Blockchain interoperability is often mentioned as one of the Holy Grails for Web3 developers, and is widely agreed to be a must-have if the industry is ever going to see the long-hoped-for mainstream adoption it dreams of.
There’s an almost insatiable hunger for some kind of connective tissue that can link every blockchain. Because if we had this, it would finally put an end to the challenges caused by liquidity fragmentation and enable decentralized applications to create more comprehensive capabilities while simplifying user experiences enormously.
Numerous solutions for blockchain interoperability have been proposed, and many have already been implemented, but none of the remedies seen so far have proven perfect. In fact, they often cause as many problems as they solve, with difficulties around security, reliability and standardization across different blockchains.
Most people are aware of blockchain bridges, which are the most widely adopted tool for blockchain interoperability, but they remain plagued security issues, and there’s little hope we’ll ever fix them all. Other solutions, such as ChainLink, are more secure but suffer from problems over their reliability, especially when implemented at scale. Then there are the Layer-2 networks and sidechains, which can do the job on a limited scale but suffer with issues pertaining to user experiences and finality.Â
If Web3 is ever going to grow beyond the niche segment it currently occupies in the technology world, it’s going to need a more reliable method of connecting different blockchains. It’s urgently needed in areas like decentralized finance, which has been waiting patiently for years to fulfil its destiny as the backbone of a new generation of borderless financial services. DeFi certainly has what it takes to do this, but unless it has robust, cross-chain functionality to unplug the flow of liquidity and simplify access, it’s not going to happen.
The Distribution Of Trust
That explains why there’s a lot of optimism around Chain Signatures, an ingenious interoperability primitive developed by NEAR Protocol. By using Chain Signatures, it’s possible for NEAR accounts to sign transactions on any blockchain, utilizing a decentralized multi-party computation (MPC) network that’s secured by staking. It’s a solution that not only fixes the longstanding problems around reliability and security, but also makes cross-chain transactions dramatically easier for end users, abstracting away the complexities involved.
Chain Signatures marry decentralized MPC networks with the novel architecture of NEAR accounts. MPC networks are systems where multiple independent parties collaborate to perform compute functions while maintaining privacy over their individual outputs, ensuring the full privacy of those computations. Meanwhile, NEAR accounts have two key capabilities not present on other blockchains. First, they’re able to create and hold an infinite number of aggregated sub-accounts, and second, each of these sub-accounts can act as a smart contract. This means that any NEAR account can manage programmable MPC calls and request MPC nodes (validators) to sign transactions from other chains.
The beauty of Chain Signatures is in the way it distributes trust, making it possible for multiple nodes to work together to sign a blockchain transaction, without any single node being able to access the complete signing key. As such, NEAR accounts can request that the MPC network signs transactions for any blockchain. When they make a request, the MPC network will generate the cryptographic signature using a shared key that’s distributed across multiple nodes, ensuring bullet-proof security. All of these operations occur under the hood, so the user doesn’t have to deal with any complexity beyond clicking a button to confirm a transaction.
Secure Key Management
One of the most promising implementations of Chain Signatures is HOT Protocol’s interoperability solution, known as HOT Bridge, where the bridge contract on each network is controlled by a programmable MPC wallet. It’s notable for using fixed rules under which transactions can be signed, enhancing security. Notably, HOT Protocol has also solved one of the challenges inherent with Chain Signatures, namely the complexity and sensitivity of storing the master key for transactions.
It does this through the use of Trusted Execution Environments (TEEs), which are an isolated section within the compute hardware that’s able to perform computations independently, with full privacy. Designed for sensitive tasks such as generating digital signatures and keys, TEEs ensure that the cryptographic keys and code are hosted within its secure environment. As such, data goes in and a digital signature goes out – but at no time does the sensitive private key ever leave the TCC. This dramatically reduces the chances of the private keys being exposed, and makes it essentially impossible for an attacker to access them to sign unauthorized transactions. HOT Protocol’s example serves as an excellent model for others to build on, and hopefully accelerate the adoption of Chain Signatures.
Chain Signatures At Work
The successful implementation of Chain Signatures has tremendous implications in areas such as DeFi. One of the most promising applications can be found in the nascent Bitcoin DeFi scene, where it opens the door to native BTC being deployed in lending platforms and yield farming protocols. One example of this is the L2 network East Blue, which is using NEAR’s Chain Signatures to create BTC smart contracts that encapsulate business logic such as borrowing, interest calculations, repayments and rewards distribution.
Cross-chain payments and staking can also be simplified dramatically with Chain Signatures. One of the most popular Web3 dApps, SWEAT Economy, showcases the potential of this with its multichain gas relayer mechanism, which makes it possible for users to pay their gas fees in SWEAT tokens, even though the dApp itself lives on the BNB Chain. There’s also LiNEAR, which is developing a multi-asset and multichain restaking platform on EigenLayer. It uses Chain Signatures to allow non-Ethereum based assets to be restaked and used to secure third-party applications.
Another compelling use case is multichain NFT platforms. Chain Signatures make it possible for users to buy non-fungible tokens that live on one blockchain with the cryptocurrency of another, or else mint NFTs that can live on multiple networks. The NFT infrastructure platform Mintbase has already demonstrated this by enabling wallets on NEAR to buy and hold Ethereum-based NFTs.
The Holy Grail Is Close To Hand
For now, Chain Signatures is still an emerging technology, but it seems like it’s already moving beyond the experimental stage. Implementations such as HOT Protocol’s illustrate the immense potential of the technology to control accounts and facilitate transactions on other blockchains.
With the advent of TEEs to enhance the security of key management, Chain Signatures have become even more robust, thus moving one step closer to becoming the Holy Grail of blockchain interoperability.
