Published On: 8/2/2022, 2:23:24 PM
zeroDAO has been working for the past 2 years on solving key problems in the interoperability space. Specifically, we’ve been engaged with handling BTC within EVM chains.
zeroDAO has developed two pieces of technology that are suited to handle these three items, and allow for a pure BTC on EVM experience. All this while retaining the security of keeping your funds on their native chain until “Just In Time” execution. What we’ll be discussing in this article specifically handles the problems above, Meta Transaction Lending.
Lending is made up of a number of components:
Imagine we have someone wanting to swap native BTC → USDC using a DEX on the Ethereum network.
Traditionally, to swap you’d need to perform a number of actions - these below are specific to bridging via RenVM, but timing stays largely the same for bridging funds onto ETH:
mint()transaction on the BTCGateway contract on Ethereum
A timeline for this is displayed below. This traditionally takes around 1.5 hours on average to complete, with the bulk of the time being spent in BTC confirmation time:
As indicated by the blue boxes, the bridging requires a number of actions done by the user to complete the bridge and swap. This process takes upwards of 1.5-2 hours to complete. This often leads to significant price shifts during bridging, with price swings of up to 5% during that time frame. For a swap, this could result in a loss of funds, or needing to wait for a better entry. Even worse, if a user was trying to add collateral to a loan that is in danger of being liquidated, it could lead to a partial or full loss of their collateral.
Another example would be adding collateral to Maker to support an existing loan. We’ll use a centralized custodian (FTX) in this example to bridge to Ethereum:
Using a centralized exchange still has the same timing issues mentioned before and a large number of user actions required to complete the desired outcome. If a user has an urgent position that needs to be collateralized quickly, this time frame may be unacceptable and cause loss of funds due to liquidation. In order to execute transactions immediately, a user would need to have funds on an exchange or wrapped on a smart contract platform, which gives up the security advantages in holding BTC natively in a private wallet.
zeroDAO solves the “time slippage” problem by implementing both a lending platform and a peer to peer network of keepers who execute actions for users via Meta Transactions. A client need only generate a BTC address and send funds to it. Once the keeper detects the transaction, they will post collateral for the loan, execute the logic, and then send the funds to the user. This gives the user an experience similar to a DEX or funds being on chain, but retaining custody of your BTC until just in time execution.
zeroDAO modules can be adapted to perform any business logic, allowing users to enter leveraged positions, top up their maker vault collateral, quickly swap for different assets and easily enter LP positions, just as an example. A user signs a Meta Transaction (a transaction within a transaction) and includes the data in the bridge for the keeper to execute on their behalf, with the lending vault taking the gas cost out of the output of the logic.
In a future article, we will deep dive into the functionality of the vaults and how they can be leveraged in different ways, as well as the future of how we plan on increasing the capacity of the system and improving the user experience.
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