Welcome to Chainflip's FAQ. If you can't find what you're looking for, join our Discord!
Chainflip is a decentralised, trustless protocol that enables native cross chain swaps between different blockchains. It's a bit like Uniswap, but allows users to swap assets between major blockchains without any wrapped tokens, traditional bridging, and at extremely competitive pricing using the JIT AMM. It is totally generalised, decentralised, and is live on mainnet.
The largest trading pairs in the cryptocurrency industry are between USD and major crypto assets like BTC, ETH, SOL, and so on - all usually base L1 assets of their own respective blockchains. However, these markets are dominated by centralised exchanges. Decentralised exchanges have struggled to compete until recently due to high slippage, gas fees and MEV. Other alternatives would be to use bridges, but this has largely failed to provide competitive markets and introduces risks which users have become wary of, limiting liquidity and utility.
Chainflip aims to be the go-to solution for cross-chain swaps. It's permissionless, easy to use, and decentralised. Developers can use it programmatically, and users benefit from better pricing with minimal difficulty. Moreover, our user experience will be superior to that of a typical centralised exchange on top of taking capital efficiency to the absolute extreme. This will make it difficult to find a better avenue than Chainflip for trading L1 assets and more on-chain
Chainflip even works without a wallet. You should try it out immediately: https://swap.chainflip.io
Consider a centralised exchange. At its heart, an exchange is a software system which manages private keys (to collect deposits and send withdrawals) in a settlement layer and handles the execution of trades for users in a logically separated accounting layer. Chainflip is not really any different at a high level, except instead of the software being run by a single entity, Chainflip is a consensus-driven software which relies on a quorum of Validator nodes. In order to manage wallets, Chainflip uses Multi Party Computation (MPC) (also knows as TSS) to govern high-threshold multi signature wallets (100/150) operated through the permissionless Validator network. The network requires a constant supermajority to function, and can safely operate so long as an honest superminority remains, which is guaranteed through strong economic security. The State Chain defines the AMM and accounting ruleset, and the Validator Software manages individual shares of the multisig wallets owned by the protocol.
In a nutshell, the Validators operate a virtual AMM system that facilitates swaps between the industry's most liquid and most traded assets.
Chainflip has its own Proof-of-Stake network that runs its own appchain, called the State Chain. To build the State Chain, we used Substrate, which is the framework used to build Polkadot & Kusama. Chainflip does not intend to become a Parachain, and will remain its own sovereign network.
The backend Validator protocol is written in Rust and relies on our own version of the FROST threshold signature scheme and custom witnessing system to interact and observe action on all of the chains we are connected to. We also have relatively simple smart contracts which support the network on smart-contract compatible blockchains. The protocol has been fully audited by Trail of Bits and Zellic, and more.
Chainflip's unique architecture enables interoperability between non-smart contract chains and smart contract chains that goes beyond the simple transfer of assets. This design enables support of almost any chain, EVM-compatible, EVM-incompatible and blockchains without smart contracts. That unlocks an opportunity to virtually support any asset available on any blockchain.
Yes, anyone can register a node as a validator on Chainflip. You will need ETH to pay the transaction fee on the Ethereum network and $FLIP to pay the transaction fee on Chainflip's State Chain, but a minimum validator bid is now well over $500,000 worth of $FLIP tokens. More information on the requirements to participate is available here. Detailed information on setting up a validator could be found in our documentation. Other users may be interested in using stFLIP or other liquid staking derivatives to participate in the network with a much lower barrier to entry.
Chainflip is specifically targeting the use case of decentralised spot trading. There are many other interoperability protocols, but few offer a native swapping capability, making them less suitable for the task of efficiently swapping from asset to asset on their respective blockchains. Spot trading is the biggest market opportunity in the cross-chain space, and Chainflip offers a secure, efficient, and simple avenue to win users over from centralised exchanges.
Using the purpose-designed Chainflip JIT AMM, users of the protocol can benefit from better pricing, a simple deposit system, and integration with other DEX offerings such as Uniswap, Trader Joe, Osmosis and others to quickly and easily transfer value between blockchains.
Liquidity Providers will find it very straightforward to offer quotes on-chain using traditional market-making systems, connecting via WebSocket directly to our LP API. The on-chain activities are abstracted away to offer similar functionality to that of centralised order book exchange APIs.
Web3 developers will also find Chainflip to be the simplest possible cross-chain solution for any aggregator, marketplace, or Web3 product looking to onboard users from other blockchain ecosystems. Using a very simple JSON RPC or websocket interface, developers can add cross-chain functionality to any front-end, wallet, or aggregator with minimal effort.
Moreover, Chainflip also supports cross-chain messaging and list many blockchains that existing messaging solutions don't offer. This maximises compatibility for developers and for traders using these systems.
With the most efficient market structure, and most liquid assets, Chainflip is looking to offer users the best prices on the highest volume pairs in the on-chain trading space.
You can read more about Chainflip's strategy here.
The current architecture design makes Chainflip excellent at providing swapping at great prices on the industry's most traded blockchain assets, but each new blockchain added introduces additional overhead for Validators.
That's why Chainflip is partnering with a range of cross-chain aggregators and other decentralised protocols to offer users access to additional markets through mutual integration. This way, users will still have access to thousands of on-chain trading pairs through collaboration, and aggregators will be able to offer their users excellent pricing on the major assets through the protocol - making the swapping experience better for all.
You can buy $FLIP on many different centralised and decentralised venues, the full list and links to the trading pair can be found on our token page.
No. Users only need the token they want to swap. $FLIP fees, where applicable, are automatically processed by the protocol for users.
The $FLIP token, integral to the Chainflip ecosystem, has two main functions:
1. Collateral for Validator Auctions: $FLIP tokens are primarily used as collateral in validator auctions. Validators, who are crucial for maintaining the Chainflip network, stake $FLIP tokens to participate and earn rewards from block rewards.
2. Burning Mechanism: A unique aspect of $FLIP tokens is their buy and burn mechanism. With every swap, the protocol automatically converts network fees (collected in USDC) into $FLIP tokens and then burns them. This process provides a potential benefit for holders of $FLIP tokens and provides underlying value to achieve economic security for the network.
The main use for your $FLIP tokens is staking. If running your own node is too complex or resource-intensive, you can opt for liquid staking through Thunderhead, our recommended partner. This allows for a simpler way to stake $FLIP tokens. For more information and to stake your $FLIP, visit StakedFLIP.
Liquidity providers play a crucial role in ensuring smooth and efficient swaps within the Chainflip ecosystem. They contribute assets to liquidity pools and earn fees in return. The quote asset across pairs is USDC to enhance capital efficiency. This setup makes Chainflip an appealing platform for those looking to actively participate in decentralised finance, particularly for experienced users familiar with liquidity provision mechanisms.
Chainflip offers a diverse tooling for liquidity provision, ranging from front-end dashboard to more sophisticated suite of APIs developer tools for quantitative trading firms and developers. It caters both to retail and institutional-grade liquidity providers. It features two main types of orders for liquidity providers:
Liquidity Providers benefit from a favourable fee structure, a diverse set of integration tooling and are encouraged to operate in a competitive environment to further assure deep liquidity and competitive pricing.
For more details on the process and how it integrates into the Chainflip ecosystem, you can refer to the official Chainflip documentation on Liquidity Provision Basics and How Liquidity Provisioning Works.
The Chainflip developers have no say in who the Validators are. Anyone with the required infrastructure and enough tokens to bid for one of the 150 Validator slots can become a Validator. Auctions for the slots are held every 3 hours on the testnet, but is likely to be less frequent on the mainnet. Learn more about auctions, bonds and rewards here.
Liquidity Providers are any actors who provide their assets to the Chainflip protocol in return for a portion of the fees generated by swap volume. Like any other AMM based protocol, Liquidity Provision in Chainflip is permissionless. Both retail users and professional LPs will have the ability to provide v3 style range orders and maker-only limit orders through the JIT AMM to earn fees. Read more about the JIT AMM here.
Although anyone can be a Liquidity Provider, there are some additional steps not normally seen in traditional AMMs. We strongly encourage market makers to consider connecting their existing systems to Chainflip’s JIT AMM to earn healthy spreads on incoming swaps. If you are interested in executing this new trading strategy, you can learn how Liquidity Provider accounts work in detail in the JIT AMM protocol documentation.
Yes, besides the rewards in the form of fees, an additional reward of $FLIP tokens will be distributed to Liquidity Pools proportional to the fees earned. You should read up on the unique JIT AMM protocol documentation before committing capital to liquidity programs on Chainflip.
In the future, newly listed assets can provide their own liquidity rewards autonomously so that new pools can be given bootstrapping incentives without requiring further $FLIP emission.
During a swap, the transactions into and out of Chainflip are on-chain, so the time depends on the speed of the blockchains involved.
Typically, the new asset should reach the user's wallet within 5 minutes. This is significantly faster than existing bridges and faster than the average centralised exchange. We also aim to speed this up dramatically in future upgrades.
If you want to understand how swaps work in detail, check out the Chainflip Native Swap Flow documentation
No, Chainflip is a decentralised exchange and therefore, there's no collection of personal data whatsoever. Keep in mind the records of all trades are still publicly visible on the Chainflip State Chain and the blockchains the protocol is connected to.
Below is a breakdown of how Chainflip's fees are structured:
Deposit Gas Fees (Normal User Transfer)
Varies per chain
Network gas fee will vary depending on the incoming chain. Coming from BTC will differ from those coming from ETH for example. These will be paid by the swapper when they deposit from their wallet.
Liquidity Fee Per Pool
Fixed Liquidity Provider Fee
Network Fee for Buy/Burn Mechinism
Fixed Network Fee used by the protocol to buy FLIP tokens from the USDC/FLIP pool on the State Chain, which in turn are burnt.
Destination Chain Transfer Broadcast Fee (Transfer by Protocol)
Varies per chain
Network gas fees will vary depending on the withdrawal chain. Batching, however, will lower the fee that would normally be paid.
Every time there is a transaction with the base asset (USDC), 0.1% is deducted and used to buy $FLIP tokens directly from the FLIP:USDC Liquidity Pool within Chainflip. The protocol then automatically burns these purchased $FLIP tokens, creating deflationary pressure on the token supply as the product usage increases.
More details on this can be found in the Cryptoeconomics blog post.