We published “The Bridge Stack 2022” this week — a 4,000-word document outlining the current state of the bridge industry. Among other things, the LI.FI research team covered bridging trilemmas, design tradeoffs, NFT bridges, and open issues/challenges for the industry.
The whole document can be found here.
You should seriously read it (and retweet it).
It is a behemoth of a research piece. Medium has it down as an 18-minute read. In fact, The Bridge Stack 2022 first draft was even larger, coming in at a startlingly long 6,000 words. That seemed a bit excessive, so we cut it down.
However, since anyone subscribed to this newsletter is probably a bridge fanatic, we thought that we’d give you a look at what was on the cutting room floor of The Bridge Stack 2022 in what we’re going to call “Cross-Chain Ecosystem Tidbits,” which covers things like App-Chains, L1s, cross-chain contract calls, and more…
So, without further adieu, here’s some fun bridging stuff that didn’t quite make the final cut :)
Cross-Chain Ecosystem Tidbits
(aka Fun Stuff Being Worked On That Didn’t Quite Fit Into The Bridge Stack Final Draft)
When it comes to trends in the cross-chain ecosystem, two specific items come to mind: NFT bridges, app-chains, and cross-chain contract calls.
Let’s take a look at each one in turn.
App-Chains and NFT Oriented L1s
App-chains are blockchains custom-built to support a single application. Examples include Ronin (for Axie Infinity) and DFK Chain (DeFi Kingdoms), which were both built to keep up with the high transaction throughput necessary for their respective blockchain games to thrive. In addition to gaming-focused app chains like Ronin and DFK Chain, there are app chains supporting DeFi use-cases. For example, on Cosmos, Osmosis is a DEX chain, while dYdX will shortly become a derivatives chain. (Author’s note: due to how Cosmos works, pretty much any dApp becomes its own chain on the network.)
NFT-oriented L1s are very similar in that they are architected with high volume, low gas fees, and a fun user experience at the top of mind. Examples include Flow, Wax, and more.
The TL;DR for app-chains and NFT-oriented L1s is that, as Synapse founder Max Bronstein wrote on Twitter, “the proliferation of app-chains will drastically increase demand for bridging.” Bronstein believes that app-chains will become more and more popular because an app-chain allows applications 1) to have more control over block space and 2) rely on their own governance process, rather than that of an entire network.
In essence, dApps that deal with NFTs and lots of transactions will require more blockspace – which is super expensive on smart contract networks like Ethereum (and can still be costly on scaling solutions like Polygon and Optimism). Furthermore, governance decisions, be it on something as innocuous as gas fees or staking rules, can negatively impact a dApp on a smart contract blockchain because it is one of many applications, rather than being the sole reason for governance on its own app-chain.
As discussed in this piece, there is no one-size-fits-all bridging solution. For app chains, there is no “correct” way to connect to the native users of Ethereum or Solana or Avalanche or Cosmos. Instead, tens of bridging solutions, from native bridges to liquidity networks to arbitrary data messaging protocols, will help the growing app-chain ecosystem coalesce into an interoperable “cross-chain” experience for users.
Miscellaneous Minutiae
The last trend is a bit of a catch-all. Miscellaneous minutiae could easily have been renamed “bridging superpowers that haven’t been talked about yet,” but, in this case, the editor lost to the author, and alliteration won out.
Cross-Chain Contract Calls
A contract call is when a user requests a specific function of a smart contract outside the bridge. Contract calls, unlike a transaction, aren’t published to the blockchain. Contract calls on the destination chain allow for more complex cross-chain strategies because additional protocols/dApps smart contracts can be called, allowing for more than an atomic swap (asset-for-asset swap).
Example: Bridges have different smart contracts on different chains. If Connext has a smart contract on Ethereum and Fantom, Connext’s contract calls allow users to swap, bridge, swap any token.
Cross-chain contract calls are the holy grail for bridging UX upgrades — with LayerZero, Connext, Multichain, Debridge, and cBridge all competing to get a working cross-chain contract call product on the market quickly.
The use-cases for cross-chain contract calls are almost endless. For example, with cross-chain contract calls, users could…
deposit USDC into a lending protocol on Avalanche while starting the transaction with MATIC on Polygon
deposit USDC/ETH into a derivatives trading contract on Perpetual Protocol in a single transaction from mainnet
purchase an NFT on BNB Chain with a OP (which is based on Optimism)
etc.
Batched Transactions
In an effort to lower gas fees and become more efficient overall, some bridges (ex: Hop) batch transactions when moving cross-chain – which cuts down on the per-user cost. To visualize why this is helpful, imagine a ferry: as the number of customers being transported rises, the cost for each individual decreases. In the same way, gas prices for bridging transactions can be distributed amongst more users, allowing for efficiencies in throughput/traffic/costs.
This is something that will only get better and more efficient going forward — and we are super interested as a bridge aggregator to see what other solutions will be built.
Closing Thoughts
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Why LI.FI?
At LI.FI, we’re building the ultimate cross-chain money lego which offers a significant user and developer experience upgrade. We have built a product that combines the power of 20 DEXs, 10+ bridges (and counting), and 17+ smart contract blockchains into a single UX. Using our product stack, we can abstract away complicated decisions for the users and developers as we can help them choose the best bridge/DEX for the cheapest, quickest, and most secure swap route.