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🌐Integrating Decentralized Cross-Chain Communication Makes Bridges 'Substantially Safer' — Flare Networks CEO🌐
January 02, 2023
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Although they grabbed less media attention than the collapse of centralized organizations, the so-called bridge exploit incidents in 2022 again proved that the decentralized finance (defi) ecosystem still lacks sufficiently secure solutions, Hugo Philion, the co-founder and CEO of Flare Networks, has argued. Philion insists that the lack of such secure solutions has constrained the growth and use of defi products.

Lack of Communication Between Chains

In written responses sent to Bitcoin.com News, Philion claimed that the large-scale, cross-chain experimentation primarily seen in 2020 and 2021 potentially explains why more than $2 billion has been lost via the so-called bridge exploits of the past 12 months. However, according to theĀ Flare Network CEO, while it may not be possible to completely eliminate risks for users, bridges could ā€œbe made substantially safer.ā€

Besides addressing security-related issues, Philion also offered his thoughts on many other issues that range from the possible use of non-smart contract digital assets in defi and Web3, to insuring digital assets when they are moved across chains.

Below are Philion’s responses to the questions sent.

Bitcoin.com News (BCN): Can you explain why no one has been able to securely unify the ecosystem yet?

Hugo Philion (HP):Ā Blockchains have historically been designed as distributed ledgers processing native transactions, i.e. for bitcoin, the movement of the native asset bitcoin from address A to address B. They haven’t been designed to relay information between themselves, i.e., the Bitcoin chain cannot tell you what happened on the Ethereum chain at block #1083483. This creates a communication problem: how can information about different chains be reliably gathered and validated with decentralization analogues to the chains themselves? Furthermore, how can this be achieved while accounting for the risk of chain rollback?

To date, sufficiently secure and decentralized mechanisms to acquire and confirm state between disparate blockchains, apart from rollups, have not been built. A single solution likely does not exist. Instead, potentially multiple, different solutions will suit different use cases.

BCN: How does the lack of efficient communication mechanisms between chains affect dapp (decentralized app) developers?

HP:Ā Today the biggest use case in the blockchain is decentralized finance (Defi). The lack of adequate cross-chain communication has constrained the size, participation, and efficiency of the Defi market. Not only have existing designs resulted in the loss of billions of dollars of capital, but they are also hard to use, limiting participation to more sophisticated users. As a result, market size, liquidity, and returns have been constrained.

Furthermore, use cases leveraging communication that could drive adoption have remained undiscovered. A simple example could be assets purchased or traded on a smart contract chain with direct payment in bitcoin. For blockchain engineers, this could enable a number of protocols that could ultimately revolutionize the digital ticketing market, gaming, or payment gateway technologies, for example. With high-integrity communication between chains, this simple example is just the starting point.

BCN: Do cross-chain activities pose systemic risks to the industry? And if so, how?

HP:Ā Yes. A case in point is how a cross-chain communication failure can wreak havoc on an entire downstream blockchain ecosystem. We have seen this recently with multiple bridge exploits. Without sufficiently secure and decentralized mechanisms for acquiring and reliably moving data between siloed blockchains, false information can be reported and relied upon to inform the movement of assets. If information is revealed to be incorrect after transactions have been validated and assets have subsequently been reallocated to more established chains, the risk is introduced to the entire system.

BCN: What do you think made cross-chain bridges quite notorious in 2022 and are there any innovations that could help restore users’ faith in bridges? Also, can bridging solutions give users a fair degree of protection against the risk of losing their assets?

HP:Ā [The years] 2021 and 2022 have witnessed large-scale cross-chain experimentation. As a result, cross-chain bridges received their first real stress tests. Ultimately, many performed abysmally with more than $2 billion of funds exploited in the last 12 months. The general inability to safely move assets across chains has likely hampered development in the space.

I believe that by integrating suitably decentralized cross-chain communication akin to the underlying blockchain consensus mechanisms themselves, bridges could be made substantially safer. Furthermore, if assets are insured at the protocol level as they move across chains, additional risk can be mitigated.

Protection is thus a two-step process. First, risk must be minimized at the protocol level. Second, where possible, usage should be insured. In any complex financial system, risk will likely never be zero, but users must be protected where possible.

BCN: How can the non-smart contract chains be connected with one another and is it possible to upgrade or to make crypto assets like bitcoin compatible with the defi world?

HP:Ā Blockchains are siloed public databases that cannot natively read or report external transactions. At Flare, we are working on two general models to upgrade non-smart contract chains: payment triggers and bridging.

A payment trigger involves a smart contract function being triggered on one chain by a transaction on another chain. This delivers simple and useful functionality, such as paying for a collectable on a smart-contract platform with bitcoin or any other token. To do this well, a sufficiently decentralized data acquisition protocol requiring a number of participating validators to prove a transaction on a specific chain is required. At this point, data can be queried, acquired and securely reported to another chain. Then, other blockchain events can be triggered. Such a mechanism can be implemented for multiple non-smart contract chains so they can be referenced and connected.

In contrast, bridging brings full smart-contract features to a token such as bitcoin. With secure data acquisition and natively-available on-chain decentralized prices, it then becomes possible to create synthetic versions of these assets on a smart-contract chain. Crucially, in Flare’s proposed model, unlike previous synthetic models, the user is only required to provide the underlying token itself, such as bitcoin. This removes the over-collateralization requirements and eliminates the direct market risk from the user, meaning that they do not need to actively manage the position. These 1:1 representations of assets like bitcoin can then be deployed in Defi and other decentralized applications.

BCN: So what novel opportunities and use cases do you foresee if non-smart contract assets can be used for defi and Web3 activities?

HP:Ā Approximately 70% of the total market capitalization of digital assets is composed of bitcoin,Ā XRP, and dogecoin. Wide-scale usage of non-smart contract assets in Defi would mean greater liquidity for the market and reduced reliance on centralized services for users.

For creators, there would be a larger available market and for token holders, decentralized access to this market. Additionally, on-ramping non-smart contract tokens onto a scalable chain also enables an alternative payment rail beyond efforts like Lightning. We also believe that Web3 needs greater scope, utility and consumer appeal through sufficiently decentralized and reliable communication protocols between blockchains and non-blockchain networks. We want to enable tokens like bitcoin to be used with these applications.

BCN: In very simple terms, can you explain what native interoperability protocols are all about?

HP:Ā Flare has two unique protocols built natively into the network: the State Connector and the Flare Time Series Oracle. They are native because they are built directly into the blockchain using the FLR token to incentivize data provision, and they use the network itself to secure accurate data provision.

In simpler terms, for an actual five-year-old, these protocols are Flare’s sensors, allowing it to reliably ā€œseeā€ what is taking place across other blockchains, make a note of it for future reference, and base decisions upon it. This is similar to how our senses allow us to see what’s going on around us and interact with the world.

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US Dept of Commerce to publish GDP data on blockchain

On Tuesday during a televised White House cabinet meeting, Commerce Secretary Howard Lutnick announced the intention to publish GDP statistics on blockchains. Today Chainlink and Pyth said they were selected as the decentralized oracles to distribute the data.

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List Of Cardano Wallets

Well-known and actively maintained wallets supporting the Cardano Blockchain areĀ Eternl,Ā Typhon,Ā Vespr,Ā Yoroi,Ā Lace,Ā ADAlite,Ā NuFi,Ā Daedalus,Ā Gero,Ā LodeWallet,Ā Coin Wallet,Ā ADAWallet,Ā Atomic,Ā Gem Wallet,Ā TrustĀ andĀ Exodus.

Note that in case of issues, usually only queries relating to official wallets can be answered in Cardano groups across telegram/forum. You may need to consult with specific wallet support teams for third party wallets.

Tips

  • Its is important to ensure that you're in sole control of your wallet keys, and that the keys used can be restored via alternate wallet providers if a particular one is non-functional. Hence, put extra attention toĀ Non-CustodialĀ andĀ CompatibilityĀ fields.
  • The score column below is strictly a count of checks against each feature listed, the impact of specific feature (and thus, score) is up to reader's descretion.
  • The table represents current state on mainnet network, any future roadmap activities are out-of-scope.
  • Info on individual fields can be found towards the end of the page.
  • Any field that shows partial support (eg: open-source field) does not score the point for that field.

Brief info on fields above

  • Non-Custodial: are wallets where payment as well as stake keys are not shared/reused by wallet provider, and funds can be transparently verified on explorer
  • Compatibility: If the wallet mnemonics/keys can easily (for non-technical user) be used outside of specific wallet provider in major other wallets
  • Stake Control: Freedom to elect stake pool for user to delegate to (in user-friendly way)
  • Transparent Support: Easy approachability of a public interactive - eg: discord/telegram - group (with non-anonymous users) who can help out with support. Twitter/Email supports do not count for a check
  • Voting: Ability to participate in Catalyst voting process
  • Hardware Wallet: Integration with atleast Ledger Nano device
  • Native Assets: Ability to view native assets that belong to wallet
  • dApp Integration: Ability to interact with dApps
  • Stability: represents whether there have been large number of users reporting missing tokens/balance due to wallet backend being out of sync
  • Testnets Support: Ability to easily (for end-user) open wallets in atleast one of the cardano testnet networks
  • Custom Backend Support: Ability to elect a custom backend URL for selecting alternate way to submit transactions transactions created on client machines
  • Single/Multi Address Mode: Ability to use/import Single as well as Multiple Address modes for a wallet
  • Mobile App: Availability on atleast one of the popular mobile platforms
  • Desktop (app,extension,web): Ways to open wallet app on desktop PCs
  • Open Source: Whether the complete wallet (all components) are open source and can be run independently.

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XLM: GDMJF2OCHN3NNNX4T4F6POPBTXK23GTNSNQWUMIVKESTHMQM7XDYAIZT
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Pyth Network (PYTH) To Rally Higher? This Emerging Fractal Setup Saying Yes!

The cryptocurrency market is undergoing a healthy cooldown as Ethereum (ETH) eases toĀ $4,440Ā from its recent peak ofĀ $4,780. The pullback has weighed on most majorĀ altcoins — includingĀ Pyth Network (PYTH) — which is down aboutĀ 5%Ā over the past week.

But while the short-term dip might look discouraging, PYTH’s chart is showing something far more interesting: a price structure that mirrors the exact same bullish breakout pattern that sentĀ Skale (SKL)Ā soaring by triple digits earlier this month.

PYTH Mirrors SKL’s Breakout Structure

A glance at SKL’s daily chart reveals a textbook falling wedge formation — a well-known bullish reversal pattern. Once SKL broke above the wedge and printed a higher high followed by a higher low, it flipped both the 200-day and 100-day moving averages into firm support. That technical shift triggered a 148% rally in just days.

PYTH appears to be tracing the same path.

Like SKL, PYTH has already broken out from its falling wedge and formed a higher high and higher low. It is now consolidating just beneath a critical confluence of resistance, with the 100-day MA at $0.1235 and the 200-day MA at $0.1481 — a setup eerily similar to SKL’s pre-breakout structure.

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For the bullish fractal to fully play out, PYTH will need to close decisively above the $0.1235–$0.1481 zone, ideally on rising volume. A confirmed breakout could open the door to the first upside target of $0.21, representing roughly 78% potential gains from current levels.

However, confirmation is key. Until PYTH clears these moving average hurdles, it remains vulnerable to extended consolidation or even a false breakout. Still, the fractal similarity to SKL is hard to overlook — and if history repeats, PYTH bulls could be on the verge of a major move.

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