Sifchain Announces Peggy, Cosmos —

Ethereum Cross Chain Bridge

Sif Follow

Jan 4, 2021 · 4 min read

Greetings Cosmonauts,
Sifchain is proud to announce that it has successfully deployed a Peggy (Cosmos <>
Ethereum bridge) on its Merry-Go-Round testnet. Sifchain is a cryptocurrency exchange
protocol built on Cosmos SDK and will target 20–25 blockchains (such as Ethereum and
Stellar) for cross-chain integration. It will also simplify the process of blockchain
integration, lowering the development process for the Cosmos community so that
additional cross-chain integrations will be cost minimized in terms of money and
developer resources.

Sifchain’s goal is for new blockchains to consider cross-chain integration as essential as a

wallet or block explorer. Liquidity from all cryptocurrencies can then be accessed on-
chain, allowing the coordinated deployment of capital from all cryptocurrencies by
DAOs.

Sifchain has deployed a persistent deployment of Peggy on a standing testnet, in parallel

with Althea’s version of Peggy. Sifchain leverages the power of the Cosmos SDK to
deploy a Peggy chain on mainnet. Sifchain uses Cosmos’ master branch Peggy with work
created by a Swish Labs team under an Interchain Foundation grant. Like Althea Peggy,
Sifchain’s approach to Peggy allows users of ETH and ERC-20 tokens on Ethereum to
create pegged tokens on a Cosmos Network chain.

In both systems, an Ethereum user can send tokens from their Ethereum wallet to a
Peggy smart contract running on Ethereum. Peggy validators observing the Peggy smart
contract keep those Ethereum tokens in a lockup group and mint a corresponding
allocation of pegged tokens to a user’s Cosmos Network wallet address.

The difference in the two lies in their cryptoeconomic security model. Althea Peggy uses
the validators of its destination chain as signatories of the Peggy smart contract,
meaning it relies on the destination chain’s consensus when minting pegged Ethereum
tokens. The original vision of a peg zone is to use a different set of validators on a
different blockchain that is connected the Cosmos Hub via IBC.

You start at the Cosmos Hub. You move Photons via IBC to the peg zone. The peg zone
receives an incoming IBC packet: a message containing a transaction for sending
Photons.

https://blog.cosmos.network/the-internet-of-blockchains-how-cosmos-does-
interoperability-starting-with-the-ethereum-peg-zone-8744d4d2bc3f

A reason to have a separate blockchain is that it allows a unique validator set with its
own separate staking collateral to provide cryptoeconomic security for the funds being
pegged that is separate from the validator set of the destination chain and the collateral
it staked for transactions internal to the destination chain.

In short, in general, pegs to PoW chains or any governless chains require

overcollateralization.

Consensus-based peg collateralization requires the safe handling of +1/3 Byzantine

faults, which means that some form of interchain staking is necessary. It isn’t sufficient
to slap a peg to Ethereum on the Cosmos Hub and require that all ATOM takers also
stake on the Ethereum peg, because nothing is keeping the hub accountable in the case
of +1/3 failure.

https://github.com/jaekwon/cosmos_roadmap/tree/master/shape_of_cosmos#token-
pegging-to-pow

By contrast, Sifchain uses a Peggy deployment with a separate peg zone blcokchain in
which Peggy validators stake collateral specifically used to secure the bridge and they
are subject to slashing as per Tendermint consensus rules on both the Cosmos SDK peg
zone chain and the Ethereum smart contract side of that bridge. This solves the
aforementioned cryptoeconomic security issue on the bridge. In exchange for being
subject to this new slashing requirement, validators earn a service rate. Althea trades off
trust minimization in exchange for simple design whereas Sifchain trades off simple
design for maximizing trustlessness supported by cryptoeconomic incentives

Peggy’s Architecture
You can find details on Peggy’s implementation here:
https://github.com/Sifchain/peggy/blob/develop/docs/sifchain-peggy-
architecture.md

Note that Sifchain will likely launch its betanet with live cryptocurrency before IBC is
ready for production. In that case, it would use a modified architecture as per this ADR
in which Peggy was deployed directly onto Sifchain instead of having its own peg zone
validator set. Some of Sifchain’s validators would simply have Peggy admin privileges
similar to Althea Peggy.

Peggy and Cosmos Network

We see Peggy’s deployment as a hallmark moment for growth of the Cosmos Network.
With Peggy and IBC, Ethereum users will be able to use their ETH and ERC20 tokens on
Cosmos SDK platforms such as Kava, Akash, Terra, e-Money, IRIS, Secret Network, and
of course, the Cosmos Hub. Cosmos Network users will also be able to use their tokens
on Ethereum and take advantage of its dapp network. Cryptocurrency holders on both
sides will be able to take advantage of the benefits of one chain while holding a position
on a token native to another, bringing us one step closer to Sifchain’s mission of
connecting liquidity on all blockchains.