Technical Interpretation： Why Blockchain State is Important in Chain Interoperability

What is State?

Blockchain functions as a distributed ledger where consensus is achieved among replicas. The ledger, subject to continuous updates, attains its latest state through the sequential appending of blocks containing new transactions, following a state transition function (STF). Consequently, full nodes in a blockchain system store two main types of data:

• Block History: An append-only record that, once committed, generally attains immutability. New transactions are packaged into blocks and appended to the blockchain ledger, forming an ever-growing chain of historical data.
• State: Representing the global state of the blockchain system at a specific moment, the state undergoes synchronization across the entire network as new blocks are finalized. The STF serves as the computational logic employed by each blockchain node to update the state. It takes the current state and some inputs, such as a new block with transactions, to compute the new state.

The current blockchain systems exhibit two mainstream state models.

• The Transfer-oriented Unspent Transaction Output (UTXO) model, analogous to the notion of loose change, is employed by early blockchain implementations such as Bitcoin and ZCash, specifically for transfer-only purposes. In this model, the ledger records each UTXO, specifying the authorized address to spend it. Each transfer entails the consumption of input UTXOs and the generation of new output UTXOs, which are subsequently added to the latest state set.
• The Account model, characterized by enhanced programmability, mirrors the concept of traditional bank accounts. This model is adopted by smart contract platforms like Ethereum to better support the development of Turing-complete smart contracts and on-chain applications. In this model, the ledger maintains comprehensive state info for each address. Taking Ethereum as an example, external accounts record user balance and nonce, while contract accounts encompass additional attributes, such as codeHash denoting the digest of contract code and the storageRoot signifying its internal state.

The robustness of blockchain lies in the decentralized maintenance of a consistent state among nodes in the network through a consensus algorithm. Nodes achieve consensus to ensure that each node possesses an identical state view. As a result, the blockchain systems not only manifest robust fault tolerance and resistance to censorship but also aid in preventing malicious activities, including but not limited to double-spending and fraudulent behaviors.

State Fragmentation under the Trend of Modularity

Over the years, blockchain technology has consistently confronted scalability challenges. To address this, the industry has proposed various L1 and Rollup solutions. However, with the emergence of multi-chain and modular architectures has transformed the landscape for state distribution. Rather than being confined to a limited number of blockchains, the state data of user and DApps are now fragmented across dozens of L1s and Rollups. This fragmentation has also introduced new challenges for both users and developers, including a fragmented user experience, higher entry barriers, insufficient liquidity in DeFi protocols, and difficulties associated with state synchronization and governance of omni-chain DApps.

Fragmented User Experience

• Scattered User State: The fragmentation of users’ state data and assets across diverse L1 and Rollup networks mandates users to manage and inspect their state data on these chains separately.
• Scattered DApp Deployment: The deployment of applications across varied networks necessitates users to interact with corresponding DApps on distinct chains. This increases the intricacies of users’ operations.
• Wallet Adaptability: Users are compelled to utilize distinct corresponding wallets tailored for various heterogeneous L1s and Rollups, potentially requiring multiple accounts on these networks. This complexity of account management raises the barriers for users transitioning from Web2 to the Web3 world.
• Technical Requirements: Accessing diverse networks imposes the need for users to configure varied network parameters and comprehend the fundamental aspects of each network. This requirement presupposes a certain level of technical proficiency in understanding diverse heterogeneous chains, thereby contributing to an elevated learning curve for newcomers.

Fragmented Asset liquidity

The Current proliferation of on-chain financial applications within the flourishing on-chain ecosystem has led to the emergence of various innovative DeFi protocols. However, deploying homogenous DeFi protocols on each network exacerbates existing insufficient liquidity challenges. The absence of interconnectivity among liquidity pools across different DeFi protocols on diverse networks fragments asset liquidity. This fragmentation results in insufficient liquidity on certain networks, leading to higher transaction slippage and volatility that has consequential negative impact on other projects, thereby posing one of the biggest barriers for substantial capital flowing into or out of DeFi protocols.

Challenges in Omni-Chain DApps

As the Web3 world is stepping into a multi-chain and modular paradigm, projects spanning multiple networks emerge as a new trend in application design patterns — refered to as omni-chain DApps. However, this innovation introduces challenges in the development process, particularly concerning state synchronization and unified governance, attributed to the state fragmentation across multiple networks.

• Inter-chain State Synchronization: The deployment of sub-contracts for an omni-chain DApp across multiple networks necessitates ongoing state synchronization to ensure the proper execution of business logic. Nevertheless, discrepancies in various networks, including variations in block intervals and state data structures, pose obstacles to achieving immediate and verifiable state synchronization.
• Inter-chain Governance: The state fragmentation introduces complexities in coordinating community efforts across all related networks and establishing a cohesive global governance framework for the advancement of omni-chain DApps. These challenges present new considerations for developers engaged in this frontier of omni-chain DApp development.

Solutions of Cycle Network

Cycle Network introduces the pioneering Omni Distributed Ledger Technology (ODLT) to address the challenge of achieving omni-chain interoperability.

Trustless State Exchange

The ODLT framework involves two key components, the Omni State Channel Indexer (OSCI) and the Trustless Cross Chain Protocol (TCCP), collectively serving as infrastructure to facilitate trustless state exchange across various L1s and Rollups. Based on them, Cycle Network is able to efficiently aggregate liquidity from diverse networks and address state synchronization challenges. An OSCI is a decentralized multi-chain indexer that operates omni-chain indexing with decentralized governance to allow for a trustless validation and determination of the state of the Cycle ledger at any given moment. The TCCP achieves secure and reliable interactions between Cycle Network and other chains through Rollup native bridges. Importantly, this is established without the introduction of any trusted third party. Through OSCI & TCCP, user assets can trustlessly and promptly traverse Cycle Network, enabling transfers or trades across different chains. This asset hub role improves liquidity for ontop DeFi protocols and mitigate price slippage. Besides, with the benefits of TCCP, the Cycle Network can uphold seamless collaboration between the sub-contracts of omni-chain DApps or other applications from other networks, maintaining real-time and correct state updates.

Cycle Layer for DApp Centric Future

One of the primary parties within the Cycle Network framework is the Cycle Layer, designed as a DApp centric infrastructure for end users to shield them from the intricacies of blockchain interoperability and omni-chain DApps. The Cycle Layer facilitates seamless user access to applications on various networks, eliminating the need to switch wallets or adjust network settings between chains. This initiative fundamentally alleviates user confusion and complexity users face in the multi-chain environment, thereby significantly improving the overall user experience.

Notably, omni-chain DApps deployed on the Cycle Network adhere to a design pattern of storage-compute decoupling. The Cycle Layer offers unified state management for users, while interactions with sub-contracts or applications on different chains occur through the form of computation outsourcing. This design effectively addresses state fragmentation issues while ensuring network scalability. The presence of Cycle Layer as a DApp centric infrastructure allows users to focus more on their practical needs without delving into underlying technical complexities, thereby improving users acceptance of the blockchain ecosystem and fostering broader Web3 adoption.