Avalanche Summit is a conference for developers, researchers, and makers building on Avalanche at Barcalona, Spain from the 22 to 25 March 2022.
In this segment on the application in the multi-chain future, Max Lomuscio talks about an innovative way modularity can solve the interoperable trilemma and change future of the multi-chain.
What is the next wave of innovation?
Before we delve into the next wave of innovation, lets take a look back at why the Web3 movement started.
Web3 was started to remove “walled gardens” from Web2 cooperation’s who were trying to limit the ways people deal with data and information.
(A Walled Garden is a closed ecosystem in which all the operations are controlled by the ecosystem operator)
When these systems are opened up, we created a series of projects that can be combined to form “lego money”.
(Lego blocks are built for borrowing, staking, or lending assets, among other things, and can be put together to create a single multi-functional financial application)
However, the majority of the web3 applications today function as a isolated ecosystem, which do not interact amongst its counterparts. This ironically forms the walled garden for today.
We are living in a multi-chain experience but not a cross chain one.
Asynchronous Web3 as a limitation
One other limitation that Web3 currently has is the idea that everything needs to happen in real-time. When you execute transactions, everything needs to happen in the same block.
We still lack this Asynchronous Web3 in our current state of things but why is this still the case?
Turns out the ecosystems on Web3 are isolated with each other. They are standalone secure but forms the weakest link when we try to connect them together, being vulnerable to attacks.
The ideal bridge has three characteristics:
Firstly, it has to be as trust minimized a possible. Basically the ability for one to mitigate a specific class of harmful agents. This has to happen so that the bridge between the chains allows communication.
Secondly, it has to be generalizable to move any type of data and information should be generalized as it needs to be.
Lastly, it has to be extensible across different chains.
Turns out, it is called a trilemma for a reason as it is not possible to tick all 3 checkboxes for an ideal communication protocol. We see some bridges optimizing for 2 out of the 3 points but never have they completed all 3.
Bridges that connect Ethereum or the Layer2 roll-ups in general or the IBC bridge, works well. They are amazing as you can pass any time or data/information yet being secure and trustless.
However, they are not extensible outside their domain. IBC only works for Cosmos and the rolls up only work between the Layer 1 and 2.
Introduction to Nomad and Connext
It is the responsibility of an innovator to create the most secure infrastructure which then the community will gravitate towards.
Connext and Nomad are two communication protocols that have different architectures that makes the most trust minimized protocols that exists today.
Connext is a cross-communication liquidity network and communication protocol. They basically try to simplify the relationship between the bridging architecture between parties.
Imagine two parties — The first is a user looking to swap his tokens while the second is a liquidity provider who is looking to do the same.
Only when the user has locked his token on the chain and the LP has done the same on the receiving chain, will the tokens be released after both parties have confirmed it.
They have more than 11 chains on Avalanche, Ethereum Layer 2s to Fantom and the Polygon Smart Chain. The Polkadot ecosystem and Cosmos will also be bridged in the coming two months.
However, the limitation of the system is that how data is generalizable, so not any type of data can be passed through.
Nomad is another communicative protocol which can prove if a message sent is not valid. Its mechanism takes inspiration from the optimistic roll ups.
What happens is that there is enough data to move a message from chain A to chain B but before that message on chain B becomes valid, there will be a latency period of 30 minutes.
During this latency period, any watcher can say this is not correct and break that transaction.
YouTube channel analysing security models of bridges
Combining Nomad and Connext
We can see the combination between the two protocols, one system being fully expressive but its alittle slower and another is not fully expressive but is one which is fast and cheap.
The idea of combining these two systems and create a stack.
They are creating a modular interoperability stack that is trying to overcome the trilemma not with a single solution.
The advantage of this system is that you would now have a tool to hold any types of information for any application to interact with one another. It allows you to do so in a trust minimized way either with a very fast and efficient way or a slower but fully expressive protocol to do what you want to do.
The modular technology stack allows you to create composability across separate ecosystems, in a way which can be synchronous as you want it to be.
Use cases of modularity
Cross Chain Zaps
Allowing users on your app to directly import token and deposit them into your pool all in 1 transaction in a trust minimized way.
Cross Chain Lending
Ability to deposit assets on one chain and borrow another asset in another without the need to bridge the tokens but just bridging the message that there is a collateral on one chain.
Cross Chain Governance
You may hold tokens which are bridged from the original chain which does not qualify for governance voting.
But now you may do so which allows you to vote, expanding the democratic process regardless of where your tokens are.
We now know how modularity could overcome the interoperable trilemma with the modularity stack. But there is so much more you can build on this. From bridging NFTs to cross chain lending and governance platforms to even the potential of bridging smart contracts and creating central hubs for application deployments.
The prospect of utilising the multichain climate through a cross-chain system may see no boundaries in its capabilities.
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Chain Debrief