"𝑊𝑒 𝑑𝑜 𝑛𝑜𝑡 𝑛𝑒𝑒𝑑 𝑏𝑟𝑖𝑑𝑔𝑒𝑠 𝑖𝑛 𝑡𝘩𝑒 𝑚𝑜𝑑𝑢𝑙𝑎𝑟 𝑓𝑢𝑡𝑢𝑟𝑒 𝑤𝘩𝑒𝑟𝑒 𝑤𝑒 𝑎𝑟𝑒 𝘩𝑒𝑎𝑑𝑒𝑑"

"𝐹𝑟𝑎𝑔𝑚𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑙𝑖𝑞𝑢𝑖𝑑𝑖𝑡𝑦 𝑤𝑖𝑙𝑙 𝑘𝑖𝑙𝑙 𝑡𝘩𝑒 𝑚𝑢𝑙𝑡𝑖-𝑟𝑜𝑙𝑙𝑢𝑝 𝑤𝑜𝑟𝑙𝑑 𝑤𝑒 𝑤𝑖𝑙𝑙 𝑠𝑜𝑜𝑛 𝑒𝑥𝑖𝑠𝑡 𝑖𝑛, 𝑏𝑟𝑖𝑑𝑔𝑒𝑠 𝑎𝑟𝑒 𝑎 𝑛𝑒𝑐𝑒𝑠𝑠𝑖𝑡𝑦"

If you've dug your toes into the state of cross-chain DeFi, you've likely experienced using bridges and may be aware of the complexities associated with them.

Perhaps, you've realized they play an integral part in the state of unifying liquidity in our current ecosystem.

Both parts are equally true...

In today's post, in collaboration with The Rollup, we are going to take you on a journey of the future of interoperability in crypto and provide some valuable insights for the pressing topic at hand.

𝐇𝐨𝐰 𝐁𝐫𝐢𝐝𝐠𝐞𝐬 𝐅𝐢𝐭 𝐈𝐧𝐭𝐨 𝐭𝐡𝐞 𝐌𝐮𝐥𝐭𝐢-𝐑𝐨𝐥𝐥𝐮𝐩 𝐀𝐧𝐝 𝐌𝐨𝐝𝐮𝐥𝐚𝐫 𝐁𝐥𝐨𝐜𝐤𝐜𝐡𝐚𝐢𝐧 𝐓𝐡𝐞𝐬𝐢𝐬

Rollups and modular designs help blockchains scale.

However, scaling via rollups and specialized modular layers also brings challenges.

First, lets understand what "modular" means:

The key difference between monolithic and modular chains is seen below, where the chain is separated into three different "layers" in which different technologies can be "inserted" to lower costs, scale throughput, increase interoperability, or create more configurable, decentralized systems.

At this point in development, its all but agreed by developers and builders that modular tech beats monolithic in the long term.

𝐒𝐨, 𝐢𝐭𝐬 𝐡𝐞𝐫𝐞 𝐭𝐨 𝐬𝐭𝐚𝐲.

With that understanding, let’s dive into how the role of bridges will be any different in a multi-rollup, modular ecosystem compared to what we have today.

𝐖𝐡𝐲 𝐰𝐞 𝐦𝐢𝐠𝐡𝐭 𝐧𝐨𝐭 𝐧𝐞𝐞𝐝 𝐦𝐚𝐧𝐲 𝐛𝐫𝐢𝐝𝐠𝐞𝐬:

1. Trust-minimized cross-chain communication is possible across rollups with a common consensus and data availability (DA) layer, removing the need for third-party bridges for inter-rollup connectivity.

Such rollups will leverage the same validator set for 1) establishing the order and validity of transactions and 2) storing all the data (in a compressed form) so that it’s available for verifying transactions and reconstructing the state of the rollup.

Moreover, these rollups will maintain a native bridge with the DA layer, which will serve as a central hub linking all these chains together.

As a result, the rollups will be part of an ecosystem where there isn’t a need for each rollup to form individual bridges with each other in order to facilitate cross-rollup messaging or liquidity transactions.

This is similar to how Ethereum acts as the central hub between rollups like Arbitrum, Optimism, Base, and zkSync.

However, such a system is limited in functionality (number of tokens support, speed, chains connected) and there’s still a case to be made for messaging protocols for industry-wide connectivity, which we will explore further in the later sections.

2. Shared sequencers can make cross-rollup interoperability faster and cheaper.

Rollups with the same shared sequencer can have synchronous composability with each other as the sequencer can order transactions in a way that they execute at the same time across multiple rollups. It is important to note here that inclusion of of txs across rollups is not the same as execution.

Furthermore, Polymer Labs contributed that the order and inclusion is not the same as defining messaging semantics (e.g IBC). Interoperability between rollups (messaging) is a separate process from the sequencer tx ordering and batching.

𝐋𝐞𝐭’𝐬 𝐠𝐨 𝐚𝐡𝐞𝐚𝐝 𝐡𝐨𝐰 𝐬𝐡𝐚𝐫𝐞𝐝 𝐬𝐞𝐪𝐮𝐞𝐧𝐜𝐞𝐫𝐬 𝐜𝐚𝐧 𝐦𝐚𝐤𝐞 𝐢𝐧𝐭𝐞𝐫𝐨𝐩 𝐟𝐚𝐬𝐭𝐞𝐫 𝐚𝐧𝐝 𝐜𝐡𝐞𝐚𝐩𝐞𝐫 𝐞𝐱𝐩𝐥𝐚𝐢𝐧 𝐯𝐢𝐚 𝐚𝐧 𝐞𝐱𝐚𝐦𝐩𝐥𝐞:

Suppose Alice, a user on Rollup A, wants to sell an NFT to Bob, a user on Rollup B, in exchange for some ETH.

The shared sequencer processes Alice's transaction. It simultaneously updates the state of both Rollup A and Rollup B to reflect the transfer of the NFT from Alice to Bob, and the transfer of ETH from Bob to Alice.

Thus, shared sequencers can guarantee rollups have transactions included in the same block reducing the reliance on bridges to order and execute transactions across rollups. This might result in lesser bridges being utilized for cross-rollup interactions connected via a shared sequencer.

3. Zk-rollup ecosystems such as the one envisioned by Sovereign Labs enable the inter-connected rollups to be interoperable with each other out of the box using a novel bridging technique based on proof aggregation.

While common DA layers, shared sequencers and zk-rollup ecosystems reduce the need for third-party bridges in some cases, there are strong reasons to believe that there will be a wide variety of bridging solutions in the modular ecosystem, even more than now.

Bridges bring together liquidity, reduce fragmentation, and enable interoperability. Amongst these reasons, and the ones below, let's explore the alternative future.

𝐖𝐡𝐲 𝐰𝐞 𝐰𝐢𝐥𝐥 𝐧𝐞𝐞𝐝 𝐦𝐚𝐧𝐲 𝐛𝐫𝐢𝐝𝐠𝐞𝐬:

In a modular ecosystem, there will be fragmentation across every layer:

1. Rollups will have different outlooks towards sequencers. Some will want to have their own to maximize profits, whereas some would opt into a shared sequencer model to benefit from other rollups in the sequencer set; however, even then, there can be fragmentation across shared sequencers. As a result, third-party bridges will be required to connect rollups across shared sequencer sets. Moreover, depending on the number of rollups using a shared sequencer, cross-chain communication or liquidity transfers may be more efficient via third-party bridges than sequencers in some cases.

2. Rollups that do not share a DA layer or those that share a DA layer but have different execution layers (virtual machines) will still need to be connected via third-party messaging bridges.

For instance, Celestia rollups will need a messaging bridge to be connected to rollups built on EigenDA OR Rollup A using EVM for execution, and Rollup B using the SVM for execution, where both use Celestia for DA will still need a third-party bridge for message passing. 3. The modular ecosystem with 1000s of rollups will be an inter-connected web of chains that’ll need to be connected via bridges. Solutions like bridges can offer much-needed abstraction and composability to the modular ecosystem and thus can be key to the adoption of different ecosystems in the modular world.

However, bridges will find it challenging to scale to serve users' needs in a world with 1000s of rollups.

Most bridges currently support 6-12 chains (with minimal token support for some). As more chains launch in a multi-rollup modular ecosystem, it’ll become challenging for bridges to scale quickly and support all the chains.

Existing bridge designs require liquidity pools or LPs. It’s difficult to bootstrap sufficient liquidity in pools across numerous rollups and at the same time, LP capital is also limited and needs to be allocated carefully.

This is where new concepts such as tokens standards like LayerZero Labs OFTs and Connext's xERC20 will come into play, effectively removing the need to create liquidity pools on every chain to transfer a token across chains. Alternatively, projects like Polymers look to establish industry standards such as implementing IBC within rollup frameworks to provide interoperability out of the box.

Also, Polymer Labs added that rollup frameworks (optimism’s interop research RFP) and established dApps (uniswap bridge report) are beginning to explore more in the interoperability vertical to determine which solutions to potentially integrate with.

In other words, having interop baked into the framework allows the standard to be set before the proliferation of chains.

Or, perhaps, we’ll see the rise of new designs with liquidity networks that are lightweight and extensible and can be extended to support new chains.

In a world with 1000s of rollups, Catalyst makes it straightforward and scalable for rollups to move value between one another.

In addition to this, with Catalyst, liquidity is shared within a single rollup ecosystem; for example, Eclipse rollups can all share the same liquidity with the Eclipse Mainnet L2 as their “hub”, leading to increased capital efficiency.

In conclusion, the multi-rollup, modular ecosystem will require many solutions, such as shared sequencers, liquidity networks, messaging bridges, and others, to create a well-connected ecosystem.

Bridging protocols will play a crucial role, and all the different protocols will continue to be aggregated and abstracted by aggregation protocols like LI.FI. which is uniquely positioned to serve the liquidity needs of users in a multi-rollup ecosystem.

𝑾𝒆 𝒂𝒓𝒆 𝒆𝒏𝒕𝒆𝒓𝒊𝒏𝒈 𝒂 𝒄𝒓𝒂𝒛𝒚 𝒏𝒆𝒘 𝒘𝒐𝒓𝒍𝒅 𝒐𝒇 𝒎𝒐𝒅𝒖𝒍𝒂𝒓 𝒅𝒆𝒔𝒊𝒈𝒏𝒔, 𝒏𝒆𝒘 𝑽𝑴𝒔, 𝒏𝒆𝒘 𝒄𝒉𝒂𝒊𝒏𝒔, 𝒂𝒏𝒅 𝒑𝒍𝒆𝒏𝒕𝒚 𝒐𝒇 𝒐𝒑𝒑𝒐𝒓𝒕𝒖𝒏𝒊𝒕𝒊𝒆𝒔. 𝑻𝒉𝒊𝒏𝒈𝒔 𝒂𝒓𝒆 𝒂𝒃𝒐𝒖𝒕 𝒕𝒐 𝒈𝒆𝒕 𝒓𝒆𝒂𝒍𝒍𝒚 𝒇𝒖𝒏.