TL;DR
Chainlink’s Cross-Chain Interoperability Protocol (CCIP) is incredibly ambitious and could indeed become a big deal. Chainlink’s new brainchild is destined to become a cross-chain standard, allowing different blockchains to safely move value across. It would make risky cross-chain bridges obsolete and put an end to fragmented liquidity across crypto. Besides crypto projects like Aave and Synthetix, tradfi banking giant Swift is running tests. Talking about ambition…
Introduced at the Ethereum Community Conference in Paris in mid-July 2023, the Cross-Chain Interoperability Protocol has entered the Mainnet Early Access phase. On Avalanche, Ethereum, Optimism, and Polygon.
According to Chainlink founder Sergey Nazarov, you can view CCIP as a protocol like TCP/IP for the internet. Just like TCP/IP decades ago, it unites a fragmented space, allowing developers to build cross-chain applications on top of it.
Solving Bridge Hacks
This solves a huge problem. Currently, the crypto landscape is characterized by a plethora of disjointed chains (or chain ecosystems) that largely function in isolation. CCIP’s goal is to establish a global standard that enables communication between these networks, allowing them to securely transfer data, assets, and smart-contract functionalities. This would be a relief to anyone who has ever bridged coins from one chain to the other. Bridge hacks have been a big problem in the recent bull market: roughly 2 billion dollars have been lost.
What is Chainlink Again?
Chainlink is the best-known Oracle, or data provider, in the world of crypto. It is an information gatherer. It aims to support all blockchains with smart contract capability, by providing them with reliable, real-world data.
As you can see in the diagram below, it is by far the biggest oracle in terms of total value locked.
But Chainlink is more than just an oracle. With a nice war chest of LINK tokens, the Chainlink team has been continuously grinding out new projects. A big one that went live in closed beta in spring 2023 was Chainlink Functions. With it, Chainlink wants to connect decentralized blockchain applications (dApps) to Web2 applications (the ‘old’ internet). An example of a Chainlink Functions use case would be to pay musicians based on their stream counts.
And now there is CCIP: yet another example of Chainlink’s goal to integrate the world of blockchain and the real world.
Use Cases
In the blog post launching CCIP, the author names a list of use cases. Three pop out:
- Cross-chain tokenized assets: Transfer tokens across blockchains without having to build your own bridge solution.
- Cross-chain collateral: Launch cross-chain lending apps that allow users to deposit collateral on one blockchain and borrow assets on another.
- Cross-chain NFTs: Users can now mint an NFT on one blockchain and receive it on another chain.
Low Barrier to Entry
Since CCIP is built on the same foundation as existing Chainlink services, the barrier to entry is low. If a dApp already relies on Chainlink for price Feeds, then relying on CCIP for cross-chain interactions is an obvious choice.
In fact, Synthetix is one of those dApps that has integrated CCIP.
Example: Token Transfers on Synthetix
Synthetix is a DeFi…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
