Cycle Network in DeFi: Trustless Shared Liquidity Network of All Blockchains

In the diverse landscape of blockchain technology, liquidity fragmentation and isolation between chains have several detrimental effects on the DeFi ecosystem. As blockchain technology proliferates across multiple platforms, each operating as isolated silos, the promise of a seamlessly interconnected financial system remains unfulfilled. This fragmentation not only stifles capital efficiency but also complicates user transactions and amplifies the risks — most notably, those arising from increasingly targeted attacks on cross-chain bridges. Moreover, the inherent lack of interoperability among diverse blockchains exacerbates market fragmentation, curtailing the innovation of new financial products and impeding overall market expansion.

Addressing these systemic challenges necessitates robust solutions that bridge these disparate chains without compromising security or usability. Cycle Network achieves this through the integration of Omni State Channel Indexer (OSCI) and the Verifiable Sequencer, utilizing the Omni Rollup Solution to facilitate efficient, secure, and trustless fund transfers across multiple chains. This integration not only boosts inter-chain liquidity but also redefines the paradigms of value transfer within the decentralized landscape.

The Crucial Role of Liquidity in DeFi

Liquidity is the lifeblood of financial markets, and even more so in the realm of DeFi, where it determines the convenience and efficiency of trading, lending, and other financial activities. The current state of liquidity in DeFi is akin to an untapped well in a desert — available but not easily accessible. Liquidity is often dispersed across different protocols and blockchains, resulting in some chains having ample liquidity while others are deficient. This imbalance in liquidity forces users to pay higher transaction fees or face greater transaction slippage. Moreover, the need to transfer assets across different chains not only increases operational complexity but also transaction costs (such as cross-chain bridge fees).

How Does Cycle Network Share Liquidity?

Cycle Network rolls in liquidity through an Omni State Channel Indexer (OSCI), sequentially handles state processes through a Verifiable Sequencer, and rolls out the liquidity result through an Omni Rollup Solution — Trustless Cross-Chain Protocol (TCCP). OSCI serves as the backbone for Cycle Network’s ability to provide a comprehensive, real-time overview of the state across various blockchains. It indexes state changes and transactions, aggregating data from multiple chains into a unified framework. TCCP ensures secure, trustless assets communication across different blockchains, eliminating the need for third-party services.

Before delving into how Cycle Network leverages OSCI and Verifiable Sequencer to share liquidity, let’s understand a foundational concept — Verifiable Sequencer Rules (VSR). VSR is used to control the ordering and execution of blockchain transactions to achieve fairer and more efficient transaction processing. The core idea of VSR is to set a set of verifiable rules for the sequencer to ensure transactions are executed in a predetermined order, preventing unfair ordering and potential MEV attacks. These rules are verifiable, providing a transparent ordering process that users can trust will not favor any party. For example, in DEX trading, VSR can set rules that protect users’ trades from price slippage or front-running by sequencing orders strictly.

Leveraging the VSR framework, we have developed the Verifiable Sequencer. Verifiable Sequencer expands upon the concept of shared sequencer by introducing a verification mechanism that employs cryptographic methods to adhere to the predefined rules. This enhancement guarantees that the transaction ordering follows the established rules, providing a higher level of trust and transparency. These technologies combined enable Cycle Network to efficiently and securely share liquidity across multiple blockchains.

To illustrate, consider DEX trading: The OSCI constantly monitors various blockchains to detect a DEX that offers superior trading conditions on a specific chain. The Verifiable Sequencer then sequences the transaction according to the preset rules and executes it on that chain, reducing MEV and ensuring users can trade at the best price. Through TCCP, funds are securely transferred from the user’s original chain to this chain without relying on any bridge.

Implementing Liquidity Solutions

Cycle Network’s innovative strategies extend beyond theory and are actively applied in practical scenarios.

Liquidity Aggregator: Efficiently Distribute Liquidity

In this scenario, Cycle Network serves as a liquidity interface, collaborating with liquidity providers to consolidate and efficiently distribute liquidity. dApps or chains can easily access liquidity through Cycle’s Liquidity Faucet interface SDK. Even end-users can act as liquidity providers, supplying their liquidity and earning LP rewards.

Once liquidity is entered, Cycle Network becomes a unified liquidity hub. Due to its inherent hub shape, Cycle Network boasts highly efficient communication capabilities. Any network connected to Cycle can connect with the entire ecosystem, enabling efficient liquidity distribution.

Currently, we are partnering with top liquidity providers like LTP, integrating their liquidity into Cycle Network’s unified liquidity pool. Cycle Network distributes liquidity to dApps on different blockchains (such as Ethereum, BSC, Polygon, etc.) through its Unified Liquidity SDK.

Full Chain Account: Unified Account Management

The Full Chain Account solution aims to achieve seamless cross-chain interaction and unified account management. Through Cycle Network’s integration of multiple blockchains, users can manage and operate assets and transactions across different blockchains within a single account.

we have launched a product called Piggybank. Piggybank is a DeFi tool built on the Cycle Network, designed to leverage aggregated liquidity for facilitating small transactions and savings services across various blockchains. Users can deposit small amounts of tokens left over from various transactions into Piggybank, which then intelligently routes and swaps these tokens across multiple chains, enhancing the utility and efficiency of capital.

In April, we conducted a 7-day Piggybank V2 Testing Campaign aimed at testing and demonstrating the new functionalities of Piggybank V2. This version allows users to use Cycle Network technology to mint omnichain assets on another chain without transferring assets from the original chain. The specific operation involves locking assets on the original chain and minting corresponding assets on the target chain through Cycle Network, achieving the same effect as traditional cross-chain assets. This method is safer compared to bridges. The campaign was highly successful, with over 73,000 participants and more than 145,000 cross-chain mints.

Conclusion

Cycle Network significantly enhances liquidity integration by providing a seamless, secure, and efficient mechanism for managing liquidity and transferring value across multiple blockchains. As the DeFi sector evolves, the capabilities of Cycle Network will become increasingly crucial in fostering a more interconnected and efficient blockchain ecosystem. Looking forward, the role of comprehensive solutions like Cycle Network, which effectively manage liquidity and ensure secure inter-blockchain value transfers, will be pivotal in shaping a robust and interconnected DeFi landscape.