Article contributed by Jacob Van
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Bridging is dead.
Ok, that is an overreaction, but with LayerZero and the launch of Stargate Finance, we now have a much better bridging experience.
More importantly, there is now an opportunity to earn roughly 20% average percentage yield (APY) on stablecoins across 7 chains with just a few clicks of a button.
Let’s break down how all of this is possible and how you can earn outstanding stablecoin returns with little to no effort.
What is LayerZero?
LayerZero is an Omnichain Interoperability Protocol designed for lightweight message passing across chains.
Those are big words.
LayerZero simplifies the process of bridging assets across blockchains to just a couple clicks of a button.
This is possible because LayerZero has successfully solved the bridging trilemma.
When designing a bridge, there are three attractive features developers strive to include:
- Instant Guaranteed Finality: The guarantee of funds on the destination chain when a transaction is successfully committed on the source chain.
- Unified Liquidity: The shared access of a single liquidity pool (LP) between multiple chains.
- Native Assets: The user-desired assets (native or most liquid synthetic) on the destination chain.
The Bridging Trilemma (Source: Ryan Zarick)
Prior to the creation of LayerZero, developers were forced to only choose one or two of the three properties.
Now it is possible to have healthy pools of native assets on all blockchains, leading to greater capital efficiency.
There is no longer any need for synthetic assets or the possibility of failed transactions due to state change.
Liquidity providers will also now be able to stake assets in a single-sided pool, earning fees from incoming transfers regardless of the source blockchain, all without having to worry about impermanent loss.
For a technical explanation of how this is possible, I suggest checking out the LayerZero white paper.
Stargate Finance
Stargate Finance is a fully composable native asset bridge with unified liquidity and instant guaranteed finality built on top of LayerZero.
More big words.
Stargate is the user interface (UI) that enables users to bridge stablecoins across the following blockchains with ease:
- Ethereum
- Avalanche
- Polygon
- BNB
- Fantom
- Arbitrum
- Optimism
Stargate is also aiming to add support for Solana, Terra, Cosmos Hub, and Osmosis in the next 6–8 weeks.
Stargate launched on March 17 with an auction of 100,000,000 STG (Stargate’s token). The goal of the auction was to raise US$25 Million in USDC.
The auction sold out in one second with the help of bots.
It turns out Alameda Research was behind the instant sellout.
Surprise, surprise.
Stargate launched just a week ago, yet the total value locked (TVL) on the platform is already north of US$1.6 billion.
Why exactly has it become so popular in such a short amount of time?
There are three key reasons.
1) Multi-chain transfers
Stargate enables users to swap 1:1 native assets cross-chain, accessing Stargate’s unified liquidity pools.
This is the largest draw for Stargate. You can bridge USDC on Avalanche over to Fantom with one or two clicks of a button.
Current bridging solutions are slow and require a 20+ click multi-transaction session.
2) Pools
Users are able to add liquidity to Stargate’s Omnichain protocol and earn stablecoin rewards on every Stargate transfer.
3) Farms
Stargate liquidity providers can farm their LP tokens in exchange for STG rewards.
It is still incredibly early in the lifespan of Stargate, but so far STG has performed well.
STG is currently priced at US$1.90 and is up 48% in the past 24 hours.
STG marketcap information
STG decentralized exchange (DEX) pools are also live on all 7 chains supported on Stargate.
The current stablecoin pools are offering some attractive returns, hovering around 20–25% APY depending on the stablecoin and chain.
Current returns on Stargate.
Keep in mind that rewards are paid out in STG.
Stablecoin farming tutorial
Now that we have an understanding of what Stargate is, let’s go step by step on how you can begin farming stablecoins to earn STG rewards.
1) Head to Stargate Finance and connect your wallet.
Connect Your Wallet.
2) If you need to bridge stablecoins, you can do so on the “Transfer” page.
Choose which asset you would like to bridge and which chains to bridge to/from.
Confirm the transaction in your wallet.
Transfer Your Assets to the Desired Chain.
2b) You can also toggle “walkthrough mode” to simplify the bridging process.
Repeat the same steps as above.
Toggle “Walkthrough Mode” to Make Things Easier.
2c) After approving the transaction in your wallet, the asset will typically transfer to your chain in about 60 seconds.
Check out the cool graphic that shows the progress.
Wait for the bridge to be completed.
3) Once you have stablecoins on the desired chain, navigate to the “Pool” tab and choose the correct stablecoin/chain pool to add liquidity.
In the example below, I chose USDC on Polygon. Confirm the transaction in your wallet.
Pool the stablecoin of your choice.
4) The final step is to head to the “Farming” tab and select the stablecoin and chain of your choice.
Confirm the transaction in your wallet and you are now earning rewards!
Stake your stablecoins to earn rewards.
You can also claim your STG rewards in this menu.
To unstake, simply follow the same steps in reverse.
Potential risks
Any time you interact with a decentralized finance (DeFi) protocol, there is risk involved.
Especially with such a new technology like LayerZero and Stargate are offering, there could be unforeseen security issues that arise.
With that being said, LayerZero is a legitimate protocol with over US$8 million raised from big-name VC firms, such as Multicoin Capital and Delphi Digital, so a potential rug pull is not a significant concern.
If there were a risk spectrum with Anchor Protocol on one side and 2omb/3omb Finance on the other side, Stargate would be much closer to Anchor.
Final thoughts
There is no doubt that the future of DeFi is multi-chain.
And the launch of LayerZero and Stargate feels like the first iteration of that future.
I am not sure about you, but this has me extremely bullish on what DeFi will look like in the coming years.
Article contributed by Jacob Van
