What is Cross Chain Technology? What does it mean?
Cross-Chain allows different blockchains to transfer assets and information to each other, bridging different blockchain networks and allowing users to transfer assets, cryptocurrencies, smart contract data and other forms of data across different blockchains.
Since there is more than one blockchain on the market, besides the most famous Bitcoin blockchain and Ether, different public chains are running out one after another, such as Avalanche, Aptos, Near, Binance Smart Chain, and so on.
What is a link bridge?
Cross-chain bridges are essential for connecting various blockchains, transferring data and assets, enabling interactions between different Layer 1 and Layer 2 ecosystems, and making different blockchain networks compatible with each other.
For example, transferring your BTC to Ether starts by sending BTC to a specific address on the source blockchain (Bitcoin), which will be locked and the information will be forwarded to a cross-link bridge, which will trigger another blockchain and create a cryptocurrency of equal value (wBTC).
Why do we need cross-links? What are the benefits?
We all know that the nature of blockchain technology is toDecentralized books of accountsAlthough blockchain has the advantages of decentralization, not being able to be tampered with, not being able to be deleted, and so on, there is an important problem that exists, that is, one blockchain itself cannot communicate or even interact with another blockchain.
When investors or users invest, pledge, or deposit assets on different blockchains, we will be limited by the respective consensus mechanisms of the different blockchains, resulting in the inability to consolidate assets.
This is where the importance of cross-chaining comes into play!
5 Functional Types of Cross-Chain Technology
I. Chain-to-Chain Bridge: Chain-to-Chain Transfer of Assets
The main role of the Chain-to-Chain Bridge is to support asset transfers between two major blockchains.
Example:
- Polygon's PoS Bridge (connecting Polygon and Ether)
- Binance Ethereum Bridge (connecting BSC and Ether)
- Avalanche Bridge (connecting Avalanche and Ether)
II. Multi-chain bridge: transferring assets between any chains
Multi-Chain Bridges are capable of transferring assets across multiple blockchains and can be used on any Layer 1 or Layer 2 blockchain.
Example: Connext and cBridge
III. Dedicated bridges: transferring assets between specific ecosystems
Specialized Bridges focus on specific ecosystems and support the transfer of assets between specific regions.
These "bridges" often enable faster and cheaper cross-chain transactions. For example, Across specializes in enabling fast, inexpensive asset transfers from Layer 2 Rollups to the Ethernet mainnet.
IV. Packaged Asset Bridge: Packaging of Transferred Assets
The Wrapped Asset Bridge transfers non-native assets to a different blockchain, creating Wrapped assets on the target chain that represent the assets on the original chain.
Examples: Wrapped BTC (wBTC), wMonero
V. Dedicated Data Bridge: Arbitrary Data Transfer Across Multiple Chains
Data Specific Bridges are interoperability protocols designed to transfer arbitrary data across multiple blockchains. These protocols often serve as the foundation layer for dApps (decentralized applications), enabling cross-chain combinations of d Apps.
Examples include Celer's Inter-chain Message Framework, IBC, and Nomad.
Types of Cross-Chain Technology
I. Notary schemes
The notary public mechanism is a mechanism whereby a third party or a group of third parties, who are trusted by both parties and are relatively impartial and independent, act as a notary public to verify and ensure the legitimacy of the transaction in the event that the two parties to the transaction are unable to trust each other.
If Blockchain A and Blockchain B cannot communicate and trust each other directly by themselves, then they can introduce a mutually trusted third party as an intermediary, and this mutually trusted intermediary will carry out the verification and forwarding of cross-chain transactions.
As the connection and verifier between the two parties, the notary needs to track the transaction status of the two chains and notify both parties when assets are exchanged or transferred between the chains, and both parties rely entirely on the information transmitted by the notary to make judgment and transactions.
Example: When it is time to transfer 50 USDT from Ether to Polygon, the notary will confirm the value of the 50 USDT and send this information to Polygon, confirming the receipt of the 50 USDT on Poylgon.
Second, the side chain / relay chain (Sidechains / relays)
SidechainsA smaller blockchain attached to a public chain can be thought of as an external piece of hardware to the public chain. The sidechain is able to receive and read information and data from transactions on the mainchain, and will lock down the content to be verified by "anchoring" it and anchoring the assets on the sidechain and the mainchain in both directions.
When the transaction data is verified, the assets in the main chain are locked, and the equivalent assets are released in the side chain, in much the same way as in a cross-currency exchange. Conversely, when the assets on the side chain are locked, the corresponding value of the assets is released on the main chain. Assets are not actually transferred, but rather locked and re-released.
RelaysDependent on and closely related to the Master Chain, it is equal and parallel to other public chains and is not part of any public chain.
Similar to a notary public mechanism combined with a side chain, a relay chain can connect the data dispatch centers of different public chains to verify the transaction data between different public chains as a third party notary public. After reading and verifying the data on the public chain, the relay chain locks the assets on the original chain and then releases the equivalent assets on the target chain to achieve the function of asset anchoring and ensure that the transaction data on both sides of the chain can be matched.
III. Hash-locking
Hash locking originated from the Bitcoin flash network, the flash network itself is a means of rapid small-value payments, and later its key technology hash time lock contract (HTLC) was applied to the use of cross-chain technology. Although hash locking realizes the exchange of cross-chain assets, but does not realize the transfer of cross-chain assets, not to mention the realization of such cross-chain contracts, so its application is relatively limited.
Distributed private key control (DPC)
Smart contracts are utilized to project assets from the original chain to other different chains while generating a set of private keys to control these assets. This private key is distributed among different nodes to achieve decentralization and improve asset security. When users need to transfer assets to another public chain, they can use this set of private keys to lock, unlock and unlock assets on different chains.
What are the drawbacks of a bridge over chains?
- Single Point FailureMost of the cross-link bridges are implemented by a certain organization, and most of them are run by centralized servers, which makes it very easy for unscrupulous members of the organization to steal the digital assets on the chain. For example, the Binance Bridge managed by the Binance Company is a highly centralized cross-chain bridge that allows users to transfer Coin ($BNB) to the Coin Chain, the Coin Smart Chain, and other blockchains, but the entire process is managed by Coin officials.
- technical gapThe majority of cross-link bridges are built from centralized servers and smart contracts, and any vulnerability in the middle of the bridge creates a risk of hacking," he said.
- MobilityFor example, if the pool of $ETH locked up in a smart contract is not liquid enough, people who hold $WETH and want to exchange it for $ETH will face a situation where they have no currency to exchange.
What are some of the cryptocurrencies associated with cross-chaining?
I. Stargate
Built on top of LayerZero, Stargate is a fully configurable cross-chain bridge protocol that allows users to transfer native tokens across a variety of blockchains.
LayerZero is an Omnichain interoperability protocol designed for delivering lightweight messages across chains. It provides authentic and guaranteed message delivery through configurable distrust. The protocol is implemented as a set of efficient, non-scalable smart contracts.
Stargate is built around a unified pool of liquidity shared across multiple chains, ensuring that there is always enough liquidity available and quickly determined, with the ultimate goal of seamlessly bridging across chains with a single transaction.
II. Near
One of Near's core technologies, the Rainbow Bridge, connects Ether and NEAR, allowing any ERC-20 token or Non-Homogenized Token (NFT) to be transferred between the two chains through the tool.
Near can also execute contracts on Ether via Rainbow Bridge, and as Near's ecosystem becomes more complete, its token, the NEAR Coin, is set to skyrocket in 2021.
III. Nomad
Nomad is an interchain communication that skips the need for block header verification. Nomad is an implementation and extension of the Optics Protocol (OPtimistic Interchain Communication).
It has only a 30 minute delay and works like a notary public service, where the source chain generates and sends out a number of documents, signs contracts to sign the documents, and is incentivized to approve only valid messages or risk financial penalties and loss of their "notary license".
Disclaimer
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