One of the biggest problems crypto will have has to do with a big word called interoperability. This means the ability of one blockchain to play well with another blockchain. Imagine if you had an ASUS laptop, and that laptop could only connect to ASUS routers, use ASUS USB connections, and they even had their own proprietary ASUS HDMI cable? It would just be a hassle to buy the adapters you needed. Well, this is the exact problem that crypto is currently facing.
In this article we are going to explain what xPollinate is, who created it, and a bit about the specific model that makes it work.
See, Ethereum is currently quite slow, at around 30 transactions per second. Secondary blockchains are created that trade decentralization for scalability, because you’re willing to give up some freedom to be able to process a transaction for less than a $50 fee. Long story short, to move in and out of these secondary blockchains, you have to use special tools. Many of these tools are good, but I have found one that is great.
xPollinate acts as a blockchain bridge that utilizes a special protocol called NXTP developed by the Connext platform. We will get into NXTP and Connext in a bit, but first let me explain xPollinate.
Blockchain Bridges for chains
You know how liquidity pools are pools of money that hold two assets, and they allow traders to trade their tokens? Well if you don’t, definitely check out our video on it because it’s super helpful to beginners. Anyways, what if we created a liquidity pool across multiple blockchains? This way you could deposit your USDC on the Polygon network and ask for USDC on the Fantom network, essentially moving your funds from one chain to another. xPollinate lets you do exactly this, with very low fees, and avoiding the hours of hours of waiting time that are usually required for traditional bridges.
They’re better than Atomic swaps too, because atomic swaps require finding someone on the other network to swap your funds with. Connext has created a dApp that is better than blockchain bridges and atomic swaps, there must be risks, right? Well, the two risks that exist are not due to the platform, but are risks on any protocol: user error and the possibility of a hack. Of course, xPollinate is open-source so devs constantly have their eyes on bugs, and user error can easily be avoided through education.
xPollinate is currently functional on a few different EVM compatible blockchains. If you don’t know what that means, it means blockchains that basically copy Ethereum’s virtual machine, and that includes: Optimism, Arbitrum, Binance, Polygon, Fantom and xDai, which are all very popular exchanges. I believe they are also working on expanding into non-EVM blockchains and even DAGs, but that will require a lot more time and effort before fully launching it.
Also, at the moment they offer the ability to switch USDC, USDT and DAI across networks, which are all popular stablecoins, but they have plans to move to other tokens as well.
Connext is what is called the ‘interoperability network’ behind the xPollinate project. In short, NXTP is the protocol, Connext is the network, and xPollinate is just one application built using the Connext network. Just like TCP/IP is the protocol, the Internet is the network, and Youtube is one application built using the protocol and network. The Connext network has been audited, they don’t have a token, and they certainly aren’t an exchange.
You know how I explained xPollinate as a liquidity pool, but for different blockchains? Well, when you send your Polygon USDC to them, they hold it. Then, they give you USDC on the Fantom network. Someone else comes along and gives them USDC on the Fantom network, and the protocol gives them the Polygon USDC you initially gave.
There are 3 big benefits that I see Connext offers in their network.
With this big blockchain interoperability system, you don’t need to trust a third-party to hold your funds. Instead, you just trust code to hold the funds you give, and to give you the funds you want.
The protocol NXTP, that I’ll talk about in a bit, can be used on any EVM-compatible blockchain very simply. Most blockchain bridges don’t build their own protocol from the ground up, and since NXTP is, it’s very flexible.
Some other solutions will take your layer 2 funds like on Polygon, and transmit data straight to Ethereum, then back to give you whatever funds you want. In short, Connext does these swaps without touching Layer 1, so the fees are very low, going from one layer 2 solution to another layer 2 solution.
To save you some time, Routers is what Connext calls their Liquidity Providers. You can become a Router yourself, and earn some of the fees that traders pay if you want. Traders using xPollinate pay a small fee, and that fee gets paid to you for investing your funds on a network and allowing them to swap their tokens across different blockchains.
Generally, the fees are quite competitive because to run a router you actually have to set up your computer to run some software, and as this is technical, it won’t attract non-technical investors.
At this point in time, Connext charges .05%, which is a very small amount, but much better than bridging gas fees.
This .05% will change dynamically in the future, depending on how many people are attempting each trade. Imagine if everyone is going from Polygon to xDai. Well, there will be tons of funds on Polygon deposited, and not many funds on the xDai side to withdraw from. Think about those scooters you can ride around in big cities. Most people don’t ride them from point A to point B, drop them and never return them. Well, what if you offered free scooter rides from point B back to point A, so that they would be returned to where more people would use them? This is the exact idea with the dynamic fee pricing, and one Connext dev actually said you might even be able to EARN money by moving funds against the current flow.
NXTP is designed to be the TCP/IP of the Ethereum multichain ecosystem. It is a simple, fully trustless protocol that can be used for value transfer and contract calling between chains. I don’t know how more people aren’t mentioning this as an idea, but here’s a great summary: “The aim of Connext’s NXTP protocol is to be the interoperability protocol of EVM networks”
NXTP Contract Calls
NXTP has the ability to call contracts on another through its liquidity provider network. Think of it as a cross-chain meta transaction, allowing users to do things like send funds from Polygon that are in an Aave or Curve pool to a similar pool on Arbitrum through a single transaction. This is a big deal, because it usually takes 3-4 transactions including using an expensive bridge to perform a swap like this. This sets NXTP to be used as a “money lego” and connect various DeFi apps across chains.
I have actually used xPollinate a bunch of times, but only recently when working on this video did I find out what goes on the behind the scenes, with Connext and their NXTP protocol, it was super interesting to learn about. If you want to save on gas fees and do quick layer 2 swaps, definitely check out the xPollinate dApp.
Thanks for reading our article, we hope you enjoyed it, we really hope you learned something, and most of all, we hope to see you in our next article!