Key takeaways:

• In the cross-chain ecosystem, users rely on bridges to transfer value.
• Value transfer bridges use onchain liquidity or offchain liquidity to fill orders.
• Intents designs are likely to dominate in the future as using offchain liquidity offers users meaningful savings and a better user experience.

When crypto started, it primarily offered one use case: transferring value. Satoshi’s early followers would advocate for “peer-to-peer electronic cash” and spend Bitcoins they’d mined on WikiLeaks donations or Silk Road (and if they really believed that permissionless money would grow, they’d hold onto a stash and hope they didn’t lose the piece of paper they’d scribbled their private key on).

Ethereum was also adopted as a network for transferring value when it catalyzed the ICO boom, though things changed with the advent of smart contracts and DeFi. Now, the believers could deploy their capital into pools to earn yield, take out loans, and do all kinds of other activities.

Crypto has evolved since Ethereum took off. Today we have many smart contract chains on Layer 1 and Layer 2, and that means users need a way to move between them. Cross-chain bridges cater to this need, and they each take different approaches to help users move from A to B.

Cross-chain interoperability has made crypto more complex. It’s unlocked many use cases, yet the primary one among bridges is still transferring value. Here, we explore how today’s top bridges help users move funds, the benefits of using offchain liquidity over onchain liquidity, and why intents will dominate the space for years to come.

Transferring value is key to bridging

Cross-chain bridges have adopted various mechanisms to help users move through the ecosystem. Early bridges used mint and burn mechanisms with intermediary tokens and wrapped assets, though this design presented problems. If a user locked their ETH in a bridge and that bridge got hacked, their wrapped ETH tokens could become worthless.

Liquidity network bridges sought to solve this problem, using canonical assets in favor of representative assets with isolated security standards. While mint-and-burn bridges give the user a new asset and ask them to trust it, liquidity network bridges aim to ensure that 1 ETH = 1 ETH.

While bridges vary in scope, users typically rely on them for one use case: transferring value.

Regardless of how the bridge works under the hood, the user visits it because they want to move their funds from A to B. Ideally, they want this process done quickly and cheaply, and the top solutions cater to this requirement.

When users go to a bridge, they have one goal: transferring value as quickly and cheaply as possible without compromising on security.

How liquidity network bridges fill orders

If a user is operating on a single chain, they need liquidity for any activity besides holding their coins. If they want to place a trade on Uniswap and then take out a loan through Aave, they need liquidity onchain to make it happen.

Similarly, bridges need liquidity to serve users. But they can pull it from onchain or offchain. When a bridge uses onchain liquidity, it sources it from a pool on the destination chain. The alternative option is to ask relayers to front orders with their own capital. We can refer to this as “offchain” liquidity.

Across takes this approach, using relayers to fill orders with offchain liquidity. They front their capital and then get repaid through a unified liquidity pool on mainnet.

Onchain liquidity and delivery vs. payment (DvP)

Bridges that use onchain liquidity typically have liquidity pools on each chain and require verification between the origin chain and the destination chain. When the message arrives confirming the user’s deposit, the funds get unlocked and the user’s order gets filled. This is a settlement method TradFi folks commonly refer to as delivery vs. payment (DvP)%20is,the%20delivery%20of%20the%20security.).

Bridges can verify the origin chain’s state through a variety of methods, including multisigs, relayers and oracles, and Zero-Knowledge Proofs. These methods have different trust assumptions, and they often require expensive onchain validation.

DvP bridging has another drawback. When a user deposits funds on the origin chain, their deposit can only be verified once the origin chain reaches finality, and they can only collect it once the destination chain reaches finality.

In other words, the minimum transfer time = origin finality + destination finality. This can cause slow transfer times.

Stargate is perhaps the most obvious example of a bridge that uses onchain liquidity for DvP. Stargate styles itself as a “liquidity transport protocol,” leveraging LayerZero’s relayer and oracle messaging mechanism.

In summary, when bridges use onchain liquidity, orders can only get filled once deposits on the origin chain have been verified on the destination chain. This leads to higher gas costs and fill times.

Offchain liquidity and intents

Instead of sourcing onchain liquidity to deliver funds on receipt of payment, bridges may use offchain liquidity.

With this approach, a market maker or relayer fronts the user’s order with their own funds to fill the request at the destination.

These third-party actors take on finality risk on behalf of the user, and in return they earn an interest rate on the assets they loan out.

Relayers must wait to be repaid, also referred to as settlement, which happens on verification that they made a valid fill. The settlement system (i.e. the bridge) may verify a relayer’s fills individually and then make a series of repayments, or it can verify and repay for several fills in batches.

In Across, independent relayers fill orders, and UMA optimistically verifies relayer repayments in bundles. This results in lower gas costs and lower fees for users.

Bridges can use onchain or offchain liquidity to fill orders, and deposits can be verified individually or in bundles.

The above diagram illustrates how bridges verify and fill orders. Across uses offchain liquidity to fill orders at the best price and speed with bundled verification to optimistically repay relayers in a gas-efficient manner.

Across’ bridge architecture offers clear advantages over DvP systems. We can classify its approach to fill orders with offchain liquidity under a new mental model: intents.

Across is an intents bridge, where offchain liquidity fulfills the user’s intent.

Across users don’t place an order for the bridge to fulfill with messages. They simply signal where they want to collect their assets and wait for the relayer to fill the order.

Where a Stargate user deposits 1 ETH on mainnet and waits for messages to validate their request before they collect it on Optimism, the Across user says “I have 1 ETH on mainnet and want to collect 1 ETH on Optimism from whomever can fulfill my order quickly and cheaply.”

Why intents will shape the future of bridging

Intents is a relatively emergent concept in crypto, first catching on as a way to solve MEV. Across and other solutions like UniswapX have also adopted intents-based designs, but we could see intents models appear across the space in the future.

The cross-chain ecosystem is becoming more complex. Intents help abstract away the complexity for regular users, offering meaningful savings and a better user experience.

Intents designs can also make crypto more accessible. It’s not hard to imagine a future where experienced market makers increasingly fulfill requests for regular users, whether that’s moving assets across chains, bidding on high-value NFTs, or other activities on their behalf.

The cross-chain ecosystem is also expanding, as the space welcomes new entrants and new chains like Base continue to attract volume. This means bridges are here to stay. If we assume that transferring value will remain the primary use case for bridging, we can also deduce that intents-based systems will become widely adopted in the future.

When bridges use an intents-based framework, the user asks for something to happen at a destination, and relayers compete to make sure that “something” happens at the best price, as fast as possible. This provides a better user experience.

Across’ growing market dominance gives credence to the thesis that intents-based systems will lead the market in the future. Across accounts for roughly 30% of bridge volume* today, trailing only Stargate. Its market share has grown throughout 2023, in large part because its intents-based design enables it to win on price and speed.

To sum up, bridges have different ways they can help users transfer value. While some solutions have successfully used onchain liquidity and DvP mechanisms, intents designs and offchain liquidity offer significant benefits. As fundamentals become increasingly important, it’s likely we’ll see intents designs thrive.

We believe in a future where trillions of dollars in value flows through bridges and solutions that provide the best user experience win. If we’re right, intents-based systems like Across look set to dominate the cross-chain ecosystem for many years to come.

This piece was compiled with contributions and editing from Ryan Carman, Across Product Lead and Hart Lambur, UMA co-founder.

*This figure is based on chains and tokens Across currently supports. It also excludes canonical bridges as regular users typically favor non-canonical bridges.

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