Cross-Chain Messaging Can Blow Open Interoperability
We all know how important interoperability is for the growth of the blockchain ecosystem.
The most promising interoperability technologies are cross-chain messaging protocols that allow smart contracts on different chains to communicate with each other without having to send the actual tokens between chains. This means applications work with any asset or service regardless of which blockchain it is on.
The protocols that best empower builders to create truly interoperable dApps will pave the way to greater security and a better Web3 user experience in 2023.
Why Multi-Chain is the Future
Multi-chain interoperability is vital to the technology’s growth because it enables specialization. While there are maximalists that insist on using one chain for everything, doing so would put an artificial cap on crypto’s possibilities.
Blockchains today are in a similar position to where computers were in the early days of the internet: many isolated systems with users and apps around them that are unable to talk to each other.
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But they are likely to evolve in much the same way that computers have — using cross-chain messaging to connect blockchains and smart contracts on disparate systems.
This connectivity will change how apps are built. Developers will be able to abstract individual blockchains away from the end user so they don’t need to know which chains they are interacting with, thus improving the user experience.
And they will also be able to combine increasingly specialized blockchain-based services together to power their apps, much like the cloud is used today for web2 apps. This will provide a way to scale Web3 apps to large user bases that can’t be served by single chains.
Moving beyond the native network and allowing for different blockchains and tokens to work with each other and leverage network effects is critical for increased adoption. Siloed tokens and blockchain data put a ceiling on a token’s reach and an app’s usability, but the primary tools behind blockchain interoperability — bridges, or protocols for transferring tokens between chains — are often shaky.
They leave data fragmented and demand too many steps for users. They also create security challenges for holders (and a dream for hackers), leading to an estimated $2 billion in stolen funds this year.
It’s time to move away from bridges.
Bridges move assets between blockchains by “wrapping,” or making synthetic versions of, tokens. The original tokens from blockchain A are held on the bridge, while the wrapped equivalent is sent to blockchain B.
Cross-chain connected contracts, by contrast, involve sending messages between smart contracts so that apps can actually communicate across blockchains and no assets need to be moved.
Different cross-chain messaging protocols enable the sending of messages from one blockchain to another in different ways. Axelar, for instance, uses an intermediate blockchain network, while Layer Zero relies on an oracle network. But the net result is that a smart contract on one chain can send a message to a smart contract on another chain without a single trusted party performing the relaying action.
These messaging protocols are more powerful than standalone bridges because you don’t have to actually move the tokens. Moreover, connected contracts allow for the exchange of more than just tokens because they also move arbitrary data and payloads between different blockchains.
Applications that use these protocols can express logic that spans multiple blockchains and centralize data and the state of the network on a single set of smart contracts while still presenting a refined UX that abstracts away the underlying infrastructure.
These messaging protocols are more powerful than standalone bridges because you don’t have to actually move the tokens.
Such protocols improve UX by removing the need for an app’s users to employ third-party bridges. Tokens no longer need to move, and can be used locally with smart contracts on whatever chain they call home.
This opens the door for apps to use multiple specialized chains that are optimized for particular purposes. And it also removes the need for users to interact with third-party bridges separate from the application while still allowing smart contracts to access and work with tokens on remote chains.
Native Multi-chain Future
New native multi-chain protocols built using cross-chain technologies will be a major driver of change in the next 24 months, forming a baseline for the future of web3.
The driver for this change will be teams that want to maximize the addressable market for their protocols while at the same time offering improved efficiency and better UX when compared to their multi-instance counterparts. Existing protocols will have to adapt or face replacement from upstarts that adopt this new connected-contracts approach.
Derek Yoo is the CEO of PureStake, a development team for Moonbeam.