Can Relay Bridges Relieve Ethereum’s Ridiculous Gas Fees?
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The summer of 2020 in crypto undeniably belongs to DeFi. Little else has been able to compete with the headline space taken up by dramatic events surrounding open finance applications. From Compound issuing its own governance token to the on-again-off-again antics of Yam Finance and SushiSwap, crypto hasn’t been this eventful since the frenzy of December 2017.

As more funds have poured into DeFi, the Ethereum network has started to creak under pressure. In August, gas prices hit all-time highs, with the average user paying around $7.50 per transaction.

Reports emerged that some projects, such as Exenox, had started to migrate away to other, faster platforms such as Tron. But of course, the challenge is that most of the DeFi ecosystem currently exists on Ethereum. Moving to another network, particularly for a DeFi developer, means locking users out of all the extra value to be captured from moving funds around different Ethereum-based DeFi dApps.

Interoperability between blockchains is the obvious long-term solution. However, after nearly a decade of disparate projects developing their own siloed platforms, a fully interoperable blockchain ecosystem still appears to be some way off. Nevertheless, there are signs that this is starting to change. Relay bridges are an example of one interoperability solution that’s gained significant traction over 2020.

What Are Relay Bridges?

A relay bridge is a two-way interface between blockchain platforms, allowing anyone to send a token from one blockchain into another. Usually, there is some kind of mint-and-burn mechanism in place that means when the token leaves one platform, it is either locked or burned. An equivalent token is then minted or unlocked on the other platform. In this way, the token supply is kept constant across both blockchains.

Token transactions using the bridge are verified similarly to traditional blockchain transactions, using some variation of consensus.

This year, several projects have released bridges to combine the strengths of their own platform with that of Ethereum.

Jagdeep Sidhu is the lead developer at Syscoin. The project launched its own version of an interoperability bridge early in 2020 to enable scalability through interoperability. The Syscoin Bridge already supports token transfers of any ERC-20 token to and from the Syscoin network, where developers can take advantage of token processing using Syscoin’s ultra-fast, low-cost Z-DAG layer.

Sidhu has since been outspoken about the possible damage that the current congestion and fee issues could do to Ethereum, and the potential bridges have to alleviate these challenges. He states:

"If [the current high gas prices] continue, the implications are negative for the rate of adoption of Ethereum for both practical and speculative uses like DeFi. While some might argue that the market is self-correcting, the reality is many users can become hesitant towards future use of Ethereum due to the potential for service impacts caused by unpredictable fees."

He elaborates: "A more positive future for Ethereum can happen if the community encourages the use of scalable sidechains and L2 solutions that alleviate pressure on the network."

Leveraging Ethereum’s Liquidity

Bluzelle is one of the most recent projects to move into bridge interoperability with its Relay Bridge announcement. Bluzelle is on the road to a full mainnet, which will provide developers with low-cost, decentralized data storage on the blockchain. The project has recently announced it had launched the first-ever automated ETH to Cosmos Relayer in live production.

The Bluzelle network uses its own native BNT token. Decentralized data storage as a service needs to be scalable almost by definition, to make it usable for developers. Furthermore, Bluzelle needs to ensure that storage costs are lower than centralized competitors such as AWS. Therefore, building on Ethereum would have been a show-stopper given the platforms continuing battle with congestion and high fees.

However, Bluzelle’s developers recognize that compatibility with ERC-20 tokens brings a significant liquidity injection thanks to DeFi exchanges like Uniswap. Therefore, the Bluzelle Relay Bridge enables automatic swapping of BNT tokens with an ERC20 token, ticker BLZ.

While the Relay Bridge's current version is live for BNT and BLZ token swaps, Bluzelle ultimately plans to open up the bridge for adoption by other applications developed on Cosmos. Doing so will enable greater interoperability between the Ethereum and Cosmos ecosystems, meaning that developers don’t have to choose between the benefits of one or the other.

A Quick-Fix or a Long-term Solution?

Ethereum 2.0 is the long-term plan to help scale the platform and overcome the congestion issues it faces. Therefore, is there a risk that interoperability bridges are a short-term fix that won’t be needed once ETH 2.0 launches?

In light of the slow pace of development for Ethereum’s upgrade, and the progress from other projects, it seems not. A development shop called Snowfork is in the process of building a bridge from “meta protocol” Polkadot to Ethereum.

Although it’s yet to be unveiled, a blog post shared by the team seems to indicate that this could be the biggest development yet. Whereas most bridges to date have tackled the challenge of token transfers, the Snowfork team has indicated that it’s planning to build an asset-agnostic bridge, meaning other assets such as contracts could transfer between ecosystems.

So, far from being a 2020 trend that will become redundant once the big Ethereum upgrade lands, it seems that the interoperability bridge is here to stay. The more of them that exist, expand their functionality, and gain adoption, the higher the value they’ll bring to the overall blockchain ecosystem. It seems increasingly unlikely that a single-platform upgrade will render them useless. The future of an interoperable blockchain ecosystem that’s greater than the sum of its parts could be closer than we realize.

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