What is cross-chain? Detailed explanation of cross-chain bridge technology, introduction of 5 cross-chain types and related currencies

Cross-Chain means allowing cryptocurrency assets to be used and stored across different blockchains. At present, there is more than one common blockchain in the cryptocurrency world. In addition to the most famous blockchains, Bitcoin and Ethereum, various large and small public chains have emerged one after another, many of which have potential and are being used by more and more people. , such as Solana, Avalanche, Terra, Binance Smart Chain, etc.

But these blockchains are independent and incompatible with each other. For example, assets on Ethereum cannot be transferred to other blockchains, such as Binance Smart Chain, if they do not use cross-chain technology. Therefore, the cross-chain technology is to facilitate the mutual transmission of different public chain assets and information.

Just like going back a hundred years ago, we could not use the bank A's certificate to use the deposit or credit line in Bank B, but since the establishment of various cross-bank and national financial systems such as VISA, UnionPay, and SWIFT, different How much money can be effectively exchanged between banks. "Cross-chain" is exactly the new technology to find ways to connect different public chains.

What is a cross-chain bridge?

A cross-chain bridge is a necessary "bridge" to connect various blockchains and transmit data and assets, enabling interaction between different encryption ecosystems and making different blockchain networks compatible with each other.

This "bridge" is not a physical connection between servers at different locations, but some protocols and technologies that enable blockchains using different consensus mechanisms to transfer data and assets to each other, such as the Ethereum blockchain. ETH, transferred to the Avalanche blockchain to become wETH.

Why do you need cross-chain?

When investors invest, pledge, GameFi and other activities on different blockchains, they will be limited by the different consensus mechanisms used by different blockchains and cannot integrate assets.

If investors need to integrate or transfer assets, they need to cross-chain. With the rise of encrypted assets, the number and scale of emerging blockchain ecosystems have increased dramatically. Investors may not use a single blockchain, and the demand for cross-chains has greatly increased.

How to understand cross-chain technology? 5 functional categories

Cross-chain technology does not necessarily have to be officially initiated. There may be cross-chain technologies officially launched by public chains, or cross-chain technologies provided by third parties. In terms of the functions of cross-chain technology, it can be roughly divided into the following five cross-chain technology functions:

Types of cross-chain functions 1. Chain-to-chain bridge: transfer assets between two chains

The main function of the Chain-to-Chain Bridge is to support the transfer of assets between the two major blockchains.

For example, the bridge PoS Bridge officially launched by Polygon mainly supports the cross-chain between Ethereum and Polygon; the Avalanche Bridge officially launched by Avalanche mainly supports the cross-chain asset transfer between Avalanche and the ERC-20 standard of the Ethereum chain.

Types of cross-chain functions 2. Multi-chain bridge: transfer assets between arbitrary chains

Multi-Chain Bridge can transfer assets across multiple blockchains and can be applied to any Layer1 or Layer2 blockchain.

For example: cBridge, able to connect Ethereum, Polygon network, xDai chain, Binance Smart Chain, Okex Chain, Arbitrum, Avalanche, Fantom, Heco, and more than 9 large blockchains.

Types of cross-chain functions 3. Dedicated bridges: transfer assets between specific ecosystems

Specialised Bridges focus on a specific ecosystem and specifically support the transfer of assets between specific regions.

Due to the specialized nature of these bridges, dedicated bridges can often provide faster and cheaper cross-chain services. For example, Hop Protocol's cross-chain bridge solution is a Rollup-to-Rollup general asset bridge, which specifically implements asset transfer between Layer 2 networks and the Ethereum main network.

Types of cross-chain functions 4. Packaged asset bridge: packaged and transferred assets

The Wrapped Asset Bridge is designed to transfer non-native assets to different blockchains by creating wrapped assets on the target chain.

For example, take Wrapped Bitcoin (WBTC) on Ethereum as an example, the custodian holds BTC, and then according to the amount of BTC held, WBTC is minted on Ethereum using the ERC-20 standard.

Types of cross-chain functions 5. Data bridge: arbitrary data transfer across multiple chains

Data Specific Bridges are interoperability protocols specially designed for the transfer of arbitrary data across multiple blockchains. These protocols usually become the base layer of dApps, enabling dApps to achieve cross-chain composition. For example Celer's Inter-chain Message Framework and IBC.

What are the cross-chain technologies?

In terms of cross-chain core technologies, the most commonly used cross-chain technologies can be divided into four types:

• Notary schemes
• Sidechains / relays
• Hash-locking
• Distributed private key control

Most of the current cross-chain projects use the above four technologies as the underlying technology of the contract. The following will briefly introduce these four technologies and their respective cross-chain methods.

Cross-chain technology 1. Notary mechanism: third-party confirmation of asset transfer

Notary schemes are to find an impartial and independent third party to act as an intermediary between the two chains, and a notary will assist in verifying transactions.

The notary will be responsible for confirming the status of the assets on the two chains and transmitting the information. For example, when 100 USDT needs to be transferred from Ethereum to BSC, the notary will confirm the value of the 100 USDT, and transmit this information to BSC, confirming that 100 USDT is received on BSC.

The third-party notary, which can be a centralized existence or a decentralized node, can be divided into the following three types:

• Centralized notary: Choose a single node or a centralized organization as the notary, but once the notary is attacked or has an accident, it is easy to shut down.
• Multi-signature notary: Multiple notaries are required. After all notaries have completed their signatures and reached a consensus, they can complete the cross-chain, which is more decentralized and secure.
• Distributed signature notary: requires the participation of multiple notaries. The mechanism will randomly select some notaries, and encrypt the private key after the notary completes the signature. This mechanism involves the public and private keys of cryptography, so it is more complex and secure than the multi-signature notary mechanism.

Cross-chain technology 2. Side chain/relay chain - connecting the main chain to transfer assets

Sidechains: It is a small-scale blockchain attached to the public chain, which can be regarded as an external hardware of the public chain.

The side chain can receive and read the data and data of the main chain transaction, and will lock the content to be verified through "anchoring", and anchor the assets on the side chain & the main chain in both directions. When the transaction data is verified, the main chain assets will be locked, and then the same amount of assets will be released on the side chain. The principle is quite similar to cross-border currency exchange. On the contrary, when the assets on the side chain are locked, the corresponding value assets will also be released on the main chain. Assets are not actually transferred, but locked and re-released.

Relays: The biggest difference between the relay chain and the side chain is that the side chain is attached to the main chain and has a close relationship with the main chain; while the relay chain is equal to and parallel to other public chains, not belong to any public chain. The relay chain is similar to the notary mechanism combined with the side chain. The relay chain can connect to the data dispatch centers of different public chains, and verify the transaction data between different public chains as a third-party notary. After reading and verifying the data on the public chain, the relay chain locks the assets on the original chain, and then releases the equivalent assets on the target chain to achieve the function of asset anchoring and ensure that the transaction data on both sides match.

Cross-chain technology 3. Hash locking - private key function to transfer assets

Hash-locking sounds difficult to understand, but it is actually just an additional cryptographic design in the cross-chain mode to handle cross-chain information connection with a verification mechanism encrypted by a hash function. The operation process is as follows:

1. The smart contract locks the user's assets on the A chain

2. The smart contract generates a set of private keys with randomly generated numbers and hash functions

3. The user provides the correct private key on the B chain within the specified time

4. The smart contract releases assets of corresponding value on the B chain to complete the cross-chain.

If the transaction fails, or the correct number is not provided within the time limit, the assets locked on the A chain will be automatically unlocked and returned to the user.

Cross-chain technology 4. Distributed private key control—multi-party distributed custody of private keys

Distributed private key control uses smart contracts to project assets on the original chain to other different chains, and at the same time generate a set of private keys to control these assets.

This private key will be distributed and kept by different institutions or nodes to achieve decentralization and ensure asset security. When users need to transfer assets to another public chain, they can use this set of private keys to lock, unlock and unlock assets on different chains.

Categorize cross-chain technologies by asset transfer

As for the essential technology of cross-chain, it can be roughly divided into the following three ways to transfer assets:

1. Lock + Recast

This method is to lock the assets on the original chain and re-mint the assets on the target chain, such as Polygon's PoS Bridge, Avalanche's Avalanche Bridge (AB) and Wrapped BTC (WBTC), etc.

The situation is like putting currency A in a bank vault in country A, and after obtaining the deposit certification, you can exchange currency B of the same value in country B; when you need to use currency A again, you only need to put The funds remaining in country B are returned, and the currency of the equivalent value in country A can be reused.

2. Destruction + Recasting

This method is to destroy the assets on the original chain and re-mint the assets on the target chain, such as Hop Protocol and Across Protocol.

Taking the above example again, it means that you first cancel the currency of country A, then apply for the currency of the same value in country B, and then do the opposite when you return to country A.

3. Atomic Swap

As for the "atomic swap", it is a step further. It does not need to be destroyed or locked as in the above two methods, and the two assets are converted directly through the certified smart contract mechanism, that is, currency A is directly exchanged for currency B. .

What are the cross-chain coins/related cryptocurrencies? Is it worth the investment?

There are many technicians in the market who are looking at the future trend of cross-chain and are actively developing various cross-chain technologies. Naturally, tokens on various cross-chain systems emerge as the times require. What other "cross-chain coins" are worth our attention?

Cross-chain currency/cross-chain related currency 1.MATIC(polygon)

Polygon, formerly known as MATIC Chain, is Layer 2's Ethereum expansion solution. It uses sidechains to provide computing power, as well as Plasma framework and PoS verification for decentralization, providing Ethereum with scalability. It is equivalent to a plug-in hardware that helps Alleviate the high transaction cost and congestion of Ethereum and expand the Ethereum ecosystem. And Polygon also has a separate chain independent of Ethereum.

MATIC coin is a token on the Polygon blockchain. It is a token in ERC20 format. Its functions include participating in network governance by voting on Polygon Improvement Proposals (PIP), improving security by staking, and paying for transaction procedures. gas fee, etc.

Cross-chain currency/cross-chain related currency 2.NEAR

One of NEAR's core technologies, "Rainbow Bridge", is able to connect Ethereum and NEAR, so that any ERC-20 assets or non-fungible tokens (NFTs) can be transferred between the two chains through this tool.

In addition, NEAR can also use the Rainbow Bridge to exercise contracts on Ethereum. As the ecosystem of Near becomes more complete, the NEAR token issued by it will see a surge in 2021 last year.

Cross-chain currency/cross-chain related currency 3.ONE

ONE coin is the native governance token of the Harmony chain, which can be used to pay the handling fees on the Harmony chain, participate in governance, and maintain the daily operation of the Harmony chain during the pledge process.

One of the key technologies of Harmony Chain is the cross-chain bridge Horizen Bridge, which can "imitate" the ERC20 standard and use its own HRC20 to realize the docking of Ethereum and Binance Smart Chain BSC assets, that is, ERC20/BEP20 standards can be used. Cross-chain conversion with Harmony.

Horizen Bridge is fast and less expensive than Ethereum. It is like a high-speed and efficient exchange shop that can freely convert currencies between different banks. Therefore, the cross-chain bridge has been regarded as the most effective member of the current cross-chain technology since its launch and operation.

In fact, the expansion and public chain related to cross-chain technology are definitely not limited to the above-mentioned MATIC, NEAR and ONE. There are countless solutions trying to integrate a faster and more effective cross-chain system. The prospect of the cross-chain world is worth looking forward to!

Introduction of popular cross-chain tools: Multichain.xyz

Multichain.xyz was originally Anyswap, and it is currently a cross-chain tool for platforms supporting the Ethereum Virtual Machine (EVM). Currently supports asset transfer of more than 1,721 tokens on 38 blockchains including Fantom, Ethereum, BSC, Polygon, Avalanche, Moonriver, Harmony, Arbitrum, etc.

Which wallets need to be used for cross-chain?

Many cross-chain tools and platforms support Metamask, Wallet Connect and Coinbase Wallet, such as Multichain.xyz, Hop, Polygon Bridge, Avalanche Bridge, etc. Cross-chain use of these platforms requires pre-installation and registration of one of the wallets supported by the platform. Therefore, before cross-chaining, you need to check what wallets are supported by the cross-chain tool used.

This article was also published in Daily Coin Research: What is Cross-chain? Detailed explanation of cross-chain bridge technology, 5 cross-chain types and related currency introductions

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