The guys at LayerZero have been able to raise both 120 million dollars in funding as well as the eyebrows of everyone keen on LayerZero’s venture to solve interoperability issues in the crypto industry.
LayerZero’s funding success has put them at the “Unicorn level” with a valuation of $3B, and it is only right for onlookers and spectators to begin to peek into protocols that surround the LayerZero ecosystem for whatever reasons they want to.
One such protocol is InterSwap, and according to these blokes, they’re the first fully composable native asset cross-chain AMM with unified liquidity built on top of the LayerZero network. You can get a full refresher on InterSwap by checking out our Complete Guide.
While this is interesting, it might take more than those words to fully understand what InterSwap is doing and what they’re not doing when compared to other methods or protocols such as Stargate, and of course, the role of LayerZero in all of this.
So, the approach is to investigate InterSwap from the perspective of what it’s not and what it is.
What InterSwap is not…
It is common knowledge to crypto residents that new blockchains are constantly clamouring to join the ranks of the already-established layer 1s, 2s, and 3s (yes there are layer 3s now).
As these new networks pop up, they compound the issue of interoperability between themselves and existing ones. The user is often left with no choice but to interact with these Blockchains in a siloed manner or use suboptimal solutions.
These suboptimal methods are what InterSwap is clearly not — It does not make use of intermediary chains to teleport assets from sender chain to receiver chain, neither is InterSwap making use of any of the three (3) types of bridging mechanisms.
- Burn and mint: A process of cross-chain transaction where the asset is burnt on the sender chain and minted on the receiver chain.
- Wrapping: A process where the asset is locked in a smart contract on the sender chain and is then minted in a wrapped state on the receiver chain.
- Lock and unlock: As the name connotes, assets are locked and then unlocked on the receiver chain.
No! InterSwap is none of these things, as these methods are flawed and prone to attack vectors such as smart contract risks, black-swan events that could cause wrapped assets to de-peg, and other systemic risks.
InterSwap, though deceptively similar, is quite distinct from Stargate, which is a fully composable, omnichain liquidity transport protocol. This implies that on a protocol level, Stargate provides a liquidity layer through its pools. On the other hand, at the infrastructure level, Stargate provides a bridge that allows Dapps to carry out cross-chain transactions.
For example, a DEX built on Stargate will be able to access Stargate’s unified liquidity pools and can facilitate the swapping of native assets. One such DEX is Sushiswap.
An example of cross-chain transaction using a bridge.
Hence, one can consider Stargate as a bridging infrastructure backed by steep liquidity pools with a focus on stable pairs, which is a limitation in itself. However, one thing that both Stargate and InterSwap use is LayerZero cross-chain messaging.
What TF is InterSwap then?
Imagine that your regular AMM DEX could easily swap native assets across multiple networks. For example, you hold some ETH (asset A) but you want to deposit AVAX (asset B) in a yield farm on Avalanche.
In order to achieve this task, there are two potential pathways available to you:
firstly, you may opt to utilize a bridge and one of the aforementioned bridging methods, which will facilitate the conversion of asset A into asset B.
Alternatively, you may choose to send your asset to a centralized exchange, where you can exchange asset A for either asset B. Or convert asset A to a stablecoin in order to purchase asset B on the spot market, then proceed to send asset B back to your non-custodial wallet using the supported network.
Unfortunately, both of these methods are arduous, precarious, and time-intensive.
InterSwap, however, allows the user to directly swap native assets for assets they want within the protocol without the use of bridges, intermediary chains, or wrapped assets.
An example of native asset swaps using InterSwap.
Stargate and InterSwap diverge significantly in their integration of LayerZero, which is central to their operations. Stargate positions itself as a bridge and liquidity layer, whereas InterSwap is an open and decentralized automated market maker that pools legacy liquidity and empowers seamless cross-chain swaps through its proprietary liquidity reserves.
Alternatively put, one can say that the key distinction lies in the way they leverage LayerZero: Stargate assumes the dual role of bridge and liquidity provider, whereas InterSwap embraces a permissionless model that enables any-to-any swaps using its own smart routing, resulting in rapid and frictionless cross-chain transactions.
Other attributes of InterSwap include its agnostic capabilities, non-upgradable open source smart contracts across supported networks, the introduction of weighted and stable pools, and on the InterSwap solution slide, 3x lesser fees when compared to Stargate.
InterSwap doubles as a cross-chain portfolio manager, a functionality that is quite brilliant due to its multi-asset pools. With all of these, one can consider InterSwap as a one-stop for cross-chain interaction which is pretty much what any DEFI maxi would want anyway.