1inch Presents Cross-Chain Interoperability Problem Solution

Decentralized exchange (DEX) aggregator 1inch Network unveiled a new hybrid protocol that could potentially solve key challenges of cross-chain interoperability. The protocol will allow users to seamlessly exchange assets between blockchains, while maintaining full control over funds and minimizing centralization.

DeFi project 1inch Network unveiled Fusion+, a hybrid cross-chain interoperability solution that builds on the security of traditional atomic swaps and ease of use. According to the white paper, the protocol will address current cross-chain interoperability issues in the cryptocurrency industry.

Fusion+ is based on an enhanced version of classic atomic swaps and uses the concept of auctions and signature-driven transactions to streamline user interaction with the protocol. The functionality of Fusion+ ensures asset security by preventing funds from being locked up and guaranteeing the execution of transactions without the need for centralized intermediaries.

The way Fusion+ works consists of several phases, namely:

1. Announcement. The initiator creates and signs a cross-chain swap order and sends it to the 1inch network. The order is distributed to all resolvers and the Dutch auction begins.
2. Deposit. The resolver deposits the initiator’s tokens into the network’s smart contract and deposits their tokens into the destination network’s smart contract.
3. Withdrawal. Once both deposits are made, the resolver can complete the exchange by unlocking the assets on both networks.
4. Recovery. If the swap isn’t completed on time, the resolver or other participants can return the assets to the owners by performing a swap reversal.

A resolver is a participant on the 1inch network that combines the functions of market maker and liquidity provider, acting as an intermediary for swaps between users. Resolvers undergo a KYC process and enter into legal agreements with 1inch.

The Dutch auction is a method of auctioning in which the price of a lot is gradually reduced from a starting point until someone agrees to buy it.

Within Fusion+, the use of the Dutch auction allows resolvers to compete for order execution: the swap price decreases until the resolver finds it favorable and executes the trade. This approach enables users to get the best swap rates through competition between resolvers. At the same time, user experience is greatly improved as all swap steps are performed automatically without any active user interaction after the order is signed.

Another key feature of Fusion+ is the ability to partially execute orders. Resolvers can commit to swap a certain portion of the assets specified in the order, reducing the risk of capital outages and increasing the efficiency of capital utilization.

In this way, the new protocol enables seamless cross-chain swaps, regardless of whether the tokens are on an L1 or L2 blockchain. This effectively blurs the boundaries between networks and promotes asset liquidity within the DeFi ecosystem.

The issue of blockchain protocol interoperability remains a hot topic for the crypto industry. Vitalik Buterin, Co-Founder of Ethereum, previously proposed several options to solve the problems of cross-chain interoperability. The compatibility of different blockchains is also being actively investigated by SWIFT.

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