Protocol Overview

Background

Cross-chain value transfers are one of the cornerstones in the world of truly decentralized finance. Blockchains are secure but isolated networks that don't have access to the outside data as well as to the state of the other chains. And that's why lots of the users have to rely on third-party services and centralized solutions, which are likely to request private information or be susceptible to censorship, to manage their assets. For example, Binance official smart chain bridge is centralized and imposes a 100k limit transfer per day and a 10k USDT limit per transfer in order to make users transfer liquidity through centralized Binance exchange

The deBridge is aimed to relieve the pain of the crypto enthusiasts by building the decentralized bridge that aims to be a standard for all cross-chain liquidity transfers

Architecture & Participants

The solution consists of 2 key parts:

  • on-chain smart contracts;

  • off-chain oracles.

Smart contracts are responsible for assets management, are controlled by the DAO, and, for simplicity, can be considered as the gateway for user's cross-chain transfers. To minimize the gas expenses the contracts have two versions: Full (for chains with low transaction fees, like Binance Smart Chain or Solana) and Light (for chains with high fees, like Ethereum).

The oracles are the Chainlink Nodes that monitor the blockchain events and submit the transfer request to the target chain to be rewarded with the LINK token. The transfer is considered as "confirmed" once 3 out of 5 confirmations are received from the oracles.

The governance manages the list of the supported tokens, transfer fees, oracles, and approved DeFi strategies. Part of the fees is converted to the Link token to pay for the oracles service. At the launch, the initial governance is the multi-signature wallet that will be replaced by DAO controlled by the governance token holders.

The supported tokens are located on the original chain and have the associated wrapped asset on the target chains with supply controlled by the protocol and backed by collateral held in the protocols' smart contracts in the original chain.

Once the user transfers assets to the target chain the original tokens are locked on the smart contract and the portion of them is used for the DeFi protocols liquidity provision to earn the extra yield that is distributed to governance token holders.

How It Works

Consider the transfer from the original asset chain to the target chain. The user comes to the platform, connects the wallet, chooses the token and the target blockchain from the list, and specifies the amount desired to be transferred. He can either enable the privacy feature that hides the connections between the sender and the recipient or provide the recipient address.

The transaction is signed and submitted, the tokens are charged from the user and locked on the contract. The part of the tokens can be used in the Defi protocol.

The transfer event is noticed by the Chainlink nodes that periodically monitor the transactions to the protocol contracts. The oracles submit the deposit identifier which is the hash of the transfer details to the target blockchain. Once 3 out of 5 confirmations are provided by the oracles the transfer is considered to be confirmed.

The user calls the contract to mint new wrapped tokens, the fee is charged from the transferred amount.

Consider the transfer back to the original asset chain from the target chain. Again the user chose the asset, amount, and (if needed) the recipient address. The wrapped tokens are transferred from the user and burnt.

The oracles notice the event and submit the withdrawal request to the original chain. Once enough confirmations are received the user can claim the unlocked tokens along with the extra reward from the Defi protocol.

Limitations

Minimal Transfer Amount

The transfer fee is charged as the percentage of the transferred amount and should cover the expenses paid to the oracles. So the transfer of the amount lower than the certain threshold is economically irrational and rejected by the protocol.

Whitelisted token transfers

All the assets are valuable not at the same level and thus the parameters of the assets should be configured individually for each asset. It is managed by the governance in the current version.

Locked Assets Partially Used in Defi

In order to maximize the user's profit, the locked assets are used to provide liquidity to the DeFi ecosystem. However, any decentralized protocol is about risks. The deBridge governance manages the risks by providing only part of the reserves to the well-audited and reliable DeFi protocols.