A general introduction to Sifchain
Sifchain is built with the Cosmos SDK, and inherits the cross-chain capabilities of Thorchain. Uniquely however, Sifchain uses pegged tokens to support cross-chain transactions across a wide array of blockchains.
As well as being connected to the Cosmos hub via IBC, Sifchain already supports cross-chain transactions for Ethereum ERC-20 tokens. In the future, 20-25 of the top blockchains such as Bitcoin, Polkadot, and EVM chains like Avalanche and Polygon will also be connected through Sifchain. These blockchains represent the overwhelming majority of all cryptocurrency trading volume and will setup Sifchain to be used with a wide variety of cryptocurrencies. It will also simplify the process of blockchain integration, lowering cost and removing development barriers for the open-source community.
Unlike Bitcoin or Ethereum, which work on probabilistic finality of blocks, the Cosmos SDK provides finality guarantees. This is important in relation to the confidence that a block will be finalized. Since Sifchain is built on Cosmos, this feature is automatically baked in, which is essential for cross-chain token swaps.
In order to accomplish this cross-chain support, Sifchain uses a concept called 'Peggy' to create a pegged token model. This model is inspired by the Cosmos peg zone model. A 'peg zone' is an account-based blockchain which bridges 'zones' within Cosmos to external chains like Bitcoin or Ethereum. These peg zones are what allow assets to be easily transferred between Sifchain and the external chain. Peg-zones can even be used for cross-chain transfers between a finalistic and probabilistic blockchain.
Peg-zones can also be thought of as a blockchain that tracks the state of another blockchain. By doing this, it acts as an adaptor zone or a 'finality gadget', which translates finality for probabilistically finalized blockchains by imposing a 'finality threshold' at some arbitrary number of blocks to achieve pseudo-finality. Generally, this 'translator' zone design can be classified as a 2-way peg (2WP).
Sifchain uses a 2WP protocol, which allows the swapping of pegged tokens. For example, a trade of currencies LTC for BTC would be executed as transactions of pegged versions of those tokens (cLTC and cBTC) on the Cosmos SDK blockchain. Sifchain users will trade with pegged tokens within the Sifchain system.
In Peggy, not only does the usage of these pegged tokens create a highly scalable design, it also has unique crypto-economic incentives for its participants. For instance, Sifchain validators only need to run 'Sifnode' (Sifchain's network) and can leave the cross-chain transaction labor to peg zone validators. Each peg zone validator only needs to run a node for the peg zone blockchain and the external blockchain (ie. Bitcoin or Ethereum) and can then send assets to and from Sifchain through Inter-Blockchain Communication (IBC).
Having successfully run our first implementation of Peggy throughout the later half of 2021, we are now approaching the launch of Peggy 2.0, which will allow for connection to all EVM blockchains to be rapidly deployed (such as Avax, FTM, Solana etc). You can get a more general understanding on Peggy 2.0 by reading this article Peggy 2.0 is designed to increase its scalability and be able to handle imports and exports across different chains. Peggy 2.0 is sometimes called the Omni-EVM bridge, as it is very straightforward to tune it in order to integrate all the EVM chains (such as Avalanche, Polygon, BSC, Phantom..). Regardless of the easiness to integrate EVM chains, Peggy 2.0's architecture is designed to handle every other chain (such as Solana, Cardano..)
In August 2021 Sifchain welcomed in IBC connectivity. With IBC, users can now freely move any assets between Sifchain and any connected blockchain via IBC. Sifchain has taken the route of connecting to each individual chain. There were many reasons for this decision, but essentially this allows the user experience of moving assets to be very easy and clear.
Through IBC & Peggy, Sifchain users are able to export approved Cosmos-specific assets onto Ethereum and transfer Ethereum assets across any IBC-enabled blockchain. This is a huge step in Sifchain's goal of becoming the world's first omni-chain DEX.
Liquidity pools enable you to buy or sell an asset for another asset on a crypto-currency exchange. Think of each liquidity pool as a mini-market within the larger market, ensuring reliability and expediency when you trade two different tokens.
Liquidity pools are important in decentralized finance (DeFi) particularly decentralized exchanges (DEX). Because Sifchain is the world’s first omni-chain DEX, this technology is fundamental to our vision. We use something called a Continuous Liquidity Pool (CLP).
Centralized exchanges (e.g. Coinbase, New York Stock Exchange) use order books: marketplaces where buyers and sellers come together, respectively trying to buy at the lowest possible price and sell at the highest possible price. Sifchain will add order functionality in the future.
Inspired by Compound, YFI, and Synthetix, Sifchain will make use of decentralized governance with SifDAO.
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 (most likely 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 that 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 super forecasting 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 crypto-economic incentives for SifDAO members.
To ensure the security of the Sifchain ecosystem, the SifCore team will lead the development and deployment of each bridge. The SifCore team intends to give all bridges the same security guarantees. We may use ROWAN as the collateral for these bridges, where required, or we may create another token solely to be used by these peg zones depending on a successful implementation of the rebalancing mechanism and market conditions.
Sifchain’s consensus mechanism includes Tendermint’s consensus engine with reasonable parameters to secure on-chain trading.
Sifchain validators stake their own ROWAN, and ROWAN delegated to them by other ROWAN holders. Sifchain’s consensus set consists of the top 115 validators with the highest quantity of Rowan staked. This set changes from time to time as validators willingly leave the consensus set or are forced out. If they are forced out, it may be because they’ve been slashed or because they are no longer among the n highest staking validators (where n is a threshold set by governance).At network launch, n was set to 100, and subsequently upgraded to 115.
Sifchain will routinely check the relative amount of ROWAN staked among all validators and reset the top n validators. This could happen as frequently as every block, depending on the performance costs. Sifchain will also be able to readily remove any validator from the consensus set as a part of slashing it (this is called “jailing”). See also tombstoning.