How to Create an Efficient and Stable Cross-chain DeFi Platform?
Cross-chain as the only route for a better DeFi future
According to the on-chain information, in DeFi, the staking on Ethereum has exceeded $60 billion, and the total staking on other ecological BSC, HECO, Solana, etc. is close to $20 billion. There is no doubt that Ethereum is still the DeFi King. However, the prosperity of DeFi has overwhelmed Ethereum, leading to the increasing network congestion and rising fees. As a consequence, the Ethereum ecosystem has become the battlefield of a small group of rich people and scientists. It is difficult for ordinary users who are troubled by high fees to profit from it.
This dilemma, however, has led to the emergence of public chains such as BSC and HECO, which can provide users with faster services and lower fees. Therefore, it is natural that users will prefer or migrate to chains other than Ethereum. Such a shift in user behavior has given rise to the demand for cross-chains in the market: users increasingly do not complete all asset transfer on a single chain. Instead they choose different chains that perform well in the market segments to better fulfill their diversified needs.
At present, the products of each ecology have gradually completed their deployment. What is the most needed is to remove the barriers among different chains. However, the independence of the public chain system determines that it is difficult for users to independently complete asset integration and transactions on multiple chains, as each chain is an independent economy with different ledgers, protocols and technical solutions. The problem of data island is becoming increasingly prominent, which is further accentuated with the surge of cross-chain demand.
Users need to maximize the use of their assets and participate in financial activities on different chains, while minimizing cross-chain costs and improving capital utilization; for developers, cross-chains can enable linkage with other assets to maximize asset value while enabling more novel gameplay rules.
In addition, cross-chain can enable projects to attract users from other chains, thereby increasing the exposure and depth of the project’s asset pool. Especially for projects on emerging chains, the congestion on the main chain is often positively correlated with on-chain prosperity. Therefore, project owners need to consider bringing in users from other ecosystems to increase more liquidity while ensuring transaction convenience.
Each public chain has its own market position and development direction. Users expect to fulfill their different functional needs on different chains; therefore, in order to achieve common prosperity, public chains need not to compete with each other for users and projects, but to establish collaboration to meet the needs of users in different aspects. This means that the demand for decentralized cross-chain DeFi will grow even more in future.
Difficulties of realizing cross-chains DeFi
As the demand for interoperability of different chains increases, the circulation of assets across chains in DeFi is getting more complicated. This is because different blockchains have different ledgers and different wallet addresses; therefore, it is not easy to participate in cross-chain DeFi activities, such as liquidity mining, lending, and trading.
There are two major challenges in cross-chain DeFi at present: how to build consensus to enable public chains to access and verify off-chain information. This issue is urgent because any data cannot be fully trusted in the absence of consensus; and how to maintain a high degree of decentralization to ensure the transparency and fairness of the data verification process.
Cross-chain DeFi needs a way to enable free flow among different chain assets without going through a centralized institution, allowing users to directly participate in DeFi activities and achieving truly open finance.
This is the reason why HurricaneSwap emerged.
HurricaneSwap’s cross-chain solution
HurricaneSwap is a DEX platform that supportscross-chain transactions of multiple chains. By using the Avalanche Protocol technology, HurricaneSwap can seamlessly connect transaction pools through a relayer — Station that is based on the Roke Protocol.
HurricaneSwap locks a user’s LP asset in a Station by creating a relayer on each chain and creating a transaction pool on the Avalanche Protocol at the same time. That is, HurricaneSwap achieves a seamless cross-chain asset transfer through migrating the asset liquidity from the native chain to the Avalanche Protocol.
Taking BSC assets as an example. The user creates a BNB/USDT liquidity pool on BSC Station, injects the corresponding amount of BNB and USDT, then stakes LP tokens and sends a minting request to the avalanche protocol; after receiving the request, the validation node verifies whether the BNB and USDT assets are locked. If the asset status verification is positive, each validation node independently signs to confirm the minting request. If the number of confirmed nodes is more than or equal to 2/3 of the total number of nodes, the cross-chain verifier alliance will execute the minting request, and mint the corresponding number of aBNB and aUSD, and create aBNB/aUSD liquidity pool on the avalanche protocol.
When users need to withdraw their liquidity, they simply initiate a burning request to the Avalanche Protocol and the node verifies the request. If the verification is positive, Station unlocks the LP tokens and sends them to the user’s address via the native chain.
HurricaneSwap currently focuses on cross-chain asset transactions. In the future, it will also become a cross-chain DeFi platform that enables lending, auctions, insurance, stablecoin services, etc..
Highlights of HurricaneSwap
Free flow of heterogeneous assets
The free flow of heterogeneous assets is the biggest difference that distinguishes HurricaneSwap apart from other DEXs, such as Uniswap, PancakeSwap, etc., which are built on a single public chain and only support assets corresponding to that public chain. HurricaneSwap, on the other hand, is a cross-chain transaction platform that builds a marketplace for tokens between different chains.
For example, on Uniswap, all the tokens traded are ERC20 tokens, like ETH, UNI, DAI, etc., while the token market to be built on HurricaneSwap not only hs ERC20 tokens, but also supports tokens of various public chains such as BTC, BNB, DOT, etc. These assets of different chains can be traded and swapped directly. For example, the liquidity provider brings BSC assets to HurricaneSwap transaction market, while users can directly use HECO’s assets to swap for BSC assets.
In other words, in HurricaneSwap transaction market, the assets of different chains can be directly swapped on the same interface, so that users do not have to interact with each other through multiple protocols. In this way, HurricaneSwap realizes a senseless cross-chain user experience.
An Efficient and stable cross-chain solution
Currently, there are two main forms of cross-chain solutions in DeFi. One is centralized custodian. For instance, WBTC relies on the centralized institution BitGo for issuance, and users must trust the issuer or custodian. However, as the centralized institution is not transparent, users cannot be fully informed of the actual situation of the institution, which is to a certain extent contrary to the spirit of blockchain. The other is cross-chain bridge, which provides a compatible channel between two public chains operating with different rules. This approach allows one chain to obtain the transactions occurring on the other chain through the prophecy function, and mint new assets on one chain while burning the same tokens from the other chain. Compared with the first method, this method is relatively decentralized, but users need to apply for the mapping from the cross-chain bridge. Users can only trade after obtaining the mapping assets, which is cumbersome operation process.
HurricaneSwap adopts the Roke protocol to realize cross-chain asset transfer by establishing the corresponding Station on the original chain. After the liquidity provider stakes the LP tokens, the cross-chain verifier alliance verifies the tokens provided; afterward, the corresponding transaction pool is established on the Avalanche protocol to allow users to trade directly in HurricaneSwap. Compared to the above two solutions, HurricaneSwap’s cross-chain is more efficient and stable. Users do not need to perform other operations when trading, and thus enjoy a smoother cross-chain trading experience.
Finally, in order to deal with the potential risk of non-rigid payment of tokens, HurricaneSwap Foundation also establishes an independent fund to achieve rigid payment of price-anchored tokens, and participates in spread reduction through hedging and other means. In doing this, HurricaneSwap ensures the system’s solvency.
HurricaneSwap is based on the Avalanche protocol, which is an efficient underlying public chain with a transaction confirmation delay of only 4 seconds and a transaction count of more than 6000 per second. Avalanche protocol is featured with fast settlement, low latency and strong scalability. It can meet the scenarios of high frequency transaction and can also interact with any chain tokens connected to the Avalanche protocol. Apart from this interoperability, it provides faster settlement and has lower transaction fees.
In terms of the underlier, HurricaneSwap is a cross-chain DeFi platform that can serve the entire DeFi market. In addition to cross-chain transactions, it also enables cross-chain lending, cross-chain synthetic asset generation, cross-chain derivatives transactions, etc. It is equivalent to a DeFi platform that combines Uniswap, Venus, and Hegic in one.
HurricaneSwap is not just a cross-chain DEX. Its ultimate goal is to base itself on the Avalanche and Roke protocols and create a cross-chain DeFi platform to realize the interaction of assets on different chains. HurricaneSwap is not only a transaction scenario in the future, but also can introduce more functions, such as cross-chain lending, derivatives, etc.. It is highly possible that HurricaneSwap will be the infrastructure for various DeFi applications.
DeFi is gaining momentum and enjoys huge potential and infinite application scenarios in future, which will inevitably lead to a huge cross-chain demand. HurricaneSwap will open up the ecology of each chain, and provide users with more efficient and more convenient cross-chain services at lower costs to truly realize open finance with seamless interoperability between chains; the exploration of various DeFi scenarios can also give rise to collisions between different projects. The exploration of various DeFi scenarios can also cause inspiration sparkles for more creative cross-chain gameplays for the industry.