If you're reading this, you're interested in learning about Stargate's proposal to provide Sushi with the ability to do multi-chain transactions in a single swap. This comes to us from Stargate through the incredible work laid out by Layer Zero.
What is Layer Zero?
In a nutshell, Layer Zero is a messaging system that would use Oracles and Relayers to verify tokens being sent to the desired contract to carry out chain-hopping.
With a little more clarification, Layer Zero, w.r.t to Stargate, uses these Oracles and Relayers to ensure tokens are equivalently held and released for the parties using the protocol. Dapps like Stargate can use Layer Zero to combine the multiple swaps we currently have to do into a simple transaction for the user – the happy little swappers! Their goal is to make it easier to transfer assets between blockchains without locking, minting, burning, and redeeming assets, which will make the process much more streamlined and efficient.
Wait, I thought we were talking about Stargate!
Layer Zero is what will be under the hood of what Stargate is offering to provide us, but that doesn't mean all the work is done yet for bringing Omni-chain liquidity to DeFi. Protocols like Stargate exist to serve that purpose, whereas Layer Zero aims to maintain the security of a more decentralized-than-current approach to chain-hopping.
The messaging system with Oracles and Relayers provides an extra layer of security, as both parties must verify the tokens are safely at their destination. This security measure is so strong that it would take multiple bad actors working together to bypass it, or a hack involving numerous parties. The Layer Zero points of failure are much more reasonable than some of the previous solutions for bridging in the past.
Stargate is dedicated to building on this base-layer to provide DEXs, like Sushi, with the infrastructure to make cross-chain swapping easier.
But what are the potential benefits to those of us providing liquidity?
Well, currently we see silo-ing of liquidity across all the chains. Liquidity providers have to choose where their liquidity will sit to earn them the most in transactional fees. With the addition of Stargate we could see the opportunity to capture more fees as users are more freely able to move their funds across-chain and do so within the Sushi ecosystem.
Currently, while swapping on Sushi occurs, the bridging process takes place elsewhere and is not captured, nor does it automatically send the user back to the Sushi ecosystem. This leaves us with an intense yearning for a solution to provide and strengthen our offerings as an ecosystem. We all love to use Sushi 24/7, but currently we might have to go to other places for certain items. Perhaps no more for bridging separately?
Benefits for Sushi:
- Users will be able to receive the desired token on the destination chain without having to go through multiple other platforms and doing a lot of transactions.
- As more users come to use Sushi for their cross-chain needs, the potential to increase swaps occurring in its liquidity pools increases.
- With Bentobox, you will have a choice between Trident and Legacy when it comes to your swaps and also deploy assets into strategy.
- A name that reminds us of how amazing it is that we can teleport our tokens from point A to point B in a few easy clicks: Stargate.
Things to Consider:
What are the potential risks to our liquidity providers if a security breach occurs on any of these chains? How will it affect our assets, even though Layer-Zero has extensive security measures in place?
Will all liquidity providers be automatically opted-in to providing cross-chain liquidity, or will it be an additional pool specifically for the task?
The question on everyone's mind is whether our whole platform will be sharing in this risk or if it will be something we opt our tokens into to claim greater rewards. We need to make a more informed decision about our liquidity, and we still have some questions and details to go over.
The current snapshot signal vote is looking favorable for the Stargate proposal. Now is the time to further explore what impacts and potential gains this will bring to the Sushi ecosystem.
Costs to Sushi:
You're probably wondering how much this will cost, but don't worry - Stargate is footing the bill! They're providing all the resources necessary to make this a reality for us. So far, they've been doing a great job in infrastructure and support.
Not only are they offering a kick-back to the treasury for using their protocol, but Sushi would also generate some nice fees by providing the bridging service. The more money goes into the treasury, the more capital available to invest in Sushi's ecosystem development. This will help promote innovation and growth within the Sushi ecosystem, making it a more formidable competitor in the DeFi space.