Author: Climber, Golden Finance
“Interoperability is the future” — Vitalik Buterin.
Terms such as cross-chain bridge, chain interoperability, and account abstraction can all be attributed to the chain abstraction track, and this concept was proposed by the co-founder of Near. Chain abstraction is to solve interoperability problems such as cross-chain communication, asset transfer, and cross-chain smart contract calls between different chains by building a universal all-purpose smart contract.
The recent LayerZero airdrop detection witch incident has caused a lot of discussion in the community, and the market focus has once again focused on the chain interoperability track. Currently, projects in this sector generally have a lot of financing and high valuations. This article selects three representative projects, Axelar, Wormhole, and LayerZero, as samples to sort out and analyze their latest progress.
1. Axelar network
According to Messari's definition, Axelar network (AXL) is a Layer 1 that enables cross-chain interoperability between various crypto ecosystems, i.e. a crypto full coverage network. Axelar has a set of Gateway smart contracts that connect the Axelar network and its interconnected external chains, as well as a software development kit (SDK) containing developer tools and APIs.
Axelar not only supports the bridging of any information/asset, but also supports the execution of smart contracts and dApps across networks, i.e. full-stack interoperability.
Currently, Axelar has connected more than 60 blockchains, including Arbitrum, Avalanche, Base, BNB Chain, Ethereum, Optimism, Polygon, Scroll and a variety of Cosmos-based chains, which is also ahead of other cross-chain networks. It interacts, cooperates and integrates more than 600 smart contracts, including leading projects in DeFi, public chains, and second-layer tracks.
Mechanism principle:
Axelar is a cross-chain interoperability project developed with Cosmos SDK with cross-chain as its main core business. On a technical level, the Axelar network consists of three key components distributed in two functional layers. The infrastructure layer includes a decentralized dynamic network of validators responsible for maintaining the network and executing transactions. These validators run the cross-chain gateway protocol, which is a multi-party encrypted overlay on top of the Layer1 blockchain.
Secondly, the gateway component is installed on the connected blockchain and exists as a smart contract on the EVM chain. The validator monitors incoming transactions in the gateway, writes data to the gateway of the target chain after reaching consensus, and performs cross-chain transactions. On top of this infrastructure layer, Axelar also provides APIs and SDKs that enable developers to easily perform cross-chain operations between the two chains.
In terms of the functional layer, Axelar introduces the General Messaging (GMP) system, which goes beyond the traditional bridging function and allows cross-chain sending and receiving of various payloads, such as function calls, data, packaged assets, etc. Axelar's architecture adopts a hub-and-spoke topology, serving as a central hub to connect various blockchains.
To improve security, Axelar uses measures such as quadratic voting and frequent key changes. In addition, the Axelar gateway uses rate limiting to limit the amount of assets that can be transferred within a certain time interval.
Financing Information:
As of March 5, 2024, Axelar has completed five rounds of financing, with a total financing amount of US$113.8 million. When the B round of financing completed US$35 million in financing, the total project valuation reached US$1 billion. Investors include Binance, Polychain Capital, Coinbase Ventures, Dragonfly Capital, Crypto.com Capital, etc.
It should be noted that the latest round of financing was completed in March 2022, nearly two years ago. The project has been listed on trading platforms such as Binance, with the highest coin price at $2.77 and a current market value of $724 million.
Key Stats:
According to Axelar’s block explorer, the Axelar network has 1.823 million cross-chain active transactions, with a transaction volume of $8.62 billion and an average transaction volume of $4,728.
It can be seen intuitively from the above data bar charts in the Axelar network that since January 2023, the inter-chain network activity (i.e. transactions and active addresses) of the Axelar network has gradually increased, and general messaging (GMP) activities have gradually dominated network activities.
However, it should be noted that Axelar's data dropped sharply in May this year, but this is due to both the overall downward trend of the crypto market and the fact that May has only started for ten days.
According to the report "Analyzing Cross-Chain Interoperability" released by Binance Research Institute in February this year, Axelar's transaction volume in the past 30 days is twice that of Wormhole and nearly eight times that of Chainlink CCIP.
This growth is mainly attributed to the implementation of its General Message Transport (GMP) feature, which supports complex cross-chain function calls and state synchronization. In addition, GMP began supporting interactions between Cosmos and EVM chains in May 2023.
future plan:
Axelar announced its roadmap at the end of January. Its future development will revolve around AVM. Specifically, it will include the following points:
1) Make AVM a development platform for open source tools and develop various Dapps.
2) Through Interchain Amplifier, permissionless links to any chain can be achieved, expanding the potential network effect to hundreds of blockchains such as Ethereum Layer2.
3) Expand the use cases of Interchain Tokens and extend their usability on the native chain across all connected chains.
4) Add a Gas burning mechanism for AXL tokens to achieve deflation to protect the Axelar network.
5) Integrate consensus mechanisms on different chains, including Solana, Stellar, and Move-based chains such as Aptos and Sui.
6) Improve the Gas pricing mechanism and improve the accuracy of cross-chain Gas estimation services on the Axelar network.
Main actions:
In May this year, Axelar announced that it would cross-chain interconnection between Bitcoin, Hedera and Polkadot ecosystems. Bitcoin L2 network Stacks, open source proof-of-stake blockchain Hedera, Moonriver Network and privacy network Iron Fish will serve as the first phase of the Axelar Interchain Amplifier pilot program to achieve one-click programmable interoperability.
Also of note is that Solana and Sui will be listed as upcoming projects in this roadmap.
Last November, Axelar implemented a proof-of-concept (POC) project involving business RWA with JPMorgan’s digital asset platform Onyx and alternative asset management company Apollo.
In July, Axelar launched its Interchain Token Service (ITS), a product designed to enhance the interoperability of ERC-20 tokens on all Ethereum-compatible chains.
Separately, Microsoft announced a partnership with Axelar to provide blockchain interoperability solutions.
In February, Axelar launched the Axelar Virtual Machine (AVM), which allows developers to build DApps only once and run them on all chains.
Wormhole
Wormhole is a universal messaging protocol that enables app interconnection across multiple blockchain ecosystems. The project was first launched in October 2020 and aims to enable developers to build native cross-chain applications covering multiple chains. Wormhole started as a hackathon project with the goal of finding a solution that enables blockchains to "communicate with each other."
Wormhole was originally incubated and supported by Jump, and its first version (Wormhole V1) focused primarily on building a two-way token bridge between Ethereum and Solana.
As the project has grown, Wormhole has evolved into a universal messaging protocol that connects multiple chains in the ecosystem. The project aims to become the base layer for developers to build diverse cross-chain applications. To this end, Wormhole V1 was phased out and the Wormhole protocol was launched in August 2021.
Currently, Wormhole has evolved into a universal AMB (Arbitrary-Message-Briage) bridge that supports the transmission of arbitrary messages between 38 heterogeneous public chains, also known as the universal cross-chain message transmission protocol or interoperability protocol. Each connected blockchain has a Wormhole core contract as the main interface of the cross-chain App. The function of Wormhole's asset cross-chain bridge is undertaken by the front-end application Portal Bridge, which provides services to the outside world.
Wormhole is secured by a network of 19 Guardians, which are nodes responsible for monitoring chain activity and validating messages. Guardian nodes are operated by reputable entities in the cryptocurrency industry, such as Jump Crypto, ensuring a high level of trust and operational integrity due to the need to be accountable to the public.
Wormhole communication process:
1. Messages sent through the Wormhole Core Contract will be forwarded to the Guardian, who will independently verify and approve the authenticity of the message.
Guardians verify and sign: The message is verified and signed off-chain by 19 Guardians. Only messages signed by at least 2/3 (i.e. 13/19) of the Guardians are considered authentic. After verification, the message is encapsulated into a structure called a Verifiable Action Approval (VAA).
3. Transfer to target chain: The relayer will transfer VAA to the core contract of the target chain for execution.
Financing Information:
In November 2023, Wormhole completed a $225 million financing, with a project valuation of $2.5 billion. Investors included Brevan Howard, Coinbase Ventures, Multicoin Capital, ParaFi, Dilectic, Borderless Capital, Arrington Capital, and Jump Trading. This round of financing is also the largest round of financing for cryptocurrency projects in 2023.
Key Stats:
According to Wormholescan data, Wormhole has transmitted more than 1 billion messages between different chains, ranking first among all interoperability protocols. Its total historical transaction volume is approximately US$42.39 billion.
The current price of Wormhole token W is $0.59, with a market value of approximately $1.069 billion. Its circulating supply is 1,800,000,000 W, and the maximum supply is 10,000,000,000 W.
Main actions:
In April this year, Wormhole’s native W token was made available on Solana, Ethereum, Arbitrum, Optimism, and Base through Wormhole Native Token Transfers (NTT). W became a native multi-chain token, completing the second phase of the W release roadmap. In March, Wormhole conducted a token airdrop.
In February, Wormhole introduced the Native Token Transfer (NTT) feature to preserve token characteristics and solve the problem of liquidity fragmentation between different blockchains.
NTT is an open source framework for transferring tokens across blockchains without liquidity pools. When leveraging NTT, projects have full control over how their tokens behave on each chain, including token standards, metadata, ownership/upgradeability, and custom features. With NTT, projects are also able to retain fine-grained control over their security, such as rate limits, pauses, access controls, and balance accounting.
In the same month, Wormhole announced that it would adopt AMD's FPGA hardware accelerator chip to expand the ability of cross-chain messaging using zero-knowledge proof (ZKP). The project plans to integrate ZKP for cross-chain secure transfers through a "light client" implementation, aiming to create a secure "channel" for messaging between different blockchains.
Additionally, the Wormhole Foundation is working with the Succinct team to build an Ethereum “ZK light client” to further advance decentralized message verification within the Wormhole platform.
In December last year, Wormhole launched a $50 million cross-chain ecosystem fund and a cross-chain instant data retrieval method, Wormhole Queries, which allows application developers to extract any on-chain data on demand.
In August, Wormhole established the Wormhole Foundation to support people who are passionate about the research and development of blockchain interoperability technologies. In July, Wormhole released the v0.0.7 version of Wormhole Connect, a cross-chain integration solution.
route map:
Wormhole announced that W will become a native multi-chain token, leveraging the unique advantages of Solana and EVM chains while introducing a multi-chain governance system.
Plans for W include: it will be launched as a native SPL token on Solana; it will be scaled on the EVM chain using Wormhole Native Token Transfer (NTT); W holders will be able to lock and delegate their tokens on Solana and the EVM chain. The Wormhole DAO will be composed of W token holders and will operate through a multi-chain governance system.
The system will be available on Solana, Ethereum mainnet, and EVM L2 at launch. Multi-chain governance will allow token holders to create, vote, and execute governance proposals across different chains.
Regarding the ZK roadmap: By integrating zero-knowledge proofs, the Wormhole protocol will make significant progress in terms of trust assumptions and overall blockchain interoperability.
The roadmap mainly includes:
Bringing in Cryptography Expertise: The Wormhole Foundation has provided contributor grants to four new engineering teams specializing in zero-knowledge cryptography and will make these announcements in the coming weeks.
Unlocking Hardware Resources: Wormhole contributors will work with strategic hardware providers to accelerate light client implementations and procure hardware accelerators for Wormhole contributors as the number of ZK-enabled channels and ZK-verified messages continues to expand.
Launch of light clients: Light clients allow users and applications to quickly and efficiently verify the state of the blockchain network (e.g. current account balances, smart contract data, etc.).
In the future, ZK light clients for blockchains (including Ethereum, Sui, Aptos, Near, and Cosmos) will be deployed and integrated with Wormhole, enabling trustless bidirectional data transfer.
LayerZero
LayerZero is a full-chain interoperability protocol designed for lightweight message delivery across chains. LayerZero provides authentic and guaranteed message delivery through configurable trustlessness. It is a "blockchain of blockchains" that allows other blockchain networks to communicate directly in a non-permissioned manner.
LayerZero supports any blockchain that can run smart contracts, such as Ethereum, BNB Chain, Avalanche, Polygon, Arbitrum, Optimism, Fantom, etc. LayerZero also supports non-EVM chains, such as Aptos.
LayerZero enables users to communicate across chains in a single trustless and secure transaction by deploying "LayerZero Endpoints" (which are lightweight clients consisting of smart contracts with communication, verification, and networking capabilities) on the corresponding chains.
LayerZero uses Oracle (currently Chainlink) and Relayer to communicate information between LayerZero Endpoints on the target chain. It is worth noting that any subject can assume the role of Oracle and Relayer. Oracle publishes the block header on the source chain to the target chain, and Relayer publishes transaction data and verifies transaction proofs. Oracle and Relayer remain independent.
It should be noted that LayerZero only focuses on message transmission between chains and can send messages to any smart contract on any supported chain. That is, it is a message transmission layer used for smart contract communication between blockchains and is not responsible for cross-chain assets.
The key function of LayerZero is the ultra-light node (ULN). Its essence is to utilize the technical principles of light nodes and design an ultra-light node mechanism, which divides the middle trust link into two through relayers and oracles, thereby exchanging lower costs for better security.
This smart contract runs on each blockchain and acts as an endpoint for cross-chain communication. ULN uses block headers and transaction proofs to verify the validity of transactions and messages from other chains, ensuring security and efficiency.
The communication between cross-chains is mainly completed through external verification or light nodes on the chain. Light nodes are a node operation mode, in addition to full nodes (Full Node) and archive nodes (Archive Node). Different nodes of the same chain are abridged versions of the chain information. Light nodes only save all historical block headers and do not store specific transaction information in the block.
The benefit of running verification on a light node chain is that the external role interference of the notary is completely eliminated, and a high degree of decentralization is achieved based on the security of the chain itself, making it safer. However, this will make the cross-chain cost extremely high, and will eventually be dispersed to users with cross-chain needs.
From the perspective of products and technologies, LayerZero focuses on achieving "lightweight" data transmission, so it chooses to use oracles and relay networks to complete data transmission. After the user completes the operation on the endpoint of the LayerZero source chain, the oracle, as an external component, will forward the block header of the transaction on the source chain to the target chain, and the relay will obtain the transaction proof on the source chain and transmit it to the target chain.
Mechanism features:
Ultra Light Node (ULN): LayerZero uses on-chain ULN, which is a smart contract that runs on each blockchain and acts as an endpoint for cross-chain communication. ULN uses block headers and transaction proofs to verify the validity of transactions and messages from other chains, ensuring security and efficiency.
Universal Messaging: LayerZero supports any type of cross-chain communication, not just asset transfers. LayerZero can support any type of payload, such as function calls, data exchanges, governance votes, NFT transfers, etc. This enables developers to create full-chain applications that can leverage the capabilities and advantages of multiple blockchains simultaneously.
State Sharing: LayerZero allows applications to share state across chains, which means they can synchronize data and logic without relying on centralized servers or databases. This enables applications to run as a single entity across multiple chains, creating a seamless user experience and reducing complexity.
Instant Finality: LayerZero guarantees instant finality for cross-chain transactions, meaning they are confirmed as soon as they are included in a block on the source chain. This eliminates the need to wait or confirm on the target chain, thereby improving speed and availability.
Financing Information:
LayerZero has completed multiple rounds of financing, with a total financing amount of US$293.3 million. Investors include Binance Labs, Delphi Digital, a16z, Sequoia Capital, Coinbase Ventures and other star capitals.
In April 2023, LayerZero Labs completed a US$120 million Series B financing round with a valuation of US$3 billion; in March 2022, LayerZero Labs completed a US$135 million Series A+ financing round with a post-investment valuation of US$1 billion; in September 2021, the project completed a US$6 million Series A financing round led by Multicoin and Binance Labs.
Key Stats:
According to data from LayerZero's official website, LayerZero has connected more than 50 blockchains and the number is still increasing, with a total of approximately 132 million communication messages and a transfer value of over US$50 billion.
Main actions:
The timetable for airdrops and TGE is getting closer. LayerZero releases a self-reporting process for witches, with a deadline of 14 days.
On May 11, LayerZero Labs released the "Protocol RFP" proposal in the community. The proposal shows that all projects that deployed OApp, OFT or ONFT contracts on the mainnet before Snapshot#1and declared them on LayerZero Scan are eligible to submit proposals.
An example of project allocation is: 50% to users of cross-chain OFT, 20% to LP, 15% to token holders, and 15% to community members. At the same time, the LayerZero Foundation will screen based on the final Sybil report, and Sybil addresses will be automatically disqualified from allocation.
At the same time, the project team stated that the Protocol RFP is only one aspect of TGE, and more information about token allocation (including single user allocation and future protocol allocation) will be announced soon.
On May 4, LayerZero released the Sybil self-reporting process, with a deadline of 14 days. On May 2, LayerZero Labs announced the completion of the first phase of the network snapshot.
In April, LayerZero announced that weETH has adopted the OFT standard and will soon launch weETH on Blast, Optimism, Base, Linea, Mode and BNB Chain.
In January, the LayerZero mainnet was launched and LayerZero V2 was launched at the same time. New features include: universal messaging, modular security, permissionless execution, unified semantics, and V1 compatibility.
Last November, ayerZero Labs launched the value attribution solution ColorTrace, which is able to attribute (dying) fungible tokens to the original entity (minter) to perform any form of fair tracking of contributions to the success of the protocol, helping to achieve fair distribution of revenue, affiliate programs, referral links and many other common real-world applications.
In October, LayerZero launched the wrapped stETH (wstETH) feature for transferring liquidity staking protocol Lido Finance on Ethereum, Avalanche, and BNB Chain. wstETH has been integrated with the LayerZero full-chain fungible token standard (OFT standard).
Summarize
With the development of blockchain ecology, there are hundreds of blockchains of various types, and the interaction between chains has become a general trend. Chain interoperability can improve the liquidity of digital assets, enrich the blockchain ecosystem, and simplify the threshold of cross-chain interaction. Based on this, major exchanges including Binance have listed Axelar and Wormhole successively this year, and LayerZero is likely to follow suit.
However, the chain abstraction track also faces the security issues of previous cross-chain bridges, that is, it is easy to become a target for hackers. Moreover, the chain interoperability protocol is still in its early stages and also faces the risk of centralization. Therefore, for such high-profile projects with large institutional investments, investors may wish to take a long-term view.
