Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

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O3 Swap is a cross-chain aggregation transaction protocol launched by the O3 Labs team. By aggregating the liquidity of the DEX on the chain such as Ethereum, BSC, Neo, Heco, etc., a cross-chain transaction pool is constructed based on the cross-chain interoperability protocol Poly Network to realize the one Key redemption.

Written by: Jiawei

With the rapid development of DeFi, crypto giants such as Binance and Huobi have successively launched Binance Smart Chain (BSC) and Huobi Ecological Chain (Heco). This year’s emerging Solana ecosystem has also begun to blossom, attracting a wide range of DeFi players Attention, the development trend of multi-chain DeFi is beginning to emerge.

However, in the DeFi world, liquidity is not loyal, and mastering liquidity also means dominating on-chain protocols. Agreement is strongly dependent on liquidity, and liquidity is weakly dependent on agreement. This has also caused the obvious Matthew effect on the chain, which may lead to the emergence of monopoly, which in turn leads to the lack of innovation and the uncontrollability of evil by giants. This uncontrollable proliferation will eventually spread to ordinary users, forming a world on the chain that goes against the spirit of decentralization. In the end, the state on the chain returns to capitalism.

The same logic applies to inter-chain competition. Multicoin mentioned in the article “Network Effects” published in 2018 that when the network effect expands to a certain extent, it creates the possibility of competition and ultimately constitutes a world where multiple poles coexist. The same is true in the blockchain. The strength of the single chain will result in insufficient user selectivity. After the public chains such as Neo and EOS have begun to decline, it seems that Ethereum will once become the “only” public chain. Up. Fortunately, as Solana, Oasis, Near and other public chains have entered an upward period, the trend of Ethereum’s dominance has not become a foregone conclusion. In an ideal state, these chains will continue their innovation and development in the future, while maintaining common ground while reserving differences and achieving the same goal by different paths, and eventually form an ideal multi-chain coexistence pattern.

Under the above background, how to connect the asset islands of various public chains conveniently and efficiently and break the asset cross-chain barriers between public chains has become an urgent problem to be solved. On this issue, the transfer of assets between chains and the consistency of transactions are critical, because this will be an important factor in promoting the coexistence of multiple chains. The reason is: For most of the non-Ethereum public chains, the transfer of assets between chains is the biggest obstacle to use. The relatively weak public chains in the ecosystem lack interoperability, and it is difficult to obtain liquidity. No liquidity means the abolition of the agreement.

The importance of cross-chain asset exchange in DeFi is self-evident. For example, a miner first uses HUSD to mine on Heco. Suppose he wants to migrate assets to BSC to mine another mine. He needs to switch HUSD on Heco to BUSD on BSC. To this end, the miner needs to refer HUSD to Huobi and change HUSD to USDT. Then the USDT is mentioned to Binance and then replaced with BUSD, and finally can be mentioned to participate in mining on the BSC chain. In this process, the slippage of multiple transactions, transaction and withdrawal fees, and the amount of time spent have greatly affected the user experience.

Many cross-chain schemes are currently limited to the cross-chain of isomorphic chains, and essentially will change the characteristics of the chain itself during the cross-chain process. At this stage, a heterogeneous chain interoperability solution that can achieve transaction consistency is more like a return to the original, because it can achieve common ground while reserving differences and inclusiveness, so that the liquidity of the aggregation chain and aggregation agreement no longer has a monopoly. For the user’s actual experience, a state of “blockchain agnostic” is realized, and the barriers between chains and protocols will no longer hinder users’ on-chain behavior, achieving a true liquidity-free state. If we compare mobility to means of production, then in this state, the previously monopolized means of production will no longer be monopolized, and productivity and creativity are equalized and communist. And O3 Swap is just such a solution.

What is O3 Swap?

O3 Swap is a cross-chain aggregation transaction protocol created by the O3 Labs team. It aggregates the liquidity of decentralized exchanges on chains such as Ethereum, BSC, Neo, Heco, etc., and builds a cross-chain transaction pool based on the cross-chain interoperability protocol Poly Network , Realize the one-click exchange of digital assets without perception and optimize the user’s trading experience.

The O3 Labs team was founded in Tokyo in 2017 and is one of the earliest crypto wallet development teams in the world. Its product O3 Wallet is a multi-asset wallet that provides on-chain asset management services such as Bitcoin, Ethereum, Neo, BSC and Heco. It is committed to providing users with professional encrypted asset management services and has a certain market share in overseas markets.

product design

The main functional modules of O3 Swap include transaction aggregator, cross-chain transaction pool and asset management center (Dashboard).

The transaction aggregator helps users find the best transaction exchange rate and path on the corresponding network. The cross-chain transaction pool provides cross-chain transaction services and allows users to add liquidity to the same token on different chains to earn cross-chain transaction fees and O3 token rewards. Dashboard displays total assets, available assets, added liquidity, pledge and income management. Users can log in to Dashboard through the wallet and manage their assets and data.

The architecture of O3 Swap uses a four-layer structure:

  • As the basis of the O3 Swap cross-chain protocol, the network layer will integrate Ethereum, Binance Smart Chain, Neo, Huobi Eco-Chain, Polkadot, and high-quality two-layer expansion projects to provide cross-chain transactions.
  • The market liquidity layer determines and provides users with the best quotation by aggregating diverse liquidity sources.
  • The settlement layer conducts cross-chain asset transactions and settlement based on cross-chain protocols and cross-chain pools, which are completed by smart contracts and require the user’s final signature authorization.
  • The application layer integrates O3 Wallet, O3 Swap and payment functions, which will provide developers with a complete service API, and at the same time provide users with a convenient and friendly interactive platform.

system design

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

The system roles of O3 Swap are as follows:

  1. User: Connect to O3 Swap through the wallet and conduct transactions.
  2. Relayer: It is a proxy for contracts and users on the chain. According to the needs of different users, Relayer can find the best exchange rate.
  3. Swap: As the core transaction mechanism of the system, Swap receives user requests from Relayer and completes liquidity settlement through smart contracts.
  4. Aggregator: Aggregate the sources of liquidity in the entire market and determine the best transaction exchange rate and transaction path.
  5. Cross-chain pool: based on the Poly Network cross-chain interoperability protocol to realize the free transaction of cross-chain assets.
  6. Liquidity providers: The main sources of liquidity covered include automated market makers of different decentralized exchanges, and market makers that provide liquidity for cross-chain pools.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Experience

At present, the test version of O3 Swap only launches the Swap and Hub function modules, which respectively support transaction functions and cross-chain asset pool liquidity mining functions.

Swap

To enter the O3 Swap webpage, you first need to connect to the wallet. O3 Swap currently supports the use of Metamask wallet for cross-chain transactions of Ethereum, BSC, and Heco. If you are not connected to the BSC and Heco networks, you need to manually add RPC and chain ID to the Metamask wallet to configure the network.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

The test uses 10 BUSD on the BSC chain to exchange for HUSD on the Heco chain. Click on the RFQ to query the exchange information. The system provides information such as the exchange ratio and the exchange path. Poly Fee is the transaction fee that needs to be paid in the cross-chain protocol Poly Network. It can be seen that the cross-chain transaction fee is very low. The redemption information page will refresh every 30 seconds. The confirmation time of the transaction depends on the transaction speed on different networks.

More Trading Price provides different exchange path options according to different sources of liquidity, and the system will select the optimal path by default. The following figure takes the exchange of ETH to BUSD as an example. The system provides three paths.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Hub

O3 Hub is composed of a cross-chain asset pool and a cross-chain protocol based on Poly Network. Liquidity providers can deposit single or multiple assets in the cross-chain pool and pledge the credentials provided by the liquidity to earn O3 rewards.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Hub provides cross-chain exchange of stablecoins to stablecoins. Click Add Liquidity to add liquidity to one or more stablecoins in the cross-chain pool and pledge LP tokens. (The staking function is not yet online.) During the O3 Swap test period, as of writing, a stable currency equivalent to $41,244 has been added to the Hub.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Token supply

O3 Swap Token(O3) is the ecological token of O3 Swap, the type is ERC-20. The total circulation is 100,000,000. The token issuance is divided into two stages: the total issuance in the zero phase is 10,000,000, including creation rewards and community feedback; the total issuance in the first phase is 90,000,000. O3 Swap will launch IDO on BSCPad, WeStarter, cobak, Bounce, and DuckSTARTER platforms on May 12-13 and issue O3 tokens.
The supply mechanism of tokens can refer to the following chart.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Economic model

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

The economic model of O3 Swap can be summarized with the figure above.

Among them, Treasury is O3’s revenue reserve pool, responsible for receiving, managing, and distributing O3 and regularly releasing financial data to the community. O3 Swap’s income will be used to buy back 03 from the open market at a fixed block time and deposit it in Treasury. In the first phase of community governance (Q1 to Q2 in 2021), 70% of Treasury’s income will be allocated to O3 Swap pledgers to incentivize community contributions; 30% will be allocated to the Development Committee.

The role of the Development Committee is to promote project development and community building. In the early stages, it will be composed of O3 Labs, community contributors, and community representatives with a majority of votes. It will be fully elected through community voting.

On the user side, there are three ways to obtain O3 tokens: participate in early product testing and community contributions to get 03 airdrops; use O3 Swap to get 03 rewards for transaction mining; provide liquidity for cross-chain pools and get O3 rewards. However, the O3 obtained through these three methods will be locked. Users need to provide liquidity for O3 trading pairs on mainstream DEX to unlock O3.

The formula for unlocking O3 by providing liquidity is as follows:

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Among them, G is the number of O3 unlocked in each block; Amount is the number of O3 in LP; Blockamount is the length of the block; K is the unlocking parameter, and the initial value is set to 15000.

When O3 is unlocked, users can pledge 03 to obtain interest and transaction discounts distributed by Treasury, participate in community governance, and provide liquidity for O3 and participate in liquidity mining.

O3 Swap also sets up transaction mining and income farming.

Users will receive O3 as a reward after trading in O3 Swap. The determination and distribution time of O3 rewards depends on the time period of the block. The formula for transaction mining is as follows:

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

The initial ratio defaults to 100%, that is, every time an O3 is repurchased from the market, the system releases one O3 for trading and mining. The subsequent distribution ratio will be determined by voting on the DAO proposal.

Income farming means that users can use the same token to add liquidity to different chains and generate a certificate LP that provides liquidity. Staking LP can get O3 rewards. The blockchains that support income farming include Ethereum, BSC, Neo, Heco, OKExchain, Solana and other mainstream blockchains.

Platform governance

According to the official roadmap, the decentralized governance of O3 Swap is divided into three stages.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

Development Trends

In early April, O3 Swap completed support for BSC, integrated Solana and MDEX networks, and announced a strategic cooperation with DODO and 1inch.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

On April 15, O3 Swap announced the completion of US$2 million in financing. Participating institutions include NGC Ventures, OKEx Blockdream Ventures, SevenX Ventures, FBG Ventures, Neo Eco Fund, BTC12 Capital, Incuba Alpha, Moonwhale Ventures, Puzzle Ventures, this fund, AC Capital, etc.

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

O3 Swap launched a pilot version test on April 25, opening the Swap and Hub functional modules, enabling cross-chain free trading of mainstream assets on chains such as Ethereum, BSC, and Heco. In the statistics released on April 27, the number of transactions and addresses of the advanced version of O3 Swap reached 21,782 and 11,766 respectively.

The first version of the test campaign ends at 23:59 on May 10th, during which users can receive O3 token rewards for completing the specified tasks. Only assets with an equivalent value of less than US$20 are allowed to be traded during the testing phase.

According to the roadmap released by the team, O3 Swap will do the following in the future:

Understand the cross-chain aggregation transaction protocol O3 Swap product design and token economy

summary

The cross-chain exchange of O3 Swap solves the pain points of cross-chain asset intercommunication for a long time, realizes the non-perceptual one-click exchange of cross-chain assets, enables the asset islands of major public chains to be connected to each other, and greatly improves the transaction of cross-chain assets. effectiveness. Under the development trend of the DeFi boom from Ethereum’s dominance to the simultaneous development of multiple chains such as BSC and Heco, O3 Swap is expected to take the lead in the field of cross-chain asset exchange by virtue of its excellent product positioning and first-mover advantage.