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Revolution in Cross-chain Space: Decentralized Instant Swaps

December 6, 2023

Kinetex co-founder Tigran Bolshoi had a discussion with Faraj Abutalibov, CCO of Venom Foundation, at the Genesis XBT Crypto Conference last month. Bolshoi talked about issues connected to cross-chain bridges, Kinetex's new approach to cross-chain swaps, and the team's plans. Here is a more detailed recap of some questions that they touched on.

Firstly, Bolshoi and Abutalibov discussed some of DeFi's main challenges, including security, rates, and bad UX. Two of the major security struggles are a need to trust third-party validators and a constant risk of depreciation of wrapped tokens. Both can affect users severely. Then, there are non-guaranteed rates and price slippages, which prevent users from receiving assets in the amount they would like. Lastly, there is bad UX. Users must make many separate decisions during swaps, including gas payments and other fees on different networks, wallet management, etc., which may scare users away from DeFi products. 

Next, Bolshoi and Abutalibov could not discuss the problems of the DeFi market without mentioning cross-chain bridges. Abutalibov reminded the conference participants that 2 billion were stolen in attacks on bridges in 2022 and asked Bolshoi what he thinks about bridges and whether he trusts them. Bolshoi listed multiple problems bridges create, such as security issues connected to wrapped tokens, centralized validators that can be compromised, etc. Moreover, he drew the audience's attention to the costliness of bridges. For instance, to make one cross-chain swap, users sometimes need to pay up to nine fees and commissions, which is excessive. Additionally, users have to manually find bridges, DEXes, and the most suitable liquidity or use aggregators, which takes a lot of time and effort and is almost impossible for novice users.

After that, Bolshoi and Abutalibov moved on to discuss possible solutions to such challenges. Bolshois explained that he believes the future lies in intents. They enable users to delegate their requests but do so in a non-centralized way. Kinetex proposes a non-custodial solution in the form of a decentralized network of professional resolvers (market makers) who will compete to fill user orders and execute them according to the conditions that users specify initially. In this solution, resolvers provide guaranteed rates, pay for gas, build optimal routes, check prices across CeFi and DeFi, and take all the risks on themselves, thus solving many issues discussed at the beginning of the interview. The whole process is performed automatically, so it looks as straightforward as a regular swap on any centralized exchange.

This new approach proposed by Kinetex has several advantages. Firstly, it is super fast, as the swap usually takes up to 10 seconds. Secondly, it is very cheap: the gas limit is approximately 60,000 gas units per transaction. Thirdly, it offers a range of liquidity sources: resolvers can look for liquidity across DEXes and CEXes, finding the most advantageous prices. The last advantage is guaranteed rates: there are no losses such as slippage, impermanent loss, or price impact.

Closer to the end of the discussion, Abutalibov asked about Kinetex's potential in the current market and the team's plans. Bolshoi explained that since Bitcoin usually drives the market, Kinetex is currently focused on creating a 'tunnel' that can help connect it with DeFi by developing Zk light clients for Bitcoin. In addition, the team would like to enable instant and commission-less swaps for stablecoins. This feature could be beneficial for many crypto users. 

The team is grateful for the opportunity to discuss topics close to their hearts and would like to thank everyone who listened online.

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