The cross-chain bridge protocol Stargate’s total lock-up volume (TVL) has recently exceeded the $5 billion mark, reaching $549.9M, making it the most popular cross-chain project on Polygon and multiple public chains, and the fastest-growing DeFi project in TVL. At the same time, the price of Stargate token STG has also increased by about 4 times in a few days, and the current price is $4.18.
Stargate was launched on March 18 by LayerZero Labs, a cross-chain interoperability protocol development team, as LayerZero Labs’ first application product built on LayerZero. LayerZero completed a $6 million financing in September last year. Multicoin and Binance Labs jointly led the investment, and Sino Global Capital, Defiance, and Delphi Digital participated in the investment.
In addition to the star investment lineup, 0xMaki, the former head of SushiSwap, and Alameda Research, an investment institution under SBF, have also created momentum for it recently: On March 16, LayerZero announced that 0xMaki will join the team full-time and serve as chief strategic advisor; Alameda Research is in the In Stargate’s ICO, it took all the shares of this round of sales (100 million pieces, accounting for 10% of the total STG issuance).
Product experts and giant whales entered the market with a high profile, what did they see? What is the underlying mechanism of Stargate? How is it different from previous cross-chain bridge solutions? For a long time, the cross-chain bridge has been the hardest hit by hackers. Can the new mechanism bring security?
Background and underlying mechanism
Stargate is positioned as an “asset cross-chain bridge”. Like LayerZero, the cross-chain interoperability protocol standard, the development team comes from LayerZero Labs.
LayerZero is a general information cross-chain transmission protocol created by the development team. It can be understood as similar to the TCP/IP protocol in Internet communication. It is positioned as a “protocol standard”. Based on this standard, various targeted application products. Stargate is the first product launched by the team that applies this protocol standard, specializing in cross-chain transmission in the field of assets.
Regarding asset cross-chain, the premise that needs to be understood is: cross-chain bridges do not really transfer the same asset from one chain to another chain, but lock assets on one chain and transfer them on another chain. Release equivalent assets of the same kind or issue equivalent asset substitutes.
Therefore, in general, cross-chain products usually provide two functions, one is asset liquidity pool, and the other is message exchange (that is, chain B can know and confirm the asset transmission requirements on chain A).
In terms of message exchange, Stargate adopts LayerZero’s communication mechanism. LayerZero’s official website describes its mechanism as:
LayerZero is an on-chain endpoint (endpoint, essentially a series of smart contracts) that runs ULN (Ultra Light Node), a configurable client application.
LayerZero relies on two components to transmit messages between on-chain endpoints: oracles and repeaters. When an application sends a message from chain A to chain B, the message first arrives at the endpoint on chain A, and the endpoint notifies the (application-specified) oracle and repeater of the message and the destination chain it is about to reach .
The oracle forwards the block header to the endpoint on chain B, and the relayer is responsible for submitting the transaction proof. After the transaction proof is verified on the target chain, the message is transmitted to the target chain.
Among them, the oracle (Oracle) is a third-party service, which is used to verify the validity of the transaction proof on the other chain by sending the block header (Block Head) to another chain. Currently, LayerZero mainly uses ChainLink in practice.
Relayer is an off-chain service. In theory, users can also build their own relays. In early practice, LayerZero will provide relay services. To ensure that transactions can be delivered efficiently, LayerZero believes that oracles and relayers must be independent of each other.
In terms of asset liquidity, Stargate claims to provide a “unified liquidity pool of native assets” to maximize capital efficiency.That is to say, instead of using separate, segmented liquidity pools for specific networks and specific trading pairs, Stargate shares liquidity across chains, and all chains share access to the liquidity of each other’s chains. If there is a USDT pool on Chain A, USDT-related transaction requests initiated by other chains such as Chain B and Chain C can use the native USDT asset pool of Chain A.
Some projects have adopted this model before, but the disadvantage of this model itself is that the user’s cross-chain transaction request may not be successful. For example, when user 1 sends a request to cross a certain type of asset from chain A to chain B, user 2 of chain C also wants to transfer the same type of asset to chain B and the cross-chain scale is large, because the transaction confirmation of chain C Faster time will cause this user to greatly reduce the liquidity and depth of this asset on Chain B, which may cause User 1’s cross-chain request to fail within a certain slippage.
Stargate claims to address this weakness. Stargate’s solution is to introduce the “Delta (Δ) algorithm”, a novel resource balancing algorithm that not only achieves unified native asset liquidity on all chains, but also ensures that cross-chain requests will be successful.
According to the Stargate white paper, each chain in the network maintains a single liquidity pool that is “soft-partitioned” into multiple slices that belong to other remote chains in the network. For example, in a network consisting of Chain X, Chain Y, and Chain Z, the $100 of liquidity available locally on Chain X would be “soft-divided” into $50 belonging to Chain Y and $50 belonging to Chain Z.
How does the Delta algorithm prevent the liquidity pool from being overdrawn? Stargate borrows and returns liquidity between these “soft partitions”, algorithmically keeping these partitions in balance in the face of unbalanced transaction volumes. However, how effective this algorithm is in balancing liquidity remains to be verified.
3 innovations from Stargate
In the article “Chain Interoperability” by Vitalik 2016, cross-chain technologies are divided into three categories: hash time locks, witnesses, and relays. This classification is still generally applicable to cross-chain products on the market.
Among them, the hash time lock (and other external coordination middleware) has been less used in the current market due to the limited functions and services.
The cross-chain bridge products on the market basically adopt the “witness” or “relay” scheme.
According to different verification methods, “witness” can be understood as “third-party verification”, usually by some reputable institutions to carry out multi-signature custody of cross-chain assets, or to build an intermediate blockchain network to handle cross-chain transactions. Some consensus or logic; “relay” can be understood as “native verification”, that is, to verify whether the message comes from the source chain, and if so, perform the operation.
The “light node” mode is the most common “relay” solution: the light node client of the other chain is deployed between the two target chains, and the transaction of the other chain can be verified by verifying the block header.
The LayerZero protocol adopted by Stargate can be understood as an “enhanced version of the light node mode”, so they call themselves “ultra-light nodes”. The enhanced part is that LayerZero’s clients (i.e., their so-called “endpoints”) don’t deploy block headers for all blocks on each other’s chains, “you don’t need to fetch every block, many of which you don’t care about. , you can transmit a single block on demand for the transactions you care about.” LayerZero co-founder Bryan Pellegrino introduced in an interview with Coindesk.
With LayerZero and Delta Algorithms, Stargate promises the following innovations in terms of transaction costs, security and composability:
1、Improve efficiency and reduce costs
According to a research article by Sino Global Capital, cross-chain designs with intermediate chain layers often come with additional computation, consensus and/or intermediate tokens. These are inefficient and unnecessary, increasing security concerns and throughput limitations. LayerZero attempts to add as little additional complexity as possible while still maintaining the security of trust-minimized communications.
In the simplicity of LayerZero’s design, neither relays nor oracles form any consensus or verification, they simply transmit messages. Since all verifications are done on their respective source and destination chains, the speed and throughput limits are entirely dependent on the properties of both transaction chains.
In addition, compared with third-party verification, the “light node” mode has higher verification accuracy and is closer to a trustless state. However, the reason why this model has not been widely used for a long time is because on the one hand, not all underlying architectures of blockchain networks support the realization of light node clients; on the other hand,When deploying a light node client on Ethereum, the gas fee is usually high, which is not suitable for ordinary users’ daily transactions.
2、It is more difficult to do evil, and it is expected to divide the security risks of the entire ecology
In LayerZero’s verification mechanism, it is necessary to combine the block header and transaction proof for cross-verification, and the entire verification process is completed.
Therefore, hacking can only happen if there is malicious collusion between the oracle and the relay network. Pellegrino concluded: “In the worst case, the system is as secure as Chainlink, which is a very good worst case scenario.”
In addition, in LayerZero’s design, both oracles and repeaters are permissionless to use, and individual applications can choose their own oracles and repeaters, providing the advantage of isolating the protocol and the risks borne by its users.
Since the attack must be performed jointly by a specific oracle and a specific repeater pair, any other protocol that does not have the exact same oracle-repeater pair will not be affected. This effectively divides the risks assumed in any ecosystem into narrow bands of “application-specific risks”.
In terms of oracles, Stargate currently uses Chainlink, but according to the chain catcher, LayerZero may provide services similar to “oracle aggregation” and “relay aggregation” in the future. Different project parties can choose different service suites to reduce systematic risks of.
3、Composability, convenient user experience
According to the Stargate blog, Stargate unlocks true composability, and any application can now perform all operations of cross-chain transactions by wrapping a cross-chain bridge that enables the Delta (Δ) algorithm.
For example, suppose a SushiSwap user wants to exchange wBTC on Ethereum for JOE on Avalanche. In this case, they can now do this in a single transaction on the source chain without leaving the SushiSwap interface. This provides a complete unified experience for multi-chain applications like SushiSwap, Abracadabra, etc.
A few days ago, 0xMaki and others have initiated a proposal on the Sushi governance forum, suggesting that SushiSwap integrate Stargate to facilitate the transfer of native assets between multi-chain networks.
$STG total 1 billion
——350 million owned by the team and early investors, locked for one year, and linearly unlocked for two years.
——303.9 million locked in the future to the community. At present, there are about 100 million in circulation, and the specific costs are as follows:
Including: ——The public auction of 10 million tokens (to be locked for one year), which is expected to last for 48 hours and cost 0.25U. It was sold out by 2 transactions within 5 seconds of the start, and then Alameda admitted that they bought it, and said on Twitter that it would not sell for 3 years.
From the perspective of the STG protocol itself, as long as the funds are transferred through the protocol, $STG charges a 0.06% service fee, of which 3/4 goes to the LP and 1/4 goes to the national treasury, and can be voted directly to the $STG holders (not yet implemented). , but can be implemented).
At present, the cross-chain demand for various funds is huge, and $STG (Chinese name “Stargate”) can support all networks in the future, including ATOM, LUNA, SOL, DOT, FTM and other networks. At that time, STG holders may have the opportunity to obtain extremely high passive income.
How to get STG
- The current STG price is 4.18U (April 1), whether it is optimistic about the long-term or short-term, it is a good idea to use stablecoins to participate in single-coin mining to obtain $STG – almost no risk compared to direct purchase (except for contracts itself), which is why the liquidity reached 330,000 in just a few days.
- Liquidity market making gets additional rewards. SWAP on the 7 chains provides liquidity for market making. In addition to the LP income from normal market making, users can also get additional block rewards, which are divided into three stages. Today is the end of the first stage.
Market making beware of impermanent losses – if you don’t know what it is, it’s best not to make a market.
- DEX buy
If you want to buy on DEX, it is recommended to go to Curve to buy on the ETH chain, which has the greatest depth.