The next step in the development of the Web3 world will depend on whether cross-chain transactions can be optimized, simplified, and further enhance liquidity. What can ERC-7683 do?
Summary:
Resolving the challenge of cross-chain interoperability has always been a highly challenging problem in the multi-chain landscape of the blockchain world. As the demand for cross-chain transactions increases, the challenges faced by cross-chain interoperability become more prominent. Common challenges include:
Security is the most common challenge in cross-chain transactions, as cross-chain bridge protocols that can attract large-scale assets are the primary targets of hackers.
Blockchains rely on validators to verify and execute transactions, and cross-chain bridge protocols also rely on trusted third-party validators to verify and process cross-chain transactions. In this process, if the incentives for the cross-chain bridge are insufficient, there are fewer validators, or the trust model is too centralized, hackers may attack validators to disrupt the cross-chain bridge and steal assets. In addition, contract vulnerabilities in cross-chain protocols are also frequently exploited by hackers.
On August 6, 2024, the Ronin Bridge was suspected to have been attacked by hackers, resulting in the theft of approximately 4,000 ETH and 2 million USDC, with a total value of about $12 million. In March 2022, the Ronin Bridge experienced a security incident known as the “largest loss in DeFi history,” in which hackers attacked five out of nine validators, stealing 173,600 ETH and $25 million worth of USDC, with a total value exceeding $600 million.
Cross-chain transactions generate relatively high gas fees. Users need to calculate the actual transaction cost based on the gas fees paid for operations on both the source and destination chains in a cross-chain transaction.
Each blockchain operates independently with its own consensus mechanism and protocol. The scattered and isolated nature of these chains leads to relatively complex and cumbersome operations when transferring assets and data across chains. In cross-chain transactions, users with frequent trading demands are more likely to encounter asset price slippage, increasing the difficulty of transactions.
To address these challenges, Uniswap Labs and the interoperability protocol Across jointly proposed a new standard solution, ERC-7683, on May 20, 2024, aiming to make cross-chain transactions simpler, faster, and more secure through a shared execution network.
The ERC-7683 standard is based on the CrossChainOrder structure and provides an ISettlementContract smart contract interface to implement standard APIs for cross-chain transaction execution systems.
The core technical proposal of the ERC-7683 standard is that all “cross-chain intents” follow the same order structure, which greatly improves the flexibility and user-friendliness of cross-chain operations.
As demonstrated by Uniswap Labs on its social platform X, the ERC-7683 standard provides a clear path for unifying Ethereum.
On August 21, 2024, Layer 2 solution Optimism announced the adoption of the ERC-7683 cross-chain standard to achieve more efficient transfer operations of ETH and USDC on the Superchain and further promote application-layer interoperability within the Ethereum ecosystem. Currently, Optimism has integrated the cross-chain solution of the interoperability protocol Across.
Uniswap Labs announced in May 2024, when releasing the ERC-7683 standard, that it would adopt the standard in cooperation with UniswapX for cross-chain operations.
It is worth noting that the implementation of the ERC-7683 standard, which only provides standard APIs for cross-chain transaction execution systems, guarantees the consistency of user experience. However, even with the implementation of ERC-7683, it is difficult to overcome a common challenge in cross-chain transactions: whether sufficient cross-chain liquidity can be obtained.
For the implementation of the ERC-7683 standard, if there is insufficient cross-chain liquidity, it means that the standard cannot attract enough active “fillers” (refer to Figure 1 in the article) to support users’ “cross-chain intents”. If there are not enough fillers, users’ “cross-chain intents” cannot obtain better costs or experiences through a competitive mechanism.
This means that the implementation of the ERC-7683 standard needs to form a network effect – more use cases accessing the standard, more users using the standard, and more fillers to ultimately improve the overall efficiency of cross-chain transactions.
Understanding the details of ERC-7683:
https://www.erc7683.org
View the Ethereum Improvement Proposal jointly released by Uniswap Labs and Across on the Ethereum Magicians forum:
https://ethereum-magicians.org/t/erc-7683-cross-chain-intents-standard/19619
Media reports have pointed out that Vitalik Buterin, co-founder of Ethereum, has provided special support for the development of the new cross-chain standard ERC-7683 through community platforms. According to the ERC-7683 standard, operations can include batch transactions, Merkle proofs, and other on-chain activities. Buterin gave an example of how the ERC-7683 standard would work, stating, “With the ERC-7683 standard, users can paste an ERC-7683 address into their wallet and simply click to easily transfer any asset on any chain to another account.”
In the Web3 era, the multi-chain landscape is inevitable. For the next step in the development of the Web3 world, whether cross-chain transactions can be optimized, simplified, and further enhance liquidity will be a crucial challenge.
The ERC-7683 standard directly addresses the pain points of cross-chain transactions and significantly improves the interoperability between blockchains. Its application will have a profound impact on the blockchain world. Currently, users can expect an improved user experience brought by the implementation of the ERC-7683 standard, which can directly benefit more DeFi projects by injecting more liquidity support and accelerating their development.