Connext (connext.network) and Nomad (nomad.xyz), two interoperability protocols working towards a secure cross-chain future, propose to run two trials with the Index Coop as a first step towards a solid collaboration for all cross chain operations.
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Deploy DPI on EVMOS: as one of the main gates to the Cosmos ecosystem, DPI could become the first point of interaction between the Ethereum and IBC DeFi communities.
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Co-develop the LAYER1 (iip-launch-the-alt-layer-1-index-layer1/3710) Index: using tokens wrapped with a trust minimized mechanism would reduce the risks and increase the value prop for the index.
Summary
Our 3 organizations are strongly aligned on core values: driving towards mass adoption, security (reducing or eliminating any trust assumptions), and high performance, with high capital efficiency and composability.
We believe that for Index Coop and its products to be truly successful, two things need to happen:
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Indices should be able to include any asset coming from any chain and not be limited to the Ethereum ecosystem.
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Indices need to be available on multiple chains to reach as many people as possible.
Connext and Nomad’s modular interoperability stack is a fast and economical way to move these assets across chains without introducing extra risks, i.e. requiring additional trust assumptions.
Business problems
- A true complete index, whether reflective of the total market cap (iip-126-dg1-launch-the-total-crypto-market-cap-index-mcap/3499) or not, will have to include assets native on chains different to the one where the index token is located.
To date, existing solutions and their associated risks include:
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a) Wrapping tokens with existing multisig bridges that rely on a set of validators to certify the presence of the collateral on one chain before minting a counterpart on the second chain. This is not only dangerous but also detrimental to the value proposition of a truly decentralized index: these systems have only a limited set of validators, and therefore are easily attackable and hackable, as history has proven multiple times.
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b) Using synthetic tokens created through Oracles, with a high risk of depegging and exposure to an off-chain system.
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The underlying assets need to be liquid on the chain where the index is located.
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As previous discussions have highlighted (ic-multichain-strategy-community-call-revisions/1598, Index tokens should easily exist on multiple chains to expand into previously untapped markets.
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Central hub for multichain operations. The issue to go multichain is having to multiply efforts and costs. The ideal solution is to keep your control tower and profit center in one location and coordinate everything from there.
Solution
The modular interoperability stack was born as a partnership between Connext and Nomad. We allow for trustless movements of data and tokens across multiple chains, whether the assets are natively present there (through the NXTP Protocol (medium .com/connext/nxtp-a-simpler-xchain-protocol-88760697ea04) or not (through optimistic minting (docs.nomad.xyz/) of Nomad representations).
This allows us to be present on any chain, at the right time, with the necessary liquidity.
Notably, the whole system is trust-minimized.
In contrast with most other systems, the Connext Network doesn’t use any validator and therefore no extra trust assumptions are needed. The network is as trustless as the underlying chains.
Nomad’s approach leverages an optimistic mechanism, a model similar to Optimistic Rollups, which doesn’t require a multi signature system, to guarantee the presence of the collateral of the minted assets.
The modular interoperability stack is also ideal for generalized operations across chains. You can for example instruct a rebalance of an index on chain B from chain A, all in one single transaction. All trustlessly. This can be a key advantage with the Index Coop scaling up.
Specifications
The author of this proposal is a core Connext team member.
Chains
- Any EVM chain: Connext is currently supporting Ethereum, Arbitrum, Optimism, Fantom, Avalanche, Binance Smart Chain, Polygon, Gnosis Chain, Fuse. New ones like Harmony, Boba can be added with ease.
- The Cosmos ecosystem, as we will be the major bridge of Evmos
- The Polkadot ecosystem as we are one of the major bridge for Moonriver and Moonbeam
- In the future, Solana, Near, and other successful non-EVM chains
Requirements to deploy DPI on EVMOS
- Establish DPI supply that should be bridged to EVMOS
- Run Connext routers for fast bridging - Connext can help
Other data
- Volume: Connext recently surpassed $1B of volume and Nomad did $200M in volume in just three weeks.
- Transactions: 500k+
- Twitter accounts: Connext, Nomad
Further Opportunities
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Possibility of setting up grants to incentivize new builders to innovate on this powerful combination of technological and financial tools.
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Option for The Index Coop to run routers and provide liquidity of the new minted tokens. Using the highly capital efficient mechanism of Connext, this could kick start a new revenue stream for the Index Coop while also adding liquidity and value to the bridged tokens.
Note: had to remove the majority of sources of our research as per limitations in the Forum for new users.
