Interoperability is an integral part of our modern lives that most people rarely give a second thought. Defined as “the ability of computer systems or software to exchange and make use of information,” interoperability allows you to write something in Google Docs, email it as a Microsoft Word attachment, then open it on a MacBook. It’s also the foundation upon which the Internet is built.
In cryptocurrency, interoperability refers to exchanging information and value across separate blockchain networks (Ethereum to Cardano, for example). Also called “cross-chain technology,” interoperability remains a stubborn problem even as the need for it grows with the proliferation of new chains. Unfortunately, blockchain interoperability remains the exception due to significant technical challenges rather than the rule.
Introducing Axelar
Many projects tackle blockchain interoperability from different angles, including bridges, hubs, and centralized exchanges. One of those solutions, Axelar, founded by MIT graduates Sergey Gorbunov and Georgios Vlachos, seeks to enable decentralized, any-to-any communication that is easy to use, highly secure, and scalable.
Axelar is a blockchain built on the Cosmos SDK. It is secured and run by a decentralized network of validators using a delegated Proof-of-Stake (DPoS) model sustained by a network of validators like Everstake. What’s unique about the Alexar network is that its validators run light-client software of other blockchains, allowing them to verify the state of those chains. They also hold threshold signature accounts that enable them to interact with other chains. In this way, Axelar acts as a routing system between separate blockchains, allowing them to communicate without a shared programming language.
Why Blockchain Interoperability Is Important
Each separate blockchain ecosystem (Bitcoin, Ethereum, Cosmos, etc.) has its communication protocols, hashing algorithms, and consensus models. They operate like distant cities, completely independent from one another. Trade between those cities (moving assets back and forth) is complex at best and a security risk at worst (four of the top 5 DeFi hacks are related to compromised bridges.)
A lack of interoperability stifles growth as dApps are forced to choose one ecosystem to develop or undertake heavy engineering work to make their solutions available cross-chain. Axelar removes this barrier to growth by acting as a highway system between the various blockchains. By making it easy to deliver information back and forth (like the post office ferrying packages between cities), Axelar allows developers to easily access users and liquidity no matter which blockchain they reside on.
This cross-chain highway benefits developers and makes web3 more accessible to the general public. Users who have grown accustomed to the interoperability of web two will find it much easier to acclimate to web three if they don’t have to understand the intricacies of blockchain before using assets and dApps. The goal is to offer one-click access to everything from a single wallet.
How Is Axelar Bridging the Gap Between Blockchains?
Axelar is building its interoperability solution using a set of universal protocols and APIs that allow for communication between chains regardless of consensus mechanism or message payload. Their protocol suite includes the Cross-Chain Gateway Protocol and the Cross-Chain Transfer Protocol, analogous to the Border Gateway Protocol and Hypertext Transfer Protocol on the Internet.
- The Cross-Chain Gateway Protocol (CGP) connects different blockchain ecosystems. It is responsible for routing data across these ecosystems and allows any blockchain to be plugged into the system without custom programming.
- The Cross-Chain Transfer Protocol (CTP) allows developers to plug in their dApps from any chain and call any function on any other connected chain. It gives developers the ability to lock, unlock, and transfer assets between any two addresses across any blockchain platform. They can also execute cross-chain application triggers and perform general cross-chain requests between apps. In short, developers can easily create dApps that allow users to interact with any chain from inside their wallet, like how your web browser enables you to interact with any website from your computer.
Overcoming Challenges
Interoperability presents several challenges that go beyond just information sharing. The protocols must provide decentralized trust, high safety, and high liveness. Alexar is an open network that allows anyone to become a validator with no upper limit on the number of validators allowed to achieve maximum decentralization. Users elect validators who must bond their stake to participate in the consensus and maintain high-quality service.
The network also ensures security by employing high safety thresholds requiring almost all validators to collude to withdraw funds maliciously. Plus, robust fallback mechanisms allow users to recover their funds should something happen to the network. In short, Axelar provides not only routing and translation but also security between all blockchains, which is lacking from most other interoperability solutions.
Axelar as a Practical Solution
Several projects are already building dApps using Axelar’s cross-chain functionality. E-Money is a blockchain-based payment platform that has partnered with Axelar to provide users with cross-chain stablecoins. This integration allows e-Money users to move assets across networks from their e-Money wallets quickly. According to their CEO, the cross-chain link will facilitate better liquidity and utility for the ecosystem.
Meanwhile, AxelarSea is building a one-stop NFT marketplace where users can buy, sell, discover and launch NFTs from any chain. Although AxelarSea is still in the testnet phase, it promises the ability to buy NFTs from any chain with any connected token. It will also integrate cross-chain verification and NFT bridging.
It’s not hard to see that the future of web3 is interoperable. Axelar is making it easier for platforms and dApps to offer cross-chain functionality without sacrificing security. The result is a better user experience for everyone.
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