Multi-Chain Liquidity Roadmap

Jun Ho Hong,
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Roadmap for improving AMKT liquidity across chains.

Almost four years ago, Vitalik published "A rollup-centric ethereum roadmap" (opens in a new tab). Since then, the Ethereum community has worked tirelessly to make it into a reality. AMKT now benefits from this foundational work, being accessible on Mainnet, Polygon, Arbitrum, and Base, with secure interoperability between these chains. AMKT is issued on Mainnet, and is bridged to where users are.

However, as a consequence of proliferation of many chains, we've experienced first-hand how difficult it is to manage fragmented liquidity and experience across multiple chains. As described in the Onchain Traded Fund Endgame (opens in a new tab):

Fragmented liquidity across chains creates inconsistent and subpar pricing for users across every chain. Expansion into a new chain requires bootstrapping that potentially siphons liquidity away from other chains and users.

Through our research so far, we're gaining confidence in a future that is increasingly intent-based and chain-abstracted, enabled by Signed Orders. In the near future, users will experience greatly improved liquidity and experience, regardless of which chain they are trading AMKT on.

Signed Orders

CoWSwap (opens in a new tab) and Uniswap X (opens in a new tab), among others, have demonstrated the power of signed orders in improving capital efficiency1. As the name suggests, signed orders are orders that users authorize in advance that fillers can come in and fill.

The major benefit to this approach, vs. traditional v2/v3-style onchain market making, is that it reduces adverse selection cost2 for LPs by offering a solution to the stale pricing issue that onchain LPs suffer from, which ultimately results in deeper liquidity with less capital requirements. What value used to be leaked across various actors in the MEV food chain is now able to be given back to LPs and users. But that's not all.

Signed orders can be much more than simple Uniswap swap transactions. Combined with ideas like Execution Abstraction (opens in a new tab), Across Settlement (opens in a new tab), or SUAVE (opens in a new tab), signed orders can offer entirely new experiences. Consider the following example:

  1. User submits intent on Chain A for a trade to buy AMKT with ETH.
  2. Filler can fill the intent with AMKT on Chain A..
  3. Or, Filler can fill the intent with a bridge initiation of AMKT from Filler to User, from Chain B to Chain A. Bridge guarantees that User will receive AMKT on Chain A.

The User will be able to trade on Chain A, where there may be little to no liquidity, without even knowing that Chain B, where the liquidity is sourced from, exists. This enables consolidation of liquidity into a single chain, instead of the fragmented status quo.

This is just one of the possible ways to interact with signed orders. Without complicating it, an intuition for signed orders is that we're changing the paradigm from requiring users to know exactly where the liquidity will come from, to leaving that open. By leaving it open, bridges, fillers, and even asset issuers can work in tandem to iterate on the best possible experience for the end user.

How We Get There

Integrate with intent-based exchanges

Liquidity can be improved today simply by encouraging usage of protocols like Uniswap X and CoWSwap. We need to work with the community, develop resources and tools so that more orders can be routed via intents, rather than market orders on v3 pools.

Integrate with a cross-chain bridge

In order to abstract the multi-chain experience, we first need a bridge that's fast and convenient. Having to wait 7 days and perform multiple transactions in between with canonical bridges won't be sufficient. In that bridge (e.g. Hop (opens in a new tab), Stargate (opens in a new tab), Across (opens in a new tab), there will need to be AMKT liquidity on all destination chains.

In the future, once we have settled into a bridge protocol we feel is secure, the bridge can be permitted to issue and redeem AMKT itself (e.g. Layerzero's OFT (opens in a new tab), Connext's xERC20 (opens in a new tab), Circle's CCTP (opens in a new tab)). This will remove AMKT liquidity requirements on the bridges. However, this approach will require an substantial effort and collaboration from the AMKT community, as it requires turning off existing issuance on Mainnet, migrating underlying assets to another chain, and migrating existing AMKT on all chains to new tokens. This is possible to do, but we should be very sure of it.

Integrate with a settlement layer

This is probably the hardest part. Uniswap has announced their cross-chain version of UniswapX will launch last year3, which has not yet delivered. This may be a sentiment for how hard it is to actually deliver a correct version of this. However, we will be looking into various solutions and reaching out to teams already working towards this problem. Atlas (opens in a new tab), SUAVE (opens in a new tab), Socket (opens in a new tab), and Across Settlement (opens in a new tab) are among them. If we've missed any that we should talk to, please let us know!

Footnotes

  1. https://cow.fi/cow-amm (opens in a new tab) ↩

  2. https://arxiv.org/abs/2208.06046 (opens in a new tab) ↩

  3. https://blog.uniswap.org/uniswapx-protocol (opens in a new tab) ↩