Composable Finance
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Composable Finance

DeFi’s Future remains Cross-Chain, enabled by Cross-Chain Governance

There has recently been some debate in the DeFi space as to whether the future of the industry is multi-chain or cross-chain. Along with Composable Finance, more than ever, I believe that the future of this ecosystem is cross-chain and that many arguments to the contrary are inaccurate or unfounded. Moreover, I believe that cross-chain governance, as facilitated by Composable, is needed for a cross-chain DeFi space to even be possible, and will mitigate many of the concerns associated with cross-chain operations.

Here, I provide a counter-argument for the claim that DeFi will be multi-chain, rather than cross-chain. I further discuss mitigations for concerns associated with cross-chain DeFi operations, including the cross-chain governance that has yet to be implemented by any other protocol and is being constructed by Composable Finance.

The Cross-Chain Ethos

Composable recognises that cross-chain communication is not just about one’s ability to transfer assets and propagate messages across different ecosystems. The overall intention for a cross-chain space is the ability to communicate cross-chain. While that may be self-evident, it is important to reiterate; this communication itself can unlock a multitude of new use cases within the siloed multi-chain framework that currently exists. What Composable ultimately envisions is a cross-chain communication infrastructure that births generalizability and blockchain-agonistic behaviour for the broader ecosystem, as I have previously discussed.

This is the underlying compass that directs our steps and dictates the path we take. Comparing the benefits and vulnerabilities of cross-chain operations, the arguments for a multi-chain future, such as those set forth by Ethereum Co-Founder Vitalik Buterin here, are far outweighed by the arguments for a cross-chain future.

Working to Improve Cross-Chain Infrastructure — Not Just Giving Up Whenever Issues Arise

New technology rarely gets it perfectly right on the first try, and bridges are no exception. Thus, the flaws found in current bridges are not a reason to give up on the whole idea entirely. Instead, they are a reason to double down on improving the bridge infrastructure available in DeFi, given the vast potential bridges have.

Initial limitations should not mean shunning the entire ideology of creating an interoperable cross-chain environment that is scalable and void of the constraints presented by the current multi-chain framework — consider how many incredible pieces of technology we would not have (in DeFi and beyond) if we had given up on them when they were not perfect right from the start.

Addressing security concerns in bridges

In the present state of DeFi, Vitalik is right in his remarks that it is safer to hold Ethereum-native assets on Ethereum or Solana-native assets on Solana. However, that would limit the utilities of these assets compared to the greater utility and productivity these assets may unlock in an entirely new environment.

Therefore, we should explore how to properly execute so that the layer or chain we house our assets on does not correlate with the security of our assets. Composable is doing just this, working on a solution that allows for interoperability in addition to security, seeking to mitigate the aforementioned concerns voiced by Vitalik. For this reason, we have decided to build in the Dotsama ecosystem, securing parachains on both Kusama and Polkadot. Dotsama alleviates many of the vulnerabilities present in other ecosystems by allowing other chains to leverage its relay chain for shared security and its validation process.

Further, the nascency of bridge solutions and the constantly evolving space results in the security breaches we see now and then with bridges, and is not inherent to the concept of bridges themselves. These security limits of bridges that currently exist are key reasons to improve the framework and, more importantly, the execution of cross-chain enabling technologies. Composable strives to address these problems rather than dismissing the cross-chain possibilities of this sector.

We believe that the vulnerabilities and potentials of a network hack through cross-chain applications should be addressed by improving the execution and not focusing on the assets themselves. After all, the ethos of cross-chain communication also sufficiently concerns the decoupling of crypto-assets and their manifesting, underlying blockchain

Addressing chain-specific 51% attacks that may affect bridged assets on another chain via cross-chain governance

Polkadot’s allowance for cross-chain governance sufficiently addresses Vitalik’s concerns of a 51% chain attack in a cross-chain scenario. Consider a scenario where chain A gets 51% attacked. Validators can vote to freeze the bridged assets on chain B almost immediately if an honest relayer submits an equivocation to the bridge. When the 51% attack is over, Chain A can then initiate a governance vote on which header is actually valid and un-freeze the bridge assets.

Overall, the existing multi-chain framework is imperfect. While it is more secure than currently available cross-chain tools, the multi-chain framework provides users with little flexibility and minimal opportunity for interfacing between different protocols. Composable Finance and other protocols focused on true interoperability are developing solutions to mitigate the risk involved in cross-chain activity while opening up the benefits associated with it.

It is our position that we should not toss away the unbelievable potential that a cross-chain world can provide. Instead, we should tackle the obstacles head-on with aggressive innovation by identifying the shortcomings to develop superior solutions.

Further Exploring Cross-Chain Governance Consensus through Mosaic

Cross-chain governance is another feature that is missing from current cross-chain infrastructure, and is holding us back from the cross-chain future. This interoperable governance is being developed by Composable Finance as a central part of our Cross Chain Virtual Machine (XCVM), and will enable complete and seamless cross-chain operations.

Cross-chain governance is of particular importance to sharded applications with instances on a variety of layers and chains. Sharded applications are becoming the norm for many dApps. SushiSwap, for example, is now deployed onto 13 chains/layers. For these kinds of applications, bridges between chains help to propagate the seamless transferral of assets. Yet, there is still a missing piece to unifying sharded applications — a governance model that operates across and between L1 blockchains.

Mosaic, which acts as a liquidity layer and an EVM gateway for Kusama and Cosmos assets to be bridged to Ethereum-compatible chains, fills this niche. Mosaic explores the concept of cross-chain consensus when bridging assets across chains. With Mosaic, a validator can “vote” on a specific network, and then these votes are synced with the other layers, so that sharded applications can be unified.

With our newly procured Composable Parachain, we provide a more secure environment for orchestrating for our XCVM and Routing Layer that allows cross-chain solutions building atop our tech stack to power blockchain-agnostic functionalities. Both these critical pieces of our technology components thrive on our Polkadot parachain. Our XCVM plus Routing Layer provides a single intuitive interface for orchestrating the interaction with different bridges, managing routing, initiating callbacks into smart contracts, reliability, finality — and the cross-chain governance capabilities currently sorely lacking in DeFi.

Summary

Composable Finance remains a firm believer in the cross-chain future of DeFi. While it is clear that current options for cross-chain transactions in the space have limitations, we believe that there are clear and significant benefits of a cross-chain ecosystem. Therefore, as a community, we should not be giving up on the idea of a cross-chain space, and instead should be working to improve the current limitations in cross-chain tooling.

Composable is doing just this, working to build superior infrastructure for a cross-chain industry. This is accomplished through technology including the Composable XCVM, which interfaces and communicates with several ecosystems through a network of bridges, mindful of specific parameters that users and developers alike can specify. Our Routing Layer further generates an incentivised pathway selection to allow for users to perform actions in an ecosystem agnostic manner. This layer will access all of the possibilities for a given action across all potential layers and chains and efficiently selects the most optimised pathway for the end-user.

The end result of Composable’s technology is a robust cross-chain ecosystem facilitating blockchain-agnostic functionalities between applications. This allows projects more granular, lower-level access to our cross-chain APIs and more advanced logic related to the block life-cycle, storage, and cryptographic primitives, such as the cross-chain governance currently missing from the space.

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If you are a developer with a project you think fits our ecosystem and goals, and you would like to participate in our interactive testing landscape at Composable Labs, reach out to me on Telegram at @brainjar.

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