Co-Launching The Europa Liquidity Hub For SKALE
The release of SKALE V2 sees the birth of a new and limitlessly scalable ecosystem of interlinked SKALE Chains. The SKALEVERSE offers a greenfield environment for Ethereum-based dApps and DeFi services — with all the challenges and opportunities that presents.
An important matter to resolve is the issue that every bridge from Ethereum mainnet to a SKALE Chain will have a different wrapping standard for tokens migrated across it. This would cause popular tokens, including BTC, ETH, and stablecoins, to be fragmented into as many different and incompatible versions as there are mainnet bridges.
The aim of the Europa initiative, jointly launched by major SKALE dApps and stakeholders including Ruby.Exchange, Boot Finance and Impossible Finance, is to establish a default mainnet bridge, and the social consensus and network effect to ensure there is a single version of each main token, which can then be used interchangeably by every dApp across the SKALE network.
By serving this critical function, and by hosting a set of liquidity-related dApps and services, Europa will become a Liquidity Hub and the chief route for funds and users to enter the SKALEVERSE.
The Problem Of Liquidity Fragmentation
Liquidity will flow into, around, and out of the SKALEVERSE across bridges powered by the SKALE Interchain Messaging Agent (IMA). IMA bridges connect both external blockchains to SKALE, and SKALE Chains to each other. Tokens are locked in a smart contract on one side of the bridge, and a “wrapped” token is minted on the destination side. When wrapped tokens are transferred back the other way, they are burned and the original tokens are unlocked.
To maintain openness, decentralization, and flexibility, SKALE does not impose a network-wide standard for token wrapping. That means every bridge will have its own version of every token, and tokens with different wrappings cannot be used interchangeably. A version of USDC used by Ruby.Exchange would not be supported by another dApp that has integrated USDC via a different bridge — even though they are both backed by L1 USDC.
Establishing A Default Mainnet Bridge
The Europa chain will address the problem of liquidity fragmentation by providing the default bridge from Ethereum mainnet to the entire SKALE network. dApp developers will not need to implement their own mainnet bridges, and there will be an established standard for tokens — so, for example, dApp developers will know that the version of USDC they integrate will also be supported by dApps on other SKALE Chains. Users will be able to on-board liquidity through Europa’s bridge, before moving it seamlessly anywhere in the SKALEVERSE.
An initiative like Europa is vital to establish the network-wide standardization that ensures no dApp becomes isolated from the rest of the SKALEVERSE. However, for it to work, it must remain independent of any single dApp or DeFi project, and must gain traction from a critical mass of major SKALE dApps at the earliest possible stage. These needs drove the proposal for the Europa Hub.
A recent blog post describing the vision for SKALE 2.0 explores the idea of Hubs: Shared SKALE Chains that host clusters of related services. In the video below, SKALE CTO Stan Kladko goes into more detail.
A Hub For Liquidity-Related Services
In addition to being the default mainnet bridge, Europa will be a Liquidity Hub. The chain will host several liquidity-related dApps and services that benefit from being directly connected to Ethereum mainnet, a major source of migrating funds. Initial dApps that have agreed to form the Europa Hub, and to be multi-sig key holders with admin rights to the chain and bridge, include:
- Custom pool AMM Boot Finance
- Crowdfunding service Impossible Finance
- Staking/validator services 01Node and Stakin (key holders).
Europa, the name of one of Jupiter’s moons, is believed to have vast reserves of liquid water under its ice crust, making it a potential fuel station for interplanetary travel — a theme explored by Arthur C. Clarke in 2010: Odyssey Two. The Europa chain will be a source of liquidity and the gateway for users moving into the SKALEVERSE.
Because Europa will provide infrastructure for the whole SKALEVERSE, it is important that control should be distributed across multiple parties. While multi-sig admin rights are a good first step, this will later be extended to include a DAO structure (distinct from Ruby DAO, though naturally with some overlap of membership), giving the wider SKALE community a say in what assets are whitelisted for the bridge and any updates to the chain’s permissions.
Different approaches for DAO token distribution and incentives are currently being researched. One option is to airdrop Europa governance tokens to users who migrate tokens across the bridge to SKALE, or who use other services on the Hub — rewarding those who provide liquidity for the SKALEVERSE. Ultimately, this is something that will be decided after consultation with the community.
A Template For The SKALEVERSE
Europa will be the first hub in the SKALE network and the default entry point for liquidity to enter the SKALE network. It will also be the first example of a shared chain, pioneering the governance systems required to take collective decisions. As such, it will provide useful insights for similar initiatives, and will offer a template for future hubs.