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

by Lau Jun Sheng

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

  1. 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

 

Tell us how much you like this article!
Lau Jun Sheng
Lau Jun Sheng

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

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