How we reduced Ethereum transaction costs by 90%
Many DeFi projects are suffering from high gas costs, but there are interim solutions if you can accept the compromises. dHEDGE is moving towards Optimistic Rollups (Ethereum Layer 2 scaling), but we needed a “Layer 1.5” solution to get us over the hump of high gas costs.
dHEDGE is a top level DeFi lego block protocol built on top of Synthetix and Chainlink. As you go up the levels, the transaction costs increase. With increasing demand for DeFi, the cost of entering a dHEDGE pool was starting to become problematic, especially for everyday DeFi users. We realised we needed a solution prior to L2.
Enter the FOX 🦊 + 🦔
As a first step, we targeted cheap entry and exit for investors.
The dHEDGE Fast Oracle eXchange (FOX) is a dHEDGE evolution in gas optimisations.
Synthetix onchain computations are relatively complex. With dHEDGE pool computations on top, the transaction costs compound. We realised that we needed to take these computations offchain, but importantly, still have the final settlement onchain.
So how does it work?
The FOX Oracle talks to an Ethereum node and asks for the most recent block computation results of a specific contract. In this case, it asks for dHEDGE pool data, including relevant Chainlink asset prices.
The FOX then signs the pool data and gives it to the investor who can choose to use the data onchain to execute transactions such as invest or exit with the FOX Swap contract.
The transaction must be executed as a “Fast” transaction, otherwise it will time out.
The FOX Swap contract then ensures there’s enough pool liquidity to execute the invest/exit, and settles the exchange on-chain.
The result is an exchange that’s as cheap as Uniswap, but with much more complex pricing mechanisms. It also allows investors to exit in a single asset (sUSD), and could later be adapted to include other stablecoins or ETH on entry and exit.
Initial Roll-out
At the time of writing, the FOX is available to the majority of top 20 pools. Exit with FOX is possible for these pools, and Investment liquidity will be added over time given that the:
- Manager is active
- Manager has some ownership in their pool
- Manager has attracted investments
Transactions are currently limited up to $5k per transaction.
You can view Swap Liquidity for Investments on the Governance page.
dHEDGE DAO FOX Governance
Currently the dHEDGE DAO holds ~$1.5M in top performing pools through the Uber Pool. Some of these pool tokens can be used as liquidity in the FOX Swap.
As DHT Stakers will soon be able to govern the Uber Pool, they can also govern the FOX Swap liquidity.
Even with this small liquidity trial, the FOX is already seeing demand for manager pool tokens in a high gas environment. This should help grow manager pool values as it enables the everyday investor low entry fees.
There’s no free lunch though. dHEDGE DAO is the sole FOX Swap liquidity provider and is taking the counterparty risk (within limits). Even though the FOX fetches onchain Chainlink data, it is still centralised. As the system matures and potentially expands to a network of FOXes (a ‘skulk’ of foxes?), liquidity limits can be increased.
On the other hand Optimistic Rollup L2 is the focus, and this may just be a stepping stone for dHEDGE. The FOX currently doesn’t resolve manager trading fees. We’re looking to bring costs down for the entire platform and L2 scaling is the key.
If you’re a part of a DeFi protocol and think this may be useful for you, let us know.
Additionally, if you are a blockchain/Solidity developer and this type of work we do at dHEDGE excites you, do reach out.
More About dHEDGE
dHEDGE is a decentralized asset management protocol connecting the world’s best investment managers with investors on the Ethereum blockchain in a permissionless, non-custodial, trustless fashion. dHEDGE aims to democratise the investing experience leveraging the unique capabilities of Ethereum and Synthetix.
dHEDGE is supported by some of the biggest names in crypto, including Framework Ventures, Three Arrows Capital, BlockTower Capital, DACM, Maple Leaf Capital, Cluster Capital, Lemniscap, LD Capital, IOSG Ventures, NGC Ventures, Bitscale Capital, Divergence Ventures, Genblock Capital, Trusted Volumes, Altonomy, Continue Capital, The LAO, bitfwd (比特未来) and Loi Luu, Co-Founder and CEO of Kyber Network.
Join the dHEDGE community on Discord, Twitter, Telegram English language, Telegram Chinese language and on WeChat.
Important Notice: DHT tokens are a means by which users may utilise the protocol. dHEDGE DAO does not recommend purchasing DHT for speculative investment purposes. DHT tokens may lose value or have no value and may have no market.
