Cedro Finance: cross-chain lending with Root-Branch design and unified liquidity
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Explains Cedro's Root-Branch architecture, COMPA messaging aggregator and CULT unified liquidity token, which virtually merges pools across chains and keeps heavy computation on a low-cost Root chain to cut gas versus monolithic Aave-style designs.
Key claims
Interest rate is the same across chains for a given asset
Interest, tracking and liquidations computed on the Root chain to save gas
Currently relies on LayerZero for messaging
Liquidity is the lifeblood of DeFi
In this multi-chain cycle, 100s of chains will compete for liquidity as the fragmentation across ecosystems increases
In my research, I found a cross-chain liquidity layer powered by @LayerZero_Labs that solves this
It's huge, anon 🤯 🧵
1/ We have officially entered the multi-chain era.
Highly optimized rollups and increasingly scalable L1 chains built on modular infra and leveraging ultra-performant virtual machines are emerging almost daily.
This fosters unprecedented innovation and enables novel use cases.
2/ However, this also introduces the problem that liquidity is increasingly fragmented across a growing number of ecosystems.
All these emerging chains will hence battle each other for this scarce and valuable resource that ultimately fuels the DeFi apps built on them.
3/ Now imagine there was a cross-chain liquidity layer that:
✦ Unifies liquidity across ecosystems
✦ Enable seamless liquidity access
For any application across any chain.
4/ Would be huge, right?
Well, this is exactly what @cedro_finance is building.
A modular, cross-chain liquidity protocol that allows builders to use leverage its liquidity and codebase to build their apps without having to worry about getting liquidity on their platform.
5/ Think of @cedro_finance as a core piece of DeFi infrastructure.
A highly versatile platform where users can lend & borrow assets natively across any chain at affordable fees.
We will revisit the lending part later.
6/ The design space of apps that can be built on @cedro_finance is huge and includes:
✦ Over-Collateralized Omni-Chain Stablecoins
✦ P2P Cross-Chain Lending Platforms
✦ Cross-Chain DEXs
✦ Omni-Chain Yield Aggregators
✦ Cross-Chain Perp Trading Platforms
✦ More
7/ Have I peaked your interest anon?
Because yes, we are talking a true game-changer here.
So let's dive in! 👇
8/ @cedro_finance relies on a unique Root-Branch architecture.
A branch is deployed on multiple chains, all of which interact with the Root, which is a contract deployed on a single chain.
That chain stores the global states of the protocol and passes information to all chains.
9/ Every Brach is connected to the Root in a bidirectional manner using COMPA.
COMPA is a stack of multiple generic cross-chain messaging protocols, which facilitates Root-Branch interaction across all connected networks.
10/ This modularity also makes @cedro_finance highly generalizable.
To add a new chain to the protocol, all that the team has to do is to deploy the Branch on that chain and establish a connection to the Root.
This means Cedro will be literally anywhere. 🤯
11/ You still following me, anon?
The Branch is the main point of interaction for the users and handles asset pools on each chain.
If for example, a user wants to deposit USDC on chain A, then the user will interact with the depositRequest() function of the Branch on chain A.
12/ The deposited amount is then stored in the USDC Liquidity Pool on Ethereum, while the information is sent to the Root using COMPA (see next tweet).
Consequently, the user receives ceToken on the Root chain.
13/ As mentioned above, @cedro_finance's cross-chain messaging is powered by COMPA.
COMPA analyses different factors like estimated transaction cost, speed, security, etc. to choose a messaging protocol from the stack for a given transaction.
14/ This is big anon.
Cedro is not just another interop protocol or lending platform.
It is the first cross-chain messaging protocol aggregator that efficiently routes liquidity across chains.
15/ COMPA is unique as it provides the user freedom to choose the protocol they want to use or let @cedro_finance choose based on:
✦ Cost
✦ Speed
✦ Security
Once a protocol is chosen, the x-chain message is sent to/from the Root. For now, @cedro_finance use @LayerZero_Labs.
16/ Pretty cool, no?
And that's not even all the alpha yet anon.
Let me introduce you to the @cedro_finance CULT feature, a.k.a. "Cedro Unified Liquidity Token".
17/ So, why is CULT something you should be excited about?
Well, this might be the solution to the problem of fragmented liquidity across chains.
Yes anon, you heard right. 👀
18/ CULT lets users deposit multi-chain assets (ex. USDT, UNI, etc.) from different chains and add them to a unified liquidity pool.
When lenders for example deposits 100 USDC on Ethereum and 200 USDC in Solana, they’ll get 300 ceUSDC on the Root chain (where they earn interest)
19/ Because of this unified liquidity pool structure, the capital will be concentrated in a single pool and the efficiency will be maximized.
The interest rate will be the same across all the chains for any multi-chain asset on @cedro_finance.
20/ On top of that, users can borrow the asset on any supported chain which makes any @cedro_finance asset truly chain agnostic.
By merging the Liquidity Pools at an asset level, Cedro is literally sending capital efficiency to the moon! 🚀✨
21/ It is important to mention though that the liquidity Pools aren't literally merged.
However, @cedro_finance is able to virtually merge the pools since all the global state variables are stored in the Root.
22/ So let's recap.
100s of chains need liquidity access.
Liquidity is fragmented across ecosystems.
@cedro_finance solve both problems.
23/ @cedro_finance aggregates interoperability protocols and democratizes access to badly needed liquidity.
It unifies liquidity across chains an offers builders a plug-and-play infrastructure solution that can power almost any cross-chain use cases.
This is the future anon. 👀
24/ Okay cool, but didn't you say something about lending?
Is think like @compoundfinance?
No, in terms of lending market design, @cedro_finance is more similar to @aave.
However, Cedro's innovative design makes it much more cost effective than these blue chips.
25/ The transaction fees for using platforms like Aave on Ethereum is extremely high.
That's due to the fact that the fee is decided based on the complexity of the smart contract.
Since such platforms have a complex monolithic codebase, the cost is always high.
26/ @cedro_finance doesn't have this problem.
It offloads all the computationally heavy lifting.
In the Cedro architecture, each Branch contract is there just to store the liquidity pools.
27/ The protocol always handles expensive computations like interest rates, asset tracking, and liquidations in the Root on a low-cost chain.
This optimization cuts gas costs, making @cedro_finance affordable for all users.
28/ Additionally, @cedro_finance builds upon @Aave’s model to develop a dynamic liquidation system that is more just towards the borrowers.
The improvements would significantly reduce the amount of bad debt in the case of an attack like Avi Eisenberg’s on Aave in Nov 2022.
29/ In combination with a bunch of other security layers, such as:
✦ CULT Fractionalizer
✦ Supply and Borrow cap
✦ Volatility cap
@cedro_finance is well positioned to be one of the most secure lending protocols on the market.
30/ A highly capital efficient lending platform currently powered by @LayerZero_Labs and that will aggregate interop protocols to enable what will be the cross-chain liquidity layer of multi-chain DeFi.
That's about as big as it gets anon.
DYOR and don't fade @cedro_finance
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