Cross-chain DeFi through Composable Finance

DFG Official
4 min readJan 8, 2022

Blockchains are acknowledged as various decentralized ecosystems powered by distributed ledger technology. While there already exist a certain group of impressive and diverse blockchain ecosystems contained within individual networks like Ethereum, Polkadot, and Solana, this is still not a cumulatively jointed ecosystem yet. All the mentioned above as well as many other blockchains exist in the market and their ecosystems are isolated from one another, which means one individual chain can’t benefit from the strengths of other chains, or the limitation of a particular blockchain can’t be compensated by leveraging the features of another chain. This is where the idea of cross-chain comes in. The designed cross-chain architecture would facilitate interoperability among different blockchains so that various features are allowed to flow smoothly across multiple blockchains.

Cross-chain solutions are a natural evolution that is fated to take place in the blockchain world, so that users and developers can interact seamlessly with different protocols regardless of which ecosystem their assets live in. That is why the core mission at Composable Finance is to build a fully interoperable future capable of offering frictionless interactions to all developers and users. Composable Finance is determined to serve all kinds of interactions, such as transfers and communication across distinguished ecosystems, by unlocking the hyper liquidity and composability to make protocol-to-protocol interactions across ecosystems possible.

As stated previously, cross-chain solutions can break the barriers that separate assets in different ecosystems, which makes moving assets between ecosystems become more intuitive. This is the reason why Composable Finance focuses more on a cross-chain, cross-layer liquidity layer for sharded applications; it aims to abstract away inter-ecosystem decision-making to maximize users’ and developers’ outcomes based on their unique goals. Composable Finance tries to create a single and unified access point called Innovation Availability Layer (IAL), and the IAL communicates with another innovative virtual machine, Composable Cross-Chain Virtual Machine (XCVM) designed by the team, which allows developers to deploy applications capable of orchestrating and computing smart contract functions across an array of layer 1 and layer 2 networks autonomously, with the sole purpose of optimizing for the best executions.

Composable Cross-Chain Virtual Machine (XCVM) is a single, developer-friendly interface to abstract complexity from the process of having to send instructions to the routing layer directly, which initiates call-backs into smart contracts and handles circuit failure such as network outages. The XCVM tools built on top of Composable’s bridging infrastructure allow developers to tap into various communications and liquidity availability functions so that users can perform cross-chain operations, and the originally overarching blockchain ecosystem is repositioned as a network of agnostic liquidity and available yield.

Regarding the routing layer, the routing transactions between different blockchains remain to be a sore point on-chain. A good route can reduce the time of transactions, the associated transaction fees and minimize the risks taken by users. To solve that, Composable Finance has dedicatedly designed for two major problems: constructing and maintaining a graph of the various chains and bridges available and finding the best route at a given time. One of the exciting features Composable Finance has presented is cross-chain fee management. The infrastructure intends to support an individual blockchain network, meaning that there will be multiple potential pathways to the same destination. Thanks to that, users will not have to search for the most efficient and compliant route for value packets. The routing layer of Composable Finance will simplify the route algorithms through a clean and straightforward interface. Additionally, Composable Finance has also been trying to design an evolving mechanism for the changing nature of blockchain ecosystems in case that newer protocols are deployed, or new tokens are added.

Composable Finance has been thoughtful to even launch its own Picasso Parachain on Kusama and Polkadot to ensure censorship resistance and network security across Innovation Availability Layer (IAL). Picasso Parachain serves as a finality and infrastructure layer, and with the development of this foundation layer, the whole Composable Finance ecosystem evolves with efficiency and enables developers to further create new applications with innovations. Each pallet within Picasso is designed for different DeFi functionalities essential for the entire ecosystem. The ultimate goal of Composable Finance is to cover all major components of DeFi, including primitives, core functions, and tertiary infrastructures.

Composable Finance believes that the applications of such a stack are the catalyst for the next DeFi revolution. Indeed, DeFi is continuously evolving as we are still witnessing an influx of users and high TVL among those top DeFi protocols. However, the current cross-chain solutions aiming for enhancing interoperability across blockchains and layers are few and somewhat efficient. Composable Finance’s presence will bring growth opportunities for technological advancements to create more innovative protocols and applications that generate compounding value and the network effect for DeFi projects that solve all challenges adequately.