Cross-Chain Interoperability | SnapFingers Weekly #12

SnapFingersEditor

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SnapFingers

11 min readSep 30, 2021

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📂 Key Takeaways of the Week

The fast-growing cross-chain bridges to implement interoperability between different networks and blockchains.
Value Capture in Web3.0 infrastrucutre, key points of the article How dApp Value Capture Will Distribute Across Decentralized Infrastructure

📂 №1 Potential areas

The fast-growing cross-chain bridge

There are now over 100 existing active public chains in the crypto market and over 40 cross-chain bridge projects up to the beginning of September. These cross-chain bridges are designed to implement interoperability between different networks, as it is an information transmission system between two blockchains or multiple blockchains.

The design of cross-chain bridges is generally divided into four main segments:

Monitoring: monitor the state of the chain
Message transfer/relay: transfer the information from the source chain to the target chain
Consensus: consensus needs to be reached between participants monitoring the source chain in order to relay the information to the target chain
Signature: encrypt and sign the information sent to the target chain

There are four types of cross-chain bridges:

Asset-specific (specific to an asset): usually wrapped assets. These assets are usually “wrapped” assets, which are fully mortgaged by the underlying assets in custody or non-custody, such as WBTC and tBTC.
Chain-specific (specific to a certain chain): A cross-chain bridge between two blockchains. The main operation is to lock and unlock the tokens on the source chain, and mint and encapsulate assets on the target chain, such as Polygon’s PoS Bridge, Arbitrum Bridge, Binance Bridge, and Rainbow Bridge.
Application-specific (specific to a certain application): Such as Compound Chain and ThorChain, which build independent blockchains dedicated to cross-chain lending and transactions. Or cross-chain fusion trading (THORSwwap, AnySwap, O3swap) which implements cross-chain asset exchange through constructing a cross-chain transaction pool. However, it is difficult to extend this function to other applications and this type of cross-chain bridge can only be used in this application.
Generalized: A protocol designed to transmit information across multiple blockchains, such as Cosmos’s IBC protocol, which is used to send messages between two heterogeneous chains (with guarantees of final confirmation).

Blockchain Bridges

Building Networks of Cryptonetworks

medium.com

Scale of cross-chain bridges

Up to Sep. 22, the total locked position of ETH cross-chain bridge reached $7.15 billion, 46.2% up in 30 days. Arbitrum Bridges is an ETH cross-chain bridge with the highest locked position, taking up 36% of the total. (Dune Analytics)

In the past month, Avalanche, Fantom, and Harmony launched their own liquidity mining program to compete and attract funds. The Arbitrum bridge is the most fast-growing in that it locked $22 million on September 1 and was up to $2.58 billion in 20 days.

Security of cross-chain bridges

While it is convenient that cross-chain bridges promote on-chain interaction, they are also vulnerable to hackers as the need for on-chain trading and the fund in custody increases. On this Monday (Sep.20) cross-chain protocol pNetwork was attacked by hackers, which caused a loss of over US$13.08 million. In July and August, there were 3 accidents where cross-chain applications got hacked, among which O3 Swap lost US$610 million due to the cyber security vulnerabilities of its infrastructure PolyNetwork, the biggest loss in DeFi’s hack history.

📂 №2 Potential areas

Value Capture in Web3.0 infrastructure

Web3.0 Tech Stack:

L0- The bottom layer is the P2P transmission network
L1- The upper layer is the final settlement layer, that is, various public chains
L2- Includes off-chain data, computing services, and oracle middlewares; the purpose is to increase performance
L3- The developer API layer
L4- Applications located at the fourth layer

Web 3.0 applications need to be built on a series of infrastructure, including:

Storage:

dApps require storage solutions to host user interfaces (UI) so users can interact with dApps in their web browser. Website hosting can be done through traditional cloud services like AWS or decentralized alternatives like Ethereum Name Service (ENS) and the InterPlanetary File System (IPFS).
Applications such as social media and streaming media need to store text, pictures, and videos on a centralized server or a decentralized storage network (Filecoin, Sia, Arweave, etc.).

Computation:

Each dApp has smart contracts with logic that need to be processed before the final state change is generated.

dApps on high-throughput blockchains may simply run computation and settlement together on-chain.
Decentralized blockchains are beginning to separate the computation and settlement processes. Separation is achieved by computing transactions off-chain in layer-2 networks, then batching those transactions together (e.g., rollup) and settling them on-chain via a single aggregated transaction.

Oracles (Hybrid Service Layer):

Generalized oracle networks like Chainlink can be leveraged to provide dApps with any type of hybrid service — off-chain computation that uses decentralization, cryptography, financial incentives, and/or trusted hardware to provide highly secure and reliable services for smart contracts in a manner that’s verifiable and enforceable on-chain.

External APIs (Off-Chain Resource Layer):

External APIs are defined as any system or network existing outside the dApp’s underlying blockchain that natively generates a unique form of value, whether that be valuable data or services. eg: dApps creating in-demand services like The Graph’s on-chain data indexing to support UIs or other blockchains for external payments.

How dApp Value Capture Will Distribute Across Decentralized Infrastructure

Decentralized applications (dApps) are a new type of digital application built on blockchains. Unlike most Apps today…

smartcontentpublication.medium.com

SnapFingers compiled the top recent headlines, 50 in total.

📂 №1 Market Data

#Overall Market

Bitcoin fell sharply on Monday (Sep.20th), down 6.5% from last Friday (Sep.17th), and ETH dropped 8% during the same period. On September 20, Forbes reported that the cryptocurrency market has recently experienced volatility, and other assets such as stocks and commodities have also fallen. After combining the opinions of some crypto analysts, it is found that the Fed’s September interest rate meeting may be another reason for the collapse of the crypto market.

What Can We Learn From Today's Crypto Market Crash?

Cryptocurrencies suffered widespread losses today, falling in value as other assets like stocks and commodities…

www.forbes.com

#Ethereum

On September 15, the total value of burned Ethereum exceeded $1 billion for the first time. The application that burns the most ETH is OpenSea, which accounts for about 14.2%.
The number of unique addresses on the Arbitrum network exceeds 150,000 (arbiscan.io, Sep.22nd), and the total value locked is $2.1 billion (l2beat, Sep.22nd), accounting for 70.8% of Rollup’s total value locked.

#Bitcoin

From August 23 to September 12, MicroStrategy purchased another 5,050 bitcoins at a total price of $242.9 million.

#Institutional reports

CoinShares Research: The total capital inflow of cryptocurrency investment funds last week was $42 million, which has achieved net inflows for five consecutive weeks. The Solana Fund’s inflow of $48 million last week was not affected by the attack incident.

📂 №2 Project Developments

#Ethereum #Layer2

Optimism will be upgraded to EVM fully compatible, and developers can use Solidity smart contracts to deploy directly. After Optimism revealed that it was about to announce big news, its network flooded with more than 10,000 independent Ethereum addresses.
Ernst & Young (EY), one of the four major accounting firms, is integrating the Polygon protocol and framework to deploy the EY blockchain solution on the Ethereum ecosystem.
Arbitrum’s permissionless token bridging function will be open to all projects on October 22.

#DeFi

On September 18, 0xMaki posted in the SushiSwap community announcing that he would resign from the leadership position of SushiSwap and become a consultant instead. Three Arrows Capital is suspected of having rushed to sell SUSHI before the news was released.
Pledge, a Fixed-rate lending and derivatives protocol based on financial NFT, launched public offering KYC certification in Tokensoft. The KYC deadline is September 27, and the public offering starts on October 5.

#New Public Chain

DFINITY ICP will be integrated with the Bitcoin network to provide smart contract support for the Bitcoin network, supporting native holding, sending, and receiving Bitcoin without bridging and cross-chaining. The implementation of the proposal is expected to take several months.
On September 14, the Solana Beta mainnet stopped producing blocks for 17 hours due to a denial of service (DoS) attack. On September 15, the network resumed block production.

#NFT

Google Cloud and Dapper Labs have established a partnership to support and expand the Flow blockchain.

Google Takes Giant Step Towards Powering Blockchain-Based Web 3

Search engine giant Google will not be refused a leadership position in powering the next generation of the world wide…

www.forbes.com

NFT trading platform Rarible announced that it supports credit card payment and can purchase 3–10,000 USD NFT.
Cross-chain transaction agreement Anyswap NFT cross-chain bridge testnet is online, currently only supports Ethereum and FTM on NFT cross-chain.
NFT index fund NFTX has launched a new version of the decentralized NFT trading market “NFTX Marketplace,” which can realize decentralized NFT transactions.

📂 №3 CeFi/Large Corporations

#Going public

Cryptocurrency exchange Bakkt and VIH have received approval from the U.S SEC to complete their merger and go public as a single traded entity. According to previous reports from CoinDesk, through this merger, Bakkt could be expected to reach $2.1 billion.

#Asset Management #Financial product

Coinbase Prime, the key crypto solution for institutions, is now open to institutional investors, providing cryptocurrency block economic service. Coinbase Prime owns all the tools and services institutions need.

The institutional clients of Coinbase include Meitu, Microstrategy and One River. The number of institutional clients has exceeded 9,000 in Q2.

Coinbase will issue senior notes worth US$2 billion to be matured in 2028 and 2031 through one private offering, which will be fully guaranteed by Coinbase Inc, a wholly-owned Coinbase subsidiary.
Crypto Index Asset Management company Bitwise applied to U.S SEC to register a Bitcoin futures ETF and will not invest in Bitcoin directly.
Skybridge Capital filed in its application to the U.S SEC for building its crypto ETF.

#Service Providers

Interactive Brokers (IBKR) — one of the largest online trading brokerages with more than $360B in assets under custody — is launching crypto access for their US customers in partnership with Paxos. Paxos Crypto Brokerage is the API solution that enables IBKR customers to buy, sell and hold Bitcoin, Ethereum, Bitcoin Cash and Litecoin.
Coinbase has filed an application with the National Futures Association (NFA) to register as a Futures Commission Merchant (FCM), planning on providing futures and derivatives trading service on Coinbase.
EY global blockchain leader Paul Brody was invited to an interview of MarketWatch: major banks will start offering “a curated selection of [decentralized finance] services in the coming three months.”

EY is establishing technologies and designing programs for some major banks and other leading financial institutions to tokenize financial assets such as stocks, bonds and real estate.

PayPal allows all British users to trade Bitcoin, Ethereum, Litecoin and Bitcoin cash.

#Title Sponsor #Cooperation #NFT+

Algorand landed a US$100 million deal of 5-year title sponsorship cooperation with Drone Racing League(DRL).
Crypto.com entered a 5-year partnership worth more than $15 million with London-based e-sports club Fnatic.
Blockchain-driven sports server Socio.com partners with Spain’s top tier football league. Blockchain sports entertainment platform Chiliz partners with NBA LA Clippers.

Socio.com is the sports entertainment blockchain server under Chiliz, a blockchain sports platform. NBA LA Clippers is the eleventh team to have ever worked with Socios.com.

Tencent issued “Chinese World Cultural Heritage” NFT: 9,999 pieces of Dunhuang.

#Mining companies

Bitcoin mining company Hut 8 Mining closes US$173 million common share public offering.
Bitcoin mining company CleanSpark is planning to invest US$145 million to build a carbon-neutral mining farm.

📂 №4 Voice and Opinions

Bridgewater’s co-founder Ray Dalio stated that if cryptocurrency can be accepted by the mainstream, regulation might take control of bitcoin.
U.S SEC chairman: Cryptocurrency lending platforms might be regulated by the securities law.
CEO of Blackrock Inc was invited to a Yahoo Finance interview: Cryptocurrency is one of the long-term assets with actual potential to raise.
Block trade expert McGlone of Bloomberg Intelligence predicted that a bitcoin ETF will be approved by the U.S SEC by the end of October. He insisted on his prediction that bitcoin price might reach $100,000 within this year despite the ongoing adjustments.

Bitcoin ETF Could Be Approved Next Month, Says Bloomberg's Mike McGlone

Alex Dovbnya In an interview with Stansberry Research, McGlone McGlone, Bloomberg Intelligence's senior commodity…

u.today

📂 №5 Project Financing