1. Introduction

In recent years, blockchain technology has shown immense potential in fields like finance, supply chains, and the Internet of Things (IoT), thanks to its decentralized, immutable, and distributed ledger features. As blockchain projects continue to emerge rapidly, the need for interoperability between different blockchains has become more evident. Blockchains often act as isolated islands of information, lacking effective communication and collaboration, which severely limits further development and expansion of blockchain technology. Cross-chain technology emerged to break down the barriers between blockchains, enabling asset transfers, information exchange, and application collaboration across different blockchains, and has become key to moving blockchain technology from “isolated islands” to a “connected continent.”

Axelar Crypto, as a significant player in the cross-chain technology space, is committed to building a secure, efficient, and universal cross-chain communication network. Through its unique technological architecture and innovative solutions, Axelar supports interoperability between different blockchains and is poised to play a pivotal role in the multi-chain ecosystem.

2. Overview of Axelar crypto

2.1 Project Introduction

Axelar network is an innovative project dedicated to achieving seamless interoperability between blockchains. As a universal overlay network, it securely connects all blockchain ecosystems, applications, assets, and users to provide Web3 interoperability. In the world of blockchain, different blockchains are like isolated islands, and Axelar network acts as a bridge and highway connecting these islands, enabling assets, information, and applications to freely flow and interact across different blockchains.

Axelar network plays a crucial role in the cross-chain ecosystem. It not only supports bridging of any information/asset to enable asset transfers between different blockchains, such as moving tokens from Ethereum to the Polkadot ecosystem, but also facilitates cross-network execution of smart contracts and decentralized applications (dApps) for full-stack interoperability. Developers can build cross-chain applications based on the Axelar network, allowing users to conveniently access services and functions from multiple blockchains in a single application. By introducing the Generalized Message Passing (GMP) system, Axelar network goes beyond traditional bridging capabilities, enabling cross-chain transmission and receipt of various payloads such as function calls, data, wrapped assets, providing robust support for the development and innovation of cross-chain applications.

2.2 Development History

• 2020: The Axelar project was officially established, co-founded by Sergey Gorbunov and Georgios Vlachos. With team members leveraging their rich experience and deep technical background in the blockchain field, they began to build the Axelar network, aiming to solve the interoperability challenges between blockchains and build a solid infrastructure for the development of Web3.

• 2021 - 2022: The project entered a rapid development stage, completed multiple rounds of financing, and attracted attention and participation from many well-known investment institutions, including Binance, Polychain Capital, Coinbase Ventures, Dragonfly Capital,Crypto.com Capital, etc., with a total financing of US$113.8 million, which provides sufficient financial support for the project’s technology research and development, ecological construction and market promotion. In terms of technology, the Axelar network is built based on the Cosmos SDK, CometBFT and CosmWasm VM, adopts the delegated proof-of-stake (DPoS) consensus mechanism, establishes a decentralized validator network, a secure gateway contract, and a software development kit (SDK) for developer tools and APIs, and initially realizes the basic functions of cross-chain communication and asset transfer.

• 2023: Axelar network has made significant progress, connecting a large number of blockchains, exceeding 60, covering mainstream EVM networks such as Ethereum, BNB Chain, Polygon, as well as Layer 2 solutions like Base, Arbitrum, Optimism, and non-EVM ecosystems like Cosmos. There are over 600 interactive, collaborative, and integrated smart contracts, deep collaborations with leading projects such as dYdX, Vertex, PancakeSwap, further enhancing Axelar network’s influence and use cases in the cross-chain ecosystem. Axelar has introduced Inter-Blockchain Token Service (ITS) to enhance interoperability of all ERC-20 tokens on Ethereum-compatible chains; also conducted a Proof of Concept (POC) project with JPMorgan’s digital asset platform Onyx and alternative asset management firm Apollo involving Real World Assets (RWA), exploring the potential application of cross-chain technology in traditional finance.

• 2024: Axelar launched the Axelar Virtual Machine (AVM), a significant technological breakthrough. AVM enables developers to build a DApp once and run it on all chains, greatly reducing development costs and complexity, improving development efficiency, and providing strong support for the large-scale development and deployment of cross-chain applications. Axelar announced plans to interconnect Bitcoin, Hedera, and Polkadot ecosystems, with Bitcoin L2 network Stacks, open-source proof of stake blockchain Hedera, Moonriver Network, and privacy network Iron Fish as the first phase of the Axelar Interchain Amplifier pilot program, achieving one-click programmable interoperability, further expanding the cross-chain ecosystem of the Axelar network.

3. Technical Principles Analysis

3.1 Core Components and Functional Layer

3.1.1 Infrastructure Layer

• Dynamic Validator Network: The Axelar network adopts the Delegated Proof of Stake (DPoS) consensus mechanism, and its validator network is dynamic, with only the top 75 validators being in the active set. This parameter can be adjusted through on-chain governance. Validators play a crucial role in the network, responsible for generating new blocks, participating in multi-signature, and voting on the state of external chains. Token holders participate in the network’s consensus process by staking AXL in the validator’s delegation pool. This mechanism allows the Axelar network to efficiently achieve consensus, ensuring the security and stable operation of the network. At the same time, the dynamic validator network increases the decentralization of the network, reducing the risk of a single validator controlling the network.

• Cross-chain Gateway Protocol (CGP) and Gateway Components: The Cross-chain Gateway Protocol is a key component of the Axelar network, serving as a multiparty cryptographic overlay layer above connected chains. CGP is responsible for read and write operations between smart contracts to verify transactions. Axelar’s gateways are essential components that provide connectivity between networks and chains, where validators run nodes or light clients on these chains to read transaction information, write to the destination, and execute transactions. For example, when a user initiates a cross-chain transaction from Ethereum to Polkadot, validators read the transaction request on the Ethereum gateway, then validate and process it on the Axelar network, and finally execute the transaction on the Polkadot chain via the Polkadot gateway. This design enables Axelar to achieve secure communication and interaction between different blockchains, providing a solid foundation for cross-chain applications.

3.1.2 Functional Layer - General Message Passing (GMP) System

The General Messaging Protocol (GMP) system is one of the core features of the Axelar network, going beyond the traditional bridging function of transferring wrapped assets only. GMP allows for cross-chain transmission and reception of various payloads, including function calls, data, wrapped assets, etc. Through GMP, developers can implement more complex interaction logic between different blockchains. For example, in DeFi applications, users can invoke functions of lending protocols based on the Cosmos chain on Ethereum, enabling cross-chain lending; in the NFT field, users can purchase NFTs on one chain and then display or trade them on another chain. The operation of the GMP system is based on Axelar’s decentralized network and gateway smart contracts. When an application on the source chain initiates a cross-chain message, the message is sent to the gateway smart contract of the Axelar network. The gateway smart contract forwards the message to the validators of the Axelar network, who verify and reach consensus on the message. Once a consensus is reached, the message is forwarded to the gateway smart contract on the target chain and then received and processed by the application on the target chain. This mechanism ensures the secure and reliable transmission of cross-chain messages, providing strong support for building full-stack interoperable cross-chain applications.

3.2 Cross-chain Communication and Trading Mechanism

Axelar’s cross-chain communication and transaction mechanism is the key to achieving interoperability between different blockchains. When users or applications initiate cross-chain transactions, a transaction request is first created on the source chain, which includes detailed information such as asset type, quantity, destination chain address, etc. This transaction request will be broadcast to the validator nodes of the Axelar network. The validator nodes will monitor the Axelar gateway contract on the source chain. Once a new transaction request is detected, it will be recorded and verified on the Axelar network. The verification process includes checking the legality of the transaction, the validity of the signature, etc. After the verification, the validators will vote on the transaction, and when a certain number of validators agree, the transaction will reach consensus on the Axelar network.

After reaching consensus, the Axelar network will forward the transaction request to the target chain through the gateway contract on the target chain. The gateway contract on the target chain will execute corresponding operations based on the content of the request, such as asset transfer and smart contract invocation. Throughout the process, the Axelar network acts as a trusted third party, responsible for verifying and forwarding cross-chain transactions to ensure their security and reliability. In addition, Axelar also provides a series of tools and services, such as cross-chain Gas payment service, which eliminates concerns about Gas fees on different chains, greatly enhancing the convenience and user experience of cross-chain transactions. For example, when a user initiates a cross-chain transaction from Ethereum to BNB Chain, the Axelar network will automatically handle the conversion of Gas fees between Ethereum and BNB Chain, allowing the user to complete the entire cross-chain transaction using Ethereum’s Gas fees.

3.3 Security Measures

Axelar has adopted a variety of security measures to ensure the security and stability of the network. At the consensus level, a two-stage voting mechanism is used to mitigate the risk of voting power being concentrated in the hands of a few leaders in the PoS consensus mechanism. The voting power of validators does not increase linearly with the stake, and to increase the voting power, they must exponentially increase the staked amount, making it difficult for validators to control the network through centralized stakes. Axelar applies network functionality to pause traffic from malicious interconnecting chains, preventing malicious attacks from damaging the network. At the contract level, contract restrictions are used to limit the maximum amount that can be transferred within a certain period of time, avoiding security risks caused by large abnormal transactions. The radial network topology of the Axelar network also enhances the efficiency of these security features. During a multi-chain collapse, cross-chain exchange services built using Axelar can maintain security and liquidity by isolating damaged connections. For example, when a connected chain is attacked due to a security vulnerability, the Axelar network can quickly identify and suspend the connection to that chain, preventing the attack from spreading to other chains, while ensuring that transactions on other normal connected chains continue safely. Axelar also frequently changes keys to reduce the risk of key compromise, further enhancing the security of the network.

4. Market Performance Analysis

4.1 Financing History and Valuation

Axelar is highly favored by investment institutions in its development. As of March 5, 2024, it has successfully completed 5 rounds of financing, with a total financing amount of up to 1.138 billion US dollars. In July 2021, Axelar completed a $16.5 million Series A financing led by Polychain Capital, which provided Axelar with sufficient funds for technology research and development and team building at an early stage, laying a solid foundation for its subsequent development, attracting more developers and partners’ attention, and promoting the project’s initial development.

In February 2022, Axelar completed a $35 million Series B financing, with a valuation of $1 billion. The investment lineup was strong, including Dragonfly Capital, Polychain Capital, North Island Ventures, Rockaway Blockchain Fund, Cygni Capital, Lemniscap, Olive Tree Capital, Blockchange Ventures, Node Capital, and well-known angel investors Waikit Lau and Gokul Rajaram. The success of the Series B financing not only brought a large amount of funds to Axelar for expanding its business, strengthening market promotion, and ecosystem construction, but also greatly enhanced the project’s visibility and industry influence, marking the broad recognition of Axelar’s potential in the cross-chain field.

During the fundraising process, Axelar has attracted many powerful investment institutions, which not only provide sufficient funds for the project but also bring rich industry resources and professional guidance. An analysis of Axelar’s fundraising history reveals that each round of fundraising is accompanied by important development milestones for the project, such as technological breakthroughs and ecosystem expansion, forming a good interactive relationship between fundraising and project development. The infusion of substantial funds enables Axelar to continuously improve its technical architecture, enhance the efficiency and security of cross-chain communication; at the same time, the resources and endorsements from investment institutions also help Axelar attract more partners and users, driving the rapid development of its ecosystem. Fundraising also has a significant impact on Axelar’s valuation. As the project continues to develop and fundraising rounds progress, Axelar’s valuation gradually increases, reflecting the market’s high expectations for its future prospects.

4.2 Price Trend and Market Cap Changes

AXL is the native token of the Axelar network and plays an important role in the Axelar ecosystem. The price trend of AXL shows significant volatility. During the period of 2021-2022, as the popularity of the Axelar project continued to rise, completing multiple rounds of financing and establishing partnerships with multiple blockchain networks, the price of AXL saw a significant uptrend. In 2022, the price of AXL once broke through $2, reaching a historically high level. This was mainly due to the market’s optimistic expectations for Axelar’s cross-chain technology prospects, as well as the overall bullish sentiment in the cryptocurrency market. With a large influx of funds into the cryptocurrency market, investors have a strong interest in projects that are innovative and have development potential. Axelar, as an important project in the cross-chain field, has been sought after by investors, thereby driving the rise in AXL’s price.

In the second half of 2022 to 2023, as the overall cryptocurrency market entered a bear market, the price of AXL also suffered a significant decline. Market panic spread, and investors sold off assets, leading to a sharp drop in the price of AXL. Some negative market news, such as the exposure of some cryptocurrency projects and the tightening of regulatory policies, also had a detrimental impact on the price of AXL. Since the second half of 2023, with Axelar continuously making technological progress, such as the further improvement and application of the Generalized Message Passing (GMP) function, and the continued increase in the number of connected blockchains, the price of AXL has gradually started to rise again, demonstrating the market’s re-acknowledgment of the value of the Axelar project.

The fluctuation of AXL’s price and market value is influenced by a variety of factors. The overall market situation is an important factor. During a bull market in the cryptocurrency market, AXL’s price often rises with the market; while in a bear market, the price is more likely to be dragged down. The project’s own development also has a key impact on the price and market value. Every technological breakthrough, new partners joining, and the expansion of ecosystem applications by Axelar could be positive factors driving the price up; conversely, if the project encounters bottlenecks or negative events, the price may fall. Market sentiment and investor expectations also greatly influence the fluctuation of AXL’s price and market value. When investors are confident in Axelar’s future, demand for AXL increases, driving the price up; but when market sentiment is pessimistic, investors may reduce holdings or sell AXL, leading to a price drop.

4.3 Comparison with competitors

In the cross-chain technology field, Axelar faces competition from multiple projects, among which Wormhole and LayerZero are well-known competitors. In terms of connecting a number of blockchains, Axelar has performed well, having connected over 60 blockchains to date, covering mainstream EVM networks such as Ethereum, BNB Chain, Polygon, as well as Layer 2 solutions like Base, Arbitrum, Optimism, and non-EVM ecosystems like Cosmos. In comparison, Wormhole and LayerZero have connected relatively fewer blockchains. Axelar has a certain advantage in this respect, being able to provide users with a wider range of cross-chain services to meet the needs of different users for asset transfer and information interaction across multiple blockchains.

In terms of trading volume, according to the report ‘Analyzing Cross-Chain Interoperability’ released by Binance Research Institute in February 2024, Axelar’s trading volume in the past 30 days is twice that of Wormhole and nearly eight times that of Chainlink CCIP. Axelar’s trading volume advantage is mainly attributed to the implementation of its General Message Passing (GMP) functionality, which supports complex cross-chain function calls and state synchronization, enabling developers to build a more diverse range of cross-chain applications, attracting more users to engage in cross-chain transactions. Wormhole and LayerZero, on the other hand, have different functional characteristics compared to Axelar. Wormhole is a general messaging protocol that focuses on enabling App connectivity across multiple blockchain ecosystems, while LayerZero focuses on providing a simple cross-chain interoperability solution. The difference in trading volume compared to Axelar reflects Axelar’s competitiveness in meeting market trading demands in terms of its technology and functionalities.

From the perspective of technical principles and security, Axelar adopts the Delegated Proof of Stake (DPoS) consensus mechanism, and ensures the security and reliability of cross-chain communication through dynamic validator networks and cross-chain gateway protocols; at the same time, it enhances the security of the network by employing a secondary voting mechanism, contract restrictions, frequent key changes, and other measures. Wormhole employs a validation mechanism based on oracles, relying on a set of validator nodes to verify cross-chain messages; LayerZero achieves cross-chain communication by introducing super light nodes and relays, with its security based on cryptography and economic incentives. Axelar’s technical principles and security measures differ to some extent from its competitors, providing users with different security guarantees and user experiences. For example, Axelar’s secondary voting mechanism reduces the risk of centralization of voting rights in the PoS consensus mechanism, making the network more decentralized and secure.

5. Ecological Applications and Cooperation

5.1 Connected Blockchains and Integration Projects

Axelar has connected to over 60 blockchains, including mainstream EVM networks such as Ethereum, BNB Chain, Polygon, as well as Layer 2 networks like Base, Arbitrum, Optimism, and many non-EVM ecosystems like Cosmos. This extensive network of connections has laid a solid foundation for the development of the Axelar ecosystem. By connecting to numerous mainstream blockchains, Axelar is able to aggregate the strengths and resources of different blockchains. Ethereum boasts a rich DeFi application and developer community, BNB Chain has efficient transaction processing capabilities and a large user base, while Cosmos is known for its unique cross-chain architecture and ecosystem diversity. After connecting to these blockchains, Axelar enables asset transfers, information exchange, and application collaboration across different ecosystems, promoting resource sharing and integration, and providing users with a greater range of services and choices.

Axelar has integrated more than 600 smart contracts for interaction, cooperation, and integration, including leading projects in DeFi, public chains, Layer 2, and other tracks, such as dYdX, Vertex, PancakeSwap, etc. These integrated projects greatly enrich Axelar’s ecological application scenarios. In the field of DeFi, through integration with projects like dYdX, Axelar has achieved cross-chain lending, trading, and other functions, allowing users to freely allocate assets between different blockchains, participate in various DeFi activities, and improve the efficiency and liquidity of funds. In the NFT field, Axelar’s cross-chain capabilities enable NFTs to be transferred and displayed between different blockchains, expanding the market scope and circulation of NFTs, bringing new opportunities for the development of NFTs. The addition of these integrated projects has attracted more users and developers to enter the Axelar ecosystem, further driving the prosperity and development of the ecosystem.

5.2 Analysis of Main Cooperation Cases

5.2.1 Collaborate with JPMorgan and Apollo’s RWA project

In November 2023, Axelar, in collaboration with J.P. Morgan’s digital asset platform Onyx and alternative asset management firm Apollo, conducted a proof of concept (POC) project involving real-world assets (RWA). In this proof of concept, blockchain technology was used to execute transactions and achieve automated portfolio management of tokenized financial assets (RWA). J.P. Morgan’s digital asset platform Onyx leveraged Axelar’s cross-chain technology to achieve interoperability with private and permissioned Provenance Blockchain instances, which currently lock up $9 billion in real-world financial asset value on-chain, including funds, loans, and private equity.

Axelar’s cross-chain infrastructure protocol connects value and communication to multiple blockchains in Web3 through a secure, programmable network and hybrid system, integrating on-chain networks with off-chain systems. One of the most innovative parts of this proof of concept collaboration is that the investment manager changes the investment model by replacing a private Apollo equity fund with another Apollo private equity fund, automatically reconfiguring 100 portfolios following the strategy using a rebalancing module, including order placement and settlement processes, leveraging the unique composability and automation features of blockchain while significantly reducing human errors.

The collaboration between Axelar, JPMorgan, and Apollo is of great significance for its development in the RWA field. This collaboration allows Axelar to enter the traditional financial sector, showcasing the potential application of its cross-chain technology in tokenizing real-world assets and portfolio management, opening up new market space for Axelar. By partnering with traditional financial giants like JPMorgan and Apollo, Axelar has gained more industry recognition and trust, helping to attract more attention from and adoption by traditional financial institutions for its cross-chain technology, driving the development of the RWA market. This collaboration also provides valuable practical experience for Axelar, helping it further optimize its technology and solutions to better meet the needs of the traditional financial market.

5.2.2 Cooperation with Microsoft

Axelar has partnered with Microsoft to provide blockchain interoperability solutions. According to TheBlock, this partnership will allow developers to use cross-chain software tools provided by Axelar on Microsoft’s cloud marketplace – Azure Marketplace in the future, such as the Axelar JS Development Suite, which automates multi-chain deployment functions, to further integrate applications on different blockchains. Daniel An, Director of Web3 Business Development at Microsoft, said he is excited to partner with Axelar to help organizations adopt blockchain technology and transform the way they operate by leveraging the strengths and expertise of both parties. Sergey Gorbunov, co-founder of Axelar, believes that this collaboration will allow Axelar to explore the field of artificial intelligence (AI) and imagine the chemistry that AI technology can have with blockchain, and based on the collaboration with Microsoft, it will be able to explore new areas of Web3, such as the blockchain-enabled OpenAI service and the integration of AI into future Web3 applications.

The collaboration between Axelar and Microsoft has multifaceted implications. For Axelar, leveraging Microsoft’s strong influence and extensive user base in the cloud computing and enterprise services fields, Axelar’s cross-chain technology and solutions can reach more enterprise users and developers, accelerating its application and promotion in the enterprise market. Through collaboration with Microsoft to explore the combination of AI and blockchain, Axelar is expected to explore new technological applications, enhance its technological competitiveness and innovation capabilities. For Microsoft, Axelar’s cross-chain technology provides important support for its layout in the blockchain field, enriches the content of blockchain services on the Azure Marketplace, enhances Microsoft’s service capabilities in the Web3 field, helps Microsoft meet the needs of enterprise customers in blockchain interoperability, and enhances its competitiveness in the enterprise blockchain market. This collaboration will also have a positive demonstration effect on the entire blockchain industry, promoting more technological integration and innovation, and driving the application and development of blockchain technology in a wider range of fields.

5.3 Ecological Project Classification and Development Status

Projects in the Axelar ecosystem can be divided into multiple categories, each with its own characteristics. In the DeFi field, Axelar has deep integration with many DeFi projects such as dYdX, Vertex, PancakeSwap, etc. These projects utilize Axelar’s cross-chain technology to achieve functions such as cross-chain lending, trading, liquidity mining, etc. dYdX has achieved asset interoperability between different blockchains through Axelar, allowing users to use dYdX’s lending and trading services on multiple chains such as Ethereum, Polygon, etc., significantly improving the efficiency and liquidity of funds. Vertex utilizes Axelar’s General Message Passing (GMP) functionality to achieve a cross-chain limit order book, providing users with a more efficient trading experience. DeFi projects are developing rapidly in the Axelar ecosystem, with increasing trading volume and user numbers, becoming an important part of the Axelar ecosystem.

In the field of wallets, Axelar has cooperated with some wallet projects to provide users with more convenient cross-chain asset management services. These wallet projects integrate Axelar’s cross-chain technology, allowing users to manage assets on multiple blockchains in one wallet, enabling cross-chain transfers and transactions of assets. Users can easily transfer tokens from Ethereum to BNB Chain in a wallet that supports Axelar, without the need for complicated operations and switching between multiple wallets. The development of wallet projects provides users in the Axelar ecosystem with a better user experience, promoting the promotion and popularization of the Axelar ecosystem.

Axelar also collaborates with traditional enterprises to explore the application of blockchain technology in traditional industries. The cooperation with JPMorgan Chase and Apollo on the RWA project applies blockchain technology to the portfolio management of real-world assets. This collaboration model provides traditional enterprises with new business models and innovative ideas, helping to drive the digital transformation of traditional enterprises. Although the current number of cooperation projects with traditional enterprises is relatively small, the development potential is enormous. With the continuous maturity of blockchain technology and the continuous expansion of application scenarios, it is expected that more traditional enterprises will cooperate with Axelar in the future to jointly explore the application of blockchain technology in various industries.

6. Outlook for Future Development

6.1 Roadmap Interpretation

Axelar’s roadmap released at the end of January 2024 shows that its next development will closely revolve around the Axelar Virtual Machine (AVM). The development plan for AVM is of great significance, as it will become a development platform for open-source tools, providing support for the development of various DApps. This means that developers can use various development tools and frameworks based on AVM to develop feature-rich and user-friendly decentralized applications, attracting more developers and users to enter the Axelar ecosystem, further promoting the prosperity and development of the ecosystem. For example, developers can use AVM to develop cross-chain financial applications, enabling efficient management and transactions of assets between different blockchains.

Another important goal is to achieve permissionless interchain links to any chain through the Interchain Amplifier. This will greatly expand Axelar’s network effects, connecting it to hundreds of blockchains such as Ethereum Layer 2. Permissionless linking means that any eligible blockchain can easily access the Axelar network without cumbersome approval processes, significantly enhancing the openness and inclusivity of the Axelar network, attracting more blockchain projects to collaborate with Axelar, and achieving broader cross-chain interoperability. This also helps Axelar to gain a more favorable market position in the cross-chain field, enhancing its influence in the multi-chain ecosystem.

Expanding the use cases of Interchain Tokens is also one of the key focuses of planning. Axelar will extend its availability on all connected chains, which will further enhance the value and utility of Interchain Tokens. For example, between different blockchains, Interchain Tokens can serve as universal asset certificates, enabling easier asset transfers and transactions; in DeFi applications, Interchain Tokens can be used as collateral or trading pairs, enriching the functionality and gameplay of DeFi applications.

Adding a Gas burning mechanism to the AXL token to achieve monetary contraction to protect the Axelar network will have a significant impact on the economic model of the AXL token. The Gas burning mechanism can reduce the circulation of AXL tokens. As network transactions increase, more AXL tokens are burned, thereby increasing the scarcity of tokens and positively supporting the token price. This also helps incentivize users and developers to use the Axelar network more reasonably and improve the efficiency of network resources.

Axelar also plans to integrate consensus mechanisms from different chains, including Solana, Stellar, and Move-based chains such as Aptos and Sui. Different blockchains adopt different consensus mechanisms, each with its own characteristics and advantages. Integrating these consensus mechanisms can fully leverage the strengths of different blockchains, improve the compatibility and adaptability of the Axelar network, and provide users with a wider range of choices and higher-quality services. In terms of performance, Solana’s high throughput consensus mechanism can bring faster transaction processing speed to the Axelar network; in terms of security, Aptos and Sui’s consensus mechanisms based on the Move language can provide stronger security guarantees for smart contracts.

6.2 Potential Risks and Challenges

In terms of market competition, the cross-chain technology field is highly competitive, and Axelar faces challenges from many competitors. Projects such as Wormhole and LayerZero also have strong technical strength and market influence in the cross-chain field. These competitors may engage in fierce competition with Axelar in terms of technological innovation, market expansion, and ecosystem construction. If Axelar cannot continuously innovate and improve technical performance and service quality, it may be at a disadvantage in market competition, leading to a decrease in market share. Some emerging cross-chain projects may also pose a potential threat to Axelar with unique technology or business models.

Technical security has always been an important challenge for blockchain projects. Although Axelar employs a variety of security measures, such as a two-vote mechanism, contract restrictions, frequent key replacement, etc., it is still difficult to completely eliminate security risks. Smart contract vulnerabilities can be exploited by hackers, resulting in the theft of user assets or the collapse of the network; The security of the consensus mechanism can also be attacked, affecting the normal operation of the network. As the number of blockchains connected to Axelar continues to grow, so does the complexity of the network, which may introduce new security risks, and how to secure cross-chain communication will be an ongoing challenge for Axelar.

The uncertainty of regulations and policies is also one of the risks that Axelar faces. The blockchain industry is greatly influenced by the regulations and policies of various countries. Different countries and regions have different attitudes and policies towards blockchain and cryptocurrencies. Some countries may have a positive and open attitude towards blockchain technology, encouraging innovation and development; while others may impose strict restrictions or bans on cryptocurrency trading. If Axelar cannot timely understand and adapt to the regulations and policies of different countries and regions during its global expansion, it may face legal risks, affecting the normal operation of the project. Changes in regulations and policies may also require adjustments to Axelar’s business model and operational strategies, increasing operational costs and uncertainties for the project.

6.3 Development Prospects Forecast

Based on Axelar’s current technical strength, market performance, and development plan, it has broad development prospects in the cross-chain field. In terms of market share, as Axelar continues to improve its technology and expand its ecosystem, the number of connected blockchains and integrated projects will continue to increase, attracting more users and developers, thereby enhancing its share in the cross-chain market. Axelar has connected more than 60 blockchains, and in the future, through the Interchain Amplifier to achieve permissionless connection to any chain, the number of connected blockchains may grow exponentially, further consolidating its position in the cross-chain field.

In terms of application expansion, Axelar will achieve more extensive applications in multiple areas such as DeFi, NFT, and traditional enterprises. In the DeFi field, Axelar’s cross-chain technology will help to achieve more efficient cross-chain lending, trading, liquidity mining, and other functions, providing stronger infrastructure support for DeFi applications and driving further development of the DeFi market. In the NFT field, Axelar can realize the free transfer and display of NFTs across different blockchains, expanding the market scope and circulation of NFTs, bringing new opportunities for the development of NFTs. Collaboration between Axelar and traditional enterprises will also continue to deepen, promoting the application of blockchain technology in traditional industries, such as in supply chain finance, logistics, copyright protection, etc., helping traditional enterprises to achieve digital transformation, improve operational efficiency, and reduce costs. With the continuous development of blockchain technology and the sustained growth in the market’s demand for cross-chain capabilities, Axelar is expected to become a leader in the cross-chain field, making important contributions to driving the development of multi-chain ecosystems.

Conclusion

Considering the risks and returns comprehensively, investors are advised to be cautious when investing in Axelar. For investors with high risk tolerance, in-depth understanding of the blockchain industry, and optimism about the development prospects of cross-chain technology, it is appropriate to allocate a certain proportion of AXL tokens, but attention should be paid to factors such as the project’s technological development, market competition, and regulatory policy changes. Investors should also diversify their asset allocation, spread investment risks, and avoid over-concentration in a single project.