CrossCurve: a deep dive into crosschain liquidity
The following explains how CrossCurve and EYWA are solving the crosschain liquidity fragmentation problem and increasing the security of bridges, comparing these solutions to others currently on the market.
As the number of blockchains grows, so does liquidity fragmentation, along with the difficulty of moving assets and data between blockchains.
Fragmentation of liquidity is the splitting of the trading volume among the various DeFi platforms, blockchains, and networks — which creates many divided pools rather than a single, accessible market.
Fragmentation of liquidity is a problem in decentralized finance (DeFi) where liquidity is spread among many networks and platforms. Rather than exist in a single, deep pool, it is dispersed across blockchains (such as Ethereum, Binance Smart Chain, Polygon, and others). This creates several problems:
- Uneven distribution of funds: Since assets are spread across chains, users face varying degrees of liquidity, depending on the platform. This increases slippage and lowers the efficiency of trades since low trading volume can affect asset prices during the exchange.
- High fees and delays: Transferring assets between chains by using bridges tends to have high fees and long processing times, which makes liquidity management complicated and costly for users.
- Difficulty in managing assets: Liquidity providers have to allocate their assets across various chains, which increases costs and complicates management. They have to regularly move assets to maintain a sufficient liquidity volume on each platform, which results in even more costs and risks.
Liquidity fragmentation limits the user options and creates costs for liquidity providers, which in turn lowers the effectiveness and accessibility of DeFi as a whole.
Solving these problems requires reliable approaches, yet current crosschain bridges and omnichain tokens are only partially up to the task. They help connect chains but do not eliminate key barriers that stand in the way of creating a single, deep liquidity market. Intent-based solutions are also limited since they rely on the existing infrastructure with all of its drawbacks. As a result, users increasingly deal with the high cost of transactions and the difficulties of moving assets between chains.
For starters, let’s take a look at the current solutions for crosschain interactions:
Native Cross-chain Bridges are built-in protocols developed for a specific blockchain and supporting a secure and direct transfer of assets and data between this chain and compatible blockchains.
They are considered the most secure solutions for crosschain transfers since they are part of the infrastructure of the chain itself and always await the hard finality of the transaction.
Hard finality is the moment when a transaction becomes irreversible and unchangeable — completely protected from blockchain state rollbacks.
Problems: Transferring assets via native bridges can take a long time, sometimes even up to a week. Usually, native bridges support the transfer of assets only between two or three chains, most often only with Ethereum, which limits their usage in a multi-chain environment. Besides, they alone do not solve the liquidity questions for the transferred tokens.
Third-Party Cross-chain Bridges
— are protocols that allow transferring assets and data between different blockchain networks, ensuring their compatibility and accessibility. Such solutions do not require hard finalization on-chain.
Problems: bridges increase fragmentation rather than solving it, since for the bridges to work LP provider funds are ineffectively locked in each chain instead of supporting active trading pools. Moreover, the bridges themselves do not provide token liquidity in the chain.
Liquidity Providers are users who add their liquidity (tokens or assets) into special pools on decentralized exchanges and DeFi protocols to make trading easier. In return, they receive part of the fees or rewards generated from each transaction that involves their assets in the pool.
LP providers help create a liquid market for other users, which minimizes slippage and improves accessibility to assets.
Crosschain bridges often get hacked because of the complex architecture required for keeping large token reserves in smart-contracts — which attracts malicious actors. Additional vulnerabilities arise from code deficiencies and the reliance on outside validators for confirming transactions between chains, making them one of the weakest points of blockchain infrastructure.
Omnichain tokens
— are tokens that freely move between the blockchain networks, remaining functional and accessible in each of them. Unlike other tokens, their minting does not require locking LP liquidity in the bridge since omnichain tokens are initially created in the bridge’s smart-contract and can be launched on any chain.
Problems: most tokens — such as ETH, wBTC, USDT, et al — do not support omnichain technology. They cannot be made omnichain because of the immutability of their contracts.
When holding an omnichain token, you are constantly carrying the contract risk of the crosschain protocol that issued it. There are many standards for such tokens, but none of them has so far been accepted by the Ethereum Foundation.
Moreover, the main liquidity pools for such tokens are usually in expensive chains, such as Ethereum — making swaps costly.
Intent-based solutions
— is the technology where users indicate their goals (e.g. swap or transfer of assets), while a third party — the “solvers” — find optimal routes and conditions for reaching those goals. The user simply needs to input the desired outcome and the solvers automatically find optimal routes or use their resources across chains to fulfill the order, simplifying the process and lowering the costs.
Problems: although the idea of intents appears to have potential, it’s important to note that the solvers are, for the most part, professional players in the market, working on top of existing infrastructure, which also limits their effectiveness. Ultimately, they prefer to work with a set of assets convenient to them, and their costs are passed down to the end user.
Besides, intent-based crosschain transfers do not solve the problem of having enough liquidity in the chain. Moved tokens still require pools in the destination chain, else their use is limited. This approach again requires the separate creation of liquidity pools in each blockchain.
As you can see, the above options solve the problem of transferring tokens between blockchain but do not fully remove fragmentation, and sometimes even increase it. Moreover, they layer on additional risks for liquidity providers and for the owners of wrapped and omnichain tokens.
But what if assets from one chain could be freely — in real time — traded against assets from other chains in a unified pool?
Many solutions, while simplifying transfers, are abetting liquidity fragmentation because there isn’t a single crosschain hub of liquidity for all the blockchains. CrossCurve by EYWA solves this problem by creating a unified hubchain, where assets of all the blockchains can be traded in a single liquidity megapool. This allows us to unify liquidity from different chains, removing fragmentation and increasing the accessibility of assets.
Here are the ingredients for preparing the ideal crosschain liquidity soup:
- Quick EVM-blockchain with minimal finalization time and low fees
- Effective pools of concentrated liquidity that minimize impermanent loss
- Secure transfer of tokens and data that eliminates vulnerabilities while increasing user trust
- Strong international community that provides support, increases awareness, and drives stable growth of the ecosystem
- Incentivization of liquidity providers via ve3.3 tokenomics that supports depositors and the stability of the pool
And the secret “umami” ingredient:
- crosschain listing of tokens paired with a unique ability to issue new assets with immediate global crosschain liquidity on all the chains at once.
Let’s look at each of those ingredients in greater detail:
1. Optimal blockchain
Finalization: For the quick and secure transfer of data between blockchains, the speed of finalization is of critical importance. In some blockchains, it takes hours or even weeks. For the effective use of crosschain liquidity, the optimal finalization needs to be within a few seconds.
Gas fee price: Keeping gas fees as low as possible is essential in order to be competitive with other crosschain protocols and lower costs for trades and transfers.
EVM-compatibility: EVM-compatible blockchains are preferred for launching reliable smart-contracts since they have already proven themselves and are thus more trusted and understood by liquidity providers.
CrossCurve decided to work with Fantom and Sonic as the EVM-compatible chains that correspond best to the above requirements, unlike the vast majority of blockchains that do not have the full set of advantages.
Fantom reaches finalization in 1–2 seconds; Sonic in less than a second. Fees in both chains are mere fractions of a penny, which makes them especially well suited for quick and cost-effective crosschain interactions.
2. Effective liquidity pools
Some projects, like Thorchain, offer crosschain swaps via a single chain, but their approach on the basis of standard AMM pools is inferior to the more advanced technology of concentrated liquidity, such as in the Curve Finance pools.
Curve Finance pools reduced the volume of necessary liquidity for effective swaps by orders of magnitude compared to other solutions while avoiding impermanent loss for liquidity providers. Such pools can — at this time — only work on EVM-compatible blockchains.
CrossCurve — in partnership with Curve Finance — launched its first crosschain pools, using the Curve StableSwap and CryptoSwap technologies on the Fantom blockchain.
The use of Curve pools ensures more effective deployment of liquidity and minimizes impermanent loss for liquidity providers. For users, it grants access to a large number of tokens with low slippage and low fees in any accessible chain.
To get a more detailed understanding of the mechanism and advantages of Curve pools, take a look at this article to simplify the learning Curve of understanding the setup and the principles of how Curve pools work.
3. Secure transfer of tokens and data
Frequent hacks of crosschain protocols are connected with the complex architecture of such solutions, where they have to synchronize and keep significant reserves of assets for transfer between chains. This creates smart-contract code vulnerabilities and attracts hackers since successful attacks can help them steal a lot of crypto. Additionally, dependence on third-party validators for confirming transactions also increases the risk of hacks since if any of those participants get compromised, it’ll give the hacker access to governing the assets.
CrossCurve is implementing EYWA’s innovative solution — the Consensus Bridge.
EYWA offers the concept of using a multitude of independent protocols for validating the transfer of assets, for which the protocols must come to a consensus in order for the transfer to take place. If one of the bridges is compromised, the transaction stops and the user can take his funds back.
CrossCurve uses fail-safe EYWA Consensus Bridge mechanism with several validation protocols for the secure transfer of tokens between Curve pools across blockchains.
The probability of several crosschain protocols getting hacked at the same time is near zero.
EYWA Consensus Bridge uses several independent systems of crosschain transfers, such as the EYWA Oracle Network, L0, Axelar, and Asterizm, with the ability to further increase the number of partnerships later.
Consensus Bridge is a fail-safe bridge that protects assets from losses even if one of the used protocols gets hacked. Built on flexible, multichain architecture, it enables multilevel, decentralized validation of transactions, increasing the overall security and reliability of CrossCurve. Thanks to this architecture, new blockchains and protocols can be easily integrated, which allows it to adapt to the changing needs of the DeFi market.
The Consensus Bridge is governed in a decentralized manner via the EYWA DAO, without multisigs or outside involvement. All changes are made exclusively via the voting of veEYWA holders.
Audits and security
CrossCurve pays special attention to security and transparency: the protocol is open-sourced, with the code available for anyone to review. The platform passed security audits from the leading teams, including MixBytes, SmartState, and Hexens, validating its reliability. The audit results are openly published, strengthening user trust in CrossCurve’s infrastructure.
- MixBytes Audit
- SmartState Audit
- Hexens Audit
4. Strong international community
Community is at the core of the CrossCurve ecosystem, bringing together over 750,000 active users. To ensure transparent and democratic governance, the project is launching its own token and DAO (Decentralized Autonomous Organization). This will allow every participant to take part in making decisions and distributing the platform’s resources.
Key capabilities:
- Decentralized governance: Projects that are integrated into CrossCurve can become part of the DAO, vote on the distribution of liquidity, and collaborate with veEYWA holders to receive additional income. The EYWA DAO governs all the smart-contracts of the protocol in a decentralized manner. The only way to change the code is via a vote by veEYWA holders.
- Incentivizing participation: The ve(3,3) model encourages long-term participation and stability of governance, ensuring deep liquidity and stability of operations.
- Rewards and benefits: DAO participants receive rewards for active participation and contributions to the platform’s development, which incentivizes the continued growth of the ecosystem.
- Incentivization of liquidity: The CrossCurve project, much like Curve, uses a mechanism of incentivizing the provision of liquidity via its token issuance. This way, it rewards liquidity providers, who can receive additional rewards for their deposits. The ve(3,3) model encourages long-term participation, providing stability and deep liquidity — which in turn attracts new users and projects into the ecosystem.
The launch of the DAO and the implementation of our own token, opens up new opportunities for users and projects, making the governance of the platform flexible and effective — and making liquidity deep and profitable. Having a DAO will strengthen the CrossCurve community, ensuring stable growth and attracting new participants.
5. Motivating liquidity providers
The lack of permanent deep liquidity has killed many a crosschain protocol: dozens of once popular bridges are now left to the dustbin of history, unable to hold on to their liquidity providers permanently.
The problem of maintaining liquidity remains one of the key ones in DeFi. To find an ideal solution, projects went through many trials and errors, but experience shows that the most effective ones use ve(3,3) tokenomics, which attracts and keeps liquidity long-term.
ve(3,3) is a tokenomics model inspired by the vote-escrowed (ve) idea and by game theory (3,3). It’s proposed for the creation of a stable and incentivizing system of distributing liquidity in decentralized finance protocols. Users lock tokens, receiving ve-tokens for voting and participating in the revenue streams of the protocol. This model incentivizes long-term provision of liquidity, increasing the value of the ecosystem and lowering temporary losses in liquidity by encouraging collaboration among the participants.
EYWA chose to go along a similar route by integrating the ve(3,3) model in which the community that actively uses and tests the CrossCurve protocol gets rewarded with $EYWA tokens. These tokens give holders the opportunity to participate in governance and in the distribution of incentives for CrossChain liquidity pools. As with Curve Finance, token holders can influence the issuance and distribution of liquidity, as well as use “bribe” mechanisms to attract additional liquidity providers to the pools that need them.
This model creates a closed loop of incentivization where active participation in governance and voting strengthens and expands liquidity, ensuring its stability and long-term interest for DeFi participants.
As a matter of fact: EYWA is integrating for the first time for ve(3,3) the innovative tokenomic mechanic that increases voting weight as well as the effectiveness of farming and staking by owning NFT tokens.
6. Crosschain listing
When launching a token, a Web3 project can run into the fragmentation of liquidity, the need to maintain it in every chain, high fees and delays on popular blockchains, as well as the risks associated with using outside bridges for crosschain transactions. Integration is further complicated by limited access to users from different chains and the difficulty in attracting liquidity providers without incentivizing tokenomics like ve(3,3). A solution requires a single crosschain hub that would unify liquidity, minimize risks, and ensure accessibility for the token on all the blockchains.
CrossCurve offers projects innovative opportunities in crosschain listing of omnichain tokens, creating unified pools and providing a profit from liquidity by participating in the EYWA DAO.
Now, projects can focus on a single hub chain for providing liquidity, knowing that their token will be available across all the blockchains.
With CrossCurve, projects can list tokens in pairs with such assets as USDT, USDC, DAI, WBTC, WETH, and Curve LPs, ensuring trading on all the available blockchains at once, including Ethereum, Avalanche, Polygon, Arbitrum, BNB Chain, Optimism, Fantom, Base, Gnosis, and others. This opens up access to a wide user base and allows to effectively manage liquidity.
EYWA DAO will allow access to a system of “bribes” and incentives via DAO mechanisms in the manner it’s done in the ve(3,3) model. This attracts liquidity to the pools that need it and allows projects to directly affect the distribution and the profitability of their tokens in a crosschain environment.
Conclusion
CrossCurve by EYWA is a fundamentally new solution to the problems of bridge vulnerability and the fragmentation of liquidity.
The CrossCurve project offers a comprehensive solution for resolving the fragmentation of liquidity between blockchains, creating a single crosschain hub. With the help of the fail-safe Consensus Bridge and the partnership with Curve Finance, CrossCurve unifies liquidity from different chains, offering secure and cost-efficient crosschain pools. The ve(3,3) mechanism attracts long-term liquidity providers, strengthening community support and incentivizing the ecosystem’s participants.
Moreover, CrossCurve offers Web3 projects unprecedented opportunities for launching tokens via a crosschain listing, turning the platform into a powerful launchpad. A new token can automatically get universal liquidity on all the key blockchains, such as Ethereum, Fantom, and Polygon — which gives projects access to a wide base of users and lowers their costs of integration with a multichain infrastructure.
The protocol becomes attractive for integrating into the DeFi ecosystem, ensuring the unification of liquidity from various chains.
CrossCurve is a cutting-edge platform for scaling Web3 projects and creating reliable crosschain liquidity, opening up new opportunities for the DeFi industry.
In short, your crosschain soup is ready.
Try it — it will be your best decision: app.crosscurve.fi
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