Everything You Need to Know About the Chainflip Protocol
Back in March 2020, Vitalik Buterin notably said – “It’s embarrassing that we still can’t easily move between the two largest crypto ecosystems trustlessly.” He was alluding to swapping between BTC and ETH and how there’s no solution as of yet.
Over a year has passed since then, and it seems like very little has changed. THORChain has broken new ground, but leaves a lot to be desired on the user experience end.
But that doesn’t mean there isn’t hope! Simon Harman from Oxen and Tom Nash from Flex Dapps have collaborated to create what is a very promising take on this ongoing problem. They’re developing a project called Chainflip that aims to put an end to the difficulty of swapping cryptocurrencies across different chains.
Many centralized exchanges are available in the marketplace, but none of them provide the convenient and permissionless solution that’s needed to really make a dent. Uniswap has proven users love decentralised tools that save them time, and back in 2017 Shapeshift offered a great experience for cross chain swaps, but the platform strayed far away from its original idea after their centralised approach forced them to implement KYC.
Chainflip plans on taking over where Shapeshift left off, creating a decentralized exchange between chains that will have a flawless UX to facilitate the swapping experience for any type of user.
The Main Idea Behind Chainflip
Shapeshift gained traction immediately after launching – people loved its simplicity and grew fond of its technology. When they began requiring KYC verification, the essence of this simple and seamless process was thrown out the window. Now, Chainflip is the platform that is set to take it to the next level.
The team at Chainflip is creating software that will be a perfect combination of the Shapeshift UX experience and the decentralization and simplicity of Uniswap.
As you probably know, Uniswap only offers ERC-20 swaps, and Shapeshift lost almost all its value once it implemented its changes. Chainflip will offer users the ability to swap coins across different chains without them having to worry about what’s happening in the background.
Everyone wants trading to be simple – to select the coins they want to buy/sell and submit the transaction. No wrapped tokens, synthetic assets, KYC, P2P counterparties, or anything else complex and time consuming.
The protocol itself is rather complex, but we can give you a high-level overview of the different components that prevail as the backbone of the platform. The coordination of these actors allows for the creation of joint multisig wallets on each blockchain, managed by a network of decentralized nodes that come to consensus on every transaction made on the Chainflip statechain.
In short, Chainflip is an AMM like Uniswap, but instead of the funds for the pools being stored in smart contracts, the Chainflip Validator network constructs giant multisignature “vaults” which are secured by Validator collateral. Also unlike Uniswap, all of the swapping and trading logic happens on the specialised Chainflip Statechain, meaning it’s fast, cheap, and dedicated for this purpose. When conducting a swap, the system generates a unique deposit address per swap, and then once a deposit is registered, executes the trade on the state chain. Once it’s been executed, the output assets are sent from a different vault on a different chain to the user’s specified address.
In other words, there’s no set up for users. This extremely simple user experience that only requires that users have a destination address. Chainflip doesn’t care which wallet software you are using. The complexity under the hood to make this happen is impossible to summarise in a few words, but if the Chainflip team can pull it off, it will be an excellent experience that differs from every other product in the cross-chain market.
The team also quietly dropped the fact that Chainflip will be a Uniswap V3 style AMM, which could mean that it can offer far superior pricing for users compared to typical peer-to-pool models.
The Three-phase Mainnet Launch
The Chainflip mainnet launch is planned in three different phases. The first phase will start sometime between August and October of this year. This is when the platform will open its validator slots and start gaining collateralization, as well as many other details to ensure the system will function properly.
It’s a process that takes time – if everything goes as planned, the product launch should occur by the end of 2021, early 2022. The FLIP token, which is planned to be bought and burned with every trade running across the platform, is due to be released to the public sometime in the next few weeks and months. The team has not released much more information on this.
What’s the TL;DR?
Chainflip is a platform that will provide seamless swaps between coins sitting on the various blockchains within the crypto ecosystem, opening the door for the possibility of aggregating liquidity from several ecosystems in one place.
The design and architecture of the protocol allow users to have a very similar user experience to what ERC-20 DEXs can offer while staying away from trade-offs like wrapped tokens or special wallets that have prevented mass adoption.
If the Chainflip team can pull it off, this platform could become a cornerstone of infrastructure in the entire crypto space. For more information about Chainflip, you can head to their website at https://chainflip.io