Background

Multi-chain coexistence is the current and future market landscape of the blockchain world. The transfer of assets between different chains makes cross-chain protocols a rigid requirement for users on blockchains. At present, there are two main ways to achieve cross-chain transactions. The first is cross-chain liquidity aggregators that combine assets on different chains into a swapping pool. Users can exchange their assets from different chains with the pool. The second is cross-chain bridges which provide a channel between two blockchains. Native assets are hosted and staked in the original chain, and the other chain can obtain the asset status through cross-chain nodes. Therefore, a mapped version of the asset can be minted by 1:1 ratio on the target chain.

Among all digital assets, stablecoins are the most important type. In 2021, the supply of USD-based stablecoins increased from $29 billion at the beginning of the year to more than $140 billion, an increase of more than 300%. While the application layer is growing rapidly, stablecoins benefit from their characteristics and act as multiple roles including transaction payment intermediaries, trading settlement units, market hedging tools, etc., and naturally grow rapidly with the expansion of the cryptocurrencies market. According to the definition of stablescoins, an ideal stablecoin should maintain a 1:1 exchange rate with fiat USD currency. Since different types of stablecoins are distributed on different chains, the conversion rates between them, including in-chain and cross-chain swaps, should also maintain at 1:1.

With the advantages of simpler product form, wider ecological coverage, and more flexible connection, cross-chain bridges and protocols have surpassed centralized services and become the main channel for carrying cross-chain asset flows. Cross-chain bridges can be divided into two types: trusted and trustless. However, these two types of bridges both have certain problems in realizing the cross-chain swap for stablecoins. Trusted bridges require additional trusted third parties and are not suitable as the basis for products with a large number of users and volumes. An ideal trustless bridge would better satisfy the trust requirements, but due to its decentralization needs, it would take extra time (usually more than 1 hour) and incur extra costs (tens of dollars) in order to establish consensus. For stablecoins that are expected to remain 1:1 conversion rate, users are generally unwilling to pay this conversion cost. In addition, the connection method of cross-chain bridges is one-to-one, which makes a fully connected network using bridges between multiple chains a complicated and laborious issue.