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Cross-chain rising star Stargate solves the "impossible trinity of cross-chain," stablecoin mining benefits over 15%

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Cross-chain rising star Stargate solves the "impossible trinity of cross-chain," stablecoin mining benefits over 15%

In this era of flourishing multi-chain development, cross-chain asset technology has always been a focus of development. However, in recent times, many cross-chain protocols have suffered heavy losses from hacker attacks, leading many to question the security of cross-chain transactions. Nevertheless, the cross-chain bridge Stargate on the LayerZero full-chain interoperability protocol, which went live about two weeks ago, has attracted over 3.7 billion TVL. Star venture capital institutions such as Sequoia Capital, a16z, and Coinbase Ventures have all invested in it. Let's take a look at the functions and unique features of this rising star in the cross-chain field!

Interoperability Protocol ── LayerZero

Before diving into the topic, let's take a look at the underlying protocol of Stargate, LayerZero. Developed by the LayerZero Labs team, LayerZero distinguishes itself from most cross-chain protocols by calling itself an omnichain interoperability protocol rather than a multi-chain one. This means that LayerZero allows more than two chains to simultaneously conduct cross-chain message transmission and aims to interconnect smart contracts on any chain with smart contracts on any other chain.

The core concepts are as follows:

LayerZero serves as an Ultra Light Node running on super lightweight nodes and is deployed on the endpoints of the chain's User Application (UA). It relies on oracles and relayers to transmit messages between the endpoints of the two chains.

When one UA sends a message from Chain A to Chain B, the message is routed through the endpoint on Chain A, and then the endpoint notifies the designated oracle and relayer of the message and its target chain. The oracle forwards the block header to the endpoint on Chain B, and then the relayer submits the transaction proof, which is verified on the target chain, and the message is forwarded to the target address.

Introduction to Stargate

Stargate, also developed by the LayerZero Labs team, is the first application based on the LayerZero protocol, claiming to be the first cross-chain bridge that solves the "impossible triangle of cross-chain" issue.

Explanation of the "Impossible Triangle of Cross-chain"

When developers attempt to build cross-chain bridges, they need three key features: Instant Guaranteed Finality, Unified Liquidity, and Native Assets. However, existing cross-chain bridges only meet one or two of these characteristics. The LayerZero Labs team explains this issue in a podcast interview.

Instant Guaranteed Finality: Current cross-chain bridges typically use a "lock + mint" approach when initially crossing chains, meaning assets are locked on the original chain and synthetic assets are minted on the target chain. To transfer assets back to the original chain, a "burn + redeem" method is used, where synthetic assets are burned, allowing redemption of the original tokens.

In this scenario, there is no liquidity issue after a successful transaction submission because assets are minted on the target chain, eliminating liquidity constraints. However, this does not meet the requirement for Unified Liquidity.

Unified Liquidity: If liquidity between cross-chain bridges is not unified but paired, it requires a pool on Chain A and a pool on Chain B, as well as other pools for A-C, A-D, A-E, and so on. The more chains supported, the worse the liquidity becomes.

However, Unified Liquidity is not without drawbacks. In this situation, the pool on Chain A is bound simultaneously to other chains. When a transaction is sent from A to B, if other chains also send transactions simultaneously and deplete the pool's liquidity, there may not be enough liquidity to fulfill the transaction requests, thus unable to provide Instant Guaranteed Finality.

This also raises the issue of responsibility, such as who should pay the Gas Fee to recover the assets?

Native Assets

As mentioned above, to meet Instant Guaranteed Finality, synthetic assets must be used; to have Unified Liquidity, native assets must be used, but this does not meet Instant Guaranteed Finality.

The three characteristics are interrelated and cannot be fully met, thus forming the impossible triangle of cross-chain.

Stargate Claims to Solve This Problem

Stargate has developed a new resource balancing algorithm called Delta Δ, which is not detailed officially but can unify the liquidity of all native blockchains while providing Instant Guaranteed Finality. Therefore, it solves the two previously incompatible features and eliminates the need for synthetic assets.

Moreover, over 95% of cross-chain operations will be completed and driven by applications rather than users, allowing users to complete cross-chain operations with a single operation after selecting assets and target chains.

Stargate Features Overview

Stargate cross-chain bridge officially launched on 3/18. According to DeFi Llama data, it has accumulated over $3.7 billion in TVL, with the highest TVL on Ethereum, approximately $1.1 billion.

1. Transfer Cross-Chain Function

Upon opening the app, users can see the most important cross-chain function, which is quite intuitive to operate.

Currently, there are 7 chains to choose from, with plans to support non-EVM compatible chains like Solana and Terra in the near future.

However, the current available assets for cross-chain transactions are only two stablecoins, USDC, USDT, and the Stargate platform token STG.

2. Provide Liquidity Pool

Users can choose different liquidity pools to provide liquidity, all of which are stablecoin pools and only require single-asset deposits. By providing liquidity, users receive LP tokens and earn protocol cross-chain transaction fee rewards, which are stablecoins.

The pools with the highest liquidity currently are the USDC pools on Ethereum and Avalanche, followed by the USDT pool on the BNB chain.

3. Liquidity Mining Farming

After users receive LP tokens by providing liquidity, they can use them for liquidity mining and earn STG rewards. The current APY is almost always above 15%, making it a good return for stablecoin mining.

4. STG Staking Stake

In the future, Stargate will also introduce STG staking, similar to Curve's ve token model. When staking, users need to choose the duration, ranging from one month to three years, and the longer the staking period, the more veSTG tokens they receive.

veSTG will serve as the governance token for Stargate, with more holdings providing more governance weight.

Stargate Backed by Sequoia Capital, a16z, FTX Ventures

Sequoia Capital, a16z, and FTX Ventures jointly led a $135 million Series A+ funding round. Previously, the team had received funding from Coinbase Ventures, PayPal Ventures, Tiger Global, Uniswap Labs, Binance Labs, Multicoin Capital, and Sino Global Capital.

Initial Token Sale Acquired by Alameda

Prior to its official launch, Stargate conducted its first token sale, auctioning off 100 million STG tokens at a price of $0.25 each. However, all tokens were quickly sold out shortly after the auction started, with only two successful transactions. This situation occurred because Stargate did not limit the purchase limit, leading to whales buying up the tokens.

However, a few days after the token auction ended, Sam Trabucco, CEO of Alameda Research, tweeted, "We did indeed buy all the tokens. We like this team and what they are doing, and we believe the field and the technology they are building are very important."

Additionally, Sam Trabucco pledged not to sell any tokens for three years and relinquished voting rights in veSTG to ensure a more equitable distribution of voting rights among early community members.

The price of STG has continued to rise since the initial sale, currently at around $3.5, nearly 14 times higher.