Challenges and New Developments in Cross-Chain Interoperability within a Multi-Chain Ecosystem

In the context of the multi-chain landscape of blockchain, achieving secure and convenient cross-chain interoperability has always been a major challenge faced by the industry. As user demand for cross-chain solutions grows, this issue has become increasingly prominent. The main challenges include:

Security Issues

Security is the most critical issue in cross-chain transactions. Cross-chain bridge protocols that aggregate large-scale assets often become the primary targets for hackers.

The cross-chain bridge protocol relies on trusted third-party validators to handle cross-chain transactions. If the validators are insufficiently incentivized, too few in number, or the trust model is overly centralized, hackers may compromise the cross-chain bridge and steal assets by attacking the validators. Additionally, vulnerabilities in the protocol's own contracts are often exploited by hackers.

In August 2024, a cross-chain bridge was allegedly attacked, resulting in a loss of approximately 12 million USD. In March 2022, this bridge had previously experienced a security incident referred to as "the largest loss in DeFi history," where hackers attacked 5 out of 9 validators and stole over 600 million USD worth of crypto assets.

High Gas Fees

Cross-chain transactions usually incur higher Gas fees. Users need to pay operation fees on both chains before and after the cross-chain transaction, which significantly increases the actual transaction cost.

Complexity of Operations

Each blockchain operates as an independent system, with its own consensus mechanism and protocols. This decentralized and isolated state leads to complex and cumbersome operations for users when transferring assets and data across chains. For users who trade frequently, they may also face issues such as slippage in asset prices, further increasing the difficulty of trading.

In response to these issues, in May 2024, a well-known DEX and an interoperability protocol jointly proposed the ERC-7683 standard, aimed at making cross-chain transactions simpler, faster, and more secure through a shared execution network.

Introduction to ERC-7683 Standard

The ERC-7683 standard is created based on the CrossChainOrder structure, providing the ISettlementContract smart contract interface to implement a standard API for cross-chain transaction execution systems.

The core technical proposal of this standard is that all "cross-chain intents" follow the same order structure. This approach can greatly enhance the flexibility and user-friendliness of cross-chain operations.

As demonstrated by the standard proposer, ERC-7683 provides a clear path for unifying the Ethereum ecosystem.

Application Status

In August 2024, a well-known Layer 2 solution announced the adoption of the ERC-7683 cross-chain standard, aimed at achieving efficient transfers of ETH and USDC within its ecosystem, and promoting greater application layer interoperability across the Ethereum ecosystem. Currently, the project has integrated a cross-chain solution of an interoperability protocol.

It is worth noting that the ERC-7683 standard mainly provides a standard API for cross-chain transaction execution systems, which serves as a standard at the implementation entry point, ensuring consistency in user experience. However, it struggles to address the challenge of obtaining sufficient liquidity in cross-chain transactions.

To fully leverage the utility of the ERC-7683 standard, it is necessary to create a wide-area effect - more use cases connected, more users participating, thereby attracting more "Fillers"( transaction executors). Only with a sufficient number of active Fillers can users' "cross-chain intentions" obtain better costs or experiences through competitive mechanisms.

Industry Response

The co-founder of Ethereum expressed support for the ERC-7683 standard. He pointed out that operations under this standard can include batch transactions, Merkle proofs, and other on-chain activities. He provided an example:

"With the ERC-7683 standard, users can paste an ERC-7683 address into their wallet and then simply click once to easily transfer any asset on the chain to another account."

Outlook

The multi-chain ecosystem is an inevitable trend in the development of Web3. Optimizing and simplifying cross-chain transactions to further unleash liquidity will be a key challenge facing the Web3 world. The ERC-7683 standard directly addresses the pain points of cross-chain transactions and is expected to significantly enhance interoperability between blockchains, having a profound impact on the blockchain world.

Currently, users can look forward to the experience enhancement brought by the ERC-7683 standard. This will also inject liquidity support for more DeFi projects, accelerating their development. With the widespread application of the standard, cross-chain transactions are expected to become safer, more convenient, and more efficient.