IOSG: Illustrate the NEAR Rainbow Bridge ecology, can the prediction function improve impermanence loss?


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NEAR released the Ethereum cross-chain Rainbow Bridge, enabling the transfer of assets between Ethereum and NEAR without permission.

Original title: “IOSG Weekly Brief | NEAR Rainbow Bridge Great Leap Forward: Chain Bridge Trend Early Adopter # 45”
Written by: IOSG Ventures

NEAR Rainbow Bridge Great Leap Forward-an early adopter of the trend of public chain bridging

NEAR officially released the Ethereum cross-chain rainbow bridge, which is currently running between the NEAR testnet and the Ethereum Ropsten Testnet, without sacrificing the trustless and permissionless features of the blockchain. Rainbow Bridge can do:

  • Bridging homogeneous tokens, non-homogeneous tokens or any kind of assets
  • Write an Ethereum contract that uses contract status or NEAR verification nodes
  • Use Rainbow Bridge to make cross-contract calls

In the construction of the NEAR ecosystem, the decentralized prediction market platform Flux also released its mainnet, becoming the first Defi protocol released on the NEAR platform. The horse racing game ZEST is currently also running on the NEAR main network. The predecessor of the game was deployed on Ethereum. At the same time, the Ethereum NFT platform Mintbase has just begun to open up the NEAR mainnet.

It is reported that this is the first production ready fully decentralized bridge.

In terms of accelerating the construction of financial infrastructure, using Rainbow Bridge technology, anyone (user, app, developer or any entity) can transfer assets between Ethereum and NEAR without permission. Stable coins such as USDT or DAI will become the basis for more open finance and open network use cases. NEAR’s capacity expansion and low fees have greatly reduced the threshold for use. Therefore, more and more Ethereum projects are considering migrating to the NEAR platform.

Will the use of oracles be the ultimate killer of impermanence?

AMMs use mathematical formulas (ie algorithms, joint curves) to replace order matching, which determines the price based on the number of underlying assets in the pool and the number of trading assets between the pool.

In order to increase the depth of the liquidity pool, AMMs have been providing incentives such as “liquidity mining” to attract millions of dollars worth of assets into the pool. However, depositors quickly realized that providing AMM with liquidity may in some cases be inferior to simply putting assets in a wallet. This problem is also known as impermanent loss.

In more detail, AMMs rely on the continuous arbitrage of market participants to adjust the proportion of asset reserves in the liquidity pool, so that AMM prices are always consistent with external market prices. However, arbitrage profits come at the expense of liquidity providers. The loss will only be offset when the price returns to the initial ratio, which is why it is defined as non-permanent. However, due to the high volatility of encrypted assets, non-permanent losses sometimes become permanent losses.

Bancor simply explained the impermanence loss with the following figures. They compared the LP portfolio and the HODLer portfolio (HODL-hold for dear life, meaning to keep in the wallet). For simplicity, this example assumes that there are no transaction fees. When the relative price of coins changes, HODLer is more advantageous than LP due to the aforementioned arbitrage effect.

IOSG Weekly Brief | NEAR Rainbow Bridge Great Leap Forward: Early adopters of the chain bridge trend # 45Examples of impermanence losses; source: Bancor

The solutions to impermanence losses at this stage can be divided into two categories:

Focus on assets with less volatility -> reduce the probability of impermanent losses

Since impermanence losses are closely related to asset volatility, the simplest solution is to ignore assets with high volatility. For example, focuses on stable currency transactions, which is why Curve’s liquidity providers rarely worry about impermanence losses. Only when a stable currency is decoupled, impermanence losses will occur.

Use oracles to get a “fairer” price

Bancor uses Chainlink oracles instead of relying on arbitrage to balance AMM prices with market prices. The weight of each asset in the pool will be adjusted according to the latest price of the oracle, while eliminating arbitrage opportunities and protecting the asset value of liquidity providers.

IOSG Weekly Brief | NEAR Rainbow Bridge Great Leap Forward: Early adopters of the chain bridge trend # 45Bancor v1

IOSG Weekly Brief | NEAR Rainbow Bridge Great Leap Forward: Early adopters of the chain bridge trend # 45Bancor v2

DODO has also adopted a similar solution. However, both DODO and Bancor v2 are still in the early stages, and it has not been proven that continuous reliance on oracles can truly solve the problem of impermanence. This scheme has risks such as the failure of the oracle and the arbitrage speed is faster than the price update speed. In this case, impermanence losses are still possible.

Industry Pulse

Aave, a decentralized lending agreement, is about to release a preliminary proposal for pledge rewards, and it is expected that pledge penalties will not be implemented in the initial stage

Aave (LEND), a decentralized lending agreement, is about to release a preliminary proposal for pledge rewards for the agreement. Since the liquidity reward will be activated after the pledge function is launched, the proposal currently only focuses on security incentives (ie pledge rewards).

Coinbase Pro will launch decentralized trading protocol Loopring token LRC

Coinbase Pro announced that it will launch the decentralized trading protocol Loopring token LRC. It will open LRC deposit service from September 14th. If liquidity conditions are met, the transaction will be opened as early as September 16th Beijing time., a cryptocurrency debit card company, launches Ethereum-based mining platform DeFi Swap, a cryptocurrency debit card company, launched DeFi Swap, a decentralized currency trading and mining platform based on Ethereum. It currently supports token exchanges between WETH, USDT, USDC, DAI, LINK, COMP, and CRO.

The new project SashimiSwap promotes Uniswap’s lock-up volume to reach US$1.1 billion, which is basically the same as SushiSwap

According to Debank data, Uniswap’s lock-up volume reached US$1.1 billion, ranking No. 3, with an increase of 108% within 24 hours, which has been basically the same as the fork project SushiSwap. So far, SushiSwap has locked-up volume of US$1.1 billion, ranking first Ranked fourth.

YFI founder Andre Cronje will launch StableCredit, a decentralized stable currency credit protocol

Andre Cronje, founder of the DeFi aggregation income protocol (YFI), announced that it will launch a decentralized credit protocol, StableCredit, in a few weeks. The protocol combines tokenized debt stablecoins, lending, AMM and single-sided AMM risks to create A fully decentralized loan agreement allows the creation of tokenized credit assets based on any asset.

Andre Cronje: Future DeFi monetary policy may enter Gamefi, which is more gamified, and it still focuses on trading

DeFi aggregation revenue agreement (YFI) founder Andre Cronje put forward the concept of Gamefi on Twitter. In the future, DeFi monetary policy may be more gamified, and users’ funds will become equipment used in DeFi games.

Aavegotchi, the NFT platform based on DeFi mortgage lending in Aave, adds a joint curve function to the Ethereum testnet

Aavegotchi, the first NFT digital collection platform based on the loan asset aToken in the Aave ecosystem, has added a joint curve to the Ethereum testnet Rinkeby.

IOSG VC: The important point is that after general ICO financing, the team has complete control over the funds; and in Aavegotchi, the funds raised are gradually given to the development team by “tap”, and future community governance can be controlled tap.

Curve forked project Swerve has a total lock-up volume of more than 400 million US dollars in three days, which is nearly half of Curve’s

The stablecoin exchange platform Curve fork project Swerve has a total lock-up volume of US$419 million in the three days it went online. In contrast, the total lock-up volume of Curve fell back to around US$1 billion.

Investment and financing events

IOSG Weekly Brief | NEAR Rainbow Bridge Great Leap Forward: Early adopters of the chain bridge trend # 45

Stafi, Phala and other Polkadot projects jointly established the Polkadot Ecological Investment Fund PAKA

The Polkadot Ecological Investment Fund PAKA Fund, jointly established by Stafi, Phala, Bifrost, Crust and other blockchain projects, was announced today. The fund stated that its scale is several million U.S. dollars, and it mainly invests in the early technology projects of the Polkadot ecology, aiming to support the development of the Polkadot ecology.

BarnBridge, a cross-platform graded derivatives agreement, completes $1 million in seed round financing, ParaFi Capital participates in the investment

BarnBridge, a cross-platform tiered derivatives agreement, announced the completion of a $1 million seed round of financing. Investors involved include Fourth Revolution Capital, ParaFi Capital, Synthetix founder Kain Warwick, Aave founder Stani Kulechov, DARMA Capital managing partner Andrew Keys, Centrality, Blockchain Companies, Dahret Group. According to the official website of the project, BarnBridge is a cross-platform graded derivatives agreement that uses fixed yield and volatility to tokenize product risks in batches.

Crypto investment agency CoinFund invests in NFT-based digital collection and trading platform Rarible

Rarible, an NFT-based digital collection and trading platform, announced that it has raised a sum of funds from cryptocurrency investment agency CoinFund. However, Rarible has not disclosed the specific amount. Rarible stated that the funds will help it develop into a community-governed, blockchain-based NFT market, so that it can establish direct connections between digital content creators and buyers.

IOSG post-investment project progress

UMA starts renBTC-based liquidity mining, and can get UMA, REN and BAL tokens every week

UMA, an asset synthesis agreement, announced the launch of the income-based U.S. dollar token uUSD based on renBTC asset mortgage. In addition, users can also inject uUSD and USDC into the Balancer fund pool for liquidity mining to obtain BAL, REN and UMA assets.

Synthetix is ​​about to launch a plan to encourage other DeFi platforms to integrate its protocols

Synthetix, the synthetic asset platform, will soon launch the Synthetix Volume Program, which aims to encourage other DeFi platforms and protocols to integrate with the Synthetix protocol.

Mooniswap, an automated market maker service launched by 1inch, has been integrated with the TRON blockchain

Mooniswap, an automated market maker service launched by 1inch, a decentralized transaction aggregation platform, has been integrated with the TRON blockchain. At the same time, TRON also plans to reward TRON (TRX) tokens to liquidity providers on Mooniswap.

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