Axelar is a programmable blockchain interoperability layer that facilitates secure inter-chain communication, enabling seamless interaction with assets and applications across different chains. Axelar provides a secure cross-chain communication method for Web3 environments, allowing dApp users to easily interact with assets or applications on any chain. It essentially acts as a bridge between blockchains, facilitating full Web3 interoperability. To ensure the security of transactions, the network uses a proof-of-stake (PoS)-based mechanism and uses an open protocol to handle the routing and conversion of messages. Axelar can be regarded as Stripe in the Web3 field. It consists of a decentralized validator network, a secure gateway contract, a unified translation mechanism, a routing system, and a complete set of software development kits (SDKs) and application programming interfaces (APIs). , aiming to achieve interconnectivity and composability between different blockchains. This way, developers can develop on the platform that best suits their project needs, while still having access to users, assets, and applications in other ecosystems. They rely on a network architecture with a unified code base and governance structure rather than a single cross-chain bridge.
Currently, the cross-chain application ecosystem developed based on Axelar is expanding rapidly, including native applications designed for cross-chain, as well as applications that originally existed only on a single chain but are now expanding outward to attract new users and assets.
The Axelar Ecosystem Map shows the evolution of this cross-chain application ecosystem, broken down by category. It includes builders in the DeFi, Gaming, Infrastructure, NFT, Payment, and Wallet sectors. Below is a snapshot showing the connected chains that application builders can access.
Chain Ecosystem: Example Applications
We will introduce three notable projects within the Axelar ecosystem: Prime, Squid, and Junkyard. These projects use the APIs provided by Axelar to bring a smooth cross-chain experience to users and developers. We will see how Axelar supports these applications, enabling them to thrive in a chain-agnostic environment and completely transform the way we interact with DeFi and NFTs.
Prime: A new chapter in cross-chain DeFi
By joining Axelar's cross-chain network, Prime Protocol has become a chain-agnostic core trading platform that allows the use of assets on any chain as cross-chain collateral. This cross-chain margin feature allows users to deposit assets on any connected chain and use their value to borrow on other chains.
Prime is unique in that assets always remain on their native chain. Users can trade on multiple chains as if they were operating a single blockchain, thanks to Axelar’s General Messaging (GMP) feature, opening up new possibilities for DeFi enthusiasts.
Squid: A Simplified Solution for Cross-Chain Liquidity
As a liquidity router, Squid has a grand vision for the future of cross-chain. Squid provides developers with a protocol that enables cross-chain liquidity routing and exchange through a simple JavaScript SDK. Using Squid and Axelar's GMP function, developers can safely and seamlessly call smart contracts across multiple chains.
Squid's multicall feature allows applications to call multiple contracts in succession, making complex cross-chain operations simple. The Squid team is confident in Axelar's security measures and has adopted a "minimize risk" strategy to ensure security. By ensuring that the Squid smart contract is only responsible for routing liquidity and does not hold any assets, Squid and Axelar put security first.
Junkyard: Innovative Game of NFTs
Junkyard brings fun and innovation to the cross-chain ecosystem while solving the problem of valuable NFTs in a bear market. This unique project creates a lottery-style game for NFTs through Axelar’s GMP feature. Here’s how it works:
Participants deposit their NFTs into the Junkyard smart contract on Ethereum. Axelar securely transmits the data of these NFTs to the contract on Polygon that stores the data. When a participant "fishes" in Junkyard, the contract on Polygon calls Chainlink's random beacon to randomly select a set of NFTs from Junkyard.
If a participant decides to claim an NFT, the transaction will be completed on the Ethereum blockchain. Axelar ensures seamless communication and state synchronization between Polygon and Ethereum, providing users with a smooth and reliable experience.
The recent explosive growth of Junkyard, which randomly distributed 10,000 NFTs, demonstrated the scalability and efficiency of Axelar GMP. As shown on Axelarscan, the increase in activity has driven Axelar GMP transaction volumes to new highs.
These three projects — Prime, Squid, and Junkyard — provide a glimpse into the Axelar ecosystem. They demonstrate the power and potential of Axelar GMP in chain-agnostic applications.
Staking Rewards and Axelar Network Security
In a Byzantine system, such as a permissionless network based on a blockchain, security is built on the level of decentralization of the network. The nodes must be diverse in order to be able to resist network attacks.
The Axelar Network is able to provide superior security and flexibility because it is based on a proven proof-of-stake consensus mechanism and is supported by a diverse and ever-changing set of validators. The AXL token plays a key role in all of this. It allows anyone to join the network, participate, and contribute to maintaining network security. This token design supports permissionless participation and ensures alignment of incentives.
Incentives
In the Axelar network, validators’ responsibilities include producing new blocks, participating in multi-party signatures, and voting on the status of external chains. AXL token holders can stake their tokens to validators and join their staking pools to earn rewards, which are distributed after deducting the validator’s service fees. The network’s reward mechanism is inflation-based, which means it increases the total supply of tokens.
In addition, the Axelar Network introduces a specific external chain inflation rate for each chain interconnected through it to further refine the reward mechanism. More details can be found in the Rewards and Transaction Fees article published by the Axelar Foundation.
Governance Functions
AXL tokens are also used for network governance, enabling token holders to vote on important network decisions such as parameter adjustments or protocol upgrades.
Token Supply
A total of 1 billion AXL tokens will be minted at network launch. These tokens will be released according to a linear schedule extending from 6 months for community sale participants to 4 years for team members. The Axelar Foundation’s article on AXL token economics provides more information on the token supply and circulation schedule.
Deflation potential
The supply of AXL tokens has the potential to become deflationary. As mentioned before, users do not need to hold AXL tokens to transact through the network, as all gas fees can be paid in source chain tokens. Services running on the Axelar network convert source chain tokens into:
AXL is used to pay network fees, which are paid to AXL stakers and validators.
Target chain token, used to pay gas fees on the target chain.
This conversion and fee payment process may generate some additional payments or "change", which can be partially refunded to users or used to implement a buyback and burn mechanism for AXL tokens. Currently, such a mechanism has not been implemented. However, once the network is launched, if gas fee refunds occur, the best refund process may be determined.
Transaction fee mechanism
Every transaction on the Axelar network involves fees in AXL tokens. Network services purchase AXL tokens in order to provide users with a seamless fee payment experience, meaning users do not have to explicitly hold AXL tokens.
The Axelar SDK estimates the fee payments on the Axelar network and the target chain, converts the tokens and sends the payment in AXL and the target chain’s gas tokens. (The gas service can be performed by any program or entity.)
In this way, validators and token holders are compensated for the services they provide, while users experience seamless cross-chain functionality and no barriers to adoption.
To learn more about gas and executor services and how they operate on the Axelar Network, visit Axelar’s technical documentation site.
Axelar Network is like a bridge, but it is better than a bridge
Axelar Network, as a platform connecting different blockchains, provides a higher level of security than traditional bridges and networks based on multi-signature technology. It also supports the execution of smart contracts, bringing unique features that other cross-chain solutions cannot provide. Here are a few key points:
Strengthening network effects: Any new chain connected through Axelar can instantly interact with all connected chains, and this instant interconnectivity strengthens the network effect as stated by Metcalfe’s Law.
As a blockchain platform, Axelar is able to connect and route any chain to any other chain, even when the number of connections reaches 1,000 or more.
As another example of innovation, Axelar has opened up an API that enables dApps to create one-time deposit addresses. These addresses allow users to transfer funds across chains from any wallet using any token. This feature provides end users with a way to enjoy the convenience of open protocols and network interactions while experiencing an operational experience similar to that of centralized exchanges. This means that decentralized Web3 projects can create an access point similar to centralized exchanges.
Comparison of projects on the same track with the same data interoperability:
1，Wormhole
Token transfers are protected by guardians, a group of carefully selected validator nodes that monitor activity on the chain. Some of the world's largest staking service providers serve as guardians, such as Everstake, the world's largest staking service provider, and Certus One (Jump), the developer of Wormhole. After requesting a transfer, the guardian verifies it and then locks the platform's native token in a smart contract. An equal number of tokens are minted as wrapped assets on the target chain.
Risk: A massive $320 million hack was launched against the bridge between Solana and Ethereum in 2022. As a result, 120,000 Wrapped Ether was stolen, which was the largest hack in 2022 and one of the largest DeFi hacks in history. Afterwards, Jump Crypto deposited 120,000 wETH into the exploited smart contract, intervened and replaced the stolen funds.
2，LayerZero
A set of smart contracts, called LayerZero endpoints, are deployed on each supported chain. LayerZero works on the premise that if two independent entities can confirm that a transaction on chain A is valid, then chain B can determine that the transaction on chain A is valid and complete the transaction on chain B. In the above case, A is Ethereum and chain B is Avalanche. The two independent entities are called Oracle and Relayer, and they are both off-chain and independent. The endpoint on Ethereum sends the details of the transaction to these two entities. LayerZero uses ultra-light nodes (ULN) and decentralized oracles to securely transmit messages between chains without the need for middleman chains or expensive on-chain light nodes.
3，Entangle
The Photon Messaging Layer facilitates cross-chain communication by leveraging a smart contract network, which is supported by a series of agents called Emitters and Conductors.
Team and financing background:
Axelar Network's founding team, Interop Labs, is composed of global experts in distributed systems, cryptography, technical business development, developer relations, and communications. Their backgrounds include top institutions, projects, and companies such as MIT, Google, Consensys, Chainlink, Salesforce, Stripe, Accenture, R3, and J.P. Morgan. Co-founders Sergey Gorbunov and Georgios Vlachos are members of the founding team of Algorand.
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