Arbitrum to Polygon Bridge

Karolina

26 Sep 2023
Arbitrum to Polygon Bridge

Layer 2 solutions stand out as a guiding light for scalability and improved user experiences. One such intriguing development in recent times is the inception of bridges, particularly the Arbitrum to Polygon bridge. These bridges represent more than just technological wonders; they symbolize progress towards a more interconnected and seamless blockchain environment. Throughout this article, we will examine the intricacies of two prominent Layer 2 platforms, Arbitrum and Polygon, and underline their interoperability's significance.

Layer 2 Solutions

While revolutionary, blockchain technology has faced its share of obstacles. Scalability has proven to be a considerable barrier, as congestion and high transaction fees afflict prominent networks like Ethereum. Layer 2 solutions have emerged as a viable response to these problems.

Arbitrum

Arbitrum is an optimistic rollup that presents a technique designed to enhance Ethereum's scalability. By shifting the majority of transactional computations off-chain and retaining only essential data on-chain, Arbitrum substantially decreases gas expenses and accelerates transaction processing times. In addition to these technical benefits, Arbitrum offers an environment nearly identical for developers, ensuring that Ethereum-compatible tools and smart contracts can easily transition or coexist on this Layer 2 platform.

READ: 'What is Arbitrum?'

Polygon

Conversely, we find Polygon, previously recognized as the Matic Network. This multi-chain scaling solution effectively turns Ethereum into a comprehensive multi-chain system, often referred to as the "Internet of Blockchains." With its standalone chains and secured chains, Polygon provides a range of solutions tailored to address diverse developer requirements. The architecture enables quicker, more affordable transactions, making dApps increasingly user-friendly and accessible.

READ: 'Arbitrum vs Polygon'

The Importance of Bridge Solutions

Although both Arbitrum and Polygon deliver substantial advantages independently, they function in somewhat separate environments. For users or developers looking to transfer assets or data between the two platforms, it can be inconvenient. This is where the significance of bridges, like the Arbitrum to Polygon bridge, arises. These bridges ensure that the wide and multifaceted world of Layer 2 solutions doesn't devolve into disconnected islands but remains an integrated, unified ecosystem.

Arbitrum to Polygon Bridge: Breaking Down the Mechanics

In the realm of blockchain, the ability to transfer assets and data across distinct networks is nothing short of a technological wonder. The bridge between Arbitrum and Polygon exemplifies this innovation. But how exactly does this bridge operate? Let's delve into its intricate mechanics.

How the Bridge Works

Cross-chain Communication: At its core, the bridge acts as a mediator between Arbitrum and Polygon, enabling tokens and data to transition seamlessly between the two. When a user initiates a transfer, the originating network locks the assets, ensuring they are temporarily out of circulation.

Security Measures in Place: The bridge employs cryptographic proofs to verify and validate transactions. These proofs ensure that the assets being transferred on one side are genuinely locked and are hence minted or released on the other side.

Gas Fees and Transaction Times: Unlike base layer transactions, bridges often have variable gas fees based on congestion and demand. However, they usually offer quicker transaction times, especially when transferring assets between two Layer 2 solutions like Arbitrum and Polygon.

Stakeholders Involved

The robustness of any bridge relies heavily on its maintainers. Validators, often incentivized through staking mechanisms, play a pivotal role. Their duty is to oversee transactions, validate the correctness of cross-chain operations, and sometimes participate in consensus protocols.

Supported Tokens and Assets

While a plethora of assets can traverse the bridge, certain popular ERC-20 and ERC-721 tokens are more commonly transferred. Additionally, as the bridge ecosystem evolves, more tokens get whitelisted, broadening the scope of interoperability.

The Benefits of the Arbitrum to Polygon Bridge

As blockchain networks grow and diversify, the need for efficient interconnectivity becomes paramount. The bridge between Arbitrum and Polygon isn't just a technical conduit but brings a slew of benefits to the table.

Increased Liquidity Across Platforms

The bridge allows assets to flow fluidly between the two platforms, ensuring that liquidity isn't trapped within one ecosystem. This is beneficial for traders, liquidity providers, and even regular users who want to maximize their assets' utility.

Diversification of dApps and Services

Developers can now harness the strengths of both Arbitrum and Polygon without alienating any user base. This means a dApp developed primarily for one platform can reach users of the other, leading to diversified services and a broader audience.

Enhanced User Experience

For end-users, the bridge epitomizes convenience. No longer do they need to manage multiple wallets or undergo complex token swap processes. The bridge streamlines cross-chain interactions, saving time and reducing transaction costs.

BenefitsDescription
Increased Liquidity Across PlatformsThe bridge allows for the seamless transfer of assets between Arbitrum and Polygon, preventing liquidity from getting isolated in a single platform. This benefits traders, liquidity providers, and users seeking to make the most of their assets.
Diversification of dApps and ServicesBy bridging the two platforms, developers can capitalize on the unique features of both Arbitrum and Polygon. This ensures that a dApp created for one platform can cater to the other's audience, leading to a richer array of services and a wider user reach.
Enhanced User ExperienceUsers no longer have to juggle multiple wallets or navigate through complicated token exchanges. The bridge simplifies cross-chain interactions, offering a more streamlined user experience by saving time and cutting down on transaction expenses.

Potential Challenges and Concerns

While the Arbitrum to Polygon bridge offers an array of advantages, it isn't devoid of challenges. Understanding these concerns is essential for informed blockchain interactions.

Security Concerns

Bridges, by their nature, can become targets for malicious actors. There's always a concern about vulnerabilities that might be exploited, leading to loss of assets. While cryptographic proofs and validators provide layers of security, the bridge is still a complex piece of architecture that needs continuous scrutiny.

Regulatory Implications

Bridging assets between different ecosystems might attract regulatory attention. While blockchain operates in a decentralized manner, regulatory bodies worldwide are still grappling with how to oversee such cross-chain operations.

Potential Bottlenecks and Scalability Issues

As more users adopt the bridge, there's potential for congestion, leading to increased fees and slower transaction times. Ensuring that the bridge remains scalable and can handle growing demand is a continuous challenge for its developers.

ChallengesDescription
Security ConcernsBridges can become potential targets for attackers. Even with cryptographic proofs and validators in place, the inherent complexity of bridge architecture can introduce vulnerabilities. Continuous monitoring and updates are required to ensure asset safety and the overall security of the bridge.
Regulatory ImplicationsAs assets move across ecosystems, they might come under the purview of regulators. Although blockchain operations are decentralized, global regulatory bodies are still figuring out how to govern these cross-chain movements. Depending on jurisdiction, users and developers might face new regulatory guidelines or restrictions.
Potential Bottlenecks and Scalability IssuesWith the increasing adoption of the bridge, there might be cases of congestion which can result in higher fees and prolonged transaction times. It's imperative for developers to continually enhance the bridge's scalability, ensuring it can accommodate the growing user base and demand without compromising performance.

Conclusion

The Arbitrum to Polygon bridge not merely elevates user experience and liquidity but also fosters cross-pollination of ideas and services spanning platforms. Nevertheless, this technological breakthrough comes with its unique set of challenges. As we venture into this new domain, striking a balance between enthusiasm and prudence is crucial, perpetually learning and adjusting.

As a vital component in the mosaic of blockchain progress, the Arbitrum to Polygon bridge seamlessly connects platforms, assets, and communities. The current excitement surrounding this space is palpable, and one can hardly wait to discover the forthcoming innovations that await us.

Tagi

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Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.

source: https://www.canva.com/design/DAFDTNKsIJs/8Ky9EoJJI7p98qKLIu2XNw/view#7

Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics

Summary

The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

FAQ

What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.

What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Karolina

18 Mar 2024
What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Enter Berachain: a high-performance, EVM-compatible blockchain that is set to redefine the landscape of decentralized applications (dApps) and blockchain services. Built on the innovative Proof-of-Liquidity consensus and leveraging the robust Polaris framework alongside the CometBFT consensus engine, Berachain is poised to offer an unprecedented blend of efficiency, security, and user-centric benefits. Let's dive into what makes it a groundbreaking development in the blockchain ecosystem.

What is Berachain?

Overview

Berachain is an EVM-compatible Layer 1 (L1) blockchain that stands out through its adoption of the Proof-of-Liquidity (PoL) consensus mechanism. Designed to address the critical challenges faced by decentralized networks. It introduces a cutting-edge approach to blockchain governance and operations.

Key Features

  • High-performance Capabilities. Berachain is engineered for speed and scalability, catering to the growing demand for efficient blockchain solutions.
  • EVM Compatibility. It supports all Ethereum tooling, operations, and smart contract languages, making it a seamless transition for developers and projects from the Ethereum ecosystem.
  • Proof-of-Liquidity.This novel consensus mechanism focuses on building liquidity, decentralizing stake, and aligning the interests of validators and protocol developers.

MUST READ: Docs

EVM-Compatible vs EVM-Equivalent

EVM-Compatible

EVM compatibility means a blockchain can interact with Ethereum's ecosystem to some extent. It can interact supporting its smart contracts and tools but not replicating the entire EVM environment.

EVM-Equivalent

An EVM-equivalent blockchain, on the other hand, aims to fully replicate Ethereum's environment. It ensures complete compatibility and a smooth transition for developers and users alike.

Berachain's Position

Berachain can be considered an "EVM-equivalent-plus" blockchain. It supports all Ethereum operations, tooling, and additional functionalities that optimize for its unique Proof-of-Liquidity and abstracted use cases.

Berachain Modular First Approach

At the heart of Berachain's development philosophy is the Polaris EVM framework. It's a testament to the blockchain's commitment to modularity and flexibility. This approach allows for the easy separation of the EVM runtime layer, ensuring that Berachain can adapt and evolve without compromising on performance or security.

Proof Of Liquidity Overview

High-Level Model Objectives

  • Systemically Build Liquidity. By enhancing trading efficiency, price stability, and network growth, Berachain aims to foster a thriving ecosystem of decentralized applications.
  • Solve Stake Centralization. The PoL consensus works to distribute stake more evenly across the network, preventing monopolization and ensuring a decentralized, secure blockchain.
  • Align Protocols and Validators. Berachain encourages a symbiotic relationship between validators and the broader protocol ecosystem.

Proof-of-Liquidity vs Proof-of-Stake

Unlike traditional Proof of Stake (PoS), which often leads to stake centralization and reduced liquidity, Proof of Liquidity (PoL) introduces mechanisms to incentivize liquidity provision and ensure a fairer, more decentralized network. Berachain separates the governance token (BGT) from the chain's gas token (BERA) and incentives liquidity through BEX pools. Berachain's PoL aims to overcome the limitations of PoS, fostering a more secure and user-centric blockchain.

Berachain EVM and Modular Approach

Polaris EVM

Polaris EVM is the cornerstone of Berachain's EVM compatibility, offering developers an enhanced environment for smart contract execution that includes stateful precompiles and custom modules. This framework ensures that Berachain not only meets but exceeds the capabilities of the traditional Ethereum Virtual Machine.

CometBFT

The CometBFT consensus engine underpins Berachain's network, providing a secure and efficient mechanism for transaction verification and block production. By leveraging the principles of Byzantine fault tolerance (BFT), CometBFT ensures the integrity and resilience of the Berachain blockchain.

Conclusion

Berachain represents a significant leap forward in blockchain technology, combining the best of Ethereum's ecosystem with innovative consensus mechanisms and a modular development approach. As the blockchain landscape continues to evolve, Berachain stands out as a promising platform for developers, users, and validators alike, offering a scalable, efficient, and inclusive environment for decentralized applications and services.

Resources

For those interested in exploring further, a wealth of resources is available, including the Berachain documentation, GitHub repository, and community forums. It offers a compelling vision for the future of blockchain technology, marked by efficiency, security, and community-driven innovation.

FAQ

How is Berachain different?

  • It integrates Proof-of-Liquidity to address stake centralization and enhance liquidity, setting it apart from other blockchains.

Is Berachain EVM-compatible?

  • Yes, it supports Ethereum's tooling and smart contract languages, facilitating easy migration of dApps.

Can it handle high transaction volumes?

  • Yes, thanks to the Polaris framework and CometBFT consensus engine, it's built for scalability and high throughput.