Traditional money exchange is a really simple and obvious concept when looking at the history of money. For example, you visit Europe, you land at the airport and exchange your Dollars for Euros because Europe does not use Dollars in their domestic market. This seems really easy in traditional finance because of the universal acceptance of Paper Money.
The acceptance and ease of exchanging paper money are feasible because of a central authority and world bank. They accept and administer almost all of paper currency/FIAT currency in the world. This results in FIAT being vast and popular amongst the masses.
A blockchain bridge allows the secure exchange of cryptocurrencies having different networks or protocols without the need for a third-party exchange.
A cryptocurrency is a digital currency powered by a database or distributed ledger called a blockchain. Each blockchain is developed on a mechanism, set of rules, or protocols we call a consensus. This consensus defines the features and protocols of a network or blockchain and its interaction with transactions.
These cryptocurrencies have different networks to run their own smart contracts, tokens, or subsets. The most overblown networks today are Bitcoin and Ethereum. These two cryptocurrencies have an entirely different approach towards their networks.
Bitcoin does not have any smart contracts capabilities, there are no other cryptocurrencies/tokens running on the Bitcoin network/blockchain. The coins derived from the bitcoin codebase are not related to bitcoin but somewhat use bitcoin's p2p mechanism or other libp2p implementations.
Whereas Ethereum has a huge list of smart contracts and decentralized applications on its network. This is because of smart contract capabilities and constant development and extension into entirely different ecosystems such as Binance Smart Chain, Matic, Cardano, etc. Ethereum was the first blockchain to introduce smart contracts.
These two networks can not be connected together for the interchange of data hence we need a blockchain bridge to connect two or more networks together while being completely trustless.
The tokens built on Ethereum's network are called smart contracts. These contracts will have the same address as an Ethereum address starting with 0x. They can have different use cases and are classified into a predefined set of tokens such as ERC-20, ERC-721, etc.
These smart contracts can run on the Ethereum network. These smart contracts or tokens can be treated as a cryptocurrency such as USDC which is the crypto version of the US dollar. USDC is an ethereum token always equivalent to one US dollar. To send/receive USDC the network will charge Ether in fee for using its network.
Another Popular Network with smart contract capabilities is Polygon Network. Polygon network can also have pegged tokens or its own version of another cryptocurrency but to conduct any transaction it will use MATIC in transaction fee, making MATIC the primary cryptocurrency of the network.
Ethereum is the most complex network as of today. The introduction of smart contracts and network pegged tokens has increased the network traffic eventually reducing the speed and increasing the transaction fees for transactions. Here are a few reasons why bridges are needed while keeping Ethereum in context.
The dominance of the Ethereum network has somewhat forced most of the cryptocurrency brokers and exchanges to sell Ethereum versions of a cryptocurrency instead of the native version. These versions of another cryptocurrency are called pegged tokens. Every cryptocurrency has an ERC-20 version of it running on the Ethereum Network.
For example, if you buy Polygon from Coinbase, it does not provide you native polygon token but instead an ERC-20/smart contract version of Polygon having an Ethereum address, running on the Ethereum network.
The network traffic has made Ethereum a lot slower and a lot expensive compared to other networks. The biggest competitor of Ethereum is Solano which can perform more than 10x the transactions at less than 100x cheaper rates.
The transaction speeds of Ethereum are currently lower than 48 other cryptocurrencies or networks. This makes Ethereum a really slow network compare to Solano or Polygon.
The average transaction fee of Ethereum is $44 according to BitInfoCharts (Taking an Average of the last 2 years). The prices rose from less than a dollar to $52 as of January 2022 for the last 2 years. This makes Ethereum the most expensive network as of today despite a surge in the market value of Ethereum.
The biggest drawback of the Ethereum network is scalability issues. Bitcoin brought peer-to-peer transactions to the table while maintaining security and keeping a public codebase. This made Bitcoin revolutionary as it served the basic purpose of a decentralized currency.
Cryptocurrencies are built to access for all, without any bounds or restrictions. Bridges will allow Ethereum to scale between networks, solve some security issues whilst introducing new security issues, and connect different blockchains together as a whole to tackle traditional finance and centralized money.
There are 2 different designs of bridges. These classifications can be made on centralized and decentralized characteristics.
The easiest version of a network bridge is a liquidity pool. These liquidity pools are backed by institutions or private investors that lend different cryptocurrencies in order to earn fees. These cryptocurrencies are pooled together and spent/exchanged as ordered by a market maker.
A bit more complex but a decentralized method of network bridge is via smart contract. In this method, a pegged token of another cryptocurrency is developed on the network in exchange for the native coin.
This pegged token will have the same price as the native asset but will not have the same characteristics as the native asset. This smart contract method is mostly used for coins that don't have smart contract capabilities.
For example, renBTC is a token that allows you to hold an Ethereum version of Bitcoin with the same price. This version of Bitcoin can be used within the Ethereum network using an Ethereum address.
A blockchain bridge does not imply a specific method or protocol instead a practice or term for interconnectivity of distinct blockchain networks via different methods.
Blockchain bridges are a need of the moment and many cryptocurrencies are in the works to make functional bridges with secure means to scale their networks and improve onboarding. Verus is also working on a decentralized bridge to connect with the Ethereum network.
Bridges can make cryptocurrencies more popular and widely accepted if not better but near the colossal scale of FIAT acceptance around the globe.
If there was ever a protocol of blockchains that would be anything like Komodo or Verus, it is probably Avalanche at the current time. It is a multi-chain project consisting of a main X-Chain for transactions & creation of tokens as well as the management of the protocol. It is not a blockchain, but a DAG - a different data structure, similar to other behemoths in the crypto space, like Cardano, Nano & IOTA.
Then there is the C-Chain for smart contracts. It is a copy of the EVM allowing developers to move their projects from Ethereum.
P-Chain is the third chain in the AVAX network. It is the "platform chain" for enabling organizations to create "subnets". A subnet is a new blockchain that has it's own consensus mechanism, whether it's PoW or PoS. Subnets can also have their own VMs (as in EVM), to run their own set of smart contracts.
AVAX subnets can be permissionless or permissioned. Sensitive organization data can therefore be shared on the permissioned chain, e.g. payroll or HR info, and the general public data on the permissionless subnets.
The information on this page was summarized from the video of AVAX by whiteboard crypto group.
The transcript of the "what is avax" video is available here on the komodefi github transcripts repo in case the video disappears from youtube and the content is needed for cross reference in the future.
Venus Protocol is an automated protocol designed to bring a complete decentralized lending and credit system onto Binance Smart Chain. Venus declares itself a money market and stable coin platform built on top of the Binance Smart Chain. Venus can be compared with Aave or Maker of Binance Smart chain.
Venus enables users to earn interest on their assets by supplying cryptocurrencies as collateral to the network. These tokens are then borrowed by the process of collateralization. This ensures both safety and incentive to users and the network.
Venus aims to solve all the problems and remove the involvement of traditional finance in the DEFI world. They have developed features that are considered unconventional for most DEFI platforms. This excites a larger demographic towards Venus.
Venus enables the world's first decentralized stable coin, VAI. This coin is built on Binance Smart Chain, backed by a basket of stable coins and crypto assets rather than actual US dollars. This ensures that it is completely decentralized and no monopoly exists in their protocol.
A lot of stable coins are actually backed by US dollars which actually brings FIAT into the play. This process is stable as FIAT currencies are a lot more stable as compared to cryptocurrencies, but somehow eliminates the core concept of cryptocurrencies which is being decentralized.
The decision-making on most DEFI platforms is considered biased while there are stakeholders and private equity firms in play. These adversities are technically making them heavily centralized.
Venus utilizes the Binance Smart chain for fast, low-cost transactions. This overcomes the conventional problem faced by the Ethereum blockchain, which is the heavy fees and slower transactions.
Users can supply cryptocurrencies and stable coins and earn a variable APY for providing liquidity to the protocol. The liquidity provided is secured by over-collateralized assets locked by borrowers. The interest rate, however, is not fixed but based on demand and supply of the particular assets, this can bring some ease for borrowers with lower collateral rates.
The block earns the interest for lending assets and can be used as collateral to borrow assets or to mint stable coins. These stable coins can be used on a platform called Swipe. This platform provides virtual and physical debit cards backed by cryptocurrencies. You can spend on more than 60 million locations worldwide.
The protocol-created pegged assets when collateral is supplied are called vTokens. Users that supply their cryptocurrency Venus receive a vToken. If you provide Venus BTC you will get vBTC token in return. vTokens are created and implemented by Governance processes and voted by Venus Token holders.
These vTokens can be stored in cold storage and can be transferred to other users.
The Venus Protocol is governed by the Venus Token (XVS), which is designed to be a “fair launch” cryptocurrency. There are no founder, team, or developer allocations, and the XVS can only be earned through the Binance Launch Pool project or through providing liquidity to the protocol.
Venus is overall a great platform with still a lot to come. The zero FIAT involvement, protocol governance, better rates, and algorithms allow venus to embrace the definition of decentralized in DEFI.
Different blockchains have a different set of rules for developers willing to develop tokens or projects on their blockchain. If you want to make a token on a popular blockchain, you need to follow their standards. These standards are a set of rules. Below are some popular token standards.
These are some of the most popular standards for tokens. These standards are API callbacks and predefine functions to follow when creating a token. If you comply with these standards your token or coin will be identified from that standard.
There are a lot of token standards in Ethereum alone, but above are some of the most popular and widely adopted standards.
It is a browser-based extension for Binance Chain, Binance Smart Chain, and Ethereum. You can send receive, store on the Binance Chain, smart chain, and Ethereum network. Binance chain wallet also allows connectivity with dApps built on the smart chain.
Binance chain wallet is a browser extension available for Chrome, Firefox, and Brave. It’s easy to use and has a slick UI. The user interface is as easy and fast as Metamask. You can also connect the Binance chain wallet with the Binance trading platform using wallet direct.
Just like Metamask, the Binance chain wallet is also a secure and client-side wallet. The authentications and signing with dApps are secure without providing access to private keys. If you want help and more info you can join the Binance community to get help from thousands of users.
WalletConnect is an open-source protocol to connect between dApps and mobile wallets. A user can simply scan a QR code on the web app and manage funds from their mobile. This makes wallet connect a protocol for both dApps and wallets.
Have you ever used WhatsApp web? You scan a QR code and instantly use WhatsApp on your browser. Let's say Wallet connect is the QR code service for Ethereum wallets.
WalletConnect will convert a mobile wallet to Meta Mask or Binance Chain wallet. You can sign and verify transactions from your mobile that are initiated on a web app.
The protocol establishes a remote connection between two apps or devices. The session is started by scanning a QR code (desktop) or by clicking an application deep link on mobile. Communication happens over a bridge server that relays messages without exposing data.
Wallet connect does not charge any fee. There is no token or blockchain association of any kind. The source code is available on GitHub. There is extensive documentation for developers and deep analysis.
There are dozens of supported wallets. The most popular are Trust, Metamask, Atomic wallet. These wallets support and need wallet connect to provide users access to the Ethereum world.
There are also a huge and popular number of platforms that have integrated WalletConnect. OpenSea is one of the most popular platforms these days.
Pancakeswap is a decentralized exchange running on Binance smart chain. It is also the top spot category liquidity provider for Binance smart chain assets. The total volume is more than $2.15 billion with a circulating supply of 140 million cake tokens. The daily trading volume is more than $1.5 billion.
This platform recently surpassed the world's largest DEX uniswap in terms of trading volumes. Pancake became operational in September last year, despite being fairly new the platform has managed to reach a remarkable user-base with returns and incentives.
It is one of the rapidly growing communities in the Binance smart chain community which is providing users huge incentives, options, and personalized IPO's.
You can do the following on Pancakeswap:
The token swap is as simple and similar to uniswap. This makes the exchange noob friendly, easier to understand for newcomers. To swap tokens simply connect a wallet, select to and from tokens, and exchange.
There is a flat 0.2% fee on a trade that goes to liquidity providers and reserves. The trade execution time is instant due to the block time in the Binance smart chain which is less than 5 seconds.
The liquidity provided to the exchange comes from tokens that are stakes in Pools. In exchange, Liquidity providers get (PancakeSwap Liquidity Provider) tokens or FLIP tokens.
When a trader makes an exchange or swap they pay a 0.2% trading fee. The 0.17% of the fee earned goes to the liquidity pool as an incentive for the liquidity providers and 0.03% goes to the Pancakeswap reserve.
Once you provide liquidity to the example pair above, you receive an LP (Liquidity provider token) with the pair name. For instance, ADA/BUSD for providing BEP-20 Cardano and Binance USD liquidity.
Each token represents the number of tokens from the pair provided. One LP token would mean you have provided liquidity of 1ADA and 1BUSD. The interest earned on the token swap automatically adds up to the token 0.17% each.
Another highly profitable option for liquidity providers to multiply their income is farming. Farming allows LPs (Liquidity providers) to stake their FLIP tokens received for providing liquidity to earn back CAKE tokens.
The coins staked can be withdrawn back any time. There is not a fixed-term for staking your coins to earn profit. The multiplier represents the amount of cake a farm receives per block. If a farm is a 40x multiplier it means the cake received would be 40 per block (depending on the block reward).
There is also a pancakeswap lottery for gamblers. The lottery pool is public and the reward comprises tickets bought by users. To participate users buy a ticket for cake. Each cake will get you 1 ticket consisting of 4 numbers from 1-14. If your numbers match the positions you win. The prize pool is distributed as follows.
There used to be 4 sessions in a day (6-hours a day). An increase in traffic changed the session timing to 2 sessions each day. Each session is 12 hours long and there are a total of 4 sessions. In every 3rd session, the platform injects 20,000 cakes into the lottery.
The lottery contract is public and audited by third parties.
The newer version of the lottery has 2 sessions in a day and 10,000 cakes injected every 4th session. The numbers have changed from 4 to now 6 and each number is from 0 to 9. Visit the site to know more
This platform has a new and unconventional method of fundraising for new platforms. This fund offering allows investors to commit their LP (Liquidity Pool) tokens to an upcoming project. Investors can buy a token sale with flip tokens and claim at the end of the sale, simple.
There is a pancake swap info website to view analytics. The project was audited by Certik which is a blockchain security and auditing platform. They have public information and score of all major platforms. The audit reports are public and anyone can read and review them.
The Binance smart chain (BSC) is a blockchain developed parallel to the Binance chain. BSC is multi-chain and compatible with the Ethereum virtual machine and is designed mostly to inherit smart contracts. It is developed to bring programmability and interoperability to the binance chain.
The Ethereum network is known for being an extensive and expanding blockchain with a growing number of smart contracts. The previous binance chain was incompatible with the ethereum chain from a programmability standpoint.
Smart contract integration could've risked the binance chain. The binance smart chain allows users to build their decentralized apps and digital assets on one blockchain and take advantage of the fast trading to exchange on the other.
Binance smart coin uses Automated market makers and Proof of Staked Authority. This consensus allows BSC to reach a 5 second block time. Users stake BNB coins to validate blocks and receive transaction fees as incentives. BSC profits both stakeholders and liquidity providers.
The automated market maker allows liquidity providers to get their fair share as well. The liquidity providers reserve original assets and traders or takers swap them for a specified fee. This fee is calculated atomically using an algorithm depending on the price movement in the market. Binance smart chain has a minimal fee structure to overcome the Ethereum gas price problem.
The smartest move played in the development of BEP-20. These are similar to ERC-20 tokens but with lower fees. They can be received in the Binance exchange. These BEP-20 tokens can be easily converted into any asset without converting them to the original form.
In the image above you can receive BSC based DAI for a minimum fee. This DAI can then be converted to any other asset without converting it into its original ERC-20 form. The Binance smart chain is not restricted to only Ethereum but has multi-chain assets.
Verus is an open-source cryptocurrency forked from the Komodo blockchain. The Verus Project aims to establish a secure, privacy-centric, fairly-distributed cryptocurrency. The verus blockchain is a Public blockchain as a service (PBAAS) that can be used to develop tokens. This makes verus the ethereum of a bitcoin fork/blockchain.
The verus chain has developed a Proof of Power algorithm also known as VerusPOP. This algorithm (consensus algorithm) is a fusion of both Proofs of work and stake. Both of these algorithms are equally split to create POP (Proof of Power). This algorithm is developed for the sole purpose of creating verus a fair network economy, helping both miners and stakeholders to get incentivized.
Verus uses the UTXO paradigm which is also used by the komodo platform. The UTXO model deduces double-spend attacks. Verus uses komodo's delayed proof of work algorithm so every block generated is constantly being notarized. Proof of power also allows the hash rates to remain constant as the ratio of both Pow and Pos remains 50/50. The 51% attack on a verus blockchain is highly unlikely to happen.
Here are some technical traits of Verus blockchain:
The biggest showcase of verus is zero-knowledge privacy. This protocol is the most modern and cutting edge technology available for anonymous and privacy-centric information interchange.
Verus uses the zk-SNARKs protocol which is developed by the Zcash blockchain. The Komodo platform is a Zcash fork and verus is a komodo fork so indirectly verus can also be called a Zcash fork or an extension.
This protocol allows a transaction between prover (sender) and verifier (receiver) without any interaction. These transactions are accomplished without contradicting the natural rules of a blockchain. Verus has implemented this protocol astonishingly well than any other cryptocurrency.
“Zero-knowledge” proofs allow one party (the prover) to prove to another (the verifier) that a statement is true, without revealing any information beyond the validity of the statement itself. For example, given the hash of a random number, the prover could convince the verifier that there indeed exists a number with this hash value, without revealing what it is.