I have been writing about the incoming multi-chain world for quite some time, and we have seen this play out with the greatest capital influx of 2021 being allocated to the alternate Layer-1 (or L1) space.
It didn’t take a genius to work out it was coming; the user experience on the Ethereum mainnet was simply too complicated for the average investor/user, whilst the demand and cost for using such protocols has remained at all-time highs during this past year.
So, naturally, user adoption on more user-friendly chains began to explode. Over the past 18-24 months, Binance Smart Chain, Solana, Avalanche, Fantom, and a number of other L1s (blockchain base layers) have all drastically increased both their market share and users compared to Ethereum.
Comparing the percentage of L1 TVL (total value locked) measured from the mid 2020’s to current rates gives us some great insight into the future:
Info: DeFi Llama – https://defillama.com/chains
Ethereum’s TVL market share has been falling to other chains whether they are EVM (Ethereum Virtual Machine) compatible or not… the idea that there would be a “one-chain to rule them all” feels a little silly now, doesn’t it?
I can only see this trend increasing. The opportunities afforded by those chains to willing participants who choose to park their capital outside of Ethereum are pretty damn huge. We all know the rotation game in and out of L1s happens, and it usually arrives in an opportunity to head over to a new chain that is paying out high incentives – this is DeFi’s customer acquisition cost (CAC). Emerging blockchains will payout handsome rewards (typically in the chain’s native token) for those who want to head over to their chain and use the protocols built on top of it.
There is a theory that all capital will eventually be harvested and directed back to Ethereum, which if I am honest, seems like a load of shit. Here is a list of current TVL for the top 15 L1 blockchains:
We have different horses for different courses; If you want security, then yeah sure, Ethereum is great. Do you want speed? Solana may be your best option (if it isn’t having a nap). Looking for a reliable and cheap L1 with an excellent user experience? Avalanche and Fantom are a good bet.
Reverse engineering a blockchain to fix problems that we have in the real world such as remittances (I know, it’s a meme), voting, privacy etc. is probably where we will end up. But for us to allow the seamless flow of capital between these separate networks will require capable infrastructure to power it.
Bridges are and always have been the foundations for this cross-chain world. For me personally, sending an asset from one chain to the other has been a bit of a pain in the ass. For example, I would route tokens through Binance or some other CEX (central exchange) which provided multi-chain options for withdrawing. Taking my capital off-chain onto a CEX wallet was stressful and coordinating the 2-FA authentication with a mobile phone wasn’t fun either. To be honest, until about 6 months ago, on-chain bridging felt incredibly clunky and talking with people in the space I know others also felt this way. An asset would be transferred between at least 2 chains on a typical bridge.
How Do Blockchain Bridges Work?
Let’s say there is a nice farming opportunity on a new DEX (decentralised exchange) on Fantom using ETH. You have some ETH on Ethereum and in order to take advantage of this opportunity, you need to use a bridge to move your assets over to Fantom.
You head to a bridge on the Ethereum mainnet. From there you select the starting chain (Ethereum) and the destination chain (Fantom). You hit “approve” and then hit “bridge” and confirm both transactions in your Metamask.
From there, your ETH is locked into a smart contract on the Ethereum network, and a wrapped version of the asset is minted on to Fantom. This is called WETH: Wrapped ETH. If you someday bridge back your WETH to Ethereum, your WETH is burned, and your original ETH is then released from the smart contract, known as redeeming. This is how the first iterations of bridges worked, and it still definitely has a place in the multichain crypto ecosystem.
Image taken from Anyswap V2 Bridge – ETH on Ethereum to anyETH on BSC. anyETH being a wrapped version.
The benefits of the wrapping and unwrapping of tokens are that: a) bridges are pretty reliable and b) they don’t require any liquidity. You are effectively minting a wrapped version of the asset on another chain whilst your native ETH remains locked until you redeem it by bridging back. No pooling of assets is required.
On top of this, nothing is left to human intervention. The full process is all conducted using a network of nodes that verify the bridging of assets from one chain to another using a Decentralised Management Account system. What I will say is beware of centralised bridges, you never know where your assets will end up.
The downside of this method is that bridging can only occur between 2 chains, and the tokens that end up on a non-native chain are wrapped versions. This is fine for all intents and purposes however: there is a much more efficient and reliable way to do this! Which leads us to the main topic of this article…
Anyswap (whoops, old habits die hard…) Multichain and the MULTI token.
What is Multichain (formerly known as Anyswap)?
Yes, Anyswap Bridge, or “Router” (as they are starting to be known in the crypto space) recently rebranded to “Multichain” (which is one of the best SEO and Twitter ranking name changes I have seen in recent times. Well played). The project started out back in July 2020 and the first time I noticed it was the early days of the Binance Smart Chain wave.
(Funny story, I actually bought a bag of ANY at a ridiculously low price – I am still coping about selling it to this day, NGMI. I also bought my friend a bag at this price which he still unknowingly has. I might have to check it out for him using his seed phrase… just kidding).
The protocol itself allowed cross-chain bridging between the most popular tokens at the time, and this was something completely new to me. I found it a little daunting at first, I have to admit. The fact that we would send our tokens to a smart contract intermediary address that would often be labelled as 0x00000000… was extremely scary – I felt like I never really knew if I was going to see the wrapped version on the destination chain.
However, those were the old days, and Multichain, as we now call it, has gone on to become the leading cross-chain protocol by TVL and Volume. The stats on the landing page are, quite frankly, amazing: $47.6bn in volume, $11bn+ TVL, 1428 tokens and over 30 chains…
It may seem crazy to say this but, I don’t think Multichain has really gotten started yet.
Behind the scenes, the transition from Anyswap Bridge to Multichain Router as we now know it hasn’t been a facelift or a nice makeover – the protocol has gone through a total transformation. Its team has recently gotten a substantial raise by some of the most prominent figures in this space:
📢 Major Announcement— Multichain (Previously Anyswap) (@MultichainOrg) December 21, 2021
#Multichain (previously Anyswap) raises a $60M financing round led by Binance Labs @BinanceLabs @BinanceChain
We look forward to having long-standing and deep cooperation with all supporters to achieve the common vision for #web3https://t.co/J1ParrDrsc
💕A heartfelt THANK YOU to all backers @binance @BinanceLabs @sequoia @IDGCapital Three Arrows Capital @DeFianceCapital @circlepay @Tronfoundation @Hypersphere @primitivecrypto @Magicventures1 @HashKey_Capital— Multichain (Previously Anyswap) (@MultichainOrg) December 21, 2021
Let's work together to take cross chain to the next level🚀
They have implemented v3 which enables cross-chain swaps of more than 2 chains. This “router” as it is now called, does away with wrapped tokens and their gas-intensive limitations, and even more importantly allows them to integrate into cross-chain liquidity pools. That means users can deposit a wide range of assets into the Multichain liquidity pools from a variety of different chains, thus enabling cross-chain transfers. Genius…
And this is where the $10.3bn in protocol TVL comes into play: with the deep liquidity across multiple chains, the protocol can facilitate what are effectively trades (more on this later…). This way, you get native assets on different chains without the need for a wrapper.
Now, I know what you’re thinking: What if there isn’t enough liquidity to be able to facilitate the move across the chain?
Let’s say there is an imminent launch for a new token XYZ (no, you can’t ape this, apologies) on the Avalanche network and you have some funds on Ethereum, but not on the Avalanche yet ( and let’s be honest, you are unorganised and leave it to the last minute the same as everyone else does)… Everyone is using the router to send funds from ETH to AVAX and the liquidity becomes off-balance with their capital moving in the same direction… Do we have a problem?
Well no, by combining the router with the original bridge function – this is where the wrapper can come back into play…
If there isn’t enough liquidity for the net outflows from chain A to Chain B, then you can still bridge over. If we use token XYZ and there isn’t sufficient liquidity to bridge the native token over, then you will receive “anyXYZ”, which represents your share of that liquidity pool. In effect, it is an IOU from the contract saying that when liquidity is available, you are owed an amount of native XYZ on the destination chain.
So, now that we know how the underlying protocol works and you are a cross-chain pro, let’s take a look at the new MULTI governance token.
What is the MULTI token?
As I mentioned above, this isn’t just a superficial rebrand. The MULTI token will be superseding the ANY token which comes with one of the most promising tokenomics updates in this space.
As a side note for everyone like my friend who is holding a bag of the original ANY tokens, you can currently head over to the Multichain dashboard on the Ethereum, BSC and the Fantom network and redeem your new MULTI tokens at a 1:1 conversion rate. You can also pick times where gas is low, if that is a concern on Ethereum, using something like ETH Gas Station
I’ve gotten the impression that in a few weeks, as the protocol rolls out, we may see some avenues where it is possible to redeem your MULTI tokens off-chain. I can imagine it would make sense if Binance was to facilitate this given they are one of the largest investors in the latest round. Script Disabled
The new MULTI tokens circulating supply will be maintained at 18.64%, with the remaining supply utility to be determined by the Multichain DAO; this is important as MULTI stakers will be in charge of the destination for the remaining tokens (think CRV, think emissions, think wars, potentially… I don’t know, I am an idiot). The most interesting upgrade for me, personally, is that MULTI staking will be moving to a veToken model. For the uninitiated, you can read more about how CRV and CVX utilise this model (to great success) HERE.
MULTI holders will be able to stake their MULTI for vote escrowed MULTI (veMULTI). Each week the fees generated from the platform will be then paid out to those who have locked their tokens. The more tokens you lock and the longer the duration, the greater your weekly rewards will be. What I LOVE, is that the plans are to pay out the weekly rewards in USDC (or possibly a similar stablecoin) instead of the standard fluctuating price of the incentivising platforms native token. The passive incoooooomers will love this one because rewards are 1) non-dilutionary and 2) more stable price-wise.
At this point I believe MULTI will be one of the most tokenomically sound projects in the whole space. I dare say it could even trigger an awful lot of other projects to make the switch to this veToken model and also implement reward payouts in stablecoins.
It even makes sense from an investors perspective; Why would you ever remove your stake or sell your MULTI if you are being paid handsomely each week? We can get an idea of what the weekly fees will look like for stakers by looking at the current volume.
Yes, you read that correctly: $9.58bn in 7-day volume with over $1,677,261 in accrued fees. That’s roughly around $88m a year…https://www.tokenterminal.com/terminal/metrics/protocol_revenue/embed/cumulative
click “show as logarithmic scale”
With the current tokenomic model, Multichain stakers will be exposed to the 8th highest revenue-generating platform in this whole space. Once the staking is implemented the revenue generation will be up to the markets to decide, but looking at the other protocols in the top 10, we can quite safely say that the most sustainable rewards structure will be for veMULTI holders. Most of the projects generating similar revenues either don’t give any of this benefit back to their stakers, or they opt to payout rewards in more of the native token (usually sourced from buybacks), which inevitably leads to downward price action selling pressure as people receive these rewards.
Even more unheard of, there are rumours that fees accrued will also be backdated from the last buyback of tokens.
Busy implemented ve3, fees have been accumulating, they will all be distributed as soon as veMULTI is live.— Andre Cronje 👻🐸 (@AndreCronjeTech) January 13, 2022
Numbers and rewards aside, I think this is an extremely bullish catalyst for the whole platform. I also would argue this protocol is still in its infancy and has the potential to provide cross-chain infrastructure for many years to come. I also have to ask myself what the potential volume and resulting fees will most likely be once we begin to onboard the first 100m users to DeFi. A personal goal of mine is to provide Blocmates as a service to help facilitate this in any possible way I can. The fact that DeFi is just at the beginning stages of starting to see the types of volume traditional markets enjoy, let alone the Forex markets, makes the future of this fee-distributing multi-ecosystem protocol extremely fascinating to me. Forex markets can trade up to $6 trillion a day, just as a reference…
Potential Partnerships and Integrations
My guess is, with Multichain’s connections to Andre Cronje, a well known and respected developer who is currently building a Fixed Forex on Keep3r Network, is the connections to the necessary backend infrastructure to enable DeFi forex trading would certainly run cross-chain and most likely on Multichains Router. I could endlessly go down the rabbit hole about how this whole ecosystem is slowly converging to be one of the biggest financial and unstoppable giants the world has seen, but I won’t bore you with that.
It isn’t just Keep3r that can utilise the Multichain infrastructure though… There are rumours of Curve, AAVE, Sushi and Yearn integration in Q1-Q2.
So, how would this integration look?
Curve and Sushi are the easiest ones to imagine – we know that these protocols enable on-chain swaps for a variety of different chains. We also know that there are a variety of assets that are traded on these DEX’s available on other chains, too.
Take USDC and ETH for example: if you want to use Sushi Swap to facilitate a trade between these two stablecoins then, depending on which chain you connect to, there will be deep liquidity to perform that trade. If you want to swap DAI for USDC on Curve, there is plenty of liquidity across multiple chains to enable this.
So, what if a person wants to trade USDC on Ethereum, for DAI on Avalanche? Well, Curve could go out and spend the next few years building the infrastructure, updating their protocols, running expensive audits and then finally deploying this feature, but why take the long route? With the extreme amounts of DeFi liquidity on Curve, wouldn’t it be a lot easier to immediately move it across multiple chains running the Multichain Router as backend support?
This isn’t just pie in the sky; this implementation is already up and running today with Sushi Swap…
Cross-chain #Sushiswap USDC(bsc) -> FTM(fantom), one step, one transaction. @danielesesta— Zhaojun (@zhaojun_sh) January 7, 2022
Routing path: USDC(bsc) -> Multichain Router -> USDC(fantom) -> Sushiswap(fantom) -> FTM(fantom)
Thanks for your great contract design. @AndreCronjeTechhttps://t.co/2ILq3zXmTU https://t.co/g5M0d5t5zh pic.twitter.com/3pWUt4sKZc
Applying this connection to Yearn and AAVE is another logical leap given Yearn’s deployment on Fantom, whilst AAVE is live on Avalanche and Polygon (for now…). It would make sense for these protocols with large TVL to be providing cross-chain strategies for their users. Say there is a YFI vault on Yearn that can generate you more yield on Fantom than Ethereum. A user would typically be able to bridge their assets over and enter the position on Fantom, this is simple, effective and works.
What if those who deposit on Ethereum could also gain access to the higher yield without having to go cross-chain? Utilising the Multichain’s Router, that initial deposit and resulting yield could, in effect, be distributed back to the preferred native chain without extra effort.
Even if the user isn’t moving their funds over personally, the MULTI protocol stakers will benefit from Yearn itself, moving a collection of users funds back and forth in bulk, for deposits and withdrawals.
The same goes for Aave: Aave has a ridiculous amount of TVL and, yes, there are questions regarding how much of it is looped, but… if an Aave x Multichain integration goes ahead, this could be a match made in heaven. Imagine being able to deposit into a USDC Aave vault. The USDC can then be borrowed on any chain. Given the collective group of users across multiple chains, the utilisation rate of the USDC will go up and consequently yield should be greater for lenders.
All in all, these integrations could be *extremely* mutually beneficial to Multichain and the other projects. I envision a lot more of them currently looking to embrace the Multichain world by using the Multichain Router as a part of their roadmap going forward.
The beauty of these protocols with some of the highest TVL in the game is, once these funds begin to be moved cross-chain, then the volume on Multichain also goes to heights not seen before in DeFi.
Music to veMULTI holder’s ears… think of the feeeees!
On top of that, imagine the moat that these kinds of integrations and partnerships create; TVL and volume is the aim of the game here, and given that Multichain has extremely strong connections with some of these above protocols, it might be hard for other cross-chain infrastructure products to compete.
Now, for a topical aspect of Multichain that could potentially get overlooked… enter, cross-chain NFTs.
Given the recent resurgence in the NFT industry and the complete lack of architecture to be able to send these tokens across the chain, Multichain opens the door to a new era of DeFi and NFT crossover.
I know for a fact, specific projects are working on NFTs as collateral for lending and borrowing protocols. I know that fractionalisation of NFTs has been tried and tested. I also know of specific projects working on weird and wonderful ways to integrate both DeFi and NFTs in ways never seen before (… to be covered in a later article). Given the current options, it may be hard to grasp why sending a jpeg across-chain would be useful, but believe me, digital art is just the beginning. We ain’t seen nothin’ yet, trust.
Looks Rare or Opensea on different chains? You better believe it, because the potential for this market, coupled with the volume and unintended benefits this has for Multichain and MULTI stakers makes this whole connected upgrade for the space, quite frankly, a work of art. It amazes me to this day how fast this industry develops, which is why I am completely and utterly obsessed with it. Blockchain will only get crazier from here…
I do believe we are heading into an extremely strong narrative of cross-chain protocols. I find myself using Multichain every day to bridge assets and explore new areas of this weird and wonderful space. I can only see this becoming easier, quicker and cheaper with time. This new interconnectivity stands to be extremely beneficial for veMULTI holders. I for one will be locking my MULTI for the full duration. I would like to see some liquid staking options for the project go-live, similar to how cvxCRV works for CRV stakers. Who will pick up this mantle and run with it? Please feel free to message me if you do.
I also see veMULTI becoming one of the most sought after assets in this space. Being able to direct ridiculous amounts of liquidity towards specific assets to encourage and help maintain pegs and stability can surely play out well, and only the DAO can decide.
Will we get cross-chain wars? I can’t see why not, and I know what protocol I am using if we do…
If you liked this article and are looking for something similar for your project just give me a message on Twitter or Discord. All my details are below 🙂
Multichain Resources –
Website and dApp – https://multichain.org/
CoinGecko – https://www.coingecko.com/en/coins/multichain
How to Buy MULTI? –
Ethereum – https://app.sushi.com/swap?inputCurrency=0x65ef703f5594d2573eb71aaf55bc0cb548492df4&outputCurrency=ETH
Fantom – https://spookyswap.finance/swap?outputCurrency=0x9fb9a33956351cf4fa040f65a13b835a3c8764e3&inputCurrency=0x21be370d5312f44cb42ce377bc9b8a0cef1a4c83
blocmates links –
Personal Telegram – @blocmates
Personal Discord – blocmates#7027
Email – [email protected]