Dialogue talks about Yuan: If Poly Network is the answer, then what is the question?

As one of the currently popular heterogeneous cross-chain protocols, Poly Network recently achieved an overall cross-chain asset transfer value exceeding $6.4 billion, with over 140,000 cross-chain addresses and more than 350,000 cross-chain transactions. It now supports 10 blockchain networks, including Ethereum, Bitcoin, and NEO.

To uncover the secrets behind the rapid development of Poly Network, Chain Catcher recently had an in-depth conversation with Tan Yuan, the technical head of Poly Network, hoping his insights can inspire you.

1. The Operation Principle and Characteristics of Poly Network

Chain Catcher: Please briefly introduce Poly Network and its overall operating logic.

Tan Yuan: Sure, Poly Network is a heterogeneous cross-chain protocol that currently supports 10 blockchain networks, including Bitcoin, Ethereum, Neo, Ontology, BSC, Elrond, Heco, OKExChain, Zilliqa, and Cosmos-SDK.

We use an information flow cross-chain method, deploying smart contracts on various chains, with a relay chain responsible for transmitting information between chains and verifying the legality of this information, which is then transmitted to the target chain to achieve cross-chain asset exchange, allowing assets to flow more quickly between different application ecosystems.

Chain Catcher: Can you give examples of typical application scenarios for users using Poly Network?

Tan Yuan: Currently, there are three main types of scenarios. The first scenario is asset mapping done by Poly Bridge. Some projects may issue assets on Ethereum, but the application may be deployed on both Ethereum and BSC, so their assets need to be cross-chain.

The second scenario is targeted by Poly NFT Bridge for the NFT market. Due to high transaction fees on Ethereum, some projects will sell NFTs on BSC and Heco, which requires transferring NFTs from Ethereum to BSC for sales activities.

The third scenario involves strong interoperability between multiple chains. The current multi-chain landscape leads to liquidity fragmentation, and often the same asset on Ethereum has different mapped assets on different chains, so cross-chain interconnection often requires leveraging liquidity from different chains.

A typical application is the cross-chain application O3 Swap. If most of your assets are on Ethereum, but you want to mine on BSC, you would need to first transfer your assets to Binance and then transfer them to BSC, making the entire process very complex and time-consuming. However, using O3 Swap allows you to directly transfer assets to BSC.

Chain Catcher: Poly Network has stated that it will not custody user assets. How do you specifically achieve cross-chain asset transfers through technology?

Tan Yuan: There are two modes of asset mapping. One is the issuance and destruction mechanism. If you need to do cross-chain mapping, you first need to lock a portion of the assets on the original chain and then issue a portion of the assets on another chain. This means you need to give the project party the authority to issue and destroy assets.

The other method we use is (Lock/Unlock), which is entirely controlled by smart contracts. If you have a token on the original chain and want to cross to the target chain, you need to issue the same token on the target chain. Then, all tokens on the target chain are transferred to a single-point contract. When the original chain issues the transfer of tokens, the tokens will be locked on the original chain. This information flow will cross to the target chain through Poly Network, and finally, the corresponding assets will be released from the single-point contract based on the information from the original chain.

This mode is safer and more decentralized compared to the first one because it does not have the authority to issue and destroy assets.

Chain Catcher: What differentiating features do you have compared to other cross-chain projects?

Tan Yuan: First, we do not need to provide liquidity for these assets on different chains. Projects like PNetwork and Renbtc need to provide liquidity, but we only do asset mapping; deploying liquidity is the responsibility of the project party, and we will not participate.

Second, we lean more towards being a protocol layer, unlike projects like Multichain that focus on applications. This allows us to have the functionality of interoperation of smart contracts between multiple chains and enables chains to achieve DeFi through a combinatorial approach.

Chain Catcher: Compared to most cross-chain platforms, one of the main features of Poly Network is its support for Neo and Ontology. How active are the users and assets on these two public chains? What are the cross-chain transaction data like?

Tan Yuan: Neo is currently developing its DeFi ecosystem, with applications in lending, options, and more, such as Flamingo, so they need to incorporate mainstream assets like BTC and ETH into Neo and expand their on-chain ecosystem through cross-chain bridges.

On the Ontology platform, the Wing lending platform uses our cross-chain bridge to not only bring mainstream assets like BTC, ETH, USDT, and USDC into its products but also develops a multi-chain lending platform, deploying applications simultaneously on Ethereum and OKExChain. This not only ensures the robustness of its products but also develops a larger application ecosystem.

Currently, our overall cross-chain asset transfer value has exceeded $6.4 billion, with over 140,000 cross-chain addresses and more than 350,000 cross-chain transactions. (Data as of June 28, 2021)

2. Trends in Layer2 and Cross-Chain Development

Chain Catcher: More and more DeFi projects plan to migrate to Layer2, and Layer2 projects are also experiencing a boom. In this context, does Poly Network have plans to support Layer2? How much market share do you think Layer2 can capture from Layer1 blockchains in the future?

Tan Yuan: The most important data in the DeFi ecosystem is TVL, but our research shows that most TVL is still on Layer1, so our priority is Layer1 cross-chain.

Recently, Ethereum Layer2 has become quite popular, but migrating applications to Layer2 also involves a problem: there is no good interaction between Layer2 and Layer1, leading to significant fragmentation. If assets are transferred from Layer2 to another Layer2, it may take several hours.

Moreover, Layer2 does not yet have particularly mature smart contracts and virtual machines. In the future, we may integrate Layer2 solutions to create a cross-chain based on both Layer1 and Layer2.

Chain Catcher: Expanding the user base is a common issue for all projects. What are Poly Network's specific operational strategies currently? How will you attract users in the future?

Tan Yuan: First, our biggest attraction to users at this stage is that it is free. Whether for To B or To C, it is free to use, and the platform does not charge any fees.

Second, the transaction speed is fast, with cross-chain asset transfers between chains achievable in just a few seconds, and user feedback has been very positive.

Third, we have high security and transparency. Users can track the progress of asset cross-chain exchanges through Poly, and since Poly launched in August last year, there have been no incidents of asset loss.

Chain Catcher: What are your upcoming development plans?

Tan Yuan: Based on the current stage, we will focus on expanding the ecosystem, connecting more public chains and DeFi, NFT projects, and bringing in stronger consensus nodes.

But in the long run, we may evolve into a public chain. The current form of Poly Network is more like a consortium chain, but for a cross-chain platform that connects so many other blockchain networks, the ultimate destination must be a public chain; otherwise, there will be limitations.

If we switch to a public chain, we need to adopt a permissionless consensus that allows everyone to participate fairly in this network. We believe that since Poly Network itself does not custody assets, this consensus only needs to ensure the security of the chain itself, and we can consider consensus mechanisms like BFT+PoS, as PoW is not very suitable for this chain.

Chain Catcher: Recently, more and more hackers are using cross-chain products to transfer stolen funds. How do you view this issue?

Tan Yuan: I think this is an inevitable issue and a stage that blockchain applications must go through. In fact, the early internet also had many serious software vulnerabilities, and even now, there are still some vulnerabilities. The blockchain industry is also in a continuous process of improvement, and I believe that such vulnerable contracts will become less frequent in the future.

Just like in the early days of Ethereum, the main application ecosystem was deploying relatively simple contracts like ERC20, but there were also many contracts with vulnerabilities at that time. However, with the development of applications and continuous summarization and improvement, we now hardly see any vulnerable ERC20 contracts.

DeFi contracts often have many vulnerabilities due to their complexity and combinatorial nature, but there are also some applications that have been relatively stable, such as Uniswap, MakerDao, and AAVE, because they are open source, allowing for reference to these relatively secure contract templates.

At the same time, for smart contract application developers, it is essential to strengthen the analysis and tracking of contract security, as writing an application contract is relatively simple, but writing a contract without vulnerabilities requires extensive analysis and understanding of vulnerabilities.

Finally, how can Poly Network help minimize losses from contracts that have vulnerabilities?

Currently, we have some ideas. Since we are a bridge connecting multiple heterogeneous chains, when a hacker steals user assets on one chain, they generally transfer the assets to other chains through cross-chain bridges for mixing or other operations. Therefore, we can add certain mechanisms in our cross-chain contracts, such as blacklists, limits, etc., which can help reduce losses to some extent.

Chain Catcher: What do you think the future development trend of the cross-chain industry will be?

Tan Yuan: I believe that the cross-chain industry will gradually shift from being primarily focused on technological innovation to cross-chain application innovation. From an overall data perspective, many emerging cross-chain technologies are relatively mature, but cross-chain applications are still in a relatively early stage. Currently, many cross-chain applications are asset mapping cross-chain, while applications with interoperation of cross-chain smart contracts between multiple chains are still relatively few. With the overall development of the cross-chain industry, I believe that more diverse cross-chain applications will emerge in the future.

Chain Catcher: What do you think the future landscape of public chains will look like?

Tan Yuan: I believe the future will still be a coexistence of multiple public chains. Currently, Ethereum is still the best-developed public chain, with a relatively mature application ecosystem and advanced technology development. However, some other public chains are also showing good momentum, such as Solana, Flow, BSC, HECO, FileCoin, Polkadot, etc., which have demonstrated good development momentum in specific application areas.

Of course, with the rise of Layer2, the future Layer2 ecosystem will complement the Layer1 ecosystem, better supporting the development and growth of Layer1 ecosystems.