Cross-Chain Perpetuals

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Lynx utilizes an innovative cross-chain trading system to support decentralized perpetuals trading on any blockchain, regardless of block rate, gas costs, or EVM compatibility.

Lynx's cross-chain system lets users interact with the perpetual exchange from any origin chain while settling transactions on Lynx's engine chain. Origin chains are the blockchains on which users hold their assets, connect their wallets, and do their normal business (eg. trading, supplying liquidity). The engine chain is where Lynx settles trades, regardless of which origin chain they come from. Currently, Lynx uses Fantom - it possesses a fast block rate, cheap gas prices, and all the infrastructure needed to make it highly suitable for perpetual trading applications.

Before using Lynx, users are required to deposit funds into their Lynx accounts. Under the hood, this performs a lock-and-mint bridge using LayerZero's cross-chain messaging protocol: the users' assets are locked on the origin chain from which they deposited while Lynx issues them 'chips' to their wallet on the engine chain. These chips serve as the currency for all interactions within the Lynx ecosystem.

Chips: Lynx Utility Tokens

Chips are simple ERC-20 tokens designed to facilitate transactions in Lynx's cross-chain trading system. They act as Lynx's internal accounting system by representing the liquidity held by a trader on the origin chain. Each collateral asset listed on Lynx is represented by its own chip; for instance, users depositing DAI receive DAI-chips on the engine chain. As users engage with Lynx from their origin chain, chips are moved accordingly between the users' wallets and the appropriate Lynx contracts on the engine chain. At any point in time, users can redeem their chips and receive their assets back on the origin chain.

Non-Custodial Trading Solution

Depositing funds to a user's Lynx account mimics the user experience on a centralized exchange but in a fully decentralized manner. Instead of transferring assets to a CEX and getting credits within their servers, users transfer assets to a Lynx smart contract and get tokens to their wallets on the engine chain. While CEXs rely on private, internal accounting to track the movement of credits on their exchange, Lynx leverages the transparent, decentralized nature of blockchain and smart contracts to account for the movement of chips. Doing so ensures Lynx remains a non-custodial, decentralized exchange where users retain full ownership over their funds at all times.

Benefits of Cross-Chain Design

1) Reduced Operational Gas Costs

Decentralized perpetual protocols carry significant expenses due to their gas-intensive nature. The gas required by complex contract logic and frequent oracle updates trickles down to users, resulting in transactional costs ranging from $1 to $5 per trade on cost-effective chains and soaring up to $100 on pricier chains such as Ethereum. As a result, smaller traders can get priced out and certain strategies such as high-frequency trading become unviable.

Lynx's use of a more affordable engine chain as a settlement layer significantly reduces operational costs for the protocol, bringing costs to a range of $0.01 to $0.50 per trade - regardless of which chain it originates on. (Note: Lynx's gasless trading abstracts away all gas fees on behalf of users; learn more in Intent-Based Order System).

2) Shared Omnichain Liquidity

DeFi protocols interested in expanding to other blockchains must deploy and bootstrap new liquidity pools on each chain before the application can be used there. Attracting sufficient liquidity to these pools often entails costly measures such as reward emissions and, even if done successfully, leads to the fragmentation of the protocol's liquidity across multiple chains.

Lynx eliminates the necessity to bootstrap liquidity on each new chain by leveraging omnichain liquidity pools. By aggregating liquidity deposits across all chains onto the engine chain, Lynx ensures available liquidity for new chains. Consequently, traders can promptly begin trading using their preferred collateral as Lynx expands perpetuals trading to new chains.

3) Highly Scalable Solution

Decentralized perpetual protocols require heavy infrastructure such as dedicated RPC endpoints (+ back-ups), trigger bots, intent solvers, and more. Additionally, they can have hundreds of parameters that need constant monitoring and tuning. As a result, deploying and maintaining multiple instances of a perpetuals protocol across different chains demands significant resources and attention.

Lynx, however, capitalizes on its cross-chain architecture to expand to new chains while maintaining a modest footprint. With core smart contracts and complex logic centered predominantly on the engine chain, Lynx can extend perpetuals trading to new chains with basic contract deployments. This approach significantly enhances accessibility for traders across diverse blockchain ecosystems, regardless of EVM-compatibility or associated gas costs.