Cross-Chain Interoperability in the Multi-Chain Era: Exploring the ERC-7683 Standard

In the blockchain world where multiple chains coexist, achieving secure and convenient cross-chain interoperability has always been a significant challenge faced by the industry. With the growing demand for cross-chain transactions from users, this issue has become increasingly prominent. Currently, cross-chain interoperability mainly faces the following challenges:

Main Challenges

security issues

Security is the most critical issue in cross-chain transactions. Cross-chain bridge protocols that can attract a large amount of assets often become the primary target of hacker attacks.

Blockchain systems rely on validators to confirm and execute transactions, and cross-chain bridge protocols also require trusted third-party validators to handle cross-chain operations. If the incentive mechanism of the cross-chain bridge is not well-developed, there is an insufficient number of validators, or the trust model is overly centralized, it may be exploited by hackers to attack the cross-chain bridge, thereby stealing assets. Additionally, vulnerabilities in the smart contracts of the cross-chain protocol itself often become entry points for hacker attacks.

On August 6, 2024, a certain cross-chain bridge was suspected to have suffered a hacker attack, resulting in the theft of approximately 4,000 ETH and 2 million USDC, with a total loss valued at around 12 million USD. In March 2022, this cross-chain bridge experienced a security incident referred to as "the largest loss in DeFi history," where hackers breached 5 out of 9 validators, stealing 173,600 Ethereum and USDC worth 25 million USD, with total losses exceeding 600 million USD.

High Gas fees

Cross-chain transactions usually incur higher Gas fees. Users need to pay the operation fees of both networks before and after the cross-chain transaction, which greatly increases the actual transaction costs.

Complexity of Operation

Each blockchain network has its unique consensus mechanism and protocol. This isolation state between networks leads to cumbersome operations for users when transferring assets and data across chains. For users who trade frequently, there may also be issues with asset price slippage, further increasing the difficulty of transactions.

To address these issues, a well-known decentralized trading platform and cross-chain interoperability protocol jointly proposed a new standard solution, ERC-7683, on May 20, 2024, aimed at making cross-chain transactions simpler, faster, and more secure through a shared execution network.

ERC-7683 Standard

The ERC-7683 standard is created based on the CrossChainOrder structure and provides an ISettlementContract smart contract interface to implement a standard API for the cross-chain transaction execution system.

The core technical proposal of this standard is: all "cross-chain intentions" follow the same order structure, which greatly enhances the flexibility and user-friendliness of cross-chain operations.

Application Status

On August 21, 2024, a certain Layer 2 solution announced the adoption of the ERC-7683 cross-chain standard, aimed at achieving efficient transfers of ETH and USDC on its network, and facilitating greater application layer interoperability within the Ethereum ecosystem. Currently, the platform has integrated a cross-chain solution from a certain interoperability protocol.

It is worth noting that the ERC-7683 standard mainly provides a standard API for cross-chain transaction execution systems, which serves as a standard at the implementation entry point and ensures consistency in user experience. However, even with the implementation of ERC-7683, it is still difficult to fully address the challenges of obtaining sufficient cross-chain liquidity in cross-chain transactions.

If cross-chain liquidity is insufficient, it means that it is difficult to obtain enough active "Fillers" to support users' "cross-chain intentions". A lack of "Fillers" can lead to users struggling to achieve better costs or experiences through competitive mechanisms.

Therefore, the successful implementation of the ERC-7683 standard requires the formation of a broad effect - more use cases accessing the standard, more users using the standard, in order to attract more Fillers, ultimately achieving an overall improvement in cross-chain transaction efficiency.

Industry Support

The co-founder of Ethereum has expressed special support for the development of the ERC-7683 standard through social media. He pointed out that operations conducted according to the ERC-7683 standard can include batch transactions, Merkle proofs, and other on-chain activities. He also provided examples of the application scenarios for the ERC-7683 standard:

"With the ERC-7683 standard, users can paste an ERC-7683 address into their wallet and then simply click once to easily transfer any asset on any chain to another account."

Looking to the Future

The multi-chain paradigm is a development trend in the Web3 era, and the optimization and simplification of cross-chain transactions will be a key challenge for future development. The ERC-7683 standard directly addresses the pain points of cross-chain transactions and is expected to significantly enhance interoperability between blockchains, having a profound impact on the blockchain world.

At the current stage, users can expect an enhanced user experience brought by the ERC-7683 standard, which will inject new vitality into more DeFi projects, provide more liquidity support, and accelerate the development of the entire ecosystem.