Disclaimer: The contents of this report reflect the opinions of the author and are provided for informational purposes only. It is not written with the intent to recommend the purchase or sale of tokens or the use of protocols. Nothing contained in this report is investment advice and should not be construed as such.

1. Introduction

1.1. The Rise of the Multi-Chain Environment

In the early days of blockchain technology, Ethereum spearheaded the revival of on-chain activities through decentralized applications (Dapps) built on smart contracts. Importantly, these dApps would be interoperable within the Ethereum ecosystem, freely combining functions and exchanging assets and information through standards like ERC-20. However, Ethereum's limited scalability prevented it from reliably handling the increasing number of transaction requests. Consequently, network congestion and gas fees surged, highlighting the critical importance of "scalability" — the ability of a blockchain network to stably process a high volume of transactions as more users and funds enter the network.

To address Ethereum's scalability issues, new monolithic Layer 1 (L1) blockchains like Solana, Aptos, and Sui were developed with high throughput and low fees in mind. Additionally, within the Ethereum ecosystem, attempts to resolve scalability problems emerged through Layer 2 (L2) solutions, which execute transactions on their own networks and record the results on Ethereum. Additionally, the Cosmos SDK framework allows the selection and combination of necessary modules to build app-specific chains (appchains) tailored for finance, gaming, and other purposes.

Moreover, to build more flexible and scalable networks, a modular blockchain architecture has emerged. This architecture separates core functions like consensus, execution, and data availability into independent layers that can be organically combined. Recently, within the Ethereum ecosystem, modular blockchain development frameworks like Arbitrum Orbit and Optimism's OP Stack have emerged, leading to the appearance of various blockchains with modular architectures.

As both the horizontal expansion of L1 blockchains and the vertical expansion of L2, L3, and appchains occur simultaneously, today's blockchain ecosystem has entered a multi-chain era where diverse blockchain networks coexist. This development gives developers the freedom to choose the most suitable blockchain for their projects and provides users with access to a wider array of services and opportunities than ever before.

However, this expansion of blockchains has sacrificed interoperability. Applications hosted on sovereign blockchains are connected through bridges or sequencers, presenting bad user experience and undue security risk, costing users billions in lost funds.

In addition to theft and over-complicated user experience, the rise of the multi-chain environment has led to liquidity fragmentation, as liquidity is dispersed across various blockchains. Users also face the inconvenience of managing separate accounts and wallets for each chain. This scenario has underscored the need for blockchain interoperability solutions that facilitate smooth asset and data exchanges between blockchains, underpinning unified liquidity and user experiences in Web3 applications.

1.2. The Emergence and Development of Blockchain Interoperability Solutions

Early cross-chain interoperability solutions included bridges that enabled asset transfers between chains. These bridges often used simple multi-signature setups to secure funds moving between blockchains, using methods such as the Lock & Mint approach, which locks tokens on the sending chain and mints wrapped tokens on the receiving chain, and the Burn & Mint approach, which burns tokens on the sending chain and mints new ones on the receiving chain. These methods partially alleviated liquidity fragmentation – but they introduced new security vulnerabilities and they provided poor user experience.

Even with bridge protocols, users still needed to manage individual accounts and wallets for each chain and submit transactions to each chain directly, hindering a seamless user experience.

For example, when a user wants to use Ethereum network's Token A to purchase Token B on the Solana network, they must:

1. Access their wallet managing assets on the Ethereum network.
2. Connect the wallet to a bridge protocol and submit a bridge transaction for Token A.
3. Access their wallet managing assets on the Solana network.
4. Connect the wallet to a decentralized exchange (DEX) that supports trading between Token A and Token B.
5. Swap the bridged Token A for Token B.

To improve the user experience, Cosmos introduced the IBC (Inter-Blockchain Communication) standard, which facilitates cross-chain messaging. This allows the transfer of not only assets but also arbitrary messages between Cosmos-based appchains. These messages can trigger smart contract executions or data exchanges on the receiving chain. This innovation simplifies asset bridging and swapping processes across multiple appchains, enabling the development of Dapps like Quasar that offer yield farming functionalities using assets from various chains.

IBC has significantly enhanced interoperability from a user experience perspective, which bridge protocols alone could not achieve. However, IBC mainly focuses on asset transfers and the execution of basic smart contracts using these assets. This limitation affects complex cross-chain interactions or multi-chain operations within a single transaction. Additionally, IBC operates primarily within the Cosmos ecosystem, making direct interoperability with other blockchain environments such as Ethereum and Solana challenging.

Therefore, to achieve a true blockchain internet that encompasses all blockchains regardless of type or structure, a more universal and open cross-chain messaging protocol is required. Addressing this need for comprehensive cross-chain interoperability led to the development of Axelar.

2. Axelar: A Protocol for Complete Interoperability

Axelar is a next-generation cross-chain messaging protocol designed to overcome the limitations of existing cross-chain messaging solutions, which are often restricted to specific ecosystems. Axelar is the web3 interoperability platform, providing an open stack to connect all blockchains and enabling 1-click user and builder experiences.

TCP/IP, a standard communication protocol in computer networking, enabled isolated networks on the internet to communicate in a common language. Think of Axelar as a secure and programmable TCP/IP for the blockchain ecosystem. Its goal is to allow different blockchains to exchange verified information and value securely while preserving their unique characteristics.

As of May 2024, Axelar supports cross-chain messaging with a total of 64 blockchain networks, including Cosmos IBC and EVM (Ethereum Virtual Machine) based networks such as Ethereum, Polygon, and Avalanche. In the near future, Axelar plans to expand its ecosystem by enabling interoperability with non-EVM based networks like Solana, Aptos, ,Sui, Stacks, Hedera, Stellar etc.

Networks compatible with Axelar, Source: Axelarscan

Axelar provides developers with a cross-chain development platform that facilitates the convenient development and deployment of interchain Dapps that interact with multiple blockchains. Interchain Dapps built on Axelar can perform complex cross-chain interactions, but from the user's perspective, they experience cross-chain functionalities by submitting a single transaction to the Dapp on the originating chain. This abstraction of actions across multiple networks offers users a seamless experience, akin to operating within a single network.

Axelar's technological prowess and potential have been demonstrated through collaborations with various projects and enterprises. Some notable examples include:

  • Ondo Finance, an issuer of RWA-based stablecoin USDY, implemented USDY's cross-chain bridge using Axelar; atop the RWA.xyz leaderboard, Centrifuge and Provenance also rely on Axelar for interoperability.
  • Leading cryptocurrency wallets such as Metamask and Trust Wallet utilize Axelar-based application Squid for cross-chain swap functionality
  • Major DeFi projects like dYdX and Uniswap have strengthened their cross-chain capabilities through partnerships with Axelar
  • Gaming project Immutable has built cross-chain infrastructure in collaboration with Axelar
  • Staking liquidity project Lido Finance expanded its staked ETH (stETH) to Cosmos and BNB Chain via Axelar
  • Global enterprises such as JP Morgan, Microsoft, Deutsche Bank, and Mastercard are cooperating with Axelar on cross-chain infrastructure for their Web3 initiatives

Next, to understand how Axelar aims to become the standard secure communication protocol of the blockchain ecosystem, we will delve into the architecture and features of the Axelar protocol.

2.1. Protocol Architecture

The Axelar protocol consists of key components such as the Axelar Network, Gateway Contracts, and API/SDK. The architecture can be illustrated with the following structure.

2.1.1. Axelar Network: A Decentralized Hub for Inter-Chain Communication

Axelar operates its own network to decentralize the bridging of messages and assets between connected blockchains.

This network is built using the Cosmos SDK framework, which is known for constructing blockchains, and employs Delegated Proof of Stake (DPoS) as its consensus algorithm. Users can stake Axelar’s native token, $AXL, to operate validator nodes. Even users who do not run validator nodes can participate in network validation by delegating their $AXL to validators.

  • As of May 17, approximately 130 entities are staking $AXL and running nodes.
  • Among them, the top 75 entities with the highest staking shares are selected as active validators and participate in the network’s validation.
  • The remaining node operators, who are not selected as validators, help propagate the blocks and receive small incentives.

Validators monitor the state of the blockchains connected to the Axelar Network and verify cross-chain transactions submitted to Axelar. To do this, each validator operates nodes for the connected blockchains, reading their data to verify the validity of cross-chain transactions.

For instance, when a user requests a cross-chain transaction to transfer assets from Ethereum to Polygon, Axelar's validators follow these steps:

  1. Verify the transaction occurred on Ethereum by checking the Ethereum node.
  2. Confirm the recipient’s address is valid on the Polygon node.
  3. Once the transaction’s validity is confirmed, record and execute the transaction on the Axelar blockchain.

Axelar employs a quadratic voting system, where the voting power of validators increases proportionally to the square root of the staked tokens, instead of linearly. For example, to double their voting power, a validator needs to quadruple their $AXL staking. This prevents a few validators from exerting excessive influence and ensures that more participants have equal decision-making power, enhancing the network’s decentralization and fairness.

2.1.2. Gateway Contracts

Each blockchain connected to the Axelar Network has Gateway Contracts implemented as smart contracts (or other kinds of installations on non-smart-contract chains) on their respective networks. These contracts perform two primary functions:

  1. Observing events, transactions and state on a source network.
  2. Executing transactions on a destination network, after Axelar Network validators verify events observed on the source network.

Gateway Contracts communicate with each other across different blockchains following specific protocols:

  • CGP (Cross-Chain Gateway Protocol): Defines rules for gateway contracts to recognize and exchange information between networks.
  • CTP (Cross-Chain Transfer Protocol): Establishes rules for transferring assets and data between networks.

These protocols allow networks to maintain their unique structures and consensus mechanisms while achieving high interoperability.

Gateway Contracts are managed by Axelar’s validators. Each Gateway contract is controlled by a key, held jointly by all Axelar validators. This setup relies on a multi-party cryptography scheme, dividing the key into pieces called key shares. Each validator holds a number of key shares, as dictated by the amount of AXL tokens staked with the validator. The Gateway can only verify messages from a source chain or execute actions on a destination chain if the authorized by a threshold number of validator key shares.

2.1.3. API and SDK

Axelar provides developers with APIs and SDKs to facilitate the easy and rapid development of interchain applications.

The Axelar API serves as an interface for developers to interact with the Axelar Network, enabling functions such as asset transfers, message relaying, and transaction status checks through simple calls. By using the API, developers can build interchain Dapps without the need to implement complex cross-chain logic themselves, leveraging the provided functions to integrate cross-chain capabilities seamlessly into their applications.

The Axelar SDK includes pre-written code libraries necessary for API calls, as well as sample codes and documentation to help developers understand and utilize these libraries more effectively. The SDK supports various programming languages, including JavaScript, Python, and Go, making it accessible to a wide range of developers.

As such, by utilizing the API and SDK provided by Axelar, developers can easily integrate Axelar's functionalities into their applications without directly implementing complex cross-chain logic.

2.2. GMP (General Message Passing)

Based on the above architecture, the Axelar Network supports two types of cross-chain transactions: Cross-Chain Token Transfer transactions and GMP (General Message Passing) transactions.

  • Cross-Chain Token Transfer: This functions similarly to traditional bridges, operating on a lock-and-mint mechanism where tokens are locked on the source chain and wrapped tokens are minted on the destination chain.
  • GMP (General Message Passing): This feature provides cross-chain messaging capabilities beyond simple asset transfers. Through Axelar’s gateway protocol and CGP/CTP standards, GMP enables unrestricted smart contract function calls and state synchronization across chains, often without asset bridging.

For example, with GMP, an interchain lending protocol can be built where assets can be locked in synchronized contracts across chains, allowing loans to be executed on different networks without the need to bridge assets between them. Additionally, users can pay gas fees for cross-chain transactions using tokens from the source chain, eliminating the need to provision gas fees in multiple networks (including the Axelar Network). From the user’s perspective, the multiple transactions required across chains are abstracted into a single transaction submitted on the source chain.

2.2.1. Mechanism and Advantages

The detailed operation of GMP transactions is best illustrated in a simple but powerful use case: the cross-chain swap. Squid is an example of a Dapp powering cross-chain swaps, which allow users to go beyond bridging by swapping directly for native tokens between chains. A cross-chain swap follows these steps:

Cross-chain Swap Process, Source: Axelar Blog
  1. A user initiates a cross-chain swap on a source chain, “Chain A,” intending to trade their native token for a token that is native on another chain, “Chain B.”
  2. The users’’ tokens are swapped on Chain A for a stablecoin that has liquidity on both chains.
  3. The stablecoin is bridged to Chain B along with instructions (GMP) to swap for the desired token via a liquid DEX on Chain B.
  4. Gas tokens are converted as needed to pay gas fees on both Chain A and Chain B.
  5. After the swap is executed on Chain B, the user receives the desired Chain B tokens in their wallet.

As of May 17, approximately two-thirds of the 1.8 million transactions processed by Axelar were GMP transactions, and the usage of GMP is steadily increasing with the development of interchain Dapps leveraging this feature.

Monthly transaction statistics of the Axelar network (as of June 3rd), Source: Axelarscan

GMP offers several advantages over interoperability solutions that include token bridging within cross-chain transactions:

  • Reduced Gas Costs: Users interact directly with the destination chain's contracts without transferring or burning assets on the source chain, saving on gas fees.
  • Asset Transparency: Since assets used in contracts on other chains remain on their original chain, it is easier to track the source and state of the assets.

As a result, GMP provides users with 1) a transparent asset usage environment and 2) a cost-effective and seamless interchain Dapp experience.

2.3. Hub & Spoke Architecture

There are two primary methods for connecting multiple networks to provide interoperability: the Point-to-Point approach, where each network connects only to other networks, and the Hub & Spoke approach, where each network connects to a central hub, through which they communicate to all other networks.

Point-to-Point, Hub & Spoke structure, Source: Axelar Blog

Axelar adopts the Hub & Spoke model, with the Axelar Network acting as a decentralized hub surrounded by various connected networks. This model offers higher scalability and security compared to the Point-to-Point method.

In the Point-to-Point approach, adding a new network requires establishing direct connections with all existing networks. As the number of supported networks increases, the number of connections required grows exponentially. In contrast, the Hub & Spoke approach allows a new network to connect only to the central hub, which then facilitates connectivity with all other networks. This results in greater scalability and makes updates to the connection protocols easier to manage.

From a security perspective, the Hub & Spoke model is more robust against problems on connected networks. In a Point-to-Point structure, if a specific blockchain has problems, they can quickly spread. To maintain safety, the entire network needs to shut down. In the Hub & Spoke model, only the problematic blockchain's connection to the hub needs to be severed, protecting the rest of the network.

Axelar has designed its central hub—the Axelar Network—as a decentralized network. This approach leverages the high scalability of the Hub & Spoke model while enhancing decentralization and security.

2.4. $AXL Tokenomics

At the heart of the Axelar Network is the $AXL token, which organically connects various participants and elements within the network. The $AXL token serves several key functions:

  • Governance Voting: $AXL holders can participate in major decision-making processes such as network upgrades and fee policy changes in proportion to their holdings.
  • Validator Participation: Users can stake $AXL to participate in the validation of the Axelar Network.
  • Transaction Fees: All cross-chain transactions conducted via Axelar incur fees paid in $AXL.
  • Validator Incentives: Rewards for block generation and validation are paid in $AXL.

For networks compatible with IBC, Axelar validators can verify transactions by running IBC’s light client. However, for new networks that are not IBC-compatible, validators must run full nodes to verify transactions, increasing operational costs and burdens.

To address this, Axelar has implemented a tokenomics model that introduces a certain amount of $AXL token inflation as a reward for validators who run additional full nodes for new non-IBC-compatible networks. This inflation model rewards validators for the increased workload. Initially, connecting a new network incurs a 0.75% inflation rate, which has increased the total $AXL token supply from the initial 1 billion to approximately 1.15 billion.

Total supply of $AXL, Source: CoinMarketCap

As the number of connected chains grows into the 100s, and even 1,000s,  associated inflation could cause long-term negative impact on $AXL’s value and the security of Axelar Network. To address these concerns, the Axelar community has proposed and passed tokenomics improvements. The proposed improvements include:

  • Inflation Reduction: Lowering the inflation rate associated with new network connections from 0.75% to 0.2%.
  • Fee Burn Mechanism: Burning a portion of the transaction fees distributed to validators and $AXL delegators. The burn rate will be determined through community governance.

As of now, the inflation reduction proposal has been implemented, bringing Axelar's annual total inflation rate down to 4.8% (1% base inflation plus 0.2% additional inflation for each of the 19 non-IBC chains). The fee burn mechanism has not yet been adopted. Once implemented, it is expected to help stabilize $AXL’s value by reducing the total supply, alongside the inflation reduction measures.

3. Key Applications of Axelar

3.1. Squid

Squid is a cross-chain liquidity router that utilizes Axelar's GMP to find and execute the optimal bridge and swap paths for user-submitted cross-chain swap orders. Users pay the entire transaction cost using gas tokens from the source chain, allowing them to easily perform cross-chain swaps with a single click. In addition to swaps for fungible tokens, Squid also offers an NFT checkout feature, allowing users to purchase NFTs on other chains using assets they hold on a specific network. Moreover, Squid provides an API, enabling other applications to freely utilize Squid's functionalities.

Squid Checkout’s interface, Source: Squid Checkout

Typical cross-chain transactions on Axelar involve block generation on the source chain and validation of block finality before the transaction is executed on the destination chain via the Axelar Network. This structural limitation means the total transaction time can vary from as short as 1 minute to nearly 1 hour, depending on the types and statuses of the interacting networks. To address this issue, Squid has introduced a Boost feature. This feature allows users to pay an additional fee for a short-term loan provided by Squid, which executes the transaction on the destination chain first.

The Boost feature operates by performing the swap transaction on the destination chain before the bridge transaction from the source chain is finalized. This means that the user receives the tokens they want to purchase immediately. Once the token transfer transaction from the source chain is finalized, Squid recovers the tokens, completing the cross-chain transaction. This significantly reduces the waiting time for users and enhances their trading experience.

To date, approximately 1 million GMP transactions have been processed by Squid, accounting for 80% of all GMP transactions on Axelar.

3.2. Prime Protocol

Prime Protocol is a Dapp that offers cross-chain lending services by utilizing Axelar's GMP functionality.

Prime Protocol interface, Source: Prime Protocol

Prime Protocol operates primarily on the Moonbeam network, where smart contracts known as Prime Contracts are deployed across various connected networks. When a user deposits assets into a Prime Contract on a specific chain, the contract sends the deposit information to the Prime Protocol Hub on the Moonbeam network through Axelar's GMP. When the user requests a loan, the loan request message is sent to the Hub on the Moonbeam network via GMP. After processing, the message is forwarded to the Prime Contract on the chain where the loan will be executed, thus using the assets on that chain to fulfill the user's loan request.

Unlike traditional DeFi lending protocols that operate on a single chain and accept collateral only from that chain, Prime Protocol leverages assets from nine different chains as collateral and allows borrowing across these chains. Moreover, users can pay transaction fees with tokens from the originating chain throughout this process, providing an experience similar to lending and borrowing on a single chain.

4. The AVM (Axelar Virtual Machine) & Axelar’s Technical Roadmap

Axelar Virtual Machine (AVM) is the programmable layer of Axelar’s cross-chain stack and the foundation of a future series of developer tools and capabilities. This is possible because Axelar is a blockchain connecting blockchains – unique among interoperability protocols for its ability to support smart-contract logic.

As mentioned earlier, GMP significantly enhances user experience by providing abstracted cross-chain messaging capabilities. However, developing unified user experiences that span multiple blockchains remains a complex and labor-intensive task. To overcome these limitations and provide a developer-friendly cross-chain development environment, Axelar is building developer tools atop the AVM, a smart-contract-capable cross-chain layer added the in March as a network upgrade, approved by on-chain vote.

AVM is a virtual machine that combines CosmWasm-based smart contract execution environment with Axelar's cross-chain functionality. It offers a secure and efficient environment for executing smart contracts while ensuring cross-chain interoperability. This allows developers to build cross-chain applications more easily. Multichain applications can be built at the smart-contract layer, with AVM handling translation at the protocol layer. This delivers a new level of chain abstraction for users and developers

Below are the additional developer tools, recently shipped or on the roadmap, based on AVM:

4.1. Interchain Maestro

Interchain Maestro simplifies multichain development, translating application logic so developers can “build once, run everywhere.”

Interchain Maestro is a forthcoming innovation on the Axelar roadmap. It will help developers easily develop, deploy, and manage Dapps in a cross-chain environment using AVM. When developers submit the code of the application they want to deploy to Maestro, it will automatically modify the code to be compatible with the target chain and deploy it. Maestro will also enable monitoring of the Dapp's operational status from a single interface and allow for automatic updates of smart contracts on all supported chains by simply modifying the code uploaded to Maestro.

4.1.1. ITS (Interchain Token Service)

ITS (Interchain Token Service) goes beyond bridges, supporting tokens that move natively across multiple blockchains.

ITS shipped to mainnet in January after approval by on-chain vote. ITS assists developers in easily issuing and managing tokens across multiple blockchains. It enables the simultaneous deployment of tokens to all EVM-compatible chains connected to Axelar with just a few clicks, without requiring any code. Interchain tokens can be customized, and will automatically translate custom capabilities, preserving them from chain to chain. All interchain tokens issued through ITS can be subsequently supported by Squid Router for cross-chain swaps, further enhancing their utility and interoperability.

Tokens issued via ITS adhere to the ERC-20 standard. When tokens move between chains, they follow a burn-and-mint mechanism where tokens are burned on the source chain and the same amount of tokens is minted on the destination chain, maintaining a consistent total supply across the Axelar-supported networks. ITS also provides a Token Manager feature, allowing developers to manage tokens across multiple chains from a single interface. All interchain tokens issued through ITS can be subsequently supported by Squid Router for cross-chain swaps.

A notable project leveraging ITS is Frax Finance. Frax Finance has integrated ITS into its own Layer-2 solution, Fraxtal, empowering developers participating in the Fraxtal ecosystem to issue cross-chain tokens quickly and easily.

By supporting developers in building and operating cross-chain Dapps without worrying about the intricacies of each chain, Maestro reduces the time and cost associated with development and operations. This fosters a more active participation in the interchain ecosystem.

4.2. Interchain Amplifier

Interchain Amplifier allows developers to easily connect new blockchains to the Axelar network, without protocol-level programming.

Amplifier automates protocol-layer processes, allowing smart-contract developers alone to easily deploy gateway contracts, activate the deployed gateway contracts, select validator groups to participate in network validation, and initiate governance proposals and voting for new-chain approval. This enables developers of modular and application-specific blockchains to easily connect their respective networks to the Axelar network..

Currently, the service is undergoing pilot testing before its official launch, with networks such as Stacks, Moonriver, Hedera, and Iron Fish participating in the pilot program.

AVM serves as a core infrastructure that not only provides a smart contract execution environment but also facilitates the expansion of the entire Axelar ecosystem. This enables Axelar to evolve into a truly interchain ecosystem, where the boundaries between blockchains disappear, creating a vast decentralized application platform.

5. Comparison with Competing Protocols

In the field of blockchain interoperability based on cross-chain messaging, other prominent protocols include LayerZero and Wormhole. Each project offers unique methods for blockchain interoperability, competing with Axelar.

In terms of message verification, LayerZero initially used two centralized entities—an oracle for data delivery and a relayer for data verification—to transmit cross-chain messages in its v1. However, in v2, it transitioned to a Decentralized Verification Network (DVN) where application developers select validators within the network to verify messages. Validators verify the integrity of the message but do not verify the validity of the transaction content itself. Questions have been raised about the level of centralization in LayerZero DVNs, some of which are apparently controlled by Ethereum externally owned accounts (EOAs).

Wormhole has designated a trusted set of 19 known validators, called Guardians, who verify the integrity and validity of messages. Wormhole relies on the reputation of these validators for message verification. This approach is known as “proof-of-authority.”

Axelar, on the other hand, uses approximately 75 validators who participate in message verification under an economic incentive structure. Axelar runs proof-of-stake consensus, similar to many of the chains it connects. Validators secure the network with their staked and delegated $AXL, and any malicious behavior results in the loss of their staked assets. Additionally, Axelar's system allows anyone to become a top staker and thus a validator, ensuring a higher level of decentralization compared to LayerZero and Wormhole.

Regarding scalability, LayerZero uses a Point-to-Point connection model, while Axelar and Wormhole utilize a Hub & Spoke model to connect networks. Axelar, in particular, simplifies the implementation of cross-chain smart-contract logic through AVM and provides an environment where network developers can easily connect new networks to Axelar, giving it an advantage over the other protocols in terms of scalability.

Axelar claims superiority over LayerZero and Wormhole in key competitive factors such as message verification and scalability. However, examining the number of cross-chain transactions, Wormhole has about 1 billion, LayerZero 130 million, and Axelar only 1.8 million. This disparity is largely attributed to airdrop farmers aiming for token airdrops from Wormhole and LayerZero. Following Wormhole's token airdrop snapshot, its transactions dropped to one-fifteenth, and LayerZero's to one-tenth, of their previous volumes.

Trend of LayerZero cross-chain transactions, Source: LayerZero Scan

Given the recent announcements of token launches by these projects and Axelar's steady transaction growth since early last year, Axelar is expected to increase its market share in the cross-chain sector. However, as competition in cross-chain interoperability is still in its early stages, it is essential to monitor the developments of LayerZero and Wormhole. Particularly, Wormhole's recent expansion to the Cosmos ecosystem alongside its existing cross-chain messaging functionality for blockchains based on the Move programming language like Solana, Sui, and Aptos, warrants continuous observation of the competitive landscape between Wormhole and Axelar.

6. Conclusion

In the current multi-chain environment, where liquidity fragmentation and user experience issues are prominent, the development of comprehensive cross-chain infrastructure is crucial for the mainstream adoption of blockchain technology.

Axelar addresses this need by providing high-degree cross-chain interoperability through GMP, supporting not only asset transfers but also arbitrary information exchange and function calls on smart contracts from other chains. Its Hub & Spoke model ensures scalability and efficiency by connecting other blockchains to its decentralized network hub.

Furthermore, with the introduction of AVM, Axelar creates an environment where network developers can easily connect new networks to Axelar, issue Interchain Tokens that move natively across multiple chains, and build multichain dApps on a “build-once-run-everywhere” basis.

As interchain Dapps built on Axelar become more prevalent and mainstream, users will experience seamless asset transfers and application experiences across multiple blockchains as if using a single blockchain. This not only enhances on-chain activity convenience for existing users but also significantly lowers entry barriers for new users unfamiliar with blockchain technology.