What is Cross-Chain?

Cross-chain refers to the technology that enables the interoperability of assets, data, or information between different blockchain networks. As decentralized distributed ledgers, each blockchain operates with its own consensus mechanism, encryption algorithm, and data structure. The blockchain world can be likened to a group of islands, where each public chain is an independent digital continent. Cross-chain technology breaks this isolation by allowing nodes from different chains to verify and execute cross-chain transactions through protocol or application layer designs.

The core value of cross-chain technology lies in achieving “interoperability.” For instance, users can transfer Bitcoin to the Ethereum network to participate in DeFi applications, or allow smart contracts on the Solana chain to trigger asset transfers on the Polkadot chain. Essentially, cross-chain establishes a channel for trust transfer between chains through cryptographic verification, consensus mechanism compatibility, and collaborative contract logic.

Why is Cross-Chain Needed?

By 2025, blockchain networks are expected to experience unprecedented expansion. According to incomplete statistics, from nearly 100 public chains and a total value locked (TVL) of only a million dollars in DeFi during the “public chain year” of 2018, the number of active blockchains has grown to 367 by 2025, carrying over $314 billion in on-chain assets, with more than $124 billion locked in various DeFi protocols.
According to a report by Research Nester, the blockchain interoperability market is projected to reach $8.48 billion by the end of 2037, with a compound annual growth rate (CAGR) of 27.1% from 2025 to 2037.

How Cross-Chain Works

The core of cross-chain technology is to establish a trusted value channel, and the main mechanisms can be categorized into three types.

Lock and Mint

The lock and mint model is the most common mechanism, where assets are mapped across chains through smart contracts. When a user needs to bring Bitcoin into the Ethereum ecosystem, the asset on the Bitcoin network is locked in a multi-signature contract, while a 1:1 pegged WBTC token is minted on Ethereum. This mechanism is akin to a bank issuing a letter of credit, where the original asset is frozen, and the wrapped asset on the target chain has full liquidity. Wrapped Bitcoin (WBTC) is a typical example, managed by 150 custodial nodes that hold the locked BTC, with a market cap exceeding $10 billion, supporting 85% of BTC-related DeFi transactions on Ethereum.

Burn and Mint

The burn and mint mechanism employs a closed-loop design, commonly used for asset transfers between homogeneous blockchains. In the Inter-Blockchain Communication (IBC) protocol of the Cosmos ecosystem, when a user transfers ATOM tokens from the Cosmos Hub to the Osmosis chain, the original ATOM on the source chain is burned, and the target chain mints new tokens after validating the transaction’s validity through light clients. This mechanism does not rely on third-party custody but requires compatible consensus verification systems between the blockchains.

Lock-Unlock

The lock-unlock mechanism enables decentralized cross-chain asset transfers through atomic swaps. When a user locks assets on Network A, the system generates cryptographic proof and triggers a smart contract, while simultaneously creating corresponding mapped assets on Network B. During this process, the original chain’s assets are frozen through a Hash Time-Locked Contract (HTLC), ensuring that double spending or withdrawal operations cannot occur on the original network.

THORChain’s RUNE cross-chain exchange protocol is a typical representative. When a user exchanges BTC for ETH, the system establishes trading conditions on both chains simultaneously through HTLC: the Bitcoin network locks the asset to be transferred, and the Ethereum network sets a receiving address. Only when both transactions are completed within the agreed timeframe will the lock be released. This mechanism completely removes intermediaries and does not require additional trust assumptions, but it does require robust liquidity pool support.

Types of Cross-Chain

Cross-chain can be categorized based on verification methods into three types:

External Verification

External verification involves introducing a group of independent external validators (witnesses) to verify cross-chain messages, using mechanisms such as multi-party computation (MPC), oracle networks, or threshold multi-signatures to reach consensus. This approach requires additional trust assumptions.
The advantage of this solution lies in its low implementation cost and strong multi-chain adaptability, making it a mainstream choice today, such as Multichain and Wormhole based on PoA, Axelar and Hyperlane based on PoS, or LayerZero based on oracles. However, the introduction of new trust assumptions poses security risks. For instance, the Ronin Bridge lost $625 million in 2022 due to the theft of a 5/8 validator private key, and Wormhole also suffered a loss of 12,000 ETH in 2022 due to a signature vulnerability.

Native Verification

Native verification relies on the blockchain’s inherent verification capabilities, allowing light clients to directly verify external chain transactions. A typical example is the IBC protocol of Cosmos: each chain runs a light client that tracks the block headers of other chains, enabling real-time verification of transaction packages’ block header information and Merkle proofs. This mechanism is akin to countries establishing embassies to independently verify documents, but it requires consensus compatibility between chains. This type of solution is highly secure but demands that the underlying chains support light clients or custom protocols.

Local Verification

Local verification is based on a localized trust model, such as hash time locks, allowing users to perform atomic swaps directly across chains. For example, users of the Bitcoin Lightning Network can set hash locks and timeout conditions, requiring both parties to complete the key exchange within a specified time; otherwise, the assets are automatically returned. This model does not require intermediaries but only supports simple asset exchanges and cannot handle complex contract calls.

Challenges of Cross-Chain Technology

Security risks remain the primary threat. The coupling of components in cross-chain protocols expands the attack surface, with smart contract vulnerabilities being the most critical threat. For example, in 2021, Poly Network was hacked due to a flaw in contract authorization logic, resulting in a loss of $600 million, and in 2022, Wormhole lost $325 million due to a signature verification vulnerability. According to SlowMist statistics, cross-chain bridge security incidents have led to losses exceeding $1.7 billion since 2021, reflecting systemic weaknesses in the industry’s attack defense capabilities.

Technical implementation faces multidimensional challenges. In the decentralized direction, while some projects reduce trust assumptions through oracle networks and on-chain light node verification, smart contract vulnerabilities can still undermine the underlying security guarantees (e.g., Nomad Bridge was attacked due to a code logic error). In terms of interoperability, differences in consensus mechanisms, transaction formats, and state verification rules among different blockchains complicate the atomic design required for cross-chain message transmission, and the current lack of unified standards exacerbates protocol fragmentation. Scalability issues are also significant, as the verification costs of cross-chain transactions and network throughput are difficult to balance; for instance, asset bridging between Ethereum and high-throughput chains often encounters efficiency bottlenecks due to gas fluctuations.

User experience and governance challenges urgently need to be addressed. The multiple signature confirmations, long locking periods, and fluctuating fees involved in cross-chain operations significantly raise the usage threshold for ordinary users. In terms of governance, the upgrade mechanisms, node incentive models, and crisis response processes of decentralized bridge protocols often lack transparency. The 2022 attack on the Harmony Horizon Bridge, due to the centralized staking of governance tokens, exposed such flaws.

Conclusion

Cross-chain technology is evolving from early asset bridging to universal message passing. With the maturation of technologies such as zero-knowledge proofs and light client verification, true decentralized cross-chain capabilities may be realized in the future. However, at this stage, a balance between security and efficiency must be sought: while native verification is secure, it has a high development threshold; external verification is convenient but poses significant risks.

Cross-chain is not only a technological breakthrough but also a transformation of production relationships. It shifts blockchain from “competition” to “collaboration,” providing the underlying support for scenarios such as the metaverse and on-chain finance. Just as the internet connects global networks through the TCP/IP protocol, cross-chain is poised to become the universal protocol for the Web3 value internet.