L3, the next level for cross-chain

Although the whole architecture is a single tool, and there have been many articles published about it over the year, I can still confidently say that this one is the most important one.

Here’s why…

L0 — L1 — L2 — L3

Not everyone agrees with the classification proposed below. Therefore I will briefly explain:

L0 is an interaction at the “depth” of atomic swaps, which work due to the low-level interaction of various blockchains. You can always find a list of “bridges” of this kind by following the link: …

L1 is, in fact, the blockchain itself. Within L1, the value can be transferred both by a native coin and a native coin, plus a unique coin of the commission (I think the founder of this is the GAS of Ether), as well as different tokens: interchangeable (ERC-20 and the like ) and not interchangeable (ERC-721 and similar).

L2 is different kinds of channels and roll-ups. They differ in various aspects, for example, in adding participants. However, the main feature is that the primary transactions occur after opening the channel/roll-up outside the main chain and enter it as a single transaction only when it is closed.

L3 is the transfer of value between different blockchains (even more precisely, DRS: decentralized and/or distributed systems, which includes not only the blockchain but also DAG) using single-order entities that are already “wired” into these DPCs.

Thus, DAO ENVELOP implements cross-chain mechanics precisely with the help of L3. I will try to explain this mechanism with examples briefly.

Cases

The most obvious case is wNFT farming/staking as they are implemented today on the site: https://envelop.is/farming/:

1. You take assets available for circulation (ERC-20 tokens, coins);

2. Combine them into one asset — wNFT (wrap NFT: a wrapped, non-fungible token);

3. You receive liquidity blocked for the selected period (now it is 6–12–18 months);

4. At the same time, you can control the future of the asset itself — wNFT: you can sell it, pledge it, etc., if you find a secondary market.

Next, you have the opportunity to transfer wNFT A created from blockchain Ethereum, for example, to the blockchain, let’s say, BSC. What could potentially happen here:

1. The opposite side imitates another version of the wNFT B with the value of the invested assets that suits you:

2. After creation, the wNFT B token is sent to the smart contract of the Oracle DAO ENVELOP (or any newly created micro-DAO with a similar function) and

3. After that, you also send your wNFT A to the same smart contract but in a different chain

4. Then the conditions are checked, and the smart contract must “reassign” the asset owner in blockchain ETH and BSC

5. At the same time, as can be seen from the example, for smart contracts to “listen” to each other, several mechanics can be used — both L0 and L1 — L2, since DAO ENVELOP does not deal with cross-chain mechanics in this context.

6. The second approach works as a more generic one:

7. Each blockchain has a liquidity provider (LP) that sees orders for wrapped wNFT and exchange. In addition, each liquidity provider can make a deal only if the size of its collateral liquidity is greater than or equal to wNFT.

8. As soon as the LP has accepted the wNFT exchange request, it looks for the LP’s counter-deal in blockchain BSC: the LP can act as any other LP, automatic platforms (AMM, DAO, etc.), etc.

9. As soon as the LP in the blockchain BSC is found, a transaction of creating wNFT B in blockchain BSC and sending wNFT B to the Oracle smart contract in block BSC should take place. The transaction is completed according to the mechanism described above in clause 1.

10. Finally, the most versatile tool is to create wNFT as a key:

11. Someone issues wNFT #A on blockchain #01 with liquidity pledged by N.

12. Then they ask the Oracle to issue wNFT #B in blockchain #02, but without liquidity collateral in the amount of N, and as an access key to wNFT #A: that is, while the wNFT key #B exists in blockchain # 02 — in blockchain # 01 wnFT A cannot be burned or blocked on the Protocol smart contract, but only laid down and/or transferred in any way to the Oracle smart contract.

13. Thus, the wNFT # B key owner is the holder of a future on wNFT # A, and without it, wNFT cannot be deployed and withdrawn from the Oracle: the exception is cases multi-signature, which is a hedge against random locks.

Conclusion

Thus, instead of creating another bridge or cross & multi-chain DRC, DAO ENVELOP focuses on developing high-level mechanisms for transferring liquidity, creating a market for secured derivatives, etc.

At the same time, in the proposed model, anybody/anything can become Liquidity Providers; and the Oracle itself can be any smart contract that implements the declared functionality. The only advantage of the Oracle of the DAO ENVELOP is the initial nature of creation (a kind of the genesis of all Oracles of this kind); Secondly, in a closed ecosystem of hedging (read the material on Protocol + Oracle + Index). Access to this functionality is allowed for everyone ready to pay for these operations with NIFTSY tokens. Additional discounts are also provided for holders of some staking in the farming mechanism.

The article was written by @Menaskop