Top 3 cross-chain solutions of 2023

Although optimistic predictions that cross-chain solutions would be able to solve the fragmentation of the blockchain space as early as this year have not materialized, the interoperability situation is still better than ever before. This is despite the severe challenges the cross-chain segment has faced in the last two years.

Overall cross-chain segment trends in 2023

The primary trend for 2023 (as well as the previous 2022) in the cross-chain segment of the blockchain industry is the continuation of the "cross-chain bridge crisis". Bridges became a favourite victim of cybercriminals, surpassing cryptocurrency exchanges in "popularity". Of course, bridge developers responded by strengthening security measures in their products, and cross-chain bridges have not lost their key role. However, the community's interest has shifted towards alternative architectures and cross-chain interoperability platforms. So, in this review, we will focus on such solutions.

Due to their rapid growth, the community is interested mainly in the projects launched last year and earlier — they had time to develop and adapt to the changing market. However, there is one important exception.

CCIP (Cross Chain Interoperability Protocol).

Chainlink launched the protocol with such an original name in the summer of this year. The project's goals are highly ambitious: as the developers put it, the protocol is intended to become "TCP/IP for finance". CCIP should unite a range of blockchains popular in the DeFi community and traditional finance.

At its core, CCIP is a unified messaging protocol between blockchains with a powerful API for integration into smart contracts. CCIP currently supports Ethereum, Avalanche, BNB Chain, Optimism, and Polygon, and several networks have announced their intention to integrate the protocol.

Chainlink's existing infrastructure links to traditional finance - the company has provided services to the largest decentralized oracle network for several years. And it is this oracle network that acts as the base layer of SSIP. In addition, a separate "risk management network" has been added to the protocol architecture — a decentralized network of nodes that monitor what is happening in the CCIP network. If they detect any suspicious activity, the entire network will be stopped immediately to prevent loss of funds.

Overall, the launch of CCIP was the top news of 2023 in the cross-chain segment, and LINK — the project token — became one of the fastest-growing cryptocurrencies on the market.

Axelar

Although Axelar Network was launched in 2022, it only "took off" in the spring of 2023. If the number of transactions in the network did not reach 100 thousand per day in March, this figure rose to 360 thousand. And, despite periodic drawdowns, since then, the activity in the network has consistently exceeded 300 thousand transactions per day, with peak values exceeding 725 thousand.

The number of permanently active nodes in the network — about 1,600 — remains stable after a threefold "takeoff" in the spring of 2023.

Axelar is a separate blockchain that combines several EVM-compliant chains and blockchains based on Cosmos technology. The blockchain supports the operation of three main products:

1. Cross-Chain Bridge Satellite is responsible for transferring assets between chains.
2. Cross-Chain Gateway Protocol (CGP) is a protocol that enables gateways to transfer data between blockchains.
3. Cross-Chain Transfer Protocol (CTP) — a protocol with an advanced API that allows dApps in third-party blockchains to send and receive data to Axelar validators. This ensures interoperability at the application level.

The network's native cryptocurrency, AXL, does not boast stability. After a rapid fall in the summer, it fell out of even the first hundred crypto-assets by capitalisation. However, at the end of autumn 2023, it began to regain its position and grow again, but AXL remains an extremely risky asset for investment.

LayerZero

LayerZero is currently the most popular cross-chain solution based on lightweight nodes. In such networks, a node in the target blockchain is responsible for validating transactions and oracle data. On the one hand, this provides a high level of security, but on the other hand, it leads to high transaction costs. LayerZero circumvents the latter problem by using so-called "ultra-lightweight nodes".

LayerZero's ultra-light nodes do not add transactions to target blockchains sequentially but instead use rollups, adding entire blocks of such transactions. This has reduced the cost of transactions without sacrificing security.

The series of hacks of "traditional" cross-chain bridges has sparked a surge of interest in more secure cross-chain solutions. While in the second half of 2022, 4-6 thousand new users were added daily, from spring 2023 to the present day — 10-12 thousand. And the total number of LayerZero users has already exceeded 2 million. However, three-quarters of the addresses show extremely moderate activity — within 60 transactions in total.

It is also noteworthy that cybercriminals were forced to use a radically new tactic against LayerZero. Instead of the usual attacks on the network and its assets, they hacked into the project's CEO's Twitter account and tried to launch a fake airdrop on his behalf. However, the network has so far met the community's expectations and demonstrated high security.