What is Poly Network: Cross-Chain Interoperability Using Smart Contracts
Launched in August 2020, Poly Network is a cross-chain protocol that enhances interoperability between homogeneous and heterogeneous blockchains. The network focuses on fixing chain data issues involving transactions, security, and trust. From there, it has developed its cross-chain system to be efficient and easy to use.
What Is Poly Network?
Layer one blockchains are often isolated networks, making it difficult for users and developers to move their assets from one chain to another. For example, information sharing does not happen across major blockchains like Bitcoin (BTC) and Ethereum (ETH). Projects like Poly Network that adopt cross-chain technology can enable interoperability, making communication between different platforms possible in the crypto world.
Poly Network is a cross-chain decentralized finance (DeFi) platform that enables users to transfer coins via various blockchains, such as BSC, Ethereum, and NEO. Furthermore, it seeks to realize effective interoperation, where features and applications flow freely across chains. For this purpose, it leverages its smart contracts and functional modules for cross-chain communication.
Poly Network does not issue its own token. Instead, it links platforms by reacting to and interacting with participating relayers, Poly Chain nodes, and cross-chain-based smart contracts.
Poly Chain Consortium Blockchain
Poly Chain coordinates the whole framework by managing participating blockchains’ registration, change, and cancellation. It is a consortium blockchain, meaning it is semi-private. Resource sharing is enabled, wherein members can share solutions with the rest of the network’s members, thereby reducing costs.
However, the chain’s semi-private nature also involves some security limitations. For one, Poly Network uses a Byzantine Fault Tolerant (BFT) consensus to avoid forks, and prevents other chains from tampering with its governance model. Additionally, Poly Chain is forced to run a full node on all participating chains before validating cross-chain transactions. Thus, the network performs a full verification and can reject illegal transactions.
Poly Network’s Smart contracts
Poly Network has a set of smart contracts that acts as a bridge between blockchains. As users transfer their assets through the network, the smart contracts efficiently burn or mint the equivalent assets on different blockchains automatically. For example, in Poly Network, one smart contract uses “keepers” to verify and execute transactions on the source chain. Once the transactions are verified, a second smart contract checks whether the keeper’s signature is valid, and executes an equivalent transaction on the destination chain.
Poly Network Relayers
The relayers perform read and write operations to validate data.
- A “write”operation affects the destination chain’s state. For example, a write operation occurs during the release of assets between chains, as the blockchains need to record the transfer.
- A “read”operation returns the status of the destination chain. For example, a read operation happens when a user wants to know their account balance.
Thus, relayers operate simultaneously, and work correctly only when both blockchains validate the transaction. Moreover, the transaction initiator bears the costs of running nodes and relayer operations to perform the service.
What Does Poly Network Offer?
Poly Network’s core function is to connect blockchains successfully to enable transaction validation at the receiving end of the chain. As a result, Poly Network helps digital assets flow freely, fostering cryptocurrency-related exchanges, payments, asset investing, and financing across the chain. Users can move tokens freely across chains while maintaining ownership, or make a payment on Chain A for assets on Chain B.
Users can also enjoy cross-chain functions. Security is enhanced as locking is executed among various threads of execution to control cross-chain business workflow.
- Cross Chain Transactions: Organizations that participate in the Poly Network enable resource sharing across other platforms. The shared resources are beneficial for users, as they have more options to make transactions on a different blockchain (with varying transaction fees). For example, through Poly Network’s PolyBridge, users can easily exchange tokens, such as USDC, UNI, and MATIC, across multiple blockchains, such as Ethereum and Neo.
- Cross Chain NFT Transfer: PolyBridge also offers the world’s first non-fungible token (NFT) cross-chain transfer bridge, enabling cross-chain compatibility of NFTs. As a result, it can be used to access cross-chain NFT mining and trading, requiring only low transaction fees. Furthermore, the trading and burning of NFTs on multiple blockchains increases market liquidity. For now, Poly Network can act as a cross-chain interoperability protocol for NFT projects interested in cross-chain transfer for users.
- Cross Chain DApps: PolyBridge allows developers to easily build functionality on their smart contracts because it is already connected with other blockchains like Neo and Ethereum. Poly Network provides infrastructure for developers to create cross-chain decentralized applications (DApps) that are compatible with their respective platforms.
Who Is Behind Poly Network?
Poly Network was launched as a collaborative effort by the top interoperability projects Ontology (ONT), Neo (NEO), and Switcheo. These strategic partners work together to build technology for the decentralized blockchain network.
Ontology co-founder and spokesperson Andy Ji has worked as director of Hyperledger and deputy director of the Blockchain Ecosystem Alliance in China (CBEA). Early in his career, he worked in a bank as a project manager for platform architecture design and was involved in blockchain research. Additionally, he worked in management roles in two different enterprises responsible for smart contracts and blockchain technology. Before Ontology, he served as a blockchain expert for blockchain initiatives in the Dalian Wanda Group.
Neo co-founder and spokesperson Da Hongfei is a notable entrepreneur in China’s cryptocurrency and blockchain industry. He has advised officials on cryptocurrencies and prohibitions on an ICO exchange. Aiming to outperform Bitcoin, he developed NEO, which has outperformed Ethereum in transaction speed with its BFT consensus algorithm.
Switcheo CEO and co-founder Ivan Poon holds a Bachelor of Engineering in computer engineering at the National University of Singapore. Previously he worked as a Chief Technology Officer (CTO) for two enterprises in the computer software field.
The Poly Network Hack
On August 10 of 2021, a hacker stole $600 million USD worth of cryptocurrencies from Poly Network under different blockchains. The hacker attempted to perform additional transactions with the stolen funds, which were rejected through an Ethereum address.
A security firm’s report reveals the hack was made possible through a private key leak within Poly Network’s signing process. The hacker was converting the tokens through multiple major blockchains like Ethereum. Poly Network’s subsystem had a vulnerability through which hackers could fake interactions between blockchains for transactions. This was identified as a rudimentary mistake, suggesting that security is not completely solid.
This hack has raised concern about Poly Network’s security, because users from major platforms are affected. Trustless bridges are vulnerable to these exploits. Hence, experts encourage security audits to be completed by users. However, auditing may not be easy for permissionless platforms such as automated market maker-based (AMM-based) decentralized exchanges (DEXs), because they theoretically serve all users connected to the internet. Tools like open-source code can be used for auditing and smart contract verification. With DeFi, users are advised to maintain security procedures through auditing because the ecosystem is becoming more diverse as it updates.
Since the attack occurred, the stolen funds have been transferred back to Poly Network. The hacker claimed to merely be teaching Poly Network a lesson in security. However, analysts speculate that the reason for returning the funds may be due to difficulties associated with laundering out such a large amount without being traced.
What Is the Future of Poly Network?
Poly Network shared its roadmap for post-hack recovery, and is currently in the third phase – restoring cross-chain service for projects associated with Poly Network. Before Poly Network is up and running again, it must complete the two remaining phases of asset recovery and service restoration.
At present, the team is outsourcing help to patch Poly Network’s security issues. On August 17, the team collaborated with Immunefi to launch a bug bounty program for more security testing on a bigger scale. External audit and security alliances have also been contacted to examine possible vulnerabilities with the current protocol code. Other crypto security organizations have also conducted an informal investigation of the Poly Network hack, concluding that a hacker modified the contract and header on Ethereum’s chain. Poly Network has even invited the white hat hacker to become their security advisor, although this offer was rejected.
As a cross-chain interoperability solution, Poly Network provides functionality based on the collaboration of major blockchain platforms. Unfortunately, the network’s security has struggled to keep up with its fast development. Despite benefits such as fast speeds and low cost, security should be the highest priority of all projects. Poly Network has learned a hard lesson and it remains to be seen whether the platform can recover its reputation.