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Cross-chain problems occur frequently. How should users choose cross-chain applications

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There is no optimal solution across the chain, only the most suitable solution

According to a cryptocurrency crime report released in July 2021 by CipherTrace, a blockchain security firm, DeFi protocol attacks involved an estimated $129 million in 2020; DeFi breaches rose to $361 million in the first seven months of 2021. Then in August, in 34 minutes, hackers managed to steal $610 million worth of crypto assets from the cross-chain protocol Poly Network.

It was the largest heist in DeFi's history, and while the hackers later returned most of the assets, the DeFi security and code-is-law reality became more like a Schrodinger question. You have to be attacked and your assets stolen to know that the protocol is not secure. In DeFi protocol, cross-chain protocol is the disaster area. According to public data, 19 security incidents occurred in DeFi in the past two months, among which 6 were cross-chain protocols involving Poly Network, Anyswap, ChainSwap and other protocols.

Choosing which bridge to use and determining the security of the bridge becomes the next challenge for DeFi users.

Impossible triangle of cross-chain protocols

Blockchain's impossible triangle is a cliche. In a blockchain system, scalability, decentralization and security cannot be achieved at the same time. For public chains, scalability is probably the most important thing. As Ethereum founder Vitalik pointed out, scalability is probably the number one issue, and scalability has become the grave of many systems. However, for DeFi protocols, especially for cross-chain applications with large pools of capital, security is perhaps the most important.

As an important part of DeFi, cross-chain applications should pay more attention to security and compromise on decentralization and high scalability. As L, who chose to call the police due to the withdrawal of StableMagnet Finance (SMAG), said that the development of the decentralized world is still in its early stage, and there are too many subjects to be explored and perfected. If we blindly advocate decentralized extremism and thorough "code is law", Will not lead to real development and future.

Kava Swap is a cross-chain liquidity center with safety as its core. Kava Swap is DeFi infrastructure, cross-chain bridge and cross-chain independent AMM market-making protocol built on the basis of Kava public chain.

Because of the complexity of the process, cross-chain bridge involves the delivery of many public chains and multiple contracts. So it's easy to leak in different places. Poly Network and ChainSwap are attacked due to contract vulnerabilities. Multi-link by AnySwap is attacked because of cross-chain private key management problems.

Due to the complexity of the process, Kava Swap underwent internal audit, external audit and public testing before officially launching. And, according to public disclosure, Kava Swap will go through four iterations to achieve all the full functionality. In the first version of Kava Swap, more mainstream token pools such as BTC, BNB and Kava will be added, and new tokens will be added through on-chain voting. In version 2, Kava Swap will package functionality into the Kava API for user integration and transactions; In the third version, the smart liquidity bridge between BSC and Ethereum will be activated; In the fourth version, smart autonomous trading functions and additional ecological cross-chain Bridges will also be activated.

In terms of fund security, Kava Swap uses the traditional trading platform "cold wallet" and "hot wallet" to cooperate with each other. The "cold wallet" is used to store large assets and the "hot wallet" is used to transfer short-term small assets. As of press time, Kava and Binance secure over $1.5 billion in cross-chain assets. Meanwhile, the community launched Kava Initiative 61, which, if approved, will provide $100,000 worth of SWPS to reward trading contest users. There are 808,400 Kava support proposals so far.

There is no optimal solution across the chain, only the most suitable solution

In his cross-chain Interoperability report for R3, Vitalik describes three cross-chain schemes: notary mechanism, side chain/repeater mode, and hash locking. At present, in addition to the above three schemes, there are more mainstream distributed private key control and multi-technology hybrid mechanism.

According to cross-chain Interoperability and public information, Rhythm summarizes the current mainstream cross-chain mechanism:

From the performance comparison, each cross-chain scheme has its own advantages and disadvantages. The notary mechanism requires multiple trusted third-party notary, which is easy to lead to over-centralization. At the same time, notary mechanism and side chain/relay mode are relatively low in security and transaction speed, so they are vulnerable to attack. Hash locking has great limitations in development. Although it supports cross-chain asset mortgage, it cannot carry out cross-chain asset transfer, and it does not support direct use of predictor. Of course, hash locking is easier to implement and more secure, and therefore more suitable for projects.

Poly Network, which was previously stolen for $610 million, was designed to use a repeater pattern that allows heterogeneous chain to cross chains. Kava Swap, which focuses on protocol security, prefers hash locking in its design. The difference is that Kava Swap users have the permission to cross the chain or not. When cross-chain operation is carried out, users need to sign on their wallets to confirm the cross-chain.

Hash locking first appeared in 2013 and was first used on the Bitcoin Lightning network. The essence of hash locking is a smart contract. In the Kava Swap system, every public chain supported by Kava Swap has a deputy wallet, and the access of funds need to pass the permission of deputy wallet.

Suppose the user wants to cross an asset from the Binance Chain to Kava, the asset will be locked in the Binance Chain. If the password is not received by the deadline, the asset is returned to the user. At the same time, Deputy to Kava public chain to send a message, the user locked X tokens, if the deadline to send unlock password, will be sent on the Kava chain equivalent token to the user. Users in the Kava Chain to receive tokens at the same time, Deputy to Binance Chain to send a message, permanently locked X tokens. Crossing from Kava to Binance Chain is the opposite.

As a user, what cross-chain protocol should I choose?

The cross-chain solutions and designs mentioned above are ultimately inseparable from the use of users. As a user, in addition to the difference in use experience, is concerned about the security of assets. As security improves, hackers continue to explore vulnerabilities.

According to BlockBeats, all but a few DeFi protocols that have been attacked recently recover from asset losses.

On July 4, RAI Finance, a Polkadot blockchain-based cross-chain transaction protocol, announced that due to a vulnerability in ChainSwap smart contract, the RAI access and payment access address connected to it was hacked and stolen, resulting in the theft of 2.9 million RAI accounts. ChainSwap reimburses with 50% USDC and 50% platform token ASAP. As of press time, both RAI and ASAP prices have returned to their pre-attack levels.

On July 12, Anyswap Multi-link was attacked by version V3, losing about 2.4 million USDC and 5.51 million MIM. Anyswap provided full compensation and filled liquidity within 48 hours. As of press time, Anyswap's lock-up volume and trading volume have not been affected by the hacker attack, but increased.

Looking at token prices and protocols that allow ecosystems to recover quickly from an attack, it's not hard to see how teams can react quickly and compensate victims.

As a decentralized application, the platform and users do not want to be attacked, but it can not be completely eliminated. Therefore, it is important for every team to plan for the event before it happens. At the very beginning, Kava Swap established a SAFU fund of up to $10 million through community governance. When the user suffers from the loss of funds caused by technical problems, such as bugs, hacking, liquidation failure, the corresponding compensation can be obtained.

In the context of massive asset theft, cross-chain applications are being questioned. This is normal, just as the world is spiraling upward, so is DeFi, cross-chain. On the way up, however, choosing the right deal becomes even more important.