Blockchain platforms are emerging at a rapid rate. However, the need for interoperability is diminishing the network effect that could exist between these platforms.
The power and value of exclusivity enable individual platforms to attract users but prohibit the industry from unlocking its full potential. For a global economy that is becoming increasingly digital and data-driven, individual blockchains must be able to communicate with each other to ensure the large-scale acceptance of blockchain-based applications.
To oversimplify, interoperability refers to the ability of disparate ecosystems to seamlessly exchange data and transfer relevant information between each other sans any centralized entity/intermediary. This is essential to alleviate the roadblocks that stifle potential growth.
This paper compares Polkadot, a Layer 0 multichain protocol, with Cosmos and Avalanche, both L1 blockchains.
Polkadot, Avalanche, and Cosmos came into existence to address the low latency and scalability issue crippling Ethereum, the largest smart contract-focused blockchain with one of the most secure and battle-tested architectures. However, these blockchains do more than that, with their bet on interoperability, the focus is on the bigger picture - a multi-chain future.
Polkadot is a heterogeneous multichain framework that connects application-specific Layer-1 blockchains (referred to as parachains) into one unified network via the Relay Chain. The relay chain is responsible for security, consensus, and cross-chain interoperability across the entire network.
Despite technical differences between public, permissionless networks, private consortium chains, and other Web3 technologies, Polkadot enables an internet that provides seamless communication and transfer of value between distinct networks under common security guarantees.
The network runs on a sharded model featuring multiple blockchains running in parallel and connected via the Relay Chain. The Relay Chain allows Polkadot to process transactions from all chains in the network at the same time, eliminating the bottlenecks of legacy networks and significantly increasing scalability. The simultaneous transaction processing, also called parallel processing, is why blockchains on Polkadot are called parachains (short for parallelized chains).
Parachains are sovereign blockchains offering specific use cases and featuring their own tokens and governance mechanism. As long as a Parachain's logic can compile to WebAssembly (WASM) and adhere to the Relay Chain, it can connect to the Polkadot network.
Substrate is the technology underpinning the Polkadot ecosystem. All chains made with the toolkit are compatible with Polkadot and, as such, gain access to its speed, security, and interoperable ecosystem of parachains and applications. However, building with Substrate on Polkadot is optional, and the two are not dependent on each other. Blockchains with alternate software can also be integrated as shards (parachains) on the Polkadot network. Similarly, blockchains made with Substrate are not compelled to join the network and can be launched stand-alone.
The Relay Chain forms the basis of the Polkadot ecosystem and is often referred to as the foundational layer of the network. It is responsible for securing, governing, connecting, and ensuring the seamless functioning of parachains. The Relay Chain does not support application functionality. Its primary task is validating the state transition of all connected chains and providing a shared state "State of States" across the entire network. Parachains connected to the Relay Chain can execute smart contracts and support dApps, besides the creation and transfer of assets on the network.
Security is paramount when transferring data between parachains. Polkadot ensures this security via the Relay chain. In addition, the Relay Chain provides a secure way for parachains to communicate with each other.
Polkadot's cross-chain messaging scheme (XCM) facilitates the exchange of data, allowing for true interoperability and creating a new paradigm of interchain services, communities, and economies. Developers can leverage and build on features/offerings of multiple blockchains rather than being restricted to the features of a single blockchain. Moreover, parachains can incorporate Layer 2 solutions on top of them for enhanced scalability and efficiency.
Additionally, Polkadot's design delivers on blockchain technology's promise of a Web3 future that returns individuals' control over their identity and assets secured from central authorities and internet monopolies. It enables blockchains to scale, specialize and work together. The network boasts an advanced suite of governance tools and, using the Wasm standard, can autonomously deploy network upgrades. In essence, the network is future-proof as it can adapt to growing needs sans the risk of forks.
Next up is Avalanche, a network that adopts a different approach than Polkadot but shares the goal of improving blockchain technology, specifically interoperability, scalability, and usability.
Developed by Ava Labs, an open-source platform, Avalanche strives to deliver high performance, extreme scaling capabilities, fast confirmation times, and affordability. They claim to be “the fastest smart contracts platform in the blockchain industry, as measured by time-to-finality.”
Avalanche has a unique tri-blockchain infrastructure to aid crypto developers in making smart contracts cheaper, faster, and more scalable. The C-chain (Contract Chain) allows for compatibility with Ethereum’s features and tools, the X-chain (Exchange Chain) allows for digital assets such as wrapped tokens, NFTs, and stablecoins, and lastly, the P-chain (Platform Chain) coordinates Avalanche's validators and the creation and management of subnets.
P-Chain and C-Chain utilize the Snowman consensus to enable high-throughput secure smart contracts, and X-Chain utilizes the DAG-optimized Avalanche consensus, a scalable protocol that enables low latency and fast finality. Avalanche boasts a transaction throughput of 4500 transactions per second.
Validators on Avalanche are required to secure and validate all three chains forming the Primary Network together. This requirement essentially enables easy connectivity and implementation between the subnets.
Avalanche’s core value proposition is its ability to create highly scalable and customizable blockchains called subnets (an abbreviation of sub-network). It is important to note subnets are a dynamic set of validators tasked with achieving consensus on their own blockchains.
Post creation by an Avalanche validator, subnets can outline rulesets for their validators and launch their own blockchains with customized virtual machines (EVM, WASM). They can have their own tokens and fee structures. Thus, Avalanche is built with flexibility and customizability.
Envisioned to serve financial markets, Avalanche offers native support for creating and trading digital smart assets. This can be corroborated by the total value locked (TVL) in DeFi ($12b in Dec 2021). Additionally, the network is designed to enable the rapid building and deployment of dApps, and it permits Ethereum developers to utilize a network with increased scalability and interoperability while still being compatible (Ethereum Virtual Machine).
Moreover, interoperability is enabled within a subnet as well as between subnets. And similar to Polkadot and Cosmos, Avalanche is also able to connect to other blockchains via bridges.
Built to facilitate communication between standalone distributed ledgers sans centralized intermediaries, Cosmos is dubbed the Internet of Blockchains.
Cosmos deliverables go beyond seamless interaction between different blockchains and include the provision of tools that simplify the process of developing interoperable blockchains.
The utilization of Hubs, Inter-Blockchain Communication Protocol (IBC), Tendermint Byzantine Fault Tolerance (BFT) Engine, and the Cosmos Software Development Kit (a framework for building application-specific blockchains) enables Cosmos to provide the necessary infrastructure for creating interoperable blockchains.
Cosmos’ approach is different from the interoperability solutions that involve the use of smart contracts. It offers open-source tools for the development of independent blockchains referred to as zones.
The zones connect to the main blockchain, referred to as the Hub (where all the network’s validators are). Zones communicate via the hub through the use of IBC. Unlike Polkadot, validators on Cosmos are independent (in order to validate on any parachain node, operators on Polkadot need to be validators on the relaychain). Zones operate autonomously and have their own validators which validate transactions. The Hub and Zone model enables Cosmos to be a low-latency network.
Cosmos Hub is the main hub and the first blockchain on the network. It is powered by ATOM coin. Each new zone on the network is linked to the Cosmos Hub, which stores a record of each zone’s state and vice versa.
Cosmos interoperability extends to blockchains that do not have fast-finality (Proof-of-Work blockchains such as Bitcoin) thanks to a special proxy chain called Peg Zone. Peg Zones can track the state of another blockchain and are compatible with IBC as they have fast-finality themselves. Peg Zones act as bridges and communicate with other chains by linking zones and hub networks.
Designed to generate thousands of interconnecting blockchain systems, the Cosmos Hub is a proof-of-stake platform where participants stake their ATOM coins to earn rewards.
Whilst there are similarities between the three blockchains, there are also critical differences that impact the way the networks scale and operate. In the following section, we shall discuss the inter-chain communications adopted by Polkadot, Avalanche, and Cosmos and how they compare.
Polkadot delivers on its promise of interoperability via the Cross-Chain Message format (XCM). It is a format for how message transfer should be performed and is defined for use between chains and smart contracts, pallets, bridges, and even sharded enclaves like SPREE.
Not only is XCM adjustable to most communication scenarios within the ecosystem it is future-proof and forwards-compatible, making it well-versioned to stand the test of time.
At the modular level, Polkadot has different types of message formats that allow communication between its constituent chains
- Vertical Message Passing (VMP) - which comprises UMP (Upward Message Passing for parachains to send messages to the relay chain) and DMP (Downward Message Passing for the relay chain to pass messages down to one of its parachains)
- Cross Chain Message Passing (XCMP) for parachains to exchange messages with other parachains.
Parachains utilize XCM to send arbitrary messages to each other. They open connections to send messages through established channels. Polkadot parachains lease security from the Relay Chain, they do not have their own validators. Full nodes of parachains called collators have no security responsibilities and can interact without trust. They simply collect the states of the blocks and submit them to the Relay Chain validators. The shared state amongst Polkadot parachains creates a trust-free environment where security is cooperative, not competitive.
Additionally, Polkadot has a protocol (SPREE) that provides shared logic for cross-chain messages. The use of SPREE for messages carries additional guarantees about provenance and interpretation by the receiving chain.
Moving on to Cosmos. The architecture of Cosmos differs from Polkadot in that it doesn’t have one central hub (relay chain) but several. Unlike Polkadot, where every parachain is supported by the same pooled security, zones connected to the Cosmos Hub do not have uniform security. They maintain their own validators and utilize IBC, the cross-chain protocol, to facilitate the transfer of data (primarily tokens) to other zones by routing through the hub.
While IBC brings Cosmos closer to its goal of becoming a truly interoperable ecosystem, it is important to note the network is as secure as its least secure chain. Efforts are being made to ensure the protocol becomes more powerful and secure. The implementation of interchain security (shared security), which is Cosmos’ solution to the security bootstrapping issue, is in the works.
However, at present, the multi-hub architecture of Cosmos connects chains with independent security guarantees, implying the receiving chain must trust the security of the sending chain (origin of the message) for inter-chain communication.
Next is Avalanche. Avalanche and Polkadot boast some similarities in their architecture as they allow for application-specific blockchains to be designed and connected to a primary network. In Avalanche, there are 3 main chains - the P-chain, X-chain, and C-chain, whereas, in Polkadot, the primary network is the Relay-chain.
However, subnets on Avalanche do not share the security of the main chains. Nor does it have a native trustless message-passing mechanism. It relies on bridges for interoperability. Though, its EVM-compatible nature enables it to interoperate at a token level. On Polkadot, parachains, in addition to utilizing block finality and security of the Relay chain, use XCM and XCMP messaging protocols for a native and trustless messaging scheme instead of relying on multiple bridging solutions.
The security model of Avalanche is different from that of Polkadot and, as such, cannot be directly compared. Though the popular belief is Avalanche offers a secure environment for interoperability, in reality, it is akin to a centralized version of Cosmos where self-selected and overlapping subsets of its validator group act as the security on the subnets.
This overlapping network topology results in different levels of security across the chains making inter-shard attacks feasible as messages from the least secure subnet could affect a transition on another subset. Thus, similar to Cosmos, the Avalanche network is only as secure as its least secure subnet.
Avalanche has plans for shared security, interoperability, composability, and on-chain governance. All of which are already offered by Polkadot.
Interoperability and scalability are essential for blockchain technology to truly thrive and encapsulate adoption. The security guarantees across a truly scalable system have to be the same irrespective of where the logic is executing while still being decentralized. Having multi-chain applications run across different chains without considering the underlying consensus security implications will either bottleneck the security (if run in the high-security chain) or compromise it (inter-chain applications run with the security of the least-secured chain). With Avalanche or Cosmos, while the number of chains can be added, the connected chains are far less secure than the central chain.
In the case of a Polkadot parachain slot, the security comes with the might of the entire network. Polkadot state transitions are Turing complete and executed at native speeds.
While all three networks (Polkadot, Cosmos, and Avalanche) have introduced an architecture to enable the internet of blockchains, Polkadot is focused on security with a larger developer count apart from being truly interoperable.
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