Although they grabbed less media attention than the collapse of centralized organizations, the so-called bridge exploit incidents in 2022 again proved that the decentralized finance (defi) ecosystem still lacks sufficiently secure solutions, Hugo Philion, the co-founder and CEO of Flare Networks, has argued. Philion insists that the lack of such secure solutions has constrained the growth and use of defi products.
Lack of Communication Between Chains
In written responses sent to Bitcoin.com News, Philion claimed that the large-scale, cross-chain experimentation primarily seen in 2020 and 2021 potentially explains why more than $2 billion has been lost via the so-called bridge exploits of the past 12 months. However, according to the Flare Network CEO, while it may not be possible to completely eliminate risks for users, bridges could “be made substantially safer.”
Besides addressing security-related issues, Philion also offered his thoughts on many other issues that range from the possible use of non-smart contract digital assets in defi and Web3, to insuring digital assets when they are moved across chains.
Below are Philion’s responses to the questions sent.
Bitcoin.com News (BCN): Can you explain why no one has been able to securely unify the ecosystem yet?
Hugo Philion (HP): Blockchains have historically been designed as distributed ledgers processing native transactions, i.e. for bitcoin, the movement of the native asset bitcoin from address A to address B. They haven’t been designed to relay information between themselves, i.e., the Bitcoin chain cannot tell you what happened on the Ethereum chain at block #1083483. This creates a communication problem: how can information about different chains be reliably gathered and validated with decentralization analogues to the chains themselves? Furthermore, how can this be achieved while accounting for the risk of chain rollback?
To date, sufficiently secure and decentralized mechanisms to acquire and confirm state between disparate blockchains, apart from rollups, have not been built. A single solution likely does not exist. Instead, potentially multiple, different solutions will suit different use cases.
BCN: How does the lack of efficient communication mechanisms between chains affect dapp (decentralized app) developers?
HP: Today the biggest use case in the blockchain is decentralized finance (Defi). The lack of adequate cross-chain communication has constrained the size,…
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