A Hub-Spoke Strategy for Cross-Chain Apps

Balanced is a DEX and stablecoin issuing platform on the ICON Network and in 2024 ICON aims to position Balanced as a leading cross-chain decentralized finance (DeFi) protocol. This should drive adoption for ICON technology and generate revenue for the network, but it also presents a cross-chain challenge.

Balanced is taking a refreshing approach to the cross-chain challenge by employing a hub-spoke strategy with ICON’s cross-chain general message passing (xCall) at its center.

Keep reading for my thoughts on the Balanced app, the benefits of applying a hub-spoke strategy, and how ICON’s xCall could be the perfect fit for any app when utilizing this cross-chain communication architecture.

Stablecoin and Exchange with a Cross-Chain Horizon

Over the past three years, Balanced has become a central pillar in the ICON community, offering a well-designed decentralized exchange (DEX) and issuing the bnUSD stablecoin. During this period, the app has shown quite some resilience and reliability. Its core mechanisms have been tested and adapted through extended phases of market volatility. Remember rebalancing?

Balanced’s revenue generation strategy centers around trading fees. And for future expansion of platforms like Balanced, cross-chain communication is crucial. It opens up access to a broader range of assets and liquidity pools from various blockchains. This can directly increase the volume of trades and the platform’s revenue.

Is a Hub-Spoke Strategy the Winning Formula?

In this piece, Xulian explains how the hub-spoke thesis bridges the gap between the fat protocol thesis and the app chain thesis. It enables app chains to offload certain tasks to other chains while maintaining interconnectivity with larger protocols and ecosystems.

In Balanced’s case, the hub-spoke strategy offers a cross-chain expansion approach where most smart contracts and core logic are centralized on a primary blockchain (ICON), known as the ‘hub’. Next, in order to reach a broader market of users, a subset of contracts are deployed on external blockchains. Spokes, in the form of cross-chain messaging, extend from the central hub, ICON, to various connected blockchains.

With all the crucial app logic on the ICON blockchain. Only a specific portion of contracts and logic needs to be deployed on new chains. This streamlines the expansion process, enabling a rapid scale-up of connected blockchains without the need to redeploy the entire application on each new chain. It makes it easier for any app to expand its reach across the blockchain ecosystem while maintaining a robust and secure operational core.

How xCall is Perfect for Balanced’s Strategy

xCall forms an important component of the ICON Cross-Chain Framework, operating as a general message passing tool that functions across multiple popular bridging protocols. The xCall interface is specifically designed to make cross-chain development easier for developers.

For Balanced developers, xCall presents a significant advantage when combined with the hub-spoke strategy. They can write their cross-chain messaging logic just once using xCall. Then it can be reused across various bridging protocols, including IBC and BTP. Essentially, it means that applications like Balanced need to develop their operational cross-chain logic a single time, after which it can be efficiently reused for every new cross-chain expansion.

These key features of xCall bring substantial benefits to Balanced:

• Bridge protocol integration is abstracted away. This allows Balanced to reuse it’s cross-chain components, regardless of the targeted blockchain.
• As xCall continues to add bridging features to its product, Balanced can cherrypick the latest advancements in cross-chain messaging solutions.
• An extra layer of security is simply enabled by running double verification with xCall. When a blockchain connection is available across more than one bridging protocol, important messages can be set to require two seperate cross-chain verifications

Successful Archway Blockchain Expansion

Balanced successfully demonstrated the usage of xCall for cross-chain operations in their December 2023 launch on the Archway blockchain. In this particular case, xCall is used to deliver messages across the Inter-Blockchain Communication (IBC) protocol.

This deployment kicked off the hub-spoke strategy for Balanced. By using xCall, Balanced was able to leverage its established infrastructure on ICON (the hub) to extend its services to the Archway blockchain (a spoke) within the Cosmos network. The use of xCall and the hub-spoke strategy meant that the core logic already developed for ICON could be efficiently and securely communicated to Archway. This deployment process can now be replicated with minimal adjustments across other blockchains.

In conclusion, the combination of the hub-spoke strategy and xCall is great for Balanced in its journey towards cross-chain expansion. This approach enables Balanced to centralize its main operations on the ICON network while effectively extending its reach to other blockchains. xCall’s role in this strategy is to streamline the process of cross-chain communication, making it simpler for Balanced to connect with different blockchains.