Break the “bridging man” under the liquidity fragmentation of Layer 2 islands

We are facing a multi-“chain” blockchain world, covering both public chains and Layer 2 (L2).

After experiencing the sweeping wave of DeFi, BSC, Solana, Avalanch, Fantom and other public chain ecosystems have exploded, quickly becoming strong competitors on the public chain track and creating an era of contention among a hundred schools of thought. At the same time, relying on the ether The L2 network of Fang security has also begun to flourish.

Based on the Optimistic Rollup expansion plan, Arbitrum has become the leader of the current L2. As of November 17, the TVL reached 2.78 billion US dollars, accounting for 51.6% of the entire L2 ecosystem. At the same time, it has integrated many star projects on L1, such as Sushiswap and Aave. Optimism Ethereum (OE), which is also the Optimistic Rollup expansion plan, also completed the launch of OVM 2.0 last week, which indicates that the applications on the Ethereum mainnet will be able to achieve seamless migration on the OE (currently, the OE launch project is still white. List mechanism).

Break the "bridging man" under the liquidity fragmentation of Layer 2 islands

Total TVL of Ethereum Layer 2 (Arbitrum accounts for 51.6%)

Based on the ZK Rollup expansion plan, zkSync has been moving frequently recently. On November 8, the zkSync R&D team Matter Labs received an investment of 50 million U.S. dollars, and directly opened up the transfer channel of funds from trading platforms such as Bybit and OKex. Lower the threshold and cost for users to enter the second layer of zkSync; Polygon is also planning to launch Miden, a new expansion solution based on STARK zero-knowledge proof.

The StarkWare team on the same track as zkSync also completed a $50 million Series C financing led by Sequoia Capital on November 16. At present, the team’s main L2 universal platform StarkNet will also be launched at the end of this month, and with the help of StarkWare The L2 NFT platform mmutableX of the expansion plan also performed well and was favored by many games and NFT projects.

At the end of last month, Boba, the L2 network created by the OMG Foundation, officially launched the OVM 2.0 version, which supports developers to deploy contracts on the original L1 without modification, and quickly gave birth to the first native DEX OolongSwap on L2, and more L2 projects are also emerging, such as: Aztec, which focuses on the second-tier scalable privacy, L2 Rollup platform metis, and the Ethereum second-tier EVM extension solution Aurora based on Near technology, and so on.

There is no doubt that L2 is re-enacting the development process of the public chain-an L2 multi-chain world. When different L2 networks flourish, a problem will arise: the funds originally gathered on Ethereum will be dispersed to various Above L2, it caused the separation of liquidity, and everyone played their own things. In addition, L2 also destroyed the composability and interoperability, making the formation of DeFi Lego difficult. In extreme cases, it may even create an island in L2. .

In view of this, “bridging people” have begun to emerge in large numbers. Various bridges connect different public chains and L2 to eliminate this liquidity separation. What are the current cross-chain bridges that support L2? What are their characteristics? Next, I will lead you to take stock of those universal cross-chain bridges that support L2.

  • Hop protocol:

Hop supports rollup-to-rollup cross-chain, and also supports Polygon PoS and xDai sidechains. With Hop users, they can transfer funds between different L2 and sidechains, and allow users to “quickly” withdraw money, allowing users to avoid lengthy Withdrawal waiting period (mainly for Optimistic Rollup scheme).

First, HOP creates a special intermediary asset called hToken (such as h ETH , h DAI, etc.), and then the automatic market maker (AMM) completes the exchange between hToken and its corresponding assets on different L2 networks, so the essence In the above, HOP introduced a third-party asset pool, and this asset pool covers different L2 networks, and hToken belongs to the real cross-chain asset behind it.

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  • Synapse protocol:

Synapse’s cross-chain model is actually similar to Hop. When the Synapse network receives the user’s cross-chain demand, after confirmation, it locks the assets on the source chain and casts the necessary packaging assets on the target chain required by the user (this Is the main way to achieve cross-chain). However, users usually want to receive the local bridge assets of the target chain (because the audience of the cross-chain bridge’s own packaging assets is small), so Synapse AMM will participate in the bridging process and convert the packaging assets into Local assets.

Take nUSD on the Synapse bridge as an example. nUSD is a cross-chain stablecoin composed of DAI, USDC and USDT. When a user is using the Synapse cross-chain stablecoin, the stablecoin on the source chain is locked and minted on the target chain nUSD, the nUSD of the target chain can be automatically exchanged to the local stable currency of the chain using the local nUSD pool.

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Synapse’s nUSD multi-chain stablecoin, with native chain stablecoin

Currently, Synapse has supported two-layer networks such as boba Network, Arbitrum, and Optimism, as well as public chains such as BSC, Fantom, Avalanch, and Harmony.

  • deBridge:

This project was originally born on the Chainlink 2021 spring hackathon. DeBridge adopts the locking and minting method, in which the native token is locked/unlocked in the deBridge smart contract in the protogenesis chain, and the packaging asset (deAsset) is minted in the secondary chain /Destroy, where deAssets are backed 1:1 by the collateral in the protogenesis chain.

The cross-chain interoperability of deBridge smart contracts is supported by an independent oracle/validator network selected by deBridge governance. Each validator runs a Chainlink oracle node, which executes data transfer between deBridge smart contracts in different chains. Cross-chain, verifiers together form a decentralized oracle network (DON), which aims to solve the current cross-chain interoperability problems. This agreement allows users or smart contracts not only to transfer assets, but also to transfer arbitrary information or transaction data, which is also the main feature of deBridge.

Break the "bridging man" under the liquidity fragmentation of Layer 2 islands

DeBridge’s investment background

On November 3, deBride released version 2.0 of the testnet, which is still in the testing phase. The mainnet is expected to be launched at the end of the year.

  • Celer cBridge:

The cross-chain completion of cBridge mainly relies on “relay nodes”. The “relay nodes” have rich liquidity on multiple chains. When you need to transfer some assets from chain A to chain B, your assets will It is first sent to a relay node on chain A. Since the relay node also has liquidity on chain B, it will further send equivalent assets to your destination on chain B. In other words, relay Nodes are the liquidity providers in cBridge. They promise liquidity on multiple chains and realize instant cross-chain transfers for users in exchange for transaction fees as economic incentives.

In order to realize the transfer between different L2 networks, or to quickly transfer the liquidity of L2 back to L1, currently running cBridge relay nodes also need to obtain a whitelist, and only supports the Arbitrum Layer 2 network, and more of them are on the public chain. On the cross-chain application.

  • Anyswap

AnySwap is a decentralized cross-chain transaction protocol that uses AMM automatic price and liquidity mechanism. Anyswap is the first to release its cross-ecological full-type asset exchange protocol. Backed by the support of AC and Yearn Finance, Anyswap has quickly become a cross-chain bridge. The leader in this field not only supports a large number of assets on the chain, but also has become the largest amount of locked funds among all cross-chain bridges.

As of November 17th, AnySwap has locked assets of US$4.56 billion and supports up to 948 cross-chain currencies. In terms of supporting the second-tier network, AnySwap is currently compatible with Boba Network and Arbitrum.

Break the "bridging man" under the liquidity fragmentation of Layer 2 islands

  • Connext :

Connext is an EVM-centric interoperability system that can realize communication between chains, and supports developers to build local cross-chain applications on top of Connext. Connext uses a local verification model, which is a point-to-point liquidity network. . What each node provides is the original assets of the target chain, not derivative assets. This peer-to-peer model has better security. The cBridge mentioned above is also the same.

Based on Connext, the cross-chain bridge xpollinate application has been launched (Arbitrum and optimism are already supported on the second layer). According to official information, there are currently more than 780 million US dollars that have completed the circulation between chains through the Connext protocol. On July 14 On the day, Connext also raised 12 million U.S. dollars and announced that it will build a larger protocol ecosystem.

The above introduction is only part of the L2 cross-chain bridge field. In addition to this general cross-chain bridge, there are also some special bridges, such as the high-speed cross-chain bridge Across Protocol that supports L2 to L1, the Rainbow Bridge on NEAR, Polkadot SnowBridge, The sidechain xDAI bridge, Zksync bridge, Layer 2 Optimism bridge, etc., according to estimates, only in the bridge linking with Ethereum, about 23.73 billion US dollars of funds are locked, of which 4.56 billion is locked on the Anyswap bridge. Accounted for nearly 20% of the total.

Break the "bridging man" under the liquidity fragmentation of Layer 2 islands

The source of tvl distribution on each cross-chain bridge: dune.xyz

There is no doubt that the cross-chain bridge is becoming an increasingly large track, the leader is beginning to take shape, and new players are influx in large numbers. However, due to the differences in security and decentralization between different chains, The security of the bridge will become the focus of attention, and with the further development of multi-chain and multi-L2, cross-chain bridges will definitely become an important part of the future “multi-chain” era.

Here, we can diverge our brains. The many L1 and L2 bridges are dazzling. Will there be bridge aggregators, just like DEX aggregator 1inch and DeFi revenue aggregator Year? What’s interesting is that there are already projects with this concept, such as movr.network and li.finance. What they do is the aggregation of cross-chain bridges.

Furthermore, in fact, the centralized CEX in the past has always acted as a bridge. Can CEX evolve into a cross-chain transfer station in the future? If this transit station is combined with ENS to become a chain website? What will it bring?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/break-the-bridging-man-under-the-liquidity-fragmentation-of-layer-2-islands/
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