Imagine a blockchain that seamlessly connects many blockchains from different networks, enabling users to transfer tokens, buy NFTs, play games, and more, without having to wrap their tokens or set up a new wallet.
Well, this is where Axelar comes in!
Axelar, also known by the market ticker AXL, is a blockchain that connects blockchains.
At its core Axelar aims to develop and deploy secure cross-chain communication for Web3 applications, which it hopes will allow the creation of the “internet of blockchains” as a universal development platform.
But what exactly does all that mean? And why Axelar is a game-changer in the crypto space? Today we find out!
What is Axelar?
Founded by Sergey and Georgios back in 2020, both of whom were among the founding team members at Algorand.
Fundamentally, Axelar aims to empower developers with new technologies that allow for the access of assets across many blockchain networks.
According to their website, Axelar can be thought of as two main things.
First, as an “air traffic control system” which handles the transportation, routing, and “border patrol” between the blockchains transferring information.
Second, as a translator between multiple programming languages. Meaning Axelar aims to handle your traffic no matter which blockchain or specific program language was used to create it.
But before we get too deep into how it works, I need to quickly cover two definitions. Web3 and the “internet of blockchains”.
Web3 refers to a vision for the next generation of the internet, emphasising decentralisation, user control, and enhanced privacy. In Web3, blockchain and decentralised technologies enable users to interact with digital services without relying on central authorities.
The “internet of blockchains”, on the other hand, refers more metaphorically to a concept of what Axelar intends to be.
In short, the “internet of blockchains” refers to a vision where various blockchains seamlessly interoperate and communicate, creating a unified ecosystem that allows different blockchains to exchange information and assets trustlessly.
The concept envisions a scalable and collaborative blockchain infrastructure, enabling applications and tokens to interact across blockchains, creating a more interconnected, versatile, user-friendly, and decentralised ecosystem.
The Cosmos Network is an example of this, using the Cosmos Hub as a central point of communication for a network of around 50 independent blockchains.
But how does Axelar work exactly?
How does Axelar work?
Perhaps unsurprisingly, Axelar makes up one of those networks on the Cosmos blockchain.
This means Axelar, like Cosmos, is a Proof-of-Stake based blockchain that uses the Cosmos SDK, Tendermint as its consensus mechanism, and has the IBC protocol enabled.
To quickly recap, the Cosmos SDK is a framework for building blockchain applications. The SDK provides developers with tools to design and customise their blockchains, defining features like consensus mechanisms, tokenomics, and governance.
Tendermint on the other hand, is a consensus algorithm that ensures agreement among a network of nodes, allowing them to reach a common decision on the order and validity of transactions.
Lastly, when the IBC Protocol is enabled, allows interoperability between different blockchains in the Cosmos ecosystem, creating a decentralized internet of independent blockchains.
So, you might be wondering, what makes Axelar different to Cosmos, which itself is a blockchain of blockchains, and also hosts Axelar?
What makes Axelar unique?
In short, because it connects to more blockchains than just the Cosmos network of blockchains.
Cross-chain bridging isn’t itself unique, there have been “wrapped” cryptocurrencies for a long time at this point.
But, to explain that quickly, when an asset is bridged, you normally receive a “wrapped” version of the asset on the blockchain you’ve bridged to.
This is because, for example, only Bitcoin Network can mine BTC. So, even if you transfer Bitcoin to another network, that network hasn’t “mined” Bitcoin, it has instead given you a “wrapped receipt” that you can use on the bridged blockchain.
This receipt is a direct 1:1 conversion that is pegged as a stablecoin to the price of Bitcoin, meaning its value will always remain the same as Bitcoin’s, even if it is “wrapped” on another network.
Though, back to Axelar, because Axelar takes things a step further.
With Axelar, the connections are universal and users can swap assets across any supported chain, regardless of which chain it is, or which programming language created it, thanks to their General Message Passing, or GMP, protocol.
It is the General Message Passing protocol that allows for this full interoperability between Cosmos, Ethereum, Arbitrum, Avalanche, Fantom, Polygon, and more.
This is partially because GMP protocol removes the need for users to revert their wrapped tokens to their native network before they can be wrapped into another asset, which not only takes time but can cost more in fees.
In short, through Axelar’s network, users can participate in multi-chain DeFi, play a game on any network, or buy an NFT from any marketplace without having to download another single-use crypto wallet.
But how about the tokenomics?
AXL Tokenomics
As with most Proof-of-Stake projects, AXL can be used for all the classics like governance, payments, staking through validators, and is also distributed as a reward to those who participate in the network, such as by running nodes, participating in governance, or providing liquidity to the network.
In total, there will be just over 1.1 billion AXL tokens released, with around half of that making up the current supply.
Of the initial 1 billion that was allocated at launch, 29.5% went to the Company, with 17% going towards the Core Team, and 12.5% towards Company operations.
A further 29.5% was given out to backers, with 13.5% going to those who invested during the Seed round of funding, followed by another 12.5% during the Series A funding, and a final 3.5% during the Series B funding.
In addition, 5% went to the community sale, and the remaining 36% went towards Community Programs, which includes an insurance fund for the project.
All of this has a vested release, or emission schedule, which releases these allocated tokens slowly over time, meaning all of these allocated tokens won’t be on the market until sometime in 2026.
Unfortunately, the wallet distribution is not currently highlighting who owns which wallet, which could be a problem as some wallets hold as much as 11% and 10% respectively.
While it is likely those two wallets in particular belong to Axelar themselves, there are plenty more wallets around the 2-5% region which could potentially cause an issue down the line.
Although with that said, as these wallets are currently unnamed, it could turn out that all of these wallets do belong to Axelar, it is just hard to say that for certain.
Axelar looks to build upon what Cosmos has started, by introducing more interoperability
and bringing us all closer to a “One Blockchain” reality.
For the consumer, the advantages are clear. It’s a bridge that will quickly, securely, and mostly cheaply transfer your assets between one chain and another without the need to create new wallets or accounts.
Of course, nothing is ever guaranteed in crypto, and it will require expert management from the top. But assuming that to be the case, I believe Axelar’s best days still likely lay ahead.