More than 2 billion USD have been stolen in 2022 through bridge hacks. We estimate that over a million accounts have been affected by bridge hacks last year alone.
On the road toward decentralization, the blockchain community still hasn’t found the perfect way to transfer value between ecosystems. Most users rely on centralized exchanges to facilitate value transfers, while blockchain bridges represent the dominant way to avoid centralized actors. But bridges themselves are still in their infancy and struggle to push for widespread adoption while also getting properly decentralized.
Bridges are bounties
Bridges today can be seen as big fat bags of money bounties, holding tens or hundreds of millions of USD in value.
In most cases, bridges consist of smart contracts or similar constructions on the two opposing sides of two blockchain networks. The contracts receive tokens to be bridged and then a network of relayers will send that information to the other network and mint bridged tokens on the other side. Because competition is strong, bridges push to launch quickly. They are complex and thus prone to all kinds of attacks. In addition, many of them are still not fully decentralized. The result is that every so often, attackers find exploits in bridges and are able to drain the smart contracts. Hackers claim their bounty.
So are we stuck with either going through centralized exchanges or semi-decentralized bridges? In this article, we present a different approach: Cross-Chain Atomic Swaps
Bridges are inevitable. We need bridges. They are necessary for the trustless exchange of information between ecosystems, like, for example, how many tokens a user wants to transfer. So if they are inevitable, the big question is: How can we reduce the risk for users?
You don’t need wrapped tokens
The problem rather stems from a different place: holding wrapped tokens. Whenever tokens are bridged from one ecosystem to another, they get represented as wrapped tokens on the other side. ETH bridged from Ethereum to Polkadot becomes wrapped ETH or wETH. The issue is that wrapped tokens, like wBTC, wETH, wDOT, etc. represent a continuous risk for the users. If at any point, the bridge gets hacked and drained, the wrapped tokens become worthless for the user.
And to a great extent, users don’t need wrapped tokens. You cannot do anything with wETH in Polkadot or wDOT in Ethereum, other than trading back and forth. You can’t pay gas and most other ecosystem services depend on their own native tokens.
Cross-Chain Atomic Swaps
So if wrapped tokens are primarily used for trading, wouldn’t it be best if users could just send their ETH into an exchange on Ethereum and receive DOT in Polkadot? This is exactly what cross-chain atomic swaps are. They allow users to natively trade tokens between ecosystems, without the need for traders to hold wrapped tokens. This minimizes the risk for traders.
The way cross-chain atomic swaps work in Mangata is that Mangata operates as a unified layer above those networks. A user that wants to perform a cross-chain atomic swap submits a transaction to a contract/pallet in one of the networks with the intent to swap tokens and the intended recipient's address in the other network. The swap is atomic, because it either succeeds or fails. Tokens will not get stuck halfway through the process.
While this does not eliminate all kinds of risks, we believe it presents a much better risk profile than holding traditional wrapped tokens.
This is the exact challenge we are striving to overcome at Mangata Finance. Mangata is the upcoming interchain DEX, connecting Ethereum, other EVM-based chains, and Polkadot via ZK-rollups, improving security and reducing the risk for users.
Our Research & Development team has recently completed the architectural design, and we plan to release a series of technical articles in the coming weeks that will shed light on how we are planning to achieve this.
Mangata is on a mission to become the #1 interchain DEX, offering traders and liquidity providers the best platform to access native tokens and earn rewards.
We believe that everyone should have the opportunity to participate in the decentralized economy and benefit from the power of blockchain technology. That’s why we are creating a user-friendly platform that makes it easy for users to trade, provide liquidity, and earn from multiple passive income streams through double staking rewards, even if they are new to crypto.
Mangata will offer access to the widest array of tokens from all chains, better prices for traders by mitigating MEV, and the ability to trade without gas.
At Mangata, we’re dedicated to building a fair and transparent platform that puts the needs of users first, offering the lowest fees for traders and the highest rewards for stakers. We’re committed to continuously improving our platform and offering new features that provide even more value to our users.
Join us on our mission to become the #1 interchain DEX and unlock the full potential of the decentralized economy.