Trustless communication across distributed ledgers: impossibility and practical solutions

Since the advent of Bitcoin as the first decentralized digital currency in 2008, a plethora of distributed ledgers has been created, differing in design and purpose. Considering the heterogeneous nature of these systems, it is safe to say there shall not be ``one coin to rule them all". However, despite the growing and thriving ecosystem, blockchains continue to operate almost exclusively in complete isolation from one another: by design, blockchain protocols provide no means by which to communicate or exchange data with external systems. To this date, centralized providers hence remain the preferred route to exchange assets and information across blockchains~-- undermining the very nature of decentralized currencies. The contribution of this thesis is threefold. First, we critically evaluate the (im)possibilty, requirements, and challenges of cross-chain communication by contributing the first systematization of this field. We formalize the problem of Cross-Chain Communication (CCC) and show it is impossible without a trusted third party by relating CCC to the Fair Exchange problem. With this impossibility result in mind, we develop a framework to design new and evaluate existing CCC protocols, focusing on the inherent trust assumptions thereof, and derive a classification covering the field of cross-chain communication to date. We then present XCLAIM, the first generic framework for transferring assets and information across permissionless distributed ledgers without relying on a centralized third party. XCLAIM leverages so-called cryptocurrency-backed assets, blockchain-based assets one-to-one backed by other cryptocurrencies, such as Bitcoin-backed tokens on Ethereum. Through the secure issuance, transfer, and redemption of these assets, users can perform cross-chain exchanges in a financially trustless and non-interactive manner, overcoming the limitations of existing solutions. To ensure the security of user funds, XCLAIM relies on collateralization of intermediaries and a proof-or-punishment approach, enforced via smart contracts equipped with cross-chain light clients, so-called chain relays. XCLAIM has been adopted in practice, among others by the Polkadot blockchain, as a bridge to Bitcoin and other cryptocurrencies. Finally, we contribute to advancing the state of the art in cross-chain light clients. We develop TxChain, a novel mechanism to significantly reduce storage and bandwidth costs of modern blockchain light clients using contingent transaction aggregation, and apply our scheme to Bitcoin and Ethereum individually, as well as in the cross-chain setting.Open Acces

Decentralized Finance – A Systematic Literature Review and Research Directions

Decentralized Finance (DeFi) is the (r)evolutionary movement to create a solely code-based, intermediary-independent financial system—a movement which has grown from $4bn to$104bn in assets locked in the last three years. We present the first systematic literature review of the yet fragmented DeFi research field. By identifying, analyzing, and integrating 83 peer-reviewed DeFi-related publications, our results contribute fivefold. First, we confirm the increasing growth of academic DeFi publications through systematic analysis. Second, we frame DeFi-related literature into three levels of abstraction (micro, meso, and macro) and seven subcategories. Third, we identify Ethereum as the blockchain in main academic focus. Fourth, we show that prototyping is the dominant research method applied whereas only one paper has used primary research data. Fifth, we derive four prioritized research avenues, namely concerning i) DeFi protocol interaction and aggregation platforms, ii) decentralized off-chain data integration to DeFi, iii) DeFi agents, and iv) regulation

Towards Understanding the Origin of Genetic Languages

Molecular biology is a nanotechnology that works--it has worked for billions of years and in an amazing variety of circumstances. At its core is a system for acquiring, processing and communicating information that is universal, from viruses and bacteria to human beings. Advances in genetics and experience in designing computers have taken us to a stage where we can understand the optimisation principles at the root of this system, from the availability of basic building blocks to the execution of tasks. The languages of DNA and proteins are argued to be the optimal solutions to the information processing tasks they carry out. The analysis also suggests simpler predecessors to these languages, and provides fascinating clues about their origin. Obviously, a comprehensive unraveling of the puzzle of life would have a lot to say about what we may design or convert ourselves into.Comment: (v1) 33 pages, contributed chapter to "Quantum Aspects of Life", edited by D. Abbott, P. Davies and A. Pati, (v2) published version with some editin