DeFi “out of” Ethereum?


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On December 15th, SushiSwap co-founder 0xMaki mentioned that SushiSwap plans to launch on Polkadot and mentioned that users will receive moonSushi.

As soon as the news came out, there was an enthusiastic response in the commentary area. Prior to this, no decentralized exchange on Ethereum has been launched on the Polkadot chain, and SushiSwap is likely to be the forerunner of the DEX compatible with Ethereum and Polkadot.

In addition to SushiSwap, cross-chain DeFi projects have appeared on Polkadot and Ethereum chains. The emergence of these projects continues to expand the market boundaries of DeFi.

Cross-chain DeFi forms continue to evolve

Cross-chain forms of DeFi projects are emerging one after another. This article will introduce the following 5 manifestations.

1. Synthetic assets

On May 27 this year, REN officially released its main network RenVM SubZero. After the mainnet is released, users can use Bitcoin, Bitcoin Cash, or Zcash in any DeFi application. These tokens are displayed as renBTC, renBCH, and renZEC on Ethereum. Before REN, it was only possible to use third-party hosting.

The emergence of synthetic assets facilitates users to directly hold Bitcoin, BCH and other external chain cryptocurrencies in the Ethereum network, and also provides external chain value for the Ethereum network.

In addition to renBTC, ERC20 tokens anchoring Bitcoin such as WBTC and oBTC are constantly emerging on Ethereum. Among them, WBTC has the highest lock-up volume, reaching 2.66 billion US dollars, second only to Maker in the TVL ranking of DeFi projects.

2. Provide Staking asset liquidity

The cross-chain projects Bifrost and StaFi in the Polkadot ecology can also generate synthetic assets to provide liquidity for staking.

Bifrost’s logic is that the assets of Bifrost Staking will generate corresponding vTokens. vTokens have interest-bearing properties and can capture staking income, while being tradable and circulated.

Bifrost has built-in AMM-type decentralized exchange vTokenSwap, which provides convenient exchange services for vToken, and can also directly capture the transaction fee income.

It is worth mentioning that Bifrost launched vETH Mint Drop before the ETH2.0 mainnet went live, and more than 10,000 ETH participated in vETH minting in less than 18 hours.

In addition to Bifrost, StaFi also proposed the ETH2.0 Staking liquidity solution rETH. Users can participate in ETH 2.0 Staking through the pledge contract deployed on ETH by StaFi, and the amount of pledge will not be restricted by 32ETH.

Similar to Bifrost’s vToken, StaFi connects the value of multiple public chains through rToken.

On December 16, StaFi officially released the rToken white paper. It is mentioned in the white paper that StaFi will develop cross-chain bridge services to realize the related circulation of rToken in the ecology of Ethereum, Polkadot and Cosmos. For example, the rToken of the Ethereum ecology can participate in Polkadot DEX transactions or lending.

And just before the release of the white paper, StaFi announced the launch of rBridge, users can complete the conversion of FIS and ERC20 tokens, and rToken transfer is realized simultaneously. rETH and rFIS can enter DeFi on the Ethereum chain through rBridge, and rETH and rFIS will be available soon.

The white paper also mentioned that in accordance with priority, StaFi will give priority to the implementation of three rTokens, rETH, rFIS, and rDOT, and gradually establish the protocol standards corresponding to rToken.

3. Launch the Ethereum DeFi project on Polkadot

Acala recently announced plans to launch Ampleforth in the project in the first half of next year.

Acala COO Bette Chen pointed out in the article: Ampleforth will bring Rebase and flexible token mechanisms to Acala and Polkadot. AMPL will also become the first multi-chain independent token to serve the wider cross-chain encryption and DeFi community.

After Acala launches Ampleforth, AMPL will circulate on the Polkadot chain through Acala. Users can directly pay AMPL as a transaction fee when transferring AMPL. Ampleforth smart contracts will be deployed on Acala’s Ethereum virtual machine.

4. Producers of Bitcoin products on the Ethereum chain

Among all cross-chain DeFi projects, Badger DAO is special. Strictly speaking, it is a decentralized autonomous community and cannot be regarded as a cross-chain project. But the main purpose of this project is to produce Bitcoin products on the Ethereum network, indirectly introducing the value of Bitcoin into the Ethereum chain.

Recently, Badger DAO announced that it will launch DIGG, a Bitcoin product with Rebase attributes, which can be regarded as a combination of Bitcoin and Ampleforth.

The Badger DAO development team pointed out that the agreement has been completed and the project has been audited. The launch of this project will help maintain the upward momentum of Badger DAO and further increase the amount of locked positions of the project.

5. Decentralized exchange cross-chain

Decentralized exchanges are also experimenting with cross-chain transactions. In addition to the SushiSwap mentioned at the beginning, Sifchain, a full-chain decentralized exchange project, announced the completion of a seed round of $3.5 million.

Sifchain is built on the Cosmos chain and will support the cross-chain transmission of ETH and ERC20 tokens, and will realize cross-chain transactions with 20-25 mainstream blockchains including Bitcoin, Binance Chain, Polkadot and EOS.

DeFi cross-chain is imperative

From the above cross-chain projects, it is not difficult to find that Polkadot ecological projects account for a large proportion, and the intercommunication between Polkadot and Ethereum will bring huge development space for DeFi. Polkadot is likely to become the next flashpoint of DeFi.

First of all, Polkadot will accelerate the pace of DeFi project development. Developers can easily create DeFi applications based on the Substrate framework, and through the cross-chain bridge on Polkadot, the value of the Ethereum chain can be introduced into the Polkadot project, and the value of the Polkadot project can also be introduced into the Ethereum.

In addition, based on the design of Polkadot’s heterogeneous parachain, Polkadot’s processing speed will far exceed that of Ethereum, and the cost of using DeFi applications will be greatly reduced. With too many DeFi applications on the Ethereum chain, the problems of low TPS and high Gas fees have been exposed. The DeFi application on Ethereum has seen the “ceiling” of development, and the value of a single chain restricts the growth of DeFi’s market value.

Cao Yin said at the event in September: “Next, more and more Ethereum DeFi projects will migrate to the Polkadot network. The migration of the large-scale Ethereum DeFi protocol to Polkadot is a sure thing.” Some people worry that Ethereum’s DeFi traffic advantage will be lost.

From the perspective of the long-term development of DeFi, Ethereum and Polkadot cannot be opposed. The two are not a competitive relationship, but a relationship of mutual learning and mutual promotion. The cross-chain migration of the DeFi protocol is to find a good platform for the sound development of DeFi projects, allowing DeFi to continue to expand the market scale and increase the “ceiling” of DeFi development.

However, there are still interoperability issues in cross-chain DeFi. For this, Nervos architect Xie Hanjian proposed the concept of interoperability 2.0 at the Shanghai Wanxiang Blockchain Summit.

Interoperability 2.0 is to allow users to enter the blockchain world from any portal and operate any asset in the digital world, rather than inventing a new standard. With Interoperability 2.0, the connection between all chains will be opened up, and Ethereum users can use their own wallets and accounts to use applications in the public chain ecology such as Bitcoin, Polkadot, and EOS.

Rune Christensen, the founder of MakerDAO, once said: “What the DeFi protocol ultimately wants to achieve is to connect real-world assets through blockchain and DeFi, and continue to expand the market.”

But from the current point of view, there is still a long way to go to get DeFi out of the amber layer of encrypted goods and embrace the larger traditional financial market. The focus of the DeFi cross-chain project is mainly on the cross-chain of public chain assets, building bridges between public chains, making them the Internet, and promoting the circulation of funds in the amber layer of encrypted goods.