While cross-chain protocols are a fairly new addition to the blockchain space, they’re vital to the overall growth of the industry.
Cross-chain technology is essentially the fundamental architecture enabling interoperability allowing sovereign blockchain networks to connect without an intermediary. As blockchain protocols are initially created as isolated environments (by nature of design), there’s no method for them to exchange data and value among one another except by utilizing cross-chain protocols.
Cross-chain technology encompasses layer-2 sidechains like Polygon, blockchain oracles like Chainlink, and blockchain bridges like Portal — with the latter type arguably being the most important.
While creating blockchain interoperability has been a game-changer for DeFi (decentralized finance), cross-chain technologies have been particularly vulnerable to cyber threats.
Today, we’re breaking down why these vulnerabilities are difficult to address and cross-chain security is vital to take blockchain mainstream.
Why Are Cross-Chain Applications So Vulnerable?
In a 2022 Reddit post, Ethereum founder Vitalik Buterin expressed his concerns about the vulnerability of cross-chain applications, writing that while he is, “Optimistic about a multi-chain blockchain ecosystem,” he’s, “Pessimistic about cross-chain applications,” citing security risks such as their vulnerability to 51% attacks.
The recent cross-chain bridge hacks have further highlighted many of these security vulnerabilities. In August 2021, cross-chain protocol Poly Network was hacked for over $600 million worth of cryptocurrency — although the attacker eventually returned all the stolen assets out of good faith.
Axie Infinity players weren’t as lucky when the popular P2E (play-to-earn) game’s Ronin Bridge was hacked for over $625 million, resulting in the biggest crypto heist in history. Adding in some of the other smaller exploits, cyber threats have drained over $1 billion worth of cryptocurrency from cross-chain applications, known as blockchain’s billion-dollar bridge problem.
So why is cross-chain technology so vulnerable, particularly blockchain bridges? To start, these bridges are off-chain solutions that don’t benefit from the inherent security and immutability of a decentralized blockchain ledger.
They also represent some of the most intricate infrastructures in the blockchain space, as cross-chain swaps are highly complex processes. Multi-chain bridges, which offer support for several blockchain networks, are even harder to manage given that the complexity of the underlying code grows with every supported blockchain.
Ronghui Gu, founder of blockchain security firm CertiK, also believes that this is part of the challenge. He noted, “If you’re trying to create a bridge between N different cryptocurrencies, the complexity of that is N squared,” — in this case, N signfiies more chances for bugs to creep in.”
In addition, most blockchain protocols are built with entirely different types of code. Because this is the case, identifying how two separate chains can interact becomes even more complicated with different programming languages.
Another reason why cross-chain bridges were heavily targeted by cyber attacks is that they hold large amounts of digital assets — and hackers usually follow the money. When it comes to centralized bridges like Wrapped Bitcoin, all the bridged assets are held in a central manner by a single custodian known as BitGo, creating a single point of failure for similar custodial bridges.
Cross-Chain Security is Essential for the Future
Given that cross-chain technology comes with many vunerabilities, why does blockchain rely so heavily on cross-chain infrastructure to improve? Simply put, it’s the only way to unlock its full potential and create multi-chain interoperability for smart contracts and dApps (decentralized applications).
Smart contracts and dApps are only as secure as their cross-chain technology bridging them to other blockchains, since bridges can create a single point of failure which can compromise an entire network. This is why the security of cross-chain technology is crucial for bolstering the trust and future adoption of blockchain and smart contracts.
To build more secure interoperability solutions, developers can start by carrying out more thorough audits or creating bug bounty programs. To future-proof cross-chain infrastructure, developers need to rebuild interoperability protocols from the ground up in a more decentralized manner, as most of the exploits were carried out on overly centralized cross-chain protocols.
Magpie Protocol: Changing the Game
On the bright side, truly decentralized cross-chain bridges have started to appear, bringing more security for DeFi users. For instance, Magpie is a truly decentralized, cross-chain liquidity aggregation platform that completely eliminates the need for bridges when exchanging digital assets. The platform only leverages cross-chain bridges as a messaging layer for asset swaps, while keeping bridged assets in secure, blockchain-based stablecoin pools. This means that users don’t have to risk their assets on a vulnerable off-chain bridge, nor under the control of a central authority.
As other cross-chain protocols become more decentralized as the industry advances, cross-chain technology will become less vulnerable to cyber attacks. Therefore, creating secure interoperability solutions will increase developer confidence in developing cross-chain applications, unlocking the full potential of blockchain.
Cross-chain architecture still needs improvements – there’s no denying it. However, as more decentralized solutions reduce the number of potential exploits, the public will begin to gain and foster more confidence in blockchain technology, paving the way to mass adoption.
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