Chaohua Community | How does Sifchain DEX build cross-chain liquidity and solve DeFi pain points?
Produced | Odaily
Editor | Hao Fangzhou
Produced | Odaily
The real pain point of the current DeFi market is that there are high barriers to the circulation of various encrypted assets, which hinder the free flow of assets and public chain interaction.
How to achieve barrier-free circulation of assets and break the island effect between public chains has become the key to the next development of DeFi and the encryption market—cross-chain may become the next hot spot.
On January 5th, Jazear Brooks, the founder of Sifchain, visited the Odaily Chaohua community to explain in detail "How does Sifchain DEX build cross-chain liquidity and solve DeFi pain points?".
Jazear Brooks said that Sifchain will target 20-25 public chains (such as Ethereum and Stellar) for cross-chain integration. Simplify the integration process and reduce the development process of the open source community, thereby minimizing the cost of cross-chain integration in terms of capital and developer resources.
Specifically, the Sifchain established based on the Cosmos SDK, by using the Tendermint consensus algorithm, has high throughput and scalability, and can achieve tens of thousands of processing capabilities per second (TPS reaches tens of thousands). “Once the Sifchain mainnet goes live, the average user transaction fee will be less than $0.01, dwarfing other Ethereum-based competitors. Even if they can reduce fees, Sifchain will still outperform these competitors.”
At the same time, Jazear Brooks also introduced the public offering of Rowan, Sifchain’s native governance token. Interested users can visit its official website to learn more.
The following is the essence of community activities, organized by Odaily:
Odaily: At present, there are many solutions to the pain points of DeFi in the encryption market, and Sifchain is one of them. First, please introduce Sifchain?
Jazear Brooks：Sifchain is an omni-chain decentralized exchange (DEX), which can release the liquidity of assets on each isolated chain and help people free themselves from inefficient transactions and high fees.
Sifchain will conduct cross-chain integration for 20-25 public chains (such as Ethereum and Stellar). Simplify the integration process and reduce the development process of the open source community, thereby minimizing the cost of cross-chain integration in terms of capital and developer resources.
The goal of Sifchain is for new blockchains to consider cross-chain integration as vital as wallets and block explorers. The liquidity of all cryptocurrencies can be accessed on-chain, allowing a decentralized organization (DAO) to coordinate the deployment of funds for all cryptocurrencies, and the future of Sifchain is a decentralized autonomous organization (DAO).
We believe that building cross-chain liquidity will be fundamental to the future development of the blockchain industry: it is an expectation, not just a feature.
Odaily: One of the hot spots in DeFi this year is decentralized exchange (DEX), and the main application of Sifchain is DEX. Could you please introduce the special features of DEX on Sifchain in detail?
Jazear Brooks：Sifchain has several major features: high performance + low cost + cross-chain + mixed transaction mode + margin transaction.
The performance of Sifchain in terms of TPS and transaction fees will be 100 times that of Ethereum.
Sifchain supports the inter-chain communication protocol (IBC), and can conduct cross-chain transactions with major blockchain assets, which is not available to many opponents such as Uniswap (cross-chain will be explained in detail later).
Different from the automated market maker model (AMM) adopted by Uniswap, Sifchain adopts a hybrid model of "liquidity pool and order book", which is more in line with the operating habits of centralized users and has a better depth. Also, Sifchain supports margin trading. Users can use the existing margin to do long/short cryptocurrencies to amplify their profits.
Odaily: Sifchain claims to achieve faster transactions and lower fees. What is the technical support behind it? Specifically, how much can TPS reach, and what is the range of handling fees?
Jazear Brooks：The market continues to tolerate Ethereum’s high fees for now only because there are no new alternatives. Once the Sifchain mainnet goes live, the average user transaction fee will be less than $0.01, dwarfing other Ethereum-based competitors. Even if they can lower fees too, Sifchain will still outperform these rivals.
The technical support behind it is that the underlying technology network of Sifchain is the high-performance blockchain network Cosmos. Sifchain is established based on the Cosmos SDK, uses the Tendermint consensus algorithm, has high throughput and scalability, and can achieve tens of thousands of processing capabilities per second (TPS reaches tens of thousands).
Odaily: The biggest feature of Sifchain is that it adopts a hybrid model of "liquidity pool and order book". Could you please explain in detail how this model works?
Jazear Brooks：Sifchain mainly uses the order book and liquidity pool CLP to complete transactions, supports limit orders and market orders, including stop loss and take profit orders; it also supports modification of limit orders that have been placed but not yet executed to implement tracking orders.
What is the liquidity pool CLP?
To put it simply, it is a transaction pair composed of Sifchain governance token Rowan and a certain cryptocurrency, such as USDC/ROWAN, BTC/ROWAN, and the price of the new token will be set according to the amount of ROWAN in the pool. An obvious feature of CLP is that it can change prices according to market participants' demand for liquidity: when the demand is high, the price increases, and vice versa.
(Odaily Note: CLP is somewhat similar to Uniswap's automated market maker, except that Rowan, the governance token, is introduced for pricing.)
Sifchain's internal asset prices are derived from its CLP. For example, the internal price of USDC/BTC is calculated using the CLP price of USDC/ROWAN and ROWAN/BTC.
When a trader places a market order, it is executed directly against the CLP immediately. When traders place limit orders, their crypto assets are transferred to on-chain custody, and these limit orders also form the order book. When Sifchain's internal asset price moves to the limit order range, CLP will be executed; if it exceeds, it will not be executed, so that traders can get the best price, but it also means that only part of the order may be executed. In addition, Sifchain will prioritize the execution of limit orders based on the number of orders that have not yet been executed, rather than when the order was placed or the price requested.
Odaily: In your introduction, we know that the internal asset price of sifchain comes from its CLP. However, in the recent "Flash Loan" attackers often manipulate the price of AMM to attack and profit. How does sifchain prevent such problems?
Jazear Brooks：In the "Flash Loan" attack, the attacker needs to conduct two transactions on two different platforms, where the price of the first transaction becomes the price of the second oracle for quotation. In the first transaction, he will deliberately exchange ABC tokens for DEF at an extreme price, so that the quotation of ABC:DEF on the oracle platform seriously deviates from the market price. In the second transaction, he will exchange DEF back to ABC according to the extreme quotation, so as to benefit from the arbitrage transaction. However, this behavior is only temporary.
The "flash loan" attack needs to manipulate an oracle machine to achieve it, and it will not interfere with a system like Sifchain. Because the internal asset price in Sifchain is derived from the ratio in the liquidity pool (CLP), rather than based on an external oracle. In addition, there will also be "slippage" in the Sifchain system. If you buy an extreme amount of tokens, it will cause high fees due to high slippage. This means that Sifchain is also useful as an oracle for external exchanges.
Odaily: Based on the Cosmos IBC protocol, Sifchain can realize cross-chain transactions. Could you please introduce Sifchain's cross-chain process and its goal planning in detail?
Jazear Brooks：Sifchain's cross-chain is a "notary mechanism + side chain hybrid" technology - we plan to achieve this goal when Cosmos truly supports IBC (cross-chain communication protocol). We've been trying to get the IBC running for a while, but it still needs some polishing before we can actually use it.
Next, let’s introduce our cross-chain implementation process in detail. We need to introduce two concepts: source chain and pegged chain. The source chain is ETH, BTC and other blockchains that want to cross-chain assets, and the peg chain can be understood as a mapping chain.
Alice wants to transfer her source chain tokens from the source chain (BTC) to the peg chain. She needs to, first send these tokens to the lock group on the source chain, which holds the tokens and generates a lock event; the peg chain is informed of this event through a relay process. It then interprets this event and creates and mints new pegged tokens (cBTC), distributing them to Alice. Alice now holds custody of these pegged tokens, which are the equivalent of the source tokens.
If Alice wants to get back the source token BTC, she can burn the peg tokens (cBTC), remove them from the peg chain, and a burn event occurs. Through a relay process, the original source chain is notified of the burn event, which will interpret the event, remove an equal amount of these source tokens BTC from the lock group, and send them to Alice.
This is the basic implementation steps of cross-chain, if you want to know more information, you can click the link below:
General case model:
https://docs.google.com/document/d/1Sq3zeUZ09438lsjIM1VJqLlel4FHSNIv_RbRRhboRyM/edit
Model extension:
https://docs.google.com/document/d/1pZjyQo4THIf-Y9NwZs3JDvUvw1UaBP353TXhn5OJb9w/edit?usp=sharing
ADR on Sifchain:
https://github.com/Sifchain/sifnode/blob/develop/docs/adr-001-peggy-with-sifnode.md
Odaily: In fact, in addition to Sifchain, there are other protocols/projects (such as Kava, Ren, etc.) on the market that focus on cross-chain. Compared with these competing products, what are the differentiating advantages of Sifchain? How to attract more projects to build on Sifchain?
Jazear Brooks：Our competitive advantage is that no other project currently targets full-chain cross-chain. There are several separate projects targeting cross-chain Ethereum, but none of them are trying to make the full chain — which could capture over $800 billion in market capitalization in the crypto market — a standard.
We will be the first to launch a network compatible with Ethereum in the Cosmos network, which will not only bring the liquidity of Ethereum to Sifchain, but also bring the liquidity of Ethereum to other Cosmos projects such as Kava and Akash.
In addition, there are currently no other projects that can support both margin trading and limit orders in DEX (Sifchain can).
What we think about is that over time, the team will slowly transfer control. There are some projects that have handed over governance to the community, such as Synthetix and Compound. We respect these communities and want to have strong governance like them. However, we also want to give SifDao some control from the start. This is why we will establish an on-chain fund pool, allowing SifDao to control project development separately from the Sifchain core team through on-chain voting.
We'll explain more in the tweet below:https://twitter.com/sifchain/status/1323162320382517248?s=20。
Odaily: Sifchain currently issues governance token Rowan. Could you please introduce the function and function of Rowan?
Jazear Brooks：Rowan is the governance token of Sifchain. Rowan is distributed to verifiers by the protocol, that is, "block rewards", and verifiers pledge Rowan to participate in network consensus.
Rowan is also the governance token of SifDAO. After the mainnet is launched, all protocol changes will be voted by Rowan holders, and the voting weight will be proportional to the number of tokens held.
Rowan is also the settlement token of Sifchain. Traders must purchase Rowan directly or indirectly to execute trades against CLP, ensuring demand for the token.
Specifically, anyone can create a new CLP by pooling Rowan and new tokens into a pool. The price of the new token will be set according to the number of Rowan in the pool.
Odaily: DeFi applications such as Uniswap once distributed governance tokens to early users. Does Sifchain have any plans in this regard? Will there be activities such as liquidity mining? How to proceed?
Jazear Brooks：We will indeed carry out liquidity mining, please check our token public offering announcement for details:https://medium.com/sifchain-finance/sifchain-public-token-sale-announcement-5a5e9bd9a2a5。
Odaily: Next, what are the development plans of Sifchain? Please answer from the aspects of technological development, project cooperation, and planning of the Shanghai Institute.
Jazear Brooks：We have been developing Sifchain in earnest since June and completed a round of funding from primary market crypto investors in August. Since then, we have been highly focused on developing our testnet: Monkey Bars, which finally launched successfully in October.
Since then, we have focused on upgrading the testnet to the mainnet as quickly as possible. To achieve this goal, we have been implementing development and testing infrastructure at breakneck speed. At any given time, 30-50% of our engineers are focused on infrastructure development.
Sifchain is releasing its second testnet"merry-go-round". It will contain token pools, token swaps, and cross-chain transactions from Ethereum to Sifchain and back. The app is nearing completion and we are ready to allow users to deploy funds on it in January.
Once officially launched, we will go live with margin trading and limit orders, as well as multiple new pegged chains, in Q1 or Q2.
Community question 1: As retail investors, how can we make profits from sif and its technical products? Or how to participate in the Sifchain ecology?
Jazear Brooks：Specifically, there are the following ways:
You can put your tokens into the liquidity pool and earn fee rewards;
You can stake or delegate your tokens to validators to earn validation income through block rewards;
You can trade your tokens and profit from the trade;
At the beginning of the project, you can also obtain liquidity mining rewards through staking, trading, and delegation;
During the public sale of tokens, even if you do not buy tokens yourself, you can earn referral fees by recommending others to buy them.
Community question 2: The goal of Sifchain is to connect 20-25 blockchains across chains. How to achieve this?
Jazear Brooks：First of all, we have a large number of experts in cross-chain development. Compared to funding projects from the Interchain Foundation, web3 Foundation, and other projects such as Thorchain, few teams have deployed as many cross-chain projects as we have.
Second, we hope to build cross-chain projects for some multi-purpose blockchains, such as Ethereum, Ethereum Classic, Bitcoin, and Bitcoin Cash. Through continuous development, drawing on our expertise, we expect to be able to build bridges of communication over time. At the same time, we also hope to cooperate with other excellent teams to further accelerate our development. For example, we have been paying attention to projects such as Rosetta and cross-chain bridges.
Community question 3: Many DeFi projects have been hacked recently. What measures does Sifchain have in terms of security?
Jazear Brooks：If you want to know the latest situation of Sifchain, you can follow the official Twitter and website.
If you want to know the latest situation of Sifchain, you can follow the official Twitter and website.
Medium：https://medium.com/sifchain-finance/sifchain-biweekly-update-5d0a9b846507
YouTube：https://www.youtube.com/channel/UCybJH9xaQx0cemM9_S8ZInA
