Full-chain narrative layout: Why is Axelar the most market-demanding full-chain protocol?

^Authors: Charlotte, Kevin, Metrics Ventures^

TL;DR:

1. Axelar belongs to the narratives of both omnichain and the Cosmos ecosystem. The omnichain sector will gain more growth space and market attention as trading volumes increase during bull markets and the number of public chains rises; more direct catalysts may come from token distributions by Layerzero and Wormhole. The Cosmos ecosystem is developing healthily, and the overall rise of the ecosystem by the end of 2023 has attracted market attention towards it.
2. Axelar has a strong technical advantage in the omnichain sector and will become a core target in the omnichain narrative. Axelar has achieved interoperability among 56 chains, surpassing competitors like Layerzero; GMP and AVM simplify the multichain development process for developers, helping them deploy omnichain contracts and integrate liquidity.
3. In this cycle, cross-chain protocols capable of achieving omnichain cross-chain deployment are primarily external validation bridges. Compared to similar cross-chain protocols, Axelar performs satisfactorily in terms of security, the number of cross-chains, and the number of integrated dApps. Compared to direct competitors Layerzero and Wormhole, Axelar is significantly undervalued.
4. Axelar is the main channel connecting the Cosmos ecosystem with EVM chains, especially the connection between Osmosis and EVM chains. As a liquidity gateway between the Cosmos ecosystem and EVM chains, it will directly benefit from the growth of the Cosmos ecosystem.

1 Fundamental Analysis: Axelar Unlocks More Cross-Chain Possibilities

1.1 Axelar Cross-Chain 101

Axelar is developed based on the Cosmos SDK and is compatible with all EVM chains. It is an application chain aimed at connecting all blockchains to achieve true interoperability, supporting the bridging of any information/assets. In terms of implementation, Axelar is an external validation cross-chain protocol, functioning as a complete PoS public chain with its own decentralized network and validators.

Axelar adopts a hub-and-spoke topology, similar to the Hub-Zone topology of the Cosmos ecosystem, where various public chains connect directly to Axelar (the hub), thus achieving indirect connections rather than point-to-point connections, reducing the number and complexity of connections and improving scalability.

In Axelar's specific implementation, its tech stack mainly consists of three key components: decentralized network/gateway smart contracts/API and developer tools. The decentralized network serves as the trust and transport layer for Axelar's cross-chain, composed of a dynamic, decentralized set of validators responsible for verifying on-chain events and executing read/write operations on the gateway smart contracts deployed on the connected public chains. The gateway smart contracts sit atop the connected blockchains, forming the core infrastructure layer alongside the decentralized network. Validators monitor the gateway smart contracts on the source chain, read transactions, reach consensus on the validity of the transactions, and then write to the target chain's gateway to execute cross-chain transactions. The API and developer tools form the application development layer, enabling developers to easily add universal interoperability to their blockchains and applications.

For cross-chain protocols, security is the most critical requirement. Axelar primarily ensures system security through three mechanisms:

First, the Proof of Stake (PoS) consensus secured by $AXL, which is the mechanism by which external validators reach consensus on cross-chain transactions. The security of Axelar's cross-chain essentially depends on the security of the Axelar public chain under PoS consensus. It relies on a dynamic and permissionless set of validators, offering higher security compared to external validation bridges that depend on PoA or multi-signature.

Second, Quadratic Voting further enhances the decentralization of the consensus mechanism. Quadratic Voting means: voting cost = number of votes^2, used to mitigate the threat to network security posed by oligopolistic monopolies and to prevent monopolists who accumulate a majority of tokens from censoring transactions. Axelar implemented Quadratic Voting to verify and process cross-chain transactions in the Maeve upgrade at the end of August 2022.

Third, in addition to the consensus mechanism, other security measures include rate limiting and network key rotation. Axelar gateways have rate limiting features that restrict the amount of each asset that can be transferred within a given time interval. Additionally, validators are encouraged to rotate keys every two months to protect the network from persistent attackers. Furthermore, both the Axelar network and contracts are 100% open-source, and a bug bounty program incentivizes the examination and reporting of potential vulnerabilities.

1.2 General Message Passing (GMP)

General Message Passing transcends the concept of bridging assets, enabling developers to build native cross-chain applications that abstract chains for users to perform cross-chain function calls and state synchronization. The implementation process and working principle of Axelar GMP are as follows:

Users initiate a call on the source chain, which enters the Axelar gateway contract and is transmitted to Axelar's decentralized network. Axelar's validators confirm the call, deduct the usage fee, and prepare to initiate a transaction on the target chain. Once this call is approved, it enters the target chain through the gateway and is ultimately executed. This Gateway-to-Gateway process takes about 120 seconds to complete and is verified and secured by Axelar's PoS mechanism.

1.3 Axelar Virtual Machine (AVM)

Building on General Message Passing, Axelar is becoming the cross-chain underlying protocol for Dapp development. To enhance customization and simplify the multichain development process, Axelar developed AVM, which, with the support of Cosmwasm, transforms interoperability into a programmable layer, allowing developers to write smart contracts on Axelar that can abstract cross-chain tasks, thereby simplifying the user experience. Currently, three functions have been implemented based on AVM:

• Interchain Amplifier: Allows developers to establish connections with the Axelar network without permission, connecting to all chains in the Axelar ecosystem by paying the cost of developing a connection, effectively "amplifying" resources. Permissionless connections will facilitate the rapid expansion of the ecosystem connected by Axelar.
• Interchain Maestro: If developers wish to deploy contracts across multiple chains, they need to repeat the deployment process multiple times, incurring significant time costs. Interchain Maestro allows developers to build a contract once and run it across multiple chains, reducing the cost of extending or cloning contracts to other chains.
• Interchain Token Service: A component of Interchain Maestro, launched on the testnet in July 2023. It allows developers to publish cross-chain tokens with one click, reducing the cost of deploying tokens across multiple chains while enabling interoperability of these tokens, addressing the issue of fragmented liquidity across chains, thereby enhancing DeFi liquidity, simplifying cross-chain liquidity mining and staking, allowing cross-chain collateralization, and creating chain-agnostic wallets. Sushi is one of the earliest applications to adopt the Interchain Token Service.

1.4 Token Economics: New Proposal Will Effectively Reduce Inflation Rate

The uses of AXL are mainly threefold:

• Rewards: Token holders can stake AXL and delegate it to validators' staking pools to earn rewards. Network validators generate blocks and validate and vote on messages through staking AXL to earn commissions.
• Fees: Used to pay for cross-chain fees when using the Axelar network.
• Governance: Allows token holders to participate in governance proposals regarding parameter changes or protocol upgrades.

The AXL token was issued in September 2022, with an initial supply of 1 billion and no maximum supply. The token distribution and unlocking schedule are as follows. The current circulating supply is 535,564,229, with a total supply of 1,128,220,669 (according to Coingecko data), and the staking amount is 761 million (according to Axelarscan data), with a token inflation rate of 6.1%.

In December 2023, the community passed a proposal to reduce the inflation rate of AXL. The inflation rate of AXL is mainly composed of three parts: TM (Tendermint) consensus, MSigs inflation, and external chain inflation, where the first two constitute the base inflation rate. External chain inflation refers to rewards for nodes validating information from public chains outside the Cosmos ecosystem, set at 1% for years 0-1, 0.75% for years 1-2, and 0.5% for years 2-3.

The methods for reducing inflation this time mainly include two: lowering external chain inflation rates and implementing a gas burning mechanism.

First, before the proposal, the external chain inflation rate was 0.75%, leading to a total inflation rate of 11.5% (1% base inflation rate + 0.75% * 14). The proposal decided to change the external chain inflation rate to 0.3%, reducing the total inflation rate to 5.2%. Considering the five EVM chains to be included, the inflation rate will reach 6.7%. This proposal lowers the overall inflation level and enhances Axelar's capacity to accommodate external chain connections.

Secondly, the gas burning mechanism states that when users conduct cross-chain transactions, they need to pay gas to Axelar, which will then redistribute it to stakers. This proposal decides to burn this portion of gas and remove it from supply.

1.5 Recent Project Developments: High-Quality Ecosystem Expansion

Since the second half of 2023, Axelar has formed partnerships with several blue-chip projects, rapidly increasing its market share in the interoperability sector:

• On June 16, the Uniswap Foundation released a cross-chain bridge evaluation report, and the committee approved Axelar for specific use cases in Uniswap. Uniswap's evaluation stated: Axelar is the only decentralized cross-chain platform with 75 nodes, strong security practices, and a universal messaging mechanism that allows users to interact with any contract function on any chain with one click.
• On June 23, Axelar became the official cross-chain bridge on Filecoin, bringing liquidity to DEX and AMM on FVM: Axelar-wrapped assets will become the standard cross-chain assets in the Filecoin ecosystem.
• On July 11, Microsoft and Axelar formed a partnership. Axelar provides cross-chain services to Microsoft customers through the Azure Marketplace.
• On September 12, Squid achieved direct token swaps between Ethereum, various EVM-compatible chains, and the Cosmos ecosystem, currently supporting 14 EVM chains and 48 Cosmos chains.
• On September 14, Lido chose Axelar and Neutron to launch wstETH on Cosmos. Neutron and Axelar provide liquidity.
• On November 13, Ondo Finance partnered with Axelar to launch the Ondo bridge. Any chain integrated with Axelar can issue Ondo's USDY.
• On November 15, JPMorgan and Apollo formed partnerships with Axelar.
• On November 21, Frax proposed to use Axelar to expand to new chains.
• On December 14, it was announced that Vertex would integrate with Axelar, making Vertex the latest leading DEX project to integrate Axelar after dYdX, Uniswap, and Pancakeswap.

1.6 Summary: Axelar Has a Leading Technical Advantage in the Omnichain Sector

"Interoperability is the future," and Axelar has a strong technical advantage in the omnichain sector, becoming a core target in the omnichain narrative. Omnichain actually encompasses two dimensions: one is achieving interoperability with as many blockchains as possible, connecting EVM and non-EVM chains; the other is transcending asset cross-chain to enable the transmission of any messages and data. Based on the Cosmos liquidity hub, Axelar has achieved interoperability among 56 chains, surpassing competitors like Layerzero; at the same time, Axelar supports arbitrary message passing, and the establishment of AVM further upgrades the messaging functionality, simplifying the multichain development process for developers and helping them achieve omnichain contract deployment and liquidity integration. In summary, the product delivery progress and the expansion of partnerships fully demonstrate Axelar's technical accumulation in the omnichain sector and confirm the solidity of Axelar's fundamentals.

2 Competitive Landscape Analysis: Why is Axelar the Cross-Chain Protocol that Best Meets Market Demand?

2.1 Sector Analysis: What Kind of Cross-Chain Protocol Do We Need?

Before analyzing Axelar's competitors, it is necessary to review the overall landscape of the cross-chain sector: why is the cross-chain protocol still a growth sector? What kind of cross-chain protocol do we need? What types of cross-chain protocols are currently available in the market?

Why is the cross-chain protocol still a growth sector?

First, with the expansion of blockchain and the increasing demand for customization, more public chains are being developed. Many Dapps, including dYdX, are choosing to migrate to application chains. The growth of modular blockchains, general-purpose rollups, and application chains is rapidly expanding the number and diversity of blockchains, making blockchain interoperability particularly important in the multichain era. Cross-chain protocols are the most important underlying infrastructure for achieving blockchain interoperability.

Second, according to L2beat data, the TVL of the cross-chain bridge sector is $6.7 billion, nearly 90% down from the previous peak of $56 billion. The arrival of a bull market will increase the number of on-chain interactions and cross-chain demand, and the increase in the number of blockchains will also increase reliance on cross-chain technology. With the emergence of new technologies and new architecture cross-chain bridges, the industry scale of the cross-chain sector still has significant growth potential.

Third, although blockchain interoperability and cross-chain protocols are crucial for the industry, the development situation in the cross-chain sector is not satisfactory. On one hand, cross-chain bridges remain one of the most severely affected targets by hacker attacks and losses, raising security concerns; on the other hand, cross-chain protocols in the market are still primarily asset cross-chain bridges, and protocols that enable seamless cross-chain development for applications are still in their early stages. Therefore, for such an important underlying technology, cross-chain protocols still have significant room for technical improvement.

What kind of cross-chain protocol do we need?

According to the cross-chain analysis framework proposed by Connext founder Arjun Bhuptani, cross-chain interoperability also faces an impossible triangle: Trustlessness, Generalizability, and Extensibility, which precisely encapsulate the core demands of the market for cross-chain protocols.

First is security, where the highest level of security is achieved by not adding any trust assumptions outside the underlying chain, maintaining the same level of security as the underlying chain. Security remains the most critical issue for cross-chain protocols. A recent cross-chain bridge attack occurred on January 1, when Orbit Chain suffered a hacker attack with losses amounting to $81.5 million.

Second is generalizability, which means supporting the transmission of arbitrary messages between different blockchains. Currently, the cross-chain sector is still primarily focused on asset bridges, supporting cross-chain asset transfers or exchanges, but this is far from sufficient for cross-chain protocols. On one hand, while cross-chain asset transfers or exchanges can occur, liquidity (funds, users, traffic, etc.) between different chains remains fragmented; on the other hand, this requires users to perform complex cross-chain actions when transferring between different blockchains, increasing the user threshold. Therefore, cross-chain protocols are exploring arbitrary message cross-chain capabilities to enable cross-chain contract calls, liquidity aggregation, and the construction of cross-chain applications.

Third is extensibility, which allows for easy adaptation to more blockchains, especially achieving cross-chain capabilities between heterogeneous chains with lower development time and costs. Connecting more blockchains will bring a broader user base, funds, and traffic.

As cross-chain protocols evolve, our expectations for them have shifted from multi-chain (Multi-Chain) to cross-chain (Cross-Chain), and further to omnichain (Omnichain), interchain operations (Interchain), chain abstraction (Chain Abstraction), or chain-agnostic (Chain-Agnostic).

Specifically, multi-chain (Multi-Chain) refers to deploying Dapps across multiple blockchains, resulting in multiple instances or versions of the same Dapp existing in different blockchain ecosystems, leading to fragmentation between different chains. Users interact across different chains through asset bridging, corresponding to the asset cross-chain era. Cross-chain (Cross-Chain) represents any process that enables mutual communication and transactions between blockchains, consisting of multiple smart contracts deployed on multiple chains forming a unified application, where smart contracts on different chains can perform different tasks and remain synchronized, constituting a complete Dapp instance without requiring developers to repeatedly deploy the same functionality across different networks. Cross-chain Dapps rely on cross-chain protocols for universal message passing. Omnichain (Omnichain) further enhances the extensibility and breadth of cross-chain protocols, achieving interoperability between various heterogeneous chains. Interchain operations, chain abstraction, and chain-agnostic further obscure cross-chain, gas, native asset, and other information from users, optimizing the user experience, with cross-chain protocols being the core technology for achieving chain abstraction.

(Source: Chainlink)

Therefore, the market expects cross-chain protocols that guarantee security and can achieve cross-chain deployment and chain abstraction, expanding the depth and breadth of cross-chain as much as possible.

What types of cross-chain protocols are currently available in the market?

Of course, ideals are beautiful, but reality is harsh. Cross-chain technology is still in its early stages, and existing technologies cannot break through the impossible triangle of cross-chain interoperability protocols, often sacrificing some characteristics to achieve a balance. What types of cross-chain protocols are currently available in the market? Which cross-chain protocols are closest to our needs?

Based on trust layers, existing cross-chain protocols can be divided into three main types: native validation, external validation, and local validation. Native validation refers to deploying light nodes of the source chain on the target chain to verify messages from the source chain, where the relayer is only responsible for transmitting the source chain's block headers to the light node contract on the target chain without verification. Native validation has the highest security, as it does not introduce new trust assumptions, but the verification cost is too high, and the development difficulty of establishing light nodes is also high, resulting in weak scalability.

External validation involves introducing a group of external witnesses to verify cross-chain messages, with witnesses reaching consensus through some mechanism. External validators can take various forms, including MPC networks, PoS/PoA networks, TEE networks, multi-signature groups, etc. External validation offers high scalability and can transmit arbitrary messages, but its security is often criticized.

Local validation refers to the counterparty directly verifying the transaction, with the typical paradigm being atomic swaps based on hash time locks, but this can only be used for asset cross-chain.

Additionally, many cross-chain protocols using new technologies are under development, with the most anticipated being ZK Bridge, which applies ZK technology to expand light node cross-chain solutions, generating block validation proofs off-chain and then submitting them to the target chain, saving block validation costs. However, this technology is currently in the research and development stage, with high development difficulty and long development cycles, making it difficult to use directly in the short term, and it still needs to address different consensus mechanisms and signature schemes, limiting its scalability.

In summary, while light client-based bridges offer higher security, they can currently only be developed for specific chains. External validation remains the primary solution for current cross-chain protocols. In this cycle, cross-chain protocols capable of achieving omnichain cross-chain deployment are primarily external validation bridges, and the more decentralized the external validator network and the stronger the security of the consensus mechanism, the better they can meet market expectations for cross-chain protocols.

2.2 Comparative Analysis: Axelar is the Best Cross-Chain Solution to Meet Market Demand

Based on the analysis of the cross-chain sector, cross-chain protocols that adopt external validation and support general message passing remain the main players in this cycle and are direct competitors to Axelar. Representative protocols include Wormhole, Layerzero, Chainlink CCIP, and Celer. In comparison, we believe Axelar is the cross-chain solution with the strongest overall competitiveness in terms of security, general message passing, and ecosystem growth.

2.2.1 The Most Important Factor: Security

The security of cross-chain protocols primarily depends on the consensus mechanism of the trust layer, i.e., how information is verified. Among the aforementioned projects, Axelar uses a DPoS mechanism, Wormhole uses a PoA mechanism, Layerzero employs a dual assurance mechanism separating Oracle and Relayer, CCIP uses its own oracle network for verification, and Celer combines DPoS with optimistic verification.

Wormhole:

Cross-chain protocols using PoA mechanisms have been the subject of theft incidents: In July 2023, the Multichain security incident resulted in over $265 million in funds being drained, and it has largely lost its competitiveness. Wormhole also suffered a hacker attack in February 2022, with losses amounting to approximately $226 million. Under the PoA mechanism, inter-chain messages are verified by a small group of trusted entities, but the number of validators is limited, and they do not require staking, lacking economic incentives. Many validator nodes are controlled by highly interested parties, or even the same entity, resulting in low costs for malicious actions and security risks.

Layerzero:

Layerzero V1 employs a dual verification mechanism, consisting of three core components: Oracle, Relayer, and Endpoint. The Relayer is responsible for transmitting messages and message proofs, while the Oracle retrieves and transmits block headers based on the block where the message resides. The Endpoint on the target chain verifies the message based on the block header. Its core design separates the Relayer and Oracle to prevent collusion. Layerzero's security relies on trusting the Oracle and Relayer to ensure they do not collude, but Layerzero allows project teams to configure and run their own Relayer and Oracle, which still requires trust in the project entity, leading to ongoing security concerns for Layerzero.

Recently, Layerzero released a V2 technical white paper, where message verification is completed by a Decentralized Validation Network (DVN), and the Executor is responsible for transmitting verified messages and triggering transactions on the target chain. Message verification uses an X of Y of N mechanism, such as 1 of 3 of 5, meaning that 5 validating DVNs are chosen, with 1 required to complete the verification. Each message verification requires 1 mandatory DVN and any 2 other DVNs to jointly complete the verification. Currently, the entities that can operate DVNs include major industry players such as Blockdaemon, Google Cloud, Animoca, Delegate, Gitcoin, Nethermind, P2P, StableLab, Switchboard, Tapioca, LayerZero Labs, and Polyhedra, but it still requires trust in these entities, especially when the number of DVNs is low, effectively introducing more trust assumptions compared to PoS mechanisms. Notably, Layerzero has introduced Axelar and CCIP as DVN Adapters, which indirectly proves Axelar's security.

Chainlink CCIP:

The information transmission of Chainlink CCIP is monitored and signed by Chainlink DONs, then transmitted to the target chain by the Relayer to complete transaction execution. Additionally, Chainlink CCIP introduces a risk management system, independent of the oracle network, as a new verification layer. Risk management nodes monitor all Merkle roots of messages submitted on each target chain and independently reconstruct the Merkle tree of all messages on the source chain, checking whether the Merkle root submitted by the DON matches the reconstructed Merkle tree root. If anomalies are detected, risk management nodes can vote to halt CCIP. The security of CCIP is primarily guaranteed by DONs, which have secured hundreds of billions of dollars in assets and achieved trillions of dollars in on-chain transaction value, making its security trustworthy. However, the overall development progress of CCIP has been relatively slow, entering the early access phase of the mainnet only in mid-2023 after its launch in 2021.

Celer IM:

Celer IM is monitored, routed, and verified by the State Guardian Network (SGN), which is a PoS blockchain built on the Cosmos SDK. Validators can become validators by staking $CELR. Additionally, Celer provides a second security model, optimistic verification, where messages transmitted by SGN are submitted to the chain and enter an "isolation zone" before execution. After a period of confirmation, the message is finally executed. During the isolation period, Dapps can run App Guardian services to verify the authenticity of submitted messages.

However, it is important to note that Celer's validator network currently has only 22 validators, including authoritative entities in the industry such as IOSG, Hashkey, Binance, Ankr, and InfStones. The cross-chain bridge evaluation by Uniswap expressed concerns about the same entities operating multiple validators, and it is currently unclear from official documentation what the conditions are to become a validator. The optimistic verification mechanism mainly relies on Dapps to run App Guardian to verify transactions, requiring voluntary maintenance by Dapps and relying on trust in Dapps, which does not effectively reduce trust assumptions to a level of 1/N.

In summary, we have reason to believe that Axelar stands out among various solutions in terms of security. Axelar's security was recognized by Uniswap in June, stating that it "has a well-designed cryptoeconomic mechanism to ensure the security of the protocol."

From the mechanism design perspective, relying on a dynamic, decentralized, permissionless PoS network for verification is the solution with the lowest trust assumptions.

From the specific data perspective, we can further compare Axelar with Celer, which also primarily uses a PoS mechanism, based on validator data. The comparative data can be divided into two categories: (1) validator-related; (2) token locked value-related.

(1) Validator-related: Axelar's number of validators (75) exceeds Celer's (22) by more than three times; the decentralization of validators is assessed by the total voting weight of the top 10% of Validators, with lower values indicating greater decentralization, making it easier to avoid collusion by a small number of individuals concentrating large amounts of voting power, thus reducing centralization risks. Axelar's validators are more decentralized compared to Celer.

(2) Token locked value-related: Axelar's locked token value reaches $795,420,281, approximately 15 times that of Celer; from the perspective of the ratio of staked token value to TVL, Celer's ratio is less than 1, meaning that the value of collateral assets used to ensure security is lower than the value of the assets being secured, posing a higher risk of malicious actions, while Axelar's ratio is 3.72, indicating a relatively healthy level.

| | Number of Validators | Validator Decentralization (%) | Staked Token Value | TVL | Staked Token Value/TVL | |---------------------------------------|-------|-----------|--------------|------------------------------------------|------------| | https://sgn.celer.network/#/staking | 22 | 24.9% | $54,373,903 | https://defillama.com/protocol/cbridge | 0.54 | | https://axelarscan.io/validators | 75 | 17.2% | $795,420,281 | https://axelarscan.io/tvl | 3.72 |

2.2.2 Scalability and Ecosystem Development

First, for Dapps, choosing a protocol that connects to more public chains for developing native cross-chain applications means having richer funds, users, and markets. Currently, Axelar connects to the most public chains and is advancing integration with L1s such as Solana, Ripple, and Sui, while also developing automatic integration features for L2s. The Hub-Spoke architecture offers higher scalability compared to point-to-point architectures; Layerzero, Celer, and Wormhole also have relatively high scalability, while CCIP is still in its early stages, currently supporting interoperability among only a few public chains within the Ethereum ecosystem.

Second, in terms of the number of integrated Dapps, Axelar's ecosystem expansion is rapid, leading the market in capturing interoperability. Nearly 100 Dapps are currently integrating Axelar, more than any other cross-chain bridge, and partnerships have been formed with companies such as Microsoft and JP Morgan. Axelar shows particularly impressive performance in cross-chain DEXs, with dYdX, Uniswap, Pancakeswap, and Vertex all using Axelar as their cross-chain solution, giving Axelar over 50% market share in cross-chain DEXs (based on market trading volume).

| | Number of Supported Public Chains | Number of Integrated Dapps | Number of Planned Integrated Dapps | Representative Blue-Chip Projects | |-----------|---------|------------|-------------|----------------------------------------------------------------------| | Axelar | 56 | 62 | 30 | dYdX, Lido, Uniswap, Pancake, Squid, Sushiswap, Frax, Metamask, Decentraland | | Wormhole | 30 | 68 | 15 | Frax, Lido, Raydium | | Layerzero | 48 | 87 | / | Curve, AAVE, Pancake, Radiant, Balancer | | CCIP | 7 | No official data | / | / | | Celer | 45 | No official data | / | / |

2.2.3 Summary: Axelar is the Most Comprehensive and Mature Cross-Chain Solution

In summary, Axelar is currently the best solution in the market that meets the demands for security, scalability, and arbitrary message passing. Wormhole and Layerzero are currently gaining market attention as the two most prominent projects in the cross-chain sector due to airdrop expectations. Axelar's fundamentals are comparable to those of Wormhole and Layerzero, but its FDV is currently less than half of their first-level valuations, indicating that it is undervalued in the cross-chain field.

| | Verification Mechanism | Number of Connected Public Chains | Ecosystem | MC | FDV or First-Level Valuation | |-----------|-----------------------|--------|-------|-----------------|--------------------------------------------------------| | Axelar | DPoS + Quadratic Voting | 56 | 62+30 | $501,347,130 | $1,016,772,630 | | Wormhole | PoA | 30 | 68+15 | / | https://www.theblockbeats.info/flash/200438?search=1 | | Layerzero | Dual Verification with Oracle and Relayer Separation | 48 | 87 | / | https://www.theblockbeats.info/flash/135165?search=1 | | CCIP | DON Message Verification + Risk Control Management | 7 | / | $11,256,847,756 | $19,173,647,260 | | Celer | DPoS + Optimistic Verification | 45 | / | $91,352,633 | $161,816,247 |

3 Axelar is a Key Gateway for the Cosmos Ecosystem

Another reason to pay attention to Axelar is its narrative within the Cosmos ecosystem. We focus on two questions: first, why is the Cosmos ecosystem worth attention? Second, if we want to position ourselves within the Cosmos ecosystem, why is Axelar an indispensable target?

The first question: why is the Cosmos ecosystem worth attention?

First, the application chain narrative will be an important theme in this cycle. Cosmos itself is built around the topic of application chains, with each chain specifically designed to host applications, and all chains seamlessly connected through shared communication standards. Of course, the Cosmos ecosystem faces challenges from the Ethereum Rollup ecosystem, but the technical standards of Cosmos give it unique advantages: first, Cosmos allows developers to build a Layer 1 with higher sovereignty, offering greater autonomy in both token economics and technology, rather than relying on Ethereum's L2/L3; second, Cosmos achieves interoperability between multiple chains through the inter-chain communication standard IBC protocol, enabling seamless transfer of assets and data across different blockchains, giving it advantages in cross-chain capabilities that other ecosystems find hard to match. Additionally, dYdX's migration from the Ethereum ecosystem to build an application chain on Cosmos has attracted significant attention to the application chain narrative in Cosmos. Therefore, both technically and in terms of market attention, Cosmos will occupy a place in the application chain narrative.

Second, recent upgrades to Cosmos will enable healthier development of the Cosmos ecosystem. Two important upgrades are: first, the Replication Security launched on March 15, 2023, allowing blockchains in the Cosmos ecosystem to forgo their own validator sets and adopt the validators of the Cosmos Hub for security, enhancing the empowerment of ATOM and reducing the difficulty of developing application chains. Second, Noble announced a partnership with Circle to introduce native USDC into the Cosmos ecosystem. After the collapse of UST, the Cosmos ecosystem has lacked a native stablecoin, relying only on cross-chain mapped stablecoins, which increases systemic risk.

Finally, the Cosmos ecosystem is thriving. The Cosmos ecosystem is rapidly growing, with several projects experiencing significant increases in 2023, including Celestia, Injective, Osmosis, Kujira, and Neutron. The overall rise of the ecosystem has renewed market attention towards Cosmos, and market sentiment towards Cosmos is generally positive.

The second question: why is Axelar one of the best targets for positioning within the Cosmos ecosystem?

Axelar is the main channel connecting the Cosmos ecosystem with EVM chains, especially the connection between Osmosis and EVM chains. In the past 30 days, the total cross-chain volume between Osmosis and Ethereum via Axelar has reached $106.63 million, making Axelar the primary path for Osmosis to cross-chain into the EVM ecosystem. As more applications are built within the Cosmos ecosystem, the demand for connections between the Cosmos ecosystem and other ecosystems will gradually increase. Axelar is the most important channel connecting the Cosmos ecosystem with others, directly capturing the value of the Cosmos ecosystem's expansion.

4 Conclusion: Solid Fundamentals and Timely Positioning

In summary, we believe that Axelar is a target worth positioning at this stage for two reasons: mature fundamentals and the right timing.

First, from a fundamental perspective, Axelar has a clear technical advantage in the omnichain sector, with deep technical accumulation. It has significant advantages in cross-chain quantity, message and data transmission, and omnichain application development, making it the cross-chain protocol that best meets market demand. As a universal information cross-chain protocol, Axelar performs satisfactorily in terms of security and scalability.

In terms of security, Axelar uses a dynamic, permissionless set of validators for message transmission and verification, with a quadratic voting mechanism and sufficient validator numbers, token locked value, and validator decentralization, making it one of the most secure solutions among external validation protocols.

In terms of scalability, Axelar currently has the highest number of integrated public chains and is the most important channel connecting the Cosmos ecosystem with EVM chains. The Hub-Spoke architecture reduces the cost of connecting more public chains, and AVM lowers the difficulty for developers to access the Axelar Network and build cross-chain Dapps. Recently, Axelar has formed partnerships with multiple blue-chip projects and companies, demonstrating its capability and potential for ecosystem expansion.

Second, in terms of timing, both the sector and narrative that Axelar is positioned in are expected to have significant growth potential and attention in the future.

Axelar belongs to the narratives of both omnichain and the Cosmos ecosystem. The omnichain sector will gain more growth space and market attention as trading volumes increase during bull markets and the number of public chains rises; more direct catalysts may come from token distributions by Layerzero and Wormhole, bringing market enthusiasm to the entire omnichain sector. Recently, Layerzero has clearly stated that it expects to complete token distribution in the first half of 2024. As a direct competitor to both, Axelar's FDV is significantly lower than their first-level valuations, which may lead to value discovery as this event unfolds. The Cosmos ecosystem is developing healthily, and the overall rise of the ecosystem by the end of 2023 has attracted market attention towards it. Axelar, as the liquidity gateway between the Cosmos ecosystem and EVM chains, will directly benefit from the growth of the Cosmos ecosystem.