Interoperability in Ethereum 2.0: Cross-Chain to Earn

According to the mainstream cross-chain bridge design, cross-chain liquidity grows proportionally to its users. Cross-chain assets become locked into the cross-chain bridge contract and added to bridge TVL. For example, if a user transfers ETH from Ethereum to BNB Chain for DeFi activities, the user's ETH will be locked into the smart contract of the cross-chain bridge on Ethereum. When users then bridge their assets back to Ethereum, the corresponding assets on Ethereum are unlocked. 

DeFi activities, which generally entail some sort of pledge or lock-up period, have resulted in an accumulation of assets locked into contracts on Ethereum. This accumulation of assets inside of certain contracts has attracted a lot of attention, notably that of hackers who target these contracts and in particular those of cross-chain bridges. Chainalysis data shows that so far in 2022, 69% of hacking losses in crypto have originated from attacks on cross-chain bridges. 

The DeFi ecosystem, which has continuously evolved and improved has seen various cross-chain projects emerge. The competition has become increasingly fierce. Cross-chain projects compete on their reputation for being secure, and continue to integrate new projects and offer cheaper cross-chain services than their competitors. Besides these things, cross-chain bridges have been lacking something novel that is attractive and will grow user retention.