Innovation in Crypto Moves Faster Than Governments, Needs Self-Regulation, Says Serial Innovator

Although the blockchain industry owes much of its success to so-called bridges, these are far from perfect solutions, argues Justin Wang, the founder and CEO of Zeus Network. While they help address the problem of liquidity segmentation that afflicts the Web3 industry, Wang insists that they pose significant security risks.

Keeping the Innovation Flywheel Spinning

Wang said the fact that many users have been burned while utilizing bridges scares prospective users, stymying blockchain adoption. The Zeus Network founder believes no one has been able to build a perfect model that can guarantee the safety of users’ funds, hence the growing security incidents involving bridges.

Nevertheless, the CEO said developers should keep working on finding better solutions, even as this seems a lost cause. In written responses shared with Bitcoin.com News, Wang expressed confidence that a foolproof model guaranteeing the security of users’ assets will eventually be found. Additionally, he said the developers’ quest to find newer or safer solutions will not only inspire others but also help keep “the innovation flywheel spinning around, furthering progress in the industry.”

Meanwhile, Wang suggested that regulators are likely to continue experiencing difficulties in influencing or controlling the crypto industry because the usual restrictions or requirements imposed on traditional finance cannot easily be enforced in a decentralized world. He also cited the pace of innovation in the crypto industry, which he said makes it difficult for notoriously slow regulators or governments to keep up.

He added that since it requires globally agreed standards to effectively regulate the crypto industry, the prospects of regulators succeeding are very slim because it is difficult to reach a global consensus on this. Elsewhere in his responses, Wang shared his thoughts on where the blockchain industry will be in five years.

Below are Wang’s answers to all the questions sent.

Bitcoin.com News (BCN): Blockchain bridges have helped break down the dividing walls between chains, allowing them to interact freely. However, these bridges are vulnerable to risks such as centralized thefts, cloning, and smart contract attacks. How would you rate the achievement of bridges, considering the solutions they provide alongside the risks they pose?

Justin Wang (JW): There’s no denying the transformative and impressive achievements of blockchain bridges, which have paved the way for what the industry now calls a multichain world. Without bridges, we wouldn’t have been able to solve the liquidity fragmentation problems that arise from having so many decentralized networks, and without that, DeFi adoption wouldn’t have taken off and the Web3 world wouldn’t be where it is today.

But as useful as bridges are, they’re far from being a perfect solution. They’re better than the alternative, which is going through a centralized exchange, but they pose significant security risks and a lot of users have been burned because of them. And that has probably stymied blockchain adoption, to a degree, because many people are wary of using them. The bridge landscape is vast and varied and it has given birth to some genius innovations, but no one has really been able to come up with a perfect model that can guarantee the safety of its users’ funds.

BCN: Some research data confirms that hackers have stolen over $2.83 billion from cross-chain bridges, amounting to nearly 50% of the total value stolen from decentralized finance (defi). Equally concerning is that more than 200 platforms have been hacked in less than three years. Do you think the extent of the vulnerability among cross-chain bridges, both in volume and frequency, is enough for developers to seek foolproof methods to achieve interoperability, or is it a dead end?

JW: It’s essential for developers to keep working for better solutions. If crypto is to become mainstream, regular consumers will require a foolproof model that guarantees their assets are secure, or they won’t risk it, it’s as simple as that. And someone is going to find a way to meet those requirements. It’s important for innovation in general, too. By working towards newer, safer solutions, developers inspire others to build on their ideas and that keeps the innovation flywheel spinning around, furthering progress in the industry.

BCN: Your project, Zeus Network, is an interoperability protocol that enables seamless transactions between the Bitcoin and Solana blockchains. However, it is not a cross-chain bridge. Can you briefly explain what Zeus Network is about and how it differs from the cross-chain bridges we have seen in the past few years?

JW: Zeus Network is more than just a bridgeless, cross-chain interoperability layer. It is a pluggable and programmable infrastructure that’s designed to serve the entire Web3 ecosystem. It consists of two key components — ZeusNodes to maintain the integrity of assets, and the Zeus Program Library that provides a programmable interface for dApps to build on top of. What we’re doing is merging key aspects of two of the best blockchains in the industry – Solana’s high-performance infrastructure and Bitcoin’s strong foundational security and vast liquidity – to create an extremely powerful synergy.

With the Zeus Program Library, developers can integrate their decentralized applications and services from any blockchain with the Solana Virtual Machine, so they can create custom protocols that can interact with dApps on any other chain. Cross-chain transactions are secured using Zeus Network’s novel fraud proofs and programmable signatures, eliminating the risks posed by smart contract vulnerabilities and centralized theft.

BCN: Network security is one of the fundamental risks of interoperability protocols in the blockchain industry. How would your network tackle the security situation and not exist as another interoperability solution that is vulnerable to external attacks?

JW: Zeus Network has created an innovative consensus mechanism in which serialized Bitcoin and Solana transactions are stored within a proposal management program, where they’re retrieved by verifiers from the Solana network. Within this system, the verifiers focus solely on verification, separated from the on-chain transaction proposal process. They implement a threshold signature mechanism with Bitcoin taproot utilizing the Schnorr signature, a concept that’s compatible with Solana’s Ed25519 signature algorithm.

By performing signature aggregation off-chain, we provide significant efficiency gains over traditional on-chain voting, enabling the smooth broadcasting of signed transactions to Solana. We have implemented further measures to fortify security, combining the assumption of honest verifier behavior with fraud proofs. Once transactions are processed, there’s a challenge period during which any node can submit a proof-of-fraud as evidence of malicious activity. A successful challenge results in the slashing of any malicious nodes to ensure the security and integrity of all cross-chain transactions.

BCN: The safety of users’ funds has been a cornerstone for regulators as they develop rules for the cryptocurrency industry. Widespread losses due to security breaches could give authorities more reason to increase oversight of supposedly decentralized networks. Should the responsibility now fall to blockchain service providers to develop robust security measures that minimize the need for regulatory intervention?

JW: It’s debatable if regulators can actually impose their rules on the crypto industry, but in any case, it’s in the best interests of blockchain service providers to ensure users have good reasons to trust in their ability to keep their funds safe. They have a responsibility to themselves, to further accelerate adoption, and a moral obligation to protect the users who place their trust in them.

BCN: To what extent should the industry permit regulatory interference to balance a decentralized ecosystem and an uncontrolled tech society prone to anarchy?

JW: Crypto operates independently of governments, and the kind of regulations you see in traditional finance, such as capital requirements, investment restrictions and background checks, cannot easily be enforced in a decentralized world. This is true because Satoshi Nakamoto designed Bitcoin, on which all crypto is based, to operate independently of governments, free from their influence.

Moreover, innovation in crypto moves faster than the speed at which governments can try to rein it in. Political negotiations and disagreements cause delays in the passage of any efforts to introduce regulation. And in order for regulation to be effective, it needs to be implemented globally, which is impossible without international consensus.

Instead of external regulation, what will be helpful is self-regulation. The honest crypto builders, developers, investors and users should strive for greater transparency. Crypto projects need to demonstrate how they have their user’s best interests and safety at heart and show how they can protect them within a decentralized framework. It’ll require lots more innovation, but that is where crypto’s path to mainstream adoption lies.

BCN: Today’s blockchain industry differs significantly from that of ten years ago, considering the numerous developments aimed at improving the sector and promoting adoption. Where do you see the industry in the next five years?

JW: Crypto is well on the way to becoming an integral part of the global economy and I believe this will accelerate as Web3 becomes more prominent. We’ll see sustained growth in DeFi, driven by institutional adoption of tokenization and real-world assets, which are the future of the financial trading and investment landscape, and this will give rise to more innovation around yield farming, even with traditional assets.

I think we’ll see more big companies come to accept crypto, and not only for payments. Organizations are already beginning to recognize the value of holding digital assets themselves, both to diversify their investment portfolios and also so they can actively participate in decentralized markets. The successful Bitcoin ETFs in the U.S. show there’s a big appetite for this.

Driving this growth will be advances in blockchain interoperability, which are essential for fostering trust in a multichain world. Interoperability paves the way for safer interactions between different cryptocurrencies and networks, encouraging the adoption of crypto and other assets, such as NFTs. That’s exactly what we’re focused on doing by bringing Bitcoin’s liquidity to Solana. We chose to build on Solana because we think its rapid, secure and user-friendly infrastructure is just what developers need to build consumer-facing Bitcoin applications that can scale and drive mass adoption.

Not only will adoption grow, but we’ll see tighter integration between blockchain and AI too, as decentralized networks will emerge as the foundation of more open AI ecosystems demanded by organizations and governments as an alternative to proprietary models.

What really excites me is that these trends are underway now, and they’ll accelerate to the point where crypto becomes a standard way of doing business for many organizations in the years to come.

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