Cross-chain Trading New Standard ERC-7683: Solving Interoperability Issues in a Multi-Chain Landscape

In the landscape of blockchain with multiple chains coexisting, achieving secure and convenient cross-chain interoperability has always been a major challenge faced by the industry. With the growing demand for cross-chain transactions from users, this issue has become increasingly prominent. The main challenges include:

Security Issues

Security is one of the most critical challenges in cross-chain transactions. Cross-chain bridge protocols with a large amount of assets often become the primary target of hackers. Both blockchain and cross-chain bridge protocols rely on validators to process transactions. If the number of validators is insufficient or the trust model is too centralized, hackers may exploit the validators to compromise the cross-chain bridge and steal assets. Additionally, vulnerabilities in the contracts of the cross-chain protocols themselves are often exploited by hackers.

On August 6, 2024, a certain cross-chain bridge was suspected to have been hacked, resulting in a loss of approximately 12 million dollars. In March 2022, this bridge experienced a security incident known as "the largest loss in DeFi history," where hackers attacked 5 out of 9 validators and stole crypto assets worth over 600 million dollars.

High Gas Fees

Cross-chain transactions typically incur higher Gas fees. Users need to pay the Gas fees for operations on both chains before and after the cross-chain transaction, which significantly increases the actual transaction costs.

Operational Complexity

Each blockchain network has its unique consensus mechanism and protocol. This independence between chains results in users needing to perform complex and tedious operations when transferring assets and data cross-chain. For users who trade frequently, they may also face issues with asset price slippage, further increasing the difficulty of transactions.

In response to these issues, a well-known DEX and an interoperability protocol jointly proposed a new standard scheme ERC-7683 on May 20, 2024, aimed at making cross-chain transactions simpler, faster, and more secure through a shared execution network.

Introduction to ERC-7683 Standard

The ERC-7683 standard is created based on the CrossChainOrder structure and provides an ISettlementContract smart contract interface that allows for the implementation of standard APIs for cross-chain transactions.

The core technical proposal of this standard is: all "cross-chain intentions" follow the same order structure, which can greatly enhance the flexibility and user-friendliness of cross-chain operations.

Current Status of Application Development

On August 21, 2024, a certain Layer 2 solution announced the adoption of the ERC-7683 cross-chain standard, aiming to achieve efficient transfers of ETH and USDC within its ecosystem and promote broader application layer interoperability within the Ethereum ecosystem.

Previously, a well-known DEX stated that it would adopt the ERC-7683 standard in its cross-chain collaborations.

It is worth noting that the ERC-7683 standard mainly provides a standard API for cross-chain transaction execution systems, ensuring consistency in user experience. However, it does not directly address the liquidity issues in cross-chain transactions. If cross-chain liquidity is insufficient, it becomes difficult to attract enough active "Fillers" to support users' "cross-chain intentions," thereby affecting users' ability to achieve a quality experience.

Therefore, the successful implementation of the ERC-7683 standard requires the formation of a wide-area effect—more use cases being accessed, more users using it, in order to attract more Fillers, ultimately achieving an overall improvement in cross-chain transaction efficiency.

Support from the Founder of Ethereum

According to reports, Ethereum co-founder Vitalik Buterin expressed support for the development of the ERC-7683 standard through social media. He pointed out that operations based on this standard can include batch transactions, Merkle proofs, and other on-chain activities. Buterin provided examples:

"With the ERC-7683 standard, users can paste an ERC-7683 address into their wallet and then simply click once to easily transfer any asset on any chain to another account."

Conclusion

The multi-chain landscape is an inevitable trend in the development of the Web3 era. For the future development of the Web3 world, optimizing and simplifying cross-chain transactions and further releasing liquidity will be key challenges. The ERC-7683 standard directly addresses the pain points of cross-chain transactions and is expected to significantly enhance interoperability between blockchains, with far-reaching impacts on the blockchain world. Currently, users can look forward to the improved user experience brought by the ERC-7683 standard, which may inject new vitality into more DeFi projects, provide more liquidity support, and accelerate the development of the entire industry.