It’s a no-brainer for anyone to reconcile that the DeFi industry is not perfect. However, many people disagree on what the biggest issue holding the space back is. There are a plethora of questions that many have sought to solve. Is it fragmentation and the lack of interoperability? The low levels of retail use and adoption? The generally overcomplicated and inconsistent user experiences/user interfaces (UI/UX)?
In truth, these issues are heavily interrelated and woven together in a web of dependencies. By improving one limitation (fragmentation), we can impact and improve the others. More specifically, if we create a more unified DeFi industry, we can together enhance interoperability and ease of use and resultantly increase the appeal to retail users.
This is why Composable Finance has made it our goal to seamlessly connect the DeFi space and, by doing so, abstract away complexity, unleashing enhanced interoperability and utility. By unifying the DeFi space, we can push interoperability as far as it can go and make the space the most conducive to widespread retail usership.
Interrelationships Among UI/UX, User Value, and the Adoption of New Technologies
DeFi, like many emerging technologies, struggles to attain mass use. Again like DeFi, the exact reasons are often debated. Many people assume that users resist new developments because they do not like change or novelty. However, this is not true; consider the rapid popularity of the iPhone or TikTok. These and other readily-adopted tools always have something in common: their user-friendliness and clear utility in users’ minds. It is simplistic in its approach, where the user does not need algorithmic, mathematical rigor or deep tech knowledge for interactions to take place. The complexity does not permeate the UI/UX and the user is grounded in the innovation experience, interacting with the function of that application or technology.
Compare this to examples like electric vehicles (EVs): these were slow to reach adoption at first because charging was slow and inaccessible, and the range was low. However, as the user experience improved (and in tandem, the efforts to easily communicate the utility of the solutions), so too did the retail adoption. Now that electric vehicle ownership is simplified, EVs are soaring in popularity.
From this, we learn that users do not resist new technologies simply because they are new; rather they resist them when they are irreconcilably clunky and difficult to use. When these limitations are alleviated, when the function of that tech can easily be used, mass adoption occurs.
A Limitless DeFi, Long live the User.
Attaining DeFi retail adoption has been stymied due to the huge learning curve and the lack of accessibility to that knowledge. One of the elements of DeFi’s utility is the diversity of chains, protocols, and services that exist. Yet this concept is a double edged sword, this diversity also has webbed a great deal of complexity with which the user must embrace to utilize the functionality. In order to execute a task menial or significant, users must choose between different chains or layers, educate themselves on their specifics, and then choose a protocol within that ecosystem to fulfill their needs, and other steps to yield the best possible outcomes.
This is the precise entry where Composable Finance steps in. Our goal is to enhance the utility and user friendliness of DeFi, thus driving up retail adoption in addition to making the space more valuable and convenient for existing users. The more users that enter the space, the more innovation and additional improvements can occur, forming a positive feedback loop that benefits everyone involved. Our mission is to propel the innovations that are taking place currently, and revolutionize the experience to a simple and seamless experience. One where the user is centered and their needs are prioritized. The DeFi user in the Composable Finance vision is empowered to think about what to do with their options, not how they are executed and the complexity of steps that are being abstracted for them in the background. In simple terms, users in our vision no longer have to triage their options to find the simplest way to accomplish their goal; instead, they can enjoy a host of simplified choices.
The Key Components to Generalization: Unity, Composability, Modularity.
By linking different subsets of DeFi (i,e, unity), we can allow functionalities to be leveraged simultaneously (i.e. composability) and even pieced together to create new functionalities (i.e. modularity). The overall result is an industry that is easier to use and more valuable, leading to high appeal to retail users (i.e. generalization).
To achieve this maximal level of interoperability, different parts of the same protocol need to be independent, interchangeable, and housed across a plethora of ecosystems. Simultaneously, these parts must also be able to interact with one another to enable a cohesive execution of functions, orchestrated for the user’s needs. In our vision and our building, users are able to choose any decentralized function on any chain or layer to execute a specific function at scale. Composable will then leverage this to directly address user needs and abstract away existing complexities. Thus ,we envision a future for DeFi that encompasses a broad and crucially important distinction from simple cross-chain communication. No longer will the user interact with decentralized functionality as a new learning curve, but take web2 experiences to make the web3 experience seamless in its interactions. In the end, dApps should be inexcusably indifferent in experience from “standard” apps, but their code and build are based upon true decentralization. A truly decentralized application must be accessible to all. Many that have promised the route of abstraction, in the end, have arrived at centralization as a solution that fits, such as Celsius; however, this is completely contrary to the values of the space that we serve and to the vision that we are enacting.
The secret to achieving ease of DeFi use that abstracts complexity is to thoroughly mitigate risks with a beautiful user experience. The user must be confident that their assets are not being mishandled, and have control of how their assets are deployed. We prioritize fluidity, accessibility, and efficiency.
As such, abstraction must not act as a black hole that overly convolutes the DeFi experience. Rather, it must be effectively communicated to the user in a way they can clearly understand and visualize. To this end, we intend to eventually open-source the user experience, for example with our wallet, stepper and wrapper. Our solutions will visualize the routes that assets can take across chains and layers, through something we are in its early stages referring to as a stepper, analogous to the socket network. The stepper allows people to understand what is happening on the backend, and show them error handling and callbacks, indicates when messages fail and allow users to make their own decisions as to whether assets should revert, among other features. Over time, this stepper will be more robust and inclusive of additional functions. The first public demonstration of this will take place as part of our XCVM demo at the Unchained conference.
The XCVM: The Technology Powering the Next Level of DeFi Interoperability and Adoption
We are accomplishing our vision through a comprehensive suite of new technologies that are designed to augment the existing technology in DeFi. A central piece of our offering is the Cross-Chain Virtual Machine (XCVM), acting as the engine facilitating unity, composability, modularity, and arriving at generalization for DeFi.
Cross-Chain Interoperability is Not Enough
The XCVM ultimately acts as a tool enabling computing to reach the pinnacle of decentralization and composability. Our virtual machine (VM) also allows for basic levels of interoperability, including cross-chain communications. This imparts the ability for applications to move liquidity between different chains, and transmit real-time information.
While this does open up some new opportunities and time/cost savings for users, more needs to be done to evolve the DeFi UI/UX to the point where retail adoption can occur. This necessitates modular functionality, wherein users and developers can combine the pieces from different tools and protocols on different ecosystems to perform any desired function in the most efficient and valuable manner.
I do not refer to conventional ‘plug-and-play’ technical architecture where applications are merely interchangeable. Rather, I explicate that the applications themselves serve as different ‘modules’ that can be separated whilst independently operating. Each can effectively execute the necessary functions synchronously across different chains, layers, and ecosystems. Moreover, they must be able to access safe and secure trustless bridging infrastructure and routing layer architecture for the smooth, efficient, and swift transfer of assets across chains, layers, and networks.
XCVM Technical Details
We understand that to achieve this end state of DeFi, we must revamp its current infrastructure. The infrastructure must include the necessary primitives to facilitate the orchestration of agnostic functionality through composability. We must also unlock state transition functions to be executed on different blockchains consecutively.
On a technical level, accomplishing our goals involves facilitating independent yet interchangeable functions that segment state transition functions on multiple chains and allow these segments to talk to each other through one overarching orchestration layer. As such, the XCVM orchestrates and composes the execution environments it corresponds with and generates functions.
Given this construction, the XCVM will abstract away complexity by enabling cross-chain smart contracts that leverage the power of the entire DeFi ecosystem for end users and DeFi developers. As we have continued to reconcile interoperability efforts, we are further building trustless bridging infrastructure that adopts the Inter-Blockchain Communication (IBC) standard for our core infrastructure. We are actively developing the expansion of IBC’s trustless architecture to any chain with light client support, to connect additional ecosystems like NEAR, Polygon and rollups. In combination with the XCVM itself, these tools will allow for vastly improved UI/UX, new opportunities, and enhanced adoption of DeFi. Thus we bring together some of the strongest components of these ecosystems, leveraging their diverse offerings into one entry point where the user can now harness modular functionality composed in a harmonious experience.
Use Cases and Industry-Wide Ramifications for the XCVM
The XCVM-powered environment will enable a host of new services and decentralized functionalities that can better speak to consumer needs. As an example, in such an environment, perpetual leverage arbitrage indices can be created that exist cross-chain and therefore across markets. Additionally, users can interact with applications that provide them with the best interest rates for loans across multiple ecosystems, the most efficient asset swaps, and harnessing arbitrage opportunities across multiple chains.
Capitalizing on MEV, Cross-Chain
The XCVM also introduces a new perspective around maximal extractible value (MEV). Our solution underscores the prevalence that cross-chain MEV will introduce at the application layer.
Cross-chain instructions are susceptible to cross-chain MEV. In its current state, there is a lack of incentives for relayers in the ecosystem to operate, as such, relayers are not operating in a sustainable manner. Due to the architecture of the XCVM, we are opening up the ecosystem by introducing the opportunity for relayer providers to operate with a steady stream of income for market efficiency through cross-chain MEV. These incentives will ensure cross-chain transactions are successful even when users are engaging functions across multiple chains.
Additional Use Cases Facilitated by the XCVM
Beyond leveraging opportunities related to MEV, the XCVM also will be utilized to facilitate an endless number of new use cases within DeFi. Any existing utility has the ability to be cross-chain, fully interoperable, and resulting in the architecting of new use cases. Just a few of the many use-cases for the XCVM are listed below:
- Cross-chain lending and borrowing
- Example: Users can leverage interest-bearing assets, trading, options, and derivatives across multiple ecosystems,
- Cross-chain market arbitrage
- Example: Users can perform arbitrage across multiple ecosystems to maximize earnings
- Cross-chain gaming
- Example: A user plays on one chain, while another plays on another chain, combining the functionality of both in one setting — in one consistent game experience uninterrupted
- Cross-chain metaverses and NFTs
- Example: Metaverses can combine elements (including NFTs) from various chains and platforms, bringing them all together to one huge, interconnected virtual world where they can be combined or further utilized
- Cross-chain protocol governance
- Example: Protocols that have multiple instances on different chains (i.e. SushiSwap) can perform unified governance (including DAO governance) of all instances
- Cross-chain liquidity provisioning (LPing)
- Example: Users can provide liquidity across multiple chains at once, with automated routing to those that will generate the highest earnings
- Cross-chain portfolio/asset management
- Example: Similar to the idea of cross-chain LPing, assets can be automatically routed to the ecosystems and protocols where they generate the highest value
As we work to confront MEV in the DeFi ecosystem and explore opportunities to leverage other use cases facilitated by the XCVM, we will continue to have discussions within our team and community. You can look forward to more information on these topics in the future.
The XCVM will necessitate not only new conversations around the advent of novel solutions where interoperability is not a hypothetical state but also the foundation for innovation where the user is king. Long live the user.
Modular functionality represents the end state of DeFi, and speaks to the ethos of Composable Finance — the core of our business. The novel infrastructure we are developing will help usher in this end state, which will better speak to user needs and thereby enable mass DeFi adoption. The new wave of this user experience is not dead, it is being birthed by Composable Finance.
The future has arrived, the gateway is XCVM.
This company information contains “forward-looking statements”. These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect”, “will”, “can”, and similar future-looking expressions include our expectations and objectives regarding our future operating results and business strategy. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of Composable Finance Ltd. and its affiliated entities (“Composable”, or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, general business, economic, competitive, political and social uncertainties; dependence on commercial product interest; as well as regulatory or legal changes and uncertainty. Forward-looking statements are based on a number of material factors and assumptions, economic conditions in the near to medium future, the average cost of the Company’s offerings compared to traditional offerings, fluctuations or changes to the tax and other regulatory requirements regarding DeFi and the industry as a whole. While the Company considers these facts and assumptions to be reasonably based on information currently available to it, these assumptions may prove to be incorrect. Actual results may vary from such forward-looking information for a variety of reasons, including but not limited to risks and uncertainties known and unknown by the Company. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. The Company’s actual results and conditions may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.
This information does not constitute an offer to sell or a solicitation of an offer to purchase securities or financial services by the Company. Such an offer can only be done through a registered or licensed offering or subject to an exemption. The recipient should not rely upon anything within this information in making a decision to invest in the Company or to utilize the Company’s technology. The Company is not required to update the information provided and the information is only current as of the date of its release and is subject to change over time.
Use cases are provided for illustration purposes only and the Company neither supports nor condones any such uses. Any such uses should be done at the risk of the person making the utilization of the technology and any user agrees to hold harmless and indemnify the Company from and against any losses that may occur as a result of any such uses.