Bessie Liu

Blockchain scaling and privacy infrastructure company Espresso Systems will release its third testnet of the Espresso Sequencer for OP stack builders.



The testnet, named Cortado, will include work for an Optimism Request for Proposal (<a href="https://github.com/ethereum-optimism/ecosystem-contributions/issues/63">OP RFP</a>) that aims to decentralize sequencers.&nbsp;



Rollup solutions today run their own sequencers that have their own execution environments. These sequencers are responsible for ordering transaction information that is then sent to a virtual machine.



To ensure there is no single authority that orders these transactions, projects such as Espresso Systems are exploring ways to diversify these sequencers.&nbsp;



The initial release will be a locally hosted demo version of an OP stack rollup running on Espresso that enterprises can test.&nbsp;



Over the coming weeks, a publicly hosted canonical OP stack testnet will be released. This testnet will be similar to the testnet <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">Doppio</a>, which went live in July, according to Jill Gunter, chief strategy officer at Espresso Systems.



This publicly hosted testnet will be deployed in partnership with Caldera. The one-click rollup deployment allows developers to choose the different layers to build a blockchain.



<h2 class="wp-block-heading">Decentralizing sequencers before decentralizing fraud proofs</h2>



A popular narrative within crypto circles raises the concern that without fraud-proofs — a mechanism that can challenge the accuracy of a transaction — shared sequencing solutions will still have to include potentially fraudulent transactions in a rollup sent to the layer-1.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Optimistic rollups without fraud proofs are just google sheets with extra steps <a href="https://t.co/KavMYbuN8T">https://t.co/KavMYbuN8T</a>&mdash; joseph.eth (@josephdelong) <a href="https://twitter.com/josephdelong/status/1690537453961064448?ref_src=twsrc%5Etfw">August 13, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Gunter told Blockworks that decentralizing a sequencer does not mitigate the need for fraud proofs, but the two play separate important roles.&nbsp;



“Decentralizing the sequencer will help mitigate the risk that this centralized entity running the sequencer is going to be persistently ignoring transactions or leaving them out,” Gunter said.



Although it’s understandable that there are debates as to whether or not the development of shared sequencers should be prioritized before fraud proofs have even been shipped, Gunter believes that all of these different aspects play an important role in ensuring that blockchains become more decentralized.



“Eventually these things will all need to be on the roadmap,” she said. “A big part of what our motivation has been at Espresso Systems is to help rollups accelerate the roadmap towards mainstream adoption.”



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A shot of Espresso, please: Blockchain scaler to offer third testnet integration

Sebastian Sinclair

Chainlink (<a href="https://blockworks.co/price/link">LINK</a>) has notched its biggest single-day rally in more than two years following the release of its Cross Chain Interoperability Protocol (CCIP) to developers.



LINK jumped up to 22% on Thursday — from $6.92 to $8.43. It had retraced slightly to $8.36 by the end of the day and now hovers at $8.15, a three-month high. Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) ended up flat.



As the blockchain ecosystem grows, there’s mounting need for these networks to talk to each other. CCIP aims to <a href="https://blockworks.co/news/chainlink-ccip-launch" target="_blank" rel="noreferrer noopener">enhance communication and data transfer</a> between various protocols.&nbsp;



To celebrate CCIP, Chainlink co-founder Sergey Nazarov explained that Chainlink aims to extend the efforts of Bitcoin, which many consider directly inspired by the 2008 global financial crisis. Nazarov <a href="https://twitter.com/SergeyNazarov/status/1682137527673577472" target="_blank" rel="noreferrer noopener">tweeted</a>:



&#8220;The 2008 financial crisis led to the creation of Bitcoin because toxic assets were created by a poorly managed financial system that left society with the costs. We have an opportunity to build a better financial system that is cryptographically guaranteed, transparent, and gives control of risk over to the parties that it affects most.&#8221; 



Nazarov said Chainlink and CCIP push to &#8220;accelerate the speed at which this world happens on-chain.&#8221; The goal is a &#8220;fair, transparent and largely derisked global financial system.&#8221;



&#8220;As CCIP becomes the most widely used connectivity standard, we will initially see two largely separate on-chain networks of value: one for institutional/bank chains and the existing public blockchain DeFi ecosystem,&#8221; he said.



Nazarov&#8217;s hope is that CCIP can morph those two networks into one that&#8217;s entirely on-chain.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14509034/embed#?secret=LrAfnNuWjF" data-secret="LrAfnNuWjF" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Chainlink’s market cap is now almost $4.5 billion, up 60% over the year to date (chart by David Canellis)</figcaption></figure>



CCIP works by using Chainlink&#8217;s oracles (a network of data providers). Developers can create products on top of CCIP, which means smart contracts on one blockchain can send messages via Chainlink oracles to another blockchain, verifying data in the process.



With its early access mainnet release earlier this week, developers working on Polygon, Optimism, Ethereum and Avalanche can now use Chainlink&#8217;s CCIP.



Since Monday, there have been over <a href="https://dune.com/queries/2741770/4567775">514 transactions</a> using CCIP with the most popular routes being Ethereum to Avalanche or Optimism, per Blockworks Research.



To date, CCIP has generated more than $12,000 in LINK revenue over the past four days, according to a <a href="https://dune.com/ericwallach/chainlink-ccip-revenue">Dune dashboard</a>. Users who pay for CCIP transaction charges using LINK are offered a reduced rate. This, in turn, aims to enhance the value for token holders.



“It will be interesting to track Chainlink’s protocol revenue as more projects establish CCIP integrations,” Blockworks Research analysts wrote in a Thursday <a href="https://blockworks.co/newsletter/issue/32127952">note</a>.



Updated Jul. 21, 2023 at 9:23 am ET: Added context.



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Chainlink rallies hardest since May 2021 after CCIP release

Swiss-based non-profit organization the Interchain Foundation (ICF) has partnered with Bianjie, a blockchain development company, to launch a new NFT standard. Users utilizing the new standard, dubbed ICS-721, will now be able to track and transfer their NFTs across different blockchains.



ICS-721 — an homage to the <a href="https://www.blockworksresearch.com/glossary#erc-721-token" target="_blank" rel="noreferrer noopener">ERC 721</a> NFT standard on Ethereum — is an application layer inter-blockchain communication (IBC) protocol, which means that it enables blockchains to communicate with one another without the need for a bridge.



This new standard can enable NFTs to be integrated into various sectors in Web3. These include gaming, socializing, identity management and many others, Maria Gomez, managing director at the Interchain Foundation told Blockworks.&nbsp;



“The surge in profile picture (PFP) projects highlighted an earlier trend in NFT technology, but this also led to questions about their long-term value and sustainability. As the industry evolves, the focus is expected to shift toward utility and real-world applications,” Gomez said.&nbsp;



Here, Interchain NFTs are expected to hold a distinct advantage, as the standard offers enhanced functionality and possibilities through cross-chain interoperability, she notes.



Harriet Cao, the founder of Bianjie and a prominent technical contributor to Cosmos, told Blockworks that ICS-721 will be initially accessible on all IBC-enabled Ethereum, Substrate, CosmWasm and Cosmos SDK chains. There are plans to expand its availability to additional ecosystems in the future.



<h2 class="wp-block-heading">The Game of NFTs</h2>



A two-phase competition for developers called the Game of NFTs, designed to test out ICS-721, launched earlier in March this year. The name is a continuation of prior Cosmos feature testing efforts, Game of Stakes and <a href="https://goz.cosmosnetwork.dev/" target="_blank" rel="noreferrer noopener">Game of Zones</a>.



The first phase of the competition drew the attention of 198 teams worldwide, Cao said. Each team had to go through <a href="https://github.com/game-of-nfts/gon-testnets#point-system">different tasks and challenges</a> with the ultimate goal of testing the protocol&#8217;s capabilities before its mainnet deployment.&nbsp;



The competition was proposed by Bianjie in partnership with multiple validator and developer teams including those from IRISnet, Stargaze, Juno, Uptick and OmniFlix.&nbsp;



“The Cosmos ecosystem benefits from enhanced growth as it attracts a more diverse range of creators, users, and developers,” Cao said. “This, in turn, fuels creativity and drives innovation, positioning the Cosmos ecosystem as the Interchain of Blockchain for cutting-edge developments in the world of NFTs.”



After completion of Phase 1 of the Game of NFTs, Phase 2 — an interchain hackathon, is now underway.



Teams will have until June 19 to submit their projects for the hackathon and over $300,000 worth of tokens and credits will be awarded to winners.



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An Interoperable NFT Standard Has Landed on Cosmos

John Gilbert

The crypto bridge was once heralded as the future of blockchain interoperability. Industry leaders branded these products as a means to <a href="https://medium.com/solana-labs/wormhole-solana-ethereum-bridge-d5502e944acb" target="_blank" rel="noreferrer noopener">leverage the community of one chain with the performance of another.&nbsp;</a>



But with <a href="https://blog.chainalysis.com/reports/cross-chain-bridge-hacks-2022/" target="_blank" rel="noreferrer noopener">$2 billion of assets</a> successfully exploited from bridge attacks, many investors are doubting the performance of this technology and are demanding a better solution. Blockchain developers from the <a href="https://www.algorand.com/" target="_blank" rel="noreferrer noopener">Algorand</a> community launched a new interoperability standard called <a href="https://medium.com/algorand/algorand-state-proofs-707d64038e35#:~:text=tl%3Bdr%3A%20Algorand%20State%20Proofs,from%20the%20cross-chain%20equation." target="_blank" rel="noreferrer noopener">state proofs</a> to address this problem. It casts a vision of interoperability intended to serve the needs of a blockchain ecosystem with world-wide adoption — both at the institutional and individual level.&nbsp;&nbsp;



<h3 class="wp-block-heading">What is blockchain interoperability, really?</h3>



Blockchain interoperability is classically defined as a characteristic that enables communication between blockchains. But crypto bridges are not the only means of cross-chain messaging. In addition to transferring value, blockchains need ways to safely communicate sensitive information.



As it stands, large segments of blockchain ecosystems are completely siloed from each other. This creates a terrible user experience that&#8217;s analogous to being unable to send an email from a Google account to a Yahoo account.



But the proliferation of cryptocurrencies makes this fragmented iteration of the internet also like an international trading system. Noah Grossman, senior product manager at Algorand, explains this in his <a href="https://medium.com/algorand/algorand-state-proofs-707d64038e35" target="_blank" rel="noreferrer noopener">Algorand State Proofs Paper</a>.



“Blockchain ecosystems are like cities: each one provides value that draws people to visit — ranging from business opportunities, community, entertainment, infrastructure, local governance, to plain personal preference,” Grossman wrote. “As the industry matures, people will have more reasons to visit different ecosystems, driving more value into cross-chain applications.”



But insecure trading routes between cities or nation states decrease economic productivity and increase distrust. One week on crypto Twitter will reveal this growing animosity between blockchain communities. If an economic commitment between parties isn’t established, then it is safe to assume the rivalries will persist.&nbsp;



<h3 class="wp-block-heading">Why we haven’t secured true interoperability yet</h3>



Grossman states that the trustless infrastructure needed for true blockchain interoperability is missing from the market. The Solana Wormhole hack is a good example of why. It was introduced as the decentralized trustless alternative to centralized cross-chain bridges. Instead of relying on a single custodian, it used smart contract code to facilitate the transfer of value between chains. After the exploit, its model was criticized for having inherent vulnerabilities. In response to the hack Max Galka, the CEO of blockchain data analytics firm Elementus, told <a href="https://cointelegraph.com/news/wormhole-hack-illustrates-danger-of-defi-cross-chain-bridges?utm_source=dlvr.it&amp;utm_medium=twitter" target="_blank" rel="noreferrer noopener">Cointelegraph</a>.



“The history of smart contracts has involved a pretty consistent stream of vulnerabilities and hacks dating back to the very early days of Ethereum when The DAO was attacked in 2016. In general, cross-chain bridge contracts have large balances making them prime targets. Historically, there have always been hacks on smart contracts. I would expect that to continue.”&nbsp;



The ‘smart contract’ approach to cross-chain interoperability has proven time and time again to be vulnerable to bridge exploits. For example, hackers were able to access and steal over $80 million from Qubit Finance through exploiting a similar vulnerability in the QBridge contract.&nbsp;



And the custodial model, where central entities or DAOs take ownership of the assets, has proven to be even more vulnerable to attacks. For example, attackers stole approximately 173,600 ETH and 25.5 million USDC from the centrally controlled Ronin cross chain bridge. They did so by gaining access to the private keys of the bridge&#8217;s validator nodes.&nbsp;&nbsp;



Both approaches to cross-chain bridges are fundamentally flawed because they rely on centralized intermediaries to communicate the transfer of value — whether it’s a smart contract or a human. This core flaw is why Algorand developed State Proofs.&nbsp;&nbsp;&nbsp;



<h3 class="wp-block-heading">State Proofs: Simplifying interoperability without sacrificing security</h3>



State Proofs are cryptographically verifiable secure proofs used to validate Algorand activity, signed by a majority of the blockchain network. So, instead of relying on centralized third parties to confirm transaction data, ASPs power the layer-1 blockchain to be the ultimate source of truth.



ASPs immediate use case is to help light clients import data from other chains in a cost-effective and secure way. Bridges can then query these light clients to securely validate activity on both the Algorand and Ethereum network. Therefore, the need to trust third parties is completely eliminated.



With State Proofs, building decentralized bridges, cross-chain decentralized exchanges or even oracles becomes possible. They enable users to maintain quantum grade security from the Algorand blockchain while interacting with an interoperable blockchain ecosystem. This allows chains within the ecosystem to leverage the benefits of each other’s communities without being exposed to inconsistent security standards. Because ASPs are secured by advanced cryptography confirmed by the entire network, attempts to alter any data typically fail.



Using ASPs can bring about a wave of adoption which we have never seen before. Developers would be able to choose the right technology for them to build on, without worrying about cross-chain limitations. Additionally, with the reduced security risk, users can freely and seamlessly move their assets across blockchains.



Learn more about State Proofs — and other bleeding-edge cryptography research — at <a href="https://www.youtube.com/playlist?list=PLpAdAjL5F75A5A7C9MSrTYIafk3DAzKva">Algorand&#8217;s Decipher conference.</a>



This content is sponsored by&nbsp;the&nbsp;<a href="https://www.algorand.foundation/" target="_blank" rel="noreferrer noopener">Algorand Foundation</a>. 



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Rethinking The Crypto Bridge After Year of Hacks

<div id="highlights-block_628d839a80758" class="highlights">
 <ul>
 <li>Injective&#8217;s Wormhole integration enables the ability for greater sophistication of transfers across its network, the company said</li>
 <li>The move will also allow for cross-chain trading across various networks, according to Injective Labs&#8217; CEO Eric Chen</li>
 </ul>
 
</div>



Decentralized blockchain network Injective said Wednesday it has integrated with cross-chain messaging protocol Wormhole in an effort to drive liquidity and boost the accessibility of its platform.



With the addition of Wormhole, Injective is aiming to tap into more than ten additional layer-1 and layer-2 blockchains, including Polygon, Algorand and Solana, by bridging them to its network.



The move is an attempt to transform Injective from an exchange-focused blockchain to a decentralized finance hub. The aim is to provide more use cases for owned digital assets to be utilized beyond their origin chain, Eric Chen, CEO of Injective Labs told Blockworks in an email.



Wormhole is a generic message-passing protocol that connects high-value blockchains allowing applications to leverage the messaging layer to facilitate interoperability between different ecosystems. 



The protocol has not been impervious to nefarious actors seeking to <a href="https://twitter.com/wormholecrypto/status/1489001949881978883?s=20&amp;t=XaNgH_RbKd5dNrdqqTKZWw" target="_blank" rel="noreferrer noopener">exploit</a> it when it became the target of an attack in February.



Still, the area of focus following the integration is to allow applications on other chains to access and compose with the Injective ecosystem as well as enable more sophisticated transfers — such as arbitrary messages, Chen said.



<blockquote class="wp-block-quote">&#8220;This integration will help increase the range of possibilities and functionalities for builders,&#8221; said Chen. &#8220;The first key area of focus is to enable asset transfers from all chains.&#8221;</blockquote>



Apps developed on Injective could open possibilities for cross-chain trading across various networks or offer yields on Solana-based assets, the CEO added.



Injective is a Layer 1 proof-of-stake blockchain geared toward building financial applications. Its ecosystem touts the ability to enable developers to leverage critical DeFi primitives including liquidity, risk, leverage and arbitrage opportunities.



&#8220;This integration opens up the pool of users that can utilize an application,&#8221; Chen said. &#8220;It broadens the audience scope for the developer, which allows a larger market to exist when thinking of a product-market fit.&#8221;



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