ViaBTC Capital | Can interoperability protocols change the cross-chain market?

Disclaimer: The text below is a publicity article that was not written by Cryptonews.com reporters.

A multi-chain market & Asset security

As it has evolved over the years, the blockchain space has become a multi-chain marketplace, with hundreds of thriving public chains, spanning Ethereum, Ethereum 2.0, Solana, Terra, Cosmos, Avalanche, and many more. Competing with each other in terms of ecosystem development, these public channels strive to attract more developers to their ecosystem. Users and developers demand mutual collaboration across different chains that enable seamless asset transfers. Meanwhile, DApps also hope to be deployed on more public channels to capture user traffic and asset liquidity. This huge demand for asset transfer and application development has triggered the emergence of dozens of cross-chain bridges and interoperability protocols.

However, since each public chain has its own unique underlying technical framework, bridging public chain islands is an extremely expensive, complex, and insecure process.

It was recently reported that Ronin, Axie Infinity’s proprietary sidechain, was hacked and $624 million in crypto assets (including 173,600 ETH and 25.5 million USDC) were stolen, which constitutes the most disastrous security flaw ever observed among cross-chain bridges. The hacking incident targeted private key management. As a cross-chain bridge involves the interaction of assets and data on two different public chains, its complex design has created a contractual authorization loophole, making it a target for hacking.

In light of these vulnerabilities, we can say that the root cause of attacks that target cross-chain bridges is their simple reliance on multisignature (among centralized members) or validators to protect asset transfers. While this approach somewhat speeds up the transfer of assets between blockchains, it also creates serious security issues.

Cross-chain exchange at the communication layer

Cross-chain solutions like LayerZero and Axelar support universal messaging, allowing all types of data and information (including arrests) to move across multiple ecosystems, and apps can even make phone calls. Arbitrary function across chains, allowing them to enter other communities without having to get deployed elsewhere. Other protocols such as Synpase and CELER are limited to cross-chain exchange of assets or tokens.

On-chain messaging remains a key part of blockchain infrastructure. As DApp development and retail demand increases, a protocol’s ability to interact with its users in a meaningful and decentralized way will be a key growth driver.

When it comes to cross-chain bridging and messaging, almost all methods fall into the following two categories: 1) those that reach consensus and form an intermediate chain that verifies and forwards messages between two chains, and 2) those that run a light node directly on the blockchain.

LayerZero

LayerZero is an Omnichain interoperability protocol designed for lightweight cross-chain messaging. LayerZero provides authentic, guaranteed message delivery with configurable reliability. The protocol is implemented as a set of efficient, non-scalable smart contracts.

LayerZero solves two problems of existing cross-chain solutions: 1) Although the way an intermediate chain receives, verifies and transfers messages between blockchains is less expensive, it is not sufficiently secure and 2) Lightweight nodes on the channel receive and verify everything. block headers for each matched string, which is safe but expensive. In this regard, LayerZero has introduced Ultra Lightweight Nodes (ULNs) which combine the security of lightweight nodes with the cost effectiveness of mid-chains. This is achieved by performing the same validation as a lightweight chain node; but instead of maintaining all block headers sequentially, block headers are received on demand by decentralized oracles.

Two roles: Oracle and Relayer

When a user application (UA) sends a message from chain A to chain B, the message is routed through the endpoint on chain A. The endpoint then notifies the Oracle and relay specified by the The AU of the message, along with its destination string. The Oracle forwards the block header to the endpoint on chain B, and the forwarder then submits the proof of transaction. The proof is validated on the destination string and the message is forwarded to the destination address.

In terms of security, if you use Chainlink as an oracle, any malicious action in the system always relies on the ability to defeat the Chainlink DON (which is not an easy task). Even if Oracle A’s consensus is corrupted and Relayer A connives, all user applications using Relayer BZ or Oracle BZ remain completely unchanged.

On the user side, LayerZero also enables unified liquidity across all chains with guaranteed finality on the source chain. This means that users own real assets on chain B, instead of just a certificate like a piece of paper.

Application

Stargate is the first fully composable liquidity transfer protocol on LayerZero. Just a few weeks after going live, the project’s TVL reached $3,735,601,761.71 as of March 31. Stargate now supports Ethereum, BSC, Avalanche, Polygon, Arbitrum, Optimistic, and Fantom. Recently, the project team also revealed that Stargate will support the Cosmos-IBC protocol.

Future

SushiSwap also approved its integration with Stargate through a voting process. Perhaps SushiSwap will become the biggest DEX for cross-chain transactions. By then, you would no longer need 11 separate bridges to trade assets from 11 chains to Ethereum.

Axelar

As LayerZero and Startage begin to tackle Cosmos-IBC, time is running out for Axelar, a cross-chain interoperability protocol that also serves Cosmos.

Axelar is comprised of a decentralized network of validators, secure gateway contracts, uniform translation, routing architecture, and a suite of software development kits (SDKs) and APIs. application (API) to enable composability between blockchains.

Three key components: decentralized network, gateway smart contracts and development tools

A decentralized network is supported by a set of validators who are responsible for maintaining the network and performing transactions. Validators run the cross-chain gateway protocol and engage in multi-party cryptography (MPC) regarding voting and validation of on-chain transactions.

Gateway smart contracts provide connectivity between the Axelar network and its interconnected layer 1 blockchains (e.g. Ethereum). Once the validators have read the incoming transactions and come to a consensus, they write to the destination chain’s gateway to execute the cross-chain transaction.

Developer tools: Above the validators and gateways are the APIs and SDKs (the libraries and tools that give developers easy access to the Axelar network).

In terms of security, the consensus validation provided by Axelar, a layer 1 blockchain, is more secure than third-party validators and other protocols that come with built-in validators. This approach also allows for strong scalability, and development components allow DApps to move from other chains to the B chain in a shorter time frame. For developers, building DApps on Axelar to make them compatible (bottom-up) with other channels might be the best solution.

Application

Axelar has launched a decentralized cross-chain asset transfer application called Satellite.

Satellite will facilitate the transfer of native Terra assets like LUNA and UST between many EVM and non-EVM chains, including Terra, Avalanche, Polygon, Ethereum, and Fantom, followed by Moonbeam soon after.

In conclusion, LayerZero and Axelar changed the traditional solutions offered by cross-chain bridges and interoperability protocols, took a more lightweight approach to messaging and validation, and made their own compromises and improvements in terms of security. and speed. However, such advantages do not fully guarantee the cross-chain security of assets. Developers should wait and watch for market adoption and ecosystem growth of both protocols. That said, both protocols meet the real needs of developers to some extent, while users are more concerned about the security of their assets and the efficiency and cost of asset transfers. In any case, LayerZero and Axelar could open a new chapter for the cross-chain sector.


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