Introducing Te Waka – A cross chain protocol developed by the CZZ community
Decentralized finance, also known as DeFi, took the crypto community’s central stage by storm. Ethereum being the default go-to blockchain for smart contract, enjoyed a stellar rise during 2020. As the value of ETH significantly appreciated, transaction cost of Ethereum based DeFi became prohibitively expensive, and scalability of the Ethereum network is being openly questioned.
While Ethereum developers are doing their best to come up with layer 2 solutions and gas fee reforms such as the controversial EIP 1559, it’s unlikely that anything would come to fruition in the next few months. Centralized exchanges such as Binance, Huobi and Okex are launching their own blockchains, with significantly cheaper “gas fees” have claimed their own turf in the DeFi space. Therefore, it’s increasingly likely that we will have a multi-chain future for DeFi.
The most critical piece of infrastructure in a multi-chain world is a robust interoperable cross chain protocol. A new protocol called Te Waka has just been announced by the CZZ community. Te Waka is the ocean crossing canoe used by early settlers of the Polynesian archipelagos to travel between islands.
There are basically two main streams of thought in this area, atomic swap and wrapped token. We have not seen much progress at an industrial scale with atomic swaps, and that’s mainly due to its inefficiency and the lack of high throughput. Wrapped tokens have seen a lot of success, and there are established products such as WBTC, renBTC. Beside the obvious question of trust, wrapped tokens suffer from a critical shortfall: in order to participate in DeFi you need to own native tokens. The ERC-20 HT for example, cannot participate in liquidity mining on the HECO blockchain, you need HECO’s HT token.
Here is where Te Waka steps in. Te Waka is a fully decentralized and open source protocol for moving native tokens cross chain. Suppose Alice want to buy 1 MDX on HECO for 5 USDT currently sitting on Ethereum. Te Waka protocol will construct the following route: USDT(ETH) – ECZZ(ETH) – CZZ(CZZ main net) – HCZZ (HECO) – HT (HECO).
Step 1: USDT(ETH) – ECZZ(ETH) is executed via a swap contract on Ethereum
Step 2: ECZZ(ETH) – CZZ(CZZ main net) – HCZZ (HECO) is administrated on CZZ main net Step 3: HCZZ (HECO) – HT (HECO) is executed via a swap contract on HECO.
Step 1 and Step 3 should be relatively straightforward to readers with DeFi experience, so let’s focus on Step 2.
CZZ runs on a proof of work main net, it has already attracted a significant amount of hash power from the community which guarantees the network’s security. The native token on this network is CZZ. ECZZ and HCZZ all have a 1:1 relationship with the main net CZZ token, respectively living on the Ethereum and HECO network. The key innovation of Te Waka is the decentralization that’s achieved in the creation and governance of these tokens.
On the CZZ main net, we have a list of community addresses, which are addresses that look like 000000000…101 (Eth community address)
000000000…102 (Heco community address)
000000000…103 (BSC community address)
…
etc.
By the NUMS principle (nothing up my sleeves), we can assume that nobody knows the private keys to these addresses, so any tokens that’s sitting in there are considered to be a public good.
The sum of all ECZZ is represented by the amount of CZZ tokens sitting at 0000…101 address The sum of all HCZZ is represented by the amount of CZZ tokens sitting at 0000…102 address The sum of all BCZZ is represented by the amount of CZZ tokens sitting at 0000…103 address etc.
Step 1: Let’s say 10 ECZZ get burned on ETH, and the user indicates that he wants HCZZ.
Step 2: On the next PoW block, miners give 000…102 a miner reward of -10, and 000…103 +10. Step 3: Upon seeing 000…103 received 10 CZZ tokens, a smart contract on HECO will mint 10 HCZZ tokens.
If the user wanted something other than HCZZ, such as MDX maybe; the smart contract will automatically call a Dex, and give the user MDX token instead. This can all be done without the user having any gas to begin with, as gas fees are automatically deducted in the smart contract.
With this piece of critical infrastructure in place, we can expect a flood of decentralized cross chain DeFi to happen. For example, if it costs 4% to borrow on AAVE and you can find a 5% yield farm on BSC, you will have a wave of arbitrageurs rushing into the game. Decentralized exchanges like Sushi, whose currently running on both Ethereum and Solana, will have the option to offer a much wider range of tokens to trade for their clients.
We end this article with a piece of wisdom. Build a bridge you connect 2 islands, and you need O(n^2) bridges to pairwise connect n islands. Build a canoe, you immediately have all n islands connected.
