In the DeFi world, bridges (which allow users to send assets from one blockchain to another) are ranked third in terms of total value locked (TVL), after decentralized exchanges and lending protocols. According to analytics firm DefiLlama, $21.8 billion worth of crypto was locked in bridges as of March 2022. This reveals a surprising trajectory for bridge protocol adoption, given the tremendous loss resulting from various DeFi bridge hacks.
One of the most severe attacks occurred when the Ronin bridge was hacked for $540 million. Prior to this, BNB Chain’s Qubit Finance bridge and Solana Wormhole were exploited for more than $400 million. These cases followed the PolyNetwork bridge hack in which $610 million were stolen, the largest hack in the history of crypto.
These startling figures illustrate significant security concerns associated with bridge protocols — However, investment in and adoption of bridges continues. Axelar, for example, has raised a total of $63.8M in funding over 6 rounds.
Sergey believes the continued growth and investor backing of bridging solutions point to the necessity for these technologies. As we move toward Web3, interoperability created by these bridges will become an imperative aspect of the blockchain economy, without which it cannot scale. Crucially, Sergey believes that bridges being hacked is due to their centralization and lack of technical security, which should be built-in.
Korea IT Times sat down with Sergey Gorbunov, Co-founder and CEO of Axelar, the universal decentralized interoperability network, and industry unicorn, on why blockchain bridges are continually growing in capabilities and adoption despite high profile DeFi hacks of many cross-chain bridges in the space.
The following are interview questions and answers with Gorbunov.
What is a blockchain bridge and why does it matter?
Bridges connect blockchains to one another, much like a bridge in the real world might connect two countries separated by a river. For commerce to exist between those two countries at scale, much more than bridges is needed. At Axelar, we think of what we deliver as something akin to an air traffic control system, airport freight terminals and a fleet of airplanes. When that kind of infrastructure exists, new kinds of applications are possible.
Is there a problem with blockchain bridge safety, given the prevalence of hacks occuring in the space?
Most bridges are just multisigs – smart contracts controlled by a set group of signers, connecting two chains in an ad-hoc way. This is a fast way to get assets cross-chain, but ultimately lacking in both security and scalability. Axelar is built on a permissionlessvalidator set, using the same consensus mechanism that supports the top Layer 1 platforms. This is a more difficult infrastructure to build. It's necessary, if we're going to scale to hundreds or thousands of blockchains.
Despite various high profile bridge protocol hacks, analytics from DefiLlama highlights $21.8 billion worth of crypto was locked in bridges as of March 2022. Why are bridges still popular despite these hacks?
Crypto has gone multichain. Developers and users are contributing to ecosystems that offer their own unique value and communities. Neither wants to be stuck in a silo; they want to take the value they've built and use it wherever they want in Web3. Bridges are just the beginning of that. Eventually, we see application developers building cross-chain native applications – super apps that compose functions and liquidity from all over the decentralized web, and put them at users' fingertips.
Will we see these hacks continuing into the future?
It's still early days for cross-chain. Infrastructure that's widely used remains centralized and immature. But demand for cross-chain communication is growing. Until infrastructure catches up with demand, we're likely to see more exploits.
What is Axelar doing differently to most bridging technologies?
Bridges move assets between blockchains. Axelar provides General Message Passing: developers building applications using Axelar can call any function on any destination chain from within their dApp on a source chain. Bridges means your users are transferring assets in cumbersome, third-party processes. Axelar enables universal, secure cross-chain communication.
How will Axelar’s overlay network address security issues as Web3 begins to take shape?
On the internet, overlay networks like Akamai and Cloudflare are able to provide security because they have visibility into all connected networks. This is even more important in a Web3 context, where as information is routed, each hop takes on new security assumptions. Axelar provides routing and visibility, built on battle-tested and permissionless consensus mechanisms. This universal architecture replaces a patchwork of ad-hoc solutions, where billions of dollars are secured using just a handful of picked signers. Security is always a concern, but this will be a significant step forward in blockchain infrastructure.
