Bridge aggregation protocols
Bridge Aggregation Protocols
Bridge aggregators operate similarly to Decentralised Exchange (DEX) aggregators. They integrate several different bridges and enable users to find the most optimal option for their cross-chain asset exchange and transfer requirements, based on factors such as cost, speed, slippage, and security. Because bridges often only support a limited number of tokens, bridge aggregators also integrate DEXs and DEX aggregators, which allows users to exchange a wide range of assets across chains. For example, if a user wants to swap USDC on Arbitrum to ETH on Ethereum, they would need a bridge aggregator that supports DEXs. Such an aggregator would transfer USDC from Arbitrum to Ethereum and swap it for ETH via a DEX.
Most aggregators have an on-chain and an off-chain component for routing crosschain transactions:
Off-chain Components: An off-chain routing algorithm finds the most efficient route for a crosschain exchange by comparing quotes from different liquidity sources for a specific trade. It filters, ranks, and recommends routes based on rule sets and user preferences. This information is communicated through an API to front-end components, which showcase the routes to the user. Although centralized, the off-chain components of an aggregator are necessary because the quotes and routes of bridges are only served off-chain. Moreover, computing the optimal routes off-chain reduces cost and improves efficiency and user experience.
On-chain Components: After a user selects a route, the aggregator's smart contracts, which integrate the contracts for different bridges, DEXs, and DEX aggregators supported by the bridge aggregator, execute the crosschain transaction. While the bridge aggregator's smart contract abstracts away the complexities of dealing with multiple bridges and DEXs, it adds another layer of smart contract risks.
Bridge aggregation protocols can be classified based on how they interact with their users:
Indirectly via other dApps
In such systems, bridge aggregation protocols work in the background and do not directly interact with the end users. Instead, the bridge aggregation protocols are integrated into a dApp’s crosschain service offering. For example, in MetaMask Bridges, crosschain transfers are executed via two bridge aggregation protocols: LI.FI and Socket.
From the perspective of dApps, the benefits of bridge aggregators include the following:
- Access to liquidity from multiple sources (bridges, DEXs, and DEX aggregators).
- Connectivity with more blockchains.
- No single point of failure, as bridge aggregators provide fallback solutions in the form of alternate bridges.
- Improved user experience as users get the optimal route for a crosschain swap.
- Bridge aggregators bear the costs of integrating and maintaining multiple bridges.
- Assessment of bridges is complicated and time-consuming as there are many factors to consider, such as speed, costs, security, trust assumptions, and others. Bridge aggregators save the dApps from the hassle of making this assessment and choosing a bridge as they get access to multiple bridges, enabling them to inherit the strengths of each bridge and overcome their limitations.
Directly via their front-end
In such systems, bridge aggregation protocols interact directly with the end-user via front-ends hosted by them. For example, LI.FI and Socket offer bridge aggregation services directly to users via TransferTo.xyz and Bungee, respectively.
From the perspective of users, the benefits of bridge aggregators include the following:
- The convenience of having multiple bridges, DEXs, and DEX aggregators all on one platform saves users time and money.
- Rather than assessing bridges and choosing which one to use, users get access to multiple bridges (and DEXs).
- Finding the optimal route and quote for their crosschain swap via routing algorithms.
- Ability to compare different routes and choose one based on their preference.
- Because aggregators enable multi-step or multi-hop bridging, there is an increased chance that a user's transaction might fail midway. How does the aggregator handle or mitigate these scenarios?
- Aggregators combine a wide range of protocols (i.e., different bridges and DEXs) with different security properties and risks. Users must largely trust aggregators to offer a curated set of options to minimize risk. What decision criteria does an aggregator use to select bridges it integrates? How are security and risk considerations surfaced to the user?
- Does the aggregator introduce additional trust assumptions beyond what is required by the underlying bridge? What are these assumptions, and under what conditions do they apply?
- What is the impact of failures of the off-chain components of an aggregator? Can such outages impact user funds?
- By adding a layer atop other protocols bridge aggregators add additional implementation risk.
Created: October 13, 2023