Universal Interoperability with Axelar: Connecting all Blockchains

What is the most critical piece of tech stack in crypto, set to unlock billions of $$ in value?

Feb 05, 2024

With the success of Celestia, another network targeting the infrastructural components of the stack is poised to be a game changer for interoperability in crypto. Enters the Axelar network.

Axelar is a Proof-of-Stake (PoS) network developed using the Cosmos SDK to act as a communication layer between the Ethereum Virtual Machine (EVM) and Cosmos.

The value proposition of the Axelar network is to address the fragmentation and painful user experiences for developers and end users in today’s blockchain ecosystems.

To sum it up, Axelar transcends the boundaries of blockchain networks.

As such, it can also be referred to as the “universal overlaying network”, securing and connecting all blockchain ecosystems, assets, ecosystems, and users, allowing developers to build on the best blockchain network for their particular use case.

Think of Axelar as:

An air traffic control system that handles transportation, routing and customs/border control (validation) between blockchains
A translator between multiple languages - in this case, different protocols.

Axelar is particularly focused on empowering developers to develop cross-chain applications more efficiently.

This network supports asset transfers, composability of applications, and generalized messages passing across any blockchain ecosystem through protocols and APIs.

This means developers can build their dApp on one blockchain and allow their users to interact with assets, users, and dApps on other blockchains

What's in the Axelar stack?

The Axelar network is composed of three components across two layers.

1. A decentralized network

At its core Axelar is a decentralized network run by a dybamic and permissionless set of validators powering cross-chain interoperability requests.

Validators are responsible for:

Maintaining the network (run the cross-chain gateway protocol)
Executing transactions (perform read and write operations, POS consensus to verify events on these chains)

2. Gateway smart contracts

All connected blockchains to Axelar have gateway smart contracts, which Validators monitor for incoming transactions, which they:

Read
Reach a consensus on their state
Write to the destination chain’s Gateway to execute

Together with the validators, gateway contracts represent the infrastructural layer of Axelar.

3. APIs and developer tools

These tools and libraries allow developers to access Axelar using a few lines of code — the application-development layer — and add “universal interoperability” to their dApps and networks. Some include:

Axelar Gas Services, automating conversions into $AXL and destination-chain gas tokens.
One-time deposit addresses automating routing, same onramp used by centralized exchanges, but decentralized.
Interchain Token Service, enabling developers to issue and manage Interchain Tokens, fungible and custom cross-chain.

Furthermore, Axelar has General Message Passing (GMP) capability, allowing applications to send and receive any data payload cross-chain, including function calls, data, and wrapped assets, leading to a “one-click” cross-chain user experience.

With the GMP, Axelar can sync states across all supported ecosystems.

This is a game changer for application development, as cross-chain limitations constrained traditional bridges and blockchain infrastructures. Axelar GMP shouldn’t be considered as another bridge application, but a new approach to cross-chain communication.

GMP Advantages

Cost-efficiency: more efficient as it moves function calls and data, rather than minting wrapped assets (cheaper gas costs)
Minimizing fragmentation: Assets remain on a single chain, making tracking their state and provenance easier.
One-Click user experiences: fold an entire transaction into a single interaction.

Axelar GMP transcends the concept of merely bridging assets by not just linking chains, but enabling computer logic that spans chains in a way that is seamless, flexible and scalable.
Build interchain-native applications, making cross-chain function calls and synchronizing states in a completely abstracted way for the user.

This enables entirely new use cases:

One-click cross-chain swaps through protocols like Squid.
NFTs as collateral across chains.
Universal liquidity pooling and lending through Prime Protocol.
Creation of interchain synthetic assets.
Open gaming.
Decentralized governance spanning multiple chains.

The Axelar network is:

Chain Agnostic
Designed to Achieve universal interoperability
Extremely easy to implement

In fact, with only a few lines of code, protocol developers can add arbitrary chains to the network through permissionless validators.

On top of the network sit the Axelar Relay Services and the Axelar SDK.

The SDK allows developers easy access to the network and composability across the unified blockchain networks supported through application-layer protocols and APIs.

The SDK allows developers, among others, to:

Efficiently connect their dApps
Enabling greater distribution across all chain
Cross-chain composability with other dApps
Greater liquidity

Some practical examples of how Axelar improves interconnectedness:

Users can transact from a single universal wallet instead of network or asset-specific ones.
NFTs can also become portable, traveling with owners as they interact across different chains

Axelar connects isolated ecosystems through a unified network and provides developers with the tools they need to 10x the efficiency of building inter-chain native dapp.

Axelar allows simple composability across dApps, which can launch across several Web3 ecosystems with a consistent and uniform environment and UX:

Powered by decentralized interoperability protocols
Composable cross-chain (transfers, messaging etc.)
Simple user interactions

An example of a protocol that leverages Axelar technology is Squidrouter, a cross-chain liquidity and messaging router.

Squid interfaces with DEXs, facilitating intra-chain swaps.

It works by deploying contracts on each chain in the Axelar network, which is the infrastructure managing the cross-chain communication when Squid users conduct transactions.

Squidrouter is one of the most adopted dApps interacting with Alexar.

Axelar has already established a vast network of supported networks:

This data from Binance Research reveals how Axelar already supported 50+ blockchains as of November 2023, comparing it against its competitors.

Hub-and-Spoke Architecture

One of the key differentiators of Axelar is the 1-to-N connectivity, thanks to its Hub-and-Spoke architecture.

Most other solutions offer “pairwise” connectivity, with specific settings to connect chains 1-to-1. Instead, by routing through Axelar, any network can immediately connect to all networks supported by Axelar.

This design greatly improves security and saves enormous development time compared to today’s way of doing things.

Security

Axelar acts as a central hub, with blockchains connecting to it rather than between each other, enabling a “one-to-many” connection.

This is why, for instance, Axelar-wrapped tokens like axlUSDC and axlETH can move freely between chains.

This is also a security feature for Axelar, as problems on one chain “can be contained”, as the hub and spoke network can isolate the problem.

Instead, in point-to-point networks each pairwise conenction are unaware about other connections being attacks — thus continuing to make cross-chain swaps, trades, or bridging with them. Read more here.

Development Times

Nowadays, most cross-chain work is done with components that are not reusable — each new chain connection requires very long development times. This makes scaling clients across networks very hard economically, as developers must repeat the process on all chains.

Instead, the Axelar Virtual Machine (AVM) enables full-stack interoperability, allowing anyone to take advantage of interoperability as a programmable layer.

With Axelar developing code, intra-chain becomes 10x faster, allowing anyone to program directly at the interoperability layer. Developers can optimize the parameters they want, e.g., the speed of cross-chain transactions.

Through the Axelar services portal, developers can seamlessly deploy cross-chain contracts and immediately become compatible with another ecosystem.

The process is smooth using Template Contracts, which protocols can run and manage their dApps across chains, simplifying multichain deployment.

In this sense, the Axelar stack can be intended as a programmable layer which is completely customizable. It’s up to the developers to make the most of it (e.g., customize security, add zk proofs, or light clients).

This week, FraxFinance launched their Fraxtal chain, which will be interoperable from Day 1 thanks to the integration of Axelar.

Axelar also boasts a security-first design with a POS design and decentralization at the consensus layer with a fully decentralized validator set with over 75 validators (other competitors have about 20).

Food for Thought

With an increasingly interconnected landscape, solutions like Axelar arrive at the perfect moment. Until now, most of the development work in crypto had to deal with the creation of Layer 1s and Layer 2s.

Now that all these networks have been created, the next step will be to connect them, ensuring full composability and interoperability across networks.

As an interoperability protocol, Axelar’s partnerships are a fundamental value proposition for the attractiveness of their product.

As long as they continue integrating and supporting new networks, these tools will become the best practice of blockchain deployment.

One of the biggest upcoming challenges of crypto will be to abstract the complexity of interoperability with very simple interfaces for users.

Axelar contributes to this vision with programmable interoperability.