Fundamental Insights
With the development of blockchain technology, new public chains are emerging, and Ethereum is no longer the only choice as the host chain of DApp. The explosion of DeFi applications has made the cross-chain exchange of assets an urgent need. Because different public chains are like silos, assets cannot be exchanged between them. For example, stable coins like USDT and USDC are only available on certain public chains. In order to meet the demand for cross-chain assets between public chains, various cross-chain solutions have been designed.
Common cross-chain solutions
Cross-chain with a centralized institution
This is the most primitive cross-chain approach, in which a project owner issues multi-chain tokens (i.e., tokens on multiple public chains) and enters into a partnership with a centralized institution (such as a custodian or exchange) to connect to all public chains supported by the project. When a user on a chain has a demand for assets across chains, the tokens are first deposited to that institution and then withdrawn to the target chain. In this way, there is no development volume on the factory for the project put, all that is needed is business on and expansion. However, it is not user-friendly, and users need to open an account with the institution and complete a series of KYC operations. The centralized solution not only has barriers to access licensing, and cross-chain operation is relatively inefficient, there is also a centralized institution, a single point of failure, the potential risk of privacy leakage.
Asset-specific cross-chain bridges
This is a self-built cross-chain bridge for some specific chains or DEX, such as Binance Bridge, which does not require user registration and provides asset cross-chaining between Binance Smart chain, Tron, Ether, and Coin Chain using decentralized wallets as browser extensions (e.g. MetaMask, Binance Smart chain Wallet, etc.). Mdex, a DEX project on Heco, also has its own cross-chain bridge, but currently only supports asset-specific transfers from Ether to BSC or Heco.
Generic Asset Cross-Chain Bridge
Universal cross-chain bridge which allows transferring assets and data between blockchains with different protocols, rules, and consensus. It allows interoperability between two chains that are not (necessarily) compatible. Its implementation usually consists of a service program responsible for monitoring transaction events on the chain, and a service program responsible for relaying transactions, as well as a smart contract on the chain. When users perform cross-chain operations, they need to transfer assets to the smart contract specified by the cross-chain bridge for locking on source chain A. When the service listener receives a deposit event against the contract, it will issue the corresponding anchor token on the target chain B based on the transaction information. When the user wants to retrieve the assets on Chain A, the reverse operation is performed, first destroying the anchored tokens on Chain B. The Cross-Chain Bridge service program will unlock the corresponding assets on Chain A.
This solution has obvious versatility and scalability compared to cross-chain bridges that utilize centralized institutions and service-specific assets, but the cross-chain bridge service itself is still centralized and requires a professional O&M team to maintain. And when the cross-chain transaction volume is high, the performance of this solution is affected by, the performance of the blockchain and the cross-chain bridge centralized service program on both ends of the transaction.
deBridge’s solution
deBridge is a cross-chain liquidity transfer and asset management protocol based on a decentralized bridge. The protocol enables regular or anonymous transfer of assets between different blockchains by locking/unlocking tokens on the original chain and managing wrapped tokens (deTokens) on the target chain. It uses Chainlink technology to enable cross-chain communication and uses its prophecy machine to validate asset transfers. The protocol also integrates with a number of DEFI projects, using locked assets to provide liquidity to the most reliable DEFI protocols to improve the efficiency of the assets and to distribute their profits among the users, thus maximizing their revenue. In addition, the project is designed with a decentralized governance mechanism that allows each user to participate in the development of the protocol and have a say in its future development.
How deBridge works
deBridge’s consists of two main components: the on-chain smart contract and the off-chain prophecy machine. The smart contract is responsible for asset management and can simply be thought of as a gateway for users to transfer across the chain. In order to minimize gas expenses, there are two versions of the smart contract. The full version (for chains with low transaction fees, such as Binance Smart Chain or Solana) and the light version (for chains with high fees, such as Ethereum). deBridge’s prophecy machine is a node of Chainlink that monitors blockchain events and is responsible for submitting transfer requests to the target chain and, as a result, receives LINK tokens as reward. A transfer is considered “confirmed” once 3 out of 5 confirmations are received from the prophecy machine.
The tokens supported by deBridge across chains are located on the original chain with associated wrapper assets on the target chain, provisioned under the control of the protocol and backed by collateral held in the smart contract of the protocol on the original chain. deBridge has also established a DAO organization as the governance body responsible for determining the list of supported cross-chain tokens, transfer fees, DeFi strategy, etc. A portion of the transfer fees are converted into LINK tokens to pay for prophecy machine services.
For a scenario where a user transfers assets from the original chain to the target chain, the process is as follows.
The user comes to deBridge and the platform connects his wallet and selects the token and the target blockchain, then specifies the amount he wishes to transfer. He can also enable privacy features to hide the connection information between the sender and the receiver or provide the receiver’s address.
The transaction is signed and submitted, and the user’s token is collected and locked in a smart contract.
The transfer event is noticed by the Chainlink node that regularly monitors the transaction and the prophecy machine submits the deposit identifier, which is a hash of the transfer details, to the target blockchain. Once the prophecy machine provides three of the five confirmations, the transfer is considered to be confirmed.
The user invokes a smart contract to mint a new wrapper token, and the fee is charged from the transferred amount.
Once the user transfers the asset to the target chain, the original token is locked in the smart contract and a portion of it is used for the liquidity provision of the DeFi protocol to earn additional revenue, this revenue is distributed to the governance token holder. For transferring from the target chain back to the original asset chain. The user can simply perform a similar operation and simply select the asset, amount and (if required) the recipient address again. The wrapped tokens are transferred from the user’s transfer account and destroyed. The prophecy machine notices the event and submits a withdrawal request to the original chain. Once sufficient confirmation is received, the user can claim the unlocked tokens and additional rewards from the Defi protocol.
In deBridge’s solution, ChainkLink nodes act as trusted decentralized data providers for cross-chain asset transfers.
Specifically, prophecy machines are nodes run by administrators and selected by deBridge governance (as determined by the DAO organization). Each prophecy machine can execute jobs — sequential tasks that a node must perform to produce a final result — that are triggered by the initiator, with the node running its own external initiator. deBridge’s prophecy machine system is responsible for executing two types of jobs (jobs): minting and destruction. In both cases, the deBridge initiator runs the job. It monitors the network to collect transfer requests and invokes the job on the transfer target chain with the submission ID as a parameter. In the case of a mint job, the wrapped assets are sent to the recipient on the target chain, and in the case of a burn-in, the original tokens are unlocked and transferred to the user.
In order to maximize profits for users, locked assets are used to provide liquidity to the DeFi ecosystem. At the same time, to hedge risk, deBridge governance manages risk by providing only a portion of reserves to well audited and reliable DeFi protocols.
In summary: @FL Cross-chain value transfer is one of the cornerstones of a truly decentralized financial world. Each blockchain is a secure but isolated network with no access to external data and information from other chains. This is why users have to resort to third-party services or centralized solutions for cross-chain information transfer, which often have certain barriers to entry, or require private information or are vulnerable to censorship. This makes decentralized, secure and reliable cross-chain solutions a much-needed infrastructure improvement for the industry.
Based on the advantages of the generic cross-chain bridge, deBridge creatively integrates Chainlink technology to achieve a decentralized cross-chain solution and provides differentiated services for blockchains with different transaction costs; in addition, deBridge also brings DeFi elements into the cross-chain solution to maximize the efficiency of user funds and also designs a privacy transfer mechanism. FL believes that deBridge brings the best of the industry’s solutions and takes cross-chain services to a new level, and is likely to become the benchmark in this track.
