Cross-chain Relay Token — Part 2 (Cross-chain Swaps)
This is a continuation of the two-part publication about the cross-chain relay token concept. The focus of this article is to describe how GTON is used as a proxy token when converting between native tokens of different blockchains without using bridges directly.
A token in the middle
In Cross-Chain Relay Token — Part 1 (Wrapped Tokens), the use of GTON as an AMM relay token was considered, which allows one to trade wrapped assets with minimal slippage, provided that the incentives are set up properly, i.e. the users have sufficient motivation to participate in LP farming by putting liquidity into GTON pairs with wrapped tokens, stablecoins, and native tokens.
In this article, we will consider another GTON use case, namely how it can, as a so-called cross-chain relay token, help exchanging a native token on one blockchain into a native token on another blockchain, without involving a bridge for making cross-chain swaps.
There are two popular cross-chain DEX projects: ThorChain and Anyswap. However, their implementation seems to be using bridges and token lock/unlock procedures, while the concept proposed by the Graviton team works on the basis of different concepts: namely Cross-chain Relay Tokens and Mirror Accounts.
Most DeFi users have an account on the Ethereum network with some amount of Ethereum on it. Imagine a situation when such a user discovers the Fantom network and becomes interested in trying what it has to offer. Despite the fact that Fantom is an EVM chain, which means that a user can utilize their existing account via Metamask for signing transactions and connect to the Fantom network in one click, one problem remains: while their Fantom balance has no FTM tokens, the user is unable to make transactions.
In theory, FTM could just be bought on a centralized exchange (CEX) and brought to the native chain, but not all exchanges support this functionality.
The problem of over-complicated user experience is very pressing in the field of DeFi cross-chain and one of the most frequently mentioned problems in our poll.
So, when the user has funds on Ethereum and is curious to explore a non-EVM blockchain (e.g. Solana, Tron, Cardano, Polkadot, Cosmos), the problem of user experience becomes even more pronounced: first and foremost, they need to create an account on the desired chain and fill it with the native tokens for paying fees.
The “mirror account” concept developed by the Graviton team is a product solution that will greatly simplify the user’s experience and their ability to use other popular blockchain networks by solving the problem of decentralized purchase of the native token in a destination chain, and then automatically creating an account which can be controlled by singing from an already existing Metamask Ethereum account. To do that, the Mirror Account service within the Graviton project stores a map of user accounts in various networks.
Note that focusing on Ethereum accounts is just the starting point because this concept can work in all directions. In addition, we have already seen a lot of users with other blockchain networks (BSC, Solana, Polygon, etc.) as their first platform.
As an example, the rest of this article describes buying the native token in Solana, a destination blockchain, by spending the native token of the original blockchain network.
On each of the integrated blockchains, the GTON token has AMM DEX pools for their native tokens. For providing liquidity to the GTON token in these pools, a reward is paid out (see LP farming). For example, on the Ethereum blockchain, there is a GTON pool to ETH (on Uniswap), on the Solana blockchain, there is a pool to SOL (on Serum), and on Polygon and Fantom, respectively, to Matic and FTM.
When a user from the Ethereum network makes a deposit converting ETH on Ethereum into SOL on Solana, a few operations take place:
- ETH is sold for GTON on an AMM pool in the Ethereum network.
- GTON is immediately locked on smart contracts of the Graviton system (Mirror Account).
- The oracles notice this event and signal it to Mirror Account’s smart contracts on the Solana side. There, in turn, an equivalent amount of GTON is unlocked and sold for SOL in an AMM pool on the Solana blockchain.
- The purchased native tokens of the Solana blockchain are transferred to the user’s account.
It is important to note that price oracles are not required in such a system, since the rate is determined automatically when buying and selling GTON in AMM pools on the corresponding chains. However, it still needs reliable oracles that will read events from one blockchain and signal them to another, such as, for example, Gravity Oracles, Band Protocol or Chainlink.
This protocol works both between EVM and non-EVM (Ethereum <-> Solana) networks supported by Graviton, and between EVM and EVM (bsc <-> polygon) and even non-EVM and non-EVM (Solana <-> Waves / Tron) blockchains.
Thus, the GTON token plays an important role as a Relay Token for the cross-chain DeFi by allowing users not only to wrap assets, but also to convert native tokens into different chains. This is one of the main goals that $GTON solves by being the “in-the-middle” token of the Graviton’s system.
Revenue for GTON holders
As you can see, the proposed system that implements cross-chain swaps without any direct swap transactions can be monetized via the relay token (GTON) itself. For example, a minor fee of around 0.01 GTON plus 0.01% of the transaction amount can be subtracted from every transaction with GTON. The accrued fees will then be sent to the governance stakers of GTON.
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Originally published at https://alexpupyshev.medium.com on July 13, 2021.