The Astar Vision Part 2: Asset Diversity Through XCM dApps and Smart Contracts

Liquidity and Asset Diversity

In an interoperable blockchain future, we believe that inter-chain liquidity asset diversity will become a huge factor for a thriving ecosystem. Currently, the development value of a blockchain is broadly determined by the market capitalization of the cryptocurrency, the ecosystem size, the network TVL, and developer resources. However, in a truly interoperable blockchain world with XCM, we believe that the total value of foreign tokens and token diversity in a sovereign blockchain will become two metrics that new ecosystem projects and investors will consider when evaluating layer 1 blockchains.

Traditionally, foreign assets that were transferred via a bridge only had applications within the DeFi space, but the reliability of these tokens has been rather questionable for certain networks, since bridges have needed to create multiple asset representations (e.g., ERC20) for the same asset–a new one for each bridge. A USDC token transferred from one bridge might not be recognized on another network. Moreover, the lack of standards amongst bridges makes it difficult for developers to fully utilize them.

XCM on the Polkadot ecosystem allows the networks to define which asset should be used for the XCM transaction, this means that foreign assets will have additional utility. Furthermore, unlike the traditional bridged assets that can have multiple ERC20 token representations for the same asset, Substrate nodes can use a single pallet to represent assets that were bridged, As a result, the network can have a single source of truth for all foreign assets, making it easier for dApps to integrate it to their project. This combined with the characteristics of XCM means that now, foreign assets are more closely integrated with the ecosystem than ever before. As networks become economically dependent on each other, a blockchain is incentivized to specialize in certain features and rely on others to maximize its value.Sustaining each other in this manner leads to a stable and reliable cross-consensus channel that the ecosystem can utilize.

We believe that this will create a truly interoperable and heterogeneous blockchain network.

Astar Network Strategy

This section describes how Astar Network sees its position within the Polkadot ecosystem, and our strategy to leverage XCM-Native dApps and WASM smart contracts to realize our vision.

XCM-Native dApps

Astar Network is the hub and smart contract platform for user-facing dApps–driving innovation in the decentralized application industry. We believe that by allowing the smart contract to leverage the functionality that other parachains provide, creates a Web3.0 space where dApps can focus on building unique and functional projects that all people can use in their day-to-day lives; in manners that dApps on other networks cannot provide.

As a decentralized smart contract platform provider, we will focus on opening XCM channels with other parachains and provide the necessary APIs for dApp developers to fully utilize this channel for their projects. In other words, as a user-facing dApp platform, we mainly view other parachains and XCM channels as building blocks that dApps on Astar Network can use as part of their business logic. We become the place where the chemistry between various parachains and their value propositions react through the hands of builders–sustaining themselves via dApp stakers, rather than token sales.

We can ensure that our dApps are compatible throughout the ecosystem by pushing the various smart contract and communication standards (i.e., The Polkadot Standards Proposals) for all dApps.In order for us to push this strategy, we must consider several factors when establishing a channel with another parachain, such as:

• Token economics: How sustainable is the network, and how will it affect our network’s ecosystem?
• Value proposition: What is the unique sales point of this parachain, and how can user-facing dApps use this feature (alongside other features) to create a unique and innovative dApp?
• Developer API: What are the XCM payloads/requirements for calling the extrinsic that developers can use, and what is the expected result/data structure?

…to list a few.

XCM via WASM Smart Contracts

The Substrate contract pallet (also known as the WASM Smart Contract environment throughout this paper) is a contract execution environment that is powered by WebAssembly at the native Substrate level. Thanks to this, WASM contracts on Substrate do not face the overhead that EVM has, and it has wider language support such as ink! (Rust) and ask (AssemblyScript) at the moment, with more to come.

The combination of extensive language support and increased performance (through reduced overhead) means that developers can create complex dApps that are impossible to build only using Solidity on EVM. Another important component of WASM contracts on Substrate is the concept of chain extensions. Simply put, chain extensions allow the smart contract to read directly and execute pallets from the network. And because the language of Substrate and ink are more or less compatible with each other, communicating with pallets and other native on-chain data is not difficult.

If we have a chain extension for the XCM pallet on Astar Network, we can create custom XCM transfers completely from a smart contract that is executed on-chain, and allow dApps to interact with other foreign parachains directly from the smart contract. In other words, the hypothetical complex use case described in the previous sections can be only realized through WASM smart contracts!

WASM smart contract development with ink! or ask and XCM with chain-specific features are two very new concepts for dApp developers; as a result, documentation, education, and standard API will be crucial for developer engagement. Both, Astar Network and the integrating parachains are responsible, and must clarify the value proposition of a certain XCM channel and how dApp developers can use its API to create something that the end-user can use.

In Part 3, we present examples of how Astar Hub and the Polkadot ecosystem are achieving true interoperability. https://medium.com/astar-network/the-astar-vision-part-3-the-innovation-hub-of-web3-0-1cace547aba3

Part 1 here: https://medium.com/astar-network/the-astar-vision-part-1-interoperability-and-multi-chain-dapps-30f014087831