Escrow-IBC (eIBC): A New Protocol for Fast, Trust-minimized Bridging between Optimistic Rollups

Introduction:

I want to present and discuss escrow-IBC (eIBC), a novel Inter-Blockchain Communication (IBC) protocol designed to overcome optimistic rollup based challenges and facilitate instantaneous, trust-minimized token transfers across Optimistic Rollups.

Link to full research paper:

Current State

At present, Dymension RollApps have one proof design option which is Optimistic, it offers an impressive avenue for scalability. However, it comes with an intrinsic set of challenges. The current model involves a considerable dispute period for fraud detection, and the Verifier’s Dilemma problem persists. Moreover, the process of bridging between RollApps at current state have a prolonged transaction finality times causing hindrances in practical applications.

Proposed Improvement

Escrow-IBC: Trust-minimized and Efficient Bridging

Understanding the Need

We need a more efficient way of bridging between RollApps hence the concept of eIBC. It aims to reduce the lengthy dispute window in an Optimistic Rollup.

The eIBC Protocol: A Synopsis

eIBC involves the protocol acting as a market for future receivables, reflecting the time cost of capital to reach the Dymension Hub after the dispute period. It also embodies the tail risk of the rollup being invalid or fraudulent, which should be mitigated completely by a verifying market maker.

The protocol introduces two roles - Alice, a user on a RollApp, and Bob, a relayer in the IBC ecosystem. Bob, taking on dual responsibilities as the eIBC message relayer and liquidity provider.

At a first step Alice initiates an IBC transaction, second Bob relays the IBC message from the RollApp to the Hub where it’s softly verified and escrowed on the eIBC module.

At this time Bob or any other actor is able to fulfill the eIBC transfer by purchasing (with a discount) the escrowed IBC tokens on the Hub. If Bob’s choosed to fulfill the eIBC transfer (discounted tokens) he sends the required tokens to the escrow module, which in turn forwards them to Alice. Whereas Alice’s pending IBC tokens are re-routed to Bob’s address and will be released at the end of the fraud proof dispute period.

The result is, Alice received her tokens instantly while Bob profited from buying discounted tokens which will get released after the dispute period.

Effect on the Ecosystem

Implementing eIBC has profound implications on the ecosystem. It can establish an equilibrium between the need to verify the validity of rollups and the value held within them.

Furthermore, the integration of eIBC promotes an organic system where market forces verify state machines, ensuring a seamless experience for users, and generating revenue opportunities for node operators.

Looking Forward

Future exploration of eIBC in the context of Optimistic Rollups is vital. Rigorous research and further implementation trials will shed light on the possible synergies it can create within the blockchain space.


27 Likes

This is a really cool idea and use of middleware for token transfer. The challenge period for rollups gives a really bad ux for users who want to move funds off the roll up and this would certainly contribute to improving this experience.

For future iterations of the protocol, it could be interesting to enable the user to specify a different token that they want to receive so that it is actually a rollup <> settlement layer swap. I think this would be handy as a user wanting to move funds from rollup to settlement layer may want to proceed further to another rollup for using a different app / yield opportunity, where a different token is needed.

The protocol is also whoever fulfils the liquidity provision gets the tokens + fee, but when you use the wording ‘buying discounted tokens’ it made me consider whether it could be possible to have a time window (I guess user specified) where lps could offer how much they would front for the tokens + fee to give more flexibility.

Looking forward to seeing how this develops :slight_smile:

11 Likes

Thanks for the thoughtful response and constructive feedback!

I believe a multi-token eIBC system would have to exist to propel a truly seamless experience. We are planning to integrate an AMM on the Dymension Hub, so naturally it should be integrated with the eIBC protocol.

Let’s take a ‘classic’ scenario, Assume Alice is on ‘RollApp X’ holding its native token, X. Alice now wants to move her funds to RollApp Y and trade her X tokens to Y tokens (RollApp Y’s native token). To do so she needs to withdraw X from the rollup, trade it to Y and send it to RollApp Y.

We can choose to facilitate the trade post fulfillment or during.

Option 1:
Alice withdraws X via eIBC, (market maker fulfills X tokens) and we ‘concatenate’ a market swap via the AMM POST eIBC fulfillment.

Option 2
Alice withdraws X but eIBC allows her to request fulfillment with Y amount of tokens instead of X, this is part of the eIBC transaction itself. (market maker fulfill Y by himself, not enforcing the usage of the AMM).

*For relevance, this assumes no trade on the rollapp itself.
*sending Y tokens to RollApp Y is trivial from the moment Alice owns Y tokens on the settlement layer.

Curious to hear your thoughts on best approach

14 Likes

This reminds me of the intent centric discussions that are prevalent today. As the user is sending a preference for the final state. As @womensrights this seems to be extensible for a better cross-rollup UX.

I will note that in the original post Bob taking on the responsibility of both a relayer and liquidity provider (i.e. solver) is likely not necessary. eIBC seems to be a middleware on the existing IBC protocol which does not place any trust on the relayer.

The eIBC seems to imply a designated solver (i.e. specific account address completing the transfer), however, can this be generalized to a liquidity pool address that can spread the risk/returns?

15 Likes

Sounds promising to me

8 Likes

a really cool idea ,Looking Forward

future exploration of eIBC in the context of Optimistic Rollups is vital.

7 Likes

Good topics discussed, thank you. :ok_hand:

6 Likes

Amazing to be here
Thanks for the opportunity

5 Likes

Cool hyped on this. Dymension to the world

5 Likes

interesting read, dimension has a lot of promise

5 Likes

Modular Blockchain night displace node running in the coming years

7 Likes