Good news everyone! After our last post discussing the importance of selecting the correct number and type of Federators, we are now on our way to having a unique, secure, and decentralized bridge. You can find our discussion here: https://www.reddit.com/r/btc/comments/qmkth9/comment/hjb1idm/?utm_source=share&utm_medium=web2x&context=3
Multiple people reached out with some questions that we believe are important to clarify. These are: Why not create competing bridges, and why is so important for bridges to be a protocol and not a business product. We made some quick illustrations to try to better answer these questions.
While initially opposing competing bridges sounds like a bad idea, it is counterintuitive, so we like to illustrate the different options to show why a single bridge set is actually the right choice.
Please keep in mind that when we refer to “Bridge”, we are not referring to the main BCH to SmartBCH bridge, but actually the set of secondary bridges that connect SmartBCH to Ethereum, BNC, Thorchain, and many other important blockchains.
Multiple competing bridges
Competing bridges divided the community
Multiple competing bridges result in the community being divided across multiple tokens that represent the same asset. Other blockchains we compete with have consensus over the bridges connecting them. Bridges are part of a protocol, and not a business. They integrate different components of a blockchain, into a single decentralized platform.
Consider it would result in not just 2 bridges, but 10s or 100s of different bridges. Imagine the community having to deal with the support of users dealing with multiple bridges. Consider for example a user depositing ETH on a DEX, yet the DEX list ETH from a different bridge. Do you see the issues having to be faced by users and DAPPs? Complexity, confusion, security risks, divided liquidity, and especially a disincentive for other DAPP builders to port or create their projects into smartBCH.
It is for this reason we consider it of such big importance that we as a community should agree on a unique bridge set. Who deploys the contract is less important, because it is a protocol, if done correctly, it will be secure as we discussed in our previous post.
Anonymous bridges turn into a business
Now let’s go over the option of a bridge run by several anon users without community-aligned interests. Federator voting to select a validator was already well discussed in the previous post, we discussed how it is a bad idea.
A business is incentivized to increase the fees to make more money, there is nothing that the community could do in this case. It becomes very difficult to change things when DEXs and DAPPs have already listed the bridged tokens, LPs. etc. To sum it all up, the profiting interests of the anonymous federator group come before the interests of the community.
Further, a business seeking income would be targeted by regulator agencies, creating risk over the whole Bitcoin Cash community. There can be entrepreneurial spirit around the bridge, but not at the protocol level.
Aligned federators bridge
Aligned bridge set create incentives for new users and DAPP builders
And finally, let’s go over a single bridge set with Federators that we already have trust in and that have aligned interests to the community. First, being part of a decentralized protocol, regulatory agencies wouldn’t be able to target: as like Bitcoin it is just a protocol. Keep in mind a federator only certifies something happened, it does not directly create or move any value. Value is moved by a protocol, just like Bitcoin. It does not make a profit from the bridge fees.
Aligned federators are incentivized to lower the fees of the bridge, they make MORE money not from the fees on the bridge but from the increased activity on the blockchain. Low fees result in more users, stronger network effects, reduction of the BCH supply, and a healthier ecosystem.
Market competition is good, just as there is a competition to create the best bitcoin wallet, there will be competition to create the best bridge front end. Users will then have to decide which front end to trust, just as they trust the Bitcoin Cash wallet they use. Hopefully, there will be many alternatives and direct integration with DEXs and other DAPPs. At the protocol level, we need to make sure it is done correctly and only one bridge set is adopted by the community, summating liquidity and creating the right conditions to attract DAPs and new users.
Notice that as the 5th Federator we suggested a “Bridge DAO” or “Bridge team”. This would be a team of multiple people working on the bridge, running a single server/signature for the bridge. It will oversee things like security, users support and coordinate any work required to maintain the bridge set working correctly. We would like to request the community to kindly consider letting us participate in this team.
What we are currently missing is a common ground to openly discuss the project. While most of the discussion happens on Telegram, /u/BCHPleaseOrg currently in charge of deploying the bridge would prefer a different method. Hopefully, we can soon agree on what to use and help move things forward.
This post is already too long, We have one more post ready with information on how we can then turn the Bridge to be so efficient and inexpensive so that SmartBCH becomes an Ethereum scaling solution generating a lot of value for everyone in the ecosystem. We believe we can create an incentive for users on other blockchains to move to SmartBCH. Will share all the details in an upcoming post.
One Bridge: https://www.reddit.com/r/btc/comments/qmkth9/one_bridge/How a bridge works: https://www.reddit.com/r/btc/comments/osynga/lets_talk_about_bridges/Security: https://www.reddit.com/r/btc/comments/qkj38l/lets_talk_about_smart_contract_security/https://www.reddit.com/r/btc/comments/p6dr02/lets_talk_about_security/