Chainlink Cross Chain Interoperability Protocol — One Solution to Connect Them All

Recently, the Chainlink team announced that they are testing and auditing the Cross Chain Interoperability Protocol to launch it in 2023. CCIP can become a driver of a new bull market and unite disparate blockchains into a true ecosystem.

In this article, we will explain the problems of current cross-chain solutions, why Chainlink is close to solving them, how the Cross Chain Interoperability Protocol will work, and what applications can be built with it.

Why do we need cross-chain solutions

There are 68 major blockchain protocols we can name from memory and 70+ more mentioned on CoinMarketCap. They are all different. Each network has its own balance between centralization, speed and security, not mentioning different virtual machines. One ecosystem has more money, another has better throughput, and a third has a more active creator community.

It would be nice to combine them and give users the opportunity to benefit from each blockchain’s strong side. But it’s harder than it looks.

For example, Tether issues the USDT stablecoin on 13 networks, each of which implements tokens differently. There is no simple way to send USDT from Ethereum to Tezos blockchain, as they are not interchangeable. The user willing to do so has to swap his USDT on an exchange or to use a cross-chain bridge.

Cross-chain bridges in fact do not move tokens between blockchains, but just wrap them. The user has to deposit his USDT on Ethereum to a bridge smart contract. Then the bridge’s operators on Ethereum validate his deposit, mint the same amount of wrapped USDT on Tezos and send them to the user’s Tezos address.

What are the problems of current cross-chain applications

While cross-chain bridges allow the movement of tokens between networks, they have disadvantages:

• subject to attack. By Chainalysis data in 2022, hackers stole over $2 billion from various cross-chain bridges;
• not universal. Bridges between blockchains with different virtual machines are usually custom made and cannot be easily connected to other networks. Also, each bridge has a set of tokens it works with, so the user will face problems trying to fungible tokens out of TOP-50 or NFTs;
• only good for asset bridging. There is no real cross-chain communication like calling any smart contracts from other chain;
• centralized. Each bridge has a set of validators, usually trusted by the community, but still too small to be considered decentralized and trustless.

Chainlink Network is already rid of the lack of centralization and security. There are 300 nodes operating in the Decentralized Oracle Network with $20 billion in value secured by Chainlink — more than any cross-chain bridge has. This is the foundation that Chainlink developers are planning to use for an ultimate solution for cross-chain operations — Cross Chain Interoperability Protocol or CCIP.

The CCIP will provide asset bridging via Programmable Token Bridge, and also will allow a user from chain A to call any smart-contract from chain B just by sending a message cross-chain.

How Chainlink Cross Chain Interoperability Protocol will work

Chainlink is already operating cross-chain, collecting data from off-chain and on-chain sources, computing them off-chain and supplying them to multiple blockchains using the Decentralized Oracle Network.

Cross Chain Interoperability Protocol or CCIP is an open-source standard that will allow smart contracts on one blockchain to send and receive data from a smart contract on another blockchain.

Technically CCIP is a part of the Cross-Chain Tech Stack the Chainlink team is working on. The stack will include:

• user interfaces — to standardize connection to cross-chain services;
• CCIP as a messaging layer — to call smart-contracts and receive responses;
• Anti-Fraud Network — to look for malicious actors and act as an emergency shutdown switch for particular and secure user’s funds in case of black swan events;
• Decentralized Oracle Network and OCR 2.0 — for reaching consensus on cross-chain operations and securely deliver data to blockchains;
• Programmable Token Bridge — a reference bridge implementation to move assets across chains.

This tech stack will allow developers to create hybrid smart-contracts that utilize the strongest features of every major chain.

How will blockchains benefit from CCIP

There are many use cases for cross-chain possibilities the CCIP will provide.

Better user experience. By delivering messages to any network, CCIP might allow users to use just one wallet and address to work with many dapps on any chain.

Secure bridging of assets. Anti-Fraud Network and OCR 2.0 will allow the transfer of tokens across chains with a new level of security, eliminating the need to use centralized exchanges.

Cheap computation. The developer deploys two smart-contracts: one on a fast and cheap chain with lack of liquidity and one on a slow and expensive chain with a variety of assets and great user activity. Computations are being processed on the cheap network and resulting data is sent back to the expensive one, so the users are paying less fees for using the dApp.

Cross-chain DeFi. The user can lock his assets on a slow and expensive chain and take a loan on a fast chain to use them for trading, or to diversify his investments and stake his tokens on a few different DeFi projects on different blockchains.

Cross-chain NFT shopping. A user can transfer his tokens to the destination chain, swap them for an interesting NFT and transfer it back to the source chain to the user’s wallet.

Conclusions

Cross Chain Interoperability Protocol will be a major breakthrough in the blockchain ecosystem, just like the SWIFT was for the international banking system.

Adoption of technology depends not only on its useful impact, but also on cost if its development. It is faster to adopt an open-source standard, when development of comparable solutions will cost too much and will give questionable interoperability with projects, who already adopted it.

Chainlink Network has the authority, expertise and infrastructure to launch CCIP and become the mainstream solution for cross-chain communication on day one. Prophet One will be waiting for it to become one of the early adopters and service providers for CCIP.