Author: Grapefruit, ChainCatcher
Recently, the cross-chain infrastructure Connext announced that it had completed a $7.5 million financing with a valuation of $250 million. Investors include Polychain Capital, Polygon Ventures, Coinbase Ventures, 1kx and many other well-known venture capital institutions, which attracted the attention of the crypto community.
According to official data, Connext's current locked TVL is US$33.41 million, its trading volume in the past 30 days is US$24.55 million, and the number of completed transactions is 81,800.
Of course, this is not the first time Connext has raised funds. According to Rootdata, in March 2021, Polychain Capital led a $2.2 million seed round of financing, and in July of that year, ConsenSys Mesh and 1kx led a $12 million Series A round. So far, Connext has publicly raised $21.7 million.
In addition, founder Bhuptani also said in an interview that he plans to launch a token later this year. The frequent support from well-known venture capital institutions and the expectation of token issuance have made Connext a hot topic in the crypto community again.
In fact, as early as April last year, Connext announced that it would issue the NEXT token and airdrop it to community users. Subsequently, in July last year, it issued another announcement stating that the distribution of the NEXT token was postponed due to market fluctuations, and planned to release the token by early autumn at the latest. However, until June of this year, there has been no public news about the NEXT token, so Connext was also nicknamed "Pigeon King" by users. Even though the founder publicly stated that the token would be launched this year, community users still have doubts about it. The frequent support of well-known capital has rekindled users' interest in Connext.
What is the difference between Connext and other cross-chain facilities? Why is it favored by well-known investors?
Connext underlying architecture: modular design
Connext was first co-founded by Arjun Bhuptani, Rahul Sethuram and Layne Haber in 2017. In the early days, it had always focused on the user experience of Ethereum L2. Later, it began to explore how to achieve cross-chain asset transactions by using state channel technology. It is known for its focus on achieving cross-chain asset transactions between Ethereum and Layer2 networks.
Today, Connext is a modular cross-chain communication protocol that can achieve fast, trustless cross-chain transmission of tokens, data, information, contract calls, etc. between different EVM networks and Rollups. The protocol aims to provide a holistic solution for multiple chains. Web3's HTTP is being built to form a communication layer across different blockchain networks, and the deployed DApp can interact with funds and data on multiple blockchain networks at the same time.
From this point of view, Connext is a cross-chain infrastructure that can not only be used to develop cross-chain bridges, but also to build any cross-chain DApp (officially called xApps) such as cross-chain DEX, cross-chain lending, cross-chain NFT, etc.
The cross-chain DApp developed based on Connext is actually a full-chain DApp, that is, a DApp deployed across multiple chains that supports users to complete data interaction with different chains through one DApp. For example, the full-chain DEX can directly realize the exchange of A Token on the X chain for B Token on the Y chain; the full-chain lending supports users to mortgage tokens e on the C chain and borrow assets d on the D chain, etc. This is just like when users search for questions on Goolge, the Goolge webpage will automatically collect answers from different websites, and users only need to view the required content without paying attention to the underlying architecture.
This is different from the current multi-chain deployment applications such as Uniswap, Curve, and Aave. First, multi-chain applications such as Curve and Uniswap are equivalent to being deployed once on each chain. Second, even if it is the same application, each chain is independent, and assets and liquidity cannot be interoperable. For example, Curve on Polygon and Curve on Ethereum are two separately deployed applications, which are independent of each other and their assets are not interoperable.
The so-called modularization means that Connext divides the main processes or functions involved in the cross-chain process into different components and develops corresponding APIs or SDK tools. These components can be combined in various ways to achieve specific goals, and developers can integrate them according to their needs.
The reason for modular development is that most of the current cross-chain applications are an overall architecture, which has an "impossible triangle", namely universality (able to process any cross-chain data), scalability (able to support any different blockchains), and trustlessness (having the same security as the underlying blockchain). The three attributes cannot be uniformly achieved in the current cross-chain facilities, and can only have two or one of the three attributes at the same time.
Take the three mainstream cross-chain technologies as an example. The natively verified light client mode (running light clients on the source chain and target chain, represented by Cosmos's IBC, Near Rainbow Bridge, Polkadot, etc.) is a cross-chain bridge that does not require trust and does not require third-party verification. However, since developers need to develop and deploy new light client smart contracts on both the source chain and the target chain, the operating cost is too high; the third-party verified intermediate chain mode (building an intermediate chain between the target chain and the source chain, such as Multichain) has the advantages of faster speed, lower cost, universal data transmission, and better user experience, but due to the existence of third parties, security issues frequently arise; partially verified liquidity networks (mainly referring to a point-to-point channel off-chain composed of a group of nodes or routers and transferring assets through the channel, represented by Connext, Celer, etc.) have certain advantages in security, cost, speed, and extension, but do not support arbitrary cross-chain information transmission, and most of them only support the transmission of Tokens.
Connext believes that cross-chain is similar to the blockchain network itself. Since there is no overall architecture that can provide all the ideal properties required for cross-chain, can we approach the best cross-chain approach through a modular protocol stack? Just like a modular blockchain, the data layer is only responsible for data-related processing, and the consensus layer is only responsible for the content and order of transactions.
Currently, all cross-chain bridges have the same core structure, with three main components (which can also be visualized as layers), including: transmission - publishing message data from one chain to another; verification - proving the correctness of the transmitted data; execution - performing tasks according to the bridged data.
Connext hopes to improve the overall performance of cross-chain facilities by separating these main functions into different components and then optimizing them one by one. For example, the message delivery layer is mainly responsible for source chain data reading, payload, transmission and publishing to the target chain, etc.; the verification layer is mainly responsible for verifying the authenticity and validity of the data, etc.
How is Connext's security guaranteed? How is its ecosystem developing?
For cross-chain facilities, how to ensure the security of asset and information transmission becomes the first task. According to the official description, Connext's modular design architecture can not only improve the overall performance of cross-chain, but also inherit the security of the Ethereum mainnet.
How is Connext implemented? In Connext, the cross-chain asset and information transmission layers are separated.
Connext's cross-chain asset transfer is called the "Liquidity layer". This is an off-chain peer-to-peer network composed of a group of routers (nodes). The router is responsible for sending and receiving asset inventories on the chain. Users can transfer assets across chains through the router network. In essence, it is a state channel cross-chain, that is, a payment channel is established between each point and the native assets are transferred through the channel. The specific process is: the user locks the cross-chain asset on the source chain, and the router releases the asset to the user on the target chain after receiving the information and charges a certain fee.
At the information transmission layer, Connext chose to cooperate with the cross-chain communication protocol Nomad in 2022 and integrate related cross-chain functions, and named the network upgrade Amarok upgrade to support developers to build cross-chain applications. Nomad's cross-chain mechanism adopts Optimistic Bridge, that is, Optimistic optimistic verification. It first assumes that the information received by the target chain is true and valid, and a third party (Watcher) automatically detects and supervises whether the transmitted data is correct. If a problem is found in the data, a challenge can be initiated, and the transaction can be rolled back on the source chain for verification. Communication with the target chain can also be disconnected. This mechanism is similar to Optimistic rollup.
However, in August 2022, Nomad was hacked and lost approximately $150 million. Subsequently, Connext stated that its users were not directly affected by the Nomad hacker attack, but its routers lost approximately $3.34 million in assets.
Later, Connext said that there was nothing wrong with Nomad’s design mechanism, but because the official needed time to recover, Connext temporarily added an additional layer of AMB (Arbitrary Message System) verification on the basis of integrating Nomad, and integrated the official cross-chain bridge of each blockchain network (such as Arbitrum-Ethereum’s official Rollup bridge, Polygon’s official bridge) as the last line of security, responsible for token cross-chain transmission. This is mainly because the official bridge has been verified over time, and the cross-chain data is regularly sent to the main network for verification, so the security is guaranteed.
For example, the cross-chain data of Arbitrum Bridge, the official bridge between Arbitrum and Ethereum, is regularly sent to the Ethereum mainnet, and the security of the cross-chain is actually guaranteed by the Ethereum mainnet. Connext has integrated the official cross-chain bridge of Arbitrum Bridge, which means there is an additional layer of protection under the Optimistic mechanism.
Specifically, there are two main modules in Connext information transmission, one is the Optimistic Layer and the other is the AMB layer. The former is mainly responsible for normal cross-chain message transmission, while AMB mainly integrates the official cross-chain bridge data of each block network, supports cross-chain sending and receiving of tokens, and is responsible for regularly submitting official cross-chain bridge data in batches to the main network, which is responsible for the final security guarantee.
However, Connext officials also stated that this design is only for transition and temporary purposes, and will be fully upgraded to Optimistic Bridge as soon as possible.
Connext completed the Amarok upgrade in February this year, allowing developers to deploy cross-chain applications. Now, multiple applications have integrated Connext to achieve cross-chain layout, such as the decentralized trading platform DODO, the Web3 stream payment platform Superfluid, and the cross-chain aggregator Lifi.
Connext Ecosystem Applications
Connext Bridge, formerly known as xPollinate, is a cross-chain bridge officially launched by Connext, which supports users to transfer assets between Optimism, Arbitrum, Gnosischain, Polygon, BNB Chain and Ethereum.
Fuji Finance — is a cross-chain lending aggregator that helps users find the best lending rates by analyzing multiple lending markets on multiple chains. The Fuji V2 Himalaya version will support users to provide collateral on one chain and borrow on another chain.
Themis — A cross-chain NFT lending protocol that allows users to lend and borrow stablecoins using UNI-V3 NFTs.
NFThashi——is an NFT cross-chain bridge built based on NFTHashi.
Gnosis zodiac——Zodiac is an extension package of DAO, a collection of governance tools on Gnosis. With the help of Connext, accounts on network A can control accounts on network B. More specifically, DAOs on the Ethereum mainnet can control the treasury on the Gnosis chain, and DeFi protocol DAOs on Ethereum can control the funding and deployment of their protocols on Polygon.
