5 min. read
June 16th, 2021
The increased congestion of the ethereum network during the latest market bull run was hard to ignore, with gas fees soaring and the rollout of Eth 2.0 still being an incremental process. Subsequently, there has been growing adoption of more efficient side- and alt-chains that provide similar smart contract functionality at a fraction of the cost of Ethereum. Networks such as Polygon, Solana, and Fantom are offering reduced gas fees and faster transaction times (though at the cost of certain trade-offs).
Although these separate blockchains solve critical issues that plague the Ethereum infrastructure, their increasing popularity represents an ongoing trend of ecosystem fractionation in the cryptocurrency space as a whole. The ongoing emergence of competing (and companion) chains dates back to the Bitcoin block size debate and ensuing hard fork of the Bitcoin blockchain. The advent of Ethereum, and easily-mintable ERC-20 tokens along with it, further increased the potential number of chains, coins, and tokens to choose from and commit to.
This "ongoing fractionation" is actually beneficial to the trial and adoption of new and alternative technologies. Free choice is integral to free markets. Moving assets from one chain to another, though, is often an expensive or complicated process. Bridges between chains can lack liquidity, contain smart contract exploits, or only support swapping a small subset of coins.
The Thorchain blockchain and its companion DEX, Thorswap, are en route to resolve the issue of cross-chain swaps once and for all. The Thorswap UI supports high-liquidity cross-chain swaps of native coins without the need for wrapped tokens or bridge dApps.
Fees are charged in the native token of the chain that is being swapped from. For example, swapping from BEP2 BTCB to native BTC incurs BEP2 BNB gas fees.
Users supply liquidity by contributing to non-custodial pools. Coins are paired with RUNE, Thorchain's native asset, instead of other coins in order to prevent scaling and valuation issues within the Thorchain network. The developers have placed hard caps on Thorswap's liquidity pools to ensure that any bugs are worked out before the service is widely adopted. Whenever the caps are raised, the pools fill almost immediately - a testament to the public hype and growing awareness of the value that Thorchain offers.
Thorchain is an important contribution to the cryptocurrency community because it offers non-custodial cross-chain swaps with reliable liquidity. Cross-chain swaps have historically been relegated to custodial exchanges that possess the required liquidity through massive on-network trade volume.
Thorchain bypasses the custodial element of exchanging cross-chain assets. In doing so, the process is simultaneously made more opaque to outsiders and more transparent to those involved in the transaction process. Instead of the user(s) being shown a loading screen while exchanging assets, the transaction can be traced through the blockchain from start to finish. Beyond fiat onboarding, KYC may become a thing of the past as tracking network participants becomes completely unecessary.
The con of transactional transparency is that anyone can view your wallet's holdings, so long as they know the corresponding public key. Coins such as Monero and ZCash have obfuscation capabilities that are able to hide the identities of wallets involved in transactions. However, CEXs generally make trading in private currencies difficult, if not impossible. The trade of anonymous currencies on government-regulated platforms poses obvious legal risks to CEX operators. It also poses a threat to the statist thesis that privacy is merely an asset to criminal behavior.
The Haven Protocol, an open-source fork of Monero, bears similar privacy attributes. Haven does this while expanding on the concept of private assets in a way that makes it extremely useful to DeFi.
Haven's native coin, XHV, is burned to create synths (synthetic assets) that are pegged to real world assets, such as USD and gold. Decentralization is maintained by relying on Chainlink oracles to peg synth valuations. This is in contrast to the centralization risk posed when synths are backed by physical assets or the trust of an intermediary entity (such as is the case with USDT - Tether). Haven offers a unique web wallet that allows users to store their xAssets (Haven synths) in a private, untraceable fashion. Assets such as xUSD and xAU can be exchanged in-wallet, without even need for an exchange.
This combination of private stablecoins with a private wallet creates a truly anonymous store of value safe from the volatility of asset markets - and protected from the perils of government bureaucracy.
If only there was a way to privately exchange xAssets with non-Haven coins...
Well, that's exactly what the emerging alliance between Haven and Thorchain will allow investors to do. Soon, the trading of xAssets will be supported on Thorswap, providing decentralized liquidity to anonymous stablecoin assets. The impending release of the Haven debit card makes this partnership even more exciting.
Citizens under threat from an authoritarian government or similar criminal organization now have access to a completely private hedge against coercion and hyper inflation. This development will revitalize the viability of cryptocurrencies as an alternative to the fiat economic system. Erik Voorhes, Bitcoin veteran and CEO of the exchange Shapeshift, seems to think so too.
Note: This article was written out of genuine interest in the protocol(s) described. I did not receive any endorsement, paid or otherwise.