As Vitalik Buterin said years ago, "interoperability is the future," and in the blockchain industry, this is becoming increasingly apparent. In today's cryptocurrency market, with hundreds of Layer1 and Layer2 solutions, their harmonious coexistence is crucial for the development of the entire ecosystem. However, even the most advanced hardware cannot support today's popular use cases with just one Ethereum virtual machine thread. The solution to this problem lies not in vertical expansion, but in horizontal expansion.

Currently, cross-chain transactions in both Layer1 and Layer2 account for a significant proportion. Users may buy coins on a decentralized exchange, then buy NFTs, open positions on GMX, and later sell coins on Uniswap or stake on Lido and Pendle. Each interaction with an application may involve several transactions, with one out of every four transactions possibly involving a new application or cross-application.

Therefore, the impact of improving interoperability on the efficiency of the entire ecosystem is self-evident. The collaboration and complementary advantages of different blockchains not only avoid duplicate work and improve resource utilization, but also enhance the security and stability of the blockchain system. The cooperation of multiple networks makes the entire system more resistant to attacks, and the data is more accurate and reliable.

With the L2 solution of Web3 about to enter a Cambrian-like stage, a new, decentralized and complex ecosystem will emerge on top of Ethereum, with numerous and diverse blockchains. The seeds of this transformation have been sown: from L2 Rollups (such as Arbitrum, Optimism, and Polygon) to modular platforms (such as Celestia and Eigenlayer), to the rapid development of zero-knowledge proofs, all of which are driving the emergence of new chains, whether as L3 or as some form of coprocessor.

However, one question still remains: how can these chains and layers maintain interoperability when connected to Ethereum? For applications, the ability to interact from one smart contract to another is crucial for supporting Web3 composable building blocks. For users, the ultimate goal should be the ability to interact with all applications through a single wallet, without the need for "chain switching" navigation.

This kind of interoperability standard has always been the cornerstone of the success of the Ethereum ecosystem: not only can users easily switch between protocols, but developers can also seamlessly combine and integrate functions and network effects across the Ethereum ecosystem. So, when the number of blockchains connected by Ethereum may reach hundreds or even thousands, how do we preserve these user experiences and developers' seamless switching capabilities?

It is in this context that Axelar Network emerged, aiming to address these key issues and drive the future development of blockchain technology. Next, let's delve into the core advantages of Axelar Network and how it provides critical interoperability solutions in this increasingly complex blockchain world.

可编程的互操作性协议 Axelar Network

Programmable interoperability protocol Axelar Network.

Axelar is an innovative platform dedicated to building blockchain interoperability, with the core goal of achieving efficient and secure connections between different blockchain platforms. The network's design enables various types of blockchains, whether public or private, to collaborate and communicate with each other. The key to Axelar's success lies in its use of smart contracts to manage and execute the rules and logic of cross-chain interactions, providing automated processing for complex cross-chain transactions while ensuring consistency and predictability of operations. This design not only provides developers with the flexibility to design and implement customized cross-chain applications, but also considers compatibility with various consensus mechanisms and operating rules of blockchains.

Currently, Axelar has connected to 55 blockchains, including Arbitrum, Avalanche, Base, BNB Chain, Ethereum, Optimism, Polygon, Scroll, and various Cosmos-based chains. This number exceeds any other cross-chain network, demonstrating Axelar's leading position in the field of cross-chain interoperability.

From a technical perspective, the Axelar network consists of three key components distributed across two functional layers. The infrastructure layer includes a decentralized dynamic validator network responsible for maintaining the network and executing transactions. These validators run the cross-chain gateway protocol, which is a multi-party encryption overlay layer located above the Layer1 blockchain. Secondly, the gateway component is installed on the connected blockchain and exists in the form of smart contracts on the EVM chain. Validators monitor incoming transactions in the gateway, reach consensus, and write data to the target chain's gateway to execute cross-chain transactions. On top of this infrastructure layer, Axelar also provides APIs and SDKs that allow developers to easily perform cross-chain operations between the two chains.

Regarding the functional layer, Axelar has introduced a General Message Passing (GMP) system that goes beyond traditional bridging capabilities, allowing for cross-chain sending and receiving of various payloads such as function calls, data, and packaged assets. Axelar's architecture adopts a hub-and-spoke topology, serving as a central hub that connects various blockchains.

Team and Investment Background

Axelar's team background is impressive, with members having rich experience and significant achievements in the Web3 interoperability field. Co-founders Sergey Gorbunov and Georgios Vlachos are both founding members of the blockchain project Algorand and graduates of the Massachusetts Institute of Technology (MIT), having received multiple academic awards in the field of cryptography. It is worth noting that Sergey Gorbunov not only serves as a professor at the University of Waterloo (known as the MIT of Canada), but also recruits talent extensively from MIT and the University of Waterloo for the Axelar team. The strong academic and technical strength of these two schools injects powerful academic and technical strength into Axelar.

In addition, the achievements of Georgios Vlachos are also remarkable. He has won a gold medal in the International Mathematical Olympiad, demonstrating his outstanding talent in the field of mathematics. Core engineer Joao Sousa has contributed important technological achievements. His BFTSmart is the first practical implementation of Byzantine fault tolerance, which has had a profound impact on many researchers. Similarly, Sergey Gorbunov has rich experience in designing and releasing core encryption protocols. He played a leading role in standardizing BLS signatures, which has now been adopted as a draft by CFRG and followed by Ethereum2.0 and multiple other implementations.

Axelar's team not only excels in academic and research aspects, but also brings together top talents from leading companies and cryptocurrency projects such as Google, Chainlink, Consensys, Salesforce, and J.P. Morgan. The diverse backgrounds and expertise of these team members provide a solid technological and business foundation for Axelar's development.

Regarding investment, Axelar has also achieved significant success, having raised over $100 million in funding. Its investors include heavyweight players in the industry such as Binance, Coinbase, Dragonfly, Galaxy, and Polychain, as well as other leading venture capitalists. In the recent funding round, Axelar was valued at $1 billion.

Axelar's Application Cases

When it comes to Axelar's application cases, it has played an important role in the DeFi field. Lido Finance chose Axelar network as the first third-party interoperability solution. At the same time, dYdX, the largest perpetual swap DEX in terms of trading volume, is also using Axelar to help smooth deposits from any connected chain, allowing assets from different blockchains to flow freely on platforms such as Uniswap, Lido, dYdX, and Frax.

Axelar has also demonstrated its strength in the wallet field, collaborating with Trust Wallet, MetaMask, Ledger, and Blockchain.com. These use cases not only showcase Axelar's technical prowess, but also demonstrate its important role in promoting interoperability and liquidity between blockchains.

In addition, Axelar has played an important role in the field of Real World Assets (RWAs). A prominent example is the successful experiment conducted by Axelar in collaboration with Morgan Stanley's Onyx and Apollo, demonstrating how smart contracts can be used to manage customer investment portfolios on a large scale, enabling blockchain technology to be used for transaction execution and automated investment portfolio management of RWAs. Additionally, Circle CCTP also utilizes the Axelar network to unlock composable USDC, making stablecoins programmable and enabling one-click transactions across multiple blockchains.

Microsoft also announced a partnership with Axelar in 2023, integrating Axelar as an interoperability provider into Microsoft's Azure Marketplace, allowing companies using Azure to seamlessly connect with encrypted applications, protocols, and blockchains. This is an important step in bridging the gap between traditional finance and emerging blockchain technology, and Axelar's technology enables various types of assets to circulate between blockchains, creating more possibilities and opportunities for businesses and consumers.

The maturity of Axelar's ecosystem applications is also an important milestone. As these applications, built in collaboration with Axelar, mature, the community will gradually realize that Axelar is not just a cross-chain bridge, but a comprehensive platform. Axelar's original concept of cross-chain has successfully implemented on platforms such as Ethereum, which has spurred a trend of cross-chain developers launching more innovative applications.

At the enterprise level, Axelar has also demonstrated its strong collaborative capabilities by partnering with industry giants such as JPM, Oracle, Mastercard, and Microsoft.

Overall, Axelar's use cases cover multiple fields including DeFi, enterprise collaboration, gaming, NFTs, etc., demonstrating its outstanding ability to provide comprehensive blockchain interoperability solutions. With the continuous development of technology and the expansion of use cases, Axelar plays an increasingly important role in promoting the progress of blockchain technology and the development of the entire industry.

New Token Economics

Recently, the token AXL of Axelar has been performing well, especially after announcing its partnership with Microsoft and being listed on Upbit, the price has been steadily rising.

Speaking of AXL tokens, it can be said that they are the "jack-of-all-trades" in the Axelar network, playing an important role in network security, decision-making, and transaction fees. If users hold AXL, they can help protect the network by staking these tokens, while also earning rewards and participating in voting on the future development of the Axelar network. In terms of transaction fees, paying cross-chain transaction fees with AXL is standard practice, but there is a clever design here: users only need to pay the token payment fee once on the source chain, saving them time and transaction costs when exchanging tokens.

Interchain Maestro is an orchestrator that developers can use to deploy and manage their multi-chain dApp instances. Interchain Maestro allows developers to build once and run anywhere. It can be thought of as the Kubernetes of Web3 - a set of orchestration contracts and templates to help design, deploy, and manage your dApp across multiple chains. Developers will be able to specify the contracts they want to deploy, as well as the associated chains and any governance parameters; store these confirmations and initial parameters in smart contracts on the Axelar network, and then deploy them to all other networks; easily extend or clone these contracts to other chains; and upgrade their contract code with just one transaction on the Axelar network, which will send the upgrade to all interconnected chains.

Cross-chain Programmability and Interchain Token Services (ITS)

The importance of cross-chain programmability lies in providing Web3 developers with an innovative platform that enables them to build advanced cross-chain user experiences similar to Web2 applications, all at minimal cost. Axelar's platform differs from other leading cross-chain solutions in that it is built on an open and programmable stack. These programmable features are built on smart contracts on a transparent blockchain network, which require no trust and no permission, allowing anyone to build and use them.

The programmability of the Axelar network solves the expensive, complex, and compromised user experience of extending Web3 applications to multiple blockchains. Developers can deploy decentralized applications (dApps) on multiple blockchains with one click, providing users with a consistent experience on any chain. This programmability advantage is particularly evident in the Interchain Token Service (ITS) cross-chain token service.

Inter-Chain Token Service (ITS) is the first instance of Axelar's programmability and another important innovation of the Axelar network. As AVM is permissionless, any developer can leverage it. The Axelar Foundation supports development teams in expanding the ecosystem, improving security, and designing inter-chain orchestration templates on AVM. ITS is a service aimed at protecting the fungibility and customizability of local tokens on multiple blockchains. These reserved tokens are called inter-chain tokens. Unlike other alternative solutions, Axelar ITS supports standardized wrappers and standardized tokens, enabling one-click deployment across multiple chains.

Through ITS, developers can deploy cross-chain tokens on multiple chains simultaneously and automate tasks such as supply management. Cross-chain tokens are supported by the security protocol of the Axelar network and can run on any EVM-compatible chain connected to the Axelar network. The feature of cross-chain tokens is that they allow users to transfer value between different blockchains. Compared to existing solutions such as cross-chain bridges, cross-chain tokens solve the problems of fragmentation and substitutability while retaining the customizability of tokens.

Existing cross-chain bridges often result in non-fungibility of tokens on different chains, while inter-chain tokens extend the fungibility and customizable features of tokens by deploying them on multiple chains. Axelar's inter-chain token portal is a practical tool that simplifies the process of creating and deploying ERC-20 tokens, while supporting standardized and regulated tokens.

Through Axelar's cross-chain token service, developers can deploy cross-chain tokens on multiple chains simultaneously and automate tasks such as supply management. In addition, cross-chain tokens are supported by the security protocol of the Axelar network, so they can run on any EVM-compatible chain connected to Axelar. This marks a breakthrough development in the blockchain field, creating a truly interoperable ecosystem.

Axelar's AVM and ITS bring a new paradigm to blockchain development, allowing developers to build once and run anywhere. Developers can leverage the tools and services provided by Axelar to easily port and deploy their applications across different blockchains, greatly reducing the complexity and cost of cross-chain development. These tools and services not only support existing blockchain technologies, but also leave room for integration with future blockchain technologies such as zero-knowledge proofs and fully homomorphic encryption, providing a solid foundation for the future development of blockchain.

Comparison with main competitors

After introducing the innovations of Axelar, we can compare and analyze the advantages of Axelar with other cross-chain solutions, such as Chainlink, Wormhole, and LayerZero.

First of all, in cross-chain solutions, only Axelar's platform is programmable and provides rich developer tools and automation, including the leading cross-chain browser Axelarscan. This allows Web3 developers to provide advanced cross-chain user experiences similar to Web2 applications. In contrast, other mainstream cross-chain solutions such as Chainlink's CCIP, LayerZero, and Wormhole are built on closed stacks and lack composability or programmability. Axelar's programmable functionality is built on smart contracts on a transparent blockchain network, is trustless, and open: anyone can build and use it.

Axelar stands out in the field of cross-chain with its 100% open source feature, which is rare in the cross-chain field. This not only ensures the complete transparency of the Axelar network, but also endows it with high modularity, allowing for flexible configuration according to the needs of users and developers.

Source: MICHAELLWY, adapted from Li.Fi

Axelar is a trust-minimized cross-chain protocol

In terms of trust minimization, Axelar has demonstrated its unique advantages compared to LayerZero and Wormhole. Axelar has a network of 75 active validators, providing a higher degree of decentralization. The aforementioned secondary voting mechanism plays a critical role in proof-of-stake systems, especially in cases where a minority holds the majority of the stake, as it helps maintain decentralized decision-making. This mechanism effectively limits centralized power by increasing the cost of additional voting, promoting a more balanced distribution of influence.

LayerZero architecture revolves around oracles and relayers, with oracles obtaining block headers from Chain A and sending them to Chain B for state verification. In theory, this is permissionless, but in practice, it is operated by LayerZero. This architecture has led to LayerZero being criticized as a "2 of 2 multisig", with the integrity of the bridge depending on the independence of the oracles and relayers.

Wormhole uses a more decentralized, but still not completely permissionless, proof-of-authority model. It relies on 19 "guardians" validators, and when 13 of them agree, cross-chain messages are considered valid. The protocol includes a "Governor throttle" function to pause large transactions and enhance security. However, this also highlights the potential risks of relying solely on reputation trust.

In addition, Axelar has introduced rate limiting functionality to enhance network security. By limiting the total value of assets transferred through Axelar within a specific time frame, the network effectively reduces the potential damage of any unforeseen events. Application-level security add-ons enable developers to create custom security rules, such as setting specific fund transfer and transaction frequency limits in DeFi applications.

Hub & Spoke Network Model

Axelar's hub and spoke network model has also demonstrated excellent scalability. Compared to LayerZero's peer-to-peer design, Axelar's communication is similar to a cellular network, routing through central nodes (representing hubs) to various endpoints. This model is reflected in its adaptability and configurability.

In a network containing "n" nodes, only "n-1" routes are needed to connect all nodes in a central radiating system. In contrast, a point-to-point system will require more routes to achieve full connectivity with the same number of destinations. As the number of chains in the future increases dramatically, the limitations of the point-to-point model will become increasingly apparent.

Another notable advantage of the Axelar network is that its central hub can improve the efficiency and responsiveness of the entire network in crisis situations. In traditional peer-to-peer network structures, isolated connections may not be able to effectively detect multiple threats occurring simultaneously, which can lead to security vulnerabilities and slow response times. However, Axelar effectively reduces this risk by centralizing network interactions to the central hub, thereby enhancing the security and responsiveness of the entire network.

Take the bridging protocol like Multichain as an example, the founder's detention led to the interruption of the project's operation. However, the same situation will not cause problems for Axelar. Axelar's center-radiating network architecture enables it to effectively identify and isolate damaged or insecure connections. The cross-chain exchange services built using Axelar can respond quickly, thereby protecting the security and liquidity of the entire network. This ability is crucial for maintaining the stability of cross-chain transactions and user trust, especially in the current era of rapid development and constant new challenges in blockchain technology.

It is obvious that the central hub of the Axelar network not only provides efficient interaction in daily operations, but also demonstrates its unique advantages in times of crisis, making it an important player in the competitive landscape of cross-chain technology.

Reference:

1. "Axelar Whitepaper", Axelar;

2. "10 reasons why Axelar is the dark horse of the interchain race", MICHAELLWY;

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