What happens to the ETH tokens when we use the cross-chain bridge?

A person in the Telegram group asked this question and it hit me: why do we always think that people know how things work and the acronyms?

Well, the person who asked the question is a person who is interested in understanding more about the project so he or she can help more. So I decided to take some time and try to explain with an analogy.

What happens when you cross a bridge?

In order to try to explain how the Tixl Cross-Chain (ERC20 <--> BEP20) works, I decided to make a real bridge analogy. Imagine a bridge that crosses over a river and this river separates 2 countries. The actual example for this is the bridge over the river that separates Brazil from Paraguay.

And, just for the sake of the example, imagine this:

  • Brazil is ETH
  • Paraguay is BSC
  • The physical bridge is the Tixl Cross-Chain Bridge
  • And the person crossing the bridge is the TXL token.

I'm using the country border as the example because every time a person wants to cross a border, they have to present their passport to indicate to the authorities "We're leaving Brazil / We're entering Paraguay" and vice-versa.

What happens when a person crosses from Brazil to Paraguay? Are you ok if I say that after the person crosses the bridge from Brazil to Paraguay, the person actually "disappears" from Brazil (or ceases to exist in Brazil) and "appears" in Paraguay?

So what happens when a TXL token crosses from ETH to BSC?

The Cross-Chain bridge is not a physical bridge and the TXL token is not a person. So, the TXL token doesn't physically go over the bridge leaving ETH country and entering BSC. But, from a logic perspective, what has to happen is:

  • The TXL/ETH token must disappear from the ETH universe AND
  • The TXL/BSC token has to appear in the BSC universe

That is because, no matter what, the total amount of TXL in the world must remain the same. Now the new question becomes: how to make the TXL/ETH disappear? It actually doesn't disappear. Because to disappear, it would have to be burnt. And when you burn a token, that's it. It's gone. There is no way it comes back. The problem is that the bridge goes both ways. A person can cross from Brazil to Paraguay and come back later. The same has to be possible here. The TXL token has to be able to cross back from the BSC universe to the ETH universe. So, in fact, the token cannot disappear.

But it cannot "exist" in both universes at the same time. Any unique token can only exist in one universe at a time. So in fact, what happens is:

  1. The TXL / ETH token  "arrives" at the bridge and gets locked in a vault. That's where the term "locked" comes from. 
  2. Once it is locked there, a new TXL token is created (the term that is used is "minted") in the BSC universe, at a 1:1 ratio. This TXL / BSC token now will be used within the BSC universe (transferred, sold and bought).

At some point, someone might want to bring the TXL / BSC token back to the ETH universe. So, they bring it back to the bridge where:

  1. The TXL / BSC token will be burnt and 
  2. The TXL / ETH will be unlocked to be able to be transacted within the ETH universe.

If you have worked with computer programming, this might seem very simple. But that is just because you're used to this kind of thinking. If not, this could seem quite complicated. In fact, after reading this explanation, my friend asked me "But what happens to the TXL / ETH tokens that are locked by the bridge? Can they be used for anything?"

NO. They are locked by the bridge. Keep this in mind: the maximum total amount of existing TXL tokens in the world is 600 million. Suppose you have all the 600 million tokens circulating in the ETH universe. Now, 100 million decided to travel to BSC. That means that 100 million TXL / ETH tokens get locked by the bridge and 100 million TXL / BSC tokens are minted in the BSC universe. If the locked tokens can be used for anything, then they are not locked and if they aren't locked, that means that there are still 600 million TXL / ETH tokens circulating. But now we have a problem, because there are 100 million TXL / BSC tokens circulating in BSC chain too. Problem: now we have 700 million TXL tokens in the world. That cannot happen!

Locked tokens cannot circulate in the ETH universe anymore, not until the corresponding quantity of TXL / BSC tokens are burned and the bridge unlocks the same quantity of TXL / ETH tokens.

Hope you all understood and found this article helped you understand better a few concepts.

You might want to read this other post now. It gives an idea on how the TXL Staking program will work and why I like it: TXl Staking Program and why I like it so much.

Comments

Post a Comment

Popular posts from this blog

What is Tixl?

Image
Introduction In order to explain what is Tixl, we first have to understand a little better what are the problems that Bitcoin, Ethereum and other crypto coins have. If we don't have the correct understanding of those, Tixl might just not make any sense. This article is written for people who have some understanding of crypto. People who have traded and transferred cryptos from/to their wallets from/to Exchanges etc. My first time (and probably yours too) The first time I bought a crypto, I got really scared. Before anyone ever explained to me why crypto was something interesting, I had my mind set to "this is good for illegal transactions like buying drugs or guns or whatever". So, even after understanding what it really is about, the first time I actually bought some, I still felt like I was going to some kind of dark, obscure place. Then I put my order and it got executed. My money came out of my account and... no bitcoin in my wallet. My first thought: "refresh, r
Read more

What about the 2021 roadmap for TXL?

I was very pleased with this announcement by the Tixl Team in Medium. Let me try to explain why. What is Tixl In the very beginning, they state their intention:  " The ultimate goal is to have one single high-performance network for all tokens." This is big! And notice they don't say "we want to replace bitcoin" or "we want to replace whatever". Because that is not what this project is about. In fact, I said it before and I will say it again: Tixl is the project that could make BTC become what it wanted to be from the very beginning - a digital currency that is used globally. What is Tixl's main product The team states very clearly:  "Our main product was and is the Autobahn Network. This will stay our core product." Now that they've implemented support fot BTC and ETH/ERC20, they will work on making the Autobahn better: they will implement decentralization, perform audits and connect more networks. This is the birth of a core produc
Read more

Who is Tixl's competition?

Earlier this month, I wrote an article " Who are Tixl's competitors? ". If you read it, you've seen that I think that Tixl has no competitors. But we need to be realistic here. I also wrote an article where I mention that not always the best technical solution is the one that dominates the market . The point is: competition can come from anywhere, at any time. From a technical point, I still think that Tixl is the best solution but we need to be fair and look at other solutions that have a similar proposition to Tixl's: fast and cheap (I think these are the main business problems everyone wants to solve), and interoperability (which I find more difficult to explain). Cardano (ADA) For all I know, Cardano is a Layer 1 solution, just like Tixl. And it was born earlier, when the founder didn't agree with what was being developed for ETH. I think he understood that, the more the ETH network grew, the slower it would get, and the higher the price of ETH, the more e
Read more