Knut Vinger

Alexander Kjeldaas

Anton Roos

We should be building cross-chain solutions as if consensus mechanisms are unnecessary — because they are. ​​Blockchain technology has been celebrated for its potential to revolutionize various industries through decentralization, security and transparency. However, as the ecosystem expands, the complexities and costs associated with interoperability between different blockchains have become increasingly apparent.&nbsp;



Consensus algorithms are essential for individual blockchain networks, ensuring that all participants agree on the state of the ledger to maintain integrity and security. Yet, when these mechanisms are applied to interoperability solutions like cross-chain bridges, they introduce significant inefficiencies and risks.



Implementing consensus in interoperability often leads to extreme over-collateralization — sometimes more than 100 times the value of the assets being transferred. Funds get locked up in validator nodes to secure the network, tying up enormous amounts of capital. For example, a common bridge is paying each validator around $30,000 per month, totalling a staggering $3 million per month for their 100 validators. The additional costs of incentivizing and maintaining a community of validators only add to this financial burden.



Read more from our opinion section: <a href="https://blockworks.co/news/web3-web2-interoperability-mistakes">Don’t let Web3 repeat Web2’s interoperability mistakes</a>



This over-collateralization isn&#8217;t just expensive; it&#8217;s economically inefficient. The total value locked (TVL) metric is frequently highlighted in the DeFi space. But, when it comes to bridges, these numbers <a href="https://blockworks.co/news/tvl-metrics-defi-lightspeed">often mask these underlying inefficiencies</a> by presenting them as indicators of success rather than sunk costs. While consensus aims to provide security, it doesn&#8217;t guarantee consistency in interoperability solutions.&nbsp;



Bridges introduce non-deterministic data, meaning the same input doesn&#8217;t always produce the same output across different chains. Without consistency, the stability of the entire system decreases with each additional blockchain connected. This instability increases the risk of tokens or transactions being duplicated, stuck or disappearing altogether. It is estimated that billions of dollars have been <a href="https://blockworks.co/news/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether">stolen from bridges</a>, including $650 million from Ronin, $326 million from Wormhole and $566 million from Binance’s BNB Chain bridge.



The lack of consistency also hampers DeFi abstractions and composability. Bridges often rely on hardcoded primitives that require hard forks to modify, complicating innovation and slowing down the evolution of dapps. Many interoperability solutions struggle to scale effectively. Since these bridges can be considered blockchains, with their own consensus mechanisms, they introduce additional layers of complexity and potential bottlenecks. This not only slows down transaction times, but also adds more points of failure to the system.



Read more from our opinion section: <a href="https://blockworks.co/news/blockchains-still-arent-great-at-communication">Blockchains still aren’t great at communication</a>



The crux of the matter is simple: Consensus mechanisms are unnecessary for interoperability, and may in fact be counterproductive. By eliminating the need for consensus in cross-chain solutions, we can significantly reduce costs and complexity. Instead of relying on validators to maintain a consensus, we can use deterministic proofs and verification methods that are inherently secure and efficient.&nbsp;



The key to enable consensus-less interoperability is to move proof and verification mechanisms out of layer-1 smart contracts. This approach mitigates major bottlenecks like limited cross-chain data availability. By decoupling from individual layer-1 constraints, dapps are enabled to process data more freely and create additional value without being hindered by consensus-related limitations — benefiting not only blockchains, but most importantly, users.



Read more from our opinion section: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



By focusing on deterministic computations, interoperability solutions can ensure that transactions are predictable and verifiable without the overhead of consensus mechanisms. Techniques like <a href="https://docs.coinweb.io/learn/protocol/refereed-delegation-of-computation-rdoc#:~:text=RDoC%20is%20the%20proof%20mechanism,that%20proves%20information%20between%20blockchains.">refereed delegation of computation</a> (RDoC) and cryptographic validation provide the necessary security assurances. This approach reduces the risk of inconsistencies and errors, enhancing the overall stability of cross-chain interactions.



Removing consensus from interoperability is not just a cost-saving measure; it&#8217;s a strategic evolution in building blockchain networks. This paradigm shift allows for greater levels of abstraction, improved efficiency and more room for innovation. Developers can create more complex and composable dapps without being hindered by the limitations imposed by consensus-driven bridges.



The current reliance on consensus mechanisms for interoperability is both costly and inefficient. By rethinking our approach and eliminating unnecessary consensus layers in cross-chain solutions, we can build a more robust, scalable and efficient blockchain ecosystem. This strategic move not only reduces operational costs but also fosters innovation, allowing blockchain technology to reach its full transformative potential.



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Want cheaper and safer interoperability? Drop traditional bridges

Donovan Choy

With LayerZero as its official interoperability provider, BitGo is expanding its tokenized wrapped bitcoin (WBTC) product to BNB Chain and Avalanche.



This effectively enables WBTC — one of the most widely used collaterals for DeFi — to be natively minted on the third and seventh largest chains by TVL without incurring additional bridging risks for users to move WBTC collateral from Ethereum.



BitGo’s expansion to BNB Chain and Avalanche is facilitated by LayerZero’s Omnichain Fungible Token (OFT) standard. It’s widely used today by over 100 protocols, including Ethena, Ether.fi and Swell.



LayerZero’s OFT standard enables the transfer of WBTC between BitGo-approved chains for the low cost of an omnichain message. It serves as a pseudo-global accounting standard that mitigates the traditional risks of double-spending or hacks with a third-party bridge.



To transfer WBTC, <a href="https://blockworks.co/tag/bitgo">BitGo</a>’s security configuration involves a 1-of-2-of-3 decentralized verifier network (<a href="https://medium.com/layerzero-official/layerzero-v2-explaining-dvns-02e08cce4e80">DVN</a>) to approve transfers. This includes BitGo&#8217;s DVN, LayerZero Labs&#8217; DVN and Polyhedra&#8217;s zkLightClient.



This is not to be confused with BitGo’s recently changed 2-of-3 multi-signature security model that is required to mint or burn WBTC.



Read more: <a href="https://blockworks.co/news/bitgo-wbtc-custodial-changes">BitGo moves to allay fears over WBTC custodial changes</a>



&#8220;WBTC is one of the largest assets in DeFi, and BitGo is one of the most trusted custodians in crypto — so this is definitely a standout example of what can be built on LayerZero,” Bryan Pellegrino, co-founder and CEO of LayerZero Labs told Blockworks.



“With BitGo running their own DVN, they have full control over the security of WBTC, which is exactly how it should be in crypto; that’s why we’re here. It’s all about teams owning their security and shipping cool stuff.”&nbsp;



<a href="https://blockworks.co/tag/layerzero">LayerZero</a> is the most adopted interoperability protocol today. Since 2021, LayerZero has facilitated 135 million omni messages and $50 billion in value across chains, a press release said.



BitGo’s WBTC is the most successful tokenized bitcoin collateral today, with 152,950 WBTC ($8.7 billion) <a href="https://wbtc.network/dashboard/order-book">issued</a> across Ethereum alone.



Read more: <a href="https://blockworks.co/news/building-better-wrapped-bitcoin-for-defi">Building a better wrapped bitcoin for DeFi</a>



The WBTC issuer was embroiled in some controversy last month after it <a href="https://www.bitgo.com/resources/blog/bitgo-to-move-to-jurisdictional-custody-to-accelerate-global-expansio/">announced</a> a change in corporate ownership that involved TRON founder Justin Sun.



Sky Protocol (previously Maker) immediately sought to <a href="https://forum.makerdao.com/t/wbtc-changes-and-risk-mitigation-10-august-2024/24844?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=referral&amp;utm_campaign=short-term-risk-elevated">delist</a> WBTC collateralization from its DAI stablecoin following the announcement. Aave on the other hand, is adopting a wait-and-see approach, said Aave-Chan Initiative founder Marc Zeller on the <a href="https://youtu.be/M-O11MPtEgg">Bell Curve</a> podcast.



Updated September 10, 2024 at 4:20 pm ET: Clarified scope of BitGo&#8217;s decentralized verifier network. 



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LayerZero chosen as interoperability provider for BitGo’s WBTC

Optimism <a href="https://blog.oplabs.co/solving-interoperability-for-the-superchain-and-beyond/">announced</a> on Monday a plan to create a native protocol layer solution that will solve the problem of liquidity fragmentation across its ecosystem of rollup chains, also referred to as the Superchain.



The layer-2 giant’s solution will unify its ecosystem through a “universal standard of interoperability.”



In a world where spinning up a rollup is as simple to do with a few clicks, issues of liquidity fragmentation and high-friction user experience remain as users require third-party bridges to jump from chain to chain.



The new Optimism multichain protocol layer will comprise four key components: A message passing protocol for cross-chain communication, a standardized SuperchainERC20 token standard for bridged assets, an interoperable chain set for all OP Stack rollup chains to read data from and lastly, a shared interop fault proof system which allows fault proofs between multiple chains.



<a href="https://blockworks.co/tag/optimism">Optimism</a>’s native protocol layer will also leverage <a href="https://www.erc7683.org/">ERC-7683</a>, a proposed standard by Uniswap and Across for cross-chain intents to facilitate <a href="https://blockworks.co/tag/interoperability">interoperability</a> on the dapp layer.



Read more from our opinion section: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



The rollout is planned over a three-stage roadmap. First, a devnet will be launched to gather feedback, followed by a testnet launch alongside the message passing protocol and SuperchainERC20 token standard.&nbsp; Finally will come the mainnet launch.



The end goal is to create a unified experience not only between all Optimism chains but also across Ethereum, where users can enjoy the convenience of seamless cross-chain movements and the benefit of unified liquidity.



Optimism’s OP Stack has seen the highest traction between all other <a href="https://blockworks.co/tag/rollups">rollup</a> development stacks, largely thanks to a crucial first-mover advantage that is key in an open-source network.



OP is an open-source and modular software development stack that builders use to deploy a customized rollup.



Optimism’s Superchain boasts 29 OP Stack chains — including Base, Blast and Zora — more than any other rollup development stack. Sam Altman-backed Worldcoin’s upcoming World Chain layer-2 is also <a href="https://blockworks.co/news/worldcoin-teases-world-chain-layer-2">slated to be launched</a> using the OP Stack later this year.



All 29 chains account for <a href="https://docs.google.com/spreadsheets/d/1f-uIW_PzlGQ_XFAmsf9FYiUf0N9l_nePwDVrw0D5MXY/edit?gid=584971628#gid=584971628">36.4%</a> of all layer-2 transactions, as of August 2024, and control $16.57 billion of value in TVL, according to <a href="https://l2beat.com/scaling/summary?#layer2s">L2beat</a>.



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Optimism plans to unify its Superchain with an interoperability layer

Temujin Louie

One of the prerequisites for the mass adoption of blockchain technology is interoperability — the ability to pass data between distinct blockchain and blockchain-like systems. Numerous interoperability projects have established themselves today, and many are growing at an incredible rate. Indeed, it’s only a matter of time before the number of cross-chain messages is measured in trillions.&nbsp;



Blockchain interoperability has never been more ubiquitous. In January 2024, <a href="https://blog.bcas.io/implications-of-cross-chain-bridges-under-mica#:~:text=As%20of%20January%202024%2C%20the,ranks%20third%20at%20%242.27%20billion.">more than $23 billion worth of assets</a> were locked in cross-chain bridges on Ethereum alone. Clearly, our industry’s early adopters — affectionately called Web3 enthusiasts — are keen to explore new ecosystems as they routinely bridge assets from one blockchain to another. This process, though clunky, has become so commonplace that&nbsp;many believe that blockchain interoperability is a solved issue.&nbsp;



The truth is far more bleak.&nbsp;



The state of blockchain interoperability today is one of fractured incompatibility. Competing interoperability projects build ad hoc solutions that gerrymander the blockchain landscape, making it impractical for enterprises and regulators to vet the security of each. As it stands, the current state of blockchain interoperability poses an existential threat to the mainstream adoption of blockchain technology as a whole.&nbsp;



Modern interoperability projects are far too focused on building and growing their own proprietary products. The fight to become the one-and-only has introduced growing system complexity and, therefore, unbounded risk. As different projects make different tradeoffs to solve different problems, blockchain interoperability protocols continue to increase in complexity. Not only does this complexity make protocols progressively more incompatible with one another, each new system component or trust assumption introduces new attack vectors. As an industry, we must curb this troubling trend.



A shared framework for interoperability is desperately needed.&nbsp;



As a trustless system, decentralized blockchains are incapable of communicating with other blockchain networks out-of-the-box. Trust assumptions dictate the risk profile of a particular cross-chain design by shaping its vulnerabilities and delineating how a system can be exploited. Generally speaking, the greater the complexity of a system, the higher its susceptibility to attack. It is therefore preferable to simplify the design of cross-chain solutions in order to limit the number of exploitable components. So, while it is true that trust assumptions are inherent to blockchain interoperability solutions, there is security in simplicity. 



Read more from our opinion section: <a href="https://blockworks.co/news/open-tech-scapegoat-progress">There’s no reason to fear open platforms</a>



A shared framework for interoperability between blockchain and blockchain-like systems — one that includes architectural guidelines and vetted interface definitions — makes it possible to reduce system complexity. This has the knock-on effect of preventing fragmentation across different project implementations. Even something as simple as common interfaces and functions to decode and verify the validity of messages would go a long way towards enhancing interoperability, while reducing the need for custom implementations.&nbsp;



A shared framework for interoperability also has the potential to foster collaboration between different interoperability projects. Broadly speaking, interoperability projects simply don’t trust each others’ work. This isn’t entirely surprising considering that, between 2021 and 2023, more than <a href="https://twitter.com/PeckShieldAlert/status/1741852326305100283?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1741852326305100283%7Ctwgr%5E97ab62338d1c1ccce7cdd60687e8ec02e6921617%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Forbit-bridge-hack-pushes-december-crypto-losses-100m">$2.9 billion was stolen</a> from exploited cross-chain bridges. Nevertheless, this distrust has directly contributed to the fractured state of blockchain interoperability today. A shared framework, built openly and vetted by all, will result in a more secure system.&nbsp;



Blockchain interoperability must be core infrastructure first, product second. If we as an industry are to have any hope of achieving the mainstream adoption of blockchain technology (without sacrificing the industry’s core ethos of decentralization), we must establish a shared framework for interoperability. Time is running out.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Temujin Louie (Tem), CEO of Wanchain, is committed to bridging the world of emerging tech to the broader public in an easy-to-understand and accessible way.

With over 10 years of experience driving the adoption of transformative digital technologies, Tem has served as a marketing director for leading new tech companies such as Matrix AI network, Calwave Group, and Lightnet Group before pursuing a VP position at Wachain in 2021. 

In addition to professional experience, Tem proved his deep understanding of decentralized technologies in an academic field as well, dedicating two years to researching Bitcoin’s impact on incumbent power structures at the London School of Economics. 

Tem believes that accessibility, simple UX, and narratives that address the non-technical everyday users are the secret sauce to making blockchain widely adopted by the general public.</div>


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Blockchains still aren’t great at communication

Joeyz Yu

Recently, I shared a photo of our family&#8217;s New Year celebration with my mom via WhatsApp. The following day, I asked her if she had seen it. &#8220;I didn&#8217;t receive any texts from you,&#8221; she responded. It took a moment to remind her that it was on WhatsApp, not her standard messaging app. After navigating her phone, she found the photo and, like any mom, was thrilled to get a glimpse into my life.



This interaction, which happens often with my older relatives, made me think more deeply about the siloed nature of Web2 applications. As my mind wandered between the pros and cons of WeChat and WhatsApp, I started to worry — are we replicating Web2&#8217;s mistake in how we&#8217;ve built blockchains?



In 2022, the European Union’s Digital Markets Act (DMA) <a href="https://techcrunch.com/2022/03/24/dma-political-agreement/">proposed</a> that the world’s six big tech companies adopt interoperability, yet two years later, Web2 messaging platforms remain walled-gardens, preventing users from sending or receiving messages from other apps.&nbsp;



When we look at the Web3 ecosystem, we see the same mistake playing out.&nbsp;



Because blockchains are siloed off from one another, communication between chains is non-existent or only possible via complicated bridges.&nbsp;



What’s more, the rise of chain <a href="https://blockworks.co/news/crypto-is-tribal-lets-just-pit-blockchains-against-each-other-once-and-for-all">tribalism</a> has fragmented the space further, creating rifts and dividing the crypto community with some die hard fans refusing to go anywhere near other chains out of loyalty to their chosen one.&nbsp;



And while interoperability is an issue across both worlds, the financialization aspect of Web3 is more problematic from an economic perspective as many blockchains also have their own native tokens, hindering the seamless exchange of value across different chains.



To amend the interoperability problems we created in Web2, we need infrastructure that is chain and wallet agnostic.



<h2 class="wp-block-heading">The fragmented nature of Web3 communication</h2>



Web 3’s default to centralized messaging platforms has made platform migration a daily reality for many. For instance, NFT marketplaces like OpenSea, facilitating close to 20,000 NFT transactions daily, lack in-house messaging features. This forces users onto separate platforms for communications, often resulting in misdirected funds.



The constant jumping around doesn’t just make us vulnerable to data and privacy breaches, but also restricts communities from being able to integrate messaging with dapps, smart contracts and other blockchain functionalities.  



Lack of interoperability has left us all with fragmented user experiences and digital identities that are all over the place and confusing to keep track of. 



Read more from our opinion section: <a href="https://blockworks.co/news/web3-companies-real-problems-infrastructure">We need more ‘boring’ Web3 companies solving real problems</a>



It begs the question, why is it that we can send something like an email to each other from multiple service providers, yet we’re still unable to send messages between Web3 applications?



And while specialized bridges that connect different blockchains exist, these bridges require constant maintenance, upkeep and can still fail, leaving users stranded in an ecosystem unable to connect their assets.



If we&#8217;re building for interoperability, we don&#8217;t need bridges. What we need is an ecosystem where data and value can flow freely between all platforms and chains.



<h2 class="wp-block-heading">Envisioning a unified future</h2>



Addressing interoperability requires more than just technical solutions; it necessitates a shift towards collaborative development over chain loyalty. I envision a network distributing data across global nodes, returning control to users and enabling effortless application interoperability — even for beginners.



Projects like Polkadot and Cosmos have made strides in addressing interoperability, yet the next step involves ensuring that practical applications, like ENS&#8217;s human-readable Ethereum addresses, are universally compatible.



DeFi is already ahead of the curve when it comes to cross-chain innovation, with projects like crypto router Squid allowing any token swaps between blockchains, and decentralized social network Farcaster enabling users to combine their wallets with their social profiles.&nbsp;



What both these projects have in common is that they are providing value to not just the users, but also to builders. It’s time we see that same type of innovation in the Web3 messaging space.&nbsp;



Ultimately, communication platforms should not only support messaging, but also seamlessly integrate with NFTs and digital assets, fostering a digital economy where communication and commerce coalesce.



Tackling Web3&#8217;s interoperability challenge demands a multifaceted approach, experimentation and community-wide collaboration. While there&#8217;s no swift solution, a collective effort can dismantle these digital barriers, paving the way for a more interconnected and collaborative Web3 ecosystem.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Joeyz Yu is an entrepreneur with over 18 years of experience in product design and development. He co-founded Sending Labs to revolutionize communication protocols and social applications for Web3, leading the development of their flagship products SendingMe and SendingNetwork. Previously, Joeyz co-founded MoboTab, where he created the Dolphin Browser, used by over 200 million users and later acquired by ChangYou. Joeyz&#8217;s passion for empowering users and building exceptional teams drives his mission to shape the future of the internet. </div>


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Don’t let Web3 repeat Web2’s interoperability mistakes

Bessie Liu

Polymer, an Ethereum rollup that is hoping to become Ethereum’s interoperability hub, has launched the Polyverse Testnet, becoming the latest team hoping to tackle blockchain interoperability.



The testnet will be launched in three phases dubbed ‘Basecamp,’ ‘Into the Unknown’ and ‘Discovery.’ The first phase, Basecamp, will be live starting today and is designed to incentivize developers to facilitate liquidity onto the testnet from other rollups.&nbsp;



Phase 2, Into the Unknown, will commence the following week, where Polymer will select a handful of decentralized apps to promote to end users, who will also be able to receive rewards. Then the final phase, Discovery, will focus on refining and optimizing incentive mechanisms to drive participation.&nbsp;



<h2 class="wp-block-heading">The blockchain interoperability problem</h2>



Like many cross-chain messaging and bridging protocols today, Polymer was created to solve the issue of blockchain interoperability.



Read more: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



Blockchain ecosystems today remain relatively isolated from one another, meaning they can not communicate or interact with each other — creating terrible user experiences for their customers.&nbsp;



An example of this in Web2 would be being unable to send emails from your Gmail account to an Outlook account.



To address the communication barrier, cross-chain messaging protocols and other interoperability solutions have sprung into life as a means to enable blockchains to safely transfer valuable information to each other.



This type of infrastructure is critical to blockchain scaling, as evidenced by the attention and interest it has received from investors.&nbsp;



Wormhole, one of the largest cross-chain messaging solutions today, <a href="https://blockworks.co/news/cross-chain-protocol-investor-funding">secured $225 million in a private token sale</a>, which saw interest from Brevan Howard, Coinbase Ventures and Multicoin Capital late last year.



Similarly, LayerZero locked in a seven-figure Series B fundraise, where investors from a16z, OKX Ventures and Sequoia Capital <a href="https://blockworks.co/news/layerzero-locks-down-funding">gave the protocol $120 million to expand its operations</a>.



Polymer also recently <a href="https://blockworks.co/news/polymer-labs-raises-23-million">revealed that it acquired $23 million</a> to bring Cosmos SDK’s inter-blockchain communication (IBC) protocol to Ethereum.



Read More: <a href="https://blockworks.co/news/polymer-labs-raises-23-million">Polymer Labs secures $23M to bring IBC to Ethereum</a>



<h2 class="wp-block-heading">Polymer’s approaches to interoperability </h2>



Unlike many interoperability protocols today, Polymer is not designed as a third-party bridge but rather as a layer-2 Ethereum rollup solution that serves a similar purpose to the ‘interoperability hub’ on Cosmos. It aims to provide IBC to Ethereum and connect with other layer-2 solutions.



IBC, unlike many other interoperability solutions today, is not a bridge application but a network standard, Devain Pal Bansal, a product analyst at Polymer Labs, told Blockworks.



“The biggest benefit of introducing it to Ethereum, particularly Ethereum rollups, is that it extends the capabilities of how a rollup settles on Ethereum via the native bridge and extends it cross rollups &#8211; without a third party required to attest to data or its validity by simply using the shared source of truth for all rollups &#8211; Ethereum,’ Bansal said.



Tommy O&#8217;Connell, a senior product manager at Polymer, explained to Blockworks that applications can build their own bridges and control inbound and outbound messages using a layer-1 trust layer. This eliminates the need for an additional trust assumption of a third party.



“This also allows us to be focused on enabling chains to join Polymer’s ecosystem of chains with just a SINGLE connection to the hub, mitigating Polymer being a blocker for growth,” O&#8217;Connell said.



This differs from Wormhole, for example, which relies on a 13 of 19 supermajority to attest to a message before it is produced or sent. It is also different from Axelar, which relies on <a href="https://axelarscan.io/validators">validators</a> for attestations.



It is important to note, however, that Polymer’s minimum viable product (MVP) will be limited to the Base and Optimism at the testnet launch.&nbsp;



Though this is the case, O’Connell notes that there are immediate plans to grow to other OP stack chains and soon after to other chains such as those in the Cosmos ecosystem.



“The primary benefit for OP stack rollups is that we have built an IBC client for OP geth, which enables us to extend the capabilities of native L1&lt;&gt;L2 bridge across rollups. It is particularly appealing because we can unlock other chains built on the OP stack with minimal expansion effort,” O&#8217;Connell said.



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‘​​The Polyverse Testnet’ is live, bringing IBC to Ethereum

Robinson Burkey

The essence of blockchain has always been about open-source and decentralization, about building something together without any single entity in control.&nbsp;



However, as the ecosystem has expanded, many blockchains have become isolated silos, lacking the infrastructure and capability to communicate with each other. This isolation hinders the true potential of a unified and interconnected blockchain ecosystem, further stressing the importance of cross-chain messaging protocols.



When it comes to blockchains, interoperability is not just a buzzword. It’s a quintessential factor driving the trajectory towards a more connected and inclusive crypto ecosystem. Cross-chain platforms are emerging, facilitating communication between isolated blockchain islands. For blockchain to unlock its full potential, constructing these bridges with an open-source and decentralized ethos is imperative.



Blockchain interoperability alleviates existing challenges by shattering the silos. We have already seen it in action with projects like Pyth Network bringing first party financial data to a growing number of blockchains, as well as the <a href="https://blockworks.co/news/top-solana-nft-projects-are-jumping-ship-to-ethereum-polygon" target="_blank" rel="noreferrer noopener">DeGods/Yoots migration</a> from Solana to Ethereum.&nbsp;



But there are still other challenges.&nbsp;



When interoperability is controlled centrally, it typically falls under the purview of a single organization or a consortium of stakeholders with aligned interests. This could be a dominant blockchain company, a group of developers or even a coalition of businesses that have significant investments in a particular blockchain. This can lead to a lack of transparency about how decisions are made and who benefits. Multisig wallets are another massive threat when they rely on a small number of individuals or entities, especially because many bridging protocols incorporate centralized multisig. In fact, improper use of multisig led to a <a href="https://blockworks.co/news/sky-mavis-ronin-network-bridge-exploited-for-over-600m" target="_blank" rel="noreferrer noopener">$625 million exploit in 2022</a>.



Venture capital involvement complicates matters as well, with its risk of biased approvals and skewed governance. For example, if a blockchain’s founders, foundation or VC holds the majority of the delegation, then the community vote can end up meaningless. Such practices could sideline the average user, straying away from blockchain&#8217;s democratic core and mission to provide an equitable solution that benefits all involved.



Decentralized, open-source interoperability is a beacon of trust in the blockchain landscape. Platforms which openly share their code <a href="https://github.com/wormhole-foundation/wormhole">repositories</a> and implement innovative <a href="https://docs.wormhole.com/wormhole/explore-wormhole/guardian">mechanisms</a> exemplify this trust-building approach, bolstering security in a decentralized environment. In stark contrast, closed-source frameworks pose risks, introducing potential avenues for manipulation and centralization which can substantially hinder innovation.



The open-source ecosystem is the crucible where innovation thrives, underscored by a myriad of success stories in the crypto arena. It’s the community-driven initiatives that morph into assets, crafting a robust and adaptable protocol. They provide a platform for developers and blockchain enthusiasts to collaborate, work on real-world interoperability challenges and learn from each other.&nbsp;



Decentralized protocols are playing their part in this larger narrative, but it’s a collective effort. The call is out for everyone in the blockchain space to join in this mission.&nbsp;



In focusing on the core values of blockchain, we must also recognize and address the hesitations around interoperability. Some protocols may resist this shift, not merely for financial gain (which is a straightforward incentive), but also over concerns in maintaining their established systems and user bases — all factors that contribute to their “hype.” The “hype” here refers to the market excitement that can drive user adoption and investment in a particular blockchain, potentially leading to a reluctance of these protocols to dilute their brand or user experience through interoperability.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/staking-can-modernize-the-ethereum-etf" target="_blank" rel="noreferrer noopener">Staking can modernize the Ethereum ETF</a>



There are valid technical and security concerns that come with opening up a system to interact with others, which can be complex and risky to navigate. Some protocols might fear losing control over their governance structures, compromising security or facing increased complexity in operations.&nbsp;



But while such concerns are understandable, it&#8217;s crucial to challenge them with the long-term vision of a unified blockchain ecosystem that champions open-source values and collective advancement over individual success.



As we continue to unite more and more of the fragmented blockchain ecosystem, reverting to the core principles of an open, decentralized and collaborative ecosystem isn’t just a choice — it’s a necessity. It’s not just about the technology, but about the ethos that underpins it. The free-flowing crypto economy, devoid of siloed chains, is within reach, but it can only be achieved in the open and with decentralized security.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Robinson Burkey is an EVP at the Wormhole Foundation. Robinson has dedicated nearly a decade to leading growth and go-to-market strategies for startups, including almost two years in the crypto industry. Previously, Robinson served as an early employee at HealthCrowd until their successful exit, after which he made the decision to join DoorDash as an early leader. Prior to joining Wormhole, he led Business Development and Ecosystem efforts at Acala in the Polkadot ecosystem.</div>


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Interoperability isn’t just a buzzword

Blockchain scaling and privacy infrastructure company Espresso Systems will release its third testnet of the Espresso Sequencer for OP stack builders.



The testnet, named Cortado, will include work for an Optimism Request for Proposal (<a href="https://github.com/ethereum-optimism/ecosystem-contributions/issues/63">OP RFP</a>) that aims to decentralize sequencers.&nbsp;



Rollup solutions today run their own sequencers that have their own execution environments. These sequencers are responsible for ordering transaction information that is then sent to a virtual machine.



To ensure there is no single authority that orders these transactions, projects such as Espresso Systems are exploring ways to diversify these sequencers.&nbsp;



The initial release will be a locally hosted demo version of an OP stack rollup running on Espresso that enterprises can test.&nbsp;



Over the coming weeks, a publicly hosted canonical OP stack testnet will be released. This testnet will be similar to the testnet <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">Doppio</a>, which went live in July, according to Jill Gunter, chief strategy officer at Espresso Systems.



This publicly hosted testnet will be deployed in partnership with Caldera. The one-click rollup deployment allows developers to choose the different layers to build a blockchain.



<h2 class="wp-block-heading">Decentralizing sequencers before decentralizing fraud proofs</h2>



A popular narrative within crypto circles raises the concern that without fraud-proofs — a mechanism that can challenge the accuracy of a transaction — shared sequencing solutions will still have to include potentially fraudulent transactions in a rollup sent to the layer-1.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Optimistic rollups without fraud proofs are just google sheets with extra steps <a href="https://t.co/KavMYbuN8T">https://t.co/KavMYbuN8T</a>&mdash; joseph.eth (@josephdelong) <a href="https://twitter.com/josephdelong/status/1690537453961064448?ref_src=twsrc%5Etfw">August 13, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Gunter told Blockworks that decentralizing a sequencer does not mitigate the need for fraud proofs, but the two play separate important roles.&nbsp;



“Decentralizing the sequencer will help mitigate the risk that this centralized entity running the sequencer is going to be persistently ignoring transactions or leaving them out,” Gunter said.



Although it’s understandable that there are debates as to whether or not the development of shared sequencers should be prioritized before fraud proofs have even been shipped, Gunter believes that all of these different aspects play an important role in ensuring that blockchains become more decentralized.



“Eventually these things will all need to be on the roadmap,” she said. “A big part of what our motivation has been at Espresso Systems is to help rollups accelerate the roadmap towards mainstream adoption.”



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A shot of Espresso, please: Blockchain scaler to offer third testnet integration

Sebastian Sinclair

Chainlink (<a href="https://blockworks.co/price/link">LINK</a>) has notched its biggest single-day rally in more than two years following the release of its Cross Chain Interoperability Protocol (CCIP) to developers.



LINK jumped up to 22% on Thursday — from $6.92 to $8.43. It had retraced slightly to $8.36 by the end of the day and now hovers at $8.15, a three-month high. Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) ended up flat.



As the blockchain ecosystem grows, there’s mounting need for these networks to talk to each other. CCIP aims to <a href="https://blockworks.co/news/chainlink-ccip-launch" target="_blank" rel="noreferrer noopener">enhance communication and data transfer</a> between various protocols.&nbsp;



To celebrate CCIP, Chainlink co-founder Sergey Nazarov explained that Chainlink aims to extend the efforts of Bitcoin, which many consider directly inspired by the 2008 global financial crisis. Nazarov <a href="https://twitter.com/SergeyNazarov/status/1682137527673577472" target="_blank" rel="noreferrer noopener">tweeted</a>:



&#8220;The 2008 financial crisis led to the creation of Bitcoin because toxic assets were created by a poorly managed financial system that left society with the costs. We have an opportunity to build a better financial system that is cryptographically guaranteed, transparent, and gives control of risk over to the parties that it affects most.&#8221; 



Nazarov said Chainlink and CCIP push to &#8220;accelerate the speed at which this world happens on-chain.&#8221; The goal is a &#8220;fair, transparent and largely derisked global financial system.&#8221;



&#8220;As CCIP becomes the most widely used connectivity standard, we will initially see two largely separate on-chain networks of value: one for institutional/bank chains and the existing public blockchain DeFi ecosystem,&#8221; he said.



Nazarov&#8217;s hope is that CCIP can morph those two networks into one that&#8217;s entirely on-chain.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14509034/embed#?secret=LrAfnNuWjF" data-secret="LrAfnNuWjF" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Chainlink’s market cap is now almost $4.5 billion, up 60% over the year to date (chart by David Canellis)</figcaption></figure>



CCIP works by using Chainlink&#8217;s oracles (a network of data providers). Developers can create products on top of CCIP, which means smart contracts on one blockchain can send messages via Chainlink oracles to another blockchain, verifying data in the process.



With its early access mainnet release earlier this week, developers working on Polygon, Optimism, Ethereum and Avalanche can now use Chainlink&#8217;s CCIP.



Since Monday, there have been over <a href="https://dune.com/queries/2741770/4567775">514 transactions</a> using CCIP with the most popular routes being Ethereum to Avalanche or Optimism, per Blockworks Research.



To date, CCIP has generated more than $12,000 in LINK revenue over the past four days, according to a <a href="https://dune.com/ericwallach/chainlink-ccip-revenue">Dune dashboard</a>. Users who pay for CCIP transaction charges using LINK are offered a reduced rate. This, in turn, aims to enhance the value for token holders.



“It will be interesting to track Chainlink’s protocol revenue as more projects establish CCIP integrations,” Blockworks Research analysts wrote in a Thursday <a href="https://blockworks.co/newsletter/issue/32127952">note</a>.



Updated Jul. 21, 2023 at 9:23 am ET: Added context.



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Chainlink rallies hardest since May 2021 after CCIP release

Swiss-based non-profit organization the Interchain Foundation (ICF) has partnered with Bianjie, a blockchain development company, to launch a new NFT standard. Users utilizing the new standard, dubbed ICS-721, will now be able to track and transfer their NFTs across different blockchains.



ICS-721 — an homage to the <a href="https://www.blockworksresearch.com/glossary#erc-721-token" target="_blank" rel="noreferrer noopener">ERC 721</a> NFT standard on Ethereum — is an application layer inter-blockchain communication (IBC) protocol, which means that it enables blockchains to communicate with one another without the need for a bridge.



This new standard can enable NFTs to be integrated into various sectors in Web3. These include gaming, socializing, identity management and many others, Maria Gomez, managing director at the Interchain Foundation told Blockworks.&nbsp;



“The surge in profile picture (PFP) projects highlighted an earlier trend in NFT technology, but this also led to questions about their long-term value and sustainability. As the industry evolves, the focus is expected to shift toward utility and real-world applications,” Gomez said.&nbsp;



Here, Interchain NFTs are expected to hold a distinct advantage, as the standard offers enhanced functionality and possibilities through cross-chain interoperability, she notes.



Harriet Cao, the founder of Bianjie and a prominent technical contributor to Cosmos, told Blockworks that ICS-721 will be initially accessible on all IBC-enabled Ethereum, Substrate, CosmWasm and Cosmos SDK chains. There are plans to expand its availability to additional ecosystems in the future.



<h2 class="wp-block-heading">The Game of NFTs</h2>



A two-phase competition for developers called the Game of NFTs, designed to test out ICS-721, launched earlier in March this year. The name is a continuation of prior Cosmos feature testing efforts, Game of Stakes and <a href="https://goz.cosmosnetwork.dev/" target="_blank" rel="noreferrer noopener">Game of Zones</a>.



The first phase of the competition drew the attention of 198 teams worldwide, Cao said. Each team had to go through <a href="https://github.com/game-of-nfts/gon-testnets#point-system">different tasks and challenges</a> with the ultimate goal of testing the protocol&#8217;s capabilities before its mainnet deployment.&nbsp;



The competition was proposed by Bianjie in partnership with multiple validator and developer teams including those from IRISnet, Stargaze, Juno, Uptick and OmniFlix.&nbsp;



“The Cosmos ecosystem benefits from enhanced growth as it attracts a more diverse range of creators, users, and developers,” Cao said. “This, in turn, fuels creativity and drives innovation, positioning the Cosmos ecosystem as the Interchain of Blockchain for cutting-edge developments in the world of NFTs.”



After completion of Phase 1 of the Game of NFTs, Phase 2 — an interchain hackathon, is now underway.



Teams will have until June 19 to submit their projects for the hackathon and over $300,000 worth of tokens and credits will be awarded to winners.



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An Interoperable NFT Standard Has Landed on Cosmos

John Gilbert

The crypto bridge was once heralded as the future of blockchain interoperability. Industry leaders branded these products as a means to <a href="https://medium.com/solana-labs/wormhole-solana-ethereum-bridge-d5502e944acb" target="_blank" rel="noreferrer noopener">leverage the community of one chain with the performance of another.&nbsp;</a>



But with <a href="https://blog.chainalysis.com/reports/cross-chain-bridge-hacks-2022/" target="_blank" rel="noreferrer noopener">$2 billion of assets</a> successfully exploited from bridge attacks, many investors are doubting the performance of this technology and are demanding a better solution. Blockchain developers from the <a href="https://www.algorand.com/" target="_blank" rel="noreferrer noopener">Algorand</a> community launched a new interoperability standard called <a href="https://medium.com/algorand/algorand-state-proofs-707d64038e35#:~:text=tl%3Bdr%3A%20Algorand%20State%20Proofs,from%20the%20cross-chain%20equation." target="_blank" rel="noreferrer noopener">state proofs</a> to address this problem. It casts a vision of interoperability intended to serve the needs of a blockchain ecosystem with world-wide adoption — both at the institutional and individual level.&nbsp;&nbsp;



<h3 class="wp-block-heading">What is blockchain interoperability, really?</h3>



Blockchain interoperability is classically defined as a characteristic that enables communication between blockchains. But crypto bridges are not the only means of cross-chain messaging. In addition to transferring value, blockchains need ways to safely communicate sensitive information.



As it stands, large segments of blockchain ecosystems are completely siloed from each other. This creates a terrible user experience that&#8217;s analogous to being unable to send an email from a Google account to a Yahoo account.



But the proliferation of cryptocurrencies makes this fragmented iteration of the internet also like an international trading system. Noah Grossman, senior product manager at Algorand, explains this in his <a href="https://medium.com/algorand/algorand-state-proofs-707d64038e35" target="_blank" rel="noreferrer noopener">Algorand State Proofs Paper</a>.



“Blockchain ecosystems are like cities: each one provides value that draws people to visit — ranging from business opportunities, community, entertainment, infrastructure, local governance, to plain personal preference,” Grossman wrote. “As the industry matures, people will have more reasons to visit different ecosystems, driving more value into cross-chain applications.”



But insecure trading routes between cities or nation states decrease economic productivity and increase distrust. One week on crypto Twitter will reveal this growing animosity between blockchain communities. If an economic commitment between parties isn’t established, then it is safe to assume the rivalries will persist.&nbsp;



<h3 class="wp-block-heading">Why we haven’t secured true interoperability yet</h3>



Grossman states that the trustless infrastructure needed for true blockchain interoperability is missing from the market. The Solana Wormhole hack is a good example of why. It was introduced as the decentralized trustless alternative to centralized cross-chain bridges. Instead of relying on a single custodian, it used smart contract code to facilitate the transfer of value between chains. After the exploit, its model was criticized for having inherent vulnerabilities. In response to the hack Max Galka, the CEO of blockchain data analytics firm Elementus, told <a href="https://cointelegraph.com/news/wormhole-hack-illustrates-danger-of-defi-cross-chain-bridges?utm_source=dlvr.it&amp;utm_medium=twitter" target="_blank" rel="noreferrer noopener">Cointelegraph</a>.



“The history of smart contracts has involved a pretty consistent stream of vulnerabilities and hacks dating back to the very early days of Ethereum when The DAO was attacked in 2016. In general, cross-chain bridge contracts have large balances making them prime targets. Historically, there have always been hacks on smart contracts. I would expect that to continue.”&nbsp;



The ‘smart contract’ approach to cross-chain interoperability has proven time and time again to be vulnerable to bridge exploits. For example, hackers were able to access and steal over $80 million from Qubit Finance through exploiting a similar vulnerability in the QBridge contract.&nbsp;



And the custodial model, where central entities or DAOs take ownership of the assets, has proven to be even more vulnerable to attacks. For example, attackers stole approximately 173,600 ETH and 25.5 million USDC from the centrally controlled Ronin cross chain bridge. They did so by gaining access to the private keys of the bridge&#8217;s validator nodes.&nbsp;&nbsp;



Both approaches to cross-chain bridges are fundamentally flawed because they rely on centralized intermediaries to communicate the transfer of value — whether it’s a smart contract or a human. This core flaw is why Algorand developed State Proofs.&nbsp;&nbsp;&nbsp;



<h3 class="wp-block-heading">State Proofs: Simplifying interoperability without sacrificing security</h3>



State Proofs are cryptographically verifiable secure proofs used to validate Algorand activity, signed by a majority of the blockchain network. So, instead of relying on centralized third parties to confirm transaction data, ASPs power the layer-1 blockchain to be the ultimate source of truth.



ASPs immediate use case is to help light clients import data from other chains in a cost-effective and secure way. Bridges can then query these light clients to securely validate activity on both the Algorand and Ethereum network. Therefore, the need to trust third parties is completely eliminated.



With State Proofs, building decentralized bridges, cross-chain decentralized exchanges or even oracles becomes possible. They enable users to maintain quantum grade security from the Algorand blockchain while interacting with an interoperable blockchain ecosystem. This allows chains within the ecosystem to leverage the benefits of each other’s communities without being exposed to inconsistent security standards. Because ASPs are secured by advanced cryptography confirmed by the entire network, attempts to alter any data typically fail.



Using ASPs can bring about a wave of adoption which we have never seen before. Developers would be able to choose the right technology for them to build on, without worrying about cross-chain limitations. Additionally, with the reduced security risk, users can freely and seamlessly move their assets across blockchains.



Learn more about State Proofs — and other bleeding-edge cryptography research — at <a href="https://www.youtube.com/playlist?list=PLpAdAjL5F75A5A7C9MSrTYIafk3DAzKva">Algorand&#8217;s Decipher conference.</a>



This content is sponsored by&nbsp;the&nbsp;<a href="https://www.algorand.foundation/" target="_blank" rel="noreferrer noopener">Algorand Foundation</a>. 



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Rethinking The Crypto Bridge After Year of Hacks

<div id="highlights-block_628d839a80758" class="highlights">
 <ul>
 <li>Injective&#8217;s Wormhole integration enables the ability for greater sophistication of transfers across its network, the company said</li>
 <li>The move will also allow for cross-chain trading across various networks, according to Injective Labs&#8217; CEO Eric Chen</li>
 </ul>
 
</div>



Decentralized blockchain network Injective said Wednesday it has integrated with cross-chain messaging protocol Wormhole in an effort to drive liquidity and boost the accessibility of its platform.



With the addition of Wormhole, Injective is aiming to tap into more than ten additional layer-1 and layer-2 blockchains, including Polygon, Algorand and Solana, by bridging them to its network.



The move is an attempt to transform Injective from an exchange-focused blockchain to a decentralized finance hub. The aim is to provide more use cases for owned digital assets to be utilized beyond their origin chain, Eric Chen, CEO of Injective Labs told Blockworks in an email.



Wormhole is a generic message-passing protocol that connects high-value blockchains allowing applications to leverage the messaging layer to facilitate interoperability between different ecosystems. 



The protocol has not been impervious to nefarious actors seeking to <a href="https://twitter.com/wormholecrypto/status/1489001949881978883?s=20&amp;t=XaNgH_RbKd5dNrdqqTKZWw" target="_blank" rel="noreferrer noopener">exploit</a> it when it became the target of an attack in February.



Still, the area of focus following the integration is to allow applications on other chains to access and compose with the Injective ecosystem as well as enable more sophisticated transfers — such as arbitrary messages, Chen said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;This integration will help increase the range of possibilities and functionalities for builders,&#8221; said Chen. &#8220;The first key area of focus is to enable asset transfers from all chains.&#8221;</blockquote>



Apps developed on Injective could open possibilities for cross-chain trading across various networks or offer yields on Solana-based assets, the CEO added.



Injective is a Layer 1 proof-of-stake blockchain geared toward building financial applications. Its ecosystem touts the ability to enable developers to leverage critical DeFi primitives including liquidity, risk, leverage and arbitrage opportunities.



&#8220;This integration opens up the pool of users that can utilize an application,&#8221; Chen said. &#8220;It broadens the audience scope for the developer, which allows a larger market to exist when thinking of a product-market fit.&#8221;



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