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September 20, 2022

Background

In this week’s episode, we feature another project built on top of the LayerZero network, InterSwap: An Omnichain AMM. As always, our host is Taariq Lewis, founder of Volume (volume.finance) and Paloma Chain. Today we are joined by the InterSwap Labs CEO, Konstantin Ramazanov.

Founded in early 2022, InterSwap is the first fully-compostable, native-asset, cross-chain automated market maker with unified liquidity built on top of the LayerZero protocol. InterSwap Labs provides a solution to enable users to swap assets across blockchains in a secure, trustless manner without the need for intermediaries in a single transaction.

Taariq and Konstantin discuss the importance of cross-chain interoperability in the world of DeFi.

Definitions

  • Omnichain – presence in all blockchains

  • AMM – automated market makers, a component of decentralized exchanges introduced to remove any intermediaries in the trading of cryptocurrency

  • Yield Aggregator - consolidate staking contracts across different blockchain protocols to make it easier to find the best DeFi crypto staking opportunities

  • THORChain – a decentralized liquidity network

  • Rune – THORChain’s native coin

  • Atomic Swap – the exchange of cryptocurrencies from separate blockchains

  • Avalanche – a layer 1 blockchain

  • Consensus – a blockchain procedure through which all peers of the blockchain network reach a common agreement about the present state of the distributed ledger

  • Validator – users that volunteer a computer’s computing power to maintain a blockchain’s integrity by computing or tracing the origins of a block to its present state

  • Relayer- a third-party that takes on individual orders and organizes them into an order book simulating the experience of an exchange without actually being one

  • Smart Contract – a computer program or transaction protocol that will automatically execute when predetermined conditions are met

  • EVM – Ethereum Virtual Machine, a virtual component that is contained in every Ethereum node

  • Testnet – usually used for testing purposes, an instance of a blockchain supported by the same or similar version of the underlying software

  • Alpha – a giveaway, usually a leak, to novel opportunities

Topics & Timestamps:

Introductions (10:41)

Bypassing Intermediaries (19:52)

LayerZero Security (26:43)

InterSwap Composability (30:42)

The State of InterSwap (32:19)

Introductions

Taariq welcomes not only the guest, but also the entire Cross Chain Coalition community and thanks everyone for listening in through the various platforms this AMA will be on. Konstantin is grateful for the invitation and the opportunity to showcase InterSwap to the cross-chain audience.

Our host asks Konstantin about his blockchain background. The guest shares a funny story that a friend of his owed him some money and could only pay through Bitcoin. Having no idea what Bitcoin was, he Googled it and created his first wallet on blockchain.com – one of the very first cryptocurrency wallets.

After studying blockchain and investing in alternative currencies, Konstantin took a step into building in the space. A couple of years later, he, together with his CTO, Dmitry Smirnov, launched Vaulty. Vaulty is a yield aggregator built on Binance Smart Chain. At the time, it was the first yield optimizer that featured NFT rewards.

After Vaulty, Konstantin discovered LayerZero and its capabilities. Founded in 2021, LayerZero is an emerging omnichain interoperability protocol enabling applications on differing L1 blockchains to send arbitrary messages and execute cross-chain swaps seamlessly. The guest could not believe blockchain technology had gone this far, this fast.

Taariq attests and credits the pace of development to open-sourced software. The more public, shared, things are, the faster they will develop.

Bypassing Intermediaries

The host has been impressed with what InterSwap has been able to develop in a short amount of time since the launch of LayerZero’s infrastructure. He asks Konstantin how the LayerZero framework solves the problem of intermediary chain tokens. Taariq asks:

“I'm curious. When InterSwap thinks about how LayerZero solves the problem of the intermediary chain token, could you share a little bit about how that works, like how you view the LayerZero solution as sort of removing the drama of the intermediary token chain. And, and I remember in your pitch deck, you guys talk about THORChain, and this is an example where, essentially $RUNE is the THORChain token. You have to create THORChain synthetic versions of the tokens you want to swap, bridge, or secure it by RUNE and then, and then straight away. How does LayerZero remove this problem? The way InterSwap is using it?”

Konstantin shares a hypothetical scenario using the Cross Chain Coalition (CCC) token on the Avalanche ($avax) blockchain. Traditionally, as a user from the Ethereum network, you would have to bridge some Eth over to Avalanche to acquire CCC tokens. A liquidity pair for Eth and CCC on Avalanche would need to be created to facilitate the swap. With LayerZero, instead of bridging from Ethereum to Avalanche, a cross-chain liquidity pool will be created. Eth would be locked into a developer contract on Ethereum and CCC tokens would be locked into a contract on Avalanche.

Taariq clarifies that what would effectively happen is an atomic swap. Konstantin agrees and continues the walkthrough:

“So basically, as soon as you are swapping Eth , it’s locked in a liquidity contract, we (InterSwap) are passing the message using LayerZero and you are getting your CCC tokens on Avalanche from a liquidity-locked contract. And you basically can consider it as a cross-chain liquidity pool. So liquidity exists on both chains at the same time. And moreover, you can expand your liquidity pool to several chains and use it as a unified liquidity pool.

It's way more capital-efficient because if you want to connect your CCC tokens to several chains, you need to create the liquidity pools, and you need to facilitate liquidity in every chain, but instead, you might be interested to create a unified liquidity pool. So what is the unified liquidity pool? Basically it’s a pool of liquidity connected to several chains.”

Our host asks follow-up questions to clarify the example:

“Now, when we say the pool of liquidity connected to several chains, what does that mean exactly in a LayerZero world? Are we saying then that the LayerZero contract actions to lock or unlock the liquidity on each of the target chains is interacting with your one sort of like management or AMM smart contract. You have cross chain-liquidity across multiple protocols slash chains. Is that what we should be thinking? So really you're interacting with LayerZero. And LayerZero is controlling the locking and unlocking of tokens on these other chains. So at its core, that is the service that is coordinating or refereeing what liquidity gets released, where, and at what price am I correct? Or is there more to it?”

Konstantin clarifies Taariq’s thread of thought by saying that the InterSwap protocol manages the locked contracts and liquidity pools. LayerZero is only responsible for passing the message across the chains. Taariq clarifies his thoughts:

“Right. So, but at the same time, you are still depending upon LayerZero’s passing of the message to essentially sign the transaction, to move one input to another output, to move the funds. That is the message. So at the end of the day, you are giving LayerZero, you're sort of delegating to LayerZero. We can trust to move the money where, to the appropriate people that are interacting with our AMM. Is that, is that how we should think about it?”

The guest confirms the statement and attests to the superior security infrastructure of LayerZero.

LayerZero Security

Taariq further picks the guest’s mind and asks him about LayerZero’s security model and what he is most impressed with.

Initiative, Konstantin picks a word. He says that most of the solutions in the market are reliant on validators. These validators have a consensus threshold of 66%+ or two-thirds to send a message from one chain to another. In LayerZero’s case, it’s a combination of two independent chain entities. The first is an oracle, and the second is a relayer.

The host asks how many relayers LayerZero has. The guest says it’s uncapped because it’s open-source. Taariq asks what specifically about the LayerZero security model is superior to the validator set security model. Konstantin states that in some models, there are limitations to becoming a validator. He mentions censorship on some networks but avoided dropping specifics.

InterSwap Composability

Taariq starts:

“Let's talk now about InterSwap and how you guys take advantage of the LayerZero security model. So, the LayerZero security model for InterSwap means that you guys are massively scalable across all the secured LayerZero target chains, right? Wherever LayerZero lives, InterSwap can create cross-chain AMMS. And this type of cross-chain DEXs, I'm guessing composability now becomes very easy for you at InterSwap. Like you guys can allow people to do creative things, and build creative DeFi sort of applications around your AMM. Is that a correct interpretation? Thinking of what InterSwap allows to be possible.”

According to Konstantin, to deploy their AMM on a new blockchain, even if it’s non-EVM, they only need to develop two smart contracts. Taariq asks what non-EVM chains InterSwap is on. The guest says they’re not on any yet, but are looking to deploy on Moonbeam. Both are fans of the Moonbeam team. Konstantin says they share the omnichain vision.

The State of InterSwap

Our host asks about InterSwap’s funding, development, and traction. Konstantin states that they are building behind the scenes. He cannot share any information about the fund-raising. Right now they are focused on building community driving cross-chain protocols.

InterSwap’s testnet is currently deployed on seven EVM blockchains. Taariq asks for some alpha. Konstantine says they are looking at deploying on Moonbeam ($glmr) and Harmony ($one).

Taariq commends Konstantin and the InterSwap team for building a great project. He asks the guest if they’re looking for particular talent or roles to be filled out. The guest mentions they’re looking for someone to lead the brand’s marketing arm. Taariq mentions InterSwap’s recent Polygon ($matic) grant and congratulates Konstantin. The guest says they’re looking to heavily improve user and liquidity flow from all supported blockchains to the Polygon network.

Check out the InterSwap website at www.interswap.io. Find them on Twitter @interswap_io and Konstantin @Konstantin_Rmz. Join their community Discord and Telegram.

This AMA is made possible by Cross Chain Coalition sponsors Curve Finance ($crv), Paloma Chain.