What is Chainflip?
Chainflip is a decentralised, trustless protocol that enables cross chain swaps between different blockchains. Chainflip can support any L1 or any future L2 transaction types. It’s like Uniswap, but allows users to swap between major blockchains without any wrapped tokens, special wallets, or specialised software.
Where can I get more information about Chainflip?
Where should I start with Chainflip?
What problem are you solving?
The problem with current major DEXs is that they only support ERC-20 tokens or wrapped tokens, which means that a large volume of non-ethereum native assets are left aside. This is why users are forced to use centralized exchanges when they want to switch from one blockchain to another.
Chainflip is aiming to become the cross-chain solution for swaps that don’t take place in the same blockchain, allowing for seamless value transfer between blockchains that is permissionless, easy to use, and decentralised. Unlike many previous DEX attempts, Chainflip wants to be easier to use than any centralised offering - if the protocol is more convenient to use then it will capture a great amount of retail volume.
It’s really hard to explain in words just how slick the UX of Chainflip will be. If you ever used ShapeShift in 2017 - that’s pretty much the exact same UX we’ll be able to replicate, but entirely decentralised this time.
How does it work?
Structurally, it’s first helpful to consider how normal exchanges work. Typical crypto exchanges are simply software packages with some trading logic, awareness of different blockchains, and a wallet on each of those chains that users can deposit to and withdraw from. In Chainflip’s case, rather than having a central entity owning the private keys and the users funds and executing the trading logic, the protocol relies on a decentralised network of validators that anyone can run. These validators use their own Substrate based proof-of-stake blockchain to come to consensus about the execution of the trading logic and management of liquidity stored in the protocol.
The consensus rules contain the logic to run a Uniswap like AMM in a completely cross chain context. These validators can see all balances across all supported blockchains and can send/receive funds as defined by the consensus rules of the Chainflip protocol. To achieve this, we use large multisignature, threshold, and MPC schemes to enable the creation of jointly controlled ‘vaults’, run by Chainflip Validators, to secure liquidity on each particular blockchain that the protocol supports, without validators ever taking unilateral control over liquidity in the platform or any aspect of the trading logic, which is executed deterministically though consensus driven software on the state chain. Everything in the protocol, from liquidity provision, trade execution, liquidity security, to user interfaces, are entirely permissionless and decentralised.
What blockchain is the protocol built on?
Chainflip’s protocol requires its own proof-of-stake based blockchain, called the state chain, which is being built using a blockchain framework called Substrate, which is the framework used to build Polkadot. While a lot of bespoke logic has to be written into the State Chain, being a part of the Substrate ecosystem brings a lot of advantages to the project. Chainflip is also a part of the Substrate Builders Program.
What are the advantages of Chainflip compared with other DEXs?
There is currently no DeFi protocol that allows a decentralised and trustless cross-chain transactions with no additional software, no specialised wallets, no pre-deposits, no pegged/wrapped tokens, no synthetic assets, no collateral requirements for users and with a seamless/intuitive user experience.
Chainflip will build upon the simplicity of the classic ShapeShift experience, without the challenges of centralisation.
Who are your competitors?
Chainflip has a very large number of competitors in the crypto-to-crypto exchange market, but ERC-20 DEXs are very limited in the type of tokens supported and serve a different market sector to what Chainflip is targeting.
Competitors such as Uniswap, Sushiswap, Pancakeswap, Balancer, Curve, 1Inch, Bancor, DODO, Linkswap, Kyberswap, Loopring, Polkadot, Cosmos, Ren, Keep do not provide any multi-blockchain swapping experience and often require additional components to perform swaps.
The only comparable competitor that serves the same purpose and goals as Chainflip is THORchain.
How are you different to THORchain?
Some of the biggest differences between the two projects are the following...
Will there be a token?
Yes! Chainflip’s protocol token is FLIP.
Has your token launched? If not, when?
No, not yet, we expect the token generation event to be in late Q2 2021.
Will there be a public sale?
There will not be a public offering of the FLIP token. We do however plan to make the token available on existing Ethereum DEXes, where the token will be freely tradeable on launch through a Liquidity Bootstrapping Pool on Balancer. This fair launch system should give ample opportunity for the community to get involved.
What is the total number of tokens?
The initial token supply will be 90M FLIP. This accounts for all tokens created at the beginning of the protocol. Future emissions will go to validators and liquidity mining.
Will FLIP be an ERC-20 token?
Yes. Although Chainflip has its own blockchain, the multi-chain nature of the project means we can have the FLIP token on ethereum for early ease of use and adoption, but later on can add FLIP to any connected blockchain network, including Polkadot, Solana, and so on
What is the utility of the token?
Chainflip is primarily a utility token in the sense that every swap on the platform will result in a direct buying and burning of a small amount of FLIP tokens through the liquidity pool system. Effectively anyone that holds the FLIP token gets upside exposure to fees generated for the protocol in a similar way to how normal centralised exchange fees work.
Do I need FLIP tokens to use Chainflip?
No, not at all, users only need the token they want to swap. FLIP fees are automatically processed for users.
How is value captured through the system?
Chainflip has an innovative fee structure mechanism that we think will allow holders of the FLIP token to capture long term value by buying and burning FLIP tokens from each trade made through the protocol. This means that more volume will increase the number of FLIP tokens being bought and burnt, capturing the value in the form of the FLIP price.
How can I become a validator?
The Chainflip developers have no say on who validators are. Anyone with the required server infrastructure and enough tokens to bid for one of the 150 validator slots can become a validator. Auctions for the slots are held every 28 days.
Who are the liquidity providers?
LP’s are simply any token holder with tokens supported by the protocol that want to provide liquidity to benefit from fees earned through swaps.
Like any other AMM based protocol, liquidity providers are not decided by the protocol. The Chainflip developers have no say on who liquidity providers are.
How can I become a liquidity provider?
Anyone who has tokens that are listed on Chainflip and wants to stake them for a certain period of time can become an LP. LPs must provide liquidity into the supported pools, which each have 2 assets. LPs can choose to provide only some or even only one of the assets, and the protocol can automatically rebalance their holdings to provide liquidity to any given pool.
Do I need both of the token pairs to provide liquidity?
No, we know having both assets can be tedious for users, particularly in a cross-chain context, so we have a solution for this.
Chainflip will automatically do the swap for the user, so say the user wants to provide liquidity to the ETH/USDC 50/50 pool but only holds USDC, Chainflip will make the swap of 50% of those USDC to ETH and allocate both token in their respective pool within defined slippage limits automatically.
Will there be a liquidity mining program?
Yes, besides the rewards in the form of fees, there will be liquidity mining programs where an additional reward of FLIP tokens will be distributed to the pools as deemed necessary based on liquidity in certain pools. In the future, newly listed assets can provide their own liquidity rewards programmatically so that new pools can be given an incentive to operate automatically by anyone without requiring further FLIP emission.
What blockchains will Chainflip support?
The future of blockchain and DeFi is multichain; that is why Chainflip’s mission is to bridge as many major blockchain ecosystems as possible. ERC20 token support will be provided by native Uniswap routing, meaning users will be able to swap from any ERC20 token listed on Uniswap to any supported native asset on Chainflip seamlessly.
Once we have completed BTC, ETH, DOT and OXEN, Integrating new blockchains won’t take a lot of time, so we will assess the most popular ones at the time and decide based on what people want and what we believe will bring the most users and volume to the protocol. Other contenders for initial integration include Solana, BSC, Tezos, Arweave, and more.
Will the Chainflip team require a protocol audit before launch?
Yes of course! Auditing something like Chainflip is much more involved than your typical DeFi project. Chainflip is a whole technology stack, not simply a smart contract. Commencement of the audits are planned to coincide with the release of the public testnet.
When are you launching?
The launch date depends on a multitude of factors, some of which are external and outside of our control. However, based on our trajectory and developments, the most likely outcome is that the final stage of the mainnet rollout will happen in Q4 of this year, making the product available to users at the same time.
How long will the user wait to receive their new coins? How fast is the Chainflip network?
Both transactions involved (in and out of chainflip) are on-chain, so the time depends on the speed of the blockchains involved.
For a BTC to ETH swap, the user will wait 3 confirmations on the BTC network for the outgoing transaction to be confirmed on Chainflip, then 60 sec for the swap to be confirmed on Chainflip’s network and finally the time for the new coins to get transferred from Chainflip to the users wallet, which should be spendable after 1 confirmation.
Typically, for faster blockchains, transfers between chains should only take a minute or two.
Will chainflip need to validate the identity of the user?
No, Chainflip is a decentralised exchange, there is no collection of personal data whatsoever. The records of all trades are publicly visible on the Chainflip state chain and the blockchains we are connected to.
What fees will the user be expected to pay?
Users have to pay for blockchain fees for both coins, fees to liquidity providers on Chainflip, plus a network fee of the Chainflip network. By batching outgoing transfers and engineering efficient liquidity routing, we believe that Chainflip will be a viable swapping platform for trades both large and small, and the fees will be well worth the convenience and UX offered by the platform.
What is the network fee on chainflip?
Whenever an interaction with the base (USDC) asset occurs, a once-per-trade fee of 0.1 - 0.2% fee is deducted and is used to buy FLIP tokens directly from the in-built USDC-FLIP liquidity pool within Chainflip. The protocol then burns these purchased FLIP tokens periodically.
How will FLIP tokens be distributed in the future?
FLIP tokens will be distributed to validators to reward them for performing their service. FLIP tokens could also be distributed for a certain amount of time in liquidity mining programs.
Will users be able to stake FLIP tokens if being a validator is not an option?
FLIP holders will be able to stake to provide liquidity on the FLIP/USDC pool for example.
How are asset prices determined on Chainflip?
Chainflip is an AMM based exchange, this means prices of the assets are determined by their weight in their respective pool. Chainflip works the same way as Uniswap in this way - rather than relying on Oracles, it actually becomes its own oracle through the state of the pools and arbitrageurs rebalancing with secondary markets.
I heard something about an Airdrop?
The Oxen community is currently running an airdrop program for Oxen Service Node operators. It’s the only way to gain access to the token at the moment, but we aren’t running it. Head to airdrop.oxen.io for more information on it!