Composable Finance wants to solve blockchain interoperability issues and smart contract vulnerabilities
Disclaimer: The Industry Talk section features information from players in the crypto industry and is not part of the editorial content of Cryptonews.com.
Blockchain or Distributed Ledger (DLT) technology has advanced rapidly in recent years. These developments were accelerated with the launch of Ethereum (ETH) in mid-2015, which introduced a Turing Complete smart contract platform for building and deploying decentralized applications (dApps).
The Ethereum blockchain itself and various other competing and supporting decentralized protocols have undergone significant improvements, particularly in the wake of the historic crypto bull market of 2017 – which brought a wave of new investors and talented professionals into the market. digital assets and the DLT space. As expected, there are no quick fixes and there are certainly critical challenges in this nascent space that must be addressed before we can expect to move forward in any meaningful way.
Interoperability solutions are not secure enough
For example, the focus has been, especially since 2018, on bridging multiple chains to support blockchain interoperability. This is essential for many reasons, but mainly because investors and traders seek to exchange data and assets between different networks to perform complex cryptocurrency transactions. However, these interoperability solutions are far from perfect and continue to suffer from hacks and damaging security breaches.
For example, Thorchain, a widely used DeFi protocol, has been compromised on several occasions (at the start of the year). The hacks resulted in millions of dollars in losses. The hacker allegedly responsible for the exploits actually provided detailed messages on the steps to be taken to ensure the protection of user assets.
Notably, the Thorchain protocol has seen around 4,000 Ether stolen during an attack. Thorchain, which provides Automated Market Maker (AMM) and Decentralized Exchange (DEX), has become known for offering liquidity pools (LPs) with substantial Total Locked-In Value (TVL) in its contracts.
In one of the attacks on Thorchain, the hacker exploited an ETH router contract to target the vulnerable component Bifrost, resulting in losses of more than $ 8 million. The hacker even admitted that the vulnerability was known before and could have been avoided with properly written source code.
When writing applications in Solidity, which is Ethereum’s smart contract programming language, software architects described the proper coding methods (best practices) in order to transfer assets. But these guidelines had apparently been ignored by the development team, leading to a serious issue with the protocol’s RUNE token contracts.
In another damaging exploit, involving the Polychain network, a smart hacker managed to steal around $ 600 million in cryptocurrency through the Poly network. Although the malicious actors returned the funds, the Poly Network team admitted that they had a lot of work to do to adequately secure their platform.
According to Brain (an anonymous character), product manager at Composable Finance, a hyper-liquidity infrastructure layer for DeFi assets powered by Layer-2 Ethereum and Polkadot, the reason for these problems is that they are heavily dependent on centralized infrastructure that makes them much more vulnerable.
There could be a number of potential solutions where interoperability between chains can become considerably more secure for end users. Composable Finance claims to be able to solve these problems by adding a solid layer of security. This, because they are focused on building the Relay chain which is currently supported by billions of dollars in DOT and KSM funds.
Composable Finance is described as a parachain project gearing up to embark on an equity loan auction in Kusama next Saturday (which they hope and of course plan to win). As a reminder, Composable operates under the project name of Picasso in Kusama.
As explained by the Composable Finance team, the crypto ecosystem has sought out fragmented blockchains for greater scalability. ETH 2.0, the updated version of Etheruem will be fragmented, Polkadot will be fragmented, and NEAR will also be fragmented.
But even though the vision of ETH 2.0 is fast becoming a reality, applications are fragmented, instead of fragmenting blockchains or DLT networks. Sushiswap, for example, is deployed on Ethereum Virtual Machine or EVM chains, Layer 2s such as rollups, Polkadot chains, and extending these applications to other ecosystems is quite likely.
Develop secure inter-ecosystem communication
Composable finance works on an inter-chain and inter-layer liquidity layer for partitioned applications.
The team will use a parachain to serve as a finality layer. It will connect the L2s to the Polkadot / Kusama ecosystem and the Inter-Blockchain Communication Protocol (IBC) to the Polkadot / Kusama ecosystem. The aim is to expand it further to include various other ecosystems, such as Algorand and Solana.
Composable’s objective is to develop a protocol allowing secure communication between ecosystems. Architecture is a Polkadot chain that acts as a finality layer to support Polkadot interchain communication to IBC and asset transfer. It will also support Layer 2 communication and transfer via parachain. Additionally, there is a layer of privacy that makes these interactions completely private.
Composable further explained that software architects can use a development kit to take advantage of this infrastructure, which is intended to support secure communication and provide access to liquidity.
The main result is the ability to conduct cross-chain actions and also to view the blockchain ecosystem as a network of âagnosticâ liquidity and available return.
With the Composable SDK, the team wants to start educating users about secure cross-layer / chain arbitrage opportunities. The team also built several products on top of their parachain.
Must provide a reliable finality layer, maintain confidentiality
As Composable Finance noted, the growth of the blockchain industry has led to serious interoperability issues. The team explains that there are several solutions that rely on off-chain infrastructure and that there is currently no reliable end-layer. The security of these types of solutions does not support the required volume of transactions that we would like the cross-chain DeFi ecosystem to support. Many so-called interoperability solutions also eliminate the privacy that a particular channel would have provided.
The Composable team points out that many projects in DeFi are working hard to address the current limitations of interoperability by building bridges. Composable differentiates its offering by focusing on establishing adequate liquidity.
Liquidity issues are not a recent issue in DeFi. But they were handled by Automated Market Makers (AMMs) built into DeFi exchanges such as UniSwap. Launching cross-layer and cross-chain applications now makes liquidity a more serious issue, with many Layer 2 applications and chains to balance liquidity, and not the right infrastructure to do so.
Liquidity for interlayer transfers is a concern that the testing lab, Composable Labs, is focusing on resolving. Product Manager, 0xBrainJar, Composable Labs has created a Liquidity Simulation Environment (LSE) to explore the opportunity and appropriate means of inter-layer liquidity provision (LPing).
In addition to providing these solutions, the Composable team explains that existing interoperability solutions are vulnerable because the core of what they do is centralized, while Composable / Picasso uses Parachains which the team believes are really decentralized and backed by billions of dollars in DOT and KSM.
Many industry participants do not understand the seriousness of these weaknesses and Composable may be able to help the industry resolve these issues.