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Key takeaways:
Cross-chain DeFi mission Elk Finance is creating new services and products which might be designed to alleviate the core issues with in the present day’s DeFiThe Elk Finance crew believes that the trio of issues, particularly bridge fragmentation, exit liquidity, and interchain messaging current the most important limitations to a multi-chain futureTo overcome these limitations, Elk Finance is creating a collection of companies and merchandise designed to spice up the broader DeFi ecosystem
With the rising variety of blockchain platforms over latest years, bridges have gotten a core part of the quickly rising decentralized finance (DeFi) sector. Cross-chain options allow customers to take full benefit of the more and more fragmented cryptocurrency house by transferring tokens between totally different distributed ledgers.
Elk Finance’s ElkNet service helps main blockchain networks, together with Avalanche, Polygon, Fantom, Huobi ECO, xDai, and Binance Good Chain. Nevertheless, the crew behind Elk Finance is trying past the bridge performance and believes that their mission has the potential to revolutionize the house and resolve essentially the most obvious issues which might be plaguing DeFi house in the present day.
The present strategy to blockchain interoperability has a number of flaws
Cross-chain options are certainly a core part of in the present day’s DeFi – with out them, blockchain fragmentation would develop into a way more obvious downside that might hinder the progress and improvement of decentralized functions. Blockchain bridges facilitate the switch of information and tokens between numerous chains that might in any other case be incompatible as a result of totally different underlying protocols, governance techniques, and different differentiating elements.
Most of the mission’s early customers see Elk solely as a bridge resolution. Nevertheless, the crew behind Elk has not too long ago written a weblog put up, wherein they listed a number of issues with the present state of affairs within the DeFi house and described how they intend to deal with them.
The primary challenge the crew recognized was the exponential development of blockchain bridges, which has led to appreciable fragmentation. In essence, a cross-chain bridge facilitates the switch of tokens between chains by locking tokens in a wise contract on platform A and minting a corresponding quantity of tokens on platform B.
The Elk crew defined how typical bridges function through the use of USD Coin for instance:
“Standard bridges function by a easy lock-and-release mechanism: to bridge USDC from Chain A to Chain B, a consumer initiates a switch by locking USDC tokens into a wise contract on Chain A, which then tells a contract on Chain B to launch the identical variety of USDC tokens.“
The rising variety of bridges has created a scenario the place quite a few token all symbolize the identical underlying digital foreign money, however the tokens created through totally different bridging strategies are usually not interchangeable. This has negatively affected the broader liquidity within the crypto ecosystem.
In an analogous vein to the issue described above, the Elk Finance crew has additionally mentioned the issue of exit liquidity and advocates that a specific amount of tokens ought to be locked up always to facilitate transfers. The crew sees two potential options to alleviate the issue of exit liquidity:
“There are methods to attenuate the exit liquidity downside, corresponding to bootstrapping a bridge with exit liquidity furnished by the protocol or proscribing the quantity of tokens that may be transferred.”
The interchain messaging downside, because the crew dubbed it, is one other challenge that must be resolved earlier than we are able to get pleasure from a seamless interplay between a number of blockchains. The present means of relaying info throughout chains is gradual and inefficient and depends on options corresponding to oracles, proprietary APIs that exist off-chain.
Elk Finance is working and numerous companies and merchandise which have a objective of mitigating the issues listed above.
Elk Finance’s ElkNet, cross-chain stablecoin CHFT, and Proxy Tokens current elegant options to frequent DeFi issues
ElkNet is totally different from different cross-chain options out there. It permits solely transactions of the ELK token completely, which implies that ElkNed doesn’t add to the issue of blockchain fragmentation. The crew explains it finest: “Elk is finest described as a “worth switch” protocol: it’s designed to bridge worth, not tokens (apart from, in fact, ELK).”
The multi-chain decentralized trade ElkDex is designed in such a means that each one of its liquidity swimming pools are bonded to ELK. Merchants are in a position to seamlessly switch digital worth between totally different blockchains by exchanging their tokens for the corresponding quantity of ELK, sending them throughout chains through ElkNet, and exchanging them into their most well-liked tokens as soon as ELK are efficiently migrated.
Along with assuaging the issue of diminished liquidity attributable to digital asset fragmentation, ElkNet solves the exit liquidity downside as effectively. Since it’s all the time transferred in a precise 1:1 ratio, it means that there’s by no means a scarcity of ELK on the Elk community.
CHFT, the world’s first cross-chain stablecoin, contains a novel “gyroscopic” design, which implies that CHFT can be minted natively on supported crypto networks. Whereas most stablecoins have their worth pegged to the US greenback, CHFT (because the title suggests) can have its worth pegged to the Swiss Franc (CHF). The minting course of would require customers to stake whitelisted tokens as collateral. CHFT can be overcollateralized with totally different crypto property, which all however ensures that exit liquidity can be accessible always.
The ultimate piece that enhances Elk Finance’s broader imaginative and prescient for the way forward for DeFi are the so-called proxy tokens. Utilizing this technique, customers will be capable to transfer their tokens between Elk-supported chains with ease.
“Our proxy token idea presents a sensible resolution to the bridge fragmentation downside by decoupling a token from its underlying asset.”
A small allocation of ELK together with the asset that the consumer needs to transform right into a proxy token is a requirement to create proxy tokens. As soon as minted, proxy tokens may be freely transferred throughout the Elk community to any of the supported blockchain platforms. Customers can redeem the underlying (locked) digital asset again on its native blockchain at an ideal 1:1 ratio.
Whereas Elk Finance’s rise to prominence can largely be attributed to its bridge resolution, the mission has far surpassed its authentic core providing and is quickly increasing its community’s performance.
David is a crypto fanatic and an skilled in private finance. He has created quite a few publications for various platforms. He likes to discover new issues, and that’s how he found blockchain within the first place.
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