Interoperability is a major barrier to blockchain’s adoption as a mainstream technology, so being able to easily build and interact across multiple chains is significant, for both developers and decentralised app (dApp) end-users.
Through Axelar’s decentralised network, connectivity provided via ‘gateway smart contracts’, and software development kit (SDK), the platform essentially enables:
- Developers of dApps to build on their chosen layer 1 blockchain, then establish connections with external chains without excessive gas fees or additional development costs.
- Users of dApps to securely use their assets and data (e.g., crypto/NFTs) from one blockchain in any application on any other blockchains.
Co-founder Sergey Gorbunov said: “For application developers, they need to be able to choose the best blockchain for their use case, without sacrificing access. For users, they need to be able to combine the assets they want with the applications they want, without taking unnecessary risks that come with ad-hoc bridges and less-than-optimal security approaches.”
Built on the Cosmos Tendermint SDK, Axelar’s mainnet launched in 2022—two years after the project was founded and after raising over $US64 million in venture capital funding.
The network’s native token, AXL, has three main purposes:
- To incentivise and reward network validators that contribute to consensus mechanisms.
- To pay fees on the network incurred during user transactions and other network usage costs.
- To confer governance rights. The more AXL you hold, the more say you get when voting on governance proposals about how the protocol works or is upgraded.
Apps and other services using Axelar can buy the AXL token to cover their users’ transaction fees, making interactions more seamless from the customer’s perspective.
Transaction fees and rewards are used as a means to attract validators and stakers—and are paid in AXL. Here’s how it works:
- Cross-chain transactions are secured using a proof-of-stake mechanism, with data verified across a diverse, decentralised network of computer nodes (validators).
- For their role in creating new ‘blocks’ of data and confirming transactions across multiple chains, validators are rewarded with AXL tokens. AXL from transaction fees (aka gas fees) is also used to compensate validators and stakers.
- Investors who hold AXL, delegate their coins to a validator’s staking pool to earn a portion of the validator’s earnings, minus the validator’s commission.
How will this scale? The project has stated: “As Axelar grows and connects more and more chains, it becomes increasingly restrictive to require every Axelar validator to run a node for every chain supported by the network.
“Instead, Axelar validators are incentivised to run nodes for as many supported chains as possible, through increased staking rewards, based on the number of chains they support.”