Today, we are excited to present our whitepaper on the Unit of Liquidity (UoL), a revolutionary concept that sets the stage for the future of cross-chain applications. In this blog post, we will outline how Catalyst takes the concepts of Uniswap and Balancer to another level, and why this is a game-changer for cross-chain applications. You can find the whitepaper at this link.
Uniswap v2 and Balancer, with their user-friendly interface for both traders and liquidity providers, have been benchmarks in the world of decentralized finance. They have consistently enabled protocols to maintain liquidity for their ecosystems. However, replicating this user experience 1:1 across chains has remained elusive. Users frequently have to deal with the inconvenience of being exposed to an intermediate token, relying on a bridge, or moving their assets to a specific liquidity chain.
This is where Catalyst brings about a sea change. By evaluating swaps independently, Catalyst enables the execution of swaps on Uniswap v2, Balancer, or even a stable-coin invariant cross-chain, without compromising on the underlying performance. The mechanism that enables this innovative capability is our unique concept of the Unit of Liquidity.
Catalyst is built on the concept of independent price curves, diverging from the constant function utilized by Uniswap v2. Uniswap v2 uses the equation x * y = k, which asserts that the product of the balances before a swap should be equal to the balances after the swap. The challenge with this equation in a cross-chain environment is that the constant k depends on both x and y. In a native cross-chain context, these variables would be stored on different chains, rendering k inaccessible without smart, albeit complicated, workarounds.
Catalyst takes a different approach. It calculates the value of incoming assets against the value of liquidity within a vault. The beauty of this method is that this comparison depends solely on the local state, allowing it to be done asynchronously and independently of the rest of the system state.
This methodology enables the execution of cross-chain swaps using only native assets. The intermediate 'Units' are utilized in the process, but the user is never exposed to them, offering an enhanced user experience. In the rare event of a swap execution failure, the original input is promptly returned to the user.
By deftly selecting the price curves, Catalyst can create an invariant that not only mimics the Balancer invariant but also enables the production of a flatter invariant that can facilitate stable-coin swaps. Beyond this, it can enable cross-chain liquidity auctions and open up an array of possibilities for applications not seen before.
The simplicity and the potential of the Unit of Liquidity is indeed a turning point in the development of cross-chain applications. We invite developers, traders, and everyone interested in the crypto space to explore our whitepaper at this link.
For those wishing to delve deeper into our concepts or join the conversation, we invite you to our Telegram channel here. Catalyst's journey has just begun, and we look forward to innovating further in the coming months. Stay tuned as we continue to push the boundaries of cross-chain possibilities.
Catalyst is a cutting-edge project in the blockchain industry, pioneering the development of a permissionless liquidity layer for the modular future. By enabling any modular chain to connect and swap with hubs like Ethereum and Cosmos, Catalyst is championing an open and borderless economic trade system.