Hello! BlockTalkers & Blockchain Enthusiastic!
We recently hosted an AMA with SifChain, on November 23rd at 04.00 PM UTC. Many of you might have participated or many of not. But we make sure no one missed out from the knowledge shared by Sifchain Team , so here we are up with the AMA transcript, for those who missed the live session, this blog post will be a saver & feeder of knowledge for them.
Introduction Questions Asked By Team BlockTalks
Q1. Could you please introduce Sifchain to our community in layman’s term?
Ans — Sifchain is the omni-chain decentralized exchange (DEX), unlocking liquidity from otherwise siloed chains to free people from egregious fees and inefficient trades. Sifchain will target 20–25 blockchains (such as Ethereum and Stellar) for cross-chain integration. It will also simplify the process of blockchain integration, lowering the development process for the open source community so that additional cross-chain integrations will be cost minimized in terms of money and developer resources.
Q2. What are the advantages of Sifchain to other alternatives in the Blockchain field?
Ans — In 2019, $8.5 billion in cryptocurrency derivatives trading occurred per day for a total of $3 trillion in the year. Most of this trading occured on centralized exchanges even though 1 cryptocurrency investors prefer decentralized exchanges because they can maintain standards of security, availability, reliability, and censorship resistance on a publicly verifiable blockchain.
A primary constraint for existing decentralized exchanges is that they limit investors to a small subset of blockchain ecosystems. Another constraint is that they are slow and charge high fees due to performance limitations of their underlying blockchain. To capture the full market, an omni-chain solution on a more performant blockchain is needed.
Sifchain is that solution. Built with the Cosmos SDK, Sifchain processes substantially more transactions per second than Ethereum, making it 100x more efficient than the current leading DEXes. Sifchain uses Thorchain as a reference implementation and uses pegged tokens to support a wide array of blockchains. Sifchain will support cross-chain transactions for 20–25 of the top blockchains such as Bitcoin, BinanceChain, Polkadot, and EOS. These blockchains represent the overwhelming majority of all cryptocurrency trading volume. In addition, Sifchain will support an on-chain governance process for developing additional pegged tokens for new blockchains as needed.
Q3. What are the major milestones Sifchain achieved so far & what are in the future pipeline?
Ans — We’ve already got our testnet, Monkey Bars up and running. We were expecting 10–20 validators but ended up with over 150 signing up!
Monkey Bars allows users to move liquidity from Ethereum to Sifchain via our Ethereum <> Sifchain bridge (the first Cosmos SDK testnet to support this).
We have also built out an innovative testing infrastructure that lets our engineers deploy a new testnet for every single feature they develop. This lets us test our work against an environment similar to production so we can more rapidly ship features than nearly any other cryptocurrenty project
We are making heavy investments in security and devops. We will continue to add tests and other infrastructure support over the coming weeks. Some of our code is undergoing an audit and we’ll soon get other key components audited as well. We’re going to open up a bug bounty program so that white hat hackers can verify our security.
When we feel comfortable that the code is safe, we’ll initiate the testnet!
We’ll also be releasing a UI for the block explorer and swap mechanics so that fuzzies (non-developers) can also also use Sifchain. A beta for the block explorer is up now
Questions Asked on Twitter For Sifchain Team!
Q1. Sifchain processes substantially more transactions per second than ETH, with respect to the upcoming launch of ETH 2.0. How will Sifchain manage to overcome this and remain 100 times more efficient than the current leading DEXes?
Ans — Once ETH 2.0 launches we will probably explore options like sharding on Cosmos SDK and roll ups to continue our competitive advantage in speed. Any upgrade that Ethereum can implement can also be implemented on Cosmos SDK and ultimately Cosmos SDK chains like Sifchain will be faster since they have a faster consensus algorithm.
Q2. What exactly do you mean when you say that Sifchain allows users to add liquidity asymmetrically? What are the benefits of this for users?
Ans — In many decentralized exchanges, users can add liquidity to liquidity pools and earn a portion of the transaction fees charged to other users who want to swap tokens in the pool. The constraint that most liquidity pools put on liquidity providers is that they must put in an equal value of each token pair. For example, in the ETH/DAI liquidity pool in Uniswap, a user is required to add 2.64 ETH for every 1,000 DAI that is added at the time of this writing. And then based on the amount the user puts into the pool, they then receive a proportionate amount of the fees charged.
With Sifchain, users who want to add liquidity to a pool can add any amount of either or both tokens. This is known as adding liquidity asymmetrically, which gives users ultimate flexibility. Based on the amount of tokens in the pool and the amount that the user adds, they will then own a percentage of the entire pool.
We explain this in more detail here
Sifchain Technical Introduction: Advantages of an Asymmetric Liquidity Pool
Hello Sifchain Community,
Q3. For traders, as Sifchain as a decentralized exchange and under a Thorchain and Cosmos infrastructure, can it cover the solution for these problems in general and offer the trader a better experience?
Ans — Absolutely, as a decentralized exchange, Sifchain combines the best elements of liquidity pools and order books for optimal order execution. While decentralized exchanges are currently dominated by liquidity pool algorithms optimized for token swaps, Sifchain will rethink the formulas used for liquidity pool algorithms from first principles of complexity theory to implement adaptive AMMs suitable to limit orders and token swaps alike.
Q4. Sifchain is implementing a Hybrid Orderbook and CLP can you explain what components makes up your hybrid orderbook and why this is important to Sifchain.
Ans — Sifchain uses both an order book and a CLP for trade completion. Orders are placed with a commit-reveal scheme to circumvent front-running from validators.
Sifchain derives its internal asset price from its CLPs. One CLP is used for trades directly involving Rowan, two CLPs are used for all other trades. For example, the USDC:BTC internal price is calculated using the USDC:ROWAN and ROWAN:BTC CLPs. Traders execute market orders (swaps) directly against CLPs immediately after placing them. Traders place limit orders by posting an on-chain transaction depositing their capital in whichever currency they prefer, along with the name of the currency they’d like to purchase and their requested price. When Sifchain’s internal asset price moves to a favorable range for a limit order, a CLP swap is executed so that the limit order is filled with an average price that does not exceed the trader’s requested price. This means limit orders may be partially filled.
The key benefit of the CLP is the fee structure, which is responsive to the demand for liquidity by market-takers. Prices inherit an inertia since large fast changes cause high fee revenue. As demand subsides, the fee paid decreases. This liquidity-sensitive fee penalises traders for being impatient. This is an important quality in markets, since it allows time for market-changing information to be propagated to all market participants, rather than a narrow few having an edge.
Sifchain supports conditional market and limit orders, including stop loss and take profit orders. It also supports amending limit orders that have been placed but not executed to enable trailing orders. Sifchain prioritizes limit order execution based on the yet-fulfilled quantity of purchased tokens, not the time the orders are placed or the requested price. This allows CLP liquidity providers to maximize revenue and encourages traders to post trades that accurately reflect their market view. CLPs are expected to maintain accurate asset prices because any inaccurate asset price presents an opportunity for market makers to profit through arbitrage . However, traders are able to request oracle verification if they believe the internal asset price may temporarily deviate substantially from its external asset price. In such a case, orders will only be executed to the extent that the average price is within a specified range of the oracle price.
Q5. Sifchain development are inspired by Thorchain. Could you specificy about the Thorchain aspects that reflected on Sifchain? ALso, What aspects did Sifchain improve?
Ans — Sifchain uses a pegged token model for pegs along the lines of Cosmos’s peg zone model. Thorchain uses native tokens, as in it makes transactions on the native chain for any external asset (Bitcoin, Ethereum, etc.).
We believe the primary benefit of using a native token is that you are participating in the consensus set of the native token’s set of validators, miners, or other nodes. We believe that benefit is not as helpful as the deployment of a pegged token based on a combination of technical and cryptoeconomic incentives. We are pretty familiar with the cross-chain token design space and believe we have selected one for Sifchain that is appropriate for a combination of time to deployment, extensibility, and security.
Thorchain has also proposed creating pegged tokens backed by its liquidity pools. This is a different kind of product from Sifchain’s pegged tokens; we are considering implementing something similar but it is not currently on the roadmap. It’s also a new, low priority initiative for Thorchain.
We are actively evaluating multiple cross-chain software frameworks that appear to have successfully implemented cross-chain data or value transfers. These include Gravity, ChainBridge, Rosetta, Substrate-IBC, the Nomic Bitcoin bridge, PolyNetwork, and other projects. Of course, we’re also prioritizing IBC compatibility.
Thorchain is primarily focused on the Bifrost module. The team often encourages other teams to fork its code and indeed, the initial attempts at developing Sifchain were on a direct fork of Thorchain. After evaluating the recent Thorchain code and advancements in Cosmos’s development environment, we opted to build our cross-chain DEX architecture from the ground up with best practices from recent Cosmos development updates. We are also interested in compatibility with other cross-chain tools that have been proven to work so that we can list as many token markets as possible with high engagement rates.
Sifchain’s AMM Specification is based on a derivation of liquidity pool architecture from first principles. We don’t end up enforcing any formula on users. At launch, Sifchain will uses Thorchain’s slip based fee formula but we’re going to then update it to allow governance to control the liquidity pool formula by voting with their Rowan on a per liquidity pool basis.
We are currently extending this model to derive the optimum balance between rewards to validators and rewards to liquidity providers, especially in a regime where we deploy temporary liquidity mining rewards. So far, our rebalancing policy is a vectorized extension of Thorchain’s Incentive Pendulum but this is under active research.
Right now, Thorchain has very centralized governance from its core development team with an ecosystem of developer agencies working on specific components under the core team’s management. Thorchain has a reasonably flat distribution of nodes and strong interest in decentralization of governance but with no specific plans.
SifCore (the core team of Sifchain) is very focused on the development of SifDao and a total transition of governance power over all aspects of the protocol. We expect to follow best practices from metagovernance including the restructuring of SifDao’s governance on a regular (probably quarterly) basis.
For true self-sovereignty, Sifchain’s development should be self-funding and self-sustaining. We look to models like Linux and Wikipedia as examples of institutions have maintained the funding needed to continually produce critical open source resources. We’re exploring a partnership with a research lab at UC Davis to formalize properly funded open source development as a hallmark of Sifchain’s governance.
We want the market’s inherent superforecasting abilities to be turned towards optimizing Sifchain’s development. Governance will engage market-based performance evaluation within SifDao through tools like alpha bonds. Wherever possible, we want the market to govern Sifchain through on-chain cryptoeconomic incentives for SifDao members.
Questions Asked by our BlockTalks Community Members during live Session to Sifchain Team!!
Q1. Why you choose Ethereum to launch your coin? From where can I buy sifchain token?
Ans — We chose Ethereum because it currently has the most liquidity of any blockchain except for perhaps Bitcoin. We will announce token sale details soon, maybe even this week.
Q2. Most DeFi projects especially those ones offering yield farming are driven up by hype and scarcity, so when the hype dies the project dies. What’s the key to sustaining Your Project yield farming?
Ans — Our yield farming program, which we call a subsidy program, is designed to last for 12 weeks and will give out rewards in proportion to the amount of liquidity traded, staked, or provided. We took design in this space to heart from thought leaders like multicoin
Exploring the design space of liquidity mining
Decentralized Finance (DeFi) has recently seen an explosion of activity and public interest. The primary driving factor…
Q3. What is the vision and mission of Sifchain ? What problems are you trying to solve? Do these problems remain unsolved with the existing public blockchains?
Ans — Sifchain’s goal is for new blockchains to consider cross-chain integration as essential as a wallet or block explorer. Liquidity from all cryptocurrencies can then be accessed on-chain, allowing the coordinated deployment of capital from all cryptocurrencies by DAOs.
The future of Sifchain is a Decentralized Autonomous Organization (DAO) and for SifDAO and other DAOs to self-sustain, they need access to massive capital. We believe that building cross-chain liquidity will be fundamental to the future of the blockchain industry: an expectation, not a feature.
Q4. I’m a developer, and I’m interested in contributing to your project alongsides earning, Do you have any Bug Bounty to check for vulnerabilities?
Ans — We will announce a bug bounty program. For now though, you can get paid if we accept a PR from you to solve one of our bugs
New issue Have a question about this project? Sign up for a free GitHub account to open an issue and contact its…
Q5. Security is always the top task of projects. But lately, a lot of cryptocurrencies and blockchain have been appropriated by hackers. What security measures does your sifchain project have in place to avoid the possibility of being appropriated by hackers?
Ans — We have a very strong focus on security. Our engineers pride themselves on creating a thorough test suite for every feature. We then have test engineers who enhance each test suite with a larger battery of standard tests (unit, integration, etc.) as well as more complicated end-to-end tests or testing harnesses that can spin up critical infrastructure for mocks (for example, standing up a service that should be running in the background adjacent to a major few feature).
Then, we’ve got auditors on top of that and an internal red team focused on attacking the network. Before mainnet, we’ll launch an external red team in the form of bounties.
Q6. “ Governance info, voting portals business and economic models “ , all these things are currently unavailable on SIFCHAIN website, what are your plans bring this into completion ?
Ans — We added a token economics model here. https://sifchain.finance/wp-content/uploads/2020/11/The-Token-Economics-of-Sifchain-edited-2.0.pdf Governance and voting is not live because the mainnet itself is not live.