Since development, the structure of the industry has changed with a greater focus on along with the platforms other co-exist. Regarding practical application, , , , Web3 and other ecosystems are growing very rapidly. However, this growth has exposed performance problems of . In addition, high gas fees and network congestion continue to hinder the expansion of the ecosystem. Some solutions to "rescue" from dependence on Ethereum, directing industry focus and attention to Layers 2 or is different.

In 2020, the growth of was severely slowed down and emerging blockchain with lower fees and shorter confirmation times. Some typical examples are BSC, , , , , , , and . Though, Ethereum remains the top choice for most DeFi projects, mainly due to the liquidity and high transaction volume of this network. But in the current DeFi era, where “liquidity is king”, big emerging blockchains are using high APY to attract users. According to statistics from DeFi Llama, the total locked value () in DeFi on Ethereum has exceeded $161.5 billion as of October 22, 2021. For BSC, and , the key value has reached about $78 billion and this is a very significant number.

Understanding cross chain bridges

Understanding Cross-Chain Communication - Examining Blockchain Interoperability and Why It Matters - Moralis Academy

Simply put: a cross-chain bridge is a connection between two independent blockchains that allows the transfer of tokens and assets from one blockchain to another. Since nearly all blockchains have their own protocols, rules, and governance models (consensus), they cannot interact directly with each other. These bridges enable cross-chain communication and information exchange by making the two chains compatible with each other.

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Most cross-chain bridge designs include the following components:

  • or Validator - This tool is responsible for monitoring the state of the source string.
  • Relayer - Pass information from source string to target string after validator/ signal/command received.
  • Consensus Mechanism - In some ways, consensus must be reached among participants monitoring the source chain before this information can be forwarded to the target chain. The consensus mechanism is designed to do this.
  • Signature - Participants are required to sign cryptographically the information sent to the target chain. This can be done individually or as part of a multi-signature. Ronin bridge of use the mechanism of 5 out of 9 signatures to reach consensus

According to Dune Analytics data monitoring, as of March 28, 2022, the total locked value () of Ethereum's 17 cross-chain bridges has reached about $25.2 billion. Of these, present of is the highest ($5.8 billion). Next is Avalanche Bridges, with a TVL of $5.47 billion. The next bridges are Bridges, Ronin and , also reached more than 3 billion dollars.

Currently, there are at least 100 cross-chain bridge projects on the market, all of which fall into one of four distinct categories.

  • The first category includes official bridges of blockchains such as Solana's Wormhole and Rainbow Bridge by . These types of bridges provide a relatively high level of safety.
  • The second category includes asset-specific bridges, such as Ren Protocol, Keep Network, DeCus, and pNetwork. These tend to be cross-chain bridges that mainly focus on connecting with other blockchains. However, these types of demand are inefficient in using capital.
  • The third category includes third-party bridges with great flexibility, such as Poly Network, Celer, Anyswap, Hop Protocol, and Synapse Protocol. This type of bridge has received wide attention from many industry experts.
  • The fourth category includes cross-chain bridge synthesizers and is still in a relatively early stage. Bridge types aim to automatically look at each asset class and recommend the best available cross-chain solution for each case.
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However, all types of cross-chain bridges basically use the same mechanism for asset movement, which is Lock and Mint ie Lock the original asset at the root chain in a vault/ and then generate a wrapped token on the target chain at a 1:1 ratio. That is, assuming 1 locked on the original chain will generate a wrapped token WETH on the destination chain. Since this 1 WETH is guaranteed by 1 on the original chain, the value of these two assets is the same.

So what exactly is the incident of Sky Mavis's Ronin Bridge being hacked recently?

Simply put, the original asset on the root chain, Ethereum, has been stolen and how much of that original asset was withdrawn from the vault/. This does not affect the wrapped tokens on the Ronin network in terms of quantity. However, when the original asset has been withdrawn, the wrapped tokens on the Ronin network are basically no longer backed by an equivalent amount of assets on the original chain, so it can be considered as the entire amount of WETH and that users bridged over Ronin has become worthless. If users have a need to transfer their WETH back to Ethereum, it is not possible at this time because that amount of assets has completely evaporated.

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It is for this reason that Vitalik, the founder of Ethereum, in an article not long ago said that the future of Blockchain will probably be multi-chain (Multi-chain) where each chain has different functions, applications and types. specialized assets rather than multi-chain because ensuring cross-chain security is difficult.

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