Hey all, so this idea came up last night in our twitter space, and Abhishek seemed to love it. So here it is:
One of the issues with bringing non-IBC native assets into the Cosmos is that there are already multiple different ways (bridges) to do it, with only more bound to come in the future. So how do we deal with having both axlETH, gravETH in our ecosystem? What’s more, how do we deal when we also have wormholeETH, multichainETH, crosschainETH, etc?
This will create a serious fragmentation problem across dApps and chains in regards to liquidity. This issue will adversely affect both protocols & projects trying to build robust DeFi solutions, and end-users who will have a subpar DeFi experience, or maybe not even try it out at all, if they notice the liquidity is too thin. Hopefully, we all know how detrimental thin liquidity can be to DeFi apps of all kinds.
What I propose, and have been trying to start the discussion around for a while now, is the idea of a Curve ($CRV on Ethereum) style chain that serves to take the various bridge versions of popular bridges, create stable, 3, 4, 5, etc way pools, and use the LP token generated from depositing as the canonical token in the cosmos. Now, this idea, as is, doesn’t quite fit the Comdex model, but I still want to discuss my original vision, and then open it up to discussion on how it may be adapted for Comdex.
Let’s walk through an example with $ETH:
So on this Curve-styled chain, there would be ONE liquidity pool for “Ethereum” it would be comprised of bridged ETH tokens from any and all bridges connecting to the cosmos. So at the moment, it would probably be 50/50 gravETH/axlETH, but it could be expanded later to a 3 pool, 4 pool, etc to support more bridges and versions of ETH.
A user that brought 2.4 ETH (random number) over from ETH would use their bridge of choice, and it would deposit it straight into this curve-style chain and into the ETH liquidity pool, in return, it would give the user a sort of LP token, 2.4 of them to be precise. This token would be called cETH (for both Canonical and maybe for Comdex ) and would be the actual ETH that all DeFi in the cosmos uses.
I see two issues with this, however, though I don’t feel they’re insurmountable.
This would expose all ETH in the cosmos to the risks associated with ALL bridges. If one bridge were to fail or have issues, it could temporarily, or even permanently affect all cETH in the cosmos.
Again, i truly do think there are ways to account for and protect against this, but that would need to be worked out with the utmost care.
If not wildly successful, it would actually be detrimental to its initial goal, in that I would be yet ANOTHER eth token floating around the cosmos, further fragmenting liquidity.
To this, I imagine the best way for this to be implemented would be to meet with and get the various bridges on board, so that when users use those bridges to bring assets over, it automatically sends it to the curve chain, deposits the asset into its respect pool, and then credit the user with the LP token, which is used as the actual asset through the interchain.
I couldn’t help but mention this idea while talking about Comdex’s up and coming stablecoin last night, and since the team seemed to like the idea, well, here I am! This is the very basis for an idea. More importantly, I hope it gets the conversation started on the issue in bold at the top. This may not be the solution, but we need to find one before we run into liquidity issues.