Glitter Finance: The Backbone of Cross-chain Infrastructure

Choosing which blockchain to use can be difficult, whether you are new to blockchains or a seasoned veteran. Often, you don’t even choose the chain at all and instead acquaint yourself with a new blockchain to access the protocol, game, or NFT project you’re interested in.

If you are unfamiliar with blockchains, it might surprise you that moving between networks is not entirely straightforward. Users rely on special protocols known as bridges to help move crypto assets between different blockchains. And with the number of active blockchains only on the rise, bridges are becoming one of the most critical pieces of infrastructure in the sector.

Glitter Finance is one such bridge. As the first bridge between the Algorand and Solana blockchains, Glitter set the benchmark for fast, secure, and affordable token bridging. Today, Glitter supports Ethereum and Avalanche in addition to Algorand and Solana, and will shortly connect BNB Chain, Tron, Polygon, and Hedera. With Glitter, the wide world of web3 unifies with a seamless user experience.

Why do we need token bridges?

Think of the many blockchains as separate banks. When you log on to your online banking account, it’s pretty easy to transfer funds from your savings to an access account or to pay down credit or a loan—as long as it’s from the same bank. In the same way, someone with funds in a wallet on the Avalanche blockchain can easily move them to any other Avalanche wallet and access all of the dApps built on Avalanche, just as you can access the different products from your bank.

When you want to transfer money to a different bank, things get more complicated. Your bank needs a way to communicate with the institution you’re sending money to and both need to agree on what the account balances should be after the transaction finalises. Fiat payment networks like Visa, Mastercard, and SWIFT exist to help with these types of transfers—you can think of bridges as the blockchain equivalents.

Why is it so important that the different blockchain ecosystems communicate?

Bridges give users choice

Different blockchains have different advantages. Bridges allow users to easily access protocols and dApps in different ecosystems and the unique benefits those products have. This is also true for the protocols themselves—bridges allow dApps to leverage the advantages of several ecosystems in their offerings.

Bridges save users time and money

It’s entirely possible to move assets from one chain to another without a bridge, but the process is far from efficient. In most cases, users need to take their assets from one chain, move them to an exchange, trade them for an asset compatible with the other chain, and then transfer them from the exchange to their wallet. This takes time and incurs fees every step of the way.

Bridging simplifies this significantly. Users deposit tokens on one side of the bridge and gain access to tokens on the other side, removing the swap fees taken by the exchange and presenting everything in a simple UI. Depositing tokens, designating the withdrawal address, and paying the transaction fee are typically done from a single interface.

Bridges unlock liquidity

Siloed liquidity is a major challenge for any ecosystem. In general, the more liquid an asset is, the more likely investors are to take interest in it; the same is true with ecosystems as a whole. Nobody wants to put large sums of money somewhere they’ll struggle to move it. Likewise, if it’s easy to move an asset between different dApps and blockchains, users will gravitate toward it. There’s a reason why business favours the US Dollar over the Guinean Franc—one will be accepted almost anywhere, while the other has little use outside of its issuing country.

Bridges create opportunities

Different conditions on different blockchains can lead to arbitrage opportunities for traders, as well as the chance to liquidate loans in different protocols. In addition to being profitable for the trader, these events are necessary to keep different ecosystems in balance. If it’s easy to perform a cross-chain arbitrage because of a bridge, users are more likely to have assets priced at their real market cost.

The problems with existing bridges

Despite how necessary they are in today's web3 landscape, bridges have a bad reputation. Several high-profile exploits over the last two years saw some of the most popular bridges drained by attackers, with stolen funds often permanently lost.

One of the largest crypto hacks ever occurred via a bridge in March 2022, with around $625 million stolen by exploiting Ronin Network. In this case, hackers gained access to the private keys controlling a majority of the bridge’s validating nodes and used them to approve a massive withdrawal that went undetected for several days.

Earlier that same year, hackers had exploited a vulnerability on the Wormhole bridge to get away with around $325 million. In this case, the attacker was able to mint 120,000 wrapped ether (WeETH) without providing equivalent ETH collateral. This WeETH was then swapped for other tokens, allowing them to get away with a decent payday. Fortunately, in this case, Wormhole was able to prop up the bridge with their own ETH to prevent it from collapsing completely.

Smaller bridges have seen similar attacks, so what makes bridges so vulnerable?

Smart contract risks

Bugs and vulnerabilities can expose bridges to different kinds of exploits. There are different ways attackers take advantage of these, but put simply, a well-forged deposit receipt can be all it takes for a falsified withdrawal on the other side. This is similar to what the Wormhole hackers did to claim WeETH they shouldn’t have had access to.

Systemic risk

Many bridges use a process called token wrapping to bring tokens to a chain they don’t natively exist on which opens the door to system risk should the wrapped token become compromised. Wormhole, for example, allowed users to mint wrapped ether on the Solana blockchain—a token usually backed by a 1:1 collateral ratio back on Ethereum.

When the bridge was attacked, the hackers generated WeETH without providing ETH collateral. Because this illegitimate WeETH was in circulation, the value of all legitimate WeETH was at risk.

Large paydays

To ensure transactions are processed quickly, bridges often have large liquidity pools on both sides of the bridge. As the bridge increases in popularity and incentivises more liquidity to facilitate larger transactions, these liquidity pools become lucrative targets.

Glitter Finance: The Better Way to Bridge

Glitter Finance has developed a solution that mitigates the significant issues other bridges face, creating a fast, affordable, and, most importantly, secure cross-chain application. For example, Glitter's latest offering, cross-chain USDC swaps, eliminates the risks associated with liquidity honeypots and smart contract exploits by removing token custody from the bridge. This is achieved through a relationship with Circle, one of the issuers of USDC, to give users access to the same services that allow institutions to trust USDC as their preferred stablecoin.

Glitter’s Cross-chain USDC Swaps Protocol leverages Circle’s liquidity for secure, efficient bridging. It’s the same process that large institutions use to move billions of dollars daily through Circle and why nearly $9.5 trillion has been transacted in USDC since its launch. There is no liquidity in Glitter’s contracts for hackers to drain, and no mint function for them to exploit.

But Glitter is much more than a USDC bridge. When the bridge first launched, it was the first to connect Algrorand and Solana with wrapped xSOL and xALGO tokens. All these contracts underwent rigorous testing with three independent audits completed to ensure their security. Glitter is committed to the highest standards of security and will continue to test token-wrapping contracts into the future. Even in the extremely unlikely event of an exploit, Glitter’s independent contracts and liquidity pools mean that a hack in one part of the ecosystem has no impact on any of the others.

As Glitter grows, so too will the protocol’s utility. Cross-chain auto trading and lending, coming in 2023, will allow users to take advantage of arbitrage and liquidation opportunities across all supported chains. Users will have a seamless experience when accessing liquidity from across web3, resulting in unified liquidity independent of where it's actually located.

In addition, Glitter features world-class support and an easy-to-use UI in a permissionless app, giving you the speed and reliability of a centralised exchange with the privacy and control of a decentralised protocol.

With Glitter, it's the best of both worlds.

Jack Evans

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments.

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