Nansen interprets the three major cross-chain communication protocols: what are the possibilities in the future?

Considering that the future is likely to be a multi-chain world, how can a world composed of thousands of blockchains communicate seamlessly?

As Celestia has elegantly pointed out before, each first or zeroth layer forms its own “cluster”.

A “cluster” is a set of chains that communicate with each other using a trust-minimized protocol for cross-chain communication (via fraud proofs, validity proofs, or direct verification of transactions). For example: a set of rollups on Ethereum or an independent main chain like Solana.

Within these clusters there is “internal communication”, which is how rollups within the cluster communicate, usually through trust-minimized bridge solutions, relying on the assumption of an honest minority.

Nansen interprets the three major cross-chain communication protocols: what are the possibilities in the future?

But how does a standalone cluster like Ethereum and its set of layer 2 networks communicate with other clusters like Cosmos Zones or Solana (“inter-cluster communication”)?

In short, what we need is a trusted cross-chain protocol. Let’s take a look at some of the current top market players and what “trusted” means:

  • Axelar Network
  • Wormhole
  • LayerZero

Now, these cross-chain protocols are best known for their bridge solutions.

However, these protocols are all generic messaging layers that allow higher-level implementations to exist on top of them, such as:

  • Cross-chain NFT minting
  • Cross-chain swap (swap)
  • Cross-chain lending
  • cross-chain bridge
  • and many more implementations

We won’t describe the different trust and security assumptions of each approach in depth, but we would like to give a somewhat simplified description of how they work and what these protocols do.

Axelar Network

Axelar Network is a cross-communication protocol that allows independent blockchains to operate with each other.

It is built on the Cosmos SDK, so it has a set of validators to maintain the network and keep the tokens safe.

How does it work? It mainly consists of 3 parts:

  • A network of validators (to secure the Axelar chain)
  • Gateway smart contract (exists on every chain it is deployed on)
  • Developer Tools (Axelar SDKs/APIs).

Nansen interprets the three major cross-chain communication protocols: what are the possibilities in the future?

Axelar currently supports over 10 chains.

It recently became the default bridge for Osmosis, the primary source of liquidity for the entire Cosmos.

It will also be the default bridge for other decentralized exchanges and will be embedded in the Agoric ecosystem, as well as other Cosmos chains.

Axelar enables Inter-Blockchain Communication (IBC) by default, so it can be an interoperability protocol for any other Cosmos chain on IBC.

Inter-blockchain communication is difficult to scale when there are thousands of blockchains in existence, but a protocol like Axelar can be a hub for interoperability for Cosmos and others. Connecting to Axelar gives you access to every blockchain it is connected to.

Nansen interprets the three major cross-chain communication protocols: what are the possibilities in the future?

But in a world of 10,000 Lisks, it’s hard to imagine 10,000 * (10,000 – 1) = 90 million independent relay channels. At this point, it makes sense to route transactions between smaller chains via the Cosmos Hub, which could be another business model for ATOM holders.

So far, Axelar has facilitated over $129 million in IBC trading volume over the past 30 days, second only to Osmosis.

Axelar has a first-mover advantage in the Cosmos ecosystem through Osmosis, a very powerful, fungible and regulated token with Lindy effect.

Once a bridge’s wrapper token is embedded into an ecosystem, it has the potential to become a dominant bridge.

Wormhole

Wormhole is another cross-chain messaging protocol that currently uses a Proof of Authority (PoA) multi-signature network to connect more than 9 blockchains, most notably Solana.

Wormhole consists of a core contract and Guardian network deployed on each chain.

Any message passing through the core contract must be observed and signed by the guardian network.

Today’s proof of rights has 19 guardians, who can be considered as validators in the proof of rights system. The visualization of Wormhole is as follows.

Nansen interprets the three major cross-chain communication protocols: what are the possibilities in the future?

Interesting features (besides bridges):

  • NFT bridge
  • Oracle data (eg: Python)
  • Cross-chain lending
  • ICS integration on top of Wormhole (an interchain standard for Cosmos IBC).
  • and more

LayerZero

LayerZero is another cross-chain communication protocol that allows any arbitrary data to be transmitted on any chain.

To ensure the validity of communication between any two chains, they use two separate entities – relayers and oracles.

Anyone can run their own relays or use their own oracles, but LayerZero plans to use Chainlink as the default oracle in the future.

Nansen interprets the three major cross-chain communication protocols: what are the possibilities in the future?

Functionality and Future Possibilities of Cross-Chain Communication

Current functions and future integration of cross-chain communication:

  • Cross-chain bridge (eg: Stargate)
  • Omnichain NFT
  • New applications based on LayerZero (eg: Rage Trade)
  • Use Chainlink as default oracle (as seen on testnet)
  • Integrate ICS standard (inter-blockchain communication standard)

A common feature of all these cross-chain solutions is that they all integrate inter-blockchain communication in some way, whether it is a shared data standard, a Cosmos SDK module (like CosmWasm), or directly built on the Cosmos SDK itself.

There are more insights into these protocols from a design, user experience, and security standpoint.

The most important point is that the cross-chain field is still in a very early stage, and there is still a lot of design space for cross-chain calls.

Other notable cross-chain solutions not mentioned above:

  • Composable Finance
  • Chainlink
  • CCIPdeng

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/nansen-interprets-the-three-major-cross-chain-communication-protocols-what-are-the-possibilities-in-the-future/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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