Axelar Protocol — Explained
Overview
The Axelar protocol enables the exchange of arbitrary information across blockchains. The Axelar network is a middle-layer blockchain that connects to other blockchains via smart contracts. Validators on the Axelar blockchain secure cross-chain messages with a PoS consensus process.
Design logic
For a cross-chain exchange of information, if the message to be delivered to the destination chain is collectively signed by a group of validators running a singing algorithm, where their honest conduct can be guaranteed against a stake, then trustless valid delivery of the message can be guaranteed.
Axelar executed this logic with the help of the following components –
- Delivery of message — Gateway smart contracts
- Singing of the message — The Axelar blockchain validators
- Signing algorithm — Threshold signature scheme
- Cross-chain delivery of events — Relayers
Protocol components
Axelar gateways
Axelar gateways are smart contracts on each blockchain the protocol is connected to. These smart contracts allow Axelar to pass information to and from the blockchain. These accounts do not have a single owner but are jointly controlled by the validators of the Axelar blockchain, who deploy a threshold signature scheme to sign messages collectively.
The Axelar blockchain
The Axelar blockchain is a PoS network built with the Cosmos SDK. The Axelar blockchain blocks are a record of cross-chain messages that have been routed through the network. The validators stake AXL tokens to participate in the block production process.
This blockchain is also a hub for all incoming and outgoing cross-chain messages from other chains, which are connected to the hub like spokes. This design allows the protocol to scale horizontally by adding support for new networks without needing to alter the core functionality of the other connected chains.
Connectivity — Axelar connects these networks together (at the time of writing: Ethereum, Polygon, Avalanche, BNB Chain, Fantom, Moonbeam, Osmosis, Aurora, Cosmos, Terra, Evmos, Secret, Kujira, Juno, Injective, e-Money, Cressent, AssetMantle, KI, Fetch.ai, Stargaze and Regen as spokes to the Axelar blockchain as their hub.
Validators
The validators of the Axelar blockchain need to come to a consensus about the validity of incoming cross-chain messages and store them in a block on the Axelar blockchain. In addition to this, they also submit outbound cross-chain messages to their designated blockchains.
To perform these tasks, each Axelar validator also runs a node or light client of at least one of the blockchains Axelar is connected to. During Axelar blockchain block creation, the validators query the source chain they’re connected to and check the legitimacy of the message. Then, the validators also participate in a threshold signature generation algorithm to collectively sign outbound cross-chain messages.
Quadratic voting — It is a novel concept deployed for the calculation of the weight of the signatures each validator accumulates with each AXL delegated to it. The system calculates signature weight as a square root of the delegated AXL, which means it gets costlier for the validator to accumulate more stake as its weight increases, thereby limiting the concentration of signing power to a few validators.
Executor services
A relayer on the Axelar network is tasked with observing the activity on the Axelar blockchain and the networks it is connected to. They transport message requests between gateway contracts and the Axelar blockchain. Relayers are a free service offered by the network. Dapps have the option to deploy their relayers as well.
Gas receiver
A gas receiver is a smart contract deployed by Axelar to smoothen the experience of interacting with multiple chains. This smart contract estimates the combined transaction cost of the source and destination chain and allows the user to pay it in AXL.
Life of a cross-chain message
The Axelar blockchain is agnostic to the underlying message that is being transported through the network. This means that the same primitive can be leveraged for all sorts of cross-chain connection requests, like token transfers, contract calls, arbitrary messages, or data exchange.
This section will break down the life of a cross-chain message request on the Axelar protocol.
On the source blockchain
Any dapp or a user that wishes to send some information from one chain to another through Axelar first interacts with the Axelar gateway smart contract. A typical message would contain information about what address and on which chain the message needs to be delivered, and the instructions stack itself.
Once a message arrives at the gateway, relayers on the blockchain create an event and submit it to the Axelar network for further processing
On the Axelar blockchain
The Axelar blockchain is the hub of the entire message supply chain. Any event that arrives on the blockchain must be recorded on a block by verifying it with a consensus algorithm. The validators, who are also the node runners of the connected chains, verify the event generated by relayers against their queries and vote on its validity, with the weight of the vote proportional to their staked AXL.
Once the message has been recorded on the Axelar blockchain, the next step is to deliver it to its designated address, which brings us to the final stage of the message’s life.
After the message is approved on the Axelar blockchain, its delivery to the gateway contract on the target chain needs to be authorized by the validators. To ensure validators are unable to collude, the gateway contract is an MPC account whose signature is generated using a threshold signature scheme. The validators enter a TSS scheme where the weight of the signature is proportional to each validator’s staked AXL.
On the destination blockchain
The relayers observe a signed message and deliver it to the gateway contract on the destination chain, where it can be executed by anyone.
AXL token
The AXL token is the native token of the Axelar network. It is an ERC-20 token and serves the following functions –
- Medium of transaction — The cross-chain fees, along with associated gas fees are all paid in AXL. Also, the validators receive AXL as compensation for a stake in the network.
- Governance — Token holders can stake AXL to participate in governance.
- Incentives — Rewarding ecosystem builders and community members.
1 billion AXL token were minted at the Axelar genesis block and was issued to team members, investors, and community members with a 2–4 year vesting schedule. You can find the detailed tokenomics for the AXL token in this official post from Axelar.
Potential limitations
Axelar offers a compelling cross-chain communication primitive for application programmers and users.
- It offers a simple plug-n-play infrastructure that requires minimal effort from developers to integrate with their dapp logic.
- Native access to the growing ecosystem of the Cosmos Hub.
- TSS and POS-powered cross-chain security is both verifiable and decentralized.
However, the protocol does possess some notable potential disadvantages that must be discussed, they are defined as follows –
Atomicity
Atomicity is a property in blockchain that states that a single transaction in a blockchain may contain several steps, either all the steps are executed successfully or the whole transaction is reverted. From swaps in DEXs to flash loans, atomicity is an essential property of smart any contract blockchain.
Due to the nature of blockchain designs today, atomicity continues to be a limitation plaguing cross-chain protocols. While achieving atomicity is simple within a system, doing so between heterogeneous chains is quite inefficient. This is because of the diverse design principles adopted (consensus, fault tolerance, number of nodes, etc).
Liveness
Axelar claims to hold high liveness standards. The blockchain design dictates that validators must run a node or a light client of at least one blockchain from Axelar’s supported chains to be eligible for participating in TSS contract signing. If this minimum requirement is not met, Axelar is unable to service that particular chain. While the validators run nodes for multiple chains at once in practice, the probability of a liveness failure cannot be ruled out.
Scalability
For the Axelar Proof-of-Stake blockchain to stay trustless and work as expected, its stake (in AXL) at any point must be higher than the value of assets secured by the network. Therefore, the security of the network is subject to price fluctuations of both, the AXL token and the assets routed through the protocol.
Concentrated risk
A hub and spoke model is efficient at scaling horizontally and a threshold signature scheme is efficient at adding more signees, but the value in Axelar’s design is also concentrated at the middle layer Axelar blockchain. Should the Axelar blockchain suffer an outage or an attack through one of its spokes, it compromises the entire ecosystem.
