The challenges in offering cross-chain smart accounts

tl;dr - Safe has facilitated **15M+ cross-chain transactions**, gaining critical insights into providing smart accounts. - **Key challenges** include poor **user experience**, fragmented liquidity for protocols, and new chains struggling to attract genuine users without relying on incentives like airdrops.

Introduction

With over six years of experience providing smart accounts, Safe has facilitated more than 15 million cross-chain transactions, with a total volume exceeding $25 billion (source). Throughout this journey, we’ve gathered a wealth of insights and learnings that we hope to share with the developer community. Our goal is to contribute to a more secure, accessible, and chain-agnostic future.

Learning 1: User Experience Still Needs Improvement

A) Confusion about the Address

One of the most persistent user experience challenges is confusion regarding how Smart Account addresses differ from Externally Owned Accounts (EOAs). Users are often accustomed to having a single address that can be used across multiple chains without issue. When deploying a Smart Accoung, they mistakenly expect the Smart Account’s address to function on other chains as well. However, this isn’t the case—Smart Accounts are chain-specific by default.

A common user error is sending funds to a Smart Account address on a chain where the Smart Account has not been deployed. In such cases, funds appear lost until the Smart Account is replayed (i.e., redeployed at the same address) on the target chain, which is possible in many scenarios.

To address this problem, we introduced improvements starting from Safe version 1.3.0. This update makes replaying a Smart Account easier and ensures that, in nearly all cases, the same address can be replicated on multiple chains. We are also adding a feature to the Safe wallet that will allow users to replay their Smart Account on other chains with just a few clicks.

However, if a Smart Account’s owners or settings change significantly (e.g., when private keys are compromised or lost), replaying the Smart Account at the same address might not be possible. To ensure a Smart Account can be redeployed on the same address, its settings must remain largely unchanged.

Ideal Scenario: A Smart Account that can automatically deploy to all chains using the same address, even when owners or settings change.

B) Manual Setting Synchronization

Changing the settings of a Smart Account—such as updating owners or modifying the threshold for approval—presents another challenge. Currently, these updates need to be applied manually on each chain where the Smart Account is deployed. This means users must repeat the same transaction on every chain to synchronize settings, which quickly becomes cumbersome.

Ideal Scenario: A solution where setting changes are automatically synchronized across all chains. Potential approaches could involve a decentralized key store or a transaction relay agent, but determining the most efficient solution is still an open challenge.

C) Gas Costs and Bridging

To deploy a Smart Account or execute transactions on a new chain, users need to have gas on that chain. This often results in the need to bridge funds twice: once for the EOA (the wallet executing the transaction) and again to fund the Smart Account. This process increases both the cost and complexity for users, leading to a frustrating user experience.

EIP-4337 introduces a potential solution through paymasters, which can sponsor gas fees for smart accounts. However, sponsored transactions remain uncommon in the DeFi landscape, meaning users still bear the burden of managing gas themselves.

Ideal Scenario: Users wouldn’t need to perform any bridging transactions to send transactions on a new chain. Gas costs would either be abstracted away or handled natively.

Learning 2: Liquidity Fragmentation Poses Major Challenges for Protocols

A) Price Slippage and Inefficiencies

Cross-chain interactions are often inefficient due to high bridging fees, long wait times, and significant price slippage. For example, if bridge parameters change during a transaction, user funds can be temporarily frozen. Similarly, liquidity fragmentation across chains leads to higher price slippage when trading assets on newer or less-liquid chains. Additionally, MEV (Miner Extractable Value) extraction still reduces transaction efficiency across DeFi protocols.

Ideal Scenario: Users would experience seamless cross-chain transactions with no noticeable delays, minimal price impact, and built-in MEV protection. Funds wouldn’t be locked in transit, and price slippage would be minimal.

B) Competitive Struggle for Liquidity

Liquidity fragmentation creates major challenges for protocols and developers. Protocols often compete to attract liquidity and Total Value Locked (TVL). However, liquidity spread across multiple chains can degrade the user experience. If a protocol deploys on too many chains, liquidity may become diluted, leading to varying experiences based on the liquidity available on each chain.

This problem is likely to worsen as app-specific chains (app-chains) become more popular. Each app-chain may have its own liquidity pools, leading to further fragmentation and friction for users. As bridging becomes more necessary, the friction increases, and new protocols face even greater competition to attract liquidity.

Ideal Scenario: Liquidity could be attracted in a chain-agnostic way, where protocols focus on acquiring users without worrying about liquidity fragmentation. Bridging liquidity would be automated and abstracted from both users and protocols.

Learning 3: New Chains Face Difficulty in Attracting Genuine Users

A) Dependence on Incentives

New blockchains face the opposite challenge. They must attract both liquidity and protocols, but the market for general-purpose chains is already saturated. Many new chains rely on high token incentives and airdrops to bootstrap usage. However, sustaining organic, non-airdrop-driven growth can be difficult.

B) Infrastructure Gaps

Additionally, new chains need to provide basic infrastructure for developers and users, including reliable bridges, swap facilities, and node infrastructure. Without these, users will struggle to bring liquidity and interact with protocols on the chain.

Ideal Scenario: Chains would no longer need to worry about bridging and swapping liquidity to their platform. As long as they offer a unique value proposition, users and liquidity could easily migrate.

Conclusion and Next Steps

At Safe, we believe that smart accounts are key to achieving a truly chain-agnostic future. However, realizing this vision requires collaboration across the entire blockchain ecosystem, from protocol developers to chain operators.

We hope the insights and learnings shared in this article will help other teams working towards the same goal: a secure, seamless, and accessible multi-chain world. By addressing the challenges of user experience, liquidity fragmentation, and cross-chain interactions, we can create a future where smart accounts function effortlessly across any blockchain.

Stay tuned for more updates and insights from our team.

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