“Interoperability is the future” - Vitalik Buterin.

Cross-chain bridges, chain interoperability, account abstraction, and other terms can all be attributed to the chain abstraction track, a concept proposed by the co-founder of Near. Chain abstraction solves interoperability issues between different chains such as cross-chain communication, asset transfer, and cross-chain smart contract calls through the construction of universal, all-powerful smart contracts.

The recent LayerZero airdrop detection event has stirred up much discussion in the community, and market focus has once again converged on the chain interoperability track. The projects in this sector generally raise a lot of funds and have high valuations. This article selects Axelar, Wormhole, and LayerZero as representative projects for analysis and review of their latest developments.

1. Axelar network

According to Messaridefinition, Axelar network (AXL) is a Layer 1 that enables cross-chain interoperability between various crypto ecosystems, namelyEncrypted full coverage network. Axelar has a set of Gateway smart contracts that connect the Axelar network and its interconnected external chains, as well as a software development kit (SDK) containing developer tools and APIs.

Axelar not only supports the bridging of any information/asset, but also supports the execution of smart contracts and dApps across the network, that is, full-stack interoperability.

Currently, Axelar has connected more than 60 blockchains, including Arbitrum, Avalanche, Base, BNB Chain, Ethereum, Optimism, Polygon, Scroll and various Cosmos-based chains. This number is also ahead of other cross-chain networks. Its interactive, cooperative and integrated smart contracts exceed 600, including leading projects in DeFi, public chain, second-tier and other tracks.

Mechanism principle:

Axelar is a cross-chain interoperability project developed using Cosmos SDK with cross-chain as its main core business. On a technical level, the Axelar network consists of three key components distributed across two functional layers. The infrastructure layer includes a decentralized network of dynamic validators responsible for maintaining the network and executing transactions. These validators run the cross-chain gateway protocol, which is a multi-party cryptographic overlay that sits on top of the Layer1 blockchain.

Second, the gateway component is installed on the connected blockchain and exists as a smart contract on the EVM chain. The validator monitors incoming transactions in the gateway, writes data to the gateway of the target chain after reaching consensus, and executes cross-chain transactions. On top of this infrastructure layer, Axelar also provides APIs and SDKs to enable developers to easily perform cross-chain operations between the two chains.

In terms of functional layer, Axelar introduces the General Messaging (GMP) system, which goes beyond the traditional bridging function and allows cross-chain sending and receiving of various payloads, such as function calls, data, packaged assets, etc. Axelar’s architecture adopts a hub-and-spoke topology, serving as a central hub to connect various blockchains.

In order to improve security, Axelar uses measures such as secondary voting and frequent key replacement. Additionally, Axelar Gateway uses rate limiting to limit the number of assets that can be transferred within a certain time interval.

Financing information:

As of March 5, 2024, Axelar has completed a total of 5 rounds of financing, with a total financing amount of US$113.8 million. Among them, when the B round of financing completed US$35 million, the total project valuation reached US$1 billion. Investors include Binance, Polychain Capital, Coinbase Ventures, Dragonfly Capital, Crypto.com Capital, and others.

It should be noted that the latest round of financing was completed in March 2022, nearly two years ago. At present, the project has been listed on Binance and other trading platforms, with the currency price reaching a maximum of 2.77 US dollars, and the market value is now 724 million US dollars.

Key data:

According to Axelar’s block explorer, the number of cross-chain active transactions on the Axelar network is 1.823 million, the transaction volume is US$8.62 billion, and the average transaction volume is US$4,728.

From the above data histograms in the Axelar network, we can intuitively see that since January 2023, the Axelar network’s inter-chain network activities (i.e. transactions and active addresses) have gradually increased, and General Messaging (GMP) Events are increasingly dominating online activity.

However, it should be noted that Axelar’s ​​various data dropped sharply in May this year, but this was not only due to the downward trend of the overall crypto market, but also because May only started for ten days.

According to the report “Analyzing Cross-Chain Interoperability” released by Binance Research Institute in February this year, Axelar’s transaction volume in the past 30 days was twice that of Wormhole and nearly eight times that of Chainlink CCIP.

This growth is mainly due to the implementation of its General Messaging (GMP) feature, which supports complex cross-chain function calls and state synchronization. Additionally, GMP will begin supporting interactions between Cosmos and EVM chains in May 2023.

future plan:

Axelar announced its roadmap at the end of January this year. Its next development will revolve around AVM. Specifically, it will include the following points:

1) Let AVM become a development platform for open source tools and develop various Dapps.
2) Use an Interchain Amplifier to achieve permissionless links to any chain, extending potential network effects to hundreds of blockchains such as Ethereum Layer 2.
3) Expand the use cases of Interchain Tokens and expand their availability on the native chain across all connected chains.
4) Add a Gas burning mechanism to the AXL token to achieve deflation to protect the Axelar network.
5) Integrate consensus mechanisms on different chains, including Solana, Stellar and Move-based chains such as Aptos and Sui.
6) Improve the Gas pricing mechanism and improve the accuracy of cross-chain Gas estimation services on the Axelar network.

Main actions:

In May this year, Axelar announced that it would interconnect the Bitcoin, Hedera and Polkadot ecosystem across chains. Bitcoin L2 network Stacks, open source proof-of-stake blockchain Hedera, Moonriver Network and privacy network Iron Fish will serve as the first phase of the Axelar Interchain Amplifier pilot program to achieve one-click programmable interoperability.

It’s also worth noting that Solana and Sui will be listed as upcoming projects on this roadmap.

In November last year, Axelar jointly implemented a proof-of-concept (POC) project involving business RWA with Onyx, a digital asset platform owned by JPMorgan Chase, and Apollo, an alternative asset management company.

In July, Axelar launched its Interchain Token Service (ITS), a product designed to enhance the interoperability of ERC-20 tokens on all Ethereum-compatible chains.

Separately, Microsoft announced a partnership with Axelar to provide blockchain interoperability solutions.

In February, Axelar launched the Axelar Virtual Machine (AVM), which allows developers to build DApps only once and run them on all chains.

2. Wormhole

Wormhole is a universal messaging protocol that enables App interconnection across multiple blockchain ecosystems. The project was first launched in October 2020 and aims to enable developers to build native cross-chain applications covering multiple chains. Wormhole started as a hackathon project with the goal of finding a solution that would enable blockchains to “talk to each other.”

Wormhole was originally incubated and supported by Jump, and its first version (Wormhole V1) was primarily focused on building a two-way token bridge between Ethereum and Solana.

As the project has grown, Wormhole has evolved into a universal messaging protocol, connecting multiple chains in the ecosystem. The project aims to become a basic layer for developers to build diverse cross-chain applications. For this reason, Wormhole V1 was gradually phased out, and the Wormhole protocol was launched in August 2021.

At present, Wormhole has evolved into a universal AMB (Arbitrary-Message-Briage) bridge that supports the transmission of arbitrary messages between 38 heterogeneous public chains. It is also called a universal cross-chain message transfer protocol or interoperability protocol. Each connected blockchain has a Wormhole core contract, which serves as the main interface for cross-chain Apps. The function of Wormhole’s asset cross-chain bridge is assumed by the front-end application Portal Bridge and provides services to the outside world.

Wormhole is secured by a network of 19 guardians, which are nodes responsible for monitoring chain activity and validating messages. Guardian nodes are operated by reputable entities in the cryptocurrency industry such as Jump Crypto, ensuring a high level of trust and operational integrity due to the need to be accountable to the public.

Wormhole communication process:

1. Messages sent through the Wormhole Core Contract will be forwarded to the guardian, who will independently verify and approve the authenticity of the message.

Guardians verification and signature: The message is verified and signed off-chain by 19 guardian nodes (Guardians). Only messages signed by at least 2/3 (i.e. 13/19) of the guardian nodes are considered authentic. Once verified, the message is encapsulated into a structure called a Verifiable Action Approval (VAA).

1. Pass to the target chain: The relay will transmit the VAA to the core contract of the target chain for execution.

Financing information:

In November 2023, Wormhole completed US$225 million in financing, with the project valuation reaching US$2.5 billion. Investors included Brevan Howard, Coinbase Ventures, Multicoin Capital, ParaFi, Dilectic, Borderless Capital, Arrington Capital, and Jump Trading. This round of financing is also the largest round of financing for cryptocurrency projects in 2023.

Key data:

According to Wormholescan data, Wormhole has transferred more than 1 billion messages between different chains, ranking first among all interoperability protocols. Its total historical trading volume is approximately US$42.39 billion.

The current price of Wormhole token W is US$0.59, with a market value of approximately US$1.069 billion. Its circulating supply is 1,800,000,000 W and its maximum supply is 10,000,000,000 W.

Main actions:

In April this year, Wormhole native W tokens became available on Solana, Ethereum, Arbitrum, Optimism, and Base via Wormhole Native Token Transfers (NTT). W becomes a native multi-chain token, completing the second phase of the W release roadmap. In March, Wormhole conducted a token airdrop.

In February, Wormhole introduced a native token transfer (NTT) feature to preserve token characteristics and address liquidity fragmentation across different blockchains.

NTT is an open source framework for transferring tokens across blockchains without liquidity pools. When leveraging NTT, projects have complete control over how their tokens behave on each chain, including token standards, metadata, ownership/upgradeability, and customization capabilities. With NTT, projects are also able to retain fine-grained control over their security, such as rate limits, suspensions, access controls, and balance accounting.

In the same month, Wormhole announced that it would adopt AMD’s FPGA hardware accelerator chips to expand the ability to use zero-knowledge proofs (ZKP) for cross-chain messaging. The project plans to integrate ZKP for secure cross-chain transfers via a “light client”, aiming to create secure “channels” for messaging between different blockchains.

Additionally, the Wormhole Foundation is working with the Succinct team to build an Ethereum “ZK light client” to further advance decentralized message verification within the Wormhole platform.

In December last year, Wormhole launched a $50 million cross-chain ecosystem fund and a cross-chain instant data retrieval method, Wormhole Queries, which allows application developers to extract any on-chain data on demand.

In August, Wormhole established the Wormhole Foundation to provide support for people who are passionate about the research and development of blockchain interoperability technology. In July, Wormhole released the v0.0.7 version of Wormhole Connect, a cross-chain integration solution.

route map:

Wormhole announced that W will become a native multi-chain token, taking advantage of the unique advantages of Solana and EVM chains while introducing a multi-chain governance system.

Plans for W include: launching as a native SPL token on Solana; scaling on the EVM chain using Wormhole Native Token Transfer (NTT); W holders will be able to lock and delegate their tokens on Solana and the EVM chain . Wormhole DAO is composed of W token holders and will be operated through a multi-chain governance system.

The system will be available on Solana, Ethereum mainnet, and EVM L2 at launch. Multi-chain governance will allow token holders to create, vote and execute governance proposals across different chains.

About ZK’s roadmap: By integrating zero-knowledge proofs, significant progress will be made in the Wormhole protocol’s trust assumptions and overall blockchain interoperability.

The roadmap content mainly includes:

Introducing cryptography expertise: The Wormhole Foundation has awarded contributor grants to four new engineering teams specializing in zero-knowledge cryptography, and will make these announcements in the coming weeks.

Unlock hardware resources: Wormhole contributors will work with strategic hardware providers to accelerate light client implementation and procure hardware accelerators for Wormhole contributors as the number of ZK-enabled channels and ZK verification messages continues to expand.

Launch of light clients: Light clients allow users and applications to quickly and efficiently verify the state of the blockchain network (e.g. current account balances, smart contract data, etc.).

In the future, ZK light clients of blockchains (including Ethereum, Sui, Aptos, Near, and Cosmos) will be deployed and integrated with Wormhole, enabling trustless two-way data transfer.

3. LayerZero

LayerZero is a full-chain interoperability protocol designed for delivering lightweight messages across chains. LayerZero provides authentic and guaranteed messaging with configurable trustlessness. It is a “blockchain of blockchains” that allows other blockchain networks to communicate directly in a permissionless manner.

LayerZero supports any blockchain that can run smart contracts, such as Ethereum, BNB Chain, Avalanche, Polygon, Arbitrum, Optimism, Fantom and other chains. LayerZero also supports non-EVM chains such as Aptos.

LayerZero enables users to achieve cross-chain communication in a single trustless and secure transaction by deploying “LayerZero Endpoints” (which are lightweight clients composed of smart contracts with communication, verification and network functions) on the corresponding chain.

LayerZero uses Oracles (currently Chainlink) and Relayers to communicate information between LayerZero Endpoints on the target chain. It is worth noting that any subject can assume the roles of Oracle and Relayer. Oracle publishes the block header on the source chain to the target chain, and Relayer publishes transaction data and verifies transaction proofs. Oracle and Relayer remain independent.

It should be noted that LayerZero only focuses on message passing between chains and can send messages to any smart contract on any supported chain. It is a message transmission layer for smart contract communication between blockchains. , is not responsible for the cross-chain of assets.

The key function of LayerZero is the ultra-light node (ULN). Its essence is to use the technical principles of light nodes and design the mechanism of ultra-light nodes. It divides the intermediate trust link into two through relays and oracles, thus Lower fees in exchange for better security.

This smart contract runs on every blockchain and serves as the endpoint for cross-chain communication. ULN uses block headers and transaction proofs to verify the validity of transactions and messages from other chains, ensuring security and efficiency.

The communication link between cross-chains is mainly completed through external verification or light nodes on the chain. Light node is a node operation mode, in addition to full node (Full Node) and archive node (Archive Node). Different nodes in the same chain are abridged versions of the chain information. Light nodes only save all historical block headers and do not store specific transaction information within the block.

The benefit of running verification through light nodes on the chain is that it completely eliminates the interference of the external role of the notary, and achieves a high degree of decentralization based on the security of the chain itself, making it safer. However, this will make cross-chain costs extremely high, and will eventually be dispersed to users with cross-chain needs.

From a product and technology perspective, LayerZero focuses on achieving “lightweight” data transmission, so it chooses to use oracles and relay networks to complete data transmission. When the user completes the operation on the endpoint of the LayerZero source chain, the oracle, as an external component, will forward the block header of the transaction on the source chain to the target chain. At the same time, the relay will obtain the transaction proof on the source chain and transmit it. to the target chain.

Mechanism features:

Ultra-Light Nodes (ULNs): LayerZero uses on-chain ULNs, which are smart contracts that run on each blockchain and serve as cross-chain communication endpoints. ULN uses block headers and transaction proofs to verify the validity of transactions and messages from other chains, ensuring security and efficiency.

Universal Messaging: LayerZero supports any type of cross-chain communication, not just asset transfers. LayerZero can support any type of payload, such as function calls, data exchange, governance voting, NFT transfers, etc. This enables developers to create full-chain applications that leverage the capabilities and benefits of multiple blockchains simultaneously.

State sharing: LayerZero allows applications to share state across chains, meaning they can synchronize data and logic without relying on a centralized server or database. This enables applications to run as a single entity across multiple chains, creating a seamless user experience and reducing complexity.

Instant Finality: LayerZero guarantees instant finality for cross-chain transactions, meaning they are confirmed as soon as they are included in a block on the source chain. This eliminates the need to wait or confirm on the target chain, thereby increasing speed and availability.

Financing information:

LayerZero has completed multiple rounds of financing, with total financing reaching US$293.3 million. Investors include Binance Labs, Delphi Digital, a16z, Sequoia Capital, Coinbase Ventures and other star capitals.

In April 2023, LayerZero Labs completed a $120 million Series B financing at a valuation of $3 billion; in March 2022, LayerZero Labs completed a $135 million Series A+ financing, with a post-money valuation of $1 billion; in September 2021 , the project completed $6 million in Series A financing, led by Multicoin and Binance Labs.

Key data:

According to data from the official website of LayerZero, LayerZero has connected to more than 50 blockchains and is still increasing. The total communication information is approximately 132 million pieces, and the transfer value exceeds 50 billion US dollars.

Main actions:

The timetable for airdrops and TGE is getting closer. LayerZero releases self-reporting process for witches, with a deadline of 14 days

On May 11, LayerZero Labs released the “Protocol RFP ‘’ proposal in the community. Proposals show that all projects that deployed OApp, OFT or ONFT contracts on mainnet before Snapshot #1 and declare them on LayerZero Scan are eligible to submit proposals.

Examples of project allocations are: 50% allocated to users of cross-chain OFT, 20% allocated to LPs, 15% allocated to token holders, and 15% allocated to community members. At the same time, the LayerZero Foundation will screen based on the final witch report, and the witch address will automatically be disqualified from allocation.

At the same time, the project team stated that the Protocol RFP is only one aspect of TGE, and more information about token distribution (including single user distribution and future protocol distribution) will be announced soon.

On May 4, LayerZero released a 14-day self-reporting process for witches. On May 2, LayerZero Labs announced the completion of the first phase of network snapshots.

In April, LayerZero announced that weETH has adopted the OFT standard and will soon launch weETH on Blast, Optimism, Base, Linea, Mode and BNB Chain.

In January, the LayerZero mainnet was launched, and LayerZero V2 was launched at the same time. New features include: universal messaging, modular security, permissionless execution, unified semantics, and V1 compatibility.

In November last year, ayerZero Labs launched the value attribution solution ColorTrace. This technology can attribute (color) fungible tokens to the original entity (coiner) to conduct any form of fair tracking of contributions to the success of the protocol, helping to achieve Fair share of earnings, affiliate programs, referral links and many other common real world applications.

In October, LayerZero launched a wrapper stETH (wstETH) function for transferring liquidity staking protocol Lido Finance on Ethereum, Avalanche and BNB Chain. wstETH has been integrated with the LayerZero full-chain fungible token standard (OFT standard).

Conclusion

With the development of the blockchain ecosystem, the number of various blockchains has reached hundreds, and inter-chain interaction has become a general trend. Chain interoperability improves the liquidity of digital assets, enriches the blockchain ecosystem, and simplifies cross-chain interaction thresholds. Based on this, major exchanges including Binance have successively listed Axelar and Wormhole this year, and LayerZero will most likely follow suit.

However, the chain abstract track also faces the security problems of previous cross-chain bridges, that is, it is easy to become a hacker target. Moreover, the chain interoperability protocol is still in its early stages and faces the risk of centralization. Therefore, investors may wish to take a long-term view on high-end projects where such institutions invest large amounts of money.

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