Building a Better Blockchain: Lessons in Innovation and Adoption

10 May 2024

I am speaking with Pavel Salas, Chief Growth Officer at Gear Foundation. We'll discuss his journey into the blockchain industry and examine the potential of blockchain technologies like tokenization and restaking.

We'll also discuss the challenges and strategies for promoting blockchain adoption, focusing on improving user experience and security through innovative transaction methods such as signless and payless transactions.

Can you describe your journey into the blockchain industry and what drew you to work at Gear Foundation?

I was introduced to the blockchain space by Yoni Assia, CEO and founder of eToro, where I worked. He's a blockchain fan and maximalist. He was among the first to consider putting some assets on top of the Bitcoin protocol.

He backed the idea of the Color Coins protocol, on which Vitalik Buterin also worked on the whitepaper. At that moment, when we were working at eToro, we were thinking about using a wallet to put the results of your trading or each position on top of the blockchain.

So, this is how I started. At the same time, eToro was one of the first platforms that introduced CFD trading on Bitcoin and Ethereum on a regulated platform. We started giving some workshops and seminars about what blockchain is.

After that, I became CEO of another startup, Tokenbox. We were willing to tokenize portfolios, meaning we allowed people to trade assets of other people, but to ensure that the person trading would not take the assets away, we tokenized the portfolio; people bought these tokens so a person could have access to the funds for trading but not to take them away.

We were also building an aggregation of the biggest exchanges at that time so that traders would have the best price and liquidity at each possible moment. After that, I moved and consulted some companies regarding blockchain integrations in the B2B sector.

The idea was to do something similar to trade finance on blockchain, and after that, one of Gear's founders introduced me to the project. We started discussing several ideas there, and this is how I joined Gear Foundation in August 2021 to help promote and build the community and the ecosystem around Gear in general and the Vara Network as the first deployment of the Gear protocol itself.

You've had significant roles in projects like eToro and Tokenbox. How did these experiences prepare you for your current role at Gear Foundation?

The roles I've had are pretty different, but they gave me a lot of experience in terms of how to work in financial markets, how to work in big structured companies, and how to work in a startup.

All this knowledge about building customer bases, community engagement, and promoting projects or ideas into the mass market actually brought and helped me, and it still helps me get a lot of ideas into the Web3 world, into the Gear Foundation, support the teams, our mates, and everything that is building around that.

We need to understand that Web3 changes a lot. One of the most important things is to learn fast and stay up to date with trends. This, I think, is one of the most unique things that I brought with me because each role had its own challenges.

It showed me that I had to learn several new skills, approaches, and ideas because it was always a competitive market. So now it's practically the same but with a different flavor and source of totally web-free decentralization, open-source teams, and open-source projects. It has its real beauty, and I think we'll see the results soon.

What have been the biggest challenges in promoting blockchain technology and adoption through your roles? How have you addressed these challenges?

One of the biggest challenges is introducing new technology in areas where people are more interested in quick profits than the technology itself. This type of adoption requires us to educate new users on why this specific technology is superior: why it's better, faster, more straightforward, offers better solutions, and provides more security.

Now that the network is live, other projects that do the same are emerging. They create applications and tools that simplify the building process and the user experience. I believe this will significantly assist and resolve many issues.

We will inevitably encounter people wanting to know how to make a tenfold return on their $100 investment, but that's not a question we will address. There are plenty of Telegram groups, chats, and channels for those inquiries.

Our focus is on how to increase Web3 adoption, attract more developers from Web2 to Web3, and convert traditional Web2 users into Web3 users. The aim is to enable people of all ages to use blockchain technology and applications built on it. These challenges inspire me to create, think, and develop tools others can use to build such applications.

To achieve this purpose, we hold workshops and hackathons, often in universities, where we gather feedback and make adjustments. We've launched the Gear Academy and introduced a 'learn to earn' program, where developers can gain skills, complete exercises, and earn small token rewards.

These tokens can then be used to further their learning and build on the main net without investing their money. We also organize a "Varathon," a yearly ongoing hackathon that starts at the beginning of each month. We try to mentor and support the projects that participate, and some of them receive grants from us for further development.

Can you explain how Vara's Signless and Payless transaction technology changes the user experience compared to traditional blockchain transactions?

Let's first clarify what Payless transactions are and what we mean by Signless transactions:

Payless transactions allow users to perform certain calculations on-chain without incurring transaction fees. However, this doesn't eliminate fees entirely; instead, the responsibility of paying them shifts. Vara implements this scenario using a special module and the concept of Vouchers.

So, anyone may issue a voucher, representing a limited amount of tokens used to cover transaction fees for another user. This allows the user to interact freely with the specific program. For example, some protocol developers could use it to enhance users' passion for trying their program.

Consider gaming, which provides an easy analogy between Web2 and Web3 environments. If you've played simple games on apps or Facebook, you know you can start quickly and easily at first, and then, as you progress, the game prompts you to purchase loot boxes as monetization begins.

It's important to understand that unlike Web2, where many services are free until monetization kicks in, in Web3, you must pay for everything you do on the chain, though you own all your actions. To mimic the web2 experience first, the dApp developers can allow users to try the game for free to engage more unfamiliar users. Then, if they want to continue, they must start paying for the gas.

Traditionally, to use any application on the blockchain, a person must open a wallet, buy some tokens—whether they are native tokens like Ethereum, Solana, or Vara—it doesn't matter—and perhaps even buy them on the exchange and pass all the KYC process.

This introduces significant friction and barriers to entry, which can deter many potential users. Our Payless transactions simplify this process; you simply open a wallet and use the application. It's free—you don't need to buy any tokens initially. Once users like the application and realize they need it, whether a game or a decentralized exchange, they only need to deposit their money to cover gas fees. We also offer on-ramp solutions to facilitate this.

Regarding Signless transactions, they are particularly relevant for gaming because they allow a specific amount of gas to be allocated to a contract that will sign transactions on behalf of the user within the application. This is crucial for improving the gaming experience. For instance, in an on-chain game, every action typically prompts a transaction signing request.

It can quickly become frustrating if you're playing a game, where each move triggers a wallet popup asking for transaction approval. The Signless solution allows you to play without having to sign each transaction; they are automatically signed in the background, providing a seamless Web2-like experience with the security of Web3. If there are credits left after you finish playing, they return to your main wallet. These technological advancements greatly improve the usability of Web3 and promote wider adoption.

What specific challenges within the blockchain and DeFi industries do Signless and Payless transactions address? Can you detail how these features overcome the need for users to sign each transaction and pay gas fees?

First, let's differentiate between the two features since Signless and Payless transactions are distinct mechanisms that enhance user experience in different ways, though they are only sometimes necessary. As previously mentioned, Payless Transactions allows a developer to issue specific credits for using an application. These can be particularly useful in the DeFi ecosystem in various ways.

For example, imagine a scenario where we have a subscription model where a user is allowed to conduct transactions on a DEX, say, ten times a day. This would incur a certain amount of gas fees. The developer could allow users to stake a certain amount of tokens to facilitate this without upfront costs for the user.

The yield from this staking could then cover the gas fees incurred by the user's transactions. As the staking generates revenue block by block, it can be claimed and allocated to the user's account to cover transaction costs. The developer can then issue vouchers that allow the user to engage with the application without worrying about gas fees.

This setup simplifies users' transaction process and builds a subscription model that can attract regular users to the platform. While this system is more applicable and beneficial in scenarios like DEXs, it's less relevant for transactions requiring frequent and individual signings, such as in trading where each transaction still needs to be individually signed by the user.

Signless transactions have better use cases in applications like gaming, where frequent user interaction is necessary. They can significantly enhance the user experience by removing the need for constant transaction confirmations, allowing smoother gameplay.

How might removing the requirement for transaction signing and gas fees impact the broader adoption of blockchain technology, especially among non-technical users?

Let's clarify a couple of things: We are not eliminating the gas fee, as it is essential for the operation of the blockchain. However, we are shifting who bears the cost of these gas fees, at least temporarily. This is more about the application owner's monetization strategy, who needs to decide whether or not they will cover these costs to attract users.

For instance, this approach is particularly straightforward in gaming because it creates its ecosystem. This simplifies the marketing approach significantly. Unlike traditional blockchain setups where you generate traffic that moves from the application to the wallet, possibly to an exchange, and often gets lost, you direct users straight into the game.

While users still need to open a wallet, we are collaborating with projects to streamline this process significantly. Some wallets, for example, are integrated directly into platforms like Telegram, making the process faster and smoother.

Once the wallet is set up, the user experience is streamlined: you play the game, and if you enjoy it, you move into the monetization phase. This model adjusts the previously less effective customer acquisition cost (CPA) model in blockchain contexts. This new approach addresses vital issues by first allowing users to experience the application and then lowering the barrier to entry.

Subsequent steps involve teaching users how to purchase tokens, transfer them to their wallet, understand gas fees, and other necessary actions. Since the initial threshold is lower because users have already experienced the value of the application, it becomes more manageable for them to take these next steps.

Additionally, removing the requirement for transaction signing, mainly through signless transactions, significantly enhances the user experience across many types of applications, especially those requiring multiple interactions within a short period. This eliminates the constant disruption of wallet pop-ups asking for transaction confirmation.

Even if you set your wallet to remember your password briefly, constant confirmations can be burdensome. Signless transactions streamline this process, making blockchain applications more accessible and appealing, especially to non-technical users. This could lead to broader adoption as it removes some technical barriers and complexities associated with blockchain interactions.

Can you discuss the security implications of signless transactions? How does Vara ensure that these features do not compromise user security?

Signless transactions are not part of the Vara Network or Gear Protocol. They're a widely used abstraction mechanism with many use cases and implementation options. For example, signless transactions could create a synthetic account on your front end and associate all transactions initiated from the synthetic account with your primary account.

In such a case, security questions from the network wouldn't be relevant since everything operates within sub-modules (e.g., a front-end app). However, vouchers can minimize your digital asset risk if your synthetic account has no balance and you only use it to cover gas-burning transactions. This approach has several security implications that need consideration.

It's similar to managing a small, restricted bank account alongside a larger primary account. Here's how it works: imagine you have a primary bank account and open a smaller account where you deposit $100. This smaller account is heavily restricted—it can only make payments to designated recipients, such as Amazon in this example.

In the worst-case scenario, if this account is compromised, the damage is limited to $100 and can only be spent within those strict parameters. Similarly, when using Vara, you allocate a small, specific amount of funds for that session each time you engage with an application. This limited fund functions within strict confines—only usable within the specified application. If the session is hacked, the potential loss is confined to the small amount allocated for that session, and the funds can only be used within that specific application context.

This compartmentalized approach minimizes risk, akin to how virtual cards are used in the Web2 space to safeguard against online fraud. Users can create a virtual card with a limited balance for specific online purchases, reducing the potential fallout from credit card theft. As with these virtual cards, once you finish using the Vara system application, any remaining funds can be redirected back to your main wallet or topped up for continued use.

While this method introduces a different security model than traditional self-custodian wallets where each transaction must be signed (often with additional security like hardware wallets), the risk is still considerably mitigated by the limited exposure of funds. It provides users freedom and security, allowing them to engage with blockchain applications confidently. However, allocating only small amounts for specific tasks is crucial to maintain security integrity in case of compromise.

With the introduction of vouchers that cover transaction costs, what incentives do developers have to adopt this model? How does it affect their revenue generation and operational strategies?

Introducing vouchers that cover transaction costs gives developers much freedom and helps them lower their marketing budgets. When you give a person the option to taste what your product can do and lower all the thresholds, and they like it, they will stay and complete all the rest of the steps as we discussed.

This approach provides a very straightforward path to the customer. People not used to Web3, and even those familiar with Web2, are generally reluctant to switch to new technologies or undertake additional tasks that might seem complicated unless they see a real, tangible value. This is why once a person tries the product and the initial threshold is lowered significantly, the likelihood of them fully adopting it increases.

Why do you think companies like Oracle, Amazon, and Microsoft often offer free credits to try something? For instance, if you want to try a CRM system, starting for free is common in Web2. If you start using it for free and input your data, switching to another system becomes more complicated, so many users stick with the original choice.

This strategy of offering free trials and experiences is employed because it engages users. They get to see if they like the product and if they do, they are likely to stay for the long term. If they don't like it, then at least the trial hasn't cost them much, but the opportunity for them to try it is still appreciated.

Thus, the cost per lead significantly drops. The monetization of these applications will likely improve, become cheaper, and open many other marketing tools previously unavailable in Web3. Additional considerations for the previous question include that the monetization model or revenue generation stays mostly the same.

It's not that you always prepay; it's for a short period. You just have to add this short period that you prepaid for a specific number of users as a marketing budget that you don't use directly for advertising but give to the customer for use. This is how it works in many normal Web 2.0 businesses. This method ensures more customers, easier onboarding, and better revenue.

Can you explain how Vara's approach to covering gas fees through vouchers could reduce costs for users and developers? What makes this model sustainable in the long run?

Vara's approach to covering gas fees through vouchers is an interesting question. While it might seem like covering gas fees reduces costs for users and developers, it doesn't change the fundamental economics because the platform itself isn't paying for these gas fees; instead, the developer pays them to enable the user to use the application for free initially. This can be seen as a part of the marketing budget rather than a direct operational cost.

The sustainability of this model comes from the fact that offering the first use of an application for free lowers the barriers to entry, potentially reducing marketing costs, usability problems for new users, adoption time, and other thresholds.

Once users begin using the product, if they find it good, their continued use becomes more likely. This model also benefits developers, especially new ones, by allowing them to build quickly and test MVPs (Minimum Viable Products), gauge market reactions, and then iterate based on user feedback without incurring high costs.

Essentially, the voucher system streamlines the user acquisition process, making it easier and potentially cheaper for developers. This allows them to focus more on refining their applications based on actual user feedback rather than worrying about users being deterred by initial costs.

This method can foster a more dynamic and responsive development environment, which is crucial for the long-term sustainability of applications in a competitive market. Essentially, the voucher system streamlines user acquisition by lowering the initial financial barriers, enabling developers to concentrate on enhancing their applications based on real user feedback.

What strategies is Vara employing to encourage developers and businesses to integrate Signless and Payless transactions into their dApps?

Vara, a decentralized network, doesn't require developers or businesses to adopt specific practices. It operates as an open-source system. At the Gear Foundation, which oversees the Vara Network, we focus on demonstrating the practical benefits of integrating Signless and Payless transactions into dApps. We use various examples to highlight the differences in usability these technologies can offer.

A prime example is the Battleship game available on our platform. Users can choose to play using the traditional method or opt for the Signless transaction mode, which we call "silent" mode. By trying out both options, users can quickly perceive the convenience of Signless transactions—often within seconds.

This immediate, tangible experience helps developers see the potential benefits of incorporating such features into their applications to enhance user engagement.

Additionally, we showcase these technologies at conferences, often demonstrating how seamless the process can be in real-time. For instance, attendees can scan a QR code while I speak on stage and start playing the game immediately without needing tokens from our network.

From hearing about the feature to experiencing it firsthand, this direct and swift interaction captivates many and demonstrates our platform's streamlined capabilities. This approach simplifies the user experience and reduces the time it takes to engage with the application, from hours or days to just minutes or even seconds, making it a compelling tool for developers looking to enhance their applications.

How do Signless and Payless transactions influence the design and functionality of decentralized applications (dApps)? What new types of applications or services could this enable?

Signless and Payless transactions don't fundamentally change the underlying logic of decentralized applications; rather they improve usability and the user experience. These features make dApps easier and more pleasant to use, providing better design and functionality.

We've previously discussed potential applications such as subscription models. An on-chain VPN service could incorporate vouchers and staking. If users stake a certain amount of tokens, they could potentially use the VPN for free indefinitely.

Another example is a fully on-chain messenger where users could stake tokens to send a specified number of messages without incurring additional costs. These enhancements primarily focus on improving infrastructure and user interaction within the application, which could attract more users from Web2 to Web3 environments by simplifying the transition and interaction.

While Signless and Payless transactions focus on improving user interface and usability, other innovations within blockchain technology significantly alter the operational logic of applications. For example, gas reservation techniques allow developers to pre-allocate gas for transactions, ensuring that applications run smoothly without delays due to fluctuating gas prices. However, gas prices are constant on Vara at the moment.

This can be crucial for developing on-chain order books or other complex financial instruments that rely on timely execution, mirroring some functionalities typically seen in centralized exchanges.

These features provide a robust framework that not only improves existing application designs but also enables the creation of new types of services that leverage the unique capabilities of blockchain technology.

How do Vara's Signless and Payless transactions compare with traditional Web2 transaction processes? What lessons have been learned from Web2 that are being applied or avoided in Vara's design?

Consider how Vara's Signless and Payless transactions compare with traditional Web2 transaction processes. Signless transactions don't exist in Web2 because there is no need to sign anything when playing a game or moving within an app; you're not required to input a signature for each action. On the other hand, Payless Transactions are a bit more complex since this concept doesn't exist much in Web2.

However, let's look at a broader scale. Similar strategies are observed in the B2B or B2C worlds, where companies often provide their software for free for a trial period, like two weeks or a month, or where platforms like Amazon give credits for use. This practice is somewhat analogous to Vara's vouchers, which mimic giving users a taste of the application for free and then later asking for payment.

Here, we replicate the Web2 experience, which allows us to provide a broader perspective and the option of bringing more Web2 people into the Web3 space.