The Future of Secure Cross-Chain Swaps with Ledger Live and Li.Fi

Introduction

In the evolving landscape of decentralized finance (DeFi), cross-chain asset swaps have become more prevalent than ever. Ledger provides users with an intuitive and secure way to swap hundreds of assets across different blockchains, while ensuring robust end-to-end security. The integration of Li.Fi into Ledger & Ledger Live marks a significant step forward in bridging different blockchain ecosystems, enabling users to conduct secure and efficient cross-chain transactions.

How Does Ledger Provide End-to-End Security for Swaps?

Ledger never compromises on security. Since introducing swap functionality in Ledger Live, we have continuously enhanced the security and user experience to ensure seamless and secure transactions.

We’ve shared the Secure Swap security model in previous blog posts, but let’s have a refresher. Swapping assets with Ledger Live is designed to be both secure and straightforward. Users begin by selecting the asset they wish to swap, the amount, and the destination account. Ledger Live then provides multiple quotes from trusted partners, ensuring transparency and liberty. Once a provider is selected, it signs an ‘exchange’ payload, which contains all the details of the swap the user wants to make, including the source and destination assets, amounts, and other necessary transaction parameters. This ensures that the communication between the exchange provider and Ledger’s devices cannot be tampered with. This payload is then securely processed by the Ledger device, where the Exchange app performs a series of meticulous verifications to uphold security.

• Confirming the recipient address is securely managed within the device.
• Querying the source and destination asset applications to validate the transaction.
• Ensuring that all transaction parameters match the signed payload before user approval, allowing them to review and confirm the operation directly on their secure Ledger display.

This rigorous validation mechanism prevents any malicious actor from tampering with swap details, reinforcing Ledger Live’s reputation as a secure swap solution.

Enter Li.Fi: Bringing Decentralized Cross-Chain Transactions

With the integration of Li.Fi into Ledger Live, we have taken another step forward in enabling secure, decentralized cross-chain swaps. Li.Fi is a bridge and DEX aggregation protocol designed to simplify asset transfers across multiple blockchains, including Ethereum, Binance Smart Chain, Solana, and Arbitrum. It tackles DeFi’s fragmentation by consolidating liquidity sources and optimizing cross-chain transactions.

Additionally, Li.Fi leverages the ERC-2535 diamond proxy standard, allowing for dynamic bridge integrations. To swap with Li.Fi, the user signs a transaction that calls Li.Fi’s smart contract. The transaction signed by the user will call Li.Fi’s smart contract, which in turn calls the smart contract of the selected bridge. 

While Ledger traditionally integrates decentralized applications via plugins or metadata files that enable clear-signing transactions, this approach presents risks for cross-chain transactions. When handling swaps across different blockchains, the security challenges multiply. To preserve security, clear-signing this transaction requires the device to recognize not only the Li.Fi contract but also the specific bridge contract involved, including parameters that only make sense on the target chain – a very difficult proposition for a single chain app. 

Our solution already ensures that the Ledger device independently verifies the destination address, mitigating risks such as address manipulation by malicious actors. By automating address verification, users no longer need to manually compare addresses across applications, enhancing both security and user experience. Addressing this additional challenge of cross-chain parameters was a key component of our integration strategy.

How Did We Integrate Li.Fi into Ledger Live?

The Exchange app plays a pivotal role in enabling Li.Fi secure swaps on Ledger Live. We enhanced its cross-chain capabilities to efficiently support decentralized cross-chain exchange aggregators.

For ERC-20 swaps, the process begins with an approval transaction, where users authorize the Li.Fi contract to spend their tokens. Before executing the swap, the user needs to approve a specific amount, which is securely clear-signed by the Ledger Ethereum application, ensuring transparency. For swaps involving native assets, this step is skipped, and the transaction moves directly to execution.

The swap transaction itself is processed through the Ledger Exchange app, which introduces a new security mechanism. Trusted providers supply additional metadata to enable secure transaction signatures, that includes target chain parameters, not displayable by the source chain signing application. The type of extra information varies based on the blockchain network. For Ethereum-based transactions, for example, the signed payload contains a hash of the transaction’s calldata. The Ethereum app then validates that this hash accurately corresponds to the transaction data, ensuring integrity before signing.

Currently, this implementation supports Ethereum and Bitcoin transactions, with ongoing development for Solana and other networks. Regardless of the network, the principle remains the same: the Ledger application independently computes and verifies transaction data before approval.

Building Trust: The Cornerstone of Secure Swaps

The Exchange app creates an unbreakable trust bridge between users and swap providers, eliminating the risk of man-in-the-middle attacks. Even if a malicious actor attempts to alter swap parameters before they are sent to the provider, users can verify transaction details on their secure Ledger screen before signing. Furthermore, if an attacker tries to manipulate the data received from the provider, the Ledger device will reject the transaction outright, ensuring that only legitimate transactions are executed.

That said, while the Ledger security model ensures that swaps are untampered with, trust in the swap provider remains a fundamental aspect of any transaction. Whenever users engage with swap providers, they must place trust in the provider to execute the transaction as expected, especially for cross-chain swaps. 

Decentralized cross-chain swap protocols like Li.Fi build that trust by providing an open, decentralized order execution mechanism and Ledger’s improved exchange application completes this trust by securing the order creation mechanism.

Conclusion

The integration of Li.Fi into Ledger Live represents a major leap forward in the evolution of secure cross-chain swaps. By leveraging Ledger’s robust security framework and the advanced capabilities of the Exchange app, users can confidently swap assets across multiple networks without sacrificing security.

As DeFi continues to evolve, Ledger remains committed to pushing the boundaries of security and innovation. With Li.Fi, we are bridging the gap between blockchain networks, making decentralized finance more accessible, seamless, and, most importantly, secure.

The future of secure cross-chain swaps is here.

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Pierre POLASTRI
Principal Architect