Tunnels
📜 TL;DR:
Bridging i.e. Tunneling allows the transfer of assets between disparate blockchains (such as between distinct L1s or between an L1 and an L2).
While bridging addresses the siloed nature common to most blockchains, it typically suffers from centralization because most blockchains do not maintain state awareness of other networks.
Hemi Network enables sophisticated asset transfer and decentralization by maintaining protocol-level state awareness of both Bitcoin and Ethereum.
🌐 Overview
Blockchain networks typically operate as independent systems with no knowledge of other networks, creating a siloed environment. This isolation makes it impossible to transfer assets directly from one chain to another.
Bridges are developed to address this issue, enabling asset transfers between different blockchains. They function by accepting a token from one blockchain (chain A) and issuing a corresponding placeholder or wrapped token on another blockchain (chain B). This wrapped token represents the original token and can be redeemed for it.
🖼️ Example
To illustrate, consider the process of transferring bitcoin to Ethereum. A user sends bitcoin to a bridge connecting to the Ethereum network. This bridge then issues a wrapped Ethereum token representing the bitcoin.
The user can utilize this wrapped bitcoin within the Ethereum network or return it to the bridge to reclaim the original bitcoin on the Bitcoin network.
🔍 Broader Applications & Limitations of Bridges
Bridges are not limited to transferring assets between distinct blockchains. They can also facilitate transfers between different network layers, like connecting a Layer 1 (L1) blockchain like Ethereum to a Layer 2 (L2) rollup chain. This connection allows assets to benefit from the L2's lower fees and other features.
However, bridges often rely on centralized infrastructure due to the lack of protocol-level awareness between the connected chains. For example, while an L2 might maintain the state of its corresponding L1, the L1 lacks inherent knowledge of the L2. This disconnect necessitates a centralized third party to maintain awareness of both chains.
🔒 Security and Efficiency
The security model behind Hemi’s Ethereum Tunnels leverages the strengths of both Ethereum and Bitcoin. By integrating Bitcoin finality, Hemi ensures that cross-chain transactions achieve a level of finality backed by Bitcoin’s Proof-of-Work consensus, widely considered the most secure consensus mechanism in blockchain technology.
This significantly reduces the time it takes to finalize cross-chain transactions and provides strong protection against censorship or fraud attempts during the tunneling process.
The decentralized Challenger role also strengthens Hemi’s security. Rather than relying on a centralized entity to raise disputes, any participant in the Hemi ecosystem can act as a Challenger, further decentralizing the network and increasing its resistance to fraud.
This approach contrasts with centralized bridges, which can be vulnerable to manipulation or collusion by a single entity overseeing the dispute process.
🏗️ A Phased Approach
The phased approach to Hemi’s Ethereum and Bitcoin Tunnels aims to progressively enhance the security, decentralization, and asset support for cross-chain transfers. Each phase introduces key improvements to the settlement mechanisms and expands the range of assets that can be tunneled across Ethereum, Bitcoin, and Hemi, all while focusing on increasing trust minimization and reducing reliance on centralized actors.
Phase 0 (Current State)
Ethereum Tunnels:
Optimistic (fault-dispute) model, where disputes are raised within a dispute window.
ETH-based assets tunneled between Ethereum and Hemi.
Bitcoin Tunnels:
Over-collateralized multisig/threshold signatures, providing moderate decentralization.
BTC itself tunneled to and from Hemi.
Phase 1 (Expansion)
Ethereum Tunnels:
ZK proof-based settlement with an optimistic fallback if the ZK system fails.
ETH-based assets plus support for Hemi-native assets, including BTC-based assets, tunneled to Ethereum.
Bitcoin Tunnels:
Introduction of BitVM2+hVM, a decentralized 1-of-N trust system for enhanced security.
BTC itself, with groundwork for supporting fungible BTC assets (BRC-20s, Runes).
Phase 2 (Maturity)
Ethereum Tunnels:
Redundant ZK proof system (2-of-3), providing higher security with multiple ZK proofs.
Full support for Hemi-native assets, including BTC-based fungible and non-fungible assets (Ordinals) tunneled to Ethereum.
Bitcoin Tunnels:
A mature BitVM2+hVM model for trust minimization.
Full support for fungible BTC assets (BRC-20s, Runes) and non-fungible assets (Ordinals).
👀 Sneak Peek WIP
Introducing Tunnels for Decentralized Asset Transfers
To promote greater decentralization and address the limitations of bridges, the Hemi Network introduces tunnels.
Tunnels allow for sophisticated, noncustodial bidirectional asset transfers between networks, such as Bitcoin and Ethereum. Unlike traditional bridges, tunnels within the Hemi Network maintain state awareness of both networks at the protocol level.
This enables a variety of custodianship approaches, both centralized and decentralized. For instance, BRC-20 tokens can be tunneled from Bitcoin to the Hemi Network or Ethereum, facilitating trading on Ethereum-based decentralized exchanges (DEXes). Additionally, tunnels benefit from the security features of the Hemi Network’s Bitcoin-based superfinality
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