The number of blockchains in existence continues to rise. The value is still concentrated on a few chains, but the diversity has increased in recent years (Figure 1). Put differently, the future is modular and multi-chain. In such world, blockchains need to be able to talk to each other to avoid fragmentation. Blockchain bridges enable this. Initially focused on moving tokens across blockchains, solutions have emerged that allow for more generic cross-chain communication. There are now dozens of blockchain bridges in existence.

In a multi-chain world, interoperability protocols are a key piece of the infrastructure. The problem is that this segment is still very experimental and often unsafe. Indeed, bridge exploits are by far the largest category with around $2.5bn in stolen funds since 2020. Despite the challenges, the interoperability landscape continues to innovate at a rapid pace. Users and builders are struggling to chose the right bridge, i.e. one that is secure and convenient. There are interoperability trilemma’s to consider, think about trust assumptions, ...

Enter LI.FI. It’s a bridge aggregation protocol that enables cross-chain asset swaps by aggregating bridges and connecting them to DEXes & aggregators. In other words, it can route any asset on any chain to any desired asset on any chain.

They are primarily a B2B business by providing an SDK and widget that other projects can use. LI.FI is thus the middle layer between DeFi infrastructure and the application (Figure 2). For example, LI.FI is integrated in MetaMask for cross-chain swaps (80-90% of MM’s cross-chain swaps is routed via LI.FI). While LI.FI’s focus is on B2B, the team recently recently launched Jumper (formerly transferto.xyz), an exchange to swap assets across chain.

Dune Dashboard

I created a Dune dashboard that tracks the usage of LI.FI. Note that the dashboard does not give a 100% complete overview of LI.FI usage: 1) Dune doesn't cover all chains and 2) Dune doesn't have all pricing info of each wrapped asset (which in turn relies on Coinpaprika data). I semi-fixed the latter issue by manually relabeling some of the addresses of wrapped tokens to the underlying asset.

LI.FI currently covers about 20 chains and over a dozen bridges. Since its launch, over 400k transactions or about $400m in value has been transacted via LI.FI. Over 150k unique users have transacted with LI.FI.

Let’s take a look at some of the Dune charts. In recent months, several bridges including Multichain, Hyphen, cBridge and Hop (Figure 3). In terms of volume, most of it has been routed via Multichain and cBridge (Figure 4). Which applications are routing most via LI.FI? Figure 5 shows that the bulk of the daily unique users (+85%) are utilizing either Jumper (transgferto.xyz) or MetaMask. Most of the $ volume also comes from these two applications. Finally it’s interesting to look at the origin and destination chains of the swaps that LI.FI routes. This is shown in Figure 6. Most of the volume is routed between L2s (Arbitrum and Optimism) and Ethereum.

Concluding thoughts

It’s still early days for interoperability protocols, so it remains to be seen how it will evolve. But it’s an exciting area that I will keep a close eye on. Especially use cases that interoperability protocols can enable. Think about lending and borrowing in a chain agnostic way, where the loan and collateral would sit on different blockchains. Or decentralized exchanges that pool liquidity from different chains. Other examples that would rely on interoperability infrastructure are NFTs that would allow the user to access its utility on another chain. Or governance that allows users to vote cross-chain.

More and more protocols need interoperability, but teams often don’t have the time or expertise to navigate that labyrinth. LI.FI’s solution takes away that burden so others can focus on their own value proposition. I think LI.FI is well-positioned (see also this recent piece on how LI.FI fits in the aggregation theory). Finally, worth to note is that LI.FI has an excellent research team, and I always learn a lot from their writings.