Author:0x76@BlockBeats

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With the launch of more and more new public chains, the demand for users to cross-chain assets also increases simultaneously. After this trend led to a number of cross-chain bridge projects, the number of assets minted through various cross-chain bridges has also increased sharply.

As cross-chain assets become more widely used, so do the issues associated with them. For example, how do we evaluate the security of a cross-chain asset? Is the USDC in some new public chains the same as the USDC in Ethereum? Why are there stablecoins in different formats such as ceUSDC, anyUSDC, madUSDC and even USDC.e on some platforms, but there is only one USDC on other platforms? When a cross-chain bridge is attacked, how can I judge whether the cross-chain assets I hold have been affected?

With these questions in mind, this article will start with the basic cross-chain logic at a lower level, and sort out the entire process of cross-chain asset casting, so that readers can better assess the real risks of cross-chain assets and choose a cross-chain that is more suitable for them tool.

So at the beginning of the article, let's briefly discuss how assets are defined.

How to define an asset?

There are two main means of defining assets. One is to define by physical properties, such as physical gold and precious metal currencies commonly used in ancient societies. But in modern society, whether it is currency or financial assets such as stocks and bonds, the definition method has basically broken away from the restrictions of physical attributes, and has changed to a more abstract mode of defining assets by accounting books.

For example, the bank deposits we use in our daily life are defined by the balance sheet of a country's banking system. As long as your account balance is registered in the bank's statement, your deposit must exist.

Like deposits, cryptocurrencies such as Bitcoin are also defined by accounting books. The only difference is that Bitcoin adopts a more centralized account book registration model (that's right, it's more centralized). All bitcoins are only recorded by a unique set of books, and there is only one version in the world (longest chain consensus). This unified and immutable accounting ledger is what we call the blockchain.

The decentralization of the blockchain that people often say is actually only reflected in the wider participation of the community in the process of recording and keeping the ledger. However, in terms of the number of ledgers involved in defining assets, the blockchain is undoubtedly a higher degree of centralization and more efficient than the traditional bank book registration system (no frequent reconciliation between multiple bookkeeping entities is required) account book registration method.

Can assets really cross-chain?

As mentioned above, each blockchain is actually an independent accounting book that can define its own native assets. But at some point, people hope that assets can break away from the original ledger that defines them, and then circulate freely in different bookkeeping systems.

For example, cross-border remittance (across different banking system ledgers), issuance of stable coins (from bank ledgers to blockchain ledgers), or recharge to trading platforms (from blockchain ledgers to trading platform ledgers), etc. All these operations of transferring assets across ledgers constitute cross-chain in a broad sense.

But the problem is that since the existence of an asset is determined by the original ledger that defines it, theoretically no asset can exist independently of the original ledger. In other words, it is theoretically impossible for assets to cross-chain in the true sense.

Just like physical gold can’t actually slip into your bank account, bitcoin can’t exist independently of the blockchain that defines it. Therefore, people often say that assets cross-chain, in fact, what cross-chain is not the asset itself, but the value represented by the asset.

Therefore, asset cross-chain is essentially a value transfer process across different bookkeeping systems. However, for the convenience of expression, we will still refer to this process of transferring value across ledgers as "asset cross-chain" for short.

Then the next question is, how can we transfer value across different bookkeeping systems?

Two basic modes of asset cross-chain

1. Lock the casting model

The locked casting model is the most basic model for cross-chain assets. As early as the era of metal currency, people used the locked casting model to lock gold in gold shops, and at the same time cast and issue gold redeemable certificates (later evolved into banknotes) that are easier to carry and circulate for daily transactions.

Similarly, in real blockchain cross-chain activities, almost exactly the same lock-casting logic is still used. The cross-chain bridge locks the assets in the original chain, and issues the "redeemable certificate" of the original chain assets in the transferred chain, that is, cross-chain assets, and then completes the cross-chain transfer of asset value.

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The original asset is locked on the A side of the outbound chain, and the redeemable certificate of the original asset is issued on the B side of the inbound chain

All currently existing cross-chain (cross-ledger) assets are basically “redeemable certificates” of original assets issued by different cross-chain intermediaries. Including the balance you recharged into the trading platform, the US dollar foreign exchange held across the country, the bitcoin-anchored currency traded on various public chain platforms, and even the WETH received by locking ETH, etc., are all cross-chain assets in a broad sense.

The only drawback of this model is that cross-chain intermediaries using this model are often difficult to meet user requirements in terms of efficiency and cost. Therefore, such cross-chain bridges often only connect a few public chains (such as Ethereum to the new chain) in order to introduce mainstream cross-chain assets to the new chain. And this cross-chain bridge is often officially supported or directly developed by the new chain, so this type of bridge is often called an official bridge.

But for ordinary users, improving cross-chain transaction efficiency and reducing costs are their more concerned issues. Therefore, a third-party bridge using a two-way capital pool model emerged as the times require.

2. Two-way capital pool model

The two-way capital pool model is not difficult to understand. Since the main efficiency bottleneck of the official bridge comes from the lock casting process, as long as this mechanism can be bypassed, the efficiency of cross-chain can be greatly improved.

Therefore, these third-party bridges choose to set up capital pools on both sides of the bridge in advance, one side collects a large number of original assets of the original chain, and the other side collects cross-chain assets that have been issued by the official bridge.

When users cross-chain through a third-party bridge, they only need to deposit the original assets on one side, and directly take out the cross-chain assets that have been minted by the official bridge in advance on the other side, and the cross-chain work can be completed in real time. As long as the transfer-out and transfer-in amounts of this third-party bridge are approximately equal during operation, the model can operate stably.

The only limitation is that the two-way fund pool model needs to utilize the cross-chain assets issued by the official bridge, so it can only be deployed after the official bridge is established.

What are the factors that affect the security of cross-chain assets?

As mentioned above, cross-chain assets are redeemable certificates of original assets issued by cross-chain bridges. And every time the lock-up casting process is passed, the risk of the asset will increase by one layer.

Let's take anyUSDC currently issued on Moonbeam as an example. The issuance of its assets needs to go through three stages in total:

1. The U.S. banking system issues USD;

2. Circle, a stablecoin issuer, locks USD and issues USDC in Ethereum;

3. The cross-chain bridge Anyswap (now Multichain) locks USDC in Ethereum and issues anyUSDC on the new chain;

Therefore, the security of anyUSDC is equal to the product of the security of these three, and the formula can be expressed as follows:

Security(anyUSDC)= Security(USD)* Security(Circle)* Security(Anyswap)

In other words, as long as any one of the three has a problem, such as the collapse of the US banking system, Circle's money running away, or Anyswap being attacked, it will directly affect the intrinsic value of anyUSDC. Therefore, the more locked and minted an asset goes through (the more prefixes and suffixes in the name), the higher the risk it carries.

Therefore, the cross-chain bridge as the initial issuer of cross-chain assets has become the core node that determines whether the cross-chain assets are safe or not.

There are currently two main ways in which cross-chain bridges can be attacked. Still taking the gold shop as an example, one is that the gold locked by the gold shop is directly stolen (the mode in which PolyNetwork is attacked), and the other is that the redeemable certificates issued by the gold shop are forged by hackers, so that hackers can use these forged certificates to first One step to redeem the gold in the vault (Wormhole attack mode).

But in any case, the security of an asset is almost entirely determined by its issuer. For cross-chain assets, it is the cross-chain bridge that issues them that determines their safety.

How can a new chain better issue cross-chain assets?

After supplementing the necessary knowledge, we can better understand how the chaotic cross-chain asset status quo in many new public chains arises.

Let's first look at the types of cross-chain assets included in Zenlink, the trading platform on Moonbeam.

It can be seen that in the new public chain of Moonbeam, the original issuer of cross-chain assets has at least three different cross-chain bridges. Taking USDC as an example, three bridges independently issued three cross-chain assets, namely: ceUSDC, anyUSDC and madUSDC.

It can be seen that Zenlink officially did not specify the only official bridge, but accepted all standard cross-chain assets for users to choose freely. At the same time, since no cross-chain asset has achieved an absolute dominant position in Moonbeam, other third-party bridges have also begun to issue their own cross-chain assets using the locked-in casting model.

Although this open and free competition is more in line with the spirit of the blockchain, for a newly established DEX, it will undoubtedly cause a large degree of liquidity fragmentation, and the user experience is not friendly.

However, unlike Zenlink, StellaSwap and Beamswap, which are also deployed on Moonbeam, have only one USDC by default in their transaction interface.

After testing, we found that the USDC is not an official stablecoin directly issued by Circle. The corresponding asset behind it is actually anyUSDC displayed in Zenlink. In other words, although there is no native USDC on Moonbeam, in order to reduce user confusion, the project party directly changed a more memorable name on the front end to recharge it.

Although this method unifies liquidity, this method of artificially specifying cross-chain asset standards by the project party does not conform to the spirit of decentralization. In particular, directly renaming anyUSDC to USDC on the front end will give users the illusion that it is officially issued directly by Circle. It caused it to ignore the risks that the Anyswap (now Multichain) cross-chain bridge may bring to the security of user assets.

Therefore, in the initial issuance of cross-chain assets, whether to artificially choose a single cross-chain bridge as the issuer or allow free competition of different cross-chain assets is actually a dilemma. Just as there are various versions of Bitcoin-anchored coins in Ethereum, as long as no bridge has achieved a market monopoly in the issuance of cross-chain assets, then this confusion and fragmentation will always exist.

But in any case, try to keep the name of cross-chain assets as complete as possible, and not mislead users intentionally or unintentionally, is still the basic principle that each project party must maintain.

At the end of the article, we will summarize the core content of this article:

1. The cross-chain bridge built with the locked casting model is an important asset issuer in the blockchain world. Similar to the Tether company that issued USDT, they have never been a simple channel, but an important issuer of cross-chain assets. Once these bridges are breached, the assets issued by them may instantly return to zero, so the security of these bridges is of paramount importance.

2. The cross-chain bridge built with the two-way fund pool model is not a simple channel business, but a liquidity relief business. The security of its fund pool generally does not directly affect users who use the cross-chain bridge to cross-chain, but theft of the fund pool will directly cause losses to LP.

3. The current chaotic status of cross-chain assets is largely due to the arbitrary simplification of the naming of cross-chain assets. In addition to StellaSwap changing anyUSDC to USDC directly on the front end, similar examples include the ETH displayed in Near, which is actually simplified from nETH (n stands for the official rainbow bridge). And the ATOM obtained through different paths cross-chain in the Cosmos ecosystem is not the same thing in essence.