THE EAGLE PROTOCOL SOLUTION TO PROBLEMS IN THE DEFI ECOSYSTEM. | by Ezekiel Essien | November 2023

THE EAGLE PROTOCOL SOLUTION TO PROBLEMS IN THE DEFI ECOSYSTEM.

Eagle protocol solution for Defi

✓ INTRODUCTION
What is Decentralized Finance (DeFi)?
Decentralized Finance (DeFi) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. DeFi eliminates the fees that banks and other financial companies charge for using their services. Individuals store funds in a secure digital wallet, can transfer funds in minutes, and anyone with an internet connection can use DeFi.

Defi ecosystem

✓ Problems in Defi
DeFi solves a lot of problems, but that doesn’t mean it isn’t without problems. The following issues are associated with DeFi;

1️⃣ Lack of interoperability:

There are currently no options for a permissionless, non-custodial, off-chain cross-chain swap solution where users are free to swap or bridge any asset they want across chains using the same wallet.

Interoperability challenges

2️⃣ Portfolio defragmentation:

Liquidity aggregation is one of the hottest topics in this space as TVL (Total Value Locked) has increased more than 100-fold in the last two years. While this is great, the problem is that it is fragmented and liquidity is spread across ten chains and then hundreds of exchanges within those chains. This leads to capital inefficiency and higher costs for users, both in terms of gas and time, as there is no quick and efficient way to bridge and exchange their assets across chains.
As of early May 2022, 55% of TVL was on Ethereum, with the remaining 45% mostly spread across about ten chains, but about 60 others have tens of millions of dollars in liquidity. This creates quite a gap between blockchains and exchanges to help users find what they are looking for quickly and at a good price. It even becomes a problem within the same chain when liquidity is spread across ten or even fifty exchanges, resulting in users having to use bridges, liquidity and DEX aggregators to find the desired token and price. Bridges alone are not enough in most cases as after using a bridge, users need a DEX or DEX aggregator to complete the exchange as bridges are limited to stablecoins and native currencies while Eagle Protocol is not.
There are too many bridges to learn about, each with its own unique interface, limitations, system to learn, and time to bridge. Some apps (DEXs) or liquidity aggregators are connected to seven or more bridges, each for a different chain, which require users to learn, navigate and use and may require a new wallet. These apps only allow deposits from a single chain, resulting in users having to leave the app to bridge their balance, do a lot of hard work, and pay a lot of gas fees just to use the previous app (DEX). . To purchase assets on the new chain, users will need that chain’s native token, e.g. ETH to complete all swaps on the target chain means users must first purchase and bridge the native token and exchange it for the desired token, adding another layer of complexity to the process.

Defragmentation problem

3️⃣ Lack of security:

Another major challenge in DeFi is bridge security. By using Bridges, users entrust their tokens to the security of the Bridge and cannot store them in their own wallets. This has been the cause of many exploits that cost users over $1 billion last year alone.

Security challenges

✓ THE EAGLE PROTOCOL SOLUTION

The Eagle Protocol helps solve this problem by not actually bridging assets or locking user assets in a smart contract to burn or mint tokens.

The simplest and easiest way to describe the Eagle Protocol is that it allows cross-chain swaps without bridging. The Eagle Protocol achieves this by sending messages using the generic messaging layer on Bridges to initiate and execute cross-chain exchanges. Instead of requiring users to lock or burn tokens and then mint them on the target chain, Eagle Protocol leverages single-asset liquidity pools and the Eagle Protocol Liquidity Aggregation Protocol, both deployed on all major chains, to enable swaps for the desired token to initiate characters. This results in users receiving their tokens very quickly and for much less gas and is not limited to stablecoin exchanges or the chain’s native gas token.

The process consists of four steps:
1). Users select the pair and chain of their choice.

2). They initiate the swap on their home chain into an Eagle liquidity pool.

3). The Eagle Protocol uses the bridges to send a swap instruction message to a relayer on the destination chain; There is no binding or minting of assets to or from the bridge.

4). After the relayer confirms the message, it sends the selected asset to the user’s wallet on the target chain.

With these simple innovative steps, the Eagle Protocol has ushered in a new phase in web3.

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