstraction is focused on building platforms that are multi-chain from the ground up.

Commenting on the term’s recent popularity, Router’s head of research Priyeshu Garg observed: “We’ve been building this for a long time, we just weren’t calling it chain abstraction, but the tooling was always there.”

As he explained to CCN, Router Chain grew out of a solution called the cross-chain intent framework (CCIF): “What [CCIF] does is it abstracts DApps onto any chain of your choice.” 

In a way, Router and  InvArch have proposed similar solutions, but at first, their approach seems counterintuitive. If the fragmentation challenge arises out of so many blockchains, how does building another one solve the problem?

Decentralized Bridges

Many chain abstraction ventures started with a more modest premise than the chain-agnostic interoperability solutions they are today. Router, for example, was originally in the business of building bridges.

When the company first started out in 2020, Ethereum was much more dominant than it is today, accounting for the vast majority of the total value locked on smart contract platforms.

Even back then, “our thesis was that fragmentation is going to increase and Ethereum is going to lose its share to rollups and other L1s,” Garg said. However as Ethereum lost its market share, bridge security became a major concern.

Following a series of high-profile exploits in 2022, it became apparent that centralized bridges posed a serious risk, he added. Given this weakness, “we decided to build a decentralized bridging protocol [and] the best way to decentralize something is to put it on a blockchain.”

In a sense then, Router and its peers are a solution to the weaknesses of centralized bridges. Instead of connecting each blockchain point-to-point and routing all transfers through centrally administered infrastructures, they aim for open-ended connectivity and security through decentralization.