Axelar (AXL): Building Interoperability for the Crypto World

The future of web3 is strongly dependent upon the ability of transactions to be completed across multiple blockchain ecosystems. More than that, this interoperability must be secure, fast and easy. However, thus far, both developers and users have struggled with web3 complexity. While blockchains are secure networks, the segregation associated with the fractured service market comes with costly deployment challenges and increased security risks. Axelar’s web3 overlay network provides an essential solution to these issues, enabling seamless interactions across various blockchains with a single click, a feature that significantly enhances the user experience in the web3 space. 

Key Takeaways:

• Blockchain interoperability has been complex for users and developers alike, presenting challenges related to security and extensive coding efforts.

• As a web3 overlay, Axelar facilitates cross-chain communication and transaction processing with a simple one-click functionality.

• Looking to trade AXL tokens? Bybit offers the AXL/USDT Spot trading pair and AXLUSDT Perpetual contracts for trading. Bybit is currently also holding an exclusive Holiday Giveaway in collaboration with Axelar where you can win $10,000 worth of prizes!

What Is Axelar?

Axelar is a programmable interoperability network that revolutionizes web3 ease of use for both developers and end users. It enables effortless interaction with any asset or application across different chains. Axela is a web3 solution serving as a universal network that builds bridges between multiple blockchain ecosystems. The simplified architecture of Axelar, with its routing and delivery protocols, supports secure cross-chain communication with one-click functionality.

Further, the platform’s developers have designed the Axelar network to elevate security. Specifically, its decentralized architecture uses a proof of stake (PoS) design, a novel quadratic voting mechanism and mandatory key rotations. In addition, traffic can be suspended if interconnected chains are deemed to be malicious or compromised, in order to quickly isolate the problem.

Why Is Interoperability Important?

In the vast expanse of the internet, the concept of interoperability often escapes the notice of everyday users. Yet, it stands as a cornerstone of digital commerce and communication that’s integral to enabling global interactions, such as international video calls.

As we delve into the realm of web3, we’re in a phase akin to the internet's infancy in the 1980s, characterized by the rise of innovative applications across a variety of networks, each one isolated and unable to tap into its full global market potential due to a lack of interconnectedness. 

In order to appreciate the transformative impact of Axelar, it's essential to explore the evolving narrative of cross-chain functionality and its pivotal importance for the web3 landscape.

• Coexistence of Numerous Blockchains: The blockchain ecosystem's success hinges on the parallel existence of a multitude of Layer 1 and Layer 2 blockchains. The rationale is straightforward: No single blockchain, regardless of its processing speed, can scale sufficiently to support the demands of today's popular real-world applications. Thus, scaling must occur through horizontal expansion.

• Cross-Chain Transactions as a Norm: In the current web3 user journey, activities such as purchasing a meme coin on a decentralized exchange (DEX), acquiring an NFT or engaging in DeFi platforms such as GMX often lead to interactions across multiple applications. Each of these interactions typically involves several transactions, with a significant proportion occurring across different platforms or chains. It's estimated that approximately one in every four transactions will be cross-chain, necessitating a robust interoperability infrastructure to facilitate these movements.

Axelar’s Role in Interoperability

The Axelar network is uniquely positioned to dominate the interoperability market, a feat that entails integration with an extensive array of decentralized applications (DApps). Currently, Axelar leads this space, boasting three times more blue-chip DeFi integrations than its closest competitors. Axelar's collaboration with leading projects spans key web3 categories.

• DeFi: Partnerships with prominent platforms such as dYdX, Frax^®, Lido, PancakeSwap and Uniswap.

• Wallets: Integration with major wallet providers such as Blockchain.com, Ledger, MetaMask and Trust Wallet.

• Real-World Assets (RWAs): Engagement with Circle, Ondo Finance, Centrifuge and Apollo Global Management.

• Enterprise Sector: Collaborations with industry giants such as J.P. Morgan, Mastercard and Microsoft.

Axelar's ascendancy in the market is largely attributed to its superior technology, particularly in terms of security and scalability. This has been widely recognized within the developer community and corroborated by independent assessments, including a notable report by the Uniswap Foundation.

How Does Axelar Work?

Axelar functions as a tech stack with three layers. Its first is a proof of stake blockchain that uses permissionless and PoS protocols to process cross-chain requests. A cross-chain gateway protocol sits over the blockchain, through which validators monitor and process cross-chain communication using smart contracts. The cross-chain gateway protocol includes consensus, multi-party computation and voting for on-chain event verification. 

The second layer are the gateways consisting of smart contracts that the validators read and write to execute cross-chain transactions. The final layer, over the blockchain and gateway layer, is the API and SDK layer, which lets developers easily establish DApps across chains.

When an integrated blockchain is established, it has limitless interoperability functionality. More specifically, the Axelar tech stack supports applications with popular blockchains like Ethereum, Avalanche, Cosmos and many others. 

Axelar Key Features

Axelar is a decentralized network with several standout features that enhance the functionality of cross-chain routing, while also supporting improved user experiences. What are some of these critical elements of the Axelar network?

Squid

Squid is a cross-chain liquidity router built on Axelar using Axelar General Message Passing (GMP). It enables conventional bridging, as well as native-to-native swaps in one click – as well as fast finality via Squid Boost, a feature that completes cross-chain swaps in seconds. Users interact directly via a simple user interface and top wallets and DEXs including MetaMask and dYdX integrate Squid via an SDK for seamless, decentralized cross-chain swaps. Try it out at app.squidrouter.com. 

General Message Passing

General Message Passing (GMP) goes beyond bridging, giving dApps the ability to securely transmit any payload, including function calls, across blockchains. This is the core of Axelar’s programmable blockchain interoperability. GMP enables developers to compose across multiple chains, delivering access to assets and functionality as seamless, one-click experiences for their users. Prominent NFT and GameFi projects like Decentraland are using GMP capabilities to deliver these experiences to their users. Learn more.

Axelar Virtual Machine

The Axelar Virtual Machine further supports interoperability by making it programmable. Developers can thus set up their DApps directly on Axelar via smart contracts, instead of having to build and manage them in multiple chains. The Axelar Virtual Machine supports two new products — the Interchain Amplifier and the Interchain Maestro. While the Interchain Amplifier supports easy and seamless connections via Axelar and its supported blockchains, the Interchain Maestro allows developers to launch and manage their DApps across all interconnected chains. 

At this time, Interchain Token Service – the first product atop Interchain Maestro – is approaching mainnet launch. Interchain Token Service allows developers to easily issue and manage tokens across multiple chains with full fungibility and custom functionality. Learn more.

Axelar vs. Other Competitors

This section compares the Axelar network to three prominent competitors: Chainlink Cross-Chain Interoperability Protocol (CCIP), LayerZero and Wormhole.



Scalability

Currently, Axelar connects 54 chains, surpassing its competitors in network reach. Its early investment in scalable architecture has enabled easy integration of new blockchains, handling over $7 billion in transactions. Competitors such as Chainlink CCIP, LayerZero and Wormhole are trailing in adding new chains, due to less scalable infrastructures.

As web3's complexity escalates, Axelar's ability for permissionless blockchain connections will become increasingly vital, allowing immediate web3 integration for new blockchain projects.

The upcoming Interchain Amplifier feature will enable developers to use smart contract templates for easy blockchain integration, supported by AXL-funded validator incentives. This feature is designed to adapt to emerging technologies, such as zero-knowledge proofs and fully homomorphic encryption, ensuring future-proof interoperability.

Security

Axelar stands out as the only decentralized interoperability platform, a fact supported by multiple independent reports, including one from the Uniswap Foundation. This decentralization is key to avoiding the significant losses seen in centralized cross-chain hacks.

Competitors such as Chainlink CCIP, LayerZero and Wormhole rely on a proof of authority (PoA) model with limited validators that’s been criticized for centralization risks. Axelar, in contrast, uses delegated proof of stake (DPoS) consensus and a dynamic validator set that’s the largest (75) in cross-chain. In addition, Axelar’s hub-and-spoke network topology model enhances safety and containment in emergencies, unlike the pairwise networks of its competitors.

Layered Security: Cross-Chain Risk Management

Axelar's security strategy includes multiple layers, as follows.

• Audits and Bug Bounties: Over 30 audits and a substantial bug bounty program through Immunefi.

• Global Rate Limits: A cap on asset transfers to manage risk

• Risk Isolation: Faulty chains can be isolated without affecting the network

• Independent Monitoring: Transaction lifecycle monitoring for security

• Application-Specific Security: Customizable relayer checks for different applications

Exclusive Cross-Chain Programmability

Axelar is unique in offering a programmable cross-chain platform, complete with developer tools like Axelarscan. This contrasts with the closed, non-programmable stacks of CCIP, LayerZero, and Wormhole.

Cross-Chain Programmability and Token Liquidity

Axelar's ITS (Interchain Token Service), nearing mainnet launch, allows for easy management of native tokens across chains, a feature not fully supported by solutions like LayerZero’s Omnichain Fungible Tokens.

Addressing Ethereum's L2 Scalability

As Ethereum evolves, Axelar's role becomes crucial in maintaining interoperability among an increasing number of blockchains. Unlike basic bridges and sequencers, Axelar can support complex cross-chain processes with smart-contract logic, ensuring a seamless user experience and reducing developer workload.

Axelar Road Map

Recognized as a leader in cross-chain solutions for web3, Axelar Network is entering 2024 with an expansive road map following its impressive advancements in 2023. The network, highly regarded for its security, scalability and programmability, is already the preferred choice of major DeFi applications, DEXs, wallets and enterprise clients. This growth trajectory positions Axelar as the definitive cross-chain platform in the web3 ecosystem.

Looking ahead to 2024, Axelar is set to bring transformative changes. Key initiatives include the launch of the Axelar Virtual Machine, which will foster chain-agnostic development through open-source tools on a decentralized cross-chain infrastructure. Additionally, the network plans to enable permissionless connections for various chains through its Interchain Amplifier, potentially connecting hundreds of blockchains within the Ethereum Layer 2 ecosystem. 

Other noteworthy developments include the introduction of Interchain Tokens that enhance fungibility and functionality across all connected chains, and a gas-burning mechanism aimed at making the network deflationary. Moreover, Axelar is set to integrate diverse consensus approaches from blockchains such as Solana and Stellar, and improve its cross-chain gas fee estimation services. 

These advancements underscore Axelar's commitment to maintaining its leadership in the cross-chain domain while fostering a more interconnected and efficient blockchain ecosystem.

What Is Axelar Token (AXL)?

The native token of Axelar is AXL, which supports the network's decentralized interoperability. This chain-agnostic token is used for governance, staking, paying transaction fees and liquidity providing. As a PoS network, validators also earn rewards from securing the network. Some parameters covered under governance include the base inflation rate, chain rewards, transfer rate limits and the addition of new EVM chains.

Rewards increase the total AXL token supply. This inflationary structure is designed to enhance security, stability and decentralization to maintain and grow the network over the long run. 

The ERC-20 compatible variation of AXL is wAXL. This token is functional on all EVM-compatible chains. Note that wAXL cannot be used for providing liquidity in exchange for rewards, and has to be converted back to native AXL in order to provide liquidity.

Axelar (AXL) Tokenomics

Initial Tokenomics of Axelar

One billion AXL tokens were issued at the genesis block. These were initially allocated with 17% to the Axelar team, 12.5% to company operations, 29.54% to backers, 5% to a community sale and 35.96% to community programs. The majority of these tokens were initially locked. AXL tokens can be staked, but not transferred or spent during the locked period. The release schedule varies for each allocation group, ranging from six months to four years. 

The Axelar network employs inflationary rewards to encourage validators to support connections with external chains. This strategy has effectively managed over $7 billion in cross-chain volume and numerous requests.

With ambitions to expand and integrate hundreds or thousands of new blockchains, the Axelar Foundation is proposing revised tokenomics.

Updated Tokenomics of Axelar

The proposed changes aim to enhance AXL's utility and value as the network grows. These modifications could potentially lead to a deflationary trend for AXL in response to increased network activity.

• Inflation Rate Adjustment: The network has already reduced the reward per chain from 0.75% to 0.3%, decreasing the annual inflation rate from 11.5% to 5.2%. Adding five new chains would adjust the rate to 6.7%.

• Gas-Burning Mechanism: The new proposal suggests burning gas fees paid in AXL, previously distributed to validators and stakers, in order to exert deflationary pressure on AXL's total supply.

• Stimulating AXL Demand: The development of a more permissionless approach for integrating new chains, including the Interchain Amplifier, is expected to increase demand for AXL. This system will enable developers to connect new chains easily using smart contract templates and AXL-funded reward pools for validators.

Staking the AXL Token

Axelar stands as a comprehensive interoperability platform, connecting various blockchains and enabling the execution of smart-contract logic across chains. The core of this functionality is the AXL token, which not only fuels the network's operations but also ensures its security. Validators on the Axelar network stake AXL tokens to participate in the PoS consensus mechanism, playing a crucial role in verifying cross-chain transactions and earning rewards for their contributions.

For those interested in acquiring and staking AXL, Bybit offers a marketplace for Axelar’s native token, AXL. 

Where to Buy the Axelar Token (AXL)

AXL drives the interoperability of the decentralized Axelar network and supports cross-chain requests. AXL can be purchased on major crypto exchanges, including Bybit. Before making your token purchase, you’ll need to create a Bybit account and fund it with USDT. Bybit supports the AXL/USDT Spot trading pair as well as AXLUSDT Perpetual Contracts and has an easy-to-use interface that simplifies orders. 

Bybit is also holding an exclusive Holiday Giveaway in collaboration with Axelar where you can win prizes by completing simple tasks from Dec 15, 2023, 12PM (UTC) through Dec 31, 2023, 12PM (UTC). In order to qualify to win, you’ll need to:

1. Like the daily giveaway post on Bybit's official X (formerly Twitter), Instagram and Facebook

2. Follow Bybit's accounts on X (formerly Twitter), Instagram, Facebook and Axelar's account on X (formerly Twitter).

3. Share, tag friends and participate in daily social media activities for extra rewards

The prize pool includes:

• 5 x 400 USDT airdrop

• 2 x Sony PlayStation® 5

• 5 x 400 USDT trading coupon

• 5 x Bybit T-shirts

• 4 x Bitcoin (worth $500 each)

• 5 x AXL token (worth $460 each)

Final Thoughts

Web3 has increasingly moved into the spotlight, and continued growth in this area is rooted in the ability to improve security and functionality for cross-chain communication. Axelar is a decentralized solution that supports the interoperability of multiple ecosystems while also enhancing security and functionality. Its network is becoming a critical aspect of web3 functionality, and its dominance will grow as more developments are introduced.

#Bybit #TheCryptoArk