Source: WeChat public number ChainX community
Original title: "Talking about asset cross-chain"
Asset exchange is the first requirement in the world of encryption. It is also the source of development for the industry.
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As the wave of blockchains sweeps across the globe, it continues to affect the commercial civilization of human society. On the one hand, it has brought about the continuous outbreak of native encryption assets, and on the other hand has brought the exponential growth of real-world commercial asset encryption. The current encryption world presents three trends:
Since the birth of Bitcoin, various types of competition chains and innovation chains have emerged. The chain-level Coin is constantly increasing, the native Token is constantly appearing on the chain, and various kinds of assets brought by various license chains and private chains are constantly flowing. This continues to break out in the foreseeable future.
Due to the diversification of user needs and the expansion of blockchain, the public chain will tend to be vertically divided. Each public chain has its own features to meet the specific needs of users. The license chain itself is serviced for specific interest alliances, specific segmentation needs, and specific industry sectors, and has been automatically verticalized.
Most of the current chain and chain cannot be connected due to technical, community, ecological, and competitive reasons. This brings about the separation of users, assets, applications, and data. User needs cannot be further met. For example, you can't use BTC to participate in ETH's DEFI ecosystem, you can't use ETH to achieve anonymous privacy and so on.
Nowadays, we have entered an era in which all things are assets, assets are value, and value can be traded. If the chain and the chain can not break through the isolation, can not establish an orderly connection, can not carry out asset cross-chain, free flow, low friction interchange, can not achieve the vision of the blockchain value Internet of Things.
Business value of assets across links
The cross-chain circulation of assets and free interaction have brought three significant values to the network and users in business:
- Asset exchange
Cross-chaining of assets brings security and transparency to asset exchange. Users can freely exchange assets in the encrypted world based on the anonymous identity in the chain. They do not need KYC, do not need centralized auditing, do not need to trust third parties, do not buy fake assets, and assets will not be misappropriated. Asset control rights Always in the hands of users.
- Expand collaboration
There can be a division of labor between chains and chains, each focusing on specialization and verticalization, and serving users with unique features. Collaborate and complement each other through a cross-chain approach. From comprehensive competition to open collaboration, comprehensively enhance network value and network effects. For example, BTC plays the role of digital gold, and flows into other chains as a base currency to play a value storage role. Libra can enter other chain platforms to play the role of trading media, and Zec can help other chains enhance privacy functions, and so on.
- Open finance
Cross-asset-based convergence will bring broader prospects for open financial applications. Today's open financial applications are considered to be one of the most explosive scenarios in the blockchain. But with current constraints and chain-to-chain fragmentation, open financial applications are trapped in single assets and a single user base. Can't expand with low friction. For example, the MakerDao application of Ethereum is currently limited to using ETH or ERC20 Token as collateral and can only serve Ethereum users. Since BTC cannot support smart contracts, MakerDao cannot be deployed to BTC. In addition, in order to serve EOS users, MakerDao needs to redeploy a set of MakerDao smart contracts on the EOS chain. This is a completely isolated world. If there are assets across the chain, it will all be very different. An application can be deployed only once, and all assets can be used across assets chain, while serving users of all chains.
Technical overview of asset cross-chain
The so-called asset cross-chain is not a "real" cross-chain. Taking BTC cross-chain to Ethereum as an example, the goal of all technical solutions is not to route the real BTC to Ethereum by establishing an intuitive connection between Bitcoin and Ethereum, which cannot be achieved. Because the so-called Coin or Token is essentially a cryptographic mathematical representation and can only be attached to the current (isomorphic class is relatively easy) host chain. Bitcoin and Ethereum are two sets of heterogeneous chains. Their data structure and network context are different and cannot be directly converted without loss.
The process of asset cross-chaining can be split into the issuance and destruction of mapped assets.
To cross-chain assets to securely lock on the source chain, and then issue the same amount of mapped assets on the target chain, this is the asset out-chain, and is also the distribution process of the mapped assets. Destroy the mapped assets on the target chain and unlock the assets on the source chain. This is the return of the assets across the chain. In both processes, the goal of the technical solution is to make the security atomicity of lock-release, destroy-unlock.
In short, the essence of asset cross-chain is a strict 100% security transparent mapping.
The technical solutions of asset cross-chain can be divided into two categories, centralized and decentralized.
The commercial organization or the centralized organization undertakes the cross-chain intermediary with credit or asset guarantee, and completes the asset lock-up issuance and destruction and unlocking process of the asset cross-chain process through the centralized accounting system. Typically, such as currency exchange on the exchange, the user recharges the BTC from the BTC wallet to the exchange, converts the BTC to ETH on the exchange, and then withdraws the ETH of the exchange to the user's ETH wallet, which is also a complete asset cross-chain process.
The centralized solution relies on human trust. The asset cross-chain process is black box for the user and opaque is not controlled. As long as the assets remain in the centralized system, there will be risks such as fake assets, asset misappropriation, asset occupation, and insufficient mapping. Control does not belong to the user.
Trust in people relative to the centralization program. The decentralization program requires the removal of human mediation, and strives to take the intermediary with decentralized technology, emphasizing trust in cryptographic security, and achieving strict 100% security and transparent mapping.
In the specific technical implementation scheme, the chain and the chain are independent of each other, and a direct connection cannot be established, and the link state change cannot be directly perceived between the chains. Therefore, it is necessary to build a communication bridge. In the choice of communication bridges, there are also different choices of decentralization. Generally divided into three categories:
Hash lock is an atomic interchange technique. It implements asset locking and hosting for both parties involved in the transaction by means of a hash time lock. Its implementation model requires strict participation processes from both parties, demanding time-locking requirements, and end-to-end communication requirements, but the parties to the transaction complete the transaction process, and the cross-chain assets are immediately atomically swapped. It is completely decentralized, secure, transparent, and without third party involvement.
Witnesses are a multi-center or weak-centered model. Compared with the unilateral trust of the centralized program, the witness mode choice believes in multi-party trust. It chooses a multi-party committee, and the messages that come across the chain can be executed as long as most of the verifiers agree. That is to trust the security of most certifiers. Cross-chain process assets are co-hosted by multiple witnesses. The Witness Model’s cross-chain security and transparency relative centralization scheme has been greatly improved. And the two sides of the transaction are more friendly, and the specific implementation is relatively simple. Therefore, this model has been widely used. But in essence, it relies on trust in people. In addition, there are also plans to further distribute and secretize witnesses in this model to further improve the degree of decentralization, but also bring better complexity.
Light node side chain relay
The so-called light node refers to a verification method that can obtain safe and correct feedback by inputting a small amount of data and a small computing resource. The use of assets in the cross-chain field is mainly in the verification of cross-chain block heads and transaction certificates.
In this scheme, the asset is mainly implemented by the two sides of the asset inter-chaining each other, and the relay is used as a communication bridge to perform two-way notification. It is because of the de-trust verification function of the two-way light node that the trust can be trusted. In the implementation of the light node, the consensus verification algorithm consistent with the original chain is used to verify all the block headers of the original chain, and the data security is verified by the transaction root and transaction signature. In the asset cross-chain process, the user assets are also hosted on the light node. No third party participation, no need to trust third parties, to achieve the highest level of security in the original chain. The lock-release, destroy-unlock process is fully automated with cross-chain certification, completely de-trusted.
In general, two-way light-node side-chain relay is the optimal solution for the choice of technical solutions across assets, followed by the Witness Program.
Other free combinations
If the asset is cross-chained into two parts: asset custody, transaction proof. It may not be limited to the two major categories mentioned above, and different technical combinations are selected according to different security requirements, implementation difficulty, and business scenario requirements for asset custody and transaction certification.
Light node contract, multi-sign contract, multi-sign address, distributed key address, single private key, etc.
Shared security, sidechain trunking, multiple witnesses, single private key, etc.
Asset cross-chain impossible triangle
Despite the numerous options for asset cross-chain technology solutions, the industry continues to explore new technologies. However, there are still many bottlenecks and restrictions. Generally speaking, in the specific implementation, it will encounter the dilemma of decentralization, security and ease of use , which requires multiple trade-offs.
Complete decentralization is the technical limit and the commanding height of technology. In general, the higher the degree of decentralization, the higher the degree of de-trusting and the correspondingly safer. Therefore, when selecting a blockchain scheme, a decentralized scheme will be selected as much as possible.
However, it should be noted that the degree of decentralization is not exactly the same as security. The choice of highly decentralized solutions is also highly complex. Taking the two-way light node side chain relay with the highest decentralization as an example, the complexity is reflected in the stability hazard brought by the light node. The stability hazard will consume security, because after all, it is the two-way between the two chains. It is agreed that one end of the change must be changed simultaneously to the other end, otherwise it will greatly affect the other end. On the other hand, in the user experience, users need to have account and related cross-chain operation skills in all cross-chain terminals to correctly carry cross-chain information. This has a very high threshold for ordinary users and greatly reduces the ease of use. In addition, the higher the centralization, the simpler the mechanism, which reduces the chances of operational failure and total security costs.
Highly decentralized solutions can also present significant challenges when implemented. Because it is necessary to have the same cross-chain condition at both ends of the chain. Taking the decentralized light node two-way light node side chain relay as an example, this solution requires a strong intelligent contract expression capability, so it cannot be implemented on most existing public chains. For example, BTC has no smart contract function. Although Ethereum has smart contracts but the expression function is too weak to implement light nodes in the chain. Therefore, in the cross-chaining of assets with such chains, you can only choose the one-way light node or witness mode, such as ChainX's XBTC product.
Asset security is very important for users. For asset custody security, choose a high-security light-node contract and multi-sign contract as much as possible, and secondly, you can choose a multi-signing address. Unilateral hosting is a very secure way. But the higher the security, the lower the user's ease of use. In scenarios where small or real-time requirements are high, users will prefer to choose the least secure one-party hosting but experience the best cross-chain approach.
- Ease of use
Most ordinary users can't understand public and private keys, and they can't understand asset cross-chain. The original cross-chain experience often has complex account systems and cross-chain operations. In general, most users only need a simple and smooth user experience, and security is given to the credit endorsement of commercial institutions. In the current technical solution, the minimal user experience is often accompanied by a decline in security.
So, is the user experience first, safety first, or decentralization most important? The three are temporarily unavailable, and need to be carefully considered in conjunction with specific needs.
Cross-chain BTC products
The birth of Bitcoin has created a new era and is the cornerstone of the new world. It is the source of innovation in the current encryption industry. Because of the bitcoin, the blockchain has brought more possibilities to the world.
However, if you only consider it from a technical perspective, Bitcoin is a very old technology genre. Old enough can be called ancient times. The simplicity of technology brings the ultimate stability. Stability brings traffic to the public. But stability has also brought a halt. There are a lot of clever minds who try their best to bring new ideas to their work, but they are all in vain, and they can only find another way. Even as developers want to do secondary development on Bitcoin, it will find it difficult, because its technical ecological support has a huge gap compared to other encryption ecosystems.
Bitcoin has no technological evolution and no innovative soil. But from a business perspective, Bitcoin still has the largest commercial inertia. It is still irreplaceable in terms of market value, mobile value, business value, and user base in the encryption ecosystem.
Therefore, how to enable Bitcoin assets to enter new innovative user scenarios and make Bitcoin assets have new technology capabilities (such as smart contract capabilities, interoperability, etc.) through cross-chain technology has always been an important product innovation exploration direction in the industry.
The following is a brief overview of several cross-chain BTC products on the market.
Cross-chain BTC products launched by ChainX, a cross-chain project. ChainX is based on Substrate technology and comes with the innovative genes of the blockchain 3.0 era. Strong support for light nodes and runtime calculations. Therefore, it is naturally friendly to cross-chain.
ChainX once stood at the forefront of the market in the field of decentralized assets. At the beginning of the line, the value of cross-chain BTC exceeded 10 million US dollars in a very short time, and the number of cross-chain BTCs quickly exceeded the number of BTCs in the lightning network. It is actually the largest sidechain and Layer 2 network of Bitcoin. At the same time, due to the decentralization of ChainX's cross-chain technology, it has promoted a wide range of mainstream BTC wallets to support OP_RETURN. OP_RETURN is a prerequisite for Bitcoin to enter the decentralized cross-chain era. This has brought the market back to the focus on the decentralization of assets across the chain, and also laid a solid foundation for the broader decentralization of Bitcoin in the future.
Technically, XBTC uses a decentralized, light-node side-chain relay and a solution that witnesses want to combine. ChainX uses Wasm technology to implement Bitcoin light nodes for the first time in the chain, supports POW verification of bitcoin block headers and complete transaction proof verification, which makes decentralization and bitcoin security in the bitcoin to ChainX direction. User XBTC assets are fully hosted and verified by Bitcoin Light Node. The lock-release process is fully automated and secure. In the ChainX chain to the bitcoin chain cross-chain direction, because Bitcoin does not have the Turing complete ability, it can not achieve a complete light node in the chain, so it can only be used in the witness mode, by multiple certifiers through the chain majority Vote to complete the destruction-unlock process. User BTC assets are hosted in Bitcoin multi-signature addresses and are co-hosted by up to 15 trustees who are independently endorsed. At the same time, Bitcoin multi-sign hosting also implements a hardware-level hot and cold separation structure to further improve security. The hot and cold multi-signed escrow address is completely openly supervised by the community owner. All asset change records are completely transparent on the bitcoin chain, and each flow change can be queried as a trust signatory. Realized openness, transparency and high security. In short, under the current cross-chain technical solution system, in the face of objective technical conditions on the bitcoin chain, the scheme is the optimal solution in decentralization and security.
WBTC is the first product to issue a mapping token on the Ethereum platform with a full BTC endorsement. Community-led, supported by a number of DEX and DEFI developers, wallets, and central exchanges. Designed to inject bitcoin liquidity and trading value into the Ethereum ecosystem.
WBTC consists of a custodian and a redemptor. Emphasis on reputation, process, compliance and multi-party checks and balances. User assets are ultimately hosted in the custodian's Bitcoin multi-sign address, but the custodian cannot issue the mapped assets directly on Ethereum unless the redemption merchant and the custodian corrupt the collusion. The exchanger is responsible for the user's needs, performs KYC, handles the user's redemption of WBTC requirements, receives the user's real BTC transfer, applies for mapping assets to the smart contract initialization, and transfers the real BTC to the custodian. The custodian confirms the BTC assets and then manually locks and approves The WBTC mapping of the smart contract, the exchanger receives the WBTC and transfers the mapped assets to the user. In the reverse destruction-unlocking process, the custodian initiates a BTC asset transfer to the redemption merchant, and then the exchanger converts the contract to apply for destruction, and finally the custodian confirms the destruction. In the cross-chain process, the custodian charges the cost of casting and destruction, and the exchanger accepts the cost of mapping the assets.
Although WBTC publicly espoken addresses on the chain to increase openness and security confidence. But after all, multi-party roles and checks and balances are used to enhance decentralization rather than technical means. Security is basically guaranteed by multi-party reputation. In addition, the user participates in the request for KYC, and it is unable to participate in trust for non-compliant users.
Similar to WBTC, tBTC is also a redeemable product issued on the Ethereum platform using a full BTC mortgage issue mapping token. tBTC has made a leap forward in anti-censorship, de-intermediation, de-trust, decentralization and security. However, it draws on the ideas of WBTC and MakerDao. The whole is an over-collateralized system with a very complicated mechanism and a very hospitable open system.
Technically speaking, tBTC is an automated protocol with multiple sign-up addresses, over-collateralization, and random combination. The signer group consists of multiple signers and is an important participant in the agreement. The signer group provides BTC asset escrow addresses for users to lock BTC assets. The signer group is selected by a random network to provide a random seed, and the signer needs to provide excess asset collateral to participate in the asset mapping process. In the whole process, multiple rounds of participation by users and signers are required, and there are many restrictions such as one-handed amount and waiting period. At the same time, because of the over-collateralization, it involves the asset price Oracle and asset utilization issues and various frictions. The complex non-speech can be explained clearly. See the tBTC white paper for details.
The design of tBTC is highly complex, exploring the new height of asset cross-chain technology in the decentralization and security dimension, but the ease of use is extremely anti-human.
The wallet manufacturer imToken launched the BTC asset tokenization product. Based on Ethereum, imBTC issues equal-cost mapping tokens using BTC asset anchoring. Through tokenization, BTC assets can indirectly obtain the complete capability of Ethereum Turing, which can seamlessly access the closed-loop application ecology of DEFI, DEX and other chains. At the same time, the market value and liquidity value of BTC assets have further expanded. imToken products always have a good user experience, imBTC is also relatively friendly and easy to use in its product logic design, which also brings a lot of convenience to Bitcoin users. It is a win for BTC users, imToken, and bitcoin.
In the choice of decentralization, security, and ease of use, imBTC is currently more inclined to choose better user usability and give priority to the user experience. Technically, the current state is biased towards extreme centralization. Equivalent to imToken itself as a guarantee of business reputation, with the brand to accept. Asset custody is a centralized custody that is not public, lock-release and unlock-destroy logic opaque, and there is no big difference from the central exchange.
As the product matures and the scale of the user's assets continues to expand, perhaps imBTC will further enhance the decentralization and security in the future product evolution and maintain the excellent user experience, and ensure the security, openness and transparency of user assets.
BTCx is the general term for BTC anchor coins. Common to centralized exchanges, such as the BTCB issued by the Currency Exchange.
Generally speaking, they are organized by a centralized organization to guarantee business credit, and are issued in equal shares in the form of reserves. Reserves can be open on the chain, subject to audit, or hosted in a third-party professional custodian, or completely undisclosed, with a credit guarantee. Technically, the user asset hosting and mapping process is almost entirely black boxed, using a thorough centralized model, and mapping assets are generally only used for transactions without other extensions.
Atomic interchange is one of the most simple technologies in the chain of assets. The process of atomic cross-chain is directly executed by both parties to the transaction, completely removing the trust of third parties and completely removing the risk of counterparty. Either the asset swap is successful or fails, and the user's assets are always safe.
Technically, atomic interchange is generally based on hash time lock techniques or multi-signature techniques, while requiring two chains, such as the same hash algorithm and hash time lock support. So it can only be applied between isomorphic chains, such as Bitcoin and Litecoin.
Atomic interchange has complete decentralization and high security, but it is very bad in ease of use. It is difficult to be commercialized on a large scale.
Written at the end
Asset cross-chain is the pilot area of the cross-chain field. In the past few years, there have been many conceptual innovations, theoretical studies, and various proof-of-concepts in the industry. Most of the cross-chain technologies currently discussed, such as multi-sign, light node proof, witness, side chain, relay, distributed key, atomic swap, etc. are not new things, and have a clear theoretical basis earlier. However, the field has been slow and has not made great progress.
One of the cases is that the early industry is small in scale, the chain and the chain are opposite each other, the competition is the main melody, and there is no interconnection and intercourse. In another case, most of the public chains are generally heterogeneous chains. Compared with the isomorphic chain, the data structure and the network context of the heterogeneous chain are completely different, and the technical difficulty in implementing the cross-chain is relatively large. At the same time, due to the limitations of the underlying technology of the blockchain, many of the chain's own light node capabilities and expression capabilities are also very limited. This has brought difficulties to the implementation of the decentralized cross-chain. The existence of another trilemma also limits the emergence of major breakthrough products.
Fortunately, with the iterative upgrade of the underlying technology of blockchain, light node technology, powerful intelligent contract engine, and practical encryption primitives have become the standard for the blockchain 3.0 era public chain. This opens up the space for further development of cross-chain technology. A new solution that perfectly solves the triad problem of decentralization, security, and ease of use should not be far off.