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- 1 The different decentralized projects available on Web3 are dApps.
- 2 Stargate is a community-powered protocol looking to create a bridge between different digital assets.
The Web3 ecosystem hosts a diverse number of different decentralized projects where users can trade their favorite tokens. These different decentralized platforms are also known as dApps. The dApps on the web3 ecosystem differ from one another based on the solution they are here to provide and the blockchain network it uses.
In this guide, users will learn about the first dApp to be built on LayerZero. The guide will take users through an in-depth guide on Stargate Finance and some of its unique features.
What is Stargate?
Stargate is a community-powered protocol looking to create a bridge between different digital assets. This bridge will allow users to easily transfer native assets across different networks. Stargate is built on LayerZero which has the first dApp solution on it.
LayerZero is an Omnichain interoperability network that allows easy cross-chain connection. This connection is used in developing Stargate to develop an operable cross-chain swapping mechanism. The vision of Stargate is to make the transfer of cross-chain liquidity a seamless process that can be done using one transaction.
The current dApp using a cross-chain bridge solution depends on minting its own wrapped version of an asset available on other chains. For example, if users want to buy an Ethereum token on the Bsc network, they can only purchase the wrapped version.
On Stargate, users can access the liquidity pools of different chains such that they can receive the native token with different chains on it and not some wrapped version of the token. This will help eliminate situations where there is low liquidity in a DEX to unwrap tokens and prevent users from paying extra fees to unwrap them. Recently, Stargate recently surpassed one million transfers and over $4.5B in volume since launch.
Solving the Bridging Trilemma
Providing a solution to the underlying bridging trilemma is what Stargate was specifically designed for. When looking at previously designed bridges that connect two blockchains together, they use a mechanism known as fractured liquidity. Fractured liquidity requires that separate pools are created and maintained for different tokens that need to be bridged.
When using this mechanism, each chain manages its own liquidity pools, which is an unnecessary complexity for a simple task. To resolve this, a unified liquidity approach is used to allow deposits and withdrawals from other blockchains to originate from the same liquidity pool. However, this comes with some difficulty.
The major challenge with unified liquify is ensuring that tennis actions are completed instantly. If multiple transactions withdraw funds from the same liquidity pool at the same time, the pool must have enough funds to cover all of them. If in case, the pools run out of liquidity before the transaction is completed, the benefits of a shared liquidity pool will be lost.
Since Stargate is built on the LayerZero network allows it to solve the bridging trilemma problem by using LayerZero’s ability to properly transmit information. This facilitates the connection of liquidity across various blockchains and improves the overall efficiency of the pool.
With the help of LayerZero, Stargate users can provide liquidity on a single blockchain. After this, an algorithm divides the liquidity among other interconnected blockchains. This effectively resolves the trilemma by ensuring immediately guaranteed finality, seamless native asset transactions, and unified liquidity.
Instant Guaranteed Finality
When users successfully complete a transaction from a source blockchain, instantly guaranteed finality guarantees that such transaction will arrive on the destination chain. This is achieved with the help of the lock+mint and burn+redeem mechanisms which allow assets to be newly minted on the destination blockchain.
Native Assets
Stargate makes one-for-one native asset swapping available across different blockchains that can access the unified liquidity pool instead of converting them to wrapped assets that normally require additional fees and extra time to acquire desired assets. As a result of these features, users no longer need to delay transactions because of inadequate liquidity or issues with wrapped tokens.
Unified Liquidity
Stargate allowed shared access to a single liquidity pool across different chains. This will create diverse liquidity for users that trust in the bridge’s reliability. Unified liquidity decides if the liquid on both chains can be uniformly utilized. The number of blockchains from which transactions are performed depends on the total number of different pools available. The more the blockchain, the more the pole which significantly lowers the capital efficiency.
The Possibility of Composition across All Chains
Stargate allows instant trading between any asset on any network and any asset on another chain with just a single click. To swap on Stargate, one should follow the given steps:
- Go to stargate.finance.
- Connect your wallet to Stargate.
- Select transfer in the navigation bar.
- Select the token, from the network to the network, and the total amount.
- Then, click approve.
Users can also use the swapping to move STG tokens across different chains. Also, it is noteworthy that no protocol transfer fee is associated with the transfer and one is only required to pay gas fees.
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational ideas only and do not establish financial, investment, or other advice. Investing in or trading crypto or stock comes with a risk of financial loss.
Bamidele Sodeeq is an experienced writer and journalist with three years of expertise in the field. He has contributed to renowned publications such as oobit, playtoearndiary, and Dapp playstore. Sodeeq specializes in crafting captivating content covering topics like cryptocurrency, blockchain, and FinTech.
His work has gained recognition and has been featured on various platforms. Apart from writing, Sodeeq also enjoys watching football matches.
Connect with Bamidele Sodeeq on LinkedIn for updates on his latest ventures.
