Reconstructing from First Principles: The True Competitor of Cross-Chain Protocols

Starting from first principles, the true competitor of cross-chain protocols/cross-chain bridges is actually centralized exchanges.

User behavior data clearly corroborates this. For example, when I have any cross-chain needs, my first reaction is often to check whether the common CEX supports deposits and withdrawals for that chain's assets; if the answer is no, I will then seek to use a cross-chain bridge.

Why do traditional cross-chain protocols lose to CEX?

The competitive disadvantages of traditional cross-chain protocols compared to CEX can be summarized as follows:

Cost Disadvantage: Cross-chain bridges generally have higher transaction costs due to complex consensus mechanisms and relay networks. In contrast, CEX withdrawal fees are usually lower and fixed.

Security Risks: Cross-chain bridges are a hotspot for hacker attacks. In 2022 alone, hacker incidents related to cross-chain bridges caused losses exceeding $1.6 billion.

Ecosystem Fragmentation: The current ecosystem coverage of cross-chain protocols is limited. For example, LayerZero mainly serves the EVM ecosystem, while Wormhole focuses on Solana, lacking a cross-chain solution that can unify all public chains and L2s. CEX, on the other hand, provides a one-stop service through extensive chain support and asset variety, eliminating the friction of users switching between different ecosystems.