My previous article focused on cross-chain bridges, what they are and how they are built. You may also hear similar terms thrown around: multi-chain, omnichain, internet-of-chains, layer zero, and chain-of-fools. I’m with Aretha on this, I know it ain’t gonna last, but I’ll degen yield farm while I can. Like she said:
“One of these mornings
The chain is gonna break
But up until the day
I’m gonna take all I can take, oh hey”
First, how did we get here from Bitcoin?
It’s actually simple, people wanted to trade Bitcoins for other stuff, and swapping isn’t native to the Bitcoin network. In 2010, someone put a post on Bitcointalk.org about creating an exchange. Thus, out of the decentralized, immutable, trustless miracle that was Bitcoin, came back the ugly thing that always haunts us: centralize it and trust your fellow humans to do the right thing.
Eventually, people started thinking about how to exchange Bitcoin for new coins like Litecoin and eventually to use its value on Ethereum. But separate chains can’t communicate, so a custodied solution is needed, like an exchange; or a new concept called a smart contract bridge. It took nearly 10 years until Wrapped Bitcoin was developed; the tech needed to use “Bitcoin” on Ethereum. With it came ways to make multi-chain more decentralized and trustless, but we haven’t quite achieved it.
When Vitalik Talks…
Vitalik wrote a post earlier this year on why the future will be multi-chain, but not cross-chain. In this post, he railed against bridges between different blockchains as fundamentally insecure. Yet said that two blockchains with different values and benefits should exist independently. He highlighted that, “it’s always safer to hold Ethereum-native assets on Ethereum or Solana-native assets on Solana than it is to hold Ethereum-native assets on Solana or Solana-native assets on Ethereum.” He also said this just weeks before the $320 million Wormhole hack, then double that amount in the Ronin bridge hack, raising eyebrows that Vitalik has magical predictive abilities.
In that post, he means that multi-chain is the future. Separate but equal in a way; keep your assets on your side of the fence. As a leader, he has the position to philosophize on visions of the future and the clarity to be taken seriously. Many of us, however, are simple grunts and might just build something because we can, or we’re paid to. If I were as rich and moral as Vitalik, I would also say that there should be a single protocol that handles all digital assets. I don’t think that’s Ethereum, however.
The desire to go cross-chain will never just dry up. Immigration has always had safety risks that went with the opportunities. People like to move around, their bodies or their assets, and assess those risks themselves. This blockchains-as-nations / bridges-as-immigration concept has been used before, but I’d like to reach for a biophysical analogy, osmosis.
The Osmosis Analogy
Salts and sugars in solution will diffuse away from areas of high concentration into the surrounding solution. This is simple diffusion. If a solution is hypertonic, containing more salt, and there’s a membrane between it and a hypotonic solution with less salt, the salt will move. You can’t stop it unless you make that membrane impermeable. Biological cells manage this chaos with semi-permeable membranes–they let water move, but they control channels to decide how much salt to let in or out. While there are assets on one chain, and opportunities on another, those assets will probably always move just like salt does. You can’t physically contain the assets as long as a way for bridges exists.
It’s Assets Locked In Smart Contracts…
Of course, these assets aren’t working as physical entities, which is where the risk comes from. They’re just balances locked in a smart contract on one side, and balances minted or cloned on the other. The smart contract could be exploited and then there’s no way to get your real asset back on its native chain. So even if you had an off-ramp, it’s unlikely you could ever turn that wrapped asset into real money to pay your vet bills with.
Bridges need systems that severely disincentivize something going wrong
But I like this osmosis analogy. So much value on one chain just physically has to spill out to the other chains. Like evolution has, we should design channels cross-chain that allows for the safest possible passage of the asset. If blockchains had enforceable laws, like countries, that would be one thing. They don’t, they have code-as-law, crypto-economic incentives and risk models. Bridges need systems that severely disincentivize something going wrong, and users need to be aware of the risks.
Users need to be aware of the risks
The risks are intense. You put any amount of money into a smart contract, and make it public, and it will be immediately and thoroughly attacked by exploiters wanting to steal it. You give humans a little anonymity and they are ruthlessly incentivized to steal. It’s not just slimy jerks who like to steal, but often people are white-hat hackers, or even government workers whose job it is to find exploits. North Korean government hacker groups have reportedly stolen billions of dollars of crypto to fund missile programs. Hell yes they are going to try to crack the multisig to your bridge!
What just might be crazy enough to work!
Super complex beasts were eventually built to solve cross-chain liquidity. The purportedly most complex solution, that could be “just-crazy-enough-to-work,” is Thorchain. It reads incoming transactions from L1s like Bitcoin, and uses its own economically secure middle-chain to store the state of the transaction, while it then also deals with a second L1 like Litecoin. The result being that you can custody your own Bitcoin and swap it to your own custodied Litecoin. It’s not exactly a bridge, but the smart contract risk is still there. Savvy Cross-Chain Bridge Developers know to consider these solutions.
Boo! Along come the Gh0stly Ghosts, to haunt everyone who ever had a cross-chain vs. multi-chain debate. These are the first “omnichain” NFTs. Minting one of them on a source chain also allows it to be registered on any other chain in the LayerZero network. Currently that is 7 EVM chains, but the Canadian company, LayerZero, intends to expand their system to Cosmos chains, Solana, and others. While everyone else was building bridges, LayerZero was working on a global super-passport and air-traffic control that allows communication between all sorts of chains at once. They’ve focused more on the communication problem, the interoperability layer (layer zero), rather than the bridge problem. I think omnichain NFTs are cool, as they can have traits that are activated depending on the chain it is on.
Is it a pointless debate?
Humans are inherently explorers. I’m not sure why we desperately need to cross the Atlantic, blast off to Mars, or wrap our assets on different chains. But I know that we will.
That’s why I feel it’s a pointless debate. Better to ensure we build good boats, rockets and blockchain interoperability protocols than to philosophize on the necessity of doing so. Yes, we will get hacked, and unfortunately we will also probably die on Mars. Which won’t stop us—apes will be apes. We’re a link in a long chain-of-fools.