The Future of Cross-Chain Bridging with Alex Smirnov, Co-founder of deBridge - Ep.66 Podcast Notes

deBridge

deBridge is a generic messaging protocol and cross-chain interoperability infrastructure. It enables transfers either through messages and liquidity in the same transaction, providing the framework for projects and developers to solve any cross-chain needs such as cross-chain composability with smart contracts. The goal for deBridge is to build more capital-efficient solutions by combining protocols and smart contracts from different chains.

Alex Smirnov

Alex Smirnov is the CEO and co-founder of deBridge. He found out about blockchains in 2016 and dropped out of his PhD to pursue web3 full time. 

Ep.66 Podcast Summary / Notes 

Two Types of Bridges Out There

1. Pure cross-chain value transfers

• Cross-chain swaps of tokens 

• Liquidity locked in respective bridges

• Alex believes they will have to pivot due to insufficient TVL to compete with big liquidity projects such as Aave, Compound, Frax

2. Generic messaging protocols

• Compatible with and sources liquidity from other DeFi projects

  • Can leverage on existing DeFi ecosystems

  • Bridges do not need their own TVL and instead can source liquidity from other protocols

  • A new generation of bridges - less fragmentation, more united, more capital efficient

Bridge Security and Vulnerabilities

• Keep note of: security audits, protocol authority, multisig

• General vulnerability 

  • Optimism $2m bounty payout  -  Vulnerability in bridge security

  • Could be exploited to mint any arbitrary amount of assets on-chain 

  • Theoretically could withdraw the liquidity of 98% of Optimism bridges.

• deBridge implements an isolated security model 

  • The vulnerability of a particular blockchain will not affect the security of funds integrated with all other chains.

Social Engineering

• Vulnerability due to poor decentralisation and team management

  • Ronin and Harmony bridge exploits

  • Lack of decentralisation and multisig management

  • Bridge projects need to be fully focused and dedicated to the security and management of their infrastructure

• deBridge Security   

  • Validators never expose their IP address and infrastructure because validations happen off-chain

  • Validators do not need to sign/ broadcast any transactions - sign a unique identifier and store their signature 

  • No one knows the IP address of the validator and validators do not need to communicate with other validators - less compromise

Problems with Bridging assets

• Multiple versions of wrapped assets

  • Leads to fragmentation of liquidity as there will be multiple versions of wrapped assets on different chains

  • Osmosis had a similar issue: How many bridges should be connected to their protocol? Too many bridges lead to liquidity issues for a particular asset.

• Wrapped assets should be an intermediary step during cross-chain transfer

  • A certain limit on wrapped assets to be swapped for native tokens - risk management

• Ultimately users don’t care about wrapped assets - they just want their routing to be done

  • Swaps of wrapped assets should be performed under the hood

What’s an underrated issue with bridging?

• The difficulty in building a future where protocols do not need to copy-paste their protocol on different chains

• Depending on the type of protocol,

  • Every blockchain ecosystem needs a foundational layer of DeFi 

  • Lending protocols, DEX, Stable where synchronous composability is needed 

  • e.g. An Aave that allows flash loans and executes complex logic 

  • Protocols that enable synchronous composability needs to be deployed in many chains 

• 95% of all other protocols don’t need to be deployed everywhere 

  • Can be deployed on one blockchain and gain global accessibility and asynchronous composability 

  • Leads to less fragmented liquidity 
     

How is the team handling the bear market?

• Bear market = time for opportunity

  • Everyone is overwhelmed during a bull market

  • Bear market washes out market speculation

• Focus on building DeFi infrastructure to solve CeFi problems

  • DeFi protocols were the first to receive funds back with the default / insolvency / bankruptcy of CeFi institutions

  • e.g. MakerDAO receiving their funds from Celsius before ‘unsecured creditors’  

• Not many challenges in deBridge

  • Just lower transaction volume and activity in deBridge

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Lau Jun Sheng

Jun Sheng is a research intern and is an avid gamer, degen, memer, sleeper. Follow the author on Twitter @jnshngl