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An Overview of Cross-Chain Solutions

Cross Chain

While people are constantly arguing about which blockchain solves the blockchain Trilemma and has the best future, cross-chain solutions provide a bigger perspective, adding interoperability between different blockchains and allowing blockchain platforms to share data and communicate with each other.

Instead of digging deep down into the specific technical features of each cross-chain solution or introducing some interesting side effects of their impact on another layer 1 blockchains, this article serves the purpose of introducing 4 different cross-chain solutions: Cosmos, Polkadot, Axelar and LayerZero, and share some insights on their ecosystems and challenges. 

TVL leaving Ethereum
Total TVL leaving Ethereum to other chains has expanded dramatically over the past year.

Introduction of Cross-chain Solutions

Cosmos was initially founded in 2014 with the aim to create a network of crypto networks united by streamlining transactions between different chains. The Cosmos network consists of the application, networking, and consensus layers, and features the Tendermint BFT engine.

Essentially, Tendermint BFT is a consensus algorithm that provides a high-performance, consistent, secure PBFT-like consensus engine, ensuring scaling of public proof-of-stake blockchains. In the Cosmos network, there are two main parts: the hub and the zones. The hub serves as the central chain, and each zone is a blockchain associated with the hub. 

Founded in 2016, Polkadot was created by Dr Gavin Wood, who is the co-founder of Ethereum. The mission of Polkadot is to provide a solution for connecting and communicating between parallel blockchains on its network.

The entire protocol has two consensus algorithms: Proof-of-Authority and Proof-of-Stake. One of the key components within Polkadot’s infrastructure is the relay chain, which performs validation and allows Parachain to communicate with other blockchains and Parachains. As its name suggested, a Parachain run parallel to the relay chain, and is able to parallelize transaction and data processing, achieving greater scalability. 

Axelar was introduced in 2020 with the heart to build a decentralized state machine responsible for facilitating heterogeneous cross-chain solutions. The core protocols for Axelar are CGP (Cross-Chain Gateway Protocol) and CTP (Cross-Chain Transfer Protocol).

Axelar first uses the BFT Byzantine consensus protocol to build a third-party chain. Axelar then uses CGP and CTP for state synchronization and asset transfer, moving the information from other chains to Axelar network. Lastly, Axelar, by using cryptographic protocols, transmits all information to other chains through nodes. 

LayerZero

LayerZero made its appearance in the web3.0 environment with a spotlight. Founded in 2021, LayerZero is a cross-chain information infrastructure, focusing on a lightweight communication layer-based solution.

LayerZero introduced the Ultra-Light Node, combining the security of a light node with the cost-effectiveness of middle chains. Such infrastructure is built with the support of the Oracle and the Relayer, two parties that transfer messages between on-chain endpoints.

As LayerZero’s information verification only needs to obtain specific transaction events and block headers on demand, LayerZero’s terminal can be extremely lightweight and cost-efficient. 

LayerZero’s information

 

Competitive Analysis

Competitive Analysis

Despite the rise of Axelar and LayerZero in later years, Polkadot and Cosmos are still the projects with the largest volume and the biggest ecosystem. Previously, we discussed the fundamental model and architecture of Polkadot and Cosmos. Now, let’s take a step forward and analyze the usage of their technologies.

Polkadot has the most complex technical schemes out of all solutions as the developers need to establish a cross-chain system with BTC, ETH, and other heterogeneous chains. Many of the promising projects in the Polkadot ecosystem are based in China. This leads to greater challenges due to Chinese policies and regulations towards crypto and web3 development. Polkadot is coded in Rust.

This brings out another concern of attracting developers. Because it faces direct competition from Solana and Near Protocol. With all challenges concerned, Polkadot will face a lot of difficulties to reach its ideal ecosystem. 

Compared to Polkadot, Cosmos’s algorithms and architecture are more flexible, resulting in a greater adoption rate of applications. Throughout the years, we witnessed many promising projects born and rise in the Cosmos’s ecosystem, including Terra (we all know what happened).

However, the biggest challenge for Cosmos is its development. Many star projects on Cosmos are actually created by members of Cosmos’s core team. Despite the success of such projects, Cosmos has delayed its platform development and update by facing competition directly from its own ecosystem. 

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