Cross-chain Bridge Guide: How can I make my assets flow across chains?

This article is from PANnews.

Recently, the hot high APY mining on Fantom has attracted many yield-seeking DeFi farmers to cross-chain for gold mining. Although a large number of users have reported long cross-chain times and lagging operations, it has not affected its popularity. The official claims that the total transaction volume has now exceeded 10 million.

Why is cross-chain necessary?

Starting with the most popular DeFi among users, according to data from DeFi Llama, the locked value of DeFi on Ethereum has exceeded $100 billion, while other public chains like BSC, Solana, and Avalanche have attracted $49 billion in funds, which can no longer be ignored.

Although many public chains have already amassed considerable funds, different chains are like isolated islands, and assets on different chains cannot be freely exchanged. Additionally, many emerging public chains still lack essential infrastructure, such as stablecoins. They do not have native stablecoins issued by strong centralized institutions like Tether or Circle, nor do they have decentralized stablecoins like DAI, which are collateralized by relatively stable cryptocurrencies such as ETH through over-collateralization.

Therefore, there is a need to bring assets from other chains into one's own public chain through cross-chain methods. Among the commonly used cross-chain methods, aside from centralized institutions like exchanges and wallets for cross-chain withdrawals, the most common are various decentralized cross-chain asset bridges.

Cross-chain Bridges

Cross-chain bridges are connections that transfer tokens or data between blockchains, allowing two chains to have different protocols, rules, and governance models. Cross-chain bridges provide a compatible way to securely interoperate between the two.

How do two independent blockchains know what is happening on the other chain? This is actually an oracle problem. The simplest current solution is to have multiple nodes listen to contract events on the blockchain simultaneously. When the vast majority of nodes agree that they have seen the event, it can be considered that consensus has been reached among the nodes, triggering the next event in the sequence. Based on the method of reaching consensus and whether custody is required, cross-chain bridges can be divided into the following categories.

• Custodial + Centralized (e.g., centralized exchange cross-chain, WBTC, etc.)

• Custodial + POA (Proof of Authority)

• Custodial + PoS (Proof of Stake) (Matic, xDAI)

• Custodial + MPC (Multi-Party Computation) (Thorchain, Anyswap)

• Non-custodial + MPC (Multichain)

Centralized exchange cross-chain bridges are the most convenient for users, but they may also have single points of failure. Most cross-chain bridges hold user assets in custody, and how consensus is reached is also crucial for the security of the custodial assets. Current cross-chain solutions are gradually moving towards non-custodial directions.

Multi-chain Tokens

To use an asset from one chain on another chain, the same asset must exist on both chains, forming a multi-chain token. When new assets are generated on the target chain, the old chain's assets can either be directly destroyed or staked in a specific contract. Each implementation of a multi-chain token can be built on any of the aforementioned custodial and consensus mechanisms. Andre Cronje, the founder of yearn.finance, categorizes multi-chain tokens into four types. Below, we will illustrate using the example of bridging assets from Ethereum to Fantom.

Balance Fluctuation

If you want to bridge tokens from Ethereum to the Fantom network, the tokens on Ethereum will first be locked, and then the bridge will be notified to transfer the corresponding tokens to the recipient on Fantom. The bridge contains tokens with a maximum supply, and the user's process does not involve the minting or destruction of tokens.

Minting/Deminting

If this method is used, when tokens are destroyed on Ethereum, corresponding tokens are minted on Fantom. Similarly, when tokens are destroyed on Fantom, new tokens will be minted on Ethereum.

Liquidity Swap

Literally, this requires liquidity and intermediary tokens. For example, to convert USDC (Ethereum) to USDC (Fantom) in anyswap, there needs to be liquidity for USDC (Fantom) and anyUSDC on Fantom. USDC (Ethereum) is first converted to anyUSDC (Fantom), and then converted to USDC (Fantom). The entire process does not require custody of user assets, only the provision of liquidity.

Packaging + Minting/Deminting

This is a combination of the second and third cross-chain methods. Using the same example, first, staking USDC will yield anyUSDC, then destroying anyUSDC (Ethereum) and minting anyUSDC (Fantom), and finally exchanging anyUSDC (Fantom) for USDC (Fantom) through a liquidity pool.

Commonly Used Cross-chain Bridges

Multichain.xyz (Anyswap)

Multichain.xyz primarily focuses on cross-chain operations between platforms that support the Ethereum Virtual Machine (EVM). It was co-developed by Andre Cronje, the founder of yearn.finance, and the Anyswap team based on the Anyswap SMPC Network, and is currently the most widely used multi-chain cross-chain platform. The biggest advantage of Multichain.xyz compared to other platforms is that it allows developers to deploy their own cross-chain tokens.

As of May 13, Multichain.xyz has supported cross-chain transactions for 263 tokens across ten blockchains, with network security maintained by 30 nodes, holding $535 million in funds.

Multichain.xyz has broad compatibility and is likely to develop into the most widely used cross-chain bridge, giving developers ample autonomy, allowing anyone to define their own cross-chain tokens.

However, the cross-chain operations of Multichain.xyz typically cannot independently form universal assets on the target chain. The anyUSDC (Fantom) in the above example will also be exchanged for the more universal USDC (Fantom) in the liquidity pool. This is how non-custodial cross-chain can be achieved.

RenBridge

RenBridge is mainly used for cross-chain operations between traditional public chains like BTC and smart contract platforms like Ethereum and BSC. The Ren Protocol's cross-chain consists of two parts: RenVM for developers and RenBridge for users. RenVM is a decentralized custodial platform based on secure multi-party computation, and the miners maintaining RenVM are called Darknodes. Developers can choose to integrate RenVM to support their cross-chain assets. Users can directly use RenBridge to cross-chain native assets like BTC to smart contract platforms, thus releasing asset liquidity between blockchains. RenBTC is also the most widely used BTC-pegged coin issued in a decentralized manner, with a total of 11,690 issued on Ethereum.

Currently, RenBridge can only achieve cross-chain for four public chain assets: BTC, BCH, DOGE, and ZEC to Ethereum and BSC. Relatively speaking, the development cost of cross-chain for RenBridge is higher because nodes need to stake REN tokens, and the scale of cross-chain assets is also limited by the market value of REN.

Poly Network

Poly Network is not limited to asset cross-chain; it can achieve cross-chain for both fungible and non-fungible tokens (NFTs), as well as arbitrary information cross-chain between heterogeneous chains, maximizing the value transfer capability and application scope of blockchains. For example, in collateralized lending, cross-chain margin can ensure the safety of user debt positions. By adopting cross-chain technology, projects on Ethereum do not need to redevelop on new chains; they can lock assets and send deposit messages to the Ethereum chain, where Ethereum's smart contracts will verify the legitimacy of the messages, thus achieving cross-chain collateralization.

Currently, PolyBridge supports cross-chain for 44 assets across public chains like Ethereum, BSC, Heco, Neo, and Ontology. PolyBridge can directly achieve cross-chain between assets on BSC and Heco, while Multichain.xyz typically requires Ethereum as an intermediary.

ShuttleFlow

The asset cross-chain protocol developed by Conflux collaborates with participants in the Conflux ecosystem, such as wallets, custodians, decentralized exchanges, etc., to form a cross-chain asset custody alliance, completing cross-chain asset mapping through 2/3 multi-signature. ShuttleFlow uses the Conflux chain as a relay bridge to achieve flexible cross-chain operations between multiple chains. For example, to cross-chain ETH to BSC, it first needs to cross to Conflux and then from Conflux to BSC.

Specific Asset Cross-chain Bridges

In addition to these general cross-chain bridges, there are also some designed specifically for cross-chain operations of certain assets.

Binance Bridge: Can be used without registering a Binance account, mainly to bring assets into Binance Chain and Binance Smart Chain, supporting cross-chain for assets like BTC, ETH, BCH, DOT, FIL, ATOM, ADA, etc.

xPollinate: Supports fund transfers across Polygon, BSC, and xDAI, allowing assets supported by BSC to be transferred to Polygon and xDAI.

Popsicle: Launched the first wrapped version of fUSDT in collaboration with Andre Cronje, the founder of YFI (yearn.finance), and the Tether team. This is the first and only official cross-chain USDT from Tether.

Dex self-built cross-chain bridge: Mdex, as the largest project on Heco, can rely on the centralized cross-chain support of Huobi Exchange for its assets, but there are also some projects that Huobi does not support for deposits and withdrawals, so Mdex has built its own cross-chain bridge, currently only allowing FEI, TRIBE, and SHIB to be cross-chained from Ethereum to BSC and Heco.

Public chain project self-built cross-chain bridge: Some projects will issue tokens on one chain during the token distribution and then gradually transfer them to other chains based on demand. For example, Harmony (ONE) initially issued tokens on Binance Chain and later built a cross-chain bridge from BEP2 to ERC20 for ONE.

Conclusion

The growth of old blockchain performance cannot keep up with the expansion of scale, while new chains take a long time to rebuild a complete ecosystem. Cross-chain bridges can precisely solve these problems. As blockchain technology matures, various forms of cross-chain bridges are already operating between blockchains, addressing interoperability issues.

Among the existing cross-chain bridges, Multichain, which offers better compatibility and autonomy, is currently in a leading position. Multichain is essentially a combination of cross-chain and AMM, reflecting the composability of DeFi.