Revelo Roundtable #24 - Interoperability

In this episode of Revelo Intel’s Twitter Spaces on August 22, 2024, Kirk hosted Arjun and Zord4n from LI.FI Protocol and Galen from Axelar Network to discuss interoperability, chain abstraction, Bitcoin Layer 2 solutions, the future of DeFi, and more! Read our notes below to learn more.

Background

Kirk (Host) – Head of Business Development at Revelo Intel

Arjun (Guest) – Research at LI.FI Protocol

Zord4n (Guest) – Marketing at LI.FI Protocol

Galen (Guest) – Contributor at Axelar Network

LI.FI Protocol – a multi-chain liquidity aggregation protocol that supports any-2-any swaps by aggregating bridges and DEX aggregators across +20 networks

Axelar Network – a permissionless PoS consensus network powered by the $AXL token, connecting 60+ blockchains, spanning consensus methods including Cosmos & EVM

Revelo Roundtable: Exploring Interoperability and Chain Abstraction in Crypto

Kirk introduces the Revelo Round table discussion, focusing on interoperability and chain abstraction in the crypto space. He highlights the importance of these areas in addressing UX problems in DeFi and crypto.
Marco (Zord4n) from Jumper shares his entry into crypto in 2017, initially losing money but continuing to research and participate in the industry. He joined LI.FI early on, developing Jumper as a B2C showcase built on the LI.FI protocol. Jumper’s success led to it becoming a separate company, with Marco now leading the team there.
Galen from Axelar introduces himself as the communications lead at Interop Labs, the initial developer of the Axelar network. He explains that Axelar is an interoperability protocol connecting 66 blockchains. Galen entered the crypto space in 2017, worked at CoinDesk, and joined Axelar before its mainnet launch.
Arjun from LI.FI shares that he joined the crypto space in 2020, doing research and marketing. He was drawn to the industry by the emergence of new chains and L2s, believing in the potential for multiple chains to coexist. Arjun joined the Li.Fi team after reaching out to the founder on Twitter.

Exploring Interoperability: Differentiators, Trade-Offs, and Future Visions

Kirk asks the panel to explain their missions and differentiators in the competitive interoperability space.
Marco from Jumper highlights their community and distribution as key differentiators. He highlights Jumper’s success in building a large user base, with 250,000 active wallets monthly and close to a billion dollars in volume. Marco notes that while technology is important, community engagement is harder to replicate.
Arjun from Li.Fi explains that Jumper is built on top of Li.Fi. He describes Li.Fi’s mission to provide cross-chain swapping capabilities for various platforms and wallets. Arjun highlights Li.Fi’s support for Ethereum, EVM chains, Solana, and Bitcoin, positioning them as a comprehensive solution for developers seeking to integrate cross-chain functionality.
Galen from Axelar presents their vision of an open, verified web as the future of internet development. He explains that Axelar provides a fully open, verifiable connection between blockchains, allowing developers to compose applications across different networks. Galen notes that Axelar’s approach appeals to both regulated financial institutions and crypto-native users who value decentralization and transparency.
Kirks asks about the trade-offs between decentralization and user experience.
Marco suggests that complete decentralization may not be necessary for all aspects of crypto products, noting that users often prioritize speed and price execution over full decentralization. He highlights the importance of decentralized ownership of protocols for aligning incentives between users, developers, and investors.
Arjun adds that while users may not prioritize decentralization in their day-to-day interactions, the level of decentralization required depends on the layer of the ecosystem a project operates in. He suggests that infrastructure-level projects like Axelar may need to prioritize decentralization more than user-facing applications.

Galen argues that security in the crypto industry is a critical issue that shouldn’t be overlooked. He predicts a polarization in the market, with organizations gravitating towards either highly centralized, established institutions (like BNY Mellon or State Street Bank) or fully decentralized, open protocols (such as Uniswap, Ethereum, or Bitcoin).
Galen suggests that projects in the middle ground, which may be presenting themselves as decentralized but aren’t truly so, will likely struggle. He acknowledges that not everything needs to be decentralized and that many projects will use a hybrid approach combining on-chain and off-chain components.
Galen explains that at Interop Labs, they’re building towards a future where developers can integrate various levels of decentralization in their applications. However, he believes that at the infrastructure layer, there will be a clear divide between the most decentralized options and the most established centralized institutions.

Bitcoin Layer 2 Solutions: Challenges, Opportunities, and Future Directions

Kirk asks how the panelists are evaluating Bitcoin L2s, particularly from an interoperability standpoint.
Zord4n admits that evaluating Bitcoin L2s is still challenging due to limited knowledge. He explains that their approach to supporting new chains or L2s is based on community interest, requests from integration partners, or if the team sees potential for a strong narrative or fundamental differences that warrant development resources.
Zord4n uses Berachain as an example, explaining that they plan to support it on day one due to its strong community and potential for high volume.
Arjun, speaking for Li.Fi and Jumper, states that as aggregators and routers, they don’t need to overthink which L2s to support – if there’s user demand, they should connect it. He mentions that they already support Rootstock and are possibly testing Bob (another Bitcoin L2).
Arjun discusses the challenges facing Bitcoin L2s, noting that the underlying technology (like BitVM) is still being developed. He explains that many L2s are taking a pragmatic approach by positioning themselves as Bitcoin L2s to bootstrap their networks while gradually increasing decentralization as the technology matures.
Arjun draws a parallel between the current state of Bitcoin L2s and the early days of Ethereum L2s, suggesting that Bitcoin L2s should be given similar leeway in their development process.
Galen agrees with Arjun’s assessment and highlights the importance of understanding what “L2” really means. He points out that L2s, whether for Ethereum or Bitcoin, are separate blockchains with their own properties and challenges, rather than direct extensions of the base chain.
Galen discusses how Interop Labs has approached the challenge of evaluating which chains to connect. He announces the upcoming release of Interchain Amplifier, a product that will make it easier to add new chain connections to Axelar by abstracting the development process to the smart contract layer.
Galen expresses excitement about the future where developer teams can more easily connect new chains, including dedicated app chains or novel consensus mechanisms, subject only to on-chain voting and governance.

Exploring the Future of Chain Abstraction and Restaking Protocols

Kirk asks about chain abstraction, inquiring how close we are to a world where users can interact seamlessly across different chains without worrying about where their liquidity is located.
Zord4n estimates that we’re two to three years away from achieving the end state vision of chain abstraction. He explains that crypto Twitter often thinks in end states, viewing new narratives as “killers” of existing solutions, but he doesn’t subscribe to this notion.
Zord4n highlights the need for protocols to become more interoperable, highlighting that a major hurdle is the tendency for projects to keep value for themselves. He points out the need for a less mercenary approach to protocol openness and value extraction.
Zord4n mentions technical challenges, such as the lack of paymasters on most EVM chains outside of zkSync, which prevents consistent UX functionality across all chains.
Galen adds that chain abstraction has become a hot narrative. He draws parallels to the internet, where most users are unaware of infrastructure providers like Akamai or Cloudflare.
Galen discusses the importance of developer abstraction, where developers can build applications without knowing which blockchain they’re building on. He compares this to the SaaS world, where developer-facing teams integrate multiple lower-level products without the end-user being aware.
Galen mentions that Interop Labs and OpenZeppelin are working on libraries that will integrate interoperability from the start for Solidity smart contracts, aiming to change the developer mindset.
Arjun describes chain abstraction as “abstract,” being a bit of everything and nothing. He points out that it’s currently more of a mind share and positioning battle for teams, with no clear definition of what chain abstraction actually means.

Exploring the Future of Shared Security and Project Developments in Web3

Kirk asks about EigenLayer and restaking protocols, inquiring how the panelists assess these technologies and their potential impact on security for interoperability protocols.
Galen describes restaking as a super important but still early concept. He expresses some skepticism about proof of stake in general but acknowledges its potential importance for dApp chains and bootstrapping security.
Zord4n admits that many aspects of the restaking world are complex, but he sees potential benefits. He reasons that increased demand for staked $ETH could lead to lower yields, making additional layers like AVSs more economically attractive.
Zord4n expresses bullishness on EigenLayer due to its first-mover advantage in this space, though he admits to not having a larger thesis beyond this basic economic logic.
Kirk asks for thoughts on EigenLayer and its utility as an AVS (Application-Specific Validation Scheme).
Arjun acknowledges the potential of renting economic security at scale through EigenLayer. He notes that some interoperability protocols are already tapping into EigenLayer, but points out there’s currently no slashing mechanism, meaning there’s technically no economic security yet. He asks Galen if they’re considering using EigenLayer.
Galen highlights the importance of the concept of renting or sharing security across different protocols. He mentions that questions about the impact on Ethereum’s base layer security need to be addressed.
Zord4n argues that scalable shared security is necessary for a future with thousands of rollups and chains.
Galen agrees, expanding on the idea that shared security is essential not just for numerous chains, but also for market participants who need better collateral than what’s guaranteed by a chain’s native token.
Arjun draws a parallel between this concept and how some countries use the US dollar in their economies, suggesting new or “exotic” chains could use $ETH as a reserve currency.
Galen adds that interoperability protocols could serve as dollarization channels for these new chains.
Kirk asks each participant to share what they’re excited about in their respective projects.
Marco discusses Jumper’s development of a “Facebook pixel for Web3,” focusing on modeling user behavior and facilitating activations across different chains. He explains the concept using an analogy to Facebook’s advertising system.
Arjun shares that LiFi has just announced Bitcoin support through THORchain. He also mentions they’re working on gasless swaps and an intent factory to improve user experience.
Galen talks about several developments at Axelar, including the upcoming mainnet release of Interchain Amplifier, a collaboration with Deutsche Bank, a partnership with OpenZeppelin, integration with Lido, and upcoming chain connections including Solana and Stellar.

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Show Information

Medium: Twitter (Audio)
Show: Revelo Intel Twitter Space
Show Title: Revelo Roundtable #24 – Interoperability
Show Date: August 22, 2024