In-depth Analysis of Orbiter Cross-Chain Bridge Transformation, to Become a Universal Ethereum Foundation Protocol.

Analysis of Orbiter Cross-Chain Bridge Transformation, to Become Ethereum Foundation Protocol.

1. Industry Trends and Current Situation

The emergence of blockchain technology has brought many advantages such as distributed ledgers and decentralization, but at the same time, it has also led to the formation of relatively isolated ecosystems for each blockchain. Different blockchains cannot directly interact, which poses many limitations and challenges to the application of blockchain technology. Therefore, how to achieve interoperability between different blockchains has become an important issue.

To solve this problem, cross-chain bridging technology has emerged. Cross-chain bridging is a technical means to establish connections between different blockchains and achieve cross-chain communication and asset transfer.

Through cross-chain bridging, users can transfer assets from one blockchain to another, and also execute cross-chain smart contracts, promoting the integration and development of the blockchain ecosystem.

Therefore, cross-chain bridging is one of the key technologies to achieve interoperability between different blockchains, which is of great significance for the practical application and promotion of blockchain technology.

1. Cross-Chain Bridging Technology Matures, Demands and Roles Highlighted

In the past, users generally completed cross-chain operations through centralized exchanges, such as transferring assets to centralized exchanges and then withdrawing them to the target chain.

With the continuous improvement of public chain ecosystems and the popularization and development of DeFi technology, the use cases for digital assets are increasing, and liquidity has significantly increased.

For example, there is a growing demand for cross-chain asset transfers when participating in staking and financial management in DApps on different chains. This has led to the emergence of cross-chain bridging applications. Nowadays, people are increasingly inclined to use cross-chain bridging technology directly to transfer assets between different chains, rather than relying on centralized exchanges for cross-chain operations.

2. Rollup Cross-Chain Bridging for Different Layer 2 Solutions

In the current public chain landscape, the development of the Ethereum ecosystem is still the most mature and complete, and more and more DApps choose to develop on the Ethereum ecosystem.

However, Ethereum is known as the “noble chain”. Not only are gas fees expensive, but its speed cannot meet the high demands for real-time DApps. As a result, more and more Ethereum Layer 2 solutions have emerged. They not only improve performance but also inherit the underlying security of Ethereum.

For example, the four major Layer 2 solutions for Ethereum, Arbitrum, Optimism, Starknet, and Zksync, have developed rapidly and formed their own ecosystems, accumulating a large number of users and assets in their respective Layer 2 ecosystems.

The prosperity of the Ethereum Layer 2 ecosystem has also led to the demand for cross-chain asset transfers between Ethereum Layer 2 solutions, and Orbiter Finance has emerged in this context.

In the past Layer2 framework, rollups could not be directly transferred between each other.

If a user wants to transfer assets from Rollup A to Rollup B, they often have to wait a long time.

1) Transfer assets from Rollup A to the mainnet;

2) Transfer assets from the mainnet to Rollup B.

The mainnet acts as an intermediary, and both transfers have to go through the Ethereum mainnet, which is not only slow but also incurs gas fees twice. Both time and gas costs are relatively high.

However, the emergence of cross-chain bridges like Orbiter has built a bridge between different Ethereum Layer2 solutions, greatly improving the interaction efficiency between Ethereum Layer2 solutions and promoting the flow of digital assets, which will unlock value.

II. What is Orbiter Finance

Orbiter Finance is a decentralized cross-rollup bridge that allows users to transfer assets between Ethereum mainnet, StarkNet, zkSync, Loopring, Arbitrum, Optimism, Polygon, Immutable X, and BNB Chain.

Through its unique market-making model, Orbiter bridge provides users with low fees, fast speed, and other excellent experiences. Currently, it only supports the transfer of ETH, USDC, USDT, and DAI.

III. Financing Situation

Orbiter completed its first round of financing in November 2022, with participation from Tiger Global, Matrixport, A&T Capital, StarkWare, Cobo, imToken, Mask Network, Zonff LianGuairtners, etc. However, the amount of financing was not disclosed.

In addition, Vitalik has donated 16 ETH to it.

IV. Features of Orbiter Finance

1. Security

Based on rollup technology, Orbiter does not have the risks associated with Layer1 Layer1 cross-chain bridges.

First of all, we need to clarify that Orbiter Finance aims to solve the problem of cross-rollup, not cross-chain (heterogeneous chain) transfers.

Strictly speaking, Orbiter is a cross-rollup bridge, not a bridge for asset transfers between two completely independent (heterogeneous) blockchains (such as from the Bitcoin network to the Ethereum network).

When it comes to asset transfers between two independent heterogeneous blockchains (Layer1 Layer1), the security of the cross-chain protocol is governed by the “bucket theory”, which means that the upper limit of the security of the cross-chain protocol is determined by the security of the lower security chain.

Ethereum founder Vitalik has written an article on this topic and proposed a concept called “shared security”, which is exactly what it means.

For example, A and B are two heterogeneous chains, where A has higher security and B has lower security.

So, when cross-chain assets are conducted between these chains, the security is determined by the security of Chain B (the chain with lower security).

The main goal of cross-chain projects is to ensure the security of transactions between two unique chains and avoid 51% attacks.

However, cross-rollup projects use the same Ethereum data layer, and each rollup can prevent 51% attacks. Based on this, Orbiter proposes a cross-rollup mechanism that can inherit the security of Ethereum L2.

In other words, Orbiter enables cross-chain asset transfers between different Ethereum Layer2 solutions.

For example, Orbiter enables cross-chain transfers between zkSync and Arbitrum, which are isomorphic chains.

Whether it is zkSync, Arbitrum, or Orbiter, all three are built on Ethereum and inherit the security of the Ethereum network, which can prevent 51% double-spending attacks.

In addition, Orbiter’s anti-cheating and over-collateralization mechanisms also ensure the security of user assets during cross-chain operations.

2. Low Cost & Instant

In the Orbiter cross-chain protocol, asset transfers are conducted between the Sender and Maker’s EOA addresses on the source and target networks. The Sender does not interact with contract addresses. This is a significant difference between Orbiter and other bridge protocols.

EOA stands for Externally Owned Account, which is the most common account type we encounter when using blockchain. It is our personal account, or wallet address, and is different from contract accounts with interactive functions.

What are the advantages of using EOA addresses in the Orbiter cross-chain protocol?

The greatest advantage is low cost and fast speed.

By eliminating unnecessary contract interactions and the need for a dedicated intermediary to mint/burn assets, transfers are made directly between the Sender (asset exchange party) and the Maker (market maker, i.e., the party accepting the cross-chain exchange demand).

Most traditional cross-chain bridges take about 10 minutes or longer to complete asset transfers, but with Orbiter, users can complete asset transfers in an average of 30 seconds.

3. Support for Native Ethereum Assets

In the Orbiter cross-chain protocol, there is no need to mint assets.

As we all know, Bitcoin, as the highest market value cryptocurrency, has not fully realized its liquidity potential due to high gas fees and slow transaction speed.

In order to bring the highest market value cryptocurrency, BTC, into the Ethereum DeFi ecosystem and promote its liquidity, a common practice is to wrap BTC, such as wrapping it into an ERC20 token on Ethereum called WBTC. This unleashes the liquidity potential of BTC and is actually a form of cross-chain solution.

However, the Orbiter cross-chain protocol supports native assets of Ethereum and does not require any wrapping operations.

How does Orbiter achieve cross-chain functionality? An example will make it clear.

For example, A wants to transfer their 0.1ETH from the zkSync chain to the Arbitrum chain.

The general process of cross-chain transfer using Orbiter (excluding fees for now) is as follows:

1) A, as a Sender, transfers 0.1ETH from zkSync to the address of B (one of the Makers, which can be understood as a cross-chain service provider). This step only occurs on the zkSync chain.

2) B, as a Maker (cross-chain service provider), receives 0.1ETH on zkSync.

3) After receiving 0.1ETH on zkSync, B transfers 0.1ETH to A’s Arbitrum address on the Arbitrum chain. This step only occurs on the Arbitrum chain.

4) B receives 0.1ETH on the Arbitrum chain.

Throughout the entire cross-chain process, there is no need for asset wrapping or other steps. It is a transfer of native assets between different addresses.

In this process, the two token transfers that occur take place on Ethereum’s Layer2 network, which has very low transaction fees and faster speed.

Let’s consider a not-so-appropriate analogy.

This is like communication between Chinese and American people. Due to different languages, cultures, and religious beliefs, communication between the two requires a translator as an intermediary, making the cost of communication higher.

However, if it is communication between people from Hunan and Hubei provinces in China, because they have similar cultural backgrounds and beliefs, there is no need for a translator as an intermediary, making the communication smoother and the cost much lower.

5. Operational Mechanism

1. Two Roles

In Orbiter Finance, there are two roles, the Sender and the Maker.

The Sender is the initiator of the cross-chain transfer, the demand side for cross-chain, while the Maker is the liquidity provider, the counterparty to the Sender, and the recipient of the cross-chain service.

When the Sender initiates the transfer, the Maker provides liquidity, and the smart contract ensures the security of the entire process.

Before providing cross-rollup to the Sender, the Maker needs to deposit excess collateral in Orbiter’s contract and set service fee rules in the protocol.

In the execution process, the Sender sends assets to the Maker on the Resource network, and the Maker sends assets back to the Sender on the target network.

If the Maker behaves maliciously, for example, after receiving assets from the Sender, they do not transfer them to the Sender on the target network.

In this case, the Sender can initiate an arbitration request to the contract using the Maker’s collateral and receive additional compensation.

2. Maker’s Operating Process

In the Orbiter cross-chain protocol, a client will be provided to the Maker. Of course, the Maker can also deploy a client themselves to automate the reimbursement process, meaning that some backend operations of the Maker can be completed automatically.

In this client of Maker, data such as currency type, amount, and cross-chain network will be monitored. Based on the monitored data, the client can perform corresponding automated operations. This is a normal process.

3. Decentralized anti-fraud mechanism

However, Maker is also capable of fraud.

To address the issue of Maker fraud, Orbiter adopts a solution of “pre-trust + dispute arbitration”.

By default, Orbiter trusts Maker and assumes that these Makers will handle assets correctly and return the corresponding assets to users. However, Maker may engage in fraud, for example, withholding the user’s assets after receiving cross-chain assets from the user and not returning the assets on the target chain.

Therefore, Orbiter adopts a set of decentralized mechanisms, primarily implemented through three contracts: MDC, EBC, and SPV, to prevent Maker fraud.

1) MDC contract

MDC stands for Market Deposit Contract.

The MDC contract has two functions: safeguarding Maker’s margin and handling the return and compensation of Sender’s funds.

2) EBC contract

EBC stands for Event Binding Contract.

This contract is used to prove the validity of transactions on the source and target networks.

3) SPV contract

SPV stands for Simple LianGuaiyment Verification.

It is a simple transaction verification contract used to prove the existence of transactions on the source network.

For example, if Sender sends 0.1 ETH to Maker on Arbitrum, SPV is used to verify the authenticity of this transaction.

Through these three contracts, Orbiter can ensure that users do not suffer asset losses when Maker engages in fraud.

If Sender does not receive the tokens correctly from Maker after transferring them, the dispute resolution procedure will proceed as follows to help Sender obtain the tokens:

1) Sender needs to provide relevant transactions on the source network to the SPV contract.

2) Sender applies for arbitration through Orbiter’s MDC contract.

3) The MDC contract obtains proof of the existence of transactions on the source network from the SPV contract and confirms that the transaction has occurred on the source network.

4) The MDC contract obtains proof of the validity of transactions on the source network from the EBC contract. The MDC contract confirms that the transaction on the source network is legal according to Orbiter’s rules and that it was sent by Sender to Orbiter’s Maker with a valid identifier.

5) The MDC contract sets this arbitration as a pending case, and Maker needs to provide transactions on the target network within 0.5 to 3 hours.

If Maker can provide the correct transactions on the target network within the specified time, the MDC contract can obtain proof of the validity of transactions on the target network from the EBC contract, confirm the match between the transactions on the target network and the source network, close this arbitration, and show the transactions on the target network to Sender.

On the contrary, if Maker fails to provide transactions on the target network within the specified time, the Sender can trigger the MDC contract for arbitration.

6) The MDC contract starts compensating the Sender.

7) The MDC contract will send the tokens and compensation (about $15) back to the Sender on the deployed domain name of the MDC contract. The tokens returned to the Sender and the compensation are deducted from Maker’s collateral.

4. Excess Collateral Mechanism

In addition, to prevent Maker from acting maliciously, Orbiter Finance has also introduced the excess collateral mechanism.

In the Orbiter protocol, Maker needs to provide two types of funds, one for liquidity, which is the funds exchanged for users, and the other is excess collateral.

If Maker’s dishonesty causes the Sender to not receive tokens on the target network as scheduled, all losses incurred by the Sender will be paid from the excess collateral, and the Sender will also receive compensation, which is also derived from Maker’s excess collateral.

So, does Maker have enough incentive to provide better services in the Orbiter protocol?

Firstly, in the Orbiter mechanism, Maker can obtain considerable income from each cross-chain service (without impermanent loss risk).

Secondly, if Maker fails to send correct information to the Sender in a timely manner, Orbiter’s MDC contract will send it back and compensate the Sender with Maker’s collateral.

Therefore, Orbiter’s design can not only prevent Maker from acting maliciously but also incentivize Maker to provide better services.

5. Fees

For the Sender, Orbiter’s fees include transaction fees and withholding fees.

Transaction fees: paid to the platform and Maker, charged as a percentage of the transfer amount.

Withholding fees: prepaid fees for Maker, used for gas fees when Maker pays for destination network transfers.

Since gas fees are unstable, Orbiter will adjust fees based on the Gwei of the destination network to ensure that Orbiter’s fees are lower than the average level, but this adjustment is not frequent.

Six, Orbiter Advantages

1. Cross-chain Speed and Fees

Through https://chaineye.tools/bridge, we can check the speed and fees of some cross-chain bridges on the Ethereum L2.

If we transfer 1000 USDC from OP Chain/ARB Chain to ZK Chain, let’s look at the fees and speeds of these cross-chain bridges:

As we can see, Orbiter is the fastest, completing cross-chain transactions in approximately 20-45 seconds, while the second-ranked Meson takes 1-4 minutes.

And in terms of transaction fees, Orbiter ranks second, but the top-ranked Meson has a fee of 0, with a daily limit of 5 transactions/$5000 exempt from fees.

In the same scenario, let’s take a look at the time required by other cross-chain bridges:

Layerswap: 2-5 minutes, fee: 2.44U
bungee: 2-10 minutes, fee: 4.77U
cBridge: 5-20 minutes, fee: 4.62U

When performing cross-chain operations, speed and cost are both factors that we consider important. By comparing them, we can see that Orbiter is still very excellent in terms of overall speed and transaction fees, especially its cross-chain speed is much faster than other cross-chain bridges.

In the Orbiter cross-chain bridge, the time required for cross-chain transactions is generally around 30 seconds. The slowest is Ethereum mainnet, which takes about 45 seconds to cross to the Layer 2 network or vice versa. The fastest cross-chain is between BNB chain and ZK chain, which can be completed in as fast as 5 seconds. Other Ethereum Layer 2 cross-chain bridges generally take more than 2 minutes.

2. Security

In the Orbiter cross-chain protocol, decentralized anti-cheating and over-collateralization mechanisms prevent the risk of inaction by liquidity providers after receiving funds, ensuring the security of users’ funds and enhancing the security of the protocol.

In addition, Orbiter is built on Ethereum and inherits the security of Ethereum, so Orbiter has advantages in terms of fund security.

3. Active Users

You can check the number of active users of some cross-chain bridges through https://www.orbiter.finance/data.

According to the data statistics from the Orbiter L2 Data platform, Orbiter has advantages in terms of active users and user breadth.

4. Official Endorsement

StarkNET’s official website recommends Orbiter as the number one cross-chain bridge.

Zksync’s official website recommends Orbiter in the list of cross-chain bridges.

Optimism also recommends Orbiter cross-chain bridge in the ecosystem’s sub-projects of cross-chain bridges.

With official endorsement, Orbiter naturally gains credibility. Moreover, official recommendations will also bring many users to Orbiter.

5. L2 Data

In addition to cross-chain functionality, Orbiter has also launched an L2 Data (Data Dashboard).

L2 Data supports Arbitrum, Optimism, Starknet, and zkSync data, including metrics such as accounts and transactions, TVL, users and user age, active user ratio, new user ratio, interactions, and new contracts, etc.

Orbiter L2 Data is committed to providing more comprehensive, scientific, and effective on-chain data for individual investors, institutions, and developers in the Rollups ecosystem.

L2 Data is also a unique feature that sets Orbiter apart from other cross-chain bridges.

7. Future Outlook

1. Cancun Upgrade, L2 Breakout, Increased Cross-Chain Demand

According to statistics from the Orbiter L2 Data platform (https://www.orbiter.finance/data), the total number of transactions on Ethereum L2 has surpassed that of the Ethereum mainnet since the end of last year.

Currently, the total number of transactions on Ethereum L2 is more than three times that of the Ethereum mainnet, including a significant amount of interaction behavior for airdrop purposes.

However, even if some transactions are for airdrops, the data at least indicates the current development status of the Ethereum L2 ecosystem. After all, Layer2 networks have lower fees and higher scalability. More and more projects choose to build their projects on Ethereum Layer2 or migrate from other chains to Ethereum Layer2.

With the completion of the Ethereum Cancun upgrade (possibly by the end of the year, there is currently no exact time), the transaction costs on the Ethereum Layer2 network will be significantly reduced. When the transaction costs on Layer2 networks approach zero, it is likely to trigger a major breakout in the Ethereum Layer2 ecosystem.

As the Ethereum Layer2 ecosystem becomes more prosperous, the demand for cross-chain bridges will also increase significantly. With the advantages of the cross-chain bridge Orbiter, it will undoubtedly gain a larger market share.

2. Huge Potential of Orbiter X and Orbiter Protocol

According to Orbiter’s Roadmap, the Maker system and Orbiter X will be released in Q2-Q3, but the specific dates have not been determined yet.

Orbiter X is an enhanced version of Orbiter, providing a simple and secure platform for executing cross-chain and cross-asset transfers. Supported by a powerful Maker system and a decentralized cross-rollup bridge, these features make Orbiter X an ideal choice for anyone who wants to transfer assets between different networks quickly, securely, and cost-effectively.

According to the official Orbiter Medium introduction, Orbiter’s goal is not only to serve as an L2 cross-chain bridge but also to act as the infrastructure for Ethereum’s expansion. Orbiter aims to become a universal Ethereum protocol.

Orbiter Protocol, centered around Ethereum expansion, is driven by a series of cutting-edge features such as zero-knowledge algorithms, EIP-4337 (account abstraction), recursive proofs, and message synchronization. These features aim to promote better scalability, interoperability, and security, thereby improving the overall availability and adoption of the Ethereum network.

The transition from Orbiter to Orbiter Protocol reflects the platform’s commitment to enhancing the Ethereum ecosystem.

In the future, Orbiter will not only be a cross-chain bridge protocol, but also a general Ethereum base protocol, which undoubtedly expands our imagination for the future of Orbiter.

3. Expectations for the issuance of platform tokens

As we all know, although Orbiter has been online for more than two years and the project has developed quite well, Orbiter has not yet issued its native token, and the official has not disclosed any information about token issuance.

However, there have always been rumors about Orbiter issuing its native token. Due to the expectation of token issuance by the project party, many users use Orbiter for airdrops.

In short, with the explosion of Ethereum Layer2, the demand for cross-chain bridges will also increase dramatically. As a leader in the Layer2 cross-chain bridge segment, Orbiter, coupled with the project’s ambitious vision (to become an Ethereum base protocol), will definitely continue to develop better in the future. It may become a leader and standard setter in the Ethereum L2 cross-chain bridge field. Moreover, since the project has not yet issued its native token, Orbiter is a project that is worth our continuous attention.