Introduction
Understanding the Blockchain Fragmentation Challenge
Blockchain ecosystem is presently a set of isolated networks with different capabilities and trade-offs. This disintegration poses serious obstacles both to the users and developers.
Users are often confined to a single blockchain network when they wish to engage with the applications of the latter, requiring them to:
- •Purchase native tokens of that chain
- •Make complex cross-chain swaps
Cross-chain swapping is exchanging assets based on one blockchain to another, including Ethereum-based ETH to Polygon-based MATIC. These operations are usually multi-step, and thus the gas costs tend to eat up the value of smaller operations.
Every step of the intermediary in the swapping process involves the payment of extra fees, which renders the whole process to be costly and inefficient.
Bridge Solutions and Their Limitations
Cross-chain swaps can be reduced by means of bridging solutions that are provided by blockchain bridges such as Lock and Mint protocols. They secure assets on the original blockchain and issue comparable assets on the new blockchain, which greatly decreases the amount of transactions needed to transfer assets between two networks.
Developers can add Web3 bridges to their apps to develop applications that can support more than one blockchain and its native assets. However, the bridge ecosystem is not unified with each bridge only supporting a few chains.
It makes no sense and is resource-consuming to develop a new bridge every time an extra chain is required. Luckily, there has been a number of projects that have been developed as bridge and DEX aggregators, which offer single access to various protocols.
Popular Bridge and DEX Aggregators
Such examples as LI.FI, Rubic, Via, and Swing should be noted. These platforms bring different exchanges together and different bridges, enabling the developers to connect to several networks via the same integration point.
The LI.FI Protocol Concept
LI.FI is one of the most detailed methods of swapping assets between the same chain and between chains. This platform uses bridge and DEX aggregators to give the most optimal route in case of an asset exchange and automatically identifies the most efficient route of any token swap transaction.
The LI.FI widget provides developers with a flexible user interface which can be easily embedded in front end applications. In projects that need more customization, LI.FI SDK allows more control of the swapping experience.
Token Availability Considerations
The availability of tokens is also an issue that should be taken into account when using LI.FI. In case a newly minted token is not in the list of any DEX or bridge, LI.FI will not be able to offer routing to that asset.
This protocol demands that the token values are known to support swaps, which is obtained by listing the token on one of the supported exchanges or bridges.
Illustrating Cross-Chain Integration: The Celebstar Project
The celebrity popularity is tokenized, and the demonstration project, known as Celebstar, gives an opportunity to the fans to invest in the tokens of their favorite celebrities.
The platform has a bonding curve mechanism which is used to aggregate tokenomics to each celebrity token. The price of tokens represents the celebrities and is in the form of a custom ERC20 token known as TAL.
How Celebstar Works
Celebrity tokens are acquired by using TAL tokens in fans, whereas the LI.FI widget is used to acquire TAL tokens with any supported asset in any compatible blockchain.
As an example, users are able to swap MATIC in Polygon network into TAL in Ethereum network. As soon as they receive TAL tokens, the user will be allowed to purchase celebrity tokens at the existing market rate.
In the sale of celebrity tokens, the users are awarded with TAL tokens depending on the market value at the time of sale.
Necessary Tools and Technologies
The project uses a number of common technologies:
- •Solidity and Hardhat to develop and deploy the ERC20 token
- •React to develop the front-end
- •LI.FI to perform cross-chain functionality
- •Uniswap V2 to instantiate a liquidity pool
- •LI.FI to integrate with the front-end application
- •Celebstar to purchase tokens
The TAL Token Contract
The TAL token is a standard ERC20 contract. ERC20 token contract developers have established documentation that can be used to provide detailed instructions on how to construct the contract.
The adoption is done in accordance with conventional token generation, such as the adequate supply of tokens, and the simplest transfer functionality.
The Deployment of TAL Token
Token deployment should be cautious in regard to address recording of contracts as this address will be the key to the integration of the Celebstar contract.
Hardhat offers detailed instructions on smart contract deployment process, which provides correct network deployment and validation.
Building the Celebstar Contract
The Celebstar contract uses mint and burn operations to carry out operations of buying and selling celebrity tokens. A closed-loop economy is implemented within the platform by the contract of the token minting of celebrities using TAL as a base currency.
The contract architecture comprises price calculation techniques using bonding curves which make sure that prices of tokens vary on a supply-demand basis. This makes the process of investing an interesting experience to the user and economically viable.
Contract Deployment and Configuration
The deployment of the Celebstar contract goes through the same steps as that of the TAL token deployment. Address of the contract should be written in frontend integration, so that the user interface can communicate with the functionality of the smart contract.
Installing Uniswap Liquidity Pools
To create a liquidity pool of TAL tokens on Uniswap, one will need to use the account of the contract owner because the token supply will be starting at the initial deposit in the account of the owner upon the deployment.
This is done by giving the go-ahead on token expenditure and provision of tokens to establish the pool of liquidity. To create the LI.FI widget routing the liquidity pool creation forms the first price connection between the TAL tokens and the ETH and is the basis of the price connection.
The process is illustrated in screenshots showing the relationship of the token values and approval and supply processes required to create a pool.
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Frontend Integration with LI.FI Widget
Installing and configuring the LI.FI widget into the frontend application requires a set of guidelines in the documentation on successful installation and configuration.
Upon integration, the user is able to choose the source chain assets as well as the destination chain assets based on his needs. The application setup will be Goerli as the chain to use and TAL tokens as the target asset.
Available Routing Options
Already, LI.FI recognizes available routes, such as the Uniswap route formed by the liquidity pool. When routing is possible, users have a choice of a variety of routing options, and transactions will result in the same quantity of TAL token depending on the prevailing pricing.
As an illustration, at TAL tokens of 5000 tokens per ETH, a user is supposed to get about 50 TAL tokens of 0.01 ETH. These calculations are well presented on the interface and the swapping process is transparent.
Similar to testnet constraints, the demonstration demonstrates same-chain swapping because bridges often do not have enough liquidity to facilitate test networks. Nevertheless, on the mainnet use, there are wide cross-chain swaps with a high level of liquidity.
Fee Structure and Monetization
LI.FI does not impose direct fees on transactions, and it is quite cheap to use. The platform however, provides monetization to application developers who would like to charge the users with the cross-chain swapping functionality.
Revenue Sharing Model
LI.FI Fee Structure
| Component | Fee Percentage | Recipient |
|---|---|---|
| Platform Usage | 0% | LI.FI |
| Application Fees | 85% | Developer |
| Revenue Share | 15% | LI.FI |
Conclusion
Cross-chain bridge and DEX aggregators such as LI.FI make it possible to develop seamless cross-chain Web3 applications. Through these solutions, developers will not have to rely on users on using various DEXes or bridges to buy the required tokens to use them in the application.
This design provides a much easier experience to users, eliminating the points of friction that are likely to discourage them when using decentralized applications. Customers will be able to concentrate on the fundamental functionality of the application instead of being concerned about the complicated processes of acquiring tokens.
Cross-chain functionality integration is a major step towards a more interconnected and end-user friendly blockchain ecosystem. These technologies will continue to be used more and more when they are more mature and adopted, but they will always serve as the bridging forces between various blockchain networks until the Web3 experience becomes more unified to everyone.
