Published Jan 20, 2023
By Qredo Team
How Can Getting Crosschain Be Made Secure?
There are now over 1,000 blockchains in existence, in a thriving technological ecosystem which continues to evolve apace.
Granted, not all of these are major public Layer 1 chains, but over 100 cryptocurrencies possess their own Layer 1 blockchains, 25 of which each have market caps north of $1 billion USD.
Each of these blockchains is essentially siloed and separated from the others, unable to communicate directly.
Not only does this lack of interoperability put limits on users, confuse newcomers and discourage onboarding to the space, but it fundamentally stifles the scaling and development of the entire ecosystem.
No wonder then that several solutions have emerged by which investors may quickly and easily transfer digital assets from one blockchain to another.
Speed and ease of use are not, sadly, the only crucial attributes for success. Blockchain data platform Chainalysis recently reported that the majority of crypto hacks now target crosschain bridges, representing 64% of all crypto losses to hacks across the year to October.
The time has come for crypto-native institutions, as well as those entering the space from TradFi, to be able to have confidence that when moving or accessing digital assets they are not putting themselves or their investors at risk.
Qredo is proud to have developed a Layer 2 solution which offers the most secure and robust approach to crosschain interoperability, allowing users to safely store, trade and transfer digital assets across multiple chains with extremely swift settlement and a fully transparent regulatory audit trail.
Our Layer 2 solution is interoperable with multiple Layer 1 chains, utilizing atomic swaps, which allow for the decentralized trading of digital assets without any counterparty risk. This is thanks to a unique technological innovation we call decentralized multi-party computation, or dMPC.
Before going into depth on our own technology, let’s look at where existing approaches to the challenge fall down.
Flaws with existing solutions for crosschain bridges
Developing robust solutions for crosschain interoperability in this fast-changing environment is a fascinating and important challenge. The industry has failed to get this crucial matter right, the solution to which will enable blockchain technology to truly scale and have real global impact.
Existing solutions for transferring digital assets between chains tend to be limited to two types of arrangement.
Crosschain on centralized exchanges (let someone else solve it)
Centralized exchanges (CEXs) offer “trusted bridges” between blockchains, along with fees or margins on exchanging and managing digital assets. Users may have a very smooth experience, until they don’t…
Whilst CEXs may advertise some protection of users’ funds, this is not necessarily guaranteed, as we’ve seen with the collapse of major exchanges like Mt. Gox, and more recently the cataclysmic failure of FTX, likely to leave many investors hurting for serious sums, with an apparent hole of billions in its finances.
When speaking of transformative technology, this is not the kind of bleeding edge we had in mind!
The true heart of the blockchain revolution lies in the distributed ledger, which grants the ability to conduct financial transactions globally without any centralized third party having direct control of one’s digital assets.
Sacrificing this self-custody goes against the core of what makes blockchain technology so powerful. CEXs are useful for a quick fiat on/off ramp, but for long-term storage they are bad practice, to say the least.
Decentralized crosschain bridges (and their tendency to burn)
“Sometimes you get the best light from a burning bridge” – Don Henley
Chainalysis refers to crosschain bridges as an “unresolved technical challenge”. With numerous designs, smart contracts at each end of a bridge are written in code unique to that chain’s architecture. There are always going to be undiscovered vulnerabilities lurking. Finding a true solution to this requires transformative technology.
In some cases, new attack vectors appear unexpectedly with smart contract updates, as in the recent Nomad hack. Especially with smaller blockchains, auditing systems may not be sufficiently developed and up to the task. Crosschain bridges often store temptingly large quantities of digital assets in their smart contracts, thus attracting hacking attempts.
Sometimes it comes down to human error, with a bridge exposed through a social engineering hack, as in the eye-watering $650M North Korean hack of the Ronin Bridge earlier this year. This was precipitated by a single engineer clicking on an infected PDF file. This exposed the private keys needed to access funds and drain wallets.
Qredo’s atomic swaps & decentralized multi-party computation
Qredo regards crosschain interoperability as one of the core attributes of our provision, along with secure distributed self-custody. We are confident that Qredo’s solution is not only innovative but ground-breaking, and will stand the test of time.
With an Atomic Swap on Qredo Network, you are exchanging ownership rights to run an MPC protocol for asset transfer. This means no delay and no gas fees. Because a proof-of-coin protocol is run to determine that digital assets are available, counterparty risk is also removed from the equation.
Qredo is radically extending the concept of self-custody of digital assets. With our implementation of dMPC comes the advent of genuinely trustless decentralized trading, and as we like to put it, the network becomes the vault.
At Qredo we offer one of the only crypto wallets in existence with institutional-grade access, built-in governance and distributed multi-party permissions, obviating the need for any users to hold (and risk losing) private keys or cold wallets. In doing so, we eliminate any single point of failure.
Qredo also utilizes an additional level of security by running our dMPC protocol across a set of decentralized nodes housed in high-security tier 4 data centers.
What’s up next with crosschain on Qredo?
With our Series A Funding raising $80 million in February 2022, we are powering ahead with our mission, growing and developing fast.
As we expand our ecosystem through incredible integrations enabled by our Web3 Wallets, we open the door to so much more than custody, securely connecting you with hundreds of dApps and services across numerous chains. Our recent integrations with MetaMask Institutional and WalletConnect help us to achieve this.
We plan to integrate all major chains with our Layer 2 network, and already support the whole Ethereum Virtual Machine Ecosystem — including BNB Chain, Avalanche, Fantom, Arbitrum, and OKEx chains — through our Web3 Wallets.
We welcome new members to Qredo!