DeFI UX: Past, Current, & Future of Bridging
The DeFi ecosystem was initially fragmented, with each blockchain operating independently with no way to interact between them. Cross-chain bridging, also known as blockchain interoperability, is the fundamental concept that allows different blockchain networks to communicate and share assets between each other. If you’d like to read a bit about why this matters, check out our past blog post here.
Why are bridges needed?
Within DeFi, Ethereum was and continues to be host to most DeFi projects, however, as activity and use-cases in DeFi grew, so did the need for alternative blockchains. These other blockchains focus on different issues such as scalability, transaction speed, security, environmental friendliness, and more. As additional blockchains were developed, the need to bridge assets across different chains increased with the number of users wanting to participate in different ecosystems. Without bridges, users would be stuck within certain blockchain ecosystems without the ability to move funds between them.
Bridge Beginnings
The crypto world initially embraced Centralized Exchanges (CEXs) as the earliest and most widely used bridges. These CEXs leveraged well-established centralized internet technology to facilitate the exchange of crypto assets across various blockchains through Notary schemes. A Notary scheme is a way to achieve cross-chain interoperability, although it centralizes trust as the trusted party will help someone on Blockchain A confirm or verify that an event occurred on blockchain B, or vice versa.
Users would transfer their assets from a chain such as Ethereum onto a CEX in which they had an account and then transfer out assets to another blockchain that the CEX supported, such as Binances BSC/BNB Chain. While something like this works, it is only accessible to those with Binance or other CEX accounts that also support different DeFi blockchains.
While centralized mechanisms like CEXs and WBTC are known for their efficiency, they aren’t the most user friendly in that they rely on users placing their complete trust in a third party. Additionally, they constantly grapple with regulatory challenges and the discretion of platform administrators, who have, in the past, blocked all transfers to particular blockchains if they please, claiming higher than normal gas fees, security issues, or maintenance downtime.
Wrapped Tokens
As we mentioned Wrapped Bitcoin (WTBC) above, it’s a great example of one of the earliest centralized solutions. WBTC operates by having BitGo Trust store assets on the Bitcoin blockchain while simultaneously running a smart contract on Ethereum to issue WBTC and keep its balance in sync with the BTC it holds. Similar to a CEX, this relies on complete trust of a third party who controls all of the BTC the WBTC represents.
The historical process of cross-chain bridging began with early projects like Wrapped Bitcoin (WBTC). These projects aimed to create synthetic assets on one blockchain representing the value of assets on another chain. WBTC, for instance, allowed Bitcoin to become compatible with Ethereum-based DeFi applications.
Ren Protocol
Another such protocol was Ren Protocol, which followed in the footsteps of WBTC by enabling cross-chain asset transfers to Ethereum for Bitcoin — BTC, Bitcoin Cash — BCH, and Zcash — ZEC. While in its years of operation it remained 100% secure with 0 hacks and helped users transfer over $13b in cross-chain transfers, its undoing was moving back into a centralized operation. They made a deal to be acquired and funded by Alameda group, which was the same group behind and controlled by FTX founders and filed for bankruptcy which required Ren Protocol to transfer all cryptocurrency assets into the FTX Debtors’ cold storage wallets and forcing all users to transfer their Ethereum wrapped tokens back to their origin chains or risk losing those assets entirely.
The Current Process
Bridges have improved, and even in this bear market, bridge use continues to grow according to DeFiLlama, showing users desire to participate in DeFi as a whole, and not be limited to one blockchain. Yet, they still lack a good user experience. For most users in DeFi, if you decide you want to use another blockchain or simply swap for a token on another blockchain, it’s a multistep process and one in which the user has to do a bit of research just to figure out where to go.
Let us provide a step-by-step process for swapping using either the largest DEX in DeFi (Uniswap) or one of the largest aggregator protocols (1inch). For this example, we want to swap our Optimism (OP) on the Optimism chain over to ETH on the Arbitrum chain so we can join a new yield.
👉 Step 1: Loading Uniswap or 1inch
To begin, a user would open a DEX or DEX aggregator platform, such as Uniswap or 1inch.
👉 Step 2: Finding a Bridge
Unfortunately, you can’t directly swap OP tokens between different chains through the largest DEX or aggregator, so you’ll need to find a bridge that supports the Optimism chain.
2a. Using Uniswap: Uniswap doesn’t provide direct links to bridge sources, so you’ll need to do some research to find a suitable bridge. For new users, a good starting point is the Optimism Bridge.
2b. Using 1inch: While 1inch doesn’t support cross-chain swaps, it does provide links to various bridges, simplifying the process a bit.
👉 Step 3: Accessing the Optimism Bridge
Regardless of whether you started with Uniswap or 1inch, both paths will lead you to the Optimism Bridge. Here, you’ll encounter a limitation: you can’t withdraw OP tokens directly, and the official bridge can take up to 7 days. However, they do link to several third-party bridges.
👉 Step 4: Exploring Third-Party Bridge Options
Click on a few of the third-party bridge options to see what they offer. Keep in mind that not all of them support direct transfers from Optimism chain to Arbitrum One chain.
👉 Step 5: Checking Token Support
It’s crucial to confirm whether these third-party bridges support OP token and ARB token transfers. In your research, you may discover that none of them do.
👉 Step 6: Safety and Liquidity Research
Before proceeding, it’s wise to conduct some research on the safety and liquidity of the bridges you’re considering. Seek out general consensus and user feedback to ensure you’re making a secure choice.
👉 Step 7: Swapping OP for a Supported Asset
Since none of the third-party bridges directly support OP token transfers to Arbitrum One, you’ll need to return to Uniswap or 1inch. Here, swap your OP tokens for an asset that is supported by the third-party bridge. Options may include ETH, USDC, USDT, or the bridge protocol’s tokenized asset.
👉 Step 8: Bridging ETH to Arbitrum One
Now that you have swapped your OP tokens for ETH, return to the bridge and initiate the process to bridge your ETH to the Arbitrum One chain.
👉 Step 9: Swapping ETH for ARB
Finally, head back to your preferred DEX or DEX aggregator to swap your ETH for ARB tokens. This completes the cross-chain swap, and you’ll now have ARB tokens on the Arbitrum One chain.
As anyone could tell, this is not a user friendly experience for someone well versed in DeFi, and it’s extremely daunting for anyone remotely new to the DeFi ecosystem, even if that user is going from Ethereum mainnet to Arbitrum One, only a couple of steps are removed.
Where Magpie Helps 🐦
How does Magpie Protocol fit in and help the user experience? Since you’ve read through all of the above, we’ll keep it simple. Rather than the minimum of the 9 above steps, we’ll shave it down to 2.
👉 Step 1: Select the Token(s) & Chains you want. In this case OP on Optimism & ARB on Arbitrum One
👉 Step 2: Click ‘Swap Now’
Magpie obfuscates all of the unnecessary non user-friendliness of going cross-chain. We’ll find you the best deal using our unique aggregator and help you swap the tokenized asset you want to swap, on the chain of your choice, for the one you want to receive, also on the chain of your choice.
It’s really that simple.
While crypto has seen incredible adoption rates in the last few years, including the number of blockchains, protocols, and bridges used, the user experience in the DeFi ecosystem makes people feel like they’re left wanting, and that’s where Magpie swoops in to save the day. Magpie obfuscates away all of the time intensive chores and rolls them all together so that our users can get where they want to go, for the best price available on the market.
In order to help further our goal of making Magpie Protocol an amazing user experience, we’re rolling out a new UX and UI soon that’s going to make it even better, so come follow us on Twitter so you can get a sneak-beak, sorry, sneak-peek at all the new updates and let us know what you think of the changes!
