An End and A New Beginning

Chris Whinfrey
Authereum
Published in
4 min readMar 22, 2021

Authereum Labs is turning our focus to Hop Protocol to bring composability to Ethereum’s layer-2 ecosystem. Hop allows users to quickly and cheaply send tokens across rollups and other Ethereum-based scaling solutions.

High layer-1 gas fees have pushed Authereum’s onboarding costs to unsustainable levels. Today, it costs over $200 to sign up for an Authereum account — a far reach from the seamless onramp to Ethereum that we set out to build. Hop addresses this issue head-on, but how we got here is best explained from the beginning.

The Beginning

When we started working on Authereum, our goal was simple:

Make Ethereum applications accessible to the average person.

To us, this meant things like human-readable ENS names instead of addresses, a simple username and password-based login, batched transactions to eliminate token approvals, and of course, sponsored or abstracted-away transaction fees.

We paid about $0.30 to deploy an account contract and assign an ENS name for each user and partnered up with several dapps that were willing to pay for their user’s transaction fees. Transactions at the time cost less than 1% of what they do today, but that didn’t last long.

Black Thursday

On Thursday, March 12th, 2020, we first realized this model may be fundamentally flawed. At the time, COVID-19 was spreading across the globe at an alarming rate, and the world was starting to realize that life as we knew it was about to change. Financial markets were tanking, and crypto assets saw 50% to 60% drops across the board. Due to a flurry of on-chain liquidations, gas prices spiked, and we saw our first glimpse of just how expensive Ethereum transactions could get.

On March 12th and 13th, gas prices spiked to a now tame-looking price of 200 Gwei and then shot past 400 Gwei. Source: glassnode

The very next day was our last day in the office for what has now been over a year. We regrouped over Zoom the next week and began to discuss how Authereum would survive in a world where it cost over $10 for each user that signed up and even more for the sponsored transactions we were paying for. We quickly put an end to the sponsored transactions and pushed the sign-up cost to the user. This allowed us to operate sustainably but caused our onboarding user experience to suffer.

Gas prices continued to rise, and it became apparent that Ethereum’s layer-1 would be prohibitively expensive not just for us but for the mainstream users we were building for as well. If Authereum had a future, it had to be on layer-2 and layer-2 couldn’t come soon enough.

Layer-2

Our first layer-2 efforts were to integrate with solutions like DeversiFi and zkSync. Both had snappy user experiences and dirt cheap fees — exactly what layer-2 had been promising all along. However, most Authereum users weren’t realizing much if any gas savings. The cost to simply get on and off of layer-2 was too expensive. Not to mention, users still had to deploy what was now a +$50 account contract on layer-1 to sign up. One thing became increasingly obvious to us.

Users needed to be onboarded directly to layer-2 and needed to be able to stay on layer-2. Any interaction with layer-1 was simply too expensive for the vast majority of users.

We started working on ways users could move tokens directly from one rollup to the next using liquidity pools. This would allow users to access a diverse rolllup ecosystem without ever needing to touch layer-1 Ethereum. After a few iterations, we landed on an early version of the Hop protocol and decided it was worth putting together a proof-of-concept.

Seeing the first version of Hop send tokens across the Optimism and Arbitrum testnets was captivating. Ethereum’s layer-2 was starting to feel like an undeniable reality, but we understood the limitations of scaling without composability first-hand. If the concepts behind Hop were sound, the implications were enormous.

We quietly published the Hop whitepaper for feedback from the broader community, and the response was overwhelming. We were on to something but knew there was still a long road ahead.

Today

Transaction fees have continued to climb with no end in sight. We’ve watched as more and more users get pushed off of Ethereum and once-promising projects become obsolete due to fees. Competing blockchains have started to take advantage of Ethereum’s congestion issues. They copy or buyout Ethereum’s projects and innovations, attempt to mirror its culture, but oftentimes sacrifice the ethos that underpins it all. Ethereum needs layer-2 to happen now more than ever.

We’ve realized our work on Hop could be impactful for the broader Ethereum ecosystem. Since day one, it has been our goal to get Ethereum applications into the hands of average people and we believe building Hop is the best way we can do that. We’re both saddened and beyond excited to announce that we’ll be winding Authereum down over the next year to focus our full attention on Hop Protocol.

Moving Forward

If you’re an Authereum user, we’d highly recommend that you hold on to your account and stay tuned for more news in the next few months. We encourage you to start unwinding your positions and moving your funds off of Authereum at your earliest convenience. We’ve put new signups on hold indefinitely but will continue to run all the infrastructure needed for Authereum to function.

If you’re interested in following our progress with Hop, give us a follow on Twitter and/or jump into our Discord and say hi.

With every end comes a new beginning and we’ve never been more excited for what the future may hold.

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