Chang Jia: By Cross-chaining, Bytom’s MOV Protocol Can be Deployed on Ethereum
According to data from defipulse.com on September 2, DeFi’s locked assets have reached 9.44 billion US dollars. In the past 3 months, this value has increased nearly 10 times.
DeFi, like a lightning bolt, divided the crypto world into two eras. We are entering the second era as we speak.
On September 2nd, Cointelegraph China Marathon season kicked off in Shanghai.
ChangJia founder of Bytom was invited to give a keynote speech.
The theme of his presentation was “MOV, Bytom’s DeFi “World View” where he shared his thoughts about the possible future development path for public chains and DeFi.
In addition, today’s community asserts that DeFi must mention Ethereum, and many practitioners in the space are disgruntled that the domestic public chains have potentially missed the DeFi opportunity. However, Changjia believes that domestic public chains still have opportunities, but if they simply employ the same methods as Ethereum, they will not be competitive.
Bytom launched the MOV testnet on November 25, 2019, which is a public blockchain project that started exploring DeFi very early on in China. As of September 2, MOV has issued 5 types of cross-chain anchored assets including BTC and ETH, and its daily active users rank among the top three in DeFi (DappTotal).
What is the future development path of DeFi?Here is a compilation of ChangJia’s speech, I hope that it can inspire you:
Someone asked me if the original intention behind Bytom has changed now that we are becoming recognized as a DeFi project. Actually no, we have been consistant in our insistance on the vision of asset tokenization.
However, in the past, we simply believed that asset tokenization required confirmation or authorization from a centralized authority. This caused a pessimistic belief that the path would be extremely long, or simply not feasible.
Looking at it now, in fact, it doesn’t need to be so laborious to get assets on the chain. It is practical to synthesize real assets by staking or locking digital assets. There is no need to have an authority to confirm the rights, no need to have the delivery of real assets, and there is no need to use complicated legal documents.
Code is the law, no credit is needed, and staking assets means credit. So today, we have seen a successful asset tokenization project, MakerDAO, which uses sophisticated financial models to anchor the dollar price and then generate stablecoins. In the future, it will not be surprising to see the tokenization gold and stocks.
So, our vision has not changed, and we have made great progress. This is what I want to share today.
The 5 major features explored by the Bytom are integral for the DeFi era
The history of blockchain is divided into three stages.
1. The era of digital currency, for example Bitcoin (2011);
2. The era of registration and issuance of digital assets represented by Ethereum (2017);
3. Issuance of synthetic assets on the blockchain and mapping real assets DeFi era (2020).
Today, the assets locked by DeFi has exceeded tens of billions of dollars, which reflects the rapidly developing nature of the space.
Ethereum has a very strong foundation in the DeFi field and industry rhetoric around DeFi usually centers around the Ethereum ecology. For other public chains to stand out in the DeFi field, they must have their own DeFi philosophy. It is impossible to break through by drawing cats on Ethereum.
The original MOV DeFi philosophy is very clear and it can be said that there are many differences that set it apart from Ethereum.
The characteristics of Bytom’s DeFi can be summarized as the following five features.
1, Engineering mode
2, Asset interoperability enabled crosschain
3, Mainchain-sidechain architecture
5, Customized BUTXO for DeFi
First, Engineering mode. Many people think that the successful children toy “Lego” is a good analogy for DeFi. I personally don’t agree with this analogy. The Building-block-style of Lego certainly has its advantages and the free combination of protocols is very flexible and convenient, and also very cool, but I think it is difficult to build financial infrastructure with the Lego model.
Bytom uses the engineering mode to construct its DeFi protocol. Engineering mode involves the unification of rules, standards, and processes. This means that our DeFi protocols will be uniformly designed so that there will be no contradictions and conflicts between the protocols.
Second, Asset interoperability enabled Crosschain. Using Bytom’s crosschain gateway, you can crosschain your asset to any blockchain. This is because Bytom’s crosschain gateway can handle multiple blockchains at once in one place.
Third, Mainchain-sidechain architecture.
The main-side architecture takes into account security, decentralization, and scalability, and ultimately determines the philosophy of DeFi. The mainchain focuses on asset issuance, and the sidechain focuses on asset circulation. The main chain exerts an ecological effect, and the sidechain exerts a network effect. The development model of the main chain is the market model, and the sidechain is the cathedral model, which is used to design more compact and consistent protocols .
The speed of Layer 2 is significantly faster than the original chain, which can theoretically reach 160,000 transactions per second and has been officially measured at 20,000 transactions per second. The transaction confirmation time is only 0.6 seconds, and the probability of a fork is only 0.27%.
It should also be noted that the transaction efficiency of Ethereum severely restricts the development of the DeFi space. In this regard, the superior transaction efficiency of MOV will be an important value-add for the broader ecosystem.
Fourth, multiple assets. Anyone who wants to fight on-chain assets can’t fight Ethereum, so everyone has to bring in other mainstream assets through cross-chain. We pay more attention to Bitcoin, Litecoin, BCH, Ethereum, and some digital currencies obtained through mining.
These assets are very good for mortgaging. Assuming that your mortgage asset is USDT, it may be seized or frozen. These mainstream assets have not yet entered the DeFi world, so I think there will be a very large application scenario for the intercommunication of such assets.
Fifth, transactions are transfers. In the past, transactions were transactions, and transfers were transfers. However, on Bytom, these two things are the same thing. This is because Bytom uses a UTXO design, that is in the same line as BTC, and the main chain is also a POW mechanism, so there is no historical burden for cross-linking BTC, LTC, and BCH assets. The UTXO model ecological wallet makes it very convenient to develop a DeFi wallet based on MOV.
Bytom MOV will undertake the mission of introducing BTC and LTC into the DeFi world.
Through the lens of a three-dimensional coordinate of the MOV universe, you can see that it is divided into three aspects: lending, derivatives and trading. Through the investment points between the coordinates, there may be some agreement between them.
MOV is designed in a unified way with respect to its DeFi protocol, and standardizes the three protocols of transaction, lending, and synthetic assets in order to avoid conflicts and inconsistent standards.
Superconducting exchange for V2 can not only avoid gratuitous losses, but also bring excess income to LP
Bytom consists of two main innovations. One is a superconducting exchange. The superconducting exchange V1 (version) is for the exchange of stable coins. The most important exchange agreement for stable coins is Curve, and Bytom’s superconducting exchange and Curve can be reconciled as follows:
First, Bytom Superconductor Exchange expands the curve into a curved surface, replacing the dual function model with a multidimensional geometric space. That is, it supports the mutual exchange of multiple currencies in a reserve pool and solves the problem of depositing a single asset.
Second, through the introduction of interest calculation rules, the current CFMM fee and income calculation model is not perfect, and based on convex optimization, it provides arbitrageurs with an efficient arbitrage strategy model.
Third, provide dynamic protection mechanisms based on oracles for external market fluctuation risks, including impermanent loss protection for liquidity providers (LP) and slippage protection mechanisms for users.
Fourth, optimize the trading curve for the characteristics of stablecoins, with minimal slippage. With a liquidity of 500,000, the slippage of a one-time large transaction of US$200,000 is 0.29%, and the slippage loss for exchanges within 10,000 is negligible.
This is still the case of the initial reserve pool size. As more and more people provide liquidity for the reserve pool, transaction wear and tear will further decrease. This is why we named MOV CFMM as a superconducting exchange.
We also recently launched V2. Superconducting V2 promotes the idea of CFMM (Constant Function Market Maker) to the exchange between other mainstream coins, innovative coins and stable coins, with a broader application scenario.
In the past, we thought that AMM was a price discovery mechanism. However, as our understanding deepened, we began to see that AMM was a trading strategy. Therefore, V2 introduces the infinite grid strategy into CFMM, making it possible for liquidity providers (LP) to avoid gratuitous losses due to the success of the strategy, and even obtain alpha gains due to asset portfolio appreciation.
The so-called infinite grid idea is to set up different trading strategies in a bull-bear cycle: i.e. ultimately to buy more at low points and sell more at high points.
Taking the exchange of BTC and USDT as an example, we divide its bull-bear cycle into five stages. In a bull-bear cycle, the superconducting V2 enables LP to “cash out” more BTC in the bull cycle, and after the bear transfer, it can retain the value-added income of the residence “cash out”. Similarly, in the bear cycle, LP can accumulate and hold until the bull cycle to “cash out” again to gain asset appreciation.
As shown in the figure, the superconducting V2 and Uniswap each help LP at the end of each phase to compare the total wealth value obtained. V2 is at a disadvantage in the first few phases. The value of wealth exceeds Uniswap by a large margin, and LP obtains excess income in addition to handling fees. This income not only comes from transaction fees, but also from the income generated by the asset portfolio itself.
The three DeFi use-cases of trading, lending, and assets are developing in parallel and all have broad prospects. Because of liquidity mining, trading and lending garner more attention, and the use case of assets seems to be relatively calm for now.
However, asset issuance and synthesis has massive potential as a DeFi use-case. This is because trading and lending are more decentralized than centralized products, and there is no major product-level innovation.
However, asset issuance and synthesis are killer blockchain applications because they bring assets onto the chain, which is seen a key step for the widespread implementation of blockchain in the future.
Our protocols are all open source, and external developers are welcome to deploy our protocols on Ethereum, Polkadot or other chains, and use Bytom to cross-chain gateways to share economic bandwidth.