Axelar is a blockchain network that connects dozens of previously siloed and separate blockchains, enabling increased interoperability for the multi-chain future.
The Axelar network consists of a decentralized group of validators, secure gateway contracts, uniform translation and routing architecture, as well as a suite of software development kits (SDKs) and application programming interfaces (APIs) that facilitate cross-chain composability. This helps developers to build applications on the best platform for their use case, while also being able to access users, assets, and applications across all ecosystems.
Axelar's primary objective is to build the underlying infrastructure necessary to onboard the next billion people onto Web3. To achieve this goal, Axelar intends to:
- Provide a straightforward and user-friendly way for blockchain developers to connect with other chains
- Enable decentralized application (dApp) developers with cross-chain composability
- Allow users to interact seamlessly with applications across multiple ecosystems
Technology
The Axelar network has a two-layer system consisting of three main components. The first component is a decentralized network supported by validators, which execute transactions and maintain the network. The validators are responsible for running the cross-chain gateway protocol, which is an overlay that sits on top of Layer 1 blockchains. This protocol allows the validators to perform read and write operations to gateway smart contracts deployed on connected external chains, as well as vote and attest to events on those chains.
The second component consists of gateways, which are smart contracts that provide connectivity between the Axelar network and interconnected Layer 1 blockchains. Validators monitor gateways for incoming transactions, which they read and then come to consensus on the transaction’s validity. Once agreed, they write to the destination chain's gateway to execute the cross-chain transaction. The validators and gateways form the core infrastructure layer.
Sitting on top of the validators and gateways are the APIs and SDKs, which enable developers to easily access the Axelar network. This application-development layer allows developers to compose across any two chains in a single hop, adding universal interoperability to their blockchains and applications. With Axelar, developers can transfer assets between any two addresses on any two blockchain platforms, execute cross-chain application triggers, and handle any cross-chain requests.
In essence, Axelar distills cross-chain interoperability down to a simple set of API requests. This is a critical aspect of adoption as the developer experience around deploying Web3 applications must be as simple as possible, similar to the experience Web2 developers have, where the underlying networking and ecosystem-specific deployment considerations are largely abstracted away.
Two-layer Approach
Axelar is a two-layer system comprised of an API layer and an underlying network. The core of Axelar's infrastructure is a permissionless overlay network built on a Proof of Stake (PoS) consensus algorithm and permissionless protocols, which enable Turing-complete cross-chain communication. Axelar validators are responsible for monitoring gateways on interconnected chains, using a decentralized protocol to process cross-chain messages.
Above the network lies a layer of APIs and protocols, which provides an application development layer for developers to compose applications across any number of chains. This means that developers can achieve cross-chain interoperability without the need for new programming languages or complicated infrastructure management. Instead, they can focus on building the specific functionality of their dApp. As new interconnected blockchains are integrated, they automatically become interoperable with the application, leading to limitless network effects.
Two Protocol “Stack”
Axelar enables dApps to leverage its cross-chain communication layer and protocol “stack easily.” The Axelar network comprises two main protocols:
- The cross-chain gateway protocol (CGP) that connects the separate blockchain by routing messages between them
- The cross-chain transfer protocol (CTP) that encompasses the application stack on top of CGP, enabling dApps to work across multiple blockchains
For Axelar-bridged chains, a gateway smart contract is deployed on both chains. Axelar validators are responsible for monitoring the gateway smart contract on each blockchain, ensuring the transaction is valid (on the source chain) and then forwarding it to the proper (destination) blockchain while also monitoring finality/trust assumptions on each chain.
Axelar Technology Stack, Source:
Nodes on Axelar run the software of other EMV-compatible and Cosmos-based chains. The external validator set monitors the connected chains and nodes sync to query their local blockchain clients and agree on the state.
To ensure security, Axelar uses a gateway contract controlled by a key that is divided into key shares held jointly by all validators. The number of key shares held by each validator is proportional to the amount of AXL tokens staked with the validator. The validators are required to rotate key shares every two months to increase security further.
To achieve cross-chain consensus, 80% of the validator vote power must approve and co-sign any transaction, and 90% of the validator vote power must collude to withdraw funds or forge state proofs. Axelar's implementation of rate limiting and quadratic voting reduces the risk of large-scale hacks by requiring a high threshold for validator collusion.
However, there are still vulnerabilities to consider. The gateway contracts are currently upgradable solidity contracts administered by an anonymous 4-of-8 multisig. This means that the contracts can be upgraded without validator approval, potentially putting all locked funds at risk at any time. Although this security decision was made to address catastrophic bugs in the earlier days of Axelar, the team plans to implement a change requiring all validators to co-sign any gateway contract upgrade in the future.
General Messaging Capabilities
Just like Layer Zero, and other bridging solutions, Axelar supports generalized messaging, allowing various forms of data and information, including those described tokens, to be moved across ecosystems. General messaging is more complex than simple connections that enable token transfers but can be far more powerful, as well.
With two blockchains that can communicate via general messaging, dApps can make contract calls across chains, allowing them to launch their product simply on one chain and communicate with others rather than needing to launch on every chain. This gives dApps access to more users than just on that one siloed blockchain network.
A contract call is different from a token transfer in that it's initiated by a user to execute a specific function of a smart contract and is not recorded on-chain. Enabling contract calls from the source chain to a destination chain allows for more cross-chain optionality for dApps and eliminates their need to deploy their dApp on multiple chains.
General Message Passing enables secure cross-chain communication, which opens up new possibilities for developers in the decentralized finance (DeFi), gaming, and non-fungible token (NFT) spaces. One potential use case is creating platforms that host NFTs from multiple chains, which would allow users from one chain to buy NFTs minted on another chain without having to move assets from one chain to another. Another potential use case is allowing NFT holders to collateralize their NFTs, using them in borrow-lend apps on any chain. Developers can also index derivatives from one chain to another using dApps or allow users to pool liquidity in multiple assets, on multiple chains, via a single aggregator on a single chain. With secure cross-chain communication, developers can build applications that use the unique features of multiple blockchains, creating new possibilities for innovation in the decentralized web.
Axelar's General Message Passing feature is a secure cross-chain communication protocol that allows developers to bring their applications to the asset rather than the other way around. This opens up new possibilities for composability in DeFi, gaming, NFTs, and other decentralized web applications. The security of General Message Passing is ensured by a permissionless validator set that operates on a Delegated Proof of Stake consensus mechanism and a decentralized protocol that handles routing and translation.
To use General Message Passing, an application developer must implement the Axelar Executable interface in the destination contract. Then, they initiate a call function or a call function plus tokens from the source chain. The call enters the Axelar Gateway from the source chain, and the Axelar network confirms the call, subtracts the usage fee in native source chain tokens, and prepares an outgoing transaction on the destination chain. The call is approved and emerges from the Axelar Gateway on the destination chain, where the call function executes as if it had been made on the source chain.
This method of cross-chain communication expands the definition of secure interoperability, allowing developers to build new applications that can function across multiple chains. By eliminating the need to move assets from one chain to another, General Message Passing opens up new possibilities for the use of NFTs in borrow-lend apps, the creation of platforms that host NFTs from multiple chains, indexing derivatives from one chain to another, and allowing users to pool liquidity in multiple assets on multiple chains via a single aggregator on a single chain.
PoS, Validators, and Incentives
Axelar's Delegated Proof of Stake (DPoS) blockchain is built on the Cosmos SDK, an open-source toolkit designed for cross-chain interoperability. Using the Tendermint consensus mechanism, Axelar can validate requests on the source chain and confirm changes on the destination chain. This consensus model provides instant finality and Byzantine fault tolerance, which are critical for secure cross-chain communication. However, Axelar can also connect diverse forms of consensus, including EVM and Cosmos chains. This makes Axelar one of the few cross-chain protocols that can support interoperability between these different consensus mechanisms, enabling a more seamless and integrated decentralized web.
Each chain Axelar connects has a Gateway smart contract that receives and sends messages between Axelar and the external blockchain. Validators hold the key that controls this contract together (proportionate to the staked AXL token), and messages/transactions only get passed once the validators' vote is completed and approved. There are 70 validators as of Q1 2023.
Top-10 validators on Axelar, February 2023, Source: Axelarscan
Axelar controls the routing and execution. However, the relayer aspect is permissionless, meaning developers can build their own version of relayer services rather than using Axelar’s default relayer if they choose.
Axelar Network has implemented rewards slashing to motivate validators to avoid undesirable behavior, such as double signing, loss of liveness, and incorrect voting on external chains' events. Rewards are earned and released at the end of each block, and Axelar Network’s slashing mechanism is unique for each inflation component.
The slashing rules for TM consensus rewards are standard and validators lose rewards if they lose liveness. Validators must sign at least 50% of blocks in a 35,000-block window, which is equivalent to maintaining total liveness for at least one day in a two-day window. A downtime of a validator will result in the loss of 0.01% of rewards per block, and double-signing of blocks will result in a 2% loss of rewards. If a validator loses liveness for over 50% of the window, they're locked for two hours and must unlock themselves to rejoin the validator set. The Axelar Network has implemented a seven-day unbonding period.
In the multi-party signing protocol (MSig) protocol, the broadcaster account’s liveness is signaled through "heartbeat" messages that are sent every 50 blocks by validators. Validators are considered "active" if their last heartbeat message was received within the last 50 blocks and have missed signing less than 5% of blocks in the last signed block window for consensus. If an "active" validator fails to participate in MSigs, they're suspended from further MSig participation for 8,500 blocks, losing their accrued rewards. If a validator fails to submit a heartbeat message, they stop accruing MSig rewards until their next heartbeat.
Heartbeat messages
For external chain voting, validators who have registered as chain maintainers can vote on events. Voting power corresponds to the fraction of the total stake delegated to them. Validators who submitted the majority vote have their accrued rewards released. To incentivize liveness and good behavior, validators who fail to vote or who submitted the minority vote lose their accrued rewards.
Axelar's approach to gas fees is distinct from many other multi-chain interoperability networks, which require users to maintain gas tokens on both the source and destination chains. Instead, Axelar lets users pay gas fees once on the destination chain using the destination token. This is possible because Axelar is a blockchain that connects blockchains and can handle smart-contract logic. As part of the cross-chain transaction flow, Axelar's gas services conveniently handle all conversions required:
- AXL tokens are paid as fees to Axelar's validators.
- AXL tokens are then converted into the source-chain token for gas.
- The gas covers actions, such as token mints or function calls, on the destination chain.
This approach streamlines the user experience by reducing the need for users to maintain multiple gas tokens and instead allows them to use the destination chain’s token.
Axelar Network Transaction Flow, Source: Axelar
