More than half of the traffic in the decentralized finance (DeFi) ecosystem runs over Ethereum. This includes lending from dApps, exchanges, blockchain games and NFT marketplaces. So how can a competitive blockchain challenge such a strong first-mover advantage?
The answer could be to create a layer 2 network on top of the base layer 1 blockchain.
Aurora is an Ethereum compatibility network on the Near blockchain. For the end user, they get Ethereum dApps on Near’s network
Origin and Purpose of the Aurora
Aurora was launched on Near’s network in May 2021 and was deployed by a team led by Alexander Skidanov and Illia Polosukhin. Skidanov is a veteran Microsoft developer and Polosukhin is a machine learning researcher with three years of experience in Google’s deep learning.
Aurora and Near are inextricably linked. The latter is an enterprise-class proof-of-stake blockchain based on Nightingale sharding technology. This gives Near an advantage over Ethereum in several features:
- Near-instantaneous block finality time, which is the time it takes to process transactions. Near runs at 1.3 seconds while Ethereum can take up to 15 seconds and up to 4 hours depending on daily traffic loads.
- Near’s tiny transaction fee averages $0.01 against Ethereum’s over $1 at its best.
- Near’s theoretical 100,000 tps once its sharding technology is fully implemented. The same could be said of Ethereum once it completes its Surge upgrade after The Merge. Nonetheless, Near is still at least 50x faster than Ethereum as is.
Aurora is a Layer 2 network specifically designed to tap into the rich Ethereum ecosystem of dApps.
Source: Aurora
Technically, Aurora runs an Ethereum Virtual Machine (EVM) on Near to allow developers to port and launch dApps written in Solidity, Ethereum’s native programming language. Although Gavin Wood conceived Solidity in 2014, the core Ethereum team took it and has been refining it ever since.
Aurora is being developed by Aurora Labs, led by CEO Alex Shevchenko. His love of physics and math suited blockchain technology well after founding Bitfury Exonum in 2015. This project uses blockchain technology to empower and tokenize legacy systems, from government logistics to business affairs.
Understand EVM to understand Aurora
To understand Aurora, one must first understand the Ethereum Virtual Machine (EVM). Just like video games have engines that run game logic, physics, and graphics, blockchain networks also have frameworks like EVM. Except they run smart contracts instead of games.
Specifically, EVM is a runtime environment responsible for running Ethereum smart contracts written using the Solidity programming language. After each new block (transaction) is executed and added on Ethereum, EVM executes its smart contracts and retrieves the status of the network as it is a software layer over all Ethereum nodes.
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To extend the previous analogy further, this would also be the case for multiplayer games powered by their engines.
Aurora runs EVM on the near network, which makes it compatible to run smart contracts not only from Ethereum, but also from other EVM-compatible networks: Polygon, Avalanche (its C-Chain), and Binance Smart Chain. This EVM compatibility allows developers to easily clone an Ethereum dApp and port it to the Aurora ecosystem.
How does Aurora work?
Aurora is compatible with Ethereum in such a way that one can send Ethereum transactions to Aurora without additional bridging steps. That’s because Aurora already has token bridging built in.
Source: Aurora.dev
More specifically, Ethereum transactions are executed using Aurora’s Sputnik VM runtime, an optimized EVM written in the Rust programming language. After Ethereum funds are sent to Aurora, they can be moved to Near itself via the Rainbow Bridge, created by Aurora’s software engineer Kirill Abramov.
This can be done with the most popular crypto wallet MetaMask, just like any other dApp. The Rainbow Bridge serves as a trusted cross-chain repository to transfer all ERC-20 tokens between Ethereum and Aurora and vice versa.
Aurora’s Native Governance Token
AuroraDAO is responsible for distributing AURORA governance tokens. This decentralized autonomous organization (DAO) works according to the voting weight of the AURORA token holders. They vote on proposals for the project, including appointing the members of the Council, the DAO’s equivalent to the Board of Directors.
AURORA tokens were launched on November 18, 2021 and are capped at 1 billion. Of this, 48% is earmarked for AuroraDAO’s future projects, 20% for the community, and the rest for Aurora’s integration with dApps, partnerships, initial DEX offerings (IDOs), and incentives.
As of October 2022, only 7% of AURORA tokens are in circulation. To mitigate demand, AuroraDAO has established an unlocking schedule that spans two years, with linear unlocking every three months at a rate of 12.5%, nine months after launch (in addition to the first six months).
Aurora’s dApp Ecosystem
Thanks to EVM compatibility, using dApps on Aurora means paying gas fees in ETH. To encourage adoption, AuroraDAO created the Aurora Plus program. Anyone who registers will receive 50 free transactions per month. This membership program is also the pathway to Aurora staking, where users receive AURORA tokens and other tokens from partnership projects.
Because of the ease with which Ethereum dApps can be ported, Aurora has hundreds of dApps on offer. Most of them should be known:
- 1 inch to get the best token swap rates on decentralized exchanges.
- Curve for the exchange of the largest stablecoins by market cap – DAI, USDT and USDC.
- Consolation for insuring DeFi ventures against losses.
Aurora’s native dApps are also popular. Similar to Aave, Bastion offers credit and token exchange. When users pool their tokens into liquidity pools for any of the scenarios, they receive an interest rate.
Another such yield platform is Trisolaris as one of the most popular Aurora DEXs. Depending on the demand for certain token pairs, the annual percentage return can reach double digits.
As the name suggests, Trisolaris corresponds to Curve’s 3pool, which consists of three tokens: TRI, AURORA and NEAR. So when users provide liquidity in a token pair liquidity pool, they can earn double rewards.
To inexpensively launch IDOs, Aurora provides the NearPad launchpad. Just as ICO is the crypto equivalent of IPO, NearPad is a crypto equivalent of KickStarter.
Aurora’s future is tied to proximity
As of October 2022, Ethereum accounts for 57.73% of the total DeFi market share, while Near only accounts for 0.5%. But as we saw with the Terra (LUNA) example, that percentage can quickly shift in favor of relatively unknown blockchains.
While Terra’s ecosystem collapsed because its UST algorithmic stablecoin was depegged, Near is positioning itself as a generalist competitor to Ethereum with no single-point liabilities. Now that Aurora has made it easy to get into Near’s fast and cheap ecosystem, it should benefit from Ethereum’s tide raising all boats.
Disclaimer for the series:
This series article is for general guidance and information only for beginners participating in cryptocurrencies and DeFi. Nothing in this article should be construed as legal, business, investment or tax advice. Consult your advisors for all legal, business, investment and tax implications and advice. The Defiant is not liable for lost funds. Please use your best judgment and exercise due diligence before interacting with Smart Contracts.
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