Chainlink CCIP is launched on the main network, understand its technical characteristics and application scenarios in this article

We are very pleased to announce that the Chainlink Cross-Chain Interoperability Protocol (CCIP) is officially launched on Avalanche, Ethereum, Optimism and Polygon, starting the early access phase of the mainnet. Many mainstream DeFi protocols in derivatives and lending tracks have integrated CCIP. Among them, Synthetix has been launched on the CCIP mainnet; in addition, BGD Labs has officially integrated the mainnet CCIP into the Aave protocol.

CCIP will be open to all developers on five testnets on July 20, including Arbitrum Goerli, Avalanche Fuji, Ethereum Sepolia, Optimism Goerli, and Polygon Mumbai.

Connecting the multi-chain world

Web3 has now entered the multi-chain era. There are hundreds of blockchain, L2, sidechain, subnet, appchain, and parachain environments for developers and users to choose from. These emerging on-chain ecologies drive innovation and technology adoption, but also fragment applications, on-chain assets, and market liquidity across siled networks. In addition, there are various types of existing cross-chain solutions. Protocols and blockchains use various technology stacks, and these technology stacks usually lack security, resulting in the cumulative theft of more than 2 billion US dollars in cross-chain assets. The lack of interoperability hinders innovation and slows down the adoption of Web3 at scale.

However, it is difficult to solve this problem. We not only develop good products, but also establish standards that the entire industry follows to achieve interoperability and composability. Creating cross-chain standards needs to take into account the three dimensions of security, flexibility, and community support. The reason for ensuring security is that the process of asset cross-chain cannot allow any mistakes. And flexibility, because this standard is applicable to all potential application scenarios and compatible with all deployed blockchains. The last one is community support, which means that this standard must be adopted by the majority of community members to be valuable. Chainlink has established a unified industry standard for Web3 data. We have been able to build a strong community with the support of all our users and partners. To sum up, Chainlink has unique advantages, and can further expand on the established standards, use it to solve cross-chain problems, and promote a new round of innovation in Web3.

Web2 requires the TCP/IP protocol to connect isolated computer networks. Likewise, Web3 also requires interoperability standards to connect isolated blockchain networks.

CCIP is the most secure, reliable and easy-to-use interoperability protocol that can be used to create cross-chain applications and services. Developers can use the Arbitrary Messaging (arbitrary message sending) function to flexibly create their own cross-chain solutions. Not only that, but CCIP can also realize the function of Simplified Token Transfer. Therefore, the protocol can use its own controlled and audited token pool to transfer tokens across chains, without custom code, and in much less time than developing a cross-chain bridge from scratch.

CCIP is driven by Chainlink's decentralized oracle network. Chainlink's oracle network has achieved outstanding results, safeguarding tens of billions of dollars in assets, and realizing more than $8 trillion in chain transaction value. CCIP shares the same infrastructure as other services Chainlink has already launched, so few new trust assumptions need to be added. If the dApp has already integrated Chainlink Price Feeds, then there is no reason not to choose CCIP for cross-chain interaction. CCIP also adds an additional security mechanism, which is unmatched by other cross-chain solutions. For example, the upper limit of the number of cross-chain tokens (rate limit) can be set at will. In addition, an Active Risk Management (ARM, active risk control) network has been set up separately, which is responsible for monitoring the validity of all cross-chain transactions.

Developers, applications and enterprises can use CCIP to unlock a range of use cases such as:

• **Cross-chain token assets: **Cross-chain tokens from a unified interface, no need to develop cross-chain bridges yourself.
• **Cross-chain mortgage assets: ** Released cross-chain lending applications, users can deposit mortgage assets on one chain, and then borrow assets on another chain.
• **Cross-chain Liquid Pledge Token: **Transfer liquid Pledge Token to different blockchains to improve the utilization of the token in DeFi applications on other chains.
• **Cross-chain NFT: **Users can mint NFT on one chain and receive NFT on another chain.
• **Cross-chain account abstraction: **Develop a smart contract wallet that integrates CCIP to enhance the user experience of cross-chain calling functions. For example, users can sign transactions on any blockchain with the same wallet.
• **Cross-chain games: **Create a game experience across any blockchain, players can store high-value game items on a chain with relatively high security, and play games on a chain with relatively high scalability operate.
• **Cross-chain data storage and computing: **Development of data storage solutions, users can store arbitrary data on the target chain, and perform calculations on the data based on transactions on the original chain.

Mainstream applications in the market are using CCIP to achieve cross-chain interaction

Synthetix integrates CCIP to achieve cross-chain liquidity

Synthetix is a DeFi protocol that provides liquidity for on-chain derivatives and financial instrument ecosystems. Synthetix V3 recently added the Synth Teleporter feature, allowing users to easily transfer Synth liquidity across chains. The specific method is to destroy the sUSD on the original chain (that is, the accounting unit of the Synthetix protocol), and then mint an equivalent amount of sUSD on the target chain.

Synth Teleporter uses Chainlink CCIP to safely and reliably burn and mint tokens across chains. This unique model can effectively improve capital efficiency without the need to create a liquidity pool. Synth Teleporter allows Synthetix's liquidity to flow to where the demand is highest, and circumvents the limitations of traditional token bridges.

“Security is critical for cross-chain assets. That’s why we have integrated Chainlink CCIP in the cross-chain Synth Teleporter. We are the first users of Chainlink Data Feeds, so we are very happy to be the first users of CCIP Batch users enjoy the new features CCIP unlocks for Synthetix." - Kain Warwick, founder of Synthetix

With CCIP, Synthetix can securely transfer tokens across chains in burn-and-mint mode

Aave uses CCIP to achieve cross-chain governance

Aave is a non-custodial liquidity protocol where users can borrow and lend assets on-chain. Aave previously integrated several cross-chain bridges for cross-chain governance, and used Ethereum as a voting network. This cross-chain architecture not only makes the voting cost of participants very high, but also causes extremely high development and maintenance costs. As soon as Chainlink CCIP was launched, the Aave community voted to pass the resolution of integrating CCIP. The reason is that CCIP has a lower gas fee and a very mature infrastructure that can be easily extended to new networks, and it is also very convenient to integrate. Therefore, BGD Labs (note: a Web3 development plan) is integrating Chainlink CCIP into Aave Governance V3 to meet the needs of future cross-chain governance.

“We are very excited to integrate Chainlink CCIP in the next iteration of the Aave protocol, enabling safe, reliable and scalable cross-chain communication. CCIP can be seamlessly integrated into our cross-chain governance mechanism, so we will save a lot development time and focus more on the development of core features." - Ernesto Boado, co-founder of BGD Labs

With CCIP, Aave can enforce adopted governance resolutions across different blockchains

Realize cross-chain interaction for the capital market

CCIP is the blockchain abstraction layer. Enterprises can directly connect to any public chain and private chain from the back-end system through CCIP, and achieve interoperability. Swift has joined hands with more than a dozen financial institutions and financial market infrastructure providers to start exploring CCIP, based on Swift's existing messaging infrastructure, to transfer tokens across various public and private chains. Institutions participating in the blockchain interoperability collaboration include ANZ, BNP Paribas, BNY Mellon, Citibank, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and the Depository Trust and Clearing Corporation (DTCC).

A simple diagram of how banking and financial market infrastructures can adopt CCIP via the Swift network

Setting new standards in cross-chain functionality, security, reliability and user experience

The following are the characteristics of CCIP that are different from other cross-chain solutions:

Simplified Token Transfers

CCIP's Simplified Token Transfers is a plug-and-play solution with audited token pool contracts. These contracts are responsible for handling the burning/minting or locking/unlocking of cross-chain tokens, and token owners have full control over their token pool contracts. Simplified Token Transfers also sets additional security features (such as the limit on the number of cross-chain tokens), and enhances the composability of the protocol's native tokens, so ecological partners can easily cross-chain through the CCIP interface and develop for protocol tokens new function.

Programmable Token Transfer

While transferring the token, other instructions can also be added to define the use of the token in the smart contract on the target chain, such as converting or staking immediately once the token reaches the target chain. With programmability, a message (i.e. token + data) becomes an atomic cross-chain transaction, and the token can always be assumed to be available when the instruction is executed on the target chain.

Active Risk Management (ARM, active risk control) network

ARM is an independent network that continuously monitors and verifies the CCIP network. This network is responsible for independently verifying cross-chain processes and identifying errors, thus providing an additional layer of security. The ARM network implements a self-contained, minimal version of the Chainlink node software using the Rust language. Doing so improves client diversity and robustness, and minimizes external dependencies to avoid supply chain attacks.

CCIP's cross-chain technology stack

The upper limit of the number of cross-chain tokens (Rate Limits)

CCIP can flexibly set the upper limit of the number of cross-chain tokens within a period of time. This parameter can be set individually for a certain token in a cross-chain channel and coordinated with the token issuer. In addition, it is also possible to uniformly set the upper limit of the total number of cross-chains for all tokens in a cross-chain channel to ensure that attackers will not reach the individual upper limit of each token at the same time. This function is in the CCIP code base, and the code base has been strictly audited. Only CCIP Token Transfer (token transfer) can use this function, but Arbitrary Messaging (arbitrary message transfer) cannot.

Smart ution

CCIP adopts the gas fee locking payment mechanism, that is, Smart ution (smart execution), the purpose is to ensure that cross-chain transactions are not affected by the fluctuation of the gas rate of the target chain. For developers, this means that they only need to pay on the original chain, and CCIP will be responsible for executing it on the target chain.

Upgrade with timelock smart contract

All major on-chain configuration updates and upgrades of CCIP must go through a timelock smart contract. During this period, proposals can be vetoed by a threshold number of CCIP node operators. In addition, updates and upgrades can also be directly passed by node operators who have reached the threshold number. In this case, there is no need to go through the time lock contract. Therefore, users and protocols using CCIP can fully research and make judgments before the update goes into effect. On-chain updates that are not vetoed within the timelock window can be performed by anyone. The community can run a timelock-worker to handle executable upgrades. This model of on-chain upgrades marks another step towards decentralization and robustness for the Chainlink network.

Payment Mode

In our recent blog posts "Chainlink Network Outlook 2023" and "Sustainable Oracle Economic Model", we mentioned that an enhanced payment model is being developed to establish a monetization model and ensure the long-term sustainable development of Chainlink services. One of the main purposes is to lower the payment threshold for dApps, enterprises and end users, and attract more fee revenue for Chainlink service providers.

• "Chainlink Network Outlook 2023":

• "Sustainable Oracle Economic Model":

As CCIP develops into the most secure and easy-to-use cross-chain solution in the industry, fee payment scenarios will appear on all blockchains, so lowering the payment threshold for users is essential for CCIP to quickly expand to more blockchains Less part. CCIP supports payment with LINK and other tokens. Currently, other tokens include native tokens on the chain and ERC20 packaging tokens of these tokens. Paying with other tokens pays at a higher rate than paying with LINK.

We are developing an automatic exchange system on the chain, which can be automatically exchanged into LINK when paying with other tokens. Before the exchange system goes online, when users pay with other tokens, the tokens will be taken out to their respective maintenance pools and replaced by LINK in the CCIP contract, and the amount of LINK is based on the payment to calculate the exchange rate. Finally, service providers (i.e. node operators) are paid in LINK. Once the automatic exchange system on the chain is launched, other token assets stored in the maintenance fund pool will be exchanged for LINK.

The message transmission function of CCIP charges a fixed fee per message, while the CCIP token transmission function charges a certain percentage of the value of the token. In addition, CCIP fees also include gas fees. When paying with other tokens, the fee will be 10% higher than with LINK. At present, CCIP charges are in line with the industry standard of cross-chain ecology, but the charges may be adjusted in the future.

As the scope of Chainlink Staking continues to expand, covering more oracle services including CCIP, we plan to distribute a portion of user fees to stakers in return for their contribution to Chainlink’s cryptoeconomic security.