What are cross-mines?
These are decentralized applications that allow you to translate the same asset between different blockchains.
Cross-marshmuses allow you to move tokens of various standards (ERC-20, BEP-20 and others) between blockchains. There are also cross-bridges that allow you to transfer funds between blockchains built using different technologies (bitcoin, Ethereum, Litecoin, Dogecoin), as well as between the solutions of the second level (arbitrum, optimism).
Wrap assets can be created between blockchains, liquidity pools in several ecosystems can be used. Also, transfer of relay units that have liquidity in different blockchains can also be transferred.
To use the cross-bridge, you need to connect to it using Web3-patch, for example Metamask. After sending funds through a decentralized application, they will enter the sender’s address, but in another blockchain. At the same time, the operation of the cross-section is inconsistent from swap inside one blockchain using non-codial exchanges.
Why is cross-country difficult to realize?
The exchange of exchange between users, one of whom wants to buy asset A, and the other to sell it for an asset b, in the absence of trust between them requires a third party (guarantor). The guarantor will receive an asset from the seller, as well as funds from the buyer (asset b). After receiving funds from both users, the guarantor will transfer funds to each of them, completing the exchange operation.
Such an algorithm can be used for any metabolic operations. The exchange can act as a guarantor. When exchanging assets within one blockchain, a smart contract may be a guarantor.
The smart contract provides asynchronous blocking of the funds of each users, and after sending them unlock and transfer the required assets to each user. Until recently, this method of exchange was not widespread, since he demanded the simultaneous availability of a seller and a buyer who are ready to exchange funds in the same volume at the current moment in time.
The existing non -codial exchanges for exchange requires liquidity suppliers (LP), blocking. When performing metabolic operations, the user funds enter the liquidity pool in one asset, in return the user receives funds in another asset. All these operations are carried out using smart contracts and do not require a guarantor.
But smart contracts can be performed only inside one blockchain (for example, Ethereum). If it is necessary to move assets to another ecosystem, such an algorithm will not work, since the smart contract does not allow to interact with it.
For cross-section, special algorithms are needed to interact with several blockchains. Liquidity suppliers in different systems are also required. For the implementation of these algorithms, the solutions of the second -level scaling are widely used.
Smart contracts of L2 solutions allow you to receive information from other ecosystems, including information about the transactions in bitcoin blockchains, Ethereum, Binance Smart Chain (BSC) and others. They can also interact with external data, receiving information from analytical Internet resources through oracles.
How to use wrapped tokens for cross -translates?
One of the solutions that allow moving assets between blockchains requires the use of wrapped tokens. Assets move using two paired operations: Coin blocking – production of wrapped coins and Coin combustion – unlocking coins, as well as combinations from these operations.
A similar approach is implemented in the Ren project. It is well suited for moving assets between different blockchains. Consider in more detail the cross-bridge between Bitcoin and Ethereum in the Ren project.
For cross-transmission, the user sends BTC to bitcoin address, generated by a decentralized application, indicating his address in the Ethereum blockchain. The sent funds are blocked, and in return the user receives wrapped Ethereum tokens Renbtc. The latter are the coins of the ERC-20 standard and are tied in value to the price of the basic asset. They can be freely exchange and translated to any other user.
Any RenbTC holder can receive basic assets for them in the source blockchain (in this case, bitcoin). To get funds at BTC, the user needs to send RenbTC to the address generated by the application. After that, coins will be burned, and the user will transfer funds to his address in the Bitcoin blockchain.
The use of wrapped assets for the transfer of stablecoins between EVM-compatible blockchains is not appropriate in connection with the existence of more progressive solutions. The implementation of the USDC translation from Ethereum to BSC by releasing RenusDC will not be in demand, since the USDC token already exists in this network.
As a blockchain intermediary allows you to realize a cross-bridge?
A promising way to transfer assets between different networks is the use of a specialized blockchain.
A similar mechanism is implemented in the Thorchain project using the Native Rune Token Token. The technology requires liquidity suppliers who introduce their funds to the pool and receive income from this.
The algorithm involves the introduction of funds to liquidity pools in two blocks, one of which is Thorchain. Moreover, most of the funds are deposited in Rune tokens and acts as a pledge, and the other part is used to perform metabolic operations. The project allows you to exchange assets from various blockchains that differ in cost.
The exchange operation takes place in two stages using a decentralized application. First, an asset is exchanged from a blockchain-source for Rune token, using funds from the first liquidity pool.
At the second stage, the Rune token is exchanged for an asset in the destination blockchain, while the second liquidity pool is used.
Consider in more detail BTC exchange for ETH. This operation requires two liquidity suppliers, one of which is provided by BTC and Rune, and the other – ETH and RUNE.
All operations are carried out through a decentralized application. After filing an application for transferring funds by the User and indicating the address in the Ethereum APPLICE Blockchain, he needs to transfer the BTC to the address indicated by the application.
BTC is received by the first liquidity supplier, who transfers the amount corresponding in value to Rune to the second LP. The second liquidity supplier, having received funds to Rune, transfers ETH to the Ethereum blockchain to the address specified by the User.
These operations are carried out by liquidity suppliers in automatic mode, and the guarantee of the honesty of LP is collateral funds exceeding the value of the funds used for exchange operations. The presence of two liquidity bullets allows you to exchange assets in direct and reverse directions.
Thorchain allows you to translate stablecoins (USDT, USDC and others) between EVM blockchains -Ethereum, BSC, Huobi Eco Chain (Heco) and T. D. Restrictions on assets and blockchains between which metabolic operations can be carried out, there are no. The only requirement is the presence of appropriate liquidity bullets.
How is the translation between EVM-compatible blockchains?
It is advisable to use L2-solutions to translate assets between EVM-compatible blockchains. Interacting with the main networks using smart contracts, they can provide quick transfer of assets, as well as the exchange between systems of both the first and the second level.
L2-solutions allow you to create a universal algorithm for transferring funds between blockchains. If there are liquidity suppliers in the blockchain-source and the assignment block, the transfer of assets is carried out only between these systems, using the means of one liquidity supplier.
In the absence of one LP with assets in the blockchain-source and the design of the destination, one or more intermediate chains can be used. The blockchain of the first and second levels may act as an intermediary. In each of them, the channels of the transfer of assets will be formed.
As a generalized example, we consider the algorithm for transferring funds using an intermediate blockchain using CBRIDGE cross-bridge from Celer Network.
The node A is a user who own the means in the chain 1, who wants to transfer these funds to the node D in the chain 3 (for the transfer of assets the same user must be represented by address A in the chain 1, and in the chain 3 – address D).
In the absence of a liquidity supplier with assets in chains 1 and 3, a decentralized application selects two relay nodes b and c. The relay node B owns an asset in chains 1 and 2 and is a liquidity provider during metabolic operations between these chains.
Retranslation node with similarly connects chains 2 and 3. For the implementation of the cross-section, smart contracts are used, which unfold in three chains and form three channels of assets that connect the nodes a, b, c and d.
Retranslation nodes B and C are liquidity suppliers, and also provide routing payments. For the provision of these services, they receive remuneration.
Unlike the traditional model of interaction with liquidity suppliers used on non -codial exchanges, the remedy provided by the relay units are not blocked for a long time. They will be blocked only during an exchange operation in the amount required to conduct it.
To implement this algorithm, CBRIDGE uses smart contracts with temporary blocking of funds-Hashed Time Lock. When performing a cross-section, the funds are transferred from the user to the liquidity supplier using a smart contract, which provides for the blocking of assets for a certain period of time. During this time, the relay unit must transfer assets to the user in the exposure block.
If during this time the knot does not execute the transfer, blocked funds will return back to the user.
Celer Network architecture is implemented using open source software, which allows anyone to create a similar relay unit. But the considered algorithm on the basis of smart contracts provides the protection of the user from loss of funds if the relay unit turns out to be malicious.
What are the cross-bridges?
Following the rapid development of Defi and non-kastodial exchanges, decentralized applications that implement cross-translators began to appear. Most have a similar interface, but the algorithms of their work can differ significantly. The most popular cross-miners:
. A project specializing in L2-solution using smart contracts for cross-section crossing. Provides the possibility of moving stablecoins, as well as a limited number of tokens based on Ethereum, BSC, HECO and other ecosystems, as well as between different networks of the second level (Arbitrum, Polygon, etc. D.).
. This L2-solution uses smart contracts to transfer assets between second-level blockchains (Arbitrum, Polygon, and T. D.). Operations are carried out in stablecoins.
. The cross-bridge uses smart contracts for translating stablecoins between BSC and second-level solutions (Arbitrum, Polygon, and T. D.).
. The project is an intermediary blockchain and allows you to exchange BTC, LTC, BCH and other assets. The exchange is carried out between the corresponding blockchains, as well as Ethereum and Binance Chain. A large number of ERC-20, BEP-20 standards, including native coins are also available for exchange.
. The project uses several technologies. Provides the possibility of exchange of a large number of tokens in Ethereum, BSC, HECO, OKEXCHAIN, as well as between different L2 solutions. . The cross-bridge allows you to translate BTC, BCH, DOGE, ZEC and other assets from the corresponding blockchains by creating wrapped tokens, as well as to carry out reverse translations. Applications blockchains: Ethereum, BSC, Polygon, Arbitrum and others.
How to use CBRIDGE cross-bridge?
The Tornado Cash mixer movement of the asset between the two blockchains is largely similar to the swap inside one blockchain. Consider as an example the translation of the USDC token from Arbitrum to Binance Smart Chain using Cbridge.
In the case of swaps in one blockchain, it is necessary to connect to the cross-bridge with a web3-wallet like Metamask. After that, the selected blockchain and your address will appear in the upper right corner.
The interface that allows you to implement a cross-transmission is quite simple. It is necessary to indicate the blockchain source and blockchain of the destination, as well as the asset itself.
In our case, we choose Arbitrum as a source and Binance Smart Chain as an appointment, asset – USDC.
Before the exchange, you need to make sure that the operation is sufficient to carry out liquidity. The latter in some areas may be absent or it may not be enough.
After choosing the main parameters, enter the transfer amount (for example, 50 USDC). If the direction is actively (there is a relay unit for this direction) and liquidity enough for translation, you will see the amount to receive (49.6 USDC) and the commission (0.39 USDC) in the lower window. If all the parameters are satisfied, you can press Transfer.
The next stage will require confirmation of the use of USDC token from Metamask. This step needs to be taken only once, subsequent USDC translations from Arbitrum will not require confirmation. Next, it is necessary to send a request for a cross-section.
The application will ask you to confirm interaction with a smart contract, for which the commission is charged. After confirmation in Metamask, you need to wait some time until the transaction is confirmed at the blockchain level.
After sending a request for a transfer, the relay unit must be wait for a while while he answers. After that, it is necessary to transfer funds by pressing the corresponding button and confirming the operation in Metamask.
After transferring the funds, the relay unit will send assets to your account in the score of the destination. At the end of the exchange, you will see information about the successful cross-transmission.
It remains only to switch the blockchain to Metamask to an appointment block and check the score. You can find out the details of the transaction using the blockchain-facetor.
What are the prospects of the cross-bridge?
Existing trends show that a scenario in which one of the blockchains will become dominant and displace other solutions is unlikely. Despite the wide possibilities of Ethereum, L2-solutions appear to obtain significant advantages-a high speed of transactions, smaller commissions, greater flexibility and functionality.
A number of ecosystems on the basis of EVM-compatible blockchains (Binance Smart Chain, Huobi Eco Chain and others) are violently developing. The existence of many competing blockchains necessitates cross-translators.
Stablecoins are widely used in such operations. These assets exist on different blockchains, they are not subject to significant price fluctuations. It is convenient to store the cost for a long time in stabiblcoins.
In connection with the significant development of the Defi sphere, the cross-bridge-bridges become more and more popular in comparison with ordinary exchanges. Technologies are in demand in the market, more and more new projects appear, which indicates the prospects of this direction.