Dubbed as the ‘Gateway’, the substrate based blockchain is currently running a testnet
Decentralized Finance aka DeFi has exploded in popularity and adoption since the beginning of 2020. And money market protocols like Compound have played a huge role in it. Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications. It is currently the third-largest lending protocol with a total value of $11.60 billion locked in DeFi assets — just behind Maker & Aave.
Functionally speaking, Compound protocol works on Ethereum — letting users earn interest or borrow assets against collateral. Anyone can supply assets to Compound’s liquidity pool and immediately begin earning continuously compounding interest. Rates adjust automatically based on supply and demand.
Compound, just like many of its contemporaries used Ethereum blockchain to borrow and lend assets but the ballooning interest in this sector has led to congestion and high gas fees on the ETH network. This limits functionality since most of the other blockchains are excluded. Interoperability between blockchains is something most sought after right now, but we have yet to see a mainstream solution.
To address this challenge, Compound released the white paper for Compound Chain — its next-gen interoperable solution dubbed as ‘Gateway’, back in December. The Gateway testnet has now been live since Mar. 1 of this year. According to Compound founder Robert Leshner, the Substrate-based blockchain is fully embracing interoperability, where application developers build on every base layer and not just Ethereum.
Here are the main features of the novel network:
🡆 Gateway offers the ability to borrow and lend any asset from any blockchain (e.g Ethereum, Polkadot, Celo, Solana).
🡆 Interest is earned and paid in dollars (stable coins), using CASH — native token for Gateway.
🡆 Gateway’s risk engine is more robust, risk is based on the volatility of assets you use as collateral, as well as the assets you borrow — leading to capital efficiency improvements for less volatile assets.
Although similar to functionality like its predecessor, Gateway is a stand-alone blockchain whose entire architecture is built around cross-chain interoperability. Users of the network can can upload supported assets from a variety of independent blockchains through its system of connected “peer” chains.
Each peer chain is connected to the Gateway via a type of contract, known as a “starport” (as shown in the top chart). The starport basically enables the locking and unlocking of assets on Gateway. Once uploaded to Gateway, users can lend and borrow assets between different blockchains. For example, Ethereum assets into their Ethereum wallets using Solana assets, or borrow Celo assets into their Celo wallets using Polkadot assets.
Currently, less than 1% of Bitcoin has been ported to Ethereum using Wrapped Bitcoin solution (WBTC). Imagine the utility of such an arrangement in unlocking the potential of Bitcoin’s $1 trillion market cap access to DeFi.
Originally Published on Medium