Edit: Liquality Atomic Swaps are live for users to swap crypto p2p.
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We should put resources toward a proper (trustless, serverless, maximally Uniswap-like UX) ETH <-> BTC decentralized exchange. It's embarrassing that we still can't easily move between the two largest crypto ecosystems trustlessly.
We absolutely agree, and we have architected and built Liquality to be a trustless, serverless cross-chain bridge where users have complete power and control.
It's critical that trustless cross-chain bridges like Liquality ensure users:
- Are not forced to use one bridge
- Are not required to pay a toll
- Can deploy their own bridges at any time
In this blog post, we dive deep into Vitalik's tweet and highlight the nuances of building a truly peer-to-peer future.
The Two Largest Crypto Ecosystems: BTC and ETH
BTC and ETH are the two largest crypto ecosystems from both market cap and development perspectives. Bitcoin’s market dominance is backed by 11 consistent years of maturing infrastructure and resilience. And the explosive growth of DeFi is the result of the Ethereum community’s rapid permissionless experimentation at the application level. By implementing trustless bridges between the two ecosystems, it’s easy to see what users gain - the best of both worlds, namely, Ethereum’s open financial applications and Bitcoin’s security and liquidity.
But what if the bridges aren’t trustless? Or what if there’s only one bridge that requires users to pay a toll? Then users are left to the mercy of those centralized points of failure, as we’ve witnessed countless times during crises. So how should we design and architect ways for users to easily move between the two largest crypto ecosystems trustlessly?
Qualities of Trustless Cross-Chain Bridges
Whether they’re centralized or decentralized, it’s clear that intermediaries who control bridges between different blockchains can threaten a peer-to-peer future and bottleneck liquidity. To minimize their impact, we believe alternative cross-chain bridges should meet these requirements:
1. Users Are Not Forced To Use One Bridge
The accessibility and innovative cultures of Bitcoin and Ethereum have enabled a variety of teams to create different kinds of bridges. As a result, users are free to choose which bridge they’d like to cross, for example:
- Using pegged tokens like WBTC or TBTC
- Connecting existing blockchains to meta-blockchains like Ren or Cosmos
- Exchanging crypto across blockchains using tools like Liquality
2. Users are not required to pay a toll
Intermediaries can charge unnecessary fees manifested in different forms like:
- Taking commissions from users’ transactions
- Only allowing “utility” token holders the freedom to transact
- Forcing users to give up custody of their funds
- Requiring users to reveal personally-identifiable information
- Imposing additional tech overhead with increased attack surfaces
Liquality atomic swaps only require native network fees (eg. gas in Ethereum, mining fees in Bitcoin) to be paid. There are no account sign-ups, deposits, "utility" tokens, wrapped tokens, or other complicated setup requirements when swapping with Liquality.
3. Users can deploy their own bridges at any time
In another series of tweets, Vitalik points out that
A fully decentralized (or "serverless") application is valuable because it gives users the confidence that *it will always be there*, so you can safely build on top of it.
If you build a dapp on top of fully decentralized / serverless infrastructure, then even if the rest of the community around that infrastructure goes away, your dapp can continue to use it
Users should not depend on a trusted third party to move across blockchains. Intermediaries would simply reintroduce the same problems p2p crypto protocols aim to solve: limited access, higher cost, significant friction, and, more importantly, siloed liquidity.
Intermediaries are easily identifiable in their ability to censor transactions and change their contracts whenever they please, like Bancor. This is due to their architecture revolving around a set of admin-controlled central hub contracts.
Liquality on the other hand offers users the ability to own and deploy atomic swap contracts, making it impossible for us to control users’ funds or change users’ rules. Users can even download our software, run it locally on their device (without depending on a third party server), and extend its functionality without asking for our permission. We’ve taken the necessary precautions to ensure Liquality is not a potential single point of failure at each layer of a cross-chain exchange:
- Serverless Application: users can download and run our free-and-open-source software locally on their devices if they don’t want to use our hosted instance on liquality.io
- Transactions: users transact directly with wallets and contracts they own and control. Users never have to give up control of their funds or use “utility” tokens or tokenized IOUs, and transactions cannot be censored by Liquality
- Smart Contract Interactions: users own and deploy disposable contracts every time they need to move across blockchains, minimizing the likelihood for a central hub contract to arise. As different blockchains support interoperable standards, like the BIP199 and ERC1630 Hash Time Locked Contract standards, they foster the free flow of liquidity rather than bottlenecking it.
- Liquidity Provisioning: users can run their own market-making bots that connect to their own network nodes, utilize open standards, and leverage FOSS libraries to create a network of trustless liquidity.
In doing so, the architecture of the system pushes security from the center to the edges, where users are in control of their financial sovereignty; where censorship cannot happen; where a more open and equitable future can exist.
A Standards-Based Approach to Trustless Cross-Chain Bridges
To ensure that all cross-chain bridges (beyond Bitcoin and Ethereum) adhere to the qualities above, a standardized approach is key to scalability.
Some have sought out to build entirely new ecosystems and push developers to adopt their middleware. But as noted in yet another one of Vitalik’s tweets, people seem to prefer tools that they can put into their existing workflows without inheriting additional overhead.
Having recognized standards to be the key to future interoperability and shared liquidity, Liquality promotes the Hash Time Locked Contract (HTLC) standard for cross-chain bridges. We’ve ported the 4-year battle-tested HTLC standard in Bitcoin (BIP199) over to Ethereum (ERC1630), allowing for:
- Cross-chain Atomic Swaps
- Interoperability with the Lightning Network
- And more
So should we put resources toward a proper (trustless, serverless, maximally Uniswap-like UX) ETH <-> BTC decentralized exchange?
Absolutely. We believe it’s critical to realizing a p2p future.
Of course, there are still many ways to improve the p2p user experience, and our team is working to release new features in the coming weeks to address UX pain points, like slow block times, wallet compatibility, and more.
We remain as excited as ever to contribute to cross-chain growth, and to collaborate with other teams and approaches that align with our vision of a more accessible and equitable peer-to-peer world.
Interested in trying Liquality? Swap with your new cross-chain bridge today.