Connext released its NXTP protocol, a trustless, low cost, and easily extensible base protocol to enable communication between EVM-compatible chains and L2 systems.
The scalability limitations of Ethereum have spurred the migration of DeFi, NFTs, and other popular use cases to “off-chain” scalability options. Users are interacting with an increasingly heterogeneous mix of Ethereum L2s, side chains and EVM-compatible Layer Ones (L1s) and have a growing need to reliably and trustlessly communicate between all the different systems.
Connext, which has been live with their version one (v1) protocol since February 2021, has already completed over $500 million in transactions across the network. After their recent $12 million ecosystem funding round from 1kx, Consensys, and more than 80 other leading exchanges, staking providers, and DeFi protocols, the Connext team has focused on building and releasing NXTP.
Connext’s network consists of a set of nodes (routers) that provide liquidity and relay data between chains, earning fees in return. The routers will initially run NXTP as their base protocol with the goal of running a stack of interoperability protocols in the future, enabling different types of communication between chains.
The network is targeted at developers who are building a growing ecosystem of natively cross-chain applications, including everything from simple bridges to more complex use cases such as DEX aggregators or cross-chain interest rate swaps.
NXTP has three distinct advantages over other systems
- Fully trustless – Unlike other interoperability protocols, NXTP does not introduce a third party set of validators that control user funds. Instead it uses a lock/unlock mechanism that makes it impossible for user funds to get stolen, even if all of the router’s in Connext’s network were to collude. This is important for adoption in L2 ecosystems where trustlessness is critical.
- Extensible – The protocol works exactly the same way on any system, meaning that it can be expanded to new sidechains, L2s, and other L1 chains in a matter of days or less. It can also be extended to build and layer new kinds of interoperability protocols, leveraging NXTP’s existing liquidity and infrastructure. Given the heterogeneity of chains and L2s in the Ethereum ecosystem, a highly extensible protocol is necessary to keep up with growth and support all types of functionality.
- Low-cost – Designed to solve high gas fees and slow transaction times, NXTP transactions don’t need to touch Ethereum L1 when going between L2s or sidechains. The protocol is also significantly more capital-efficient than competing projects, with mainnet testing showing millions of dollars of volume being routed using only $600k in liquidity. This combination of properties makes the protocol low-cost for users and highly attractive for liquidity providers.
“Our vision for NXTP is that it will become the internet protocol (IP) of the Ethereum multi chain ecosystem,” said Arjun Bhuptani, Founder of Connext, “Now that it’s live, our focus will be on growing liquidity within the system, rapidly adding support for new chains/L2s, and transitioning the protocol to becoming entirely owned and operated by the community.”