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Cross-chain Bridge Overview: A Look at the Characteristics and Progress of Six Mainstream Cross-chain Bridges

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Cross-chain Bridge Overview: A Look at the Characteristics and Progress of Six Mainstream Cross-chain Bridges

Cross-chain bridge competition is fierce, but risks should not be overlooked.

Author: Route 2 FI

Compiled by: Peng SUN, Foresight News

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Similar to physical bridges connecting two physical locations in the real world, cross-chain bridges in the crypto world connect two blockchain ecosystems, facilitating communication between different blockchains through message and asset transfers. In the early days of blockchain, when demand exceeded supply, factors such as the impossibility triangle problem of public chains, capital drive, and the "continue revolution" nature of blockchain made it possible for multiple chains to coexist, making it difficult for a single blockchain to dominate, and the competition among various projects will continue. In this scenario, different blockchains have their own strengths in terms of performance, ecosystem, etc., and users and their economic needs spread across different networks need to be bridged through cross-chain bridges.

Currently, countless projects are laying out in the cross-chain bridge race, attempting to seize market share in advance. Among the many projects, Stargate, Orbiter, Synapse, Bungee, Multichain, Lifi protocol, Rango, LayerZero, Connext, Relay, Hop Protocol, and Router protocol are 12 projects that are particularly popular. I will select 6 mainstream cross-chain bridges to briefly introduce their basic concepts, innovative features, data indicators, future developments, token airdrops, and other related information, and once again remind everyone to pay attention to the risks associated with cross-chain bridges.

1. Synapse Protocol (SYN)

Synapse is essentially a cross-chain liquidity protocol that allows users to bridge assets across different chains. To navigate the multi-chain narrative effectively, users are advised to be familiar with various cross-chain bridges, and Synapse represents one of the user-friendly bridges. According to DefiLlama data, we noticed that Synapse currently has a Total Value Locked (TVL) of $204 million, ranking it in the top ten within the ecosystem.

On Synapse, users can seamlessly move across chains such as Ethereum, Arbitrum, Avalanche, BNB Chain, Optimism, and Polygon:

Synapse plans to launch its own blockchain: SynChain. Speculation from crypto commentators on Twitter, based on price movements and interactions on Discord, suggests that the SynChain announcement may be released around ETHDenver 2023.

Given the narrative around Layer 2 and substantial unique wallet support for Optimism and Arbitrum, it can be inferred that Synapse aims to position itself as the most cost-effective L2 rollup with a fully diluted valuation (FDV) of approximately $350 million.

It is worth noting that the upcoming SynChain may potentially distribute early tokens through an airdrop—although speculative, rumors suggest there might be an airdrop for Synapse holders.

With Synapse already approving unilateral staking in November, it would not be surprising if Synapse aligns itself with the narrative of real yield and eventually starts sharing protocol profits. Remember to conduct your own research on the project.

Finally, let's take a look at Synapse's data points:

  • Market Cap: $247 million
  • Price: $2.30
  • Fully Diluted Valuation (FDV): $325 million
  • Total Value Locked (TVL): $204 million

2. Connext

Connext is an Ethereum Layer 2 interoperability protocol. Formerly known as xPollinate, its primary function is to facilitate the transfer of assets across blockchains and rollups.

Since its closed beta launch in early February, Connext has seen significant growth, with an average weekly trading volume of $5.5 million and approximately 5,000 transactions per week in February.

It is worth noting that Connext uses Automated Market Makers (AMMs) to price liquidity on each chain. According to Twitter user pepes, there is excess liquidity on Optimism and Arbitrum, allowing Connext users to benefit from positive slippage when bridging across chains. In simpler terms, Connext pays you in ETH to bridge to Optimism and Arbitrum.

Connext serves as a fast and secure cross-chain bridge, making it ideal for everyday crypto enthusiasts. By leveraging active liquidity, Connext routes liquidity to users on the target chain, which is then repaid by the protocol.

Connext effectively loans funds to waiting users and receives repayment through the protocol, impacting transaction delays. Overall, Connext's product is both innovative and promising.

Lastly, let's look at Connext's data points for February, serving as monthly indicators:

  • Total Value Locked (TVL): $18.4 million
  • Total Trading Volume: $17.4 million
  • Total Cross-chain Transactions: 20,221

3. RelayChain (RELAY)

Relay is a cross-chain bridge aggregator designed to address fragmentation and lack of interoperability between different chains. Its core product is a cross-chain bridge that aggregates the most efficient bridges for users; to incentivize new users, Relay has set up a lottery system for users each time they use a cross-chain bridge (with a maximum prize of $5,000). Relay aggregates liquidity from 5 cross-chain bridges, acting as a price comparison site to find users the cheapest, fastest, and most liquid cross-chain bridges.

Currently, Relay's cross-chain bridge supports 15 blockchains. Relay also features staking functionality aimed at providing liquidity to the protocol.

Relay is positioned as a long-term project, with its token unlocking model ensuring medium-term support for the project from advisors. In simple terms, token unlocking is time-based: 10% unlocked at the first unlock (30 days), 15% at the second unlock (60 days), followed by 25% quarterly unlocks thereafter. The team has partnered with major companies in the Web3 space and was the first team to support the first DEX on Avalanche.

Lastly, let's review RelayChain's data points:

  • Total Value Locked (TVL): $77 million
  • Cross-chain Value Transferred: $1.03 billion
  • Total Transactions: 50,988
  • Market Cap: $4 million

Please note that Relay has a relatively small market cap, so if you decide to purchase the token, do so with caution, or it might be best to avoid it, as the probability of significant price fluctuations is higher.

4. Stargate

Stargate is a cross-chain liquidity protocol based on LayerZero and the first DApp deployed using LayerZero. The primary differentiating factor of Stargate from other cross-chain bridges lies in its implementation, claiming to be the first to solve the well-known impossible trilemma proposed by Vitalik.

While cross-chain bridges typically have to sacrifice one element of the impossible trilemma (instant finality, native assets, and unified liquidity), Stargate does not compromise on any of these attributes.

Stargate also utilizes an innovative liquidity pool balancing algorithm that incentivizes users to deposit into underfunded pools (withdraw from overfunded pools) on the target chain. This ensures that liquidity remains deep on the chains supported by Stargate, offering users a better cross-chain bridge experience with low slippage and price impact.

Backed by one of the most well-funded teams in the space, LayerZero, Stargate enjoys robust financial support. In fact, LayerZero's funding is substantial, as they repurchased all tokens and equity related to Stargate/LayerZero held by Alameda after the FTX event, eliminating the risk of forced liquidation faced by many projects supported by Alameda during asset recovery.

Finally, Stargate's data metrics are as follows:

  • Market Cap: $176 million
  • Fully Diluted Valuation (FDV): $1.065 billion
  • Total Value Locked (TVL): $480.1 million
  • Price-to-Earnings Ratio (P/E ratio): 490.93x

5. Hop Protocol

Hop Protocol is a scalable Rollup-agnostic universal token cross-chain bridge and DEX, allowing users to transfer and send tokens from one Rollup or sidechain to another without waiting for network challenge periods.

Hop Protocol achieves this by introducing market makers (or Bonders) to provide liquidity on the target chain in exchange for a small fee, contributing to a multi-chain future. Bonders provide this credit guarantee in the form of hTokens, which are subsequently exchanged for equivalent native tokens in the target chain's AMM.

The creation of hTokens enables Hop Protocol to programmatically mint and burn tokens for faster transfers between chains and reduce the native withdrawal time across all scaling solutions, allowing Bonders to deploy and utilize capital more efficiently.

To ensure a secure cross-chain experience for users, Hop Protocol ensures on-chain guarantees so that funds are received even in rare instances when Bonders are offline. Enhanced on-chain guarantees ensure that Hop's cross-chain bridge cannot extract funds, but there is a trade-off—if a Bonder is offline, the user's cross-chain experience may slow down.

Due to its security model, Hop Protocol can compete with trustless bridges, as compared to other trustless bridges like Hop Protocol, other bridges may require higher fees to attract liquidity. Considering this efficiency, trustless bridges can offer lower costs than centralized cross-chain bridges.

As of March 1, 2023, Hop Protocol's fundamental data points are as follows:

  • Market Cap: $13,135,651
  • Fully Diluted Valuation (FDV): $201,000,502
  • Total Value Locked (TVL): $79,733,768

6. Multichain (formerly Anyswap)

Multichain is a Web3 routing protocol utilizing an SMPC network, supporting nearly 40 chains and over 1,000 tokens.

Multichain consists of two parts: a cross-chain bridge and cross-chain routing. The cross-chain bridge functions similarly to other bridges. When assets on the source chain need to cross to the target chain, the assets are deposited into an MPC smart contract on the source chain, and the target chain mints wrapped assets. Conversely, wrapped assets need to be deposited into the smart contract for redemption in exchange for assets on the source chain. On the other hand, the cross-chain routing ensures that any asset can transfer across multiple chains, whether native assets or wrapped assets created by Multichain's cross-chain bridge.

The Multichain token is MULTI, which can be locked to obtain veMULTI NFTs. Holding the NFT grants governance rights and the ability to propose and vote. Besides governance, NFT holders can also receive rewards.

As mentioned, there are numerous cross-chain bridges in the crypto market, but perhaps the most important question is, "Which cross-chain bridge to choose for a specific occasion?" This depends on which chain you want to bridge your assets to.

Personally, I often use Multichain because it supports many chains, eliminating the need to consider many issues. However, I am unsure if it is the best as sometimes the cross-chain time it requires is longer than other bridges. I have used Connext once, and its UI/UX and cross-chain speed were satisfactory.

I also enjoy using the tool "Find My Bridge." By entering the source and target chains, "Find My Bridge" retrieves 55 cross-chain bridges to find the most cost-effective way.

Furthermore, by trying different cross-chain bridges, you will find your favorite. Remember always to access their applications through their official Twitter or CoinGecko. Avoid searching on Google, as it might lead to phishing websites.

7. Risks of Cross-chain Bridges

The following risks associated with using cross-chain bridges are sourced from the Ethereum website and are explained sufficiently without the need for further embellishment.

Cross-chain bridges are in the early stages of development, and the optimal design for cross-chain bridges may not have emerged yet. There are risks associated with interacting with any type of cross-chain bridge:

  • Smart Contract Risks—Code vulnerabilities leading to user fund loss
  • Technical Risks—Software failures, code vulnerabilities, human errors, spam, and malicious attacks may disrupt user operations

Additionally, as trusted cross-chain bridges add trust assumptions, they come with extra risks, such as:

  • Censorship Risks—Theoretically, operators of cross-chain bridges can prevent users from utilizing the bridge to transfer assets
  • Custodial Risks—Operators of cross-chain bridges can collude to steal users' funds

If the following scenarios occur, user funds are at risk:

  • Smart contracts have vulnerabilities
  • Users make mistakes
  • Underlying blockchains face hacker attacks
  • Operators of trusted bridges attempt malicious actions on trusted bridges
  • Cross-chain bridges are hacked

Do not assume that cross-chain bridges are immune to hackers; BNB cross-chain bridges, Wormhole, and Harmony cross-chain bridge operators have experienced significant hacks, which can be viewed on the rekt website.

【Disclaimer】The market carries risks, and investments require caution. This article does not constitute investment advice, and users should consider whether any opinions, viewpoints, or conclusions in this article align with their specific circumstances. Invest at your own risk.