🌉Interoperability

To establish the SMP ecosystem, another important factor is to achieve interoperability with external systems (other blockchains and off-chains) while utilizing blockchain as a core technology. This is because while blockchain provides verifiability for the integrity of internal states, it does not provide a way to verify the integrity of data brought in from outside.

Bridge services, which provide interoperability between different blockchains, and oracle services, which provide interoperability with systems outside the blockchain, are also modules that are vulnerable to attacks such as theft of crypto assets and data tampering.

For early Bitcoin-based cross-chain swaps, cryptographic solutions such as HTLC (Hashed Time-Locked Contract) were explored. However, due to practical issues such as too much time required for swapping, schemes using consensus building by multiple Relayers have become the mainstream for current bridges between EVM-based chains. On the other hand, the Relayers scheme still has issues, such as trust in the operating entity of the bridge, the high risk of attacks, and the lack of a common protocol.

Since solution methods for these interoperability issues continue to evolve day by day, SMP emphasizes a modular structure that does not rely too heavily on specific technologies and aims to improve usability and security by incorporating the most appropriate technology and methods.

Overlay Token Concept

Since around 2018, the DMM Group has focused on blockchain interoperability, conducting research and development to improve security and user experience when connecting different blockchains. For example, we have been working on projects such as PeaceRelay, which builds bidirectional relays between EVM-based chains, and GORMOS, a decentralized exchange that enables trading of tokens across multiple blockchains using PeaceRelay (e.g., GORMOS Whitepaper Japanese Version). This research includes the GORMOS whitepaper (Japanese version) and studies on the interconnection between Polkadot's parachains and EVM chains. Additionally, we have proposed the Overlay Token concept, a token standard based on interoperability.

An overlay token is a token standard built on a virtual token layer constructed over multiple physical blockchains, similar to an overlay network in computer networking. Considering the mass adoption of web3, it is problematic for general users to understand the differences between individual blockchains. We believe it is important to create an environment where users can focus on their service experience without being conscious of the blockchain they are currently using. This idea is similar to the recent concept of Chain Abstraction.

Image of Overlay Token

In the overlay token concept, for example, token issuance is carried out on a high-security Ethereum chain. Then, chains optimized for the characteristics of the service, such as games, videos, and marketplaces, are constructed, and the required amount of tokens is bridged to those chains for service utilization. This concept is also carried over to the current architecture of SMP.

Ideally, users should be able to use their tokens without being conscious of which chain they are actually on. To create such an experience, the overlay token standard proposal aimed to solve challenges such as how token contracts on each chain synchronize the state of contracts on other chains.

Demonstration of overlay token operation between para-chains using Polkadot's Substrate

Similar projects to the Overlay Token include the Paratoken standard by Efinity, the public cross-chain token standard xERC 20, and LayerZero's Omnichain Fungible Token (OFT).

Leveraging Omnichain Fungible Tokens (OFT) for Interoperability

Omnichain Fungible Token (OFT) is the most widely adopted token standard that provides native interoperability functions. By implementing tokens as OFTs, users can natively transfer tokens across multiple blockchains without needing additional preparations such as wrapped tokens or liquidity pools.

SMP adopts the OFT standard to implement the interoperability functions of its native token SMP Token, utilizing LayerZero's messaging stack to minimize the burden on users in multi-chain environments. Additionally, SMP invests in research and development of zkBridge and other technologies to enhance the security and performance of interoperability technology.

By implementing native interoperability functions in the SMP token, users can easily consume content on different blockchains. This is similar to how various participating companies in existing business loyalty programs aggregate and analyze consumer behavior data to enhance marketing strategies and user experiences. The difference is that the platform does not monopolize consumer behavior and holding data. Instead, data sovereignty remains with the users, and the data is shared on public blockchains in an open format, making it usable for improving various services while protecting user privacy and data sovereignty. This creates a unique token ecosystem that leverages web3's strengths.