By Angela Potter, Lead Product Manager and EEA Member at Consensys, with input from the EEA Crosschain Interoperability Working Group
The future of blockchain is multichain. layer 2s are a major part of the Ethereum scalping strategy, and we have seen significant growth of sidechains and optional Layer 1s in the past year. although there is some debate As for what this multichain world will look like in the future, we know that new blockchain networks are emerging rapidly, and there is an increasing need for users to interact with multiple heterogeneous blockchains simultaneously.
Today, the main Crosschain use case is to bridge assets from one chain to another in order to use any opportunity available on a particular chain. The opportunity could be to buy a digital asset; participating in the high-yield DeFi protocol; Playing blockchain-based games; Or simply doing business with a person on a different chain.
We are just scratching the surface of the opportunities (and risks) of crosschain bridges. Over the past few months, two major bridge hacks have resulted in a total of ~$1 billion in stolen funds. The Wormhole Bridge hack ($320M) was due to a smart contract bug; Whereas the Ronin Bridge hack could have been prevented with a more decentralized bridge design (see more discussion in the External Validator section below). Transparency and trust at least bridge design has never been more important.
What is meant by bridging property?
Although we can imagine countless ways that multiple blockchains might need to interact, today’s technologies are primarily focused on enabling users to transfer funds from one chain to another. How do bridges actually accomplish this? Today we look at two high-level methods.
1. Asset Transfer
Asset transfer involves locking tokens in escrow on Chain A and placing some equivalent (“wrapped”) tokens on Chain B. When bridging in the opposite direction, the token wrapped on chain B is burned and unlocked from escrow on chain A. With this method, tokens on Chain B are always backed directly by funds held in bridge contracts on Chain A.
The main drawback of this approach is that the pull contract on Chain A may contain a large store of closing price. If these tokens are compromised, all wrapped tokens on Chain B will lose their value.
2. Asset Exchange
With an exchange, a user on Chain A trades tokens with a user on Chain B. No funds are escrowed beyond the execution of the exchange, and no tokens are required to be mined or backed; Any two native tokens can be traded directly. The disadvantage is that if I want to transfer funds to another chain, I need to find a user (or liquidity provider) on my destination chain to complete the other half of my trade.
How are bridges verified?
In order to transfer assets or exchange assets across two blockchains, there must be parallel transactions on each chain. There must be some mechanism in place to ensure that funds are actually paid out on the source chain, so that related assets can be mined, issued or transferred on the destination chain. These methods differ in their trust model: a trust minimized bridge transfer does not add any new trust assumptions beyond the two chains involved, which is the norm; But as discussed below, this can be difficult to achieve in practice.
There are four primary methods for validating the source transaction and for initiating the destination transaction.
1. External Verifier
A trusted set of validators verifies that tokens have been deposited on the source chain, allowing tokens to be mined or withdrawn at the destination. This method can be used for asset transfer or asset exchange, and is easy to set up; But it adds additional belief assumptions beyond the two chains involved in the transfer. This is the most common verification method among bridges on the market today, with the total number of validators typically ranging from one to fifty, depending on the bridge, and the majority requiring each transaction to be signed in order to go through it. Is.
The Ronin Bridge was recently hacked for $650M when a malicious actor acquired the keys for 5 out of 9 validators, enabling them to sign a fraudulent transaction. This highlights the importance of securing the bridge of a large number of independent parties (or using one or more of the other verification methods mentioned below).
In this method, the transaction is considered valid unless flagged by a watcher. Each transaction submitted has a challenge period, during which viewers are rewarded for identifying fraud. Once the challenge period is over, the transaction is finalized. This approach has fewer trust assumptions than external validators, as preventing fraud requires only one honest party. However, transactions take longer (anywhere from 30 minutes to a week) due to the duration of the challenge, and viewers should be appropriately encouraged to continuously monitor transactions. The original exit from an optimistic rollup is a classic example, which uses the rollup’s built-in security to move from L2 to L1; But you can also have a standalone optimistic bridge protocol with your own set of external watchers, which can be used across any two chains.
3. Nuclear swap
Used for asset exchange, this method relies on contract code for its security. The most common method is hash timelock contracts (HTLC), where users can receive funds on their respective destination chain only after both parties have deposited funds on their source chain. If one party fails to make a deposit, everything is returned after the timeout period. This method is the least trustworthy, but requires both parties to be online for the duration of the swap in order to withdraw funds from the other side, which can create friction for end users.
4. Light Client Relay
Block headers and proofs are forwarded from the source chain to the destination chain’s contract, which verifies them by running the light client of the source chain’s consensus mechanism. This method minimizes trust and is typically used for asset transfers, but can be applied to asset exchanges or other common use cases. However, implementation comes with a lot of overhead: for each pair of source/destination chains a lightweight client must be developed that supports bridges; And once developed it can be computationally intensive to run.
There are several approaches to bridging, some of which combine several of the designs mentioned above. There are several CrossChain projects, including interoperability networks such as Cosmos, Polkadot, Chainlink CCIP, and Hyperledger Cactus; But for the purposes of this overview we will focus on the bridges that support the Ethereum mainnet. Here are some examples of bridges on the market today that support bridging between these networks.
Connect Ka Amroki
Connect is planning to release a new upgrade in June called Amarokchanging their design from atomic swaps to an asset exchange network that uses Nomad Optimist Protocol To settle fraud claims. Liquidity providers enable fast up-front transfers of funds while waiting for a 30-minute challenge period on Nomad.
fund in Jump Ether are locked on and secured by a native rollup bridge, while the liquidity provider allows for fast transfers between L2s by forwarding funds to mint tokens. Wrapped tokens are automatically converted back to Canonical tokens via AMM as part of the bridge transaction.
Near Rainbow Bridge
Rainbow Bridge Lite Client enables asset transfer between Ethereum and the NEAR network via relay. A Near Lite client runs in a contract on the Ethereum network, and an Ethereum Lite client runs in a contract on the Near network. A relay service blocks headers from one network to another, which are verified by Lite clients on each side. This is combined with an optimistic design, where viewers can challenge invalid transactions from Near to Ethereum within a period of 4 hours.
stargate There is an implementation of LayerZero, an asset exchange protocol that requires an oracle and a relayer (two separate parties) to validate each transaction. Stargate also recently launched a pre-crime system which simulates each transaction and checks that the resulting pull status is considered valid before finalizing it.
wanchain Enables asset transfer between multiple layer 1 and layer 2 networks. Each transaction must be signed by a limit number of external validators using multiparty computation. Verifiers must stake collateral for each transaction they process to encourage acting in good faith.
The Crosschain space is evolving rapidly, and the fragmented and ever-changing nature of Crosschain technology makes it challenging for enterprises to participate. As the space matures, enterprises have the opportunity to use Crosschain technologies to unlock value in all corners of the blockchain ecosystem; But to do so, we have to address the top barriers to adoption facing enterprises:
- Security concerns and unclear best practices
- Different bridge approaches that are not flexible or consistent enough to build
- Privacy and regulatory requirements
The EEA has issued crosschain security guidelines And is working on draft interoperability standards to overcome these hurdles. Stay tuned for the next article in the series EEA Crosschain Interoperability Working Group,
To learn about the many benefits of EEA membership, contact team member James Hersh here [email protected] Or visit https://entethalliance.org/become-a-member/.