ZERO Network: Solving the Challenges of Bitcoin Bridges
Published On: 6/20/2023
Since their inception, Bitcoin and crypto bridges have been evolving and growing in importance within the DeFi ecosystem. Despite this, they have continued to face significant hurdles, including limited interoperability, centralization and technical inefficiencies.
In this article, we take a look at these challenges and introduce the ZERO Network by zeroDAO – a decentralized and trustless Layer 0 that aims to revolutionize cross-chain bridging.
Challenges with Bitcoin Bridges
Over time, numerous solutions have been developed to bridge the gap between Bitcoin's blockchain and other networks. This is primarily to allow Bitcoin to have a more active role in the DeFi sector.
However, these initiatives faced several considerable challenges:
- Limited cross-chain interoperability: Most Bitcoin bridge solutions focus on EVM-compatible chains, leaving a significant portion of the crypto ecosystem disconnected.
- Centralization & security risks: Many bridges and cross-chain solutions require trust in central parties or small groups of validators, contradicting blockchain’s key principles of decentralization and trustlessness, while also creating potential security risks.
- Inefficiency: Due to technical inefficiencies, Bitcoin and crypto bridges are typically slow and expensive to use.
Smart Contract Vulnerabilities
Bridges utilize smart contracts to facilitate the transfer of assets between chains. While this remains a necessary component for bridging, these complex and often vulnerable contracts have become a target for hackers.
Notable Bridge Hacks:
Thorchain hack (July 2021): Thorchain, a cross-chain liquidity protocol, was exploited for approximately $7.6 million. The attacker manipulated Thorchain's Bifrost bridge system to overpay assets.
Ronin bridge hack (March 2022): Ronin, an Ethereum sidechain developed for the NFT game Axie Infinity, was compromised for over 173,600 ETH and 25.5 million USDC, totaling over $600 million. The attacker gained control of four of the nine validator nodes in the Ronin chain, plus a validator run by Axie DAO.
Binance bridge hack (October 2022): Binance bridge suffered a major breach resulting in the loss of $570 million (2 million BNB tokens). The attacker exploited a proof verifier bug in the bridge by registering as a relayer for the BSC Token Hub – a vault that facilitates cross-chain transactions. Despite a quick response that saw the suspension of all 44 validators and the introduction of an urgent patch to address the issue, the attacker was able to launder around $137 million through various chains, with the remainder frozen on BSC.
Cross-chain solutions have come a long way, and smart contract security has been held to much higher standards since the introduction of professional code auditing companies and popular audit competitions. However, it's clear that issues remain.
Issues with Cross-Chain Tokenization
Wrapped Bitcoin (WBTC) – a tokenized form of Bitcoin on Ethereum – is the most prominent example of a cross-chain compatible version of BTC.
While WBTC plays a significant role in bringing Bitcoin into Ethereum's DeFi ecosystem, it continues to face several issues due to its dependence on centralizing factors:
Centralized custodians: WBTC depends heavily on centralized custodians, like BitGo, for token issuance and redemption, contradicting blockchain's decentralization principle.
Blacklisting concerns: Custodians can be granted the power to blacklist specific addresses, limiting access.
Conversion delays: The conversion of Bitcoin to WBTC and back is not always instant, potentially causing liquidity issues.
Now that we understand some of the challenges and vulnerabilities associated with bridging and cross-chain transacting, it’s time to introduce the ZERO Network by zeroDAO!
ZERO Network: The Future of Cross-Chain Bridging
The ZERO Network is a next-gen EVM and non-EVM compatible bridge that aims to overhaul the cross-chain transaction process and mitigate smart contract vulnerabilities through rigorous security measures and innovative architecture.
With ZERO’s distributed key custody, assets are held by a key managed collectively by all participating signing nodes, reducing central points of failure. The network also employs a decentralized model of signers and validators, which helps ensure security and trustlessness.
Let's break down these key components of the ZERO Network, as well as its economic model, liquidity-generating NFTs and more!
The Economic Model of the ZERO Network
ZERO Network incorporates a unique economic model that combines liquidity-generating NFTs and staking, making it possible to bridge assets across EVM and non-EVM networks.
When assets such as Bitcoin are transferred from their native chains to EVM networks, they are secured and replaced with equivalent coins or tokens on the destination chain.
This is achieved using distributed key custody, a system where the assets are held by a key managed collectively by all participating signing nodes, eliminating the need for a central party and providing a more secure and trustless solution than previous attempts such as WBTC.
Incentivizing Liquidity: The Role of ZERO Heroes NFTs
zeroDAO has pioneered a new approach to the liquidity provision process using its unique ZERO Hero NFT collection. By contributing $ETH, users can mint a ZERO Hero NFT, with zeroDAO providing $ZERO tokens to create a liquidity pool.
These NFTs incorporate a 'diamond hands' game to incentivize long-term holding, with their redemption value growing over time. In this way, zeroDAO leverages NFTs not just as collectibles but as integral parts of its economic model, promoting network liquidity.
Network Architecture: Ensuring Efficiency and Security
The efficiency and security of the ZERO Network rest on key actors – signers and validators.
Signers, who stake $ETH as collateral, participate in key generation and earn passive yield from bridged assets.
Validators, on the other hand, produce blocks on the ZERO Network and earn rewards based on their $sZERO balance on the Ethereum mainnet, obtained by staking $ZERO / $ETH LP tokens.
The distributed nature of the network and efficient use of signers and validators means that transactions can be processed quickly and cost-effectively while eliminating the need for centralized parties.
Bridging the Gap to a More Connected DeFi Future
As the ZERO Network gears up for its ZERO Heroes NFT drop and testnet launch, there are plans to extend support to include Layer 2 chains like Arbitrum. The team also has a major focus on partnership building, collaborative development and education.
The ZERO Network is set to redefine the future of Bitcoin and crypto bridging, addressing the security issues associated with past and current solutions and introducing enhanced interoperability, decentralization and efficiency.
For partnership or investment inquiries email email@example.com
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