What Is Your Favorite dApp Thinking About? Check Out the Forum Post, Anon
THE CROSS-CHAIN INSIDER
Hey!
Welcome to our latest blog series, where our two researchers, Mark and Arjun, write about weird, niche cross-chain topics they come across as they scour the internet reading whitepapers, governance forum posts, threads, and, well, the occasional book or three.
When thinking about the cross-chain space, much of the discussion is focused on how chainA will talk to chainB and how person W can move asset X to chain Y from chain Z. These topics should be discussed. If you are looking for stuff like this, you should check out our Medium page – it’s all we write about.
However, there is soooo much more going on in the cross-chain space now than just bridging, and we want to keep you guys informed on some of the weirder, fun-stuff we come across. Hence, this blog will be kept casual, light (like a client), and hopefully engaging, rather than academic.
So, without further adieu, let’s get to our first blog post.
What Is Your Favorite dApp Thinking About? Check Out the Forum Post, Anon
dApps play a significant role in the “cross-chain” world, as they have to deploy on multiple chains, worry about fragmented liquidity, and attempt to bootstrap a multi-chain governance system.
One of the biggest (and wholly unreported) trends in the crypto space right now is dApps talking about and acting upon plans to go cross-chain in their governance forums. We think you should be paying attention.
This article dives into how three well-known dApps are approaching the cross-chain space.
Compound: Finally Leaving Ethereum
Compound is a money market protocol. It allows DeFi participants to borrow and lend a wide variety of tokens using an algorithmic, autonomously generated interest rate.
Compound Labs, the foundation behind Compound, the 8th largest dApp by total-value locked, published code for its forthcoming “Comet” (aka Compound lll) upgrade last week on its governance forum. The codebase hopes to “form the basis of a multi-chain deployment strategy” for Compound, according to Jared Flatow, an engineer at Compound.
With the upgrade, Compound governance can grant usage rights as it sees fit to different entities looking to launch Compound on various EVM compatible via a business source license.
One of Comet's major tweaks is using Chainlink as a price feed provider rather than a custom price feed. This is significant because, as Flatow’s announcement noted, Chainlink is “portable” to chains outside Ethereum.
Ok, but what does this mean? Well, this is a very similar solution to what Uniswap and Aave have implemented.
I liken this type of cross-chain plan to a restaurant franchise expanding to a new country. For example, there are McDonald’s in the US and China. They are technically the same company but have to exist in different environments from a regulatory and customer perspective. The same thing happens for dApps launching codebases on new chains: they are essentially the same dApp, except they have to function under the parameters of the chain they launch on regarding throughput and client base (smaller chains = more degens, etc.).
On Twitter, Boyan Barakov, a blockchain developer for Fuji Finance, explained that “the highlight of…"Comet" is the introduction of lending markets with single borrowable assets. Each market can be seen as a separate protocol instance with its own collateral and liquidation factors.” He added, “This gives the flexibility to create tailored money markets with different flavors and risk profiles deployed across multiple EVM chains.”
Maker: Building Their Own Dang Bridge
MakerDAO is a stablecoin protocol. Anyone, anywhere can print DAI, a token pegged to the dollar, as long as they post an overcollateralized amount of crypto assets in return.
(For the governance forum explorers out there (all fourteen of you (who are probably the same people who kept Synthetix alive before atomic swaps)), it will come as no surprise that a MakerDAO post is being highlighted in this article, as they have one of the most vibrant and expansive governance communities in the web3 space.)
According to a May forum post authored by protocol engineer Derek Flossman, MakerDAO wants to scale DAI but is reticent to leave the decentralized, permissionless nature of Ethereum to do so. Derek believes the crux of the issue is this:
While on Ethereum we tend to ignore the very real technical risks associated with Ethereum itself (e.g. if Ethereum breaks down, the whole DeFi ecosystem including MakerDAO will break - we can therefore consider this to be a systemic risk that we simply accept). When we consider moving DAI or minting DAI on other chains, these risks become real and cannot be ignored by MKR holders.
In addition to the risks associated with implementing an iteration of MakerDAO on another chain, Flossman also points out that the issue of moving DAI across chains adds another layer of complexity due to the different security measures of bridges.
To summarize, MakerDAO is worried about moving MakerDAO contracts to new chains and then moving DAI across those new chains.
The solution? Flossman believes that MakerDAO needs to control the DAI bridging experience – because, Flossman argues, leaving it to bridges to mint DAI use wrapping or lock/mint mechanisms could lead to MakerDAO losing control of their decentralization first ethos.
The end goal of MakerDAO would be to make bridged DAI and minted DAI fully fungible by minting DAI directly on non-EVM chains using native tokens as collateral. From there, a bridge controlled by MakerDAO that makes bridging DAI originally minted on Mainnet to other rollups & chains easy and safe — this will make it cheap for users to use.
It sort of looks like this (from the forum post):
PoolTogether: Multi-chain Governance
PoolTogether is a DeFi prize savings application. Users deposit tokens like USDC, COMP, or ETH into pools, which are then deposited into something like Aave to earn interest. The interest accrued from the pooled deposits is then put into a lottery system, with one depositor receiving the entire pot of accrued interest from the pool over a certain period.
TL;DR – PoolTogether is a DeFi lottery game.
Regarding the cross-chain world, PoolTogether is available across various chains, including Ethereum, Polygon, and Avalanche.
One quirk with the PoolTogether protocol is that users, in addition to having the chance to win the pool prize, are awarded PT tokens for depositing tokens into PoolTogether smart contracts. These tokens give governance rights to holders, who can then vote on changes to the PoolTogether protocol.
Now, this raises an interesting question: how can Ethereum-based PT tokens issued on another chain be utilized in Ethereum voting?
There are a few solutions for this conundrum, but nothing that feels like THE solution. For example, dApps can have a multi-sig act in accordance with a Snapshot vote. While this works if you trust the multi-sig signers, there is no recourse if the multi-sig goes rogue or dormant.
What’s needed is something called, as described by PoolTogether CTO Brendan Asseltine in a recent EIP draft, “multi-chain token signalling.”
Specifically, PoolTogether is looking to mass-produce a solution that would allow token holders to vote and approve state changes across multiple chains – meaning 1) tokens should be able to vote from any chain and 2) whatever changes are approved by the vote automatically get executed on the various EVM-compatible iterations of a dApp like PoolTogether.
As Brendan wrote, “We need a governance system that is flexible enough to add new chains and efficient such that cross-chain messages are minimized.”
The proposal aims to fork the OG Compound-style governance model into a fluid cross-chain structure. From the looks of it, Brendan and PoolTogether would love to see this become an ecosystem-wide solution (rather than just a PoolTogether fix), and they are asking for feedback from the community.
You can read the entire spec here (if you like code and such). Or, if you are more interested in the conversation regarding a cross-chain governance system, you can join in on the discussion here.
Conclusion
So what’s the big idea? What a tremendous rhetorical question, anon.
The big idea is this: dApps are looking to expand their reach across multiple chains.
“Cross-chain” or “multi-chain” (the semantics of this do matter but not for this conversation) is not a “when is this going to happen?” type of thing. It is a “how are protocols going to pull this off?” type of question, and if you are a participant in crypto, then you should be aware of how and why dApps are choosing to utilize different tools, ideas, and money legos in the context of multiple chains.
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