Investing in Aurora

Lisa Cuesta and I are proud to announce our investment in Aurora’s first funding round alongside Pantera Capital, Electric Capital, Dragonfly Capital, and over 100 other investors from the broader crypto ecosystem.

The Ethereum ecosystem is at an inflection point as dapps, wallets, users, exchanges, and everyone else, works to transition to layer 2 solutions. Layer 2 has a specific technical definition in that it inherits its security from the base layer. However, what we are seeing in the market is that this definition is broadening to include cultural alignment with the Ethereum community and an adherence to ETH as a monetary base. I’m not advocating that the definition should expand, but I am calling out that it is expanding.

From that perspective, Aurora is fascinating. It is similar to an Ethereum layer 2, but it’s built on NEAR, not Ethereum. It has out-of-the-box operability with all existing Ethereum wallets and developer tooling, and transactions fees on Aurora are paid in ETH that has been bridged over from Ethereum.

NEAR, of all blockchain ecosystems, is one of the most ethos aligned with the Ethereum community. If we accept that the future is multi-chain (which I do), there’s actually very little difference between an Ethereum Layer 2 that’s tethered to Ethereum vs another blockchain like NEAR. Fundamentally, Aurora makes Ethereum more usable and more widely adopted, and once you have that realization, it is easy to see why Aurora is such a powerful contender to help scale Ethereum. Although not an investor, I am a huge fan of Polygon for many of the same reasons.

Digging deeper into Aurora, one of the most important pieces to unpack is why being based on NEAR is fundamentally different from any other layer 1 blockchain. Aurora founder Alex Shevchenko led the team that built Rainbow Bridge, the most decentralized bridge on the market. The Aurora team now maintains this bridge, which enables users to bridge over ETH, ERC-20’s, and soon NFTs and other assets from Ethereum to Aurora.

“Most currently operating bridges require users to trust an additional component, such as a separate validator set, outside of the two base protocols. With the Rainbow Bridge, a user need not trust any outside party’s security other than the miners and validators on the two individual chains. As long as they have faith in NEAR and Ethereum security, developers can use the bridge to take advantage of the lower gas fees on NEAR without having to build a completely new user base.” - NEAR Rainbow Bridge and the quest for interoperable protocols by Bison Trails

Of course trusting NEAR’s security is one step further than only trusting Ethereum’s security, but given how secure PoS systems are proving to be, Aurora’s security assumptions are effectively very close to those provided by competing layer 2’s on Ethereum.

The other key bit to cover is that while most systems attempting to scale Ethereum simply copy the EVM, Aurora differentiates itself by attempting to add additional functionality, such as gasless metatransactions and gas fees denominated in ERC-20s. Ultimately copying the EVM is easy, going to market is hard, but improving the developer and user experience without breaking Ethereum’s tooling and contracts is extremely challenging.

In the early days, NEAR struggled with going to market compared to others in their cohort like Solana and Polygon, but their decentralized ethos and constant focus on improving the experience for users and developers is paying off at an exponential rate. They’ve hit the million wallet mark, register 350k+ daily transactions, and have hundreds of ecosystem partners and guilds. NEAR’s approach is working and given that the Aurora team spun out of NEAR, Inc. as recently as July 2021, they have learned the hard lessons along the way, and can be counted on to continue to improve from there. As an example, they’re prioritizing Etherscan support, a crucial tool for developer and user visibility into on-chain activity, and planning their DeFi liquidity mining program to entice users to migrate assets to Aurora.

Lastly, some layer 2 solutions shy away from a token, but I believe this is misguided. One of my favorite anon’s, @epolynya, wrote an excellent Reddit post that summarizes most of my thoughts on layer 2 tokens. I see them as inevitable and believe that cultural alignment will ensure the continued use of ETH as a monetary base. Layer 2 tokens, on the other hand, will be used to decentralize, upgrade, and vote in governance, and will be valued using cash flow models based on ETH tx fees collected. We have seen the incredible community alignment that can be gained with a token over and over again, and believe Aurora is well positioned to do just that.

Aurora provides a credible and creative solution to scaling Ethereum in an ethos aligned way. Lisa and I are incredibly excited to support their team and encourage you to follow them on Twitter to stay up to date on their progress.

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Viktor Bunin

Protocol Specialist at Bison Trails. ex-ETHDenver, ConsenSys, EY.