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Why is the "bridge" important to Layer 2?



"Bridge", determines what is Layer 2. From a community perspective, we are very excited about the off-chain protocol as a way to scale the blockchain network, because it will move most transactions from the layer 1 blockchain to the off-chain system. This avoids network fees and latency issues on the L1 blockchain. I want to use this article to discuss some basic knowledge about off-chain protocols, so that everyone can better understand the relationship between the current "bridges" and the Layer 2 (L2) technology connected by these bridges. Before answering this question, we should talk about the "bridge", an often overlooked but fundamental component that is critical to assessing the security of funds: the bridge is responsible for keeping assets on the L1 blockchain, and the same assets then publish on another (mainly external) service. The bridge defines who holds custody of the funds, and the conditions that must be met before the assets can be unlocked. In short, bridges are used whenever an L1 blockchain like Ethereum connects to any other system. All bridges have a similar action: deposit assets. Users can deposit assets to the bridge, and the bridge will give proofs that represent this asset in other systems; update account balances. Information about the new account balance will inform the bridge, which can be used to facilitate the withdrawal process. Asset withdrawal. Users can withdraw assets from the bridge by virtue of their balances in other systems and issued tokens burned in other systems. The market value of USDC has shrunk by more than 3 billion US dollars in the past 30 days: According to news on August 25, according to data from CoinGecko, the market value of the US dollar stablecoin USDC has shrunk by more than 3 billion US dollars in the past 30 days. The market value of USDC remained in the range of 55 billion US dollars at the end of July. At the peak, it exceeded 55.2 billion US dollars, but it has now fallen to the range of 52 billion US dollars. [2022/8/25 12:47:22] The most common bridge (used by people without realizing it) is a single-organization: most cryptocurrency exchanges (probably all) provide a single-organization bridging service if we Considering only the bridge and nothing else, it can be said that a centralized cryptocurrency exchange is an off-chain protocol. Users can lock funds into the services of the centralized exchange, bypass network fees and delays when making transactions, and eventually withdraw their funds back to the L1 blockchain. In addition to this single-organization bridge, there are two other bridges that rely on a group of custodians: multi-organization bridges. A fixed number of independent individuals (K out of N representatives) hold locked funds. The bridge of the encrypted economy. A dynamic number of individuals keep locked assets, and the specific amount is determined by their asset weight. Chengdu Lianan: The project was attacked, at least 5,946 BUSD and 5964 USDT were lost: According to the news on June 21, according to the security public opinion monitoring data of Chengdu Lianan's "Chain Bing-Blockchain Security Situational Awareness Platform", The project was attacked, and Chengdu Lianan technical team analyzed and found that the reason may be due to a problem with the K value verification of the Pair contract. Whenever the user is exchanging, there is a problem with the magnitude of the parameter passed in the K value verification, which causes the K value verification to fail. The attacker first borrowed a BSC-USD through a flash loan, and then when returning the flash loan, the K value verification parameter has an order of magnitude of 10000^4. However, the parameter verification magnitude used in the K value verification is 10000^2, which leads to the invalidation of the K verification. [2022/6/21 4:41:57] An important insight is that none of the above three bridges on the L1 blockchain can verify that the account balance from another system is correct (or, if in another system liabilities exceed the assets in the bridge). Then, a group of custodians will determine whether all withdrawal requests are processed against the assets in another system, and they ultimately decide whether the funds can be unlocked and who should receive them. In the above discussion, we mainly considered the adoption of custodial service bridges such as cryptocurrency exchanges. An increasingly popular use case for bridges is to connect one blockchain to another (which, by the way, is where the term "sidechain" originated). CCTV helps the Winter Olympics to distribute "Digital Snowflakes" in limited quantities: Jinse Finance reported that CCTV is specially preparing for the immersive interactive project "Digital Snowflakes". Let hundreds of millions of people all over the world have the opportunity to create their own digital snowflake identity and help the Winter Olympics together. "Digital Snowflakes" are issued in limited quantities from time to time. You can automatically get the exclusive digital snowflake identity by logging in with CCTV authorization. After receiving the digital snowflake, the user can get the CCTV digital snowflake identity certificate. [2022/1/6 8:29:10] The security of side chains and bridges is independent of any blockchain network and there are multiple examples of bridges: WBTC: a bridge with a single organizational form, connecting BTC assets to the Ethereum network . Liquid Network or RSK: A multi-organizational bridge, multi-party consortium with Hardware Security Modules (HSMs) to lock/unlock funds in BTC assets to another blockchain. Polygon bridge: a bridge of encrypted economic form, in which 2/3 + 1 of the locked assets in the bridge regularly reach an agreement on the account balance of all users in Polygon, and users can use this agreement to withdraw funds on Ethereum (actually, Polygon Ultimately it will be governed by small multi-signature contracts, but this example focuses on long-term goals). HyperDAO applied to become the governance representative of ENS DAO: According to official news, HyperDAO (HDAO for short) applied to become the governance representative of the Ethereum Domain Name System ENS decentralized autonomous organization DAO. The HDAO expressed agreement that name ownership is an absolute right, that registration fees exist as an incentive mechanism, that ENS revenue funds be used for other public goods, and that ENS integrate a global naming system. As a cryptocurrency start-up company, HDAO has been exploring the possibility of DAO governance, and believes that the biggest obstacle to Internet Web 3.0 is the lack of UX. At the same time, HDAO is also an early adopter of DAO governance, and believes that DAO is the future trend. [2021/11/9 6:41:47]Rainbow bridge: a bridge of encrypted economic form, the bridge contract is a light client, which can verify the progress of other blockchains. It does not check the validity of the other blockchain, and the security of funds ultimately depends on the continued development of the other blockchain (secured through cryptoeconomics). Crucially, each bridge has its own security model and is not tied to any blockchain network. We can take a simple case of WBTC to further elaborate: BitGo Trust hosts the funds locked in the Bitcoin blockchain, and they are responsible for issuing the same amount of WBTC on Ethereum. Smart contracts on Ethereum track account balances for all transfers of WBTC. BitGo is the trustworthy party, managing the account balance recorded in the smart contract. KeeperDAO will use $3.5 million in treasury funds to generate income through the DeFi lending platform Maple Finance: Official news, KeeperDAO passed the KIP-6 proposal and will use $3.5 million in treasury funds to generate income through the DeFi lending platform Maple Finance. Maple Finance is an institutional capital market that provides borrowers with on-chain financing and lenders with a sustainable source of income through a diversified pool of encrypted high-quality institutions. KeeperDAO will participate in a pool managed by Maven 11 Capital, receiving benefits in USDC and MPL tokens. [2021/11/12 21:47:03] There are several aspects to consider in the WBTC example: Single Custodian. WBTC's bridge relies on a single custodian to guarantee its integrity. They could theoretically issue more WBTC on Ethereum than locked in Bitcoin, and they could decide not to honor the withdrawal of WBTC into BTC. Standalone security model. Ethereum has its own security model that is independent of the Bitcoin blockchain. The bridge has its own security model, which is independent of the two blockchain networks mentioned above. Ethereum is a sidechain. Compared to the Bitcoin blockchain, transactions have been moved off-chain, from the Bitcoin blockchain to Ethereum. What all three bridges mentioned above have in common is that they do not check the integrity of sidechain information, and there is no self-enforcing contingency plan to protect funds if the custodian (or sidechain) goes offline. They are only subject to their own security model, not the security mechanisms in the L1 blockchain where the bridge resides. L2 scalability aims to move transaction throughput from an L1 blockchain to another off-chain system, requiring bridges to hold assets issued on other systems. However, unlike all the other bridge types explored in this article, the L2 protocol strives to secure funds with the same security mechanisms as the L2 blockchain, and it cannot rely on a set of custodians (or other off-chain systems) to secure funds. It requires a new type of bridge: the L2 bridge. The L1 blockchain has custody of the funds, and the bridge must trust that the message integrity of the L2 protocol will not be compromised. In the worst case, the bridge will automatically increase the liveness of the L2 protocol until all funds can be withdrawn. The L2 bridge is the most powerful of all bridges, it does not rely on a set of custodians to secure funds. Instead, the bridge must be convinced that all is well with the off-chain system before funds are released. If for some reason, the bridge is convinced that the off-chain system is compromised, the net just needs to bypass another network entirely. There are several companies focused on building L2 bridges, and naturally building entirely new blockchain networks. This is why the L2 protocol is so exciting, and it took the teams mentioned above a few years to come up with a solution. The first competitors using L2 protocols in the market are mainly focused on how to implement a secure L2 bridge (and not necessarily deploy other blockchain networks). This is a good opportunity to further explore technical issues and definitions. We make it clear: it must be ensured that the bridge does not break the L2 protocol, and the breach of L2 data integrity can be broken down into four issues: Data availability. How can the bridge be confident that all data of another blockchain network is publicly available so that users can independently recompute the L2 database? Integrity of state changes. How do we convince the bridge that all state transitions of the L2 network are well-formed and valid? Integrity of withdrawals. If the L2 network is compromised, how does the bridge guarantee that all honest users' funds can be withdrawn? Protocol liveness. How does the bridge guarantee that transactions can still be executed when the L2 protocol stops or goes offline? Of course, the above problems must be resolved, and at the same time, the bridge contract has significantly less computing resources than the off-chain system, so the bridge cannot re-execute all transactions in real time. Otherwise, it's not a scalable solution. Solving the above issues can lead us down the rabbit hole. This includes on-chain challenges, fraud proofs, validity proofs, posting transaction data to L1 blockchains (rollups) and on-chain worlds. Although our article does not highlight various solutions, we emphasize that all solutions are not the same. Some upcoming L2 protocols will not be able to meet the above security goals. They cannot be called L2 protocols due to the lack of L2 bridges. As in the case explored in this article, there are four types of bridges that allow funds to be locked in a blockchain while the same asset is represented in another off-chain system (and possibly another blockchain). Managed bridge. The first three types of bridges mentioned above focus on which set of custodians control locked funds. The role of the custodian is to verify that the off-chain system is correct before allowing any assets to be withdrawn from the bridge. The assumption is that the integrity of the off-chain system is a client-side issue, and the custodian has enough computing resources to handle it. While there is work to alleviate the role of custodians and introduce cryptoeconomic incentives to encourage custodians to follow the protocol, the bridging protocol cannot fully constrain custodians. There have been several incidents of bridges losing user funds (e.g. Mt. Gox), and this is because the integrity of such bridges ultimately depends on trust in people. L2 bridge. L2 bridges replace the role of custodians, who hold funds and check the integrity of off-chain systems. The core of the problem is that such a bridging system must be confident that the off-chain system cannot be compromised, and it lacks the computing resources to independently check each transaction (otherwise it is not a scalable solution). Aside from the high level of technical challenges it entails, it doesn't come for free. There is an ongoing financial cost to convincing the L1 blockchain that the off-chain system is indeed well-structured and that its integrity has not been compromised in the slightest. Ultimately, however, it will be the bridge that will keep custody of the funds, not the off-chain system operator. Overall, the jury is still out on whether users really care about L2 bridges and whether we should extend Ethereum's security model to off-chain systems. As with all things in life, I suspect all four types of bridges are here to stay, as they are all integral to scaling among users. My only request is this: You (the user) take a careful look at the type of bridge your favorite protocol uses. Important: Get a better understanding of how your money stays safe from the bad guys. Thanks Hasu and Chris Buckland .


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