The Future of Prism — Part 1: Cross Chain Swaps
Currently there exists a major problem within the various EVM networks. While you would be forgiven for intuitively thinking that it is possible to trade directly between these networks (after all they are working on the same infrastructure, right?), this is currently not the case. Trading between networks can be done but there are some key issues:
- Slow: The speed of trading between these networks is reliant on the speed of the bridges between the networks. Some bridges can taken many hours or even far longer to complete a bridging transaction! In the fast paced world of crypto this is not ideal.
- Multiple Transactions: The nature of how bridges work currently is that generally two transactions are required to complete the transfer. One for locking up the token on the first network and a second for unlocking it on the second network.
Currently Prism Network bridges are incredibly fast in comparison to other bridges, with the transfer speed being the time it takes for both networks to confirm the transactions and a bit of time for the bridge to do some processing — on average around 2–3 minutes depending on what network is bridged to/from. However, this current implementation still suffers from the same issue of requiring the user to confirm 2 separate transactions. Not only is this undesirable from a user experience POV, it also prevents smart contracts from interacting directly across networks. Thus, for true interoperability between EVM networks, 1 continuous function is needed.
Our proposed solution is for “One Transaction Cross Chain Swaps”, or to shorten it down just “Cross Chain Swaps”. This is facilitated by routing transfers between chains through the PRISM token. An example swap would be as follows:
User is looking to trade their ETH on the Ethereum mainnet for BNB on the Binance Smart Chain.
- Trade: ETH -> PRISM
- Bridge: PRISM -> bPRISM
- Trade: bPRISM -> BNB
Thus, the User in this example has completed a swap of ETH for BNB while also migrating their funds to another network. Their are some caveats that must be discussed here:
- The user must pre-approve the contract on the receiving network.
- If liquidity on the ETH/PRISM and BNB/bPRISM pair is low, slippage can occur. A positive feedback loop should resolve this. As the utility of cross-chain swaps become recognised and volume increases, this should in turn attract liquidity providers, allowing for higher value transactions to occur, attracting more liquidity providers etc.
- Gas fees will be picked up on the outbound and inbound network, so total fees are dependent on the networks being transferred between. At the current time, this is mainly an issue with transferring to/from the Ethereum mainnet, while other EVM networks generally have almost negligible gas costs.
This is an incredible improvement to the current bridges that are widely available. Not only can traders now trade for any token on any network with any other token on any other network (with the use of Exchange Aggregators including EmpireDEX), it provides a new fundamental piece of infrastructure for developers to build upon. In essence, another lego block.
For example, this upgrade to the bridge would also allow for users to potentially transfer between networks with a net cost of 0, or even to make money on the transfer! If an arbitrage opportunity existed, the User would be able to complete the transfer of value to another network while profiting from the arbitrage which could nullify their gas costs or even give them an overall profit. Or perhaps a project could set up an arbitrage bot to identify opportunities for “free money” and then give back the rewards to their community.
The possibilities that cross chain swaps unlocks are truly wide in scope. Our hope is that from this new tool innovation will flourish. Not only are entirely new projects now feasible, previous projects will be able to implement this into their smart contracts to give their tokens new use cases and offer new features to their communities. As ever, we remain committed to empowering developers.