Andrew Kang, the co-founder of Mechanism Capital, recently tweeted the news of Mechanism Capital’s opening of CELR and explained the reasons. He said that Layer 2 is not a winner-take-all field, and shared Mechanism’s holdings and investment projects in this field.

The content of the tweet is as follows:

1/ We recently opened a position in $CELR

There is no doubt that we are in a multi-chain world, and cross-chain bridge projects like CelerNetwork are very important infrastructure and applications for users.

2/ There are billions of dollars of funds flowing on the chain every week, most of which happen through centralized bridges and exchanges, but there is currently an upward trend in cross-chains through decentralized bridges.

3/ As on-chain applications such as Solana, Avalanche, Arbitrum, Fantom, and Polygon begin to take off, there is a need to transfer funds across chains for mining, transactions, etc.

This demand is reflected in an increase in the number and volume of transactions on Celer Bridge over the last month.

4/ While POA bridges, Rollup exits, and CEXs can also do the job, the process requires multiple steps or takes a lot of time, and in crypto, time is money.

If blockchains were countries, these slower bridges could be thought of as freight trains, while the decentralized solution would be high-speed rail.

5/ Currently, Celer is running on cBridge v1 with current transaction volume facilitated by only $6M TVL (representing a 300% daily turnover rate).

Currently without incentives, this level of TVL earns 45% APR for cBridge nodes, which charges on par or less than other bridges.

6/ In the current HTLC design, liquidity providers must themselves be running nodes. In cBridge v2, we expect liquidity and network throughput to expand significantly as delegated liquidity provisioning and liquidity mining are enabled.

7/ In traditional designs, LPs either operate trustlessly through HTLCs (cBridge v1, Connext, etc.) or trust validator groups (Thorchain, Synapse, Ren, Chainflip).

It has not yet been proven that a fully trustless set of validators will be able to secure multiple on-chain assets.

8/ Celer cBridge V2 expands the scope of the design to allow LPs to choose the security assumptions they want to adopt

9/ We believe Celer will be able to build a moat/brand in the space as they currently offer the broadest utility in terms of number of supported chains and assets. They are currently the only bridge that provides liquidity for stablecoins and ETH.

10/ This is not a winner-take-all field. Like L1, the lending market, etc., there will be many cross-chain bridges. Sometimes the interest rate of a certain bridge will be better, and sometimes other bridges will be better.

11/ Eventually, cross-chain bridge aggregators like xyfinance and Li Finance will emerge and route liquidity to different places, just like DEX aggregators and OTC platforms do today.

This article is from The Way of Defi, reproduced with authorization.

This article is from The Way of Defi, reproduced with authorization.