Bridging to v4: Assessing Token Bridges

V4 will entail a paradigm shift in the dYdX ecosystem from Ethereum (StarkEx) to COSMOs. This will mean that the present DYDX tokens will have to be transferred over to another blockchain and the community will need to adopt a ETH <> dYdX bridge in this process. To push this even further, we can even envision this canonical bridge to provide the infrastructure of choice for exchange between these 2 blockchains, and potentially other chains as well. Therefore, the interchain experience is a crucial area of discussion.

Rationale

  1. Security Risks

Crypto bridges have been primary vectors of attacks given its nascency in the cross chain space. According to Chainalysis, attacks on bridges accounted for 69% of total funds stolen in 2022 as of Aug last year. Based on those consolidated by rekt, the more infamous ones include the $624M hack on Ronin, $611M hack on Poly Network and $586M on the BNB Bridge. Evidently, choosing a bridge, assessing its security is a critical area that should be made known and discussed by the community.

  1. User Experience

Furthermore, different bridges entail different forms of the asset. A foreseeable future for dYdX involves multi-asset collateral structures which possibly entails using the coin as a margin for trading. Thus, a standardized form is important to position dYdX as the leading on-chain exchange.

An example would be that if we bridge ETH over to dYdX (COSMOs), this will appear as a wrapped version of it on the destination chain. For instance, ETH through the Gravity Bridge may become ETH1 while ETH through Wormhole becomes ETH2. Evidently, this fragments the liquidity on dYdX in the future, distorting the trading experience. Thus a single wrapped version of the token will be ideal to simplify the user experience.

  1. Learning from other protocols

More recently, the Uniswap community had an intense discussion and closely watched vote, over which bridge to adopt, for deploying v3 on the BNB Chain. Likewise, Osmosis had a similar situation in voting for the canonical ETH bridge service provider. Evidently, these are important decisions that concern the protocol and community.

Bridges Today

Present ETH <> COSMOs bridges today include:

  • Gravity Bridge (connects to Osmosis, Evmos, Stargaze etc)
  • Wormhole (connects to Injective, Oasis, Terra)
  • Axelar (connects to Osmosis, Juno etc)
  • Nomad (connects to EVMOS etc)

And potentially others which may be in the works…

As a starter, Osmosis had previously created a similar post, comparing these bridges through concise summaries : The Great Osmosis Bridge-Off. Here is where we stand after the town… | by Stevie Woofwoof | Osmosis Community Updates | Medium

Edit: Uniswap has shared their bridge assessment report and recommended Wormhole, Axelar. Bridge Assessment Report

Factors of Consideration

1. Mechanism Design

2. Security

  • Model - How is the security model designed? Does it leverage security on the destination chain, source chain or both?

  • Audits - Has the source code been audited by known organizations?

  • Hacks - Has the bridge been hacked before? If so, what remedies were taken and have the funds been returned?

  • External vulnerabilities - Does the bridge rely heavily on external services (eg. Chainlink) and how are these actively minimized?

3. Consensus

  • Decentralization - is this bridge secured by a group of validators? A multi-sig or just 1 entity? Or is this just a single point of failure?

  • Malicious Actors - How does the bridge penalize malicious validators? What are some mitigation factors (eg. can the bridge be halted?)

4. Adoption Rate

  • TVL, Transaction Volume - are there known deployed contract addresses? Is this widely used?

  • Costs - What are the gas costs required to send transactions? Can these be minimized for better user experiences?

5. Others

  • Future plans - Can the bridge support NFT transfers (eg. Hedgies) over to dYdX (COSMOs)?

  • Team / Reputation - Is this supported by a known team?

  • Alignment with dYdX/IBC - Does the team have a vested interest in dYdX and the COSMOs ecosystem?

Conclusion

Fundamentally, these are some suggested points of consideration which the community should collectively discuss in choosing our bridge to transition seamlessly and securely to v4. I do hope that bridge providers and validators can also chip into the discussions for the community to make an informed decision. Ideally, this should end off with a snapshot in signaling the community’s intention for our bridge of choice for the team to work on ahead of v4.

References:

Osmosis Vote (Choosing the Osmosis Canonical Ethereum Bridge)
Uniswap Vote (Deployment on BNB Chain)

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The bridge hopes to integrate all chains, not just a few chains.

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Thank you @0xcchan for this research piece. Great read.

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@0xcchan thanks for this piece. And, in agreement with @jake - this has to integrate all chains, which is something Router Protocol has been working towards.

Router Protocol’s vision is to curb the fragmenting of liquidity as more chains are introduced/adopted by enabling interoperability for smart contracts and blockchains.

Let’s briefly explore Router Chain based on the factors we’re considering here:

Factors of Consideration

1. Mechanism Design

An article on understanding the architecture of Router Chain

2. Security

  • Model - In Router v2, the Router Chain acts as the bridge. Router Chain is built using the cosmos SDK. Hence, it leverages tendermint’s Byzantine Fault Tolerant (BFT) consensus engine. As a Proof of Stake (PoS) blockchain, the Router chain is primarily run by a network of validators with economic incentives to act honestly. The trust assumption is that there will be ⅔+1 validators who will act honestly.

What sets Router apart from other providers, is providing customizability to dApps to add their own security layer on top of the PoS-based mechanism inherited by default from the Router chain. DApps can add optimistic layers as well to make their system more secure.

  • Audits - The V1 bridge was audited by multiple auditors - Halborn Security, Hacken, and Oak Security.
    All the vulnerabilities in the V1 architecture were fixed as part of the audit process.

Router Chain (v2) will be audited by Informal Systems, Zokyo and Oak Security. Router also runs security bug bounty on ImmuneFi for Router v1 and the same will continue once we open up Router v2 for audit and security process. We have rewards up to $200,000 available for the Immunefi bug bounty program.

  • Hacks - No, Router has never been hacked before.

  • External vulnerabilities - Router does not rely heavily on external services (eg. Chainlink)

3. Consensus

  • Decentralization - Router chain is secured by a diverse set of 30+ validators of different ecosystems ie EVM, Cosmos, others. Validators have to stake $ROUTE tokens on the Router chain.

  • Malicious Actors - Any validator having excessive downtime or engaging in any kind of malicious activity is penalized by having a portion of their staked ROUTE slashed. For attack vectors like double signing, validators liveness, we use cosmos sdk slashing module.

While for attack vectors like cross chain message tampering, message withholding etc we will be implementing our custom slashing mechanism which will be available in testnet phase now.

4. Adoption Rate

  • TVL, Transaction Volume - Router protocol’s V1 has had over 100k+ transactions since its launch with a transaction volume of over $630M. The current TVL in the ecosystem is around $300-350k.

As for Router Chain (v2), within the first 24 hours, 12500 transactions have been done by 8500 users on Router Chain testnet’s first iDapp (interoperable Dapp) “ping pong”, across 7 chains - Avax Fuji, Mumbai Matic, Goerli Ethereum, Arbitrum Goerli, Scroll Testnet, Mantle Testnet, and Router Testnet.

  • Costs - The gas costs to send transactions is minimal, and can be delegated to the protocol, the user or a third party.

5. Others

  • Future plans - Router Chain does support NFT transfers ie Hedgies between dYdX chain and other chains.

  • Team / Reputation - The Router Protocol team comprises many industry veterans. The team is led by MIT alumnus Ramani Ramachandran.

Ramani Ramachandran (Co-founder & CEO)

Ramani Ramachandran (Ram) is the Founder and CEO of Router Labs, which runs Router Protocol. Ram has been in crypto since 2014. Prior to Crypto, Ram was in the financial services industry and spent time across various functions including product management, research, fundraising, and investments across the US, Europe, and Asia.

Shubham Singh (Co-founder & CTO)

Full-stack Developer and Technical Architect building in crypto and blockchain since 2016; Built a crypto-index (108token) as well as Fordex - the world’s first stablecoin DEX.

Chandan Choudhary (Co-Founder)

Head of Strategy at Bitpolo, a leading Indian crypto exchange; Veteran trader and advisor across asset classes spanning over 15 years. Energy trader at Futures first; Managed crypto fund, generating 4x returns; Head of Ops & Market Research at Tradelab

Priyeshu Garg ( Co-Founder )

Priyeshu leads the research and developer-relations wing at Router. Past stints include software engineering at Ola, crypto journalism at Cryptoslate and product at Qredo.

Mankena Venkatesh (Blockchain Engineer)

He is a core engineer at Router Protocol currently building Routerchain. He previously worked as a Blockchain engineer at Matic (now Polygon) and Injective protocol.

Prof. Ashutosh Sahoo (Chief of Strategy & Marketing)

Prof. Ashutosh Sahoo is a blockchain ecosystem growth specialist. Since 2021 he has been involved in building a trade finance protocol on blockchain, Polytrade, and Reef - a substrate-based Layer 1 as the Chief Growth Officer. Prior to his foray into blockchain and academia, Prof. Sahoo has held leadership roles for over 15 years in strategy , operations, sales and marketing functions in FMCG, IT, manufacturing and real estate industries with brands of global renown like Hewlett-Packard, Johnson & Johnson, Lodha Group, Trump Organization and Sobha Realty.

  • Alignment with dYdX/IBC - Router Protocol, which has been quite successful in the EVM ecosystem since 2022 is here to build in Cosmos for the longer term, building Router Chain using Cosmos SDK. With regards to dYdX and IBC, Router’s senior BD, Matthias, has personally met with Charles and Hisashi of dYdX in Seoul and Tokyo, and expressed interest to support dYdX fully. He also personally met with Polymer Labs (that is scaling IBC) co founder Bo, Osmosis and Keplr co founder Josh - in Seoul. Router is also in talks with Secret Network, Kujira, Evmos and supporting them by enabling interoperability to all chains.

References:
Uniswap posted their consideration for Router Protocol

What do you guys think of this?

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That’s a great topic and research, looking forward to a well-established Bridging-partnership plan to be purposed in the Community.

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Hi there,

as already mentioned here Blockscape Validator Introduction , we are building the frontend for Gravity Bridge and - if you want - can help you write the proposal to add the dYdX token to Gravity Bridge for bridging between Ethereum and Cosmos.

Let me know if you have any questions!

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