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[professional good article] read and understand blockchain cross chain technology and mechanism

Time : 09/07/2021 Author : i9po5t Click : + -
        Since the development of blockchain technology, countless different chains have been born. The information isolation of many chains inevitably forms the value island effect of blockchain. Cross chain literally means connecting different blockchains, just like building a bridge between two islands. The plan of building the bridge is on the one hand, but at least we should make clear what the bridge is going to pass, pedestrians, cars and trains? Many blockchain projects have mentioned cross chain. What is the essence of cross chain and what problems need to be solved are rarely discussed. As a rigorous cross chain technology project, we are ready to elaborate our views through this article, and hope to cause the whole blockchain industry to deeply discuss and think about this issue.
 
        At the same time, we will also publish wanchain's cross chain mechanism in this article. Since the development of blockchain, countless tokens have been created. Different tokens are essentially a kind of bookkeeping symbol, a symbolic expression of a certain value. This symbol can be a "currency" symbol as a measure of value (such as bitcoin), or a virtualization symbol of some "intrinsic value". Aside from monetary tokens, the "intrinsic value" of blockchain tokens is similar to the "intrinsic value" of assets in the traditional financial sense: the important feature of modern finance is the value of real assets, which are represented by financial virtual assets measured by money (such as stocks, financial derivatives, etc.), and the accumulation of social real assets is also represented by the accumulation of virtual assets.
 
        Blockchain provides a more convenient, transparent and fair accounting method for a certain "intrinsic value". Tokens on blockchain can reflect a wider range of "intrinsic value". To put it simply, cross chain is to solve how to transfer tokens from one chain to another. From a technical perspective, token is a piece of digital information. Many people will understand token as the transmission of information. If the transmission of token is only a simple process of information transmission, it is not necessary for Nakamoto to to design a sophisticated POW mechanism to solve the problem of double payment in a distributed system. As mentioned above, a token represents a certain value, which requires accurate bookkeeping as a guarantee, otherwise the value will disappear.
 
        In the traditional world, the central bank, commercial banks, Payment institutions, stock exchanges, securities registration institutions and real estate registration institutions are ensuring the accuracy of various value bookkeeping under the centralized bookkeeping system, whether out of responsibility, obligation or commercial interests. In the blockchain world, the accuracy of bookkeeping is guaranteed by distributed blockchain ledgers. Therefore, cross chain is not only information flow, but also the value behind information flow that needs to be accurately bookkept. Blockchain records value, and cross chain is also value. From the perspective of bookkeeping, a single blockchain solves the problem of how to accurately bookkeep in a distributed situation, and cross chain solves the problem of how to accurately bookkeep in two distributed ledgers when token transfers occur between accounts controlled by the same user or different users.
 
        Many white papers or technical articles refer to cross chain as a protocol, but this protocol is not completely equivalent to the information transmission protocol like tcp/ip of the Internet. Because the information transmission protocol only needs to ensure that the receiver receives the complete information and the sender gets the corresponding feedback. In this process, if there is a transmission obstacle, it can be sent repeatedly, without considering the problem of repeated transmission of information. However, to synchronize data between ledgers, it is necessary to ensure that the changes of the two ledgers are consistent, otherwise double payment or value loss will occur. In this process, information transmission is only the process of synchronizing data between the two ledgers, rather than the ultimate goal and result.
 
        Cross chain nature is a process in which value flows between different blockchains under the premise of the law of conservation of value. Due to the rapid development of blockchain technology, the accounting mechanism and consensus mechanism of each chain are different, and the establishment of a general cross chain agreement becomes more complex. This is completely different from the so-called "Protocol" in the Internet, but more like "agreement". If we take the real world as an example, "Protocol" is similar to fax machines and containers. Such agreements are relatively easy to reach, and once reached, they will be used in a wider range, with obvious scale effect. While cross chain "agreements" are more like bilateral and multilateral trade agreements, which are more personalized in the process of reaching and realizing, and it is more difficult to unify on a large scale.
 
        If each blockchain ecosystem is regarded as an economy, the "agreement" is more appropriate. The "agreement" in the real world is not only a technical problem, and the agreement needs the consensus of the participants. However, in the world of blockchain, the object of the "agreement" is not a subject, but a distributed network. It is basically impossible to reach the "agreement" through the traditional subject negotiation mode &mdash& mdash; Because there is no main body, the internal adjustment of bitcoin ecosystem cannot reach a consensus on internal agreements (such as capacity expansion), and it is more infeasible to reach cross chain agreements with other blockchain networks.
 
        The cross chain "agreement" in the blockchain world has become a technical problem, which requires technical methods to realize the cross ledger accurate bookkeeping of two ledgers. So far, the cross chain is called agreement and protocol, which are not accurate, but a mechanism. Cross chain is essentially a set of liquidation mechanism between chains, and the essence of liquidation is accurate bookkeeping. Nakamoto describes bitcoin as a peer-to-peer cash system, which is actually a peer-to-peer ledger or a peer-to-peer clearing mechanism. If there is only one set of bitcoin account books in the world, Nakamoto's goal will be achieved.
 
        In terms of the development trend of blockchain, a set of account books is impossible, whether from the perspective of technological realization or commercial application. On the contrary, countless blockchains have emerged, and the blockchain world is developing towards the free market direction described by Hayek. Clearing capacity is the basis for the existence of any value exchange market. Without convenient clearing, the market will lack liquidity and a more prosperous market will not appear. Since the development of digital currency, exchanges have made great contributions. In addition to the ability to provide price discovery, the more important ability of exchanges is to enhance liquidity. However, the disadvantages of the centralization of the exchange have been accompanied by the development of digital currency. Hacker attacks, the running of the exchange, the opacity of the background and other issues have become the Achilles heel of the digital economy.
 
        One of the significance of cross chain is to provide a clearing mechanism for transfer between chains in a distributed manner. Many times, people will confuse the ability of the exchange with the ability provided by cross chain. In fact, there are differences. First, the exchange itself provides a price matching mechanism for tokens. Second, the exchange is a clearing center that collects all kinds of token ledgers, but this clearing center is centralized. It should be said that the latter is the basis of the former, and it is not feasible to make deals without the latter. The cross chain mechanism provides a more basic clearing capability through a distributed way. The establishment of distributed cross chain clearing capability is also the premise for the emergence of distributed exchanges.
 
        Bookkeeping and clearing are the basis of all financial activities. All financial activities in the modern financial industry are based on the basic clearing capacity provided by the banking system. Whether it is simple transfer business, deposit and loan, or cross-border payment, third-party payment, funds, insurance, and financial derivatives, they are all based on the basic clearing capacity provided by the banking system. Analogy to the blockchain world is the same. The pan financial application innovation in the digital world is closely related to the cross chain clearing capability. The current clearing system in the blockchain world is composed of distributed blockchain networks and centralized exchanges. In many cases, the role of centralized exchanges even exceeds the blockchain network itself. For example, many users who have tokens have never used blockchain wallets, but take the mechanism of exchanges as the whole of blockchain, and even don't care about the meaning of blockchain at all.
 
        Centralized exchanges are distorting blockchain while amplifying its significance. Let's review the short trading history of blockchain economy. In the initial era when there was only bitcoin, the trading mechanism between legal coin and bitcoin gave bitcoin, the "toy" of the geek circle, a chance to connect with the real world, so that more people had the opportunity to hold bitcoin. With the birth of more tokens and the reduction of legal currency trading channels, currency trading has rapidly developed the blockchain world into a relatively independent economic system, and bitcoin has become the hard currency and value measurement in the blockchain world. In the whole process, centralized exchanges have contributed greatly. They are not only the gateway between the real world and the blockchain world, but also the connector of different blockchain networks.
 
        However, problems also follow. The exchange has become the entrance of traffic and has the largest voice in the blockchain world. Any independent blockchain network, regardless of its size, should act according to the eyes of the exchange, otherwise it will not be able to get access to the blockchain world, let alone connect with the traditional world. In short, the exchange decides whether a new token is qualified to access the clearing network composed of other tokens and legal currencies. Many blockchain projects have gone further and further in the direction of being distorted to meet the needs of exchanges. Blockchain economic network is in urgent need of a distributed clearing mechanism. Its significance is not to quickly replace centralized exchanges, but to bring a new choice and balance, so that the distorted parts can be corrected, so that the real value of blockchain can be rediscovered, and it is possible to solve distributed problems in a distributed way.
 
        Therefore, we believe that the most important application scenario after the realization of cross chain capability is distributed trading, which includes distributed exchanges, distributed over-the-counter trading, centralized bidding matchmaking and distributed clearing and settlement mixed exchange and other implementation modes. In Ethereum's white paper, vitalik mentioned that one of the most important application scenarios is the application of financial derivatives or similar financial contracts, which is also one of the application scenarios in which smart contracts seem to have the greatest value. We still believe in vitalik's judgment and ideals, but there have been some changes in the actual development. The emergence of a large number of competitive chains (whether public chains or alliance chains) makes both digital assets and traditional chain financial assets exist in many different chains, that is, the basic ledger of bookkeeping is different.
 
        In this case, in addition to smart contracts, distributed clearing capabilities (cross chain capabilities) are also required to realize the premise of digital financial innovation. Otherwise, the application scenarios based on smart contracts will be very limited. For example, if a traditional financial asset is in a bank alliance chain, a digital asset is in Ethereum network, and a stable currency is in wanchain network, it is completely infeasible to create a financial contract based on these two basic assets with stable currency as consideration (in the form of intelligent contract rather than centralized way), when there is no cross chain capability. Because to create such a smart contract, we need to first transfer the above three assets to a blockchain network, and then deploy the smart contract in the network, so as to control the relationship between the three assets through the contract.
 
        The simple explanation is to put the three assets into one ledger first, and then control this ledger through smart contracts. Specific application scenarios will be very rich. From a purely technical point of view, traditional finance can be achieved, and digital finance can be achieved more. There are many articles describing similar scenes, which will not be expanded one by one here. Wanchain mentioned in the white paper that the development of blockchain technology in traditional asset chain and digital asset is like two parallel worlds. In the long run, the socio-economic changes brought about by blockchain will always bring these two parallel lines together. From a technical point of view, whether it is the commercial alliance chain represented by the traditional asset chain, the public chain project represented by the stable currency and virtual asset chain, or even the sovereign public chain represented by the national digital currency, ultimately to play a greater commercial value and generate more innovative applications, cross chain capabilities are needed as support.
 
        Cross chain capability is the technical driving force to promote the comprehensive development and integration of digital economy based on blockchain. We can't predict what the future blockchain based finance will look like, but looking back at history, the third-party payment and scientific and technological financial innovation promoted by Internet technology are re carving the outline of traditional finance with great power, which has a profound impact on the process of human finance. Cross chain has been the key research direction of blockchain technology since blockstream proposed the concept of side chain. At present, there is no universally recognized cross chain mechanism. In addition to the low intensity of demand before, technical difficulties are also a major obstacle.
 
        Two difficult problems need to be solved across the chain. One is how to verify the transaction status on the original chain in a distributed way. The transaction information on the original chain is an external information (Oracle) for another chain. How to ensure that this external information is correct when entering another chain is an important part of the whole cross chain mechanism. If we consider that there is no final state on the blockchain using POW mechanism (there is always bifurcation, but the probability gradually decreases with the increase of confirmation blocks), the complexity of this problem will be higher. For the convenience of the following description, this difficulty is defined as difficulty alpha in this paper. Readers who are not familiar with the blockchain distributed mechanism may find it difficult to understand this difficulty, because under the centralized mechanism, this problem is much simpler.
 
        For example, if Alice uses the credit card of bank a to consume on the POS machine of bank B, the instructions on the POS machine will pass the card swiping information to bank a for confirmation through an organization such as visa. When visa receives the confirmation information of bank a, the inter-bank payment is completed. What bank a confirms is that Alice's transaction is legal. At this time, bank B or visa need not consider whether the transaction is really legal, because bank a has assumed the responsibility of payment at this time. Whether Alice really has enough balance or bank a's system error is the business of Bank A and Alice.
 
        In the case of blockchain distributed bookkeeping, there is no centralized bank a to confirm and promise payment. If banks a and B are replaced by a and B chains, it becomes a difficult problem to confirm whether Alice's cross chain related payment transactions on the a chain are completed. If distributed nodes are used to verify cross chain transactions, this problem will be derived from how to ensure that nodes handling cross chain transactions do not commit evil. The node doing evil will lead to the error of information verification between chains, and then produce double payments, which will cause losses to cross chain users. This is similar to the situation faced by the node doing evil in a single ledger, but when this problem is placed on two mutually unrecognized chains, the complexity of the problem becomes higher.
 
        Another difficulty is to ensure that the total number of tokens on the original chain will not decrease or increase due to cross chain transactions (that is, the law of conservation of value is defined as difficult beta). The consequence of the decrease in the total number of tokens on the original chain is that when tokens need to cross back to the original chain, the original chain cannot generate new tokens, that is, it can only cross the chain in one direction. The increase in the number of tokens in the original chain is nominal. In fact, it is the number of tokens that have already crossed another ledger in the original chain
 
        
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