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Ethereum Beacon Chain Hiccup | Uniswap Replica on Bitcoin | Jumper Joins Alpha Insider's Spring Campaign & More!
Last Week In The Multi-Chain Ecosystem (08 - 14 May '23)
Welcome to LI.FI’s Cross Chain Insider newsletter. If you want to join this community of cross-chain aficionados learning about bridges, interoperability, and the multi-chain ecosystem, subscribe below.
The 1st dApp based on zkRouter, a ZKP-based cross-chain bridge between Ethereum and Fantom, is now live on testnet.
Jumper announced that it will be joining Alpha Insider’s Spring Campaign which starts on 15 May exclusively on Layer3. Other participating projects include CoinStats, Paraswap, Instadapp, Polynomial, and Connext.
deBridge has launched DLN (deSwap Liquidity Network) API, a complete solution making it easy for devs to interact with the DLN protocol and build cross-chain experiences.
Across has officially deployed oSnap, an optimistic governance solution developed by UMA protocol and Snapshot Labs. This gives the community equal power to execute governance results, allowing anyone to execute txs for Across onchain (after a snapshot vote has passed).
cBridge has added support for bridging native $CANTO between Ethereum, BNB Chain, Polygon, Optimism, and Arbitrum. Users can now bridge $CANTO 1:1 between these chains using cBridge.
Multi-Chain Ecosystem Updates
The Ethereum mainnet was unable to fully confirm transactions for about 25 minutes on Thursday, 11 May, with blocks getting proposed but not being finalized. During this time, users’ transactions were still going through but were at the risk of being altered in case the chain reorged and transactions were to be reverted.
Trustless Market, an AMM protocol based on Uniswap, is now live on Bitcoin enabling users to swap BRC-20 tokens.
Neutron Chain, the first consumer chain to adopt Cosmos’ Replicated Security model, is now officially live and producing blocks. Powered by the Cosmos SDK, Neutron Chain enables developers to deploy smart contracts that seamlessly interact with various protocols and appchains, fostering a highly interoperable environment.
Chiliz Chain, an EVM-compatible L1 built for sports and entertainment, is now live. Projects on the blockchain will include metaverse games, football and football manager games, AI-based content platforms, among others. All fees on Chiliz Chain will be paid using Chiliz native token $CHZ.
Maker Endgame is a series of 5 major product launches that aim to take Maker to the forefront of DeFi and AI innovation. Here’s what is planned for MakerDAO:
Phase 1: a new unified brand for the ecosystem — to be launched within several months.
Phase 2: launch of the first 6 Maker SubDAOs and their token farms — to be launched some months after Phase 1.
Phase3: production-grade AI tools for governance monitoring and improvement.
Phase4: Sagittarius Lockstake Engine (SLE) to incentivize governance participation.
Phase5: deploying Maker’s NewChain that houses all backend logic for SubDAO tokenomics and MakerDAO governance security.
Ethereum, Finality and Bridges
On Thursday, May 11, Ethereum’s Beacon Chain encountered an unexpected problem that disrupted transaction finality for approximately 30 minutes. During this time, Ethereum Mainnet could not achieve block finality; new blocks were still being produced, but because of the technical issue, they were not being finalized.
Despite the hiccup, Ethereum resumed functioning with finalized transactions shortly, thanks to the network’s client diversity.
Finality is an important property for blockchains because it allows dApps and users to trust that their transactions are secure and irreversible. This impacts all types of protocols, but for cross-chain bridges in particular, finality issues are a fundamental concern and the worst-case results can be catastrophic.
Luckily, no major issues related to bridges were reported during this time. But, it’s important for us to understand how finality in blockchains impacts bridges. Let’s dive in!
Understanding the Term Finality
The term "finality" refers to the concept that once a transaction or a block of data has been added to the blockchain, it is considered irrevocably confirmed or confirmed with some negligible probability of being reversed or altered.
Most blockchains, including Bitcoin and Ethereum have probabilistic finality, i.e., the probability of a transaction being reversed decreases as more blocks are added to the chain. Different chains take different approaches to ensure that a block won’t be reverted after some point in time. For example, in Bitcoin’s case, after 6 confirmations, a transaction is considered 99.99% likely to be irreversible.
It’s important to understand here that a block with 6 confirmations isn’t any different from blocks with lesser confirmations. It simply represents a point where the wait time is considered sufficient enough for most practical use cases to safely determine that the probability of a transaction being reversed is unlikely.
Even after a transaction has achieved "probabilistic finality," there are rare cases where the blockchain community may collectively decide to reverse transactions for the greater good. For example, during the Ethereum DAO hack, the Ethereum blockchain was hard forked to revert the attacker's transactions by going back to a block before the hack occurred. This decision was made even though the blockchain had already achieved finality.
Therefore, due to the rare chance of a blockchain experiencing a reorganization based on social consensus, or instances like the recent technical difficulties faced by Ethereum where there was a lack of finality for 25 minutes and an hour on Thursday and Friday, respectively, along with the varying finality times across different blockchains, there exists a fundamental security limitation when it comes to bridges.
These limitations have led many individuals, including Vitalik, to have a pessimistic outlook on cross-chain applications.
Let’s understand these concerns in more detail.
Finality & How it Applies to Bridges
Bridges are designed to enable the coordination of state changes across multiple blockchains. This coordination involves transmitting state information from one blockchain (known as the source chain) to one or more other blockchains (known as destination chains), and subsequently implementing the required state modifications in those blockchains.
For this process to work effectively, two fundamental assumptions are made.
1) the source chain’s state is considered valid and final
2) the chain can perform the required state changes in a timely manner (without significant delays)
Everything would work fine if bridges could just wait long enough for chain’s to have 100% confirmed finality before executing transactions on different chains.
However, we live in a world where everything needs to be ‘instant’ or else the user experience is deemed bad. As a result, bridges have to bow down to the demand for instant bridging and make trust assumptions related to finality (as mentioned above), and therein lies the risky edge case: what happens if a chain experiences state reversion after a bridging transaction has been executed?
In such cases, bridges that move assets and data instantly (prematurely here since there’s no confirmation), the destination chain and other connected chains will have inconsistent information with the source chain which could lead to scenarios like double spending of bridged funds.
In order to fix this, the bridged transaction would need to be rolled back. This would mean reverting the source chain and the destination chain (along with the other connected networks) in order to invalidate the transaction. However, this is very unlikely to be possible given how such a problem would scale across chains.
As a result, even with Ethereum’s recent technical issue and period of no finality, attackers could’ve possibly bet against the chain resuming operations without a reorg and bridged large amounts of funds to wreak havoc.
Moreover, since bridges continued to operate as they would under normal circumstances — executing transactions after x number of confirmations (varies for different bridges) and released the funds on destination chains, if Ethereum had reorged:
LPs would’ve lost their locked funds in bridges whereas,
burn and mint bridges would have inconsistent balances on source-destination chains, meaning there would be less funds backing the bridged funds resulting in cascading inconsistencies across DeFi ecosystems of several chains.
Therein lies the inherent security limitation to the security guarantees that bridges can offer.
How Can Bridges Address Finality Issues?
If we believe the space will continue evolving with multiple chains and bridges that connect them, how do we design bridges that can address some of these fundamental attack vectors? Here are some of the ways and considerations:
Communicating only the states that have been finalized in the source chain by trading off speed for security.
Hybrid verification of transactions using conditional transfers to remove the risks away from the users — here, the finality risk is borne by LPs whereas the users receive their assets instantly on the source chain in exchange for a fee.
The likelihood of chain reorgs, hard forks, is higher in chains with less decentralization, lower economic security, and few validators. As seen in Ethereum’s case, the network was able to resume operations because of the decentralization owing to client diversity. Thus, by connecting blockchains with sufficient security and decentralization, bridges can reduce the impact of finality failures in one chain by limiting its contagion to other chains.
Using rate limits and caps on transaction size to mitigate the potential impact of such failures.
For blockchains with deterministic finality (100% guarantee that transactions cannot be reversed) like Algorand and Solana, one can consider building and using bridges that support deterministic finality.
The recent finality issues in Ethereum's blockchain did not result in significant problems as the network eventually achieved delayed finality, thereby preventing the exploitation of security concerns associated with bridges. Nonetheless, it serves as a crucial reminder for bridges to remain vigilant and implement strategies that effectively mitigate such risks.
If you’re interested in learning more about bridges, finality, and bridge security, you must check out:
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