The Rollup - Interoperability For The Modular Future

In this episode of The Rollup which took place on February 15, 2024, Andy and Robbie hosted Hart Lambur from Across Protocol, Layne Harber from Connect Network, Jon Kol from Hyperlane, Kaiserkarel from Union, and Philipp Zentner from LI.FI Protocol to discuss blockchain interoperability, standards, security, user experience in a fragmented landscape, and more! Read our notes below to learn more.

Background

Andy (Host) – Co-Founder of The Rollup

Robbie (Host) – Co-Founder of The Rollup

Hart Lambur (Guest) – Co-Founder of Across Protocol

Layne Haber (Guest) – Co-Founder of Connext Network

Jon Kol (Guest) – CEO of Hyperlane

Kaiserkarel (Guest) – Founder of Union

Philipp Zentner (Guest) – CEO of LI.FI Protocol

Across Protocol – an interoperability protocol powered by intents

Connext Network – a modular protocol for securely passing funds and data between chains

Hyperlane – the first universal and permissionless interoperability layer built for the modular blockchain stack

Union – a hyper-efficient zero-knowledge infrastructure layer for general message passing, asset transfers, NFTs, and DeFi

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

Blockchain Interoperability: Protocols, Perspectives, and Security

Kaiserkarel talks about Union, a permissionless and trustless zk interoperability protocol currently in audits, aiming to go live by the end of Q2.
Layne talks about Connext, which has been building interoperability infrastructure since 2020, and hints at exciting future developments.
Jon talks about Hyperlane, an open framework for interoperability focusing on the modular ecosystem and connecting Snoot roll-ups and chains, marking his sixth year in the crypto profession.
Hart talks about Across, a cross-chain bridge focusing on intent-based architecture.
Philipp talks about LI.FI Protocol, is a multi-chain trading API that aggregates and abstracts asset movements across tax aggregators, bridges, and other platforms, serving major wallets and trading apps.
Robbie asks what the end goal of achieving interoperability looks like, questioning if it’s a never-ending road or if there’s a definitive endpoint.
Jon says that the end goal is a state where users are unaware of the hosting environment for services, similar to how people are indifferent to which AWS enclave is hosting a live stream. He says that the concept of account abstraction in single-chain contexts should extend to interoperability across different chains and environments, aiming for simplicity despite the potential diversity of chains and roll-ups.
Hart offers a perspective comparing the concept of interoperability to the banking system where, although US dollars are supposedly uniform, the experience and value can differ depending on the bank holding the dollars. This analogy suggests that while interoperability aims for seamless interaction, there might still be instances where the underlying platform matters due to security and other implications.
Jon agrees with Hart, adding that security concerns play a crucial role in the interoperability discussion. He notes the importance of trustless transfers and the potential risks associated with weaker chains, comparing it to the risk of a bank default.
Philipp introduces two viewpoints: the consumer perspective, where fragmentation should be minimal and akin to the differences between banks, and the technological perspective, questioning whether a unified communication standard will emerge or if multiple standards will coexist. He highlights the importance of seamless user experience and the role of new technologies in achieving interoperability.
Kaiserkarel highlights the importance of not compromising on security levels, advocating for the highest possible security across all interactions. He discusses the future of interoperability from a developer’s perspective, stressing the need for app-specific Layer-2 solutions and the aim for asynchronous composability.
He mentions the potential of shared security and deterministic execution-proof ordering to mitigate risks associated with interoperability and enhance the user experience.

Exploring Analogies, User Autonomy, and Asset Mobility

Robbie asks if considering different blockchains as different banks, with the interoperability between these chains acting as the infrastructure to connect them, is a correct analogy.
Hart says that differentiating the movement of money from the movement of messages, highlighting the unique trust assumptions and strategies involved in transferring money compared to data, suggesting that the process should appear seamless to users despite the underlying complexities.
Layne asks whether users will have the autonomy and information to make informed choices regarding the movement of money across blockchains.
Hart doubts users’ desire to engage with the complexities of money movement, highlighting the goal of a seamless experience despite differing trust assumptions and risks associated with moving money.
Jon points out the occasional failure of systems, even those with high reliability, and says that the banking analogy is useful but acknowledges the inevitability of issues like 51% attacks and the difficulty of achieving universal agreement on a single architecture.
Layne says that the uncertainty about the future state of blockchain interoperability is significant, but there is a consensus on the desired user experience of seamless interaction with multiple blockchains without understanding the specifics.
Hart questions whether users will primarily operate from a single “home chain” or distribute their assets across multiple chains, suggesting that user behavior may vary based on their interaction with the blockchain ecosystem.
Layne says that user preferences for a home chain or multiple chains depend on their engagement level, from DAO members with a clear home chain to airdrop hunters and long-term investors in various ecosystems.
Philipp adds that the choice of chains and assets might also depend on whether the user is an individual or an institution, how they were onboarded, and the ongoing efforts of banks to enter the digital asset space, which could lead to a fragmented landscape driven by compliance, economic interests, and control.
Hart compares the competition for user funds among banks to the potential fragmentation in blockchain, suggesting that entities like JP Morgan or BlackRock will want to monopolize user funds on their chains.
Philipp talks about the complexity of asset distribution across chains, questioning whether assets will physically move across chains or if zero-knowledge proofs will suffice for asset verification across multiple chains.
Kaiserkarel discusses the nature of asset ownership across chains, distinguishing between true asset mobility and the creation of debt tokens as proxies for original assets, highlighting $USDC as a unique case of an asset with multiple canonical homes.
Jon talks about the market structure and the necessity of debt tokens due to the architectural requirements of most systems, suggesting a correlation between wealth and the number of bank accounts, and the potential for crypto market structures to enable centralized liquidity management across different financial ecosystems.

Financial Chain Interactions: Streamlining Transactions and Improving User Experience

Hart proposes a separation of financial assets across different types of chains, distinguishing between chains for major financial assets and those for microtransactions, suggesting a model where users maintain their funds in primary financial chains while making payments on consumer application chains.
Jon explains the mechanism of transferring funds between a user’s primary financial chain and consumer application chains, comparing the role of cross-chain connectors to that of the Visa network in traditional e-commerce, facilitating payments without the need to maintain balances in multiple currencies or platforms.
Philipp highlights the importance of simplifying the payment process to increase consumer spending, comparing advancements in e-commerce and the potential for blockchain technology to streamline transactions while noting the ongoing improvements in Web2 technology.
Hart mentions that many are unfamiliar with 5.25-inch floppy covers, noting a shared knowledge gap regarding older technology.
Layne asks about achieving important and attainable standards for technology alignment.
Hart suggests focusing on standards for cross-chain interactions, highlighting the need for seamless action across blockchains through a three-layer architecture: order flow, solver layer, and settlement layer.
Layne adds the idea of a shared indexing layer for solvers to compete but points out the importance of focusing on the execution layer and error handling for a better user experience in interoperability solutions.
Kaiserkarel discusses the importance of error handling for security and trustless interoperability, advocating for clear distinctions between fully trustless operations and those relying on external entities.
Philipp highlights the challenges of transaction monitoring and debuggability, advocating for transparency and standards in error communication to improve customer support and user experience.
Robbie introduces a monetization strategy for bridges involving ads during token transfers to reduce user anxiety, contrasting it with user spam concerns.
Jon says extending the waiting period for optimistic transfers to align with the length of TV show episodes, humorously integrating entertainment into the transaction process. Philipp shares an exploration of ads on Jumper Exchange to cover transaction costs.
Hart and Layne advocate for focusing on reducing transaction times to enhance user experience, rather than relying on distractions like ads.

Bridging Blockchain Gaps: Perspectives on Interoperability

Andy highlights the need for a solution to bridge the gap between different blockchains and execution environments for power users in DeFi and NFT spaces.
Philipp says that as a meta aggregator now functioning as a multi-chain trading API, they acknowledge the challenges faced by users in a multi-chain environment and are working on integrating solver systems and more advanced aggregators to simplify crypto adoption and support mass adoption from a B2B perspective.
Kaiserkarel expresses a desire for a future where there is one protocol standard at the base layer to unify competing protocols, suggesting that interoperability standards will likely evolve from collaboration and consensus among developers.
Philipp questions whether a single standard or a “winner takes all” scenario will resolve interoperability challenges, suggesting that the evolution of standards might be influenced by the community and developer consensus.
Kaiserkarel predicts that interoperability standards will converge through collaborative efforts, leading to API compatibility and a unified interface for operations across different blockchains.
Jon says that the crypto space is unique in that user affiliation with certain protocols may influence technology adoption, suggesting that financial characteristics and user preferences might lead to a diversity of standards rather than a single dominant solution.

Blockchain Standards & Interoperability Challenges

Jon asks about engagement with the chain agnostic improvement and standard alliance, highlighting the importance of adopting a broad perspective on interoperability and standards development.
Layne acknowledges the importance of messaging standards across blockchains but points out the difficulty in adoption without widespread use, suggesting a focus on investment in this area.
Philipp questions the need for widespread adoption of a standard for an individual or entity to adopt it themselves, challenging the notion that standards require universal acceptance.
Layne highlights the practicality of using methods that best integrate with existing systems over adopting a standard that lacks broad support.
Hart separates the discussion into two parts: the challenge of establishing messaging standards across blockchains due to competition, and the potential for a standard based on user intents for faster transactions without traditional messaging.
Hart explains the concept of an order ticket standard that simplifies cross-chain transactions for developers, highlighting the efficiency and user-friendly aspect of such a system despite underlying complexities.
Kaiserkarel presents a counterargument about the future irrelevance of solvers in a scenario where chains achieve single-slot finality and cheap ZK-proof generation, envisioning a system that operates efficiently without the need for solvers or liquidity provision by third parties.
Hart adds that the envisioned system depends on rapid finality and affordable ZK-proof generation, which are not yet feasible due to current technological limitations, explaining the interim necessity of third-party solvers to bridge these gaps.
Philipp questions if the SSL issue, reminiscent of database locking in high-traffic environments, can be resolved shortly, noting that even as databases continue to evolve with innovations like QDB and ClickHouse, blockchain faces a bigger challenge with shared state and composability, not seeing a resolution within the next decade.
Kaiserkarel distinguishes the issue, mentioning Ethereum‘s single-cell finality and its large validator set compared to Cosmos, highlighting the efficiency of the BLS approach post-merge, which provides solid guarantees and eliminates block reorganizations, enhancing user experience.
Kaiserkarel acknowledges potential downsides, explaining that while Ethereum can continue execution amid finalization halts, similar to issues seen with Solana, making it challenging to preserve continuous execution.
Hart focuses on the significance of ZK proofs for blockchain interoperability and the potential for off-chain actors to enhance transaction efficiency, advocating for immediate solutions while acknowledging the future potential of ZK technology.
Philipp predicts that market consolidation through standardization will take longer than expected due to continuous innovation and funding in various projects, expressing excitement about the ongoing developments in the space.

TCP/IP Insights & Blockchain Standards: Interoperability & User Adoption

Robbie shares his newfound understanding of TCP/IP standards and their parallels to blockchain transactions, noting the potential for a standardized approach to interoperability in blockchain.
Andy discusses the challenges of establishing a single standard in blockchain due to the diverse incentives within the crypto economy, contrasting with the unified standards in the internet’s early development.
Robbie agrees with the analogy of on-chain accounts to traditional financial accounts, seeing the value in mirroring this structure in the blockchain world for ease of use and familiarity.
Andy says that integrating blockchain in a way that aligns with current e-commerce habits is crucial for adoption, highlighting the importance of seamless user experiences and the potential of 200 milliseconds bridging with intense zero-knowledge proofs.
Robbie highlights the significance of zk approaches in the short and long term and mentions the prerequisites for successful blockchain integration are single slot finality and the resulting fast, cheap proofs.
Andy discusses the concept of blockchain accounts being used for specific financial activities rather than everyday payments, suggesting that focusing on microservices for day-to-day transactions could enhance blockchain’s utility.
Robbie predicts that as user experience and adoption improve, people will start to see different blockchain chains as distinct accounts, similar to how traditional financial accounts are viewed. He says that the introduction of blockchain solutions by trusted financial institutions could significantly boost adoption and trust.
Andy expresses uncertainty about whether users will care about or even be aware of the underlying blockchain chain they are using, aspiring for a future where applications operate seamlessly across different chains without the need for users to navigate bridges.
Robbie contrasts the current high transaction frequency of on-chain users with the lower monetary velocity of the general population, suggesting that while bridges may not need to be exceptionally fast or cheap for most, payment solutions must prioritize speed, affordability, and throughput.

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Show Information

Medium: YouTube (Video)

Show: The Rollup

Show Title: Interoperability For The Modular Future

Show Date: February 15, 2024