We are writing to seek feedback on our roadmap on cross-chain and cross-exchange initiatives.
In short, we are building trustless bridges to Bitcoin, Ethereum and Cosmos for broader access of users and assets to decentralized finance. Our consumer product is a cross-chain exchange without custodial risks. Later we will be putting centralized exchanges’ order books on chain for cross-exchange arbitrage and fiat cash-flow management.
Below we review our 2020 milestones before diving into the two broad products we are building. We conclude with our progress on decentralization and some notable reference on the current fintech revolution.
Since Harmony Mainnet launch in June 2019, we have worked non-stop to bring validators and products to Harmony. We launched Open Staking in May 2020 attracting hundreds of nodes staking more than 53% of our native ONE tokens. Below are some key milestones of our network technology and ecosystem growth.
Scalability in terms of transactions per second (TPS) is well understood but over-promoted. Almost all base protocols are under-utilized while sharding already guarantees horizontal expandability. The most meaningful feature for our users is fast finality. Harmony’s 5-second finality has a clear advantage over Ethereum’s 6-minute, Ethereum 2’s 12-minute and Polkadot’s 60-second benchmarks.
We have prototyped multiple bridges to and from Ethereum and Binance Smart Chain. Our cross-chain Uniswap V2 and Chainlink oracle on Harmony Mainnet are launching in coming weeks. Migration is easy with our Ethereum-compatible tooling — we have successfully ported many demos of decentralized finance including Balancer, Synthetix, Curve, parts of MakerDAO and Yearn governance. Our community had fun testing several marketplaces for non-fungible tokens and branded assets.
Are we decentralized yet? Cosmos boasts 125+ active validators and Polkadot 100+. Harmony supports 1000 seats split among 82 elected of 161 validator pools today. But the ultimate metric is human participation: We have 44 contributors on Github, while Polkadot has 84 and Cosmos 164.
Harmony Foundation is committed to funding grants for protocol and ecosystem development for years to come. The goals are to drive mainnet utility, decentralized community, and cryptographic innovations in open development. Via media grants, we partner with Camila Russo and The Defiant for a DeFi video series. Along with 109 grant governors, we have approved 13 grants for a total of $375k on bridges, tooling and decentralized exchanges.
Here’re some highlights of the Harmony Ecosystem:
- 16 apps, 10 native tokens (BUSD, 1Dai), 3 assets (Sandbox / Animoca NFT)
- 20 wallets (TrustWallet, Ledger), 13 grants (Connext, JellySwap), 50 angels
- 12 exchanges, 5 fiat pairings (Binance.US, Huobi, WazirX, ProBit)
Cross-Chain Pool with Trustless Bridges
A unifying vision of blockchains is to connect with all people and with any economy. While the disruption of financial infrastructure is still early, now is the time to bring many protocols together to scale their innovations for broader adoption.
In particular, lending Bitcoin for high-yield financial instruments on Ethereum has surpassed US $1B under on-chain management. Major chains like Cosmos, Polkadot and Cardano — with promises for interoperability of contracts and assets — recently launched the first phase of their mainnets.
Our approach to unification is to embed the light clients of multiple chains into our existing validators. Harmony’s cross-chain architecture, similar to Cosmos’ IBC and Polkadot’s XCMP, enables a trustless ecosystem with all permissionless networks. Here, a light client is another blockchain’s node using minimal resources to validate transactions at lower fees, suitable for embedding directly into Harmony’s nodes. Cross-chain transactions are more than asset transfers via atomic swaps with hash time locked contracts; the innovation, across open heterogeneous systems, to commit then verify computations and states is truly groundbreaking.
Harmony’s advantage is that we have all the necessary cross-chain components already in production. They include custodians (hundreds of validators, view changes), bonds (staking in native ONE tokens, delegation and slashing), threshold signatures (our own Boneh–Lynn–Shacham implementation), multi-party computations (verifiable randomness function), and on-chain validations (Ethereum VM based, cross-shard communication, Chainlink oracle).
We have recently launched multiple ONE-ETH swaps and bridges. We begin by bringing all ERC20 assets, especially wBTC and stablecoins Dai and BUSD, to our decentralized exchange. Not only can our 5-second finality provide faster settlements, our low fees due to sharding also enable new paradigms of on-chain market makers and lending. For example, like “menu costs” for restaurants, Kyber allows frequent updates of asset prices and slippage parameters, particularly critical for non-pegging arbitrages on assets other than stablecoins, and for congested markets during asset selloffs. Other examples are DeversiFi with Bitfinex and Serum with FTX that are aggregating liquidity from centralized sources and self-custodial wallets.
Our trustless, two-way ONE-ETH bridge with a light client gives Harmony applications full access to Ethereum’s ecosystem of assets and liquidity. Here are our opportunities: light clients like ZCash’s Flyclient across Proof-of-Work and Proof-of-Stake chains are still under active research and require significant gas-fees. Trustless bridges such as Keep’s tBTC, Near’s Rainbow and Interlay’s XClaim are only reaching basic production.
Yet, the bigger story here is composability and liquidity — like Kyber or Serum but across all chains. Therefore, we have prototyped bridges for Binance Smart Chain and Polkadot, and soon extending to BTC as well as Cosmos. These bridges for our exchange can then easily generalize to other Bitcoin-based assets such as LTC and BCH, and to other Tendermint-based assets such as Terra and Kava.
Cross-Exchange Pool with Fiat Gateways
The future of blockchain is already here — but unevenly distributed to just thousands of people. Open finance is now a key initiative at Paypal (Visa Direct), a16z (Maker, Celo) and even governments (digital yuan).
Which product will have the market-fit for millions of people in the coming months? Harmony’s answer is a liquidity pool for Harmony-ONE assets and USD stablecoins across fiat exchanges. Soon, we can provide efficient cash-flow management (payroll, credit lines, treasury management) on our blockchain for cross-border business. Our focus is on US commerce to and from the leading southeast Asia markets such as India, Indonesia, Korea and Singapore.
Building a cross-exchange pool as described above — like Hummingbot, which is external trading bots as decentralized market makers, but on chain — requires massive integration of disparate financial infrastructure. Such liquidity pools generalize automated market makers (AMM) to any trading bot that runs on-chain as a smart contract. We believe that this innovation is the final frontier of breaking crypto into fiat gateways, thus into finance across borders. This financial revolution enables composable transactions of any off-chain assets, customer compliance and business contracts.
The immediate problem our product solves is liquidity, hence yields for closing arbitrage and price gaps, of thousands of cryptoassets across hundreds of isolated exchanges. Building on top of our cross-chain decentralized exchange mentioned in the last section, on-chain market makers and order books can then serve broadly for all assets in aggregate between any marketplace.
Beyond cryptoassets, the general problems our product solves is creating a radically fair economy of marketplaces. Fiat is simply the last mile of distribution, while cross-border is just the scale of billions of people in the world. On-demand liquidity is the common infrastructure for financial products such as serving recurring remittances in long-tail countries, scaling over-the-counter trades, and managing e-commerce cash flows.
Our technical challenges, similar to aggregated pools in traditional financial markets, include supporting market microstructures and complying with regional regulations. How can we support multiple oracles and API as fine-grained price feeds for the same asset but from different markets? How can we protect privacy but allow view-specific auditing? Solutions for these problems will be defining blockchain innovations for years to come.
Harmony has already enabled remittances between US and India. We have integrated fiat gateways (Binance US, CoinDCX) and stablecoins (Binance USD, WazirX INR) in both countries; we have prototyped end-to-end transfers of dollars and rupees to bank accounts.
Ethereum’s main innovation is the permissionless composition and trustless execution of any contracts. Harmony’s protocol will extend this innovation to other platforms as well as fiat assets. Once bridges across blockchains and once integrations across exchanges run in our unified platform, a new economy is created: end-to-end fiat settlements happen in seconds, all risks are insured with tradable contracts, and any code evolves via community forking.
Protocol with Decentralized Governance
Our founding team came together in 2018 to build, then to decentralize. We managed the COVID transition to become fully remote and stay lean with a team of 22 full-timers. Like Day ONE, we meet every Saturday at 10am for all-hands team meetings. Thriving in change (chaos!), we challenge each other during monthly team hackathons.
Still, we must accelerate decentralization in our network, development and governance. We are gradually transferring our 68% voting power externally to Foundational Nodes, Panagaea Captains and staking validators. In the coming months, our community will fully own testing, upgrades and 100% control of our network, initially with off-chain voting like Yearn and Synthetix, then on-chain governance like Tezos.
For development, the core team regularly and openly commits to Github. We welcome contributions via bounties, hackathons and grants. Besides cross-border finance above, our protocol will keep scaling the best research results, including data availability (Lazy Ledger, DeversiFi), cryptographic primitives (Coda, Matter Labs) and formal security (Runtime Verification, Coq), in production.
Harmony’s 2021 on Cross-Chain Finance
Reference on Fintech Revolution
- https://harmony.one/comparison on finality (and other network features) of Harmony, Ethereum 2, Cosmos and Polkadot
- https://harmony.one/showcases on our bridges, grants, partners and prototypes
- https://harmony.one/eth3 on product survey of cryptography in future blockchains
- https://eprint.iacr.org/2019/1128.pdf SoK: Communication Across Distributed Ledgers