– Let’s talk about cross-chain protocols.
Если Вам понравилось видео — поделись с друзьями:
– Hi there. It’s Jackson. Thanks for watching. I’ve been getting a lot of questions lately from people about cross-chain protocols they’ve heard of, such as Cosmos, Polkadot, and Interledger. Today, I’m going to walk through some of those, explain their differences, and hopefully give you a better understanding of what they’re trying to achieve. Now, before I continue, I must preface this by saying, this stuff does get pretty technical, but that’s just because it’s inherently a very complex subject. I’ll do my best though to try and break it down to simple concepts that anyone can understand.
So back in the day, and by back in the day, I only mean about three or four years ago, there was this real kind of Maximalist belief that everything on a Blockchain should be done on the one chain. And this is how we ended up with solutions such as Bitcoin or Ethereum, where all the transactions, and in the case of ethereum, all the smart contracts, are executed on the one network. Now as long as all this is secured through decentralized consensus, that works out pretty well, because you can verify everything cryptographically, all through this one, decentralized Blockchain.
But over the last few years, we’ve seen this “One Blockchain to rule them all” ideology, kind of fall apart. Part of this has been all the scalability issues that these networks have run into, as they’ve tried to increase the number of users and transactions. But also, if everybody is operating on this one Blockchain, with a set of pre-defined rules they have to follow, it also kind of hampers innovation in this space. You can’t quickly sub something out or change a rule and experiment with it, because you have to maintain consensus across that one Blockchain.
As such, many leaders in this space, over the last couple of years, have decided that one Blockchain Maximalism isn’t the right solution, and actually we should have multiple Blockchains out there, all serving different kinds of purposes. What we need to make sure of though, is if there is multiple Blockchains out there, is that they can all talk to one another in a standardized way, and transfer value from one chain to another with relative ease. This is what cross-chain protocols are seeking to do. They’re looking to standardize the way that Blockchains are written and secured just like the way we use the internet today is standardized itself.
As such, you’ll often hear these cross-chain protocols referred to as an “Internet of Blockchains”, because it’s really a network of Blockchains which are all inter-operable, and that they can speak to one another because they’re all built in a standardized way. If technology can achieve this goal, it means that you’re going to be able to speed up innovation with people innovating on individual Blockchains, but it also means that they can talk to one another and scale together. This means that the technology won’t rely on third-party connectors or exchanges in order to transfer value from one chain to another. It’ll be built into the protocol itself.
The cross-chain protocols
Let’s step through some of the cross-chain protocols that are being developed right now and talk about what they do differently, and what their futures look like. Let’s start with Cosmos. Cosmos started out being developed by a developer called Jae Kwon, here in San Francisco, and it’s a network of Blockchains which all ladder up to “hubs”, which helps them all connect to one another. The key goal here is to allow for the transfer of value, e.g., “tokens” from one chain to another, with low transaction fees, and in a scalable way.
The Blockchains built on top of Cosmos use “Proof-of-Stake” for their consensus and I recommend you go and watch my previous video on “Proof-of-Work” vs. “Proof-of-Stake”. But the key motivation here was to reduce the wastefulness of “Proof-of-Work” by going with a “Proof-of-Stake” model. In Cosmos’s case, they follow a “Proof-of Stake” model where there’s a security deposit that validators have to lay down. Bad actors are then penalized if they try to lie to the network. All the codes for Cosmos and it’s components is open-source under the APACHE 2 license. So Cosmos is made up of several key components which glue it together into this network, so let’s run through those now.
The first component is called “Tendermint”, and you might have heard of this before. It’s a low level, general purpose, Blockchain engine which is based on a Byzantine Fault Tolerant consensus protocol. In a nutshell, it’s kind of a development kit for building Blockchains on top of. It’s been around for a while, first being created back in 2014 before it morphed into and became part of Cosmos. So building on top of Tendermint you have the Cosmos network itself, and this is simply a network of Blockchains which are all operating on a similar “Proof-of-Stake” model, and they can easily communicate with one another because of the standardized protocol they’re built on.
In Cosmos, the Blockchains that make up the network, are referred to as “zones”. Sitting above the zones, you have something called the Cosmos “hub”, which is the glue that ties together all these zones. It’s actually a block chain itself, but it kind of acts as the coordinator, which manages the communication between all of the zones which plug into it. Initially, Cosmos will operate their own hub which a bunch of zones will plug into, but you should keep in mind that anyone can run a hub in the future.
This technology is all open source and so the kind of desire in the future is that multiple people are running these hubs with multiple zones, then plugging into them. The Cosmos network also has a token which is used for participating in the network. They did an ICO for this earlier in the year and raised $17,000,000.00, which is how a portion of the token will be initially distributed. The “Atom” tokens are used for two purposes.
Firstly, they’re used by validators on the network which I’ll talk about in a minute, in order to maintain consensus on the network. Secondly, they’re also used to pay transaction fees by anyone interacting on the network and transferring value from one chain to another. Again, I recommend you go and watch my “Proof-of-Stake” video, for a better understanding of how validators work in that eco-system, but in Cosmos, validators are essentially the miners, the people who get to write into the Blockchain, and they can write into the Blockchains of the individual zones, or they can actually write into the Blockchain of the hub itself.
In order to become a validator, you have to “stake” a bunch of the Atom token, to get that privillage. Initially, there will actually be a hard cap of 100 validators per zone or on the hub itself, and this is to guarantee the speed of the network. If you have too many validators, things can get slower. But as the technology improves, obviously, they’ll be able to up this limit. Additionally, anybody that’s just holding Atoms, can delegate those tokens to a validator and for the work that validator is doing, they end up getting some transactions fees back, so making money.
Some people have criticized the 100 validator limit, but I don’t really think that’s an issue if you look at the centralization of Bitcoin mining right now. There’s far less than 100 people in charge of mining and securing the Bitcoin network right now. And because it’s not an arms race with all this hardware involved, validators can come and go, bad actors can be weighted out and banned from the network. Zones on Cosmos have to be built on top of the Tendermint technology, but they’re free to do whatever they really want with their protocol, and they can build all sorts of interesting applications by plugging into the kind of development kit that the Cosmos team have provided.
This will ultimately allow innovation to flourish, while also maintaining the ability to transfer money between the different zones if they’re all connected into the hub. In addition to all these new “zones” or new Blockchains which are being built on Cosmos, Cosmos is also going to allow users to interact with existing Blockchains such as Bitcoin or Ethereum, through peg derivatives. These pegs will be set up as zones as themselves, and there will be a little bit of trust involved in trusting the people running the zone, but it’s pretty cool because at the end of the day, you might be able to trade money from a Cosmos zone over to Ethereum relatively seamlessly.
As I said, Cosmos just did their ICO earlier this year, and they’re still in active development. There’s a bunch of code on GitHub though, and they’re building something called “Basecoin” which is kind of like a blue print or a development kit, which you can go and build other cryptocurrencies on top of. I haven’t seen a Cosmos Blockchain released yet, but I anticipate we’ll see something come out in the next six to 12 months, or maybe even sooner.
Next up, lets talk about Polkadot. Just like Cosmos, Polkadot is a network and protocol for connecting ledgers. Development of the Polkadot protocol was pioneered by Gavin Wood, who is actually one of the main minds behind Ethereum, and now the Parity Wallet. Polkadot is actually a Parity project, but it’s released open source and under the Creative Commons license. It’s similar to Cosmos, in that it allows value transfer across chains, but in additon to that it also focuses on the ability to transfer data between the chains as well.
So we’re talking smart contracts, sending data on one chain to smart contracts on another chain. While Cosmos refers to their chains as “zones”, Polkadot instead refers to them as “Parachains”. The one catch is the participating currencies or “chains” on the network, do need to plug into Polkadot’s security model and consensus engine. What this means is that each “Parachain” actually has to give up it’s sovereignty in terms of consensus and tap into the overall Polkadot network. The argument is that this actually helps reduce wastefulness because it’s all the one consensus protocol while also allowing for the efficiency of cross-chain transfers.
It’s important to know that the Polkadot protocol doesn’t specify any sort of true and complete virtual machine itself. What it’s simply doing is “connecting the dots” as the Polkadot team would like to say. So just to confuse us, Polkadot have gone and used a whole bunch of different terminology which is different to Cosmos. So let’s walk thorough those components right now. First up, you have Parachains, which I’ve already mentioned, and these are simply those sub-blockchains on the network or the zones in Cosmos.
These Parachains tap into the overall consensus of the Polkadot network, instead of having to maintain their own stand-alone consensus systems. Just like Cosmos’s hubs, in Polkadot you have something called, “The relay chain” and the relay chain is the glue, it’s the central Polkadot chain, which helps coordinate between the Parachains. Lastly, you have something called, “bridges” and bridges are a way to tap networks that don’t want to operate on the Polkadot consensus system, into the Polkadot network.
An example of this might be a bridge over to the Ethereum network. Just like the Cosmos’s pegs that I mentioned earlier, this does involve writing connectors and some degree of trust with those connectors, so ultimately, I imagine for the Polkadot network to work, they want everybody to switch over using their “pooled” consensus. Pooled consensus is actually pretty cool because it’s a lot less wasteful than “Proof-of-Work” or even having individual “Proof-of-Stake” chains.
It reminds me a little bit of merged mining which is something that Dogecoin and Litecoin do right now, but again, without any of that “Proof-of-Work” wastefulness. Consensus in Polkadot is reached via a “Proof-of-Stake” mechanism, that relies on an intrinsic network token called “Dot”. Just like Cosmos and it’s Atoms, ownership of “Dot”, allows people to become validators and participate in the consensus on the network. This essentially gives them a validated role in the network. In addition to the Dot tokens being staked for validation, they also give people voting rights about adding, modifying or deleting Parachains which are hooked up to the relay chain. In addition to that, people holding Dot can also vote on where the protocol is evolved into the future.Polkadot are actually running an ICO right now to help with the distribution of the Dot tokens. You should go to their website, Polkadot.IO if you want to find out more.
The Polkadot roles
So within the Polkadot network, there are many roles that different types of users can play. Let’s walk through some of those. First up there are validators, who just like in any other “Proof-of-Stake” network, are the ones who validate the blocks and write them into the chain. In this case, they’re writing transactions for multiple Parachain candidates. Again, these are kind of just like Bitcoin miners, but with “Proof-of-Stake” instead where they’re staking the Dot token.
The validators receive transaction fees in exchange for protecting the network. Next up, you have collators. Collators gather Parachain transactions across all the Parachains and bundle them up into a “Proof of Validity” block. As a reward for doing so, they also receive transaction fees. These are kind of like Bitcoin full nodes who receive a bunch of transactions and then keep broadcasting them to all their peers. It’s kind of neat if there’s an incentive for full nodes to be rewarded in a network, because that’s currently not the case with something like Bitcoin. And lastly, there’s something called “Fisherman”.
Kind of a weird name. These users “fish” in the network, and try to weed out bad actors. As a reward if they find somebody that is trying to lie to the network, they receive part of the staked bond. That staked “Dot” token that was put down by the person who was trying to validate. So far, you’re probably thinking, “Well, Polkadot and Cosmos sound pretty similar” Right? The key difference between Cosmos and Polkadot, is that Cosmos is a much simpler system, and it doesn’t require the individual zones in it’s network to sacrifice the sovereignty of their consensus in order to participate.
Polkadot on the other hand, requires that all the Parachains adopt it’s pooled consensus to take part in the protocol. There’s arguments for and against both of these things. On one hand, it’s nice to have the flexibility that a simpler protocol like Cosmos offers. But on the other hand, something like Polkadot, allows new coin and cryptocurrency developers to just focus on the new functionality they’re trying to build, instead of having to worry about peer-to-peer consensus, which is really hard.
If you think about that, both approaches could actually stimulate more innovation. It’s going to be interesting to see how that pans out. I will say that ultimately, Polkadot is a lot more complex in it’s implementation, and that’s partly due to the fact that it does not only value transfer across chains, but it also seeks to do data transfer across different chains. As a result, I think there’s probably going to be a much longer tail on the development of Polkadot, and it’ll probably be a good 12-24 months before we start seeing some of that stuff hit the prime time. The cool thing about these protocols is that they can actually work together.
If the Cosmos zones start adopting the Polkadot pooled consensus, then you can actually have a connection there between the Parachains on the Polkadot network, and the zones in the Cosmos network, and transfers going between them. The last protocol I wanted to mention today, because I think it deserves an honorable mention, is called “Interledger”. If you’re not familiar with what cross-chain atomic swaps are, go and watch this other video I have. Essentially, Interledger is cross-chain atomic swaps on steroids.
It was originally invented by the people over at Ripple, but now it’s completely open source and licensed under Creative Commons. Of all the technologies we’ve talked about today, Interledger is actually the simplest. It essentially defines protocol, which allows for “trustless escrow”. Interledger doesn’t have it’s own network or Blockchain per se. What it does is define a process and procedure where by you have “connectors” which act as these trustless intermediaries.
These connectors simply facilitate the trade but everything is done securely and trustless because of the cryptographic protocol used. In a nutshell, the protocol basically standardizes and facilitates cross-chain atomic swaps easily. There’s no utility token involved, there’s no ICO as far as I’m aware, and what’s interesting is that Interledger haven’t just focused on crypto to start with. They’re actually working with banks and other institutions to use this protocol to send “fiat money” across this trustless escrow.
Now to be clear, Interledger doesn’t provide anywhere near the toolkit or eco-system that Polkadot and Cosmos does, but I recommend you check it out, because they’re currently working with the W3C on standardizing these kind of payments on the web, and I do think we’ll start seeing this technology floating into our everyday soon. Now, a question I’m sure I’m going to get in the comment, so I’m going to try and preempt it, is “how does this all relate to Ethereum sharding?”
So as most of you have probably heard, Ethereum, at some point in the future, is going to switch to a “Proof-of-Stake” model, from it’s current “Proof-of-Work”. Alongside this, they’re investigating doing something called “sharding”, which essentially means, you’d be able to have these sub-blockchains, just like Cosmos’s zones or Polkadot Parachains, which don’t require all the work to be done in the “virtual machine”, on the main Ethereum Blockchain. They could be done in a sub-blockchain.
It’s still early days with this technology, but it is kinda cool. The one catch though with sharding, is that for all that work that’s being done in the sub-blockchain to be verified on the main Ethereum Blockchain, there’ll be a set of rules or protocol that has to be followed. And this will probably mean that the sub-blockchains all have to run on the EVM or the Ethereum Virtual Machine.
One of the benefits of a broader eco-system like Cosmos, is that it actually allows it’s developers to be very free with how they implement the protocol, and any sort of virtual machine for processing different types of code. They only thing Cosmos really wants to standardize on, is how value is transferred between those chains. So ultimately, something like Cosmos or maybe even Polkadot in the future will give people a little bit more freedom, in terms of how they implement, whereas Ethereum, the sub-block chains that are sharded, will still have to follow the Ethereum “rulebook”.
Ultimately, it’s a bit like vendor lock-in. It’s kind of like choosing to go with AWS and building everything there, instead you’re building everything on Ethereum. In some cases, the protocols we’ve covered today may be a bit more light-weight, and not as restricting in terms of locking you in. So that’s what’s going on with cross-chain protocols. It’s still really early days and nothing is really “production ready” or out there, ready to use. Cosmos and Tendermint seem to be a bit further ahead in terms of the code that’s out there, but the challenge for both Cosmos and Polkadot is going to be boot-strapping the network, and getting a bunch of Blockchains built on top of this new technology.
To help boot-strap this, I would imagine that Polkadot and Cosmos, are probably going to start off with bridges and relays and pegs, over to existing networks like Bitcoin or Ethereum. But I think the rubber is really going to only hit the road when we start seeing entirely new Blockchains written on top of these new protocols. These new Parachains or zones are going to be able to utilize the full potential of the new technology that’s being built.
I’ll link a bunch of resources below, so you can go and learn more about what I’ve discussed today, but I think there’s the potential for these new technologies to usher in a whole new generation of Blockchains and different cryptocurrency technology. Being able to transfer value and data across chains in a decentralized way is really going to help us remove some of the centralized aspects that we deal with today.
You won’t need these centralized exchanges anymore, let alone a third party decentralized exchange. Because it’ll be built into the protocol itself. So its really exciting stuff, but I think as always, “the proof is in the pudding”, and it’s going to come down to the execution, to see if this stuff pans out. I hope you found this video helpful and learned a little bit more about what’s going on in the cross-chain protocol world. Development in this space is really only starting, so it’s a good time to get in and start understanding some of these concepts.
If you did find this video helpful, please hit “like” below, and if you want to get regular video updates, hit “subscribe”. As always, if you have any questions, just drop them in the comments below, and I’ll try to get back to you as soon as possible. Until next time, thanks for watching. See you later!