In November 2022, Bill Hughes, Senior Counsel & Director of Global Regulatory Matters at ConsenSys, wrote an article titled “Money Crypto Versus Tech Crypto”. In it he distinguishes the two as separate ecosystems, a clarification that has been useful of late. While “money crypto” has seen significant volatility, “tech crypto” continues to onboard developers faster than ever. In fact, 36% of all smart contracts ever deployed and verified occurred in 2022, with total deployments increasing by 14% in the two weeks following the Merge. There are now 12,495+ dApps across all chains (compare that to 1,000 four years ago).
There are no signs of this developer activity slowing down. As builders continue to flock to the space, as dApps continue to be built, and as users continue to onboard, the need for separate blockchains that can communicate or transfer funds directly and securely between one another is indispensable. The inability to successfully interoperate across chains not only siloes users and value, but also limits the likelihood of mass adoption.
The majority of bridging solutions working to solve this problem suffer from poor security models: they rely on a multisig or other external trusted parties to work. This leads to bridges that are more likely to be compromised as these parties (it could be a set of validators or an oracle) are subject to being hacked, bribed, manipulated or economically attacked.
Connext, a MESH portfolio company, solves this through their modular architecture that integrates native, battle-tested infrastructure to move messages across chains, using Ethereum as the security layer and central hub. For example, for an Optimism-Ethereum rollup, the most secure path is the Optimism-Ethereum bridge. Connext uses that connection to bring tokens/messages to Ethereum, and then from Ethereum to a destination chain of choice.
This ability to use secure channels enables fast, trust-minimized, and non-custodial communication between blockchains. For users, trustlessness or trust-minimization means that bridging assets or information between chains remains as safe as the underlying chains themselves.
Connext recognized the need for trust-minimized token transfers in 2020. While most other research teams at the time were focused on building rollups and EVM-compatible systems for peer-to-contract DeFi protocols, inevitably leading to fragmentation across L2s, Connext focused instead on the crosschain problem. They launched V0 of their network back in 2021 and saw weekly revenue volume grow from $100K to $40MIL in just three months (read more of their background story here).
Today, the Connext bridge protocol supports the transfer of funds between 6 chains. The solution not only connects independent blockchains with one another, it can also connect all smart contract capable chains with layer 2 solutions without the use of external validators, making these connections safe and secure.
What does safe mean in practice for Connext?
The majority of crosschain bridges in Web3 rely on third parties in their security model. Who is in charge of validating crosschain transactions? In the majority of cases, it’s a multisig (a type of wallet that requires two or more private keys to perform certain tasks), or an oracle (entities that connect blockchains to external systems), all of which can be hacked, bribed, or make mistakes in their operations. These approaches introduce new trust assumptions and significant risks. Connext recognized the limitations of these architectures, and chose to make security a top priority in their design. With the Connext bridge protocol, users can bridge their funds and developers can build crosschain applications (more about that later) in a way that retains the security properties of the chains being connected. Recent bridge hacks like the $650m Ronin hack or the $100m Horizon bridge hack illustrate the importance of safe communication between blockchains.
What is in store for Connext? Building secure crosschain applications.
Connext has much larger ambitions than being a token bridge: it allows protocols and applications to exchange data and information across chains in a trust minimized way. This paves the way for making the original vision of Web3 a reality: unified, open, and composable ecosystems.
With Connext, developers can now build secure crosschain applications (xApps). xApps (pronounced zaps) are a progression of dApps (decentralized apps). While dApps exist and operate on a specific blockchain, xApps interact with multiple blockchains simultaneously and abstract away the “chain” for the user. Thanks to Connext's easy-to-use “xcall” interface, builders can easily build apps that pass liquidity and data between independent chains and can thus take advantage of liquidity and deployed contracts on any chain, while providing a seamless experience to the end user.
Amarok, the latest Connext upgrade, went live last week. It allows builders to create even more flexible xApps, by introducing asynchronous calls on smart contracts. Developers can now access data and liquidity across multiple chains. Connext already had some of the cheapest fees among all the crosschain bridges - and now with Amarok they have built a chain-agnostic world for developers and users alike. This brings Web3 development much closer to standard web development patterns, making it easier for more mainstream developers to make the mental jump. Read more about the recent Amarok upgrade here.
A range of xApps from across the Web3 spectrum have already deployed on Connext. NFTHashi is the most secure crosschain bridge for NFTs, Fuji Finance allows for crosschain loans, where users deposit collateral on one chain and can borrow tokens on a second chain, and with Superfluid users can stream tokens every second from one chain to another.
By enabling the deployment of xApps, Connext is building a critical piece of public infrastructure for the decentralized web, thereby bringing us one step closer to the reality of blockchain technology being the backbone of the Internet.
Connext is also in the process of transitioning into a DAO with the launch of $NEXT, the utility and governance token for the protocol. $NEXT keeps the network running by ensuring all routers are held to the same set of rules around fair transaction ordering, and rewards are slashed if they violate these rules.
Interoperability is the future, and Connext’s long-term strategy as well as their ability to articulate their value proposition from a developer-centric perspective have made them a leader in this interoperability space. At MESH we continue to watch Connext’s evolution with excitement and enthusiasm. For more information, see here. You can also follow Connext on Twitter and Discord.