EAGLE PROTOCOL’S SOLUTION TO PROBLEMS IN DEFI ECOSYSTEM.
✓ INTRODUCTION
What Is Decentralized Finance (DeFi)?
Decentralized finance (DeFi) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. DeFi eliminates the fees that banks and other financial companies charge for using their services. Individuals hold money in a secure digital wallet, can transfer funds in minutes, and anyone with an internet connection can use DeFi.
✓ Problems in Defi
DeFi solves a lot of issues, but that doesn’t mean it isn’t without its problems. The following problems are associated with DeFi;
1️⃣ Lack of Interoperability:
Currently, there are no options out there for a permissionless, non-custodial, chain-agnostic cross-chain swap solution in which users are free to cross-chain swap or bridge any asset they wish with the same wallet.
2️⃣ Portfolio Defragmentation:
Liquidity aggregation is one of the hottest topics in the space as TVL (Total Value Locked) over the last two years increased by over one hundred times. While this is great, the problem is that it’s fragmented with liquidity spread across ten chains and then hundreds of exchanges within those chains. This leads to capital inefficiency and higher costs to users, in both gas and time, with no fast and efficient way to bridge and cross-chain swap their assets.
At the beginning of May 2022, 55% of TVL was on Ethereum, with that 45% remaining being spread mostly between about ten chains, but roughly 60 more have tens of millions in liquidity. This causes quite the fracture between blockchains and exchanges for users to find what they want, quickly, and for a good price. It even becomes an issue within the same chain , liquidity spread across ten or even fifty exchanges, creating a need for users to use bridges, liquidity, and DEX aggregators to find the token and price they want. Bridges are most often not enough of a solution by themselves as after using a bridge, users need a DEX or DEX aggregator to complete the swap as bridges are limited to stablecoins and native currencies, while Eagle protocol is not.
There are too many bridges to be educated on, each with their own unique user interface, limitations, system to learn, and time to bridge. Some apps (DEXs) or liquidity aggregators link to seven or more bridges, each for a different chain, that users would need to learn, navigate, use, and possibly need a new wallet for. These apps allow deposits from a single chain only, forcing users to leave the app to bridge their funds, having to do a lot of hard work, paying a lot of gas fees, all just to be able to use the previous app (DEX). In order to purchase assets on the new chain, users need that chain’s native token, ex. ETH, in order to complete any swaps on the destination chain, meaning users have to first purchase and bridge the native token and trade it for the token they want, adding another layer of complexity to the process.
3️⃣ Lack of security:
Another major challenge in DeFi is that of Bridge security. By using bridges, users are entrusting their tokens with the security of the bridge, not being able to keep them in their own wallets. This has been the cause of many exploits which have cost users over $1 billion dollars USD in the last year alone.
✓ EAGLE PROTOCOL’S SOLUTION
Eagle protocol helps solve this problem by not actually bridging assets or locking users assets in a smart contract to burn or mint tokens.
The easiest and simplest way to describe Eagle Protocol is that it facilitates cross-chain swaps without bridging. Eagle protocol accomplishes this by sending messages using the generic messaging layer on bridges to initiate and execute a swap across chains. Rather than requiring users to lock or burn tokens and then mint them on the destination chain, Eagle protocol uses single-asset liquidity pools and the eagle protocol liquidity aggregation protocol, both deployed on all of the most popular chains, to initiate swaps for the desired token. This results in users receiving their tokens very quickly, for much less gas, and not being limited to swapping stablecoins or the chain’s native gas token.
There are four steps to the process:
1). Users select their pair and chain of choice.
2). They initiate the swap on their home chain into a Eagle liquidity pool.
3). Eagle protocol uses the bridges to send a swap instruction message to a relayer on the destination chain; there is no bonding or minting of assets to or from the bridge.
4). The relayer, after confirming the message, sends the chosen asset to the user’s wallet on the destination chain.
With this simple innovative steps, Eagle protocol has brought a new phase to web3.