In this episode of Rollup, which took place on December 8th, 2023, Robbie, Andy, and Beachball discuss infrastructure and application projects, Synonym Finance, Wormhole, and more. Read our notes below to learn more.
Background
- Andy (Host) – Contributor at the Rollup
- Robbie (Host) – Contributor at the Rollup
- Beachball (Guest) – Contributor at Synonym Finance
- Synonym Finance – a cross-chain money market
Background of Beachball
- Beachball says that he has been in the VC industry for 4 years.
- He adds that he got involved in DeFi projects such as Notional Finance, Jones DAO, LayerZero, and New Order DAO (now Synonym Finance).
VC Perspective on Infra vs DApps
- Andy says that many VCs have invested more in infrastructure projects rather than decentralized applications.
- Beachball says that the reasons behind this phenomenon, including scalability and throughput, are major concerns for funds.
The Relationship Between Infrastructure and Applications
- Beachball says that there is a tendency to fund infrastructure projects first because it is easier and clearer to bet on infrastructure rather than dApps. Betting on infrastructure first has led to an explosion of infrastructure development in the blockchain industry.
- He believes that user acquisition for applications built on modular infrastructures will follow a certain curve. It is unlikely to go directly from great infrastructure to applications solely built on that infrastructure. There will be an interim stage where use cases need to be created to connect all the modular components together. This middle stage requires finding ways to create use cases that utilize the existing infrastructure.
- Beachball says that as the evolution progresses, different components will blend together, making them seamlessly interoperable. At this stage, the focus can shift towards app designs and use cases rather than just building infrastructures themselves. Synonym is building for both the interim step and the future where users won’t even know which chain they are using.
The Intertwining Relationship Between Infrastructure and Apps
- Robbie says that sometimes, there is a perfect alignment between apps and infrastructures where they intertwine effectively. Other times, there may be a gap between apps and infrastructures. For example, Uniswap became overloaded due to high demand before the infrastructure could catch up. Currently, there is a surplus of good infrastructure but a lack of apps taking advantage of it.
- Bechball highlights Wormhole‘s recent $225 million raise and discusses its split from Jump Trading. Jump Trading distanced itself from crypto due to regulatory and compliance concerns.
- He believes that Wormhole’s capabilities won’t be negatively impacted by this split.
Wishlist for Infrastructure Improvement
- Beachball says that reliable, transparent, and robust relaying infrastructure is crucial for cross-chain messaging design. He praises Wormhole’s automatic relayer feature but suggests pouring more resources into relayer infrastructure to make it accessible to teams.
- He adds that testing cross-chain applications requires multiple faucets and resources for different chains. He emphasizes the need for improved testnet infrastructure to simplify testing processes.
- Beachball says that while modularity is valuable, having reliable built-in options at the protocol level can be beneficial when building complex dApps.
Importance of Education and Community Involvement
- Beachball says that there is a lack of knowledge about cross-chain activities among users. Community education is crucial for understanding the benefits of moving between chains.
- He adds that increased awareness will benefit ecosystems connected to cross-chain messaging layers.
Understanding Wormholescan
- Beachball says that Wormholescan serves as a block explorer for dApps utilizing Wormhole for cross-chain activities.
- He adds that it uses VAA (Verified Action Approvals) to sign and validate messages across chains. Recent improvements have been made to Wormholescan.
- Beachball says that the user initiates a cross-chain transaction. Message created on the Wormhole endpoint adapter. Guardians (large operators in DeFi) validate the message’s validity. The approved message is relayed to the destination chain for processing. Relayers compete to deliver messages securely and efficiently.
Hub and Spoke Model for Synonym
- Beachball says that Synonym uses a hub on Arbitrum as a central point for accounting and state management. Deposited collateral stays in its native form on each respective chain (e.g., Optimism). Transactions trigger messages to the hub for accounting purposes.
- He adds that Circle’s CCTP helps eliminate the issue of wrapped asset liquidity fragmentation. This ensures a seamless user experience without double-wrapped tokens.
- Beachball says that borrowing assets like $USDC through Synonym avoids creating double-wrapped tokens on different chains. The goal is to reduce liquidity fragmentation and provide a smooth user experience.
- He adds that by settling in native $USDC, users can avoid multiple wrapping when moving between different chains. On Arbitrum, for example, there are two versions: regular $USDC and CCTP-enabled $USDC. With CCTP-enabled $USDC, users can tap into the overall system liquidity of Synthetix without needing additional wrapping.
- Beachball says that by using native burn and mint functionality, Synthetix ensures that users never end up with double-wrapped tokens that limit usability.
Sequencing Messages in the Hub and Spoke Model
- Beachball says that in the hub and spoke model, messages are sequenced as they enter the dApp on Arbitrum to avoid desynchronization issues.
- He adds that liquidations play a crucial role in DeFi applications’ smooth functioning, requiring careful parameterization of assets across different chains. Shared sequencers can enhance security by enabling atomic cross-rollup liquidations. However, this feature is still under development.
Importance of Atomicity in Cross-Rollup Liquidations
- Beachball says that achieving atomicity in cross-rollup liquidations is a goal for Synonym. The desired outcome is to have clarity on state outcomes for large deposits or withdrawals across different rollups.
- He adds that this would ensure sufficient liquidity on every endpoint and enhance the overall robustness of the system.
Leveraging Atomic Swaps for Arbitrage and Pricing Efficiency
- Beachball says that atomic swaps enable efficient arbitrage across different chains, aligning prices more effectively. Espresso team highlighted the power of atomic transactions in terms of driving profit and improving pricing efficiency.
Exploring Atomic Liquidations
- Beachball says that achieving atomic liquidations is still a work in progress. They aim to have clarity on state outcomes for large deposits or withdrawals between different rollups.
- He adds that collaboration with projects like Espresso contributes to pushing boundaries in this area.
Launching on Mainnet and Engaging the Community
- Beachball says that the Arbitrum community is very important, stating that it is full of people who genuinely care and are super engaged.
- When the launch on mainnet comes around early 2024, they plan to list more assets from these communities to provide utility for their supporters.
Check out these important links
- Listen to the YouTube Video
- Follow Andy on Twitter
- Follow Robbie on Twitter
- Follow Beachball on Twitter
- Follow The Rollup on Twitter
- Follow Synonym Finance on Twitter
Show Information
- Medium: YouTube (Video)
- Show: The Rollup
- Show Title: Synonym Finance x Wormhole: Innovative Cross-Chain Lending in DeFi
- Show Date: December 8, 2023