Tuesday, September 26, 2023

The Present State of Layer 2 Bridges

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By Dr. Andreas Freund (Co-Chair) on behalf of the EEA Group Tasks L2 Requirements Working Group

We reside in a multi-chain world, with billions of USD in asset worth locked in 100+ chains. And the house owners of these blockchain property behave similar to they might with property in conventional finance: they’re in search of arbitrage alternatives to make cash. Nevertheless, in distinction to the world of conventional finance the place property in a single nation could be utilized in arbitrage performs in a foreign country with out shifting property by utilizing trusted intermediaries, the identical method didn’t work for blockchains for a very long time for 3 causes:

  1. blockchains can not speak to 1 one other,
  2. arbitrage performs on a specific blockchain require that each one concerned property are current on that blockchain due to the trustless nature of public blockchains, 
  3. and there was no equal to the trusted middleman as in conventional finance between trustless blockchains.

To unravel the issue of capital inefficiency on blockchains, and make cash within the course of, enterprising people created blockchain bridges that addressed these three challenges and began to hyperlink the blockchain ecosystem collectively – sure, now you can commerce bitcoin on Ethereum. After all, bridges can be utilized for different kinds of performance too; nevertheless, the first operate is to enhance capital effectivity. 

At a excessive degree, a blockchain bridge connects two blockchains facilitating safe and verifiable communication between these blockchains by means of the switch of knowledge and/or property.

This enables for a large number of alternatives reminiscent of

  • cross-chain switch of property,
  • new decentralized functions (dApps), and platforms that enable customers to entry the strengths of assorted blockchains – thus enhancing their capabilities,
  • and builders from totally different blockchain ecosystems can collaborate and construct new options.

There are two fundamental kinds of bridges:

Trusted Bridges Trustless Bridges
Depend on a central entity or system for his or her operations. Function utilizing decentralized techniques reminiscent of sensible contracts with embedded algorithms.
Belief assumptions regarding funding custody and bridge safety. Customers principally depend on the bridge operator’s fame. The safety of the bridge is similar as that of the underlying blockchain.
Customers want to surrender management of their crypto property. Allow customers to stay answerable for their funds by means of sensible contracts.

Inside each units of belief assumptions one can distinguish totally different, frequent kinds of bridge designs:

  • Lock, mint, and burn token bridges: Immediate assured finality as minting property on the vacation spot blockchain can happen each time required with out the potential of a failed transaction. Customers obtain an artificial, typically known as a wrapped asset, on the vacation spot blockchain, not the native asset.
  • Liquidity networks with swimming pools of native property with unified liquidity: A single asset pool on one blockchain is related with extra asset swimming pools on different blockchains with shared entry to 1 one other’s liquidity. This method doesn’t allow instantaneous, assured finality since transactions can fail if there’s a lack of liquidity within the shared swimming pools.

Nevertheless, all designs, and below no matter belief assumptions, have to handle two trilemmas that blockchain bridges face.

Bridging Trilemma as posited by Ryan Zarick, Stargate

Bridging protocols could solely have two of the three properties under:

  • Immediate Assured Finality: Assure to obtain property on the goal blockchain instantly after transaction execution on the supply blockchain and transaction finality on the goal blockchain.
  • Unified Liquidity: Single liquidity pool for all property between supply and goal blockchains.
  • Native Belongings: Obtain goal blockchain property as a substitute of property minted by the bridge representing the unique asset on the supply blockchain.

Interoperability Trilemma as posited by Arjun Bhuptani, Connext

Interoperability protocols could solely have two of the three properties under:

  • Trustlessness: Identical safety assurances because the underlying blockchain with out new belief assumptions.
  • Extensibility: Means to attach totally different blockchains.
  • Generalizability: Permits for arbitrary knowledge messaging

Apart from the trilemmas which could be addressed with intelligent design, the largest problem for blockchain bridges is safety as the numerous hacks in 2021 and 2022 have demonstrated; be it the Wormhole, Ronin, Concord, or Nomad incidents. And basically, a bridge between blockchains is just as safe because the least safe blockchain used within the (chain of) bridge(s) for an asset. Nevertheless, this latter subject will not be an issue for bridges between Layer 2 platforms which can be anchored on the identical Layer 1 (L1) blockchain as they share the identical safety ensures from their shared L1 blockchain. 

Till this level, we’ve got not particularly talked about L2 platforms which can be designed to scale L1 blockchains whereas inheriting the L1 safety ensures, since L2s are strictly talking a specific kind of bridge: a local bridge. There are, nevertheless, a number of idiosyncrasies of L2 platforms when making a bridge between L2s e.g. optimistic rollups vs. zk-rollups vs Validium rollups vs Volition rollups. These variations make them particular due to the distinction in belief assumptions and finality for L2s versus L1s and between totally different L2s.

The rationale why bridges between L2s are essential is similar as for L1s: L2 property are in search of capital effectivity on different L2s, in addition to portability and different functionalities.

The distinction in native belief assumptions on L2 platforms could be overcome if bridged L2s are, as remarked already, anchored on the identical L1. And that the bridge doesn’t require extra belief assumptions. Nevertheless, variations in L2 transaction finality on the anchor L1 make it difficult to bridge property between L2s in a trust-minimized method. 

Digging a bit deeper into L2 bridges, we see that L2-to-L2 bridges ideally ought to fulfill the next standards:

  • Purchasers have to be abstracted away from every L2 protocol they interface with by means of an abstraction layer – loose-coupling paradigm.
  • Purchasers should have the ability to confirm that the info returned from the abstraction layer is legitimate, ideally with out altering the belief mannequin past the one utilized by the focused L2 protocol.
  • No structural/protocol modifications are required from the interfacing L2 protocol.
  • Third events should have the ability to independently construct an interface to a focused L2 protocol – ideally a standardized interface.

When wanting on the present panorama, one sees most L2 bridges are treating L2s similar to one other blockchain. Notice that fraud proofs as utilized in Optimistic rollups, and validity proofs as utilized in zk-rollups options, take the place of block headers and Merkle proofs as utilized in “regular” L1-to-L1 bridges.

Under we summarize the present and really different panorama of L2 bridges with a reputation, transient abstract, and bridge design kind:

Bridge Identify Description Kind of Design
Hop Alternate Rollup-to-rollup normal token bridge. It permits customers to ship tokens from one rollup to a different nearly instantly with out having to attend for the rollup’s problem interval. https://hop.alternate/whitepaper.pdf Liquidity Community (utilizing an Automated Market Maker)
Stargate Composable native asset bridge, and dApp constructed on LayerZero. DeFi customers can swap native property cross-chain on Stargate inside a single transaction. Purposes compose Stargate to create native cross-chain transactions on the software degree. These cross-chain swaps are supported by the community-owned Stargate unified liquidity swimming pools. https://www.dropbox.com/s/gf3606jedromp61/Delta-Fixing.The.Bridging-Trilemma.pdf?dl=0 Liquidity Community
Synapse Protocol A token bridge leveraging a validator between chains and liquidity swimming pools to carry out cross-chain and same-chain swaps. Hybrid (Token Bridge/Liquidity Community)
Throughout A cross-chain optimistic bridge that makes use of actors known as Relayers to meet consumer switch requests on the vacation spot chain. Relayers are later reimbursed by offering proof of their motion to an Optimistic Oracle on Ethereum. The structure leverages a single liquidity pool on Ethereum and separate deposit/reimburse swimming pools on vacation spot chains which can be rebalanced utilizing canonical bridges. Liquidity Community
Beamer Permits customers to maneuver tokens from one rollup to a different. The consumer requests a switch by offering tokens on the supply rollup. Liquidity suppliers then fill the request and straight ship tokens to the consumer on the goal rollup. The core focus of the protocol is to be as simple to make use of as doable for the tip consumer. That is achieved by separating two totally different issues: the service supplied to the tip consumer, and the reclaiming of funds by the liquidity supplier. The service is supplied optimistically as quickly because the request arrives. Being refunded on the supply roll-up is secured by its personal mechanism and decoupled from the precise service. Liquidity Community
Biconomy Hyphen Multi-chain relayer community using sensible contract-based wallets for customers to work together with liquidity suppliers to switch tokens between totally different (optimistic) L2 networks. Liquidity Community
Bungee The bridge is constructed on the Socket infrastructure and SDK with the Socket Liquidity Layer (SLL) as its principal part. The SLL aggregates liquidity throughout a number of bridges and DEXs and in addition permits for P2P settlements. That is totally different from a Liquidity Pool community since this single meta-bridge permits dynamical choice and routing of funds by way of one of the best bridge as per a consumer’s preferences reminiscent of value, latency, or safety.  Liquidity Pool Aggregator
Celer cBridge A decentralized and non-custodial asset bridge that helps 110+ tokens throughout 30+ blockchains and layer-2 rollups. It’s constructed on prime of the Celer Inter-chain Message Framework which is constructed on the Celer State Guardian Community (SGN). The SGN is a Proof-of-Stake (PoS) blockchain constructed on Tendermint that serves because the message router between totally different blockchains. Liquidity Community
Connext Dispatches and handles messages associated to sending funds throughout chains. Custodies funds for canonical property, quick liquidity, and steady swaps. The Connext contract makes use of the Diamond sample so it includes a set of Aspects that act as logical boundaries for teams of features. Aspects share contract storage and could be upgraded individually. Hybrid (Token Bridge/Liquidity Community)
Elk Finance Makes use of ElkNet with options reminiscent of 

  • Cross-chain utility token for worth switch ($ELK)
  • Secure and safe transfers in comparison with conventional bridges
  • Cross-chain worth switch by way of ElkNet in seconds between all of the blockchains Elk helps
  • Bridging-as-a-Service (BaaS) to supply infrastructure for builders to leverage the ElkNet for customized bridging options
  • Cross-chain swaps between all related blockchains
  • Impermanent Loss Safety (ILP) for our liquidity suppliers
  • Non-Fungible Tokens (Moose NFTs) with distinctive talents and options
Hybrid (Token Bridge/Liquidity Community)
LI.FI A bridge and DEX aggregator that routes any asset on any chain to the specified asset on the specified chain made obtainable on the API/Contract degree by means of an SDK, or as an embeddable widget in a dApp  Liquidity Pool Aggregator
LayerSwap Bridge for tokens from a centralized alternate account on to a Layer 2 community (each optimistic and zk- rollups) with low charges. Liquidity Community (utilizing an Automated Market Maker)
Meson An atomic swap software utilizing Hash Time Lock Contracts (HTLC) utilizing safe communications between customers mixed with a liquidity supplier relayer community for the supported tokens. Liquidity Community
O3 Swap The O3 cross-chain mechanisms of Swap and Bridge aggregating a number of liquidity swimming pools throughout chains enable for easy one-time affirmation transactions with a deliberate Fuel Station fixing the fuel charge demand on every chain. Liquidity Pool Aggregator
Orbiter A decentralized cross-rollup bridge for transferring Ethereum-native property. The system has two roles: Sender and Maker. The ‘Maker’ is required to deposit extra margin to Orbiter’s contract earlier than they’ll qualify to be a cross-rollup service supplier to the ‘Sender’. Within the standard course of, the ‘Sender’ sends property to the ‘Maker’ on the ‘Supply Community’, and the ‘Maker’ sends them again to the ‘Sender’ on the ‘Vacation spot Community’. Liquidity Community
Poly Community Permits customers to switch property between totally different blockchains utilizing a Lock-Mint swap. It makes use of a PolyNetwork chain to confirm and coordinate message passing between Relayers on supported chains. Every chain has a set of Relayers, whereas the PolyNetwork chain has a set of Keepers that signal cross-chain messages. Chains built-in with Poly Bridge must help mild shopper verification since validation of cross-chain messages consists of verifying block headers and transactions by way of Merkle proofs. A few of the sensible contracts utilized by the bridge infrastructure aren’t verified on Etherscan. Token Bridge
Voyager (Router Protocol) The Router Protocol makes use of a pathfinder algorithm to search out essentially the most optimum route to maneuver property from the supply chain to the vacation spot chain using the Router community which is analogous to Cosmos’ IBC. Liquidity Community
Umbria Community Umbria has three main protocols working collectively:

  • A Cross-chain Asset Bridge; enabling the switch of property between in any other case incompatible blockchains and cryptocurrency networks.
  • A Staking Pool, the place customers can earn curiosity on their crypto-assets by offering liquidity to the bridge. Liquidity suppliers of UMBR earn 60% of all charges generated by the bridge.
  • A Decentralised Alternate (DEX); and automatic liquidity protocol powered by a relentless product components, deployed utilizing sensible contracts, ruled completely on-chain.

Each protocols work in tandem to supply asset migration between cryptocurrency networks

Liquidity Community (utilizing an Automated Market Maker)
Through Protocol The protocol is an aggregator of chains, DEXs, and bridges to optimize asset switch routes. This enables asset bridging in 3 ways:

  • Make a number of transactions on totally different blockchains
  • Make one transaction by means of decentralized bridges which have built-in DEXs
  • Make one transaction by means of semi-centralized bridges, which can set off a second transaction on the goal chain
Hybrid (Token Bridge/Liquidity Community)
Multichain Multichain is an externally validated bridge. It makes use of a community of nodes operating SMPC (Safe Multi-Occasion Computation) protocol. It helps dozens of blockchains and 1000’s of tokens with each Token Bridge and Liquidity Community. Hybrid (Token Bridge/Liquidity Community
Orbit Bridge Orbit Bridge is a part of the Orbit Chain undertaking. It’s a cross-chain bridge that enables customers to switch tokens between supported blockchains. Tokens are deposited on the supply chain and “illustration tokens” are minted on the vacation spot chain. Deposited tokens aren’t exactly locked and can be utilized in DeFi protocols by Orbit Farm. Accrued curiosity will not be handed on to token depositors. Bridge contract implementation and farm contract supply code aren’t verified on Etherscan. Token Bridge
Portal (Wormhole) Portal Token Bridge is constructed on prime of Wormhole, which is a message-passing protocol that leverages a specialised community of nodes to carry out cross-chain communication. Token Bridge
Satellite tv for pc (Axelar) Satellite tv for pc is a token bridge powered by the Axelar community Liquidity Community

The L2Beat undertaking maintains an lively record of bridges related to L2s with the Whole-Worth-Locked (TVL) within the bridge in addition to an outline and transient danger evaluation, if obtainable.

L2 Bridges Threat Profiles

Lastly, when customers make the most of L2 Bridges, in actual fact, any bridge, care must be taken, and the next dangers have to be evaluated for a given bridge:

Lack of Funds

  • Oracles, relayers, or validators collude to submit fraudulent proofs (e,g, block hash, block header, Merkle proof, Fraud proof, Validity proof) and/or relay fraudulent transfers that aren’t mitigated
  • Validator/Relayer non-public keys are compromised 
  • Validators maliciously mint new tokens
  • False claims aren’t disputed in time (optimistic messaging protocols)
  • A vacation spot blockchain reorganization happens after optimistic oracle/relayer dispute time passes (optimistic messaging protocols).
  • Supply code of unverified contracts concerned in or utilized by a protocol incorporates malicious code or performance that may be abused by a contract proprietor/administrator
  • Token Bridge house owners behave maliciously, or provoke time-sensitive emergency actions that affect consumer funds, and don’t correctly talk to the consumer base
  • Protocol contract(s) paused (if performance exists)
  • Protocol contract(s) obtain a malicious code replace

Freezing of Funds

  • Relayers/Liquidity Suppliers don’t act on consumer transactions (messages)
  • Protocol contract(s) paused (if performance exists)
  • Protocol contract(s) obtain a malicious code replace
  • Inadequate liquidity within the goal token on the bridge

Censoring Customers

  • Oracles or relayers on both vacation spot or goal L2s or each fail to facilitate a switch (message)
  • Protocol contract(s) paused (if performance exists)

Whereas this record will not be exhaustive, it offers a very good overview of the present dangers related in utilizing bridges.

There are new developments underway utilizing zero-knowledge-proof (zkp) applied sciences designed to mitigate a few of the above danger components and handle the 2 bridge trilemmas. Specifically, using zkps permits for the next bridge design traits:

  • Trustless and Safe as a result of the correctness of block headers on the supply and goal blockchains could be confirmed by zk-SNARKs that are verifiable on EVM-compatible blockchains. Therefore, no exterior belief assumptions are required, assuming the supply and goal blockchains and the utilized light-client protocols are safe and we’ve got 1-of-N trustworthy nodes within the relay community.
  • Permissionless and Decentralized as a result of anybody can be a part of the bridges’ relay community, and PoS-style or related validation schemes aren’t wanted 
  • Extensible as a result of functions can retrieve zkp-verified block headers, and execute application-specific verification and performance 
  • Environment friendly due to new, optimized proof schemes with brief proof era and quick proof verification occasions

Albeit early, these kinds of developments promise to speed up the maturation and safety of the bridge ecosystem.

We will summarize the above dialogue and overview of L2 Bridges as follows:

  • L2 Bridges are an essential glue of the L2 ecosystem to additional L2 interoperability and environment friendly use of property and functions throughout the ecosystem. 
  • L2 bridges used on L2s anchored on the identical L1, reminiscent of Ethereum Mainnet, are safer than bridges between L1s – assuming the supply code is protected, which is commonly an enormous if.
  • As with all distributed system architectures, there are important tradeoffs to be made, as expressed within the two posited Trilemmas – Bridging Trilemma and Interoperability Trilemma.
  • L2 Bridges have very totally different belief assumptions, e.g., trusted vs. trustless bridges, and really totally different design decisions, e.g., lock-mint-burn vs. liquidity networks.  
  • The L2 Bridges ecosystem continues to be nascent and in a state of flux.
  • Customers are suggested to do their due diligence to evaluate which L2 bridges supply one of the best risk-reward profile for his or her wants.
  • There are new developments underway utilizing latest zkp-technologies which can be successfully addressing the 2 bridge trilemmas, and assist to extend the safety of bridges general.

Whereas nonetheless early within the journey in the direction of a standardized L2 interoperability framework, these are essential developments, and have to be taken critically as any a kind of tasks may change into “THE” bridge framework – it isn’t but VHS vs Betamax, however we’re getting there.

The L2 WG want to gratefully acknowledge Tas Dienes (Ethereum Basis), Daniel Goldman (Offchain Labs), Bartek Kiepuszewski (L2Beat) for a cautious studying of the manuscript and invaluable content material recommendations.

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