Why Faster Plasma Exits are needed in the first place:
Brief answer — To provide a better experience for users. In order to ensure security and sanctity of off chain computations, the Plasma framework recommends a wait time of 7 days before an exit is finalized on mainchain. This long waiting period results in subpar user experience. No other Plasma based solution or L2 solution, in general, has been able to solve it yet. Matic will be the first L2 solution to enable faster exits (< 10 minutes to credit funds back on mainchain) in a sustainable manner while leveraging Ethereum based infrastructure.
Let’s explore how we are doing it
Backdrop: Some time ago, we had written about our intent to enable faster exits from Plasma sidechains for users. An excerpt:
We have been working towards enabling such a process by generating the Exit Token in the form of an NFT so that it represents/contains the assets that are locked up in the Plasma contract for the duration of the challenge period.
Please do read the article below for better context for the remainder of this piece.
In order to realize faster exits, we wanted the user to put up their exit NFT as collateral. A liquidity provider would then check its validity and on successful validation, credit the funds to the user thereby completing the “Exit/Withdrawal” at the users end. On completion of the exit challenge period, this NFT would then be exchanged by the creditor to get their funds back and earn fees for making the faster exit possible.
We are excited to announce that we are now partners with Nuo Network in order to make faster exits a reality.
Nuo Network backed by ConsenSys, is a decentralized debt platform that connects lenders and borrowers using smart contracts. Nuo uses “Reserve Pooling Model” which unlocks massive liquidity and enables borrowers to take a loan instantly against collateral. Since Nuo’s launch, lenders have deposited $4.5M in reserve pools and $1.75M in loans have been disbursed using the platform making it the #1 lending protocol in Asia.
The flow for the faster exits will be as below (All these steps will be abstracted via UI):
- The user wants to exit Matic’s Plasma side-chain, she initiates the exit and an exit NFT is minted. This NFT denotes the number of tokens that are eligible for withdrawal.
- Using Matic Wallet she can put up the NFT as collateral on Nuo
- The lender checks the validity of the Exit NFT before approving the request
- Upon the lender’s approval, the request is sanctioned and the tokens are released to the user after deducting a small exit fee. These tokens come from Nuo’s reserve pool
- Upon completion of the challenge period for this Plasma exit, the NFT can then be redeemed to credit the amount back to Nuo’s reserves
With the help of a lending partner, the exit experience becomes seamless and results in opportunities to put otherwise dormant assets to work.
Matic is pioneering the development of faster exits for Plasma chains. This has the potential to be used across the whole Plasma ecosystem for enabling faster exits.
“Our goal is to use decentralized debt to create new user experiences in financial markets which otherwise weren’t possible before. Instant plasma exits using Nuo reserve pools is a step towards creating these unique borrowing use cases which the platform is designed for. This will increase reserve pool utilization ever further and ensure highest returns for lenders.” — Siddharth Verma, Co-Founder of Nuo.
This will lead to a new revenue generation avenue for lending platforms as L2 solutions become the mainstay for scaling transactions. The users on Nuo will benefit as they stand to earn interest from the fees charged on every exit.
This is the beauty of Open Finance #DeFi!
We at Matic are looking forward to supporting Nuo in every way possible to make faster exits transform from an idea to reality.