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Cross-chain technologies have become increasingly popular in recent years. They offer a reliable method of connecting different blockchain networks and facilitating interoperability. However, it is crucial to consider the drawbacks of cross-chain technologies, such as, potential security vulnerabilities, a lack of standardization, scalability issues, and frozen liquidity. These drawbacks must be addressed quickly to allow DeFi projects to develop more effective cross-chain solutions.
Check out this post to learn more about cross-chain technologies and this post for cross-chain bridges.
Cross-chain technologies can pose significant security risks. When blockchains are connected through cross-chain bridges, these bridges can become points of weakness that can compromise all connected blockchains. Since these bridges are generally less robust than blockchains themselves, hackers often target their smart contracts or supporting node validators, stealing locked tokens or creating new wrapped ones.
Furthermore, multiple signatures and approvals required for cross-chain transactions, while intended to improve security, can sometimes weaken it instead. Attackers may have more opportunities to intervene in the exchange process and take advantage of it.
Standardization is one of the biggest hurdles that cross-chain technologies face. The lack of widely accepted protocols for cross-chain communication can lead to compatibility issues and make establishing communication between networks unnecessarily complicated.
Moreover, the absence of standardization can also result in limited functionality. Since not all blockchains support the same types of smart contracts, it can complicate how they work with each other and limit the types of transactions users can execute across networks. Additionally, some blockchains may not support certain native coins or tokens, which can further restrict the scope of possible cross-chain transactions.
Another issue is that only experienced users can comfortably access and use cross-chain services without standardization and user-friendly interfaces. Catering for experienced users negatively affects the adoption of the technology and the speed with which it is possible.
Scalability is another cross-chain struggle. As more blockchains become connected, the amount of data transmitted between them increases. It can lead to slower transaction times and increased network congestion, making using cryptocurrencies less efficient and convenient.
In addition, as the number of connected blockchains grows, it can become progressively more work to manage and maintain the created extensive ecosystem, resulting in possible security failures and other defects.
Finally, cross-chain bridges exacerbate the already complex issue of liquidity in the DeFi market by creating frozen liquidity. This term refers to the scenario where assets become trapped in a smart contract during the process of creating wrapped tokens. As a result, these assets cannot be used by their owners or anyone else. While frozen liquidity may not significantly impact popular and widely used cryptocurrencies, it can have considerable implications for lesser-known tokens, leading to inadequate liquidity and high volatility. These factors can be dangerous for nascent projects that are still in the process of gaining widespread community support.
One of the technologies that could help solve some of the cross-chain issues is Zero-knowledge technology, also known as Zk. Zk can enable secure, private, and fast data sharing between different parties. It allows users or blockchain participants to generate a proof that a particular calculation has a specific result, which can be verified quickly, even if the underlying processes take a long time. Moreover, it allows for checking the proof without revealing any personal information and at a much lower gas cost. Due to its advantages, Zk technology can be an ideal solution for improving cross-chain transactions. Let's look at the cross-chain challenges and how Zk can help overcome them.
Firstly, Zk can ensure the confidentiality of sensitive information and reduce the risk of hacker attacks on bridges by eliminating the need to rely on external third parties to validate transactions. The bridge is secure as long as the connected blockchains and network remain secure and at least one honest node exists in the source chain. Furthermore, by keeping private information hidden, Zk also eliminates the need for companies to store sensitive data of their users, which also contributes to the security of cross-chain data sharing.
Secondly, Zk technology can help with the lack of standardization and accessibility. All blockchain networks can implement zk technology, given they support a light client protocol for synchronizing block headers, allowing for seamless interoperability between different blockchain networks. Additionally, Zk can help to make cross-chain transactions more user-friendly and accessible to inexperienced users by simplifying cross-chain transactions and eliminating the need for technical expertise, thus ultimately promoting crypto to the masses.
Thirdly, Zero-knowledge technology can improve the scalability of cross-chain transactions. With the ability to verify transactions in batches, Zk significantly reduces the time and resources required for cross-chain transactions.
Lastly, Zk can help with frozen liquidity as the technology is widely used for cross-chain atomic swaps. Unlike traditional cross-chain bridges, Zk allows cross-chain peer-to-peer trading without locking assets in smart contracts without creating new wrapped tokens.
Cross-chain technologies have improved network interoperability, but they are still not a perfect solution. Like any new technology, certain issues must be resolved to ensure its successful adoption in the future. These include accommodating the growing number of users, enhancing interoperability, and implementing adequate security measures. Additionally, finding ways to reduce the need for wrapped tokens is essential. Emerging Zk technologies have the potential to address these challenges and offer a range of benefits.
Kinetex Network works to implement Zk technology in the innovative Kinetex dApp. The second mode, called Flash Trade, is a new generation of Kinetex that addresses the most prominent security issues of cross-chain by utilizing zero-knowledge proofs (Zk-SNARKs) instead of third-party validators and allows users to make swaps directly with market makers.
Kinetex Network: Website | Kinetex dApp
