What is Cross Chain?

Cross-chain is a technology that enables the interconnection between blockchain networks by allowing the exchange of information and value. Blockchain are decentralized distributed ledgers, and different blockchains correspond to different distributed ledgers. For example, Bitcoin and Ethereum are two different blockchains. BTC always exists on the Bitcoin blockchain, and ETH always exists on the Ethereum blockchain. BTC can’t be transferred to ETH, and vice versa. Cross chain can connect the two different blockchains to accomplish the information exchange and value transfer between them. It means although Bitcoin blockchain and Ethereum blockchain are independent of and unrelated to each other, cross-chain communication and the exchange of BTC and ETH can be achieved through the cross-chain technology. 

Moreover, from a longer-term point of view, cross-chain technology will be able to realize the mutual communication, transfer and interchange of assets, data information and functional states on different blockchains, increase the scalability of blockchain technology overall, realize the value interconnection of the entire blockchain world, and break the barrier of "isolated islands" of blockchain data.


What Problem does Cross Chain Aim to Solve?

As the current blockchain market is largely associated with the field of assets. In essence, the main problem cross chain aims to solve is how to transfer a token of one chain to another. From the bookkeeping perspective, a single blockchain aims to address the problem of the accurate bookkeeping of a transaction, while cross chain is designed to solve the problem of how two distributed ledgers can accurately bookkeep on a specific transaction, synchronize the transaction data and ensure the consistent information changes.

Generally speaking, cross-chain technology needs to address the following problems:

1.     How to ensure the authenticity and credibility of cross-chain information. That is, compared to the original chain, the information from another chain is considered external information, so cross chain should ensure that the external information received is correct.

2.     Cross-chain trading should ensure the total amount of tokens on the chain will not increase or decrease after the cross-chain mechanism is enabled. That is, how to ensure the tokens of one chain can be safely transferred to another chain and can also safely return to the original chain without violating the principle of accurate bookkeeping.

3.     Ensuring the automation of cross-chain trading. That is, double payment will not occur due to cross-chain information inconsistency caused by partial execution of a transaction which is somehow cancelled during the transaction process.


Overview of Mainstream Cross-chain Technologies

1.     Notary Mechanisms

In a notary mechanism, a trusted entity is introduced. It resembles a real-world situation. Assume that A and B can’t trust each other, so a third party trusted by both A and B is introduced as a notary to achieve indirect mutual trust between them. In addition, the notary mechanism can be divided into three types:

1.     Single signature with a strong degree of centralization,

2.     Multi-signature

3.     Distributed signature.

Representative Projects: Interledger and Corda


2.     Sidechains/Relay Chain

The sidechain operates relative to the main chain. It can verify and analyze the block data and ledger data of the main chain. The basic technology of side chain implementation is called two-way peg. Through the two-way peg technology, digital assets can be locked on the main chain and equivalent assets can be released in the side chain. On the contrary, when the related assets in the side chain are locked, the equivalent assets anchored on the main chain can also be released.

Representative Project: BTC-Relay


Relay chain, also known as repeater, is a channel built between two chains, where a specific data structure is created within the channel to enable the two chains to interact with each other. The relay chain only acts as the data collector, and the relay chain that accepts the data will automatically complete the data and transaction confirmation after receiving the data. Representative Projects: Polkadot、Cosmos


3.     Hash-locking

Hash-locking or Atomic Swaps first appeared on the lightning network of bitcoin. The technology skillfully uses hash lock and time lock to complete a transaction without the need for a third-party notary. To sum it up, hash-locking uses hash lock and time lock to force the receiver of the asset to determine the collection in the deadline and generate a collection certificate to the payer, otherwise the asset will be returned to the payer.

Representative Project: lightning network


4.     Distributed Private Key Control

Distributed private key control refers to the private key distributed nodes use to control the assets in a blockchain system, with which the right to use and ownership of the digital assets are separated, so that the control of the on-chain assets can be safely transferred to the decentralized system, while mapping the assets on the original chain to the cross-chain. When the private key of the asset is entrusted to decentralized organizations or networks for management after being divided into several parts, it is also controlled by the user. Users will not lose the control of the assets.

Representative project: Wanchain