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Helix Markets vs. Atomic Trades vs. Cross-Chain Trading

Published at 03/Apr, 7 mins to read

Enabling seamless, cross-chain trading, together with the blockchain trilemma has been one of the holy grails of crypto. There have been two leading schools of thought on cross-chain interoperability; atomic cross-chain transactions and multi-chain bridges. Let’s dive into these two different solutions and how they compare with Helix Market’s approach.

Atomic cross-chain transactions

Atomic swaps are a trustless way of exchanging cryptocurrencies between two different blockchain networks without the need for a centralized exchange. It's a very popular approach due to its potential to eliminate intermediaries and reduce transaction fees.

However, when it comes to atomic multichain swaps, the technology faces some limitations that make it difficult to scale and implement on a larger scale.

One of the primary reasons for the difficulty is the lack of standardization among different blockchain networks. Each blockchain has its own unique protocol and underpinning cryptography (ECDSA, EdDSA, etc.), accounting principle (UTXO vs accounting model), consensus mechanism and block time impacting transaction finality, and transaction speed. All of these differences make it incredibly challenging to create a unified atomic swap protocol that can be used across multiple blockchains.

Another big challenge is the liquidity problem. Atomic swaps require both parties to have the same amount of cryptocurrency available for the swap. This requirement makes it difficult to find a counterparty with the same amount of cryptocurrency available for the swap, especially for more illiquid tokens.

Multi-chain bridges

Multi-chain crypto bridges are a promising solution for interoperability between different blockchain networks. At the moment they present the most popular solution to blockchain interoperability, however, they still have some limitations that need to be addressed.

Most existing multi-chain crypto bridges are centralized, meaning they rely on a central authority to manage the transactions between different chains. This centralization creates a single point of failure, making the bridge vulnerable to hacking, censorship, or other attacks.

Fragmenting of liquidity across many different chains, L2s and rollups poses a huge challenge as it requires a significant capital allocation to bridge the asset to the other chain. With an increasing number of bridges and layer 2 solutions, it is becoming increasingly difficult to bring enough liquidity over to facilitate efficient markets.

Multi-chain crypto bridges involve the transfer of assets between different chains, which can pose security risks. Malicious actors may attempt to exploit vulnerabilities in the bridge to steal assets or launch attacks on the connected chains. Over $2 billion were stolen from bridges in 2022 alone!

Multi-chain crypto bridges are currently limited in the number of chains they can support. Bridges must be built and maintained for each chain, which can be time-consuming and costly. This limits the scalability of multi-chain bridges and makes it difficult for smaller chains to participate.

Finally, multi-chain crypto bridges can also suffer from slower transaction speeds due to the added complexity of transferring assets between chains. This can lead to longer wait times and higher transaction fees for users.

Helix Markets approach

We took the approach that the underlying denominator to all blockchains is cryptography. At the cryptographic level, we can facilitate communication between different blockchains through the use of threshold-ECDSA, enabled by our smart contract (a canister in Internet Computer Protocol parlance). ECDSA is the cryptography that is underpinning the majority of protocols today, and it is used in Helix Markets to manage all of the account funding and settlement. For example, when you deposit ETH into your Helix Markets wallet, you are depositing ETH to an Ethereum wallet on the Ethereum blockchain that was created by the Helix Markets smart contract. These funds are fully segmented from others’ funds, they are accounted for by the smart contract, and you remain in full control of the funds at all times.

This enables us direct, bridge-less interactions with native chains via our smart contract - from native address creation, to sending and settling transactions on these native chains.

Trades are placed on the Helix Markets off-chain order book, and after the trade occurs, the matching engine reconciles the balances with the chain with a bit of lag as the matching engine is 1000x faster than any Ethereum VM-based chain, running at a maximum of 100K transactions per second! This is the initial implementation of Helix Markets - decentralized on-chain funding and settlement with an off-chain order book. In 2024, we plan to move the order book on-chain, transitioning from a hybrid exchange model to a fully decentralized exchange model. Our matching engine is being built from scratch, and it's easier to build a super-fast matching engine off-chain and then move it on-chain instead of building all the matching logic directly on-chain.

Our smart contract is also capable of doing HTTP calls, which means that it can directly communicate with the outside world without requiring oracles. This enables us to propagate transactions to other networks, such as sending a Bitcoin transaction to a Bitcoin node, which then pushes the transaction into a block. Similarly, for Ethereum, we send it to an RPC provider such as Infura or Alchemy, which then sends the transaction to the Ethereum mempool, and it gets written into a block.

In terms of architecture, the smart contract is deployed and lives on the Dfinity (Internet Computer Protocol) blockchain. However, our smart contract can talk to other blockchains in their language, meaning that it has the ability to create transactions on other protocols. This means we can interact with tokens on Ethereum and Bitcoin directly without having to bridge them over in any way, and the same goes for other protocols.

In this way, the Helix Markets platform is in a position to tap into all of the native liquidity instead of further fragmentizing it across multiple chains and rollups. This means that we are not constrained or slowed down by any bridges or token minters, enabling us to provide the users of this platform with a more seamless and frictionless user experience. That enables us to create a non-custodial, transparent, secure and lightning-fast marketplace where users can trade their favourite tokens!

We hope this provided you with a good overview of the differences between atomic swaps, cross-chain bridges, and what the Helix Markets team is building and soon making available. We really look forward to getting it into the community’s hands soon for testing, validation and feedback so that we can work with you to build the best possible platform.

Join our Discord community to learn more and become part of the Helix family today, and apply to be one of the first Helix Markets alpha testers!