Solving the Problem of Fragmentation of Liquidity in DeFi
For our entry for the Fintech Awards, Umbria co-lead developer @devbarnyard has highlighted some of the main problems in the cryptocurrency space, and in particular in DeFi. Here he explains how Umbria’s Narni Liquidity Bridge is solving them.
The problem
Currently, there are a host of different EVM-compatible (Ethereum Virtual Machine) blockchains in operation, which host smart contracts. They all use the same smart contract architecture as Ethereum - including Solidity, the programming language for writing and implementing smart contract — and have similar functionality.
Blockchains such as Polygon, Binance Smart Chain, Avalanche and Solana are great for running smart contracts on because they are faster and cheaper than Ethereum. However, it has been very difficult to move assets from Ethereum onto these other blockchains in order to utilise DeFi and NFT platforms on these systems.
The main problem that we see with DeFi right now is the fragmentation of liquidity and the fact that it’s not very easy to move your assets between blockchains in order to take advantage of the fast speeds and cheaper transactions available.
The solution — presenting the Narni Bridge
Umbria’s Narni Liquidity Bridge is enabling users to move assets from Ethereum to other EVM compatible blockchains very quickly and cheaply (currently Ethereum to Polygon and vice versa and very soon expanding to Binance Smart Chain).
Before Umbria implemented the Narni Bridge, the only viable option to move assets from Ethereum to Polygon was via the official Polygon Bridge. As anyone who has used this bridge will testify, it is a very slow process — three or four hours to move assets is common — and can be incredibly expensive if the gas price is high at the time of transacting. It can cost in excess of $300 just to bridge assets from the Ethereum blockchain to the Polygon blockchain. In practice, this often means cancelling out all of the benefits of the Polygon blockchain.
Umbria has developed a new style of Bridge, which we’ve coined a liquidity bridge. It typically costs between about $9 and $15 to move assets from Ethereum to Polygon depending on the gas costs.
NFTs and arbitrage opportunities
This will solve a lot of problems in the DeFi and NFT spaces as people can now transact much cheaper when moving assets from Ethereum to Polygon. It opens the door to a lot of people for whom it wasn’t previously economically viable to bridge between these two blockchains. It enables them to access all the fantastic products that are on Polygon and take advantage of the faster speeds and the cheaper prices.
Narni solves a number of problems and has multiple use cases. It’s invaluable for anyone wanting to buy NFTs on Polygon and people wanting to interact with NFT metaverses and ecosystems like Zed Run.
It hugely helps anyone seeking to take advantage of arbitrage opportunities. For example, someone sees they can buy a certain asset on Polygon really cheaply, which is more expensive on Ethereum, they can come over to Polygon, buy that asset, bring it back over to Ethereum for a cheap price, sell it, and then make a quick profit.
These are the main use cases right now, but there are so many more opportunities that are going to become available because there is now a cheap bridging solution between Ethereum and Polygon.
API
Umbria has built an API, which is available to any developer who wants to implement a yield-aggregating protocol, DEX-aggregating protocol or any protocol that requires quick and cheap bridging.
What’s next for Umbria Network?
We’re going to be growing the protocol, we’re going to be accessing Binance Smart Chain, Avalanche, Solana and any EVM-compatible chain that our user base would like to bridge quickly and cheaply to. We’ll also be adding many more assets to the ecosystem so any community that needs a coin bridging cheaply and quickly are able to do so using Narni.
Check out our entry to the FF Awards. Don’t forget to vote Umbria!
Got a project on Polygon? Does your community need cheap and fast bridging? Get in touch on Twitter if you’d like to collaborate.
