Analysis of the Current Development of Cross-Chain Aggregation

Original Title: "Cross-chain Trading, Aggregation, and Reconstruction Under "Modularity"

Author: Cabin Crew, Cabin VC

Whether it is asset cross-chain or information/data cross-chain, there are currently too many cross-chain bridges and various cross-chain protocols in the market. According to Chainspot, there are about 114 cross-chain bridges and over 130 networks in the market, making the field crowded.

In this context, cross-chain aggregation has become a necessity. Whether from asset cross-chain or data/information cross-chain, how to better integrate various cross-chain solutions such as official bridges and third-party bridges, and introduce more liquidity, is a problem that cross-chain aggregators need to solve.

Before discussing cross-chain aggregators, let’s define and classify cross-chain methods. Dmitriy Berenzon, a research partner at 1kx, has provided an authoritative explanation of cross-chain bridges:

A "bridge" is defined as a system that transmits information between two or more blockchains. Information can refer to assets, contract calls, identity proofs, or states.

It can be simply understood that cross-chain bridges allow any data, including tokens, chain states, contract calls, and even identity proofs, NFTs, governance votes, etc., to be transmitted from the source chain to the target chain, enabling assets and data to flow freely across different blockchains. The two chains can have different protocols, rules, and governance models. Cross-chain bridges enable both parties to interoperate in a communicative, compatible, and secure manner.

Most early cross-chain bridges focused on asset cross-chain, while data/information cross-chain requires more complex structures and designs. Observing a cross-chain bridge often requires discussing its several main components:

(1) Monitoring: Responsible for monitoring the state and smart contract function calls on the source chain, often involving roles such as Oracles, Validators, or Relayers.

(2) Consensus (may exist): In certain models, before the information is relayed to the target chain, the relay nodes reach a consensus on the correctness of the relayed message.

(3) Message Passing/Relaying: After the monitoring role receives an event, it transmits the message from the source chain to the target chain.

(4) Signing: Relay nodes sign the message, encrypting the information sent to the target chain (as part of an individual or multi-signature, etc.).

Looking at the different blockchain frameworks and structures corresponding to cross-chain methods can better observe the functions and innovations of a cross-chain product:

Application Layer: Asset Cross-chain Bridge

Data Transmission Layer: Message Cross-chain Protocol

Trust Layer: Inter-chain Trust Mechanism

Incentive Layer: The trust layer or transmission layer may involve incentives and can be observed separately.

The Trust Layer is very important for cross-chain protocols. The design of the trust mechanism will make trade-offs between security, cost, latency, and fees during information transmission, making it a crucial position for cross-chain projects in technological innovation.

The development of cross-chain aggregation products relies on the development of the cross-chain bridge ecosystem itself, requiring various cross-chain bridges to have a certain level of maturity to produce more refined products.

After 2022, with the continuous progress of cross-chain bridge projects, updates to the modular blockchain concept, and the development of new technologies like ZK, there are numerous cross-chain bridge solutions based on different needs, and the maturity of cross-chain trading aggregators (such as LI FI, etc.) is increasing;

Message cross-chain protocols are also gaining attention in the primary market and receiving good valuations. In the general interoperability solutions represented by LayerZero, within the LayerZero framework, neither the Relayer nor the Oracle forms any consensus or verification, only performing information transmission, becoming a cross-chain protocol without a native consensus system, providing insights to the market.

CabinVC has organized information on currently representative projects in the multi-chain bridge/cross-chain aggregator/cross-chain information protocol space, including LayerZero, Socket, XY Finance, O3 Swap, Chainswap, Multichain, and LiFi protocol, which can be used for simple valuation benchmarking and project comparison in this field:

However, general cross-chain message passing may not be the so-called "endgame of cross-chain." In some innovative cross-chain projects, the concept of modular blockchain is also influencing this field, attempting to break through the "impossible triangle of interoperability," bringing more possibilities to cross-chain.

*Impossible Triangle of Interoperability:

Trustless: Having the same security as the underlying domain;

Scalability: Any domain can be supported;

Information Universality: Able to handle any cross-domain data.

Some projects based on modular thinking are innovating cross-chain communication protocols, cross-chain aggregators, etc. They are conceived with a modular approach.

In modular interoperability protocols, the structure of the bridge can be simply divided into:

Application

Verification

Transport

Among them, the application layer and transport layer can be shared to adapt to the existing application paradigms. Meanwhile, if a verification layer is configured for the modular interoperability protocol, it can also increase programmability in terms of actual use cases, transaction amounts, transaction delays, etc., based on the various existing verification mechanisms.

However, this composable approach requires bridges to mix and match various verification methods with different structural parts of the blockchain while ensuring effective information transmission. Among various verification methods, the execution layer can simplify the entire verification process through ZK proofs.

Based on the above ideas, attention can be focused on the following more innovative cross-chain concepts:

* Modular Network Protocol Polymer Based on IBC

Polymer was originally developed based on the Cosmos ecosystem and extends cross-chain communication to outside the Cosmos ecosystem through ZK-IBC (Inter-Blockchain Communication). Polymer Chain serves as a multi-chain routing center, building a chain to host ZK light clients and OP fraud provers to verify transactions from any modular configuration, supporting communication between heterogeneous chains like Ethereum.

* Hashi Aggregator of Gnosis Chain

Launched by Gnosis Chain, Hashi is defined as an EVM hash oracle aggregator, with its main logic being "requiring information to be verified by multiple independent mechanisms rather than just one." Hashi allows the same message to be transmitted in different ways; if the same information appears in the target domain of multiple providers, it is considered correct; if different messages appear, they are resolved through a dispute resolution process.

* Multi-Message Aggregation (MMA)

MMA is a design by Uniswap in governance cross-chain message passing, aiming to transmit commands from the Ethereum mainnet to Uniswap on other non-L2 EVM chains for deployment, regarded as an additional security module for cross-chain communication. Recently, Kydo from the Uniswap Accountability Committee proposed the idea of "using the protocol's client as a bridge": intending to use MMA to transmit N bridges with the same message from Ethereum to another chain. On the receiving chain, if k/N bridges transmit the same information, the message is executed.