What is Axelar and How Does it Work?

Axelar is a new technology that is meant to make it easier for different blockchain networks to work together smoothly. It acts as a kind of backbone for the Web3 ecosystem. At its heart, it is a decentralized blockchain network designed to make cross-chain communication easier. This means that users, assets, and applications on one blockchain can interact with those on any other blockchain in a way that is safe, fast, and easy to use.

Source: Axelax App

Axelar is built on a three-tiered system:

It starts with a decentralized network of validators who are in charge of keeping the network healthy and carrying out transactions. These validators use a cross-chain gateway protocol, which is a type of multi-party cryptography overlay that lets Layer 1 blockchains talk to each other. Validators make sure that events happening on connected external chains are real by reading and writing to gateway smart contracts that are located on those chains.

The second layer comprises gateway smart contracts that act as bridges between Axelar and the Layer 1 blockchains it is connected to. Validators keep an eye on these gateways all the time to find incoming transactions, which they then look at, analyze, and confirm using a consensus mechanism. Once everyone agrees on a transaction, they write it to the destination chain’s gateway. This makes it easier for the cross-chain transaction to happen.

The third component comprises the tools for developers, namely APIs (Application Programming Interfaces) and SDKs (Software Development Kits), which sit above the foundational layers of validators and gateways. This application-development layer is what developers utilize to construct cross-chain applications, thereby infusing universal interoperability into their applications and blockchains.

Axelar’s clever design gets rid of the need for awkward two-way bridges between different networks, which could lead to a need for an increasing number of bridges as more networks appear. Instead, it works as a single, universal network that all connected blockchains can use to handle routing, translation, and security. This lets developers focus on their use case without worrying about networking and interoperability issues between chains.

As an interface to the Axelar Network, developers can leverage Axelar’s SDKs to write decentralized applications (dApps) that can be easily deployed across all Axelar-connected ecosystems. Furthermore, users and blockchain developers can communicate effortlessly with other chains, enhancing the overall user experience and promoting decentralized application development.

Have a look at all the chains supported by Axelar:

Source: here

Axelar aims to make Web3 development and deployment as easy and scalable as Web2. They want to make Web3 applications available to the next billion people by building the necessary infrastructure. It wants to change the Web3 space in the same way that Akamai and CDN changed the Web2 space, by making it possible for all blockchain ecosystems to work together securely. In essence, Axelar is set to be the backbone of a multi-chain future. It will provide a secure, efficient, and decentralized transport layer that is supported by permissionless validators and powered by Tendermint.

History of Axelar, origins and key person

The Axelar Network was conceived with the vision of breaking down the barriers to cross-chain communication that currently exist in the blockchain world. Sergey Gorbunov and Georgios Vlachos, two seasoned researchers and technologists with extensive experience in blockchain technology, launched the network on behalf of the Axelar Foundation. Before co-founding Axelar, Sergey Gorbunov was an Assistant Professor at the University of Waterloo, specializing in Cryptography, Security, and Privacy. He has a solid background in the industry, having co-founded Skalex, a company providing cryptocurrency exchange software, and Algorand, a technology company aiming to remove barriers to broader blockchain adoption.

His co-founder, Georgios Vlachos, also brings an impressive pedigree to the team. Before Axelar, he worked as a Research Scientist at Algorand, contributing to developing next-generation, public, and permissionless blockchains.

Axelar grew out of the founders’ knowledge and desire to make a cross-chain communication protocol that is effective, decentralized, scalable, and safe. They knew each blockchain had its limitations and was separate from the others, so they wanted to make a network where any decentralized application (dApp) could interact with multiple blockchain ecosystems without any problems. They wanted to make it easy for developers to talk to each other across chains, making the Web3 landscape more integrated and cohesive. This goal is what Axelar is built on, and it continues to drive its growth and development.

How does AXL Work?

Source @axelar-foundation/the-axl-token-the-cross-chain-future-3dee3dc45e95">here

The AXL token is a crucial component of the Axelar Network, serving as its native cryptocurrency. It is integral in sustaining and promoting the network’s operations, security, and governance. The AXL token is developed to enable a decentralized, proof-of-stake consensus mechanism. This mechanism, coupled with a dynamic and diverse set of validators, is crucial for maintaining the network’s robustness against potential attacks.

In the Axelar network, validators, who are responsible for producing new blocks, participating in multiparty signing, and voting on external chain states, are incentivized through rewards paid in AXL tokens. Token holders stake their AXL tokens, delegating these to a validator’s staking pool, and in return, receive rewards, which are inflationary and contribute to the total token supply. This process aligns the interests of all participants, contributing to network security.

AXL Token Economics

The goal of AXL’s token economics is to create a token economy that helps the Axelar network reach the following important goals:

• Security: A good incentive model with good rewards for staking that encourages a large number of validators to run secure nodes.
• Decentralization: A token is given to a large number of people, who then give it to a decentralized group of validators and help make decisions about governance.
• Longevity: The economics of tokens are set up to encourage the general upkeep of all important Axelar processes, like block validation.
• dApps: The token encourages developers of decentralized applications (dApps) to use Axelar APIs for cross-chain development.

At the time of its genesis, the network will mint 1 billion AXL tokens. The release of the token supply will follow linear schedules over periods ranging from six months (for community sale participants) to four years (for team members), supporting a measured and sustainable growth of the network. See the chart below:

来源：@axelar-foundation/an-overview-of-axl-token-economics-4dc701c9054d"">https://medium.com/@axelar-foundation/an-overview-of-axl-token-economics-4dc701c9054d

来源：@axelar-foundation/an-overview-of-axl-token-economics-4dc701c9054d"">https://medium.com/@axelar-foundation/an-overview-of-axl-token-economics-4dc701c9054d

The Chart above provides a chart showing the allocations of AXL genesis tokens, which are as follows:

• Company: 29.5%.
  • Core team: 17%.
  • Company operations: 12.5%.
• Backers: 29.54%
  • Seed: 13.4%.
  • Series A: 12.64%.
  • Series B: 3.5%.
• Community sale: 5%.
• Community programs (incl. insurance fund): 35.96%.

The AXL token also facilitates network governance by allowing stakers to control proposals such as parameter changes or protocol upgrades. This way, it ensures that the decision-making process within the network is democratized and that the changes made align with the interests of its participants.

Additional Use Cases

The AXL token is used for transaction fees within the network as well as staking rewards and governance. AXL fees must be paid for every transaction on the Axelar network. These fees are handled in a way that is easy for users to understand. Network services buy AXL tokens to pay the fees, which makes the whole process seamless for end users. Also, the AXL token has the potential to cause deflation. Even though users do not have to hold AXL to use the network (they pay all gas fees in the source-chain token), there may be extra payments or “change” from transactions that could be partially returned to the user or used in the AXL token buyback-and-burn mechanisms. These mechanisms could cause deflation on the network, making AXL tokens more valuable over time.

To stake AXL tokens and earn rewards, token holders can use compatible wallets such as Keplr and Cosmostation from the Cosmos ecosystem. They can delegate their stake to the validators of their choice, contributing to the network’s decentralization and security while earning rewards.

wAXL

wAXL represents the ERC-20 variant of the native AXL token that powers the Axelar network. Designed to function across multiple blockchains, the AXL token has various forms, including the ERC-20 representation residing on Ethereum and other connected chains. This particular manifestation of the token is known as wAXL.

The wAXL token is created through a process that locks native AXL tokens into a gateway on the Axelar blockchain. An equivalent amount of wAXL is then minted on an Ethereum Virtual Machine (EVM)-compatible blockchain using a smart contract, creating a ‘wrapped’ representation of the native token. This process can be reversed, enabling users to switch between AXL and wAXL freely, while maintaining a 1:1 ratio between the two token types.

Exchanges may use different tickers for the native and ERC-20 versions of AXL. Typically, “AXL” refers to the native token, and “wAXL” is used for the ERC-20 representation. Caution should be exercised when interacting with these tokens on exchanges to prevent confusion and potential loss of funds due to sending tokens to incompatible addresses.

AXL and wAXL can be distinguished by their addresses. Native AXL addresses begin with the ‘axelar’ prefix, while ERC-20 versions (wAXL) adopt the standard Ethereum address format starting with ‘0x’.

Satellite

Source: https://satellite.money/

Since its inception, Satellite has been one of the most intriguing and promising innovations within the Axelar Network. As a decentralized cross-chain asset transfer application, Satellite creates a bridge that enables assets to move from one blockchain to another.

Now you may be wondering, what makes Satellite unique? Satellite works with both EVM and non-EVM chains like Terra, Avalanche, Polygon, Ethereum, and Fantom This versatility allows for a wider range of asset transfers across various blockchains.

But the innovation doesn’t stop there. Satellite is the pioneer in showing that Axelar connects all Cosmos chains via IBC and its GCP protocol with multiple ecosystems. This puts Axelar in a unique position as the translation layer, allowing assets from Cosmos to flow freely to all Axelar-interconnected networks and vice versa. In simpler terms, Axelar is like a language translator between blockchains, enabling transactions to execute seamlessly, no matter the blockchain’s “native language.”

As for the transaction fees, there are costs involved to process cross-chain asset transfers. Users must pay the fee on the source chain they’re sending from, plus a 0.1% charge for the asset transferred. This will cover the fees on all other chains and operational costs. Satellite marks just the beginning of what’s possible with Axelar. Developers will soon be able to connect their applications to Axelar’s decentralized network via an API. This will grant them access to every other network linked to Axelar, along with the assets and users on those networks.

Regarding how Axelar processes cross-chain transfers, here’s a quick rundown. A decentralized group of validators oversees the gateway smart contract, which transfers assets from the source chain. When a transaction occurs, these validators execute a read request to the gateway. Through a multi-party consensus protocol, they agree upon the state of the transfer. Once consensus is achieved, the validators execute a write request to the destination chain’s gateway contract. After another round of consensus, the funds are transferred to the destination address.

Source: https://medium.com/axelar/announcing-the-launch-of-satellite-6f9674e91833

Main Features of Axelar

Axelar Virtual Machine

Source: here

The Axelar Network has made significant strides in connecting a multitude of blockchain ecosystems as explained in the introduction, processing an impressive number of cross-chain requests, and transferring billions in value. With its growing influence, the need to connect with more chains and simplify multi-chain development has never been greater. In response to this need, the Axelar Network created the Axelar Virtual Machine (AVM), which uses the power of CosmWasm, which is a smart contract platform that focuses on security, performance, and interoperability. It is the only platform for smart contracts on public blockchains that is widely used outside the EVM world.

The Axelar Virtual Machine is a game-changer, as it converts interoperability into a programmable layer. It facilitates developers to author smart contracts on Axelar, thereby scaling their interchain deployments and crafting the cross-chain networking layer.

The advent of the AVM has brought forth two ground-breaking products: The Interchain Amplifier and the Interchain Maestro.

The Interchain Amplifier

The Interchain Amplifier offers a permissionless model and service that allows anyone to form a seamless connection to the Axelar network and all its interconnected chains.

The Interchain Amplifier lets developers connect to the Axelar network without asking for permission. Developers can use Axelar’s network of chains, which are all connected to each other, and can “amplify” their resources by paying what it would cost to build just one connection. They can set up links between new ecosystems or existing chains to add new network properties, like better security or faster delivery.

For example, once Ethereum makes strong light clients and ZK proofs for its state, a developer can easily add them to the Axelar network to replace or improve an existing connection.

Source: here

The Interchain Maestro

On the other hand, the Interchain Maestro acts as an orchestrator that developers can utilize to deploy and manage their multi-chain dApp instantiations. This innovative tool enables developers to build once and run everywhere, massively streamlining the development process. Developers will be able to:

• Give details about the contracts they want to use, as well as the chains and any governance parameters.
• Store these confirmations and initial parameters in a smart contract on the Axelar network, which will then send them to all other networks.
• You can easily copy or extend these contracts to other chains.
• Upgrade their contract code with just one transaction on the Axelar network, and the upgrade will be sent to all the chains that are connected to it.

Developers can interact with multiple chains by sending transactions on the Axelar network with just one hop. This eliminates the need to do the same things across multiple chains and makes it easier to manage the workload.

Source: here

The Axelar Virtual Machine is a big step forward for programmable interoperability. It makes it easier and more effective to connect different chains. As Web3 continues to grow, the AVM’s role in making it easier to make new connections and faster to deploy interchain dApps will be very important. This shows how committed Axelar is to improve the ecosystem of the decentralized Web, connecting more chains, and giving developers easier-to-use tools for making and deploying multi-chain dApps.

Axelar Security

Several steps are taken by the Axelar network to make sure it is as safe as possible. It takes a multifaceted approach to cross-chain security, using a mix of new techniques and methods that all help make the system more secure as a whole.

• Decentralized Proof-of-Stake Design: Axelar uses a proof-of-stake (PoS) consensus algorithm that has a set of validators that are both diverse and changeable. This means that anyone can join the network, take part, and help keep it safe. Using PoS also helps ensure the system is alive and safe since an attacker would need a lot of resources to take over enough nodes to disrupt the network or make a bad transaction.
• Quadratic Voting Mechanism: Axelar uses a quadratic voting mechanism to stop the concentration of power and make it even more decentralized. With this system, the number of votes each validator gets equals the square root of how much they have invested. This makes it harder for validators with bigger investments to get all the votes. But it is important to remember that this quadratic voting is used to validate and process transactions between chains. The standard PoS staking model is still the basis for how blocks are made and rewards are given.
• Validator Security Policies: Validator security policies are enforced, one of which is that keys have to be changed occasionally. Key rotations add another layer of protection against persistent attackers who might try to get a bunch of bad keys by compromising validators one by one.
• Rate Limits and Contract Limits: Axelar uses rate limits to transfer major assets (like USDC, FRAX, and ETH) across the Axelar gateways to limit how much of each asset can be transferred in a certain amount of time. This is a way to protect against large-scale attacks that try to take advantage of the fact that the network works across chains.
• Interchain Security: This feature lets a network “borrow” the security of other networks. By doing this, it raises the stake used to validate transactions on the network. This makes it much harder to use money to attack the network.
• Bug Bounties and Strict Audits: The Axelar network goes through strict audits regularly, and all of its contracts are open-source, so white-hat hackers and other security experts can look into them and make them safer. There’s also an active bug-bounty program that incentivizes the discovery and reporting of vulnerabilities.
• Planning for Failures: Axelar understands that no system is completely invulnerable. Hence, they have put in place measures to react to failures, be they malicious or accidental. These measures include things like key rotations and rate limits.
• Application-level Security Add-Ons: Axelar offers Turing-complete general message passing, enabling developers to build their own custom cross-chain security policies. This could include setting additional limits on transaction volumes, repeating transactions, or co-authoring large transfers.

In summary, Axelar takes a comprehensive and thoughtful approach to security, combining various strategies and tools to create a robust and resilient cross-chain system. From its consensus mechanism to its application-level security add-ons, each facet of the Axelar network is designed with safety, liveness, and decentralization in mind.

Is AXL a Good Investment?

Determining whether AXL is a suitable investment for you depends on your individual situation and tolerance for risk. Cryptocurrencies are known for being high-risk assets, and it is recommended that you conduct your own research and assess the amount of risk you are comfortable with before making an investment. It is essential to avoid investing money that you cannot afford to lose.

How can you own AXL?

Going through a centralized cryptocurrency exchange is one approach to acquiring AXL. The first step is to create a Gate.io account and complete the KYC process. Once you have deposited money into your account, follow the instructions to purchase AXL on the spot or futures market.

News on Axelar

Axelar network went live on the mainnet at the beginning of 2022, establishing a secure bridge for interchain communication across Cosmos and EVM ecosystems. During its first year on mainnet, it achieved a series of notable milestones.

Following its successful launch, the project received Series B financing, taking its valuation to $1 billion. To stimulate innovative ideas, the Axelar Grant Program and Ecosystem Funding Program were introduced, fostering a productive environment for idea-stage projects aimed at mass adoption.

Amidst the crisis of Terra’s UST stablecoin collapse, Axelar’s infrastructure played a critical role in bridging millions in USDC liquidity into Cosmos. Furthermore, the General Message Passing went live on the mainnet in May 2022, enabling interchain NFTs and simplifying user interchain experiences.

One of Axelar’s revolutionary achievements was implementing a quadratic voting mechanism in September 2022 to decentralize the network further. Moreover, the AXL token was also released, opening access to staking and governance on Axelar.

Over the course of the year, Axelar set up strategic partnerships with a number of the most important blockchain ecosystems and projects. The network grew a lot, connecting 30 chains, handling more than $1.6 billion in transfers, and handling more than 300,000 transactions.

Looking back at the beginning of 2023, the first-of-its-kind Interop Summit was successfully held on February 27-28 in Denver. The summit brought together leading chain-agnostic builders, setting new paradigms for building in the interchain. Furthermore, the anticipated Axelar Ecosystem Startup Funding Program has been launched, with the participation of over 15 renowned Web3 VCs working to identify projects that contribute to mass adoption on the decentralized web.

Another significant achievement of 2023 has been extending General Message Passing to Cosmos chains and dApps, thereby bolstering cross-communication across both ecosystems. Additionally, with the help of Circle, Axelar has successfully introduced Composable USDC, opening the gates of liquidity to every application across multiple blockchains.

As of today, Axelar has also broadened its support for non-EVM blockchains by adopting gateways and protocol semantics across various languages. Axelar’s dedication to inclusivity and accessibility is evident through these expansions. To add another layer of security, application-level security validation has been successfully implemented, offering dApp developers protocols to enhance transaction authorization and deploy additional validator nodes.

Axelar continues to exemplify the seamless integration of cross-chain communication, demonstrating an unwavering commitment to innovation, inclusivity, and growth in the blockchain sphere.

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