Cross-Chain Technology: The Future of Blockchain Interoperability, with ston.fi as case study | by geraldmed | Coinmonks | Dec, 2024

With the continuous development of blockchain technology, many blockchain applications,such as digital currencies in the form of tokens, are deployed but limited inter-blockchain data and value transfer methods have created isolated “data islands.” Cross-chain technology addresses this issue, enabling asset transfers and information exchange across different blockchains. Though still in its early stages, it is rapidly evolving and applied in fields like digital finance and e-governance.This article reviews key cross-chain methods, such as Hash-locking, Notary schemes, Sidechains, and others, analyzing their technical aspects, security, and limitations. It highlights challenges, existing solutions, using Ston.fi as a case study, it also explores the milestones ston.fi has covered so far.Blockchain technology enables a secure, decentralized ledger that is tamper-resistant through mechanisms like encryption, hash chains, and consensus protocols. Unlike traditional databases, blockchain stores all data across a network of participants, ensuring traceability, reliability, and reduced maintenance costs. Public blockchains (e.g., Bitcoin) rely on decentralized consensus methods like proof work (PoW) and proof of staking (PoS), while consortium blockchains are controlled by selected nodes, offering higher privacy and efficiency at the cost of some decentralization.Despite rapid blockchain advancements, interoperability between different blockchains remains limited, creating “data islands.” Cross-chain technology aims to connect these isolated systems, enabling seamless data and value transfers. Key cross-chain approaches include Notary Schemes, Sidechains/Relays, Distributed Private Key Control, Hash-locking, and Tight Coupling. These methods improve transparency and efficiency, particularly in consortium blockchains, by facilitating regulated and trustworthy transactions.This article explores cross-chain technologies, analyzing their principles, challenges, and security concerns. I will also talk about how ston.fi has advanced with this Technology.Cross-chain technology in blockchain has made progress but still faces significant challenges. Here are the main issues:1. Cross-Chain Interaction ProtocolBlockchains are self-contained systems where data cannot easily flow between chains. This “data island” problem makes cross-chain interaction difficult. A proper protocol is needed to securely transfer data between chains while ensuring consistency, security, and accuracy.2. Transaction Performance in Public ChainsPublic blockchains like Bitcoin and Ethereum struggle with slow transaction speeds due to consensus mechanisms and limited block capacity. Solutions like Sharding, Sidechains, and Off-Chain Computing (e.g., Lightning Network) aim to improve performance but are still constrained by the mainchain’s limitations, such as consensus speed and block size.3. Scalability of Consortium ChainsConsortium blockchains are used in areas like finance and healthcare, but their functionality often needs to be updated for specific applications. Adding new features directly to the chain can reduce efficiency. Instead, Sidechains or multi-chain architectures are used to improve scalability without compromising the mainchain’s security or performance.4. Cross-Chain Bookkeeping and ClearingDifferent blockchains use separate ledgers, making decentralized transactions and token exchanges difficult. Cross-chain technology aims to unify these systems, allowing for decentralized, efficient, and secure transaction clearing without relying on centralized exchanges. The challenge is creating a consistent and decentralized bookkeeping system in a multi-chain environment.Cross-chain technology is categorized into two types: homogeneous and heterogeneous. Heterogeneous cross-chain can be further divided into three methods: no direct interaction, third-party collaborative interaction, and block listening. This article focuses on heterogeneous cross-chain technology.No Direct Interaction: The main method here is Hash-locking, used in applications like the Lightning Network, which facilitates asset transfer using smart contracts without direct interaction between the blockchains.Third-Party Collaborative Interaction: This method involves third-party nodes, such as Notary Authentication and Distributed Private Key Control, to enable cross-chain interactions in scenarios where participants do not fully trust each other.Block Listening: This approach involves sidechain/relay technology and requires saving block headers from the target chain to facilitate cross-chain operations, though it is more complex to implement.Hash-locking is a technique that makes it possible to exchange assets between different blockchains, like TON and TRON, in a secure and trustless way. It works by using a hash algorithm and a time lock to ensure the transaction is either fully completed or canceled, which helps prevent issues like double-spending.Here’s how it works in simple terms: imagine Barry wants to exchange his TRON for Yuris STON . First, Barry generates a secret number, hashes it, and locks his TRON in a contract on his blockchain, giving Yuri the hash and setting a time limit. Yuri then locks his STON in a similar contract on his blockchain, using the same hash but with a shorter time limit. When Barry unlocks Yuri’s STON using his secret number, Yuri can use that same number to unlock Barry’s TRON, completing the exchange.This method has some clear benefits. It ensures atomicity, meaning the exchange either happens entirely or not at all, reducing fraud risks. The time limit prevents endless delays, and the process inherently verifies participants’ actions, increasing security.Source: https://link.springer.com/article/10.1007/s12083-023-01491-zHowever, it’s not perfect. Hash-locking is mainly suited for asset exchanges and doesn’t support broader applications like information transfers or complex cross-chain contracts. It can also face fairness issues if exchange rates change during the process, and the need for multiple transactions and smart contracts can make it costly. Disputes can also arise in systems like the Lightning Network if intermediate transaction states aren’t properly recorded.Despite these limitations, hash-locking is a vital part of blockchain technology, often used with micro-payment solutions like the Lightning Network to enable efficient off-chain transactions.Notary schemes are used when two blockchains (A and B) can’t trust each other and need a third-party notary to verify transactions between them. The notary acts as a trusted middleman, ensuring the transaction happens without either blockchain needing access to the other’s private keys. This makes cross-chain interactions easier, but it introduces the risk of relying on a third party, which can reduce the decentralization of the process.There are different ways notary schemes work. In a centralized notary system, one organization acts as the notary, but this introduces risks since the whole system depends on a single point of control. A multi-signature notary requires several notaries to agree before a transaction is approved, making it more secure and decentralized, but it can slow down the process. A distributed signature notary splits up an encrypted key across several notaries, ensuring no single notary has control over the transaction, improving both security and decentralization.However, the main issue with notary schemes is trust. The notary system must be reliable, or it could lead to manipulation or security breaches. Centralized notaries, in particular, carry more risks, while multi-signature and distributed methods offer better security but can be slower or harder to implement. So, while notary schemes help make cross-chain transactions possible, they involve a balance between security, speed, and decentralization.This technology uses decentralized nodes to manage private keys, enabling secure cross-chain transactions without relying on third parties. Each participant holds part of the private key, ensuring that no single party has control. The system locks and unlocks assets across chains while maintaining security and decentralization.In this setup, private keys are split and stored across the network, preventing hackers from accessing the whole key. Transactions are processed quickly, but if there’s an issue or delay, the system can automatically cancel problematic transactions to prevent double-spending, ensuring that the exchange is secure. The reward-punishment mechanism helps deal with any malicious node delays.While the system prioritizes decentralization, it’s not as efficient as others since it waits for transactions to be confirmed to avoid issues like double-spending. This delay can make transactions slower, but it ensures users maintain control over their assets and avoids centralization risks. One challenge with this approach is adapting it to work with different blockchains, and the need to wait for confirmation can lower efficiency.Sidechains and relays are mechanisms designed to enable interoperability, scalability, and upgrades between blockchains. A sidechain is an independent blockchain that connects to a main chain through a cross-chain protocol, typically used to enhance performance and expand functionality. For example, Ethereum can serve as a sidechain to Bitcoin, allowing assets and data to flow in both directions via “Two-way Peg” technology. Sidechains help improve transaction speeds and extend digital currency blockchain applications, but they operate independently, with the main chain often unaware of their existence.Source: https://images.app.goo.gl/DdNKVxbQMra6QZKJ7Relays function similarly to sidechains but connect multiple main chains. They facilitate communication and asset transfers between chains without requiring a notary intermediary. Relays are highly flexible and scalable, supporting cross-chain contracts, asset collateral, and information exchange. Prominent examples include Cosmos and Polkadot, which have advanced relay chain technologies.Simplified Payment Verification (SPV) is often used in sidechains to verify transactions efficiently. It relies on confirming the number of digital signatures and block confirmations rather than full transaction details. SPV-based Two-way Peg technology enables secure asset transfer between chains, involving a process of locking assets, ensuring sufficient confirmations, and releasing tokens on the sidechain for circulation. However, SPV has vulnerabilities, such as susceptibility to malicious nodes and double-spending attacks, as it only stores block header data.Despite their advantages, sidechains and relays introduce complexity by adding asynchronous blockchains and increasing miner resource demands. They require marking asset origins for proper transfers and may face challenges like mining centralization and consensus issues from potential soft forks. Security concerns, including network partition attacks and forged block exploits, remain significant considerations in their implementation.Tight coupling refers to a design approach where multiple blockchains are built to work closely together from the start. These chains share similar designs for contracts, interfaces, structures, and nodes, and store each other’s block header information internally. This allows for seamless communication between the chains without needing external data, making it particularly useful for private or secure networks like military systems or industry-specific blockchains. In such systems, the main chain and sidechains collaborate, with the sidechains handling lightweight tasks to support mining efficiency.However, tight coupling has significant limitations. While it simplifies cross-chain communication, it lacks scalability and flexibility, making it hard to expand functionalities or connect to external chains. Though secure in controlled environments, tight coupling systems require strong consensus mechanisms and security controls to protect information and assets.The five cross-chain technologies have unique strengths and weaknesses.Hash-locking is simple, safe, and inexpensive, but it only works for basic asset transfers and requires both blockchains to use the same algorithms, which limits its applicability. The notary scheme can support multi-token transfers and data interactions, making it versatile and relatively easy to implement. However, it relies on third-party intermediaries, which reduces decentralization, and it can be slow, expensive, and dependent on the trustworthiness of notaries.Distributed private key technology provides strong security and supports multi-token transactions and interactions. Still, it sacrifices speed because it waits for blockchain verification and is limited by the blockchain’s performance. Sidechains and relays are designed to improve scalability and expand functionality, but they are technically complex and difficult to implement, requiring advanced coordination between chains.Tight coupling is the simplest to implement, making it suitable for private networks or specific scenarios like joint mining. However, it lacks scalability and interoperability, with limited cross-chain interaction capabilities. Overall, the performance, security, and decentralization of these technologies depend on their design and reliance on third parties, with more advanced methods offering greater functionality at the cost of higher complexity.STON.fi is a decentralized exchange leveraging Hashed Timelock Contracts (HTLCs) to enable secure and atomic cross-chain swaps, ensuring transactions are executed simultaneously on both sides without the risk of default. This innovative approach creates a zero-trust environment, allowing users to trade assets across multiple blockchain networks without relying on intermediaries or custodians.The platform emphasizes security through its non-custodial architecture, where users retain full control over their private keys and assets, eliminating vulnerabilities associated with centralized entities. Additionally, STON.fi employs a Request For Quote (RFQ) liquidity model instead of traditional automated market makers, offering deep liquidity and price stability while maintaining decentralized security.Integrated the Request for Quote (RFQ)Developed and thoroughly tested HTLC (Hashed Timelock Contracts)Successfully conducted test token exchanges between the TON and TRON networks!Developing an internal database to store transactions.Launching a synchronization service between the internal database and the TON and TRON networks.Establishing a notification system for bidders.Preparing for high-volume transaction processing between the TON and TRON blockchains.Wrapping up.Cross chain technology, if fully functional, is going to be the greatest breakthrough in Defi, this will make transactions easier and faster between two different Blockchain and on the other side reducing the cost of transaction.. I am passionately hoping ston.fi will not only stop at TON-TRON Cross-Chain but will keep developing until a fully functional Cross-Chain technology is established.https://www.leewayhertz.com/blockchain-interoperability-crosschain-technology/https://coingape.com/can-cross-chain-technology-be-the-future-of-crypto-ecosystems/amp/https://www.blockchain-council.org/blockchain/blockchain-interoperability/https://blog.ston.fi/tag/cross-chain/STON.fi DEX Data on DeFi Lama: STON.fi’s Total Value Locked (TVL) is approximately $149.84M.Explore more on DeFi Lama https://defillama.com/protocol/ston.fi?volume=falseTON Stat https://www.tonstat.com/ .Tonscan https://tonscan.com/statistics. STON.fi on Dexscreener: https://dexscreener.com/ton/stonfiFor more information:Website: https://ston.fiTwitter (X): x.com/ston_fiTelegram: t.me/stonfidexDiscord: discord.gg/bdmaGV6qUwReddit: reddit.com/r/STONFi/