DeFi
Bybit Learn
Bybit Learn
Beginner
Sep 7, 2022

Stargate Finance (STG): A Fully Composable Native Asset Bridge

Decentralized cryptocurrency exchanges are becoming increasingly popular among crypto investors who want their every transaction to be 100% anonymous and secure. 

Over the past few years, decentralized finance (DeFi) has grown rapidly, resulting in decentralized crypto exchanges adding more customized benefits to their platforms to differentiate themselves from the competition. Among the most ambitious projects is Stargate Finance, a native asset bridge created by LayerZero Labs. The following is an in-depth and detailed guide on Stargate Finance and its many advantages.

What Is Stargate Finance?

Stargate Finance is a decentralized crypto exchange with modern features that aims to deliver a fully composable native asset bridge. As a liquidity transport protocol, the platform allows users to add liquidity to various pools, stake assets and transfer native assets.

Crypto users can also farm tokens. When a user stakes their own asset, they’re given the opportunity to govern the Stargate Finance exchange. If they want to use the platform, they have to connect their wallet to the exchange. The team behind the exchange has made sure the platform's layout and format are easy for both new and experienced investors to understand.

Stargate Finance focuses mainly on stablecoins, which reduce the risk of losing a substantial sum of money since their price is pegged to a stable asset. Users also can earn high returns with unified liquidity pools as well as extensive farming features. Even though Stargate Finance was started by LayerZero Labs, it's considered to be a community-driven project. In fact, the exchange aims to provide users total transparency with documents and white papers that address any potential issues.

History of Stargate Finance

Stargate Finance was started by LayerZero Labs in March 2022. LayerZero exists as an omnichain interoperability protocol. On March 15, Stargate Finance was launched on the mainnet as the first cross-chain bridge app. 0xMaki, a popular crypto developer, joined the team at LayerZero the same day.

Stargate’s objective is to make sure that cross-chain liquidity transfers can be done in a one-time transaction without any hassle. The platform facilitates one-click swaps from practically any asset that's available on any chain. The swaps can occur with all assets found on other chains.

Solving the Bridging Trilemma

Stargate Finance was designed specifically to solve the bridging trilemma. When looking at traditional bridges that connect two blockchains together, a technique known as fractured liquidity is used, which requires separate pools to be maintained for the various tokens that are set to be bridged. When using a fractured scheme, each individual chain keeps its own liquidity pool, which is a complicated method for something that should be simple.

In order to resolve the issue, it's necessary to use a unified liquidity technique that allows deposits and withdrawals from multiple blockchains to originate from one liquidity pool. Every connection goes to the same pool. However, this benefit isn't available for free, and results in additional difficulties.

The main issue with unified liquidity is ensuring instant guaranteed finality of transactions. Let's say multiple transactions withdraw funds from the single liquidity pool at the same time. It's essential that the liquidity pool has enough funds to cover all of these transactions. If the pool is exhausted before the transactions are completed, the benefits of a shared liquidity pool become irrelevant.

The feature that allows Stargate to solve the bridging trilemma is LayerZero, because of its ability to properly transmit information. It helps connect every blockchain's liquidity, thereby improving the efficiency of the entire pool. Thanks to LayerZero, Stargate users are able to deliver liquidity on a single blockchain, after which an algorithm allocates portions of the liquidity to other connected blockchains. The process solves the trilemma by delivering instant guaranteed finality, native asset transactions and unified liquidity.

Instant Guaranteed Finality

When transactions are successfully performed from a source blockchain, instant guaranteed finality guarantees that funds will be on the destination chain. The technique is achieved with a lock+mint and burn+redeem mechanism, in which assets are minted directly on the destination blockchain.

In this scenario, the assets cannot revert to the source's blockchain since they weren't created there. The downside to this technique is that users will receive what's known as a synthetic asset. This asset must be swapped for the one you meant to obtain before it can be used.

Native Asset Transactions

Native asset transactions occur when native assets are directly swapped instead of being converted to wrapped assets, which requires extra swaps to ensure you receive the asset you intended to buy. 

Certain cross-chain bridges work to issue bonds whenever liquidity is too low. For instance, Multichain, previously known as Anyswap, provides 1:1 anyUSDC to users who transfer USDC when its liquidity is insufficient. In this situation, native asset transactions are sacrificed for the instant guaranteed finality, since the user must have an extra layer of trust with Multichain. USDC is also abandoned to acquire anyUSDC.

Unified Liquidity

If native asset transactions and instant guaranteed finality are fully ensured, a liquidity pool will need to be developed between each pair of blockchains if a dynamic allocation algorithm isn't used. Unified liquidity identifies whether the liquidity on both of the chains can be uniformly used. The total number of different pools that need to be constructed depends on the number of blockchains from which the transactions occur. More blockchains equals more pools, which significantly lessens capital efficiency.

Delta Algorithm

To solve the bridging trilemma, the Stargate platform uses an advanced cross-chain bridge mechanism, as well as a balancing algorithm called the delta algorithm. When these two mechanisms are combined, cross-chain liquidity and native token transfers are possible.

Cross-chain bridges let users send fully native assets to separate blockchains without requiring intermediate tokens to be created. These transactions can also occur without depreciation of composability or interoperability.

Keep in mind that cross-chain bridges are operational because of the unified liquidity pool shared between multiple chains, meaning that every bridge will have instant guaranteed finality, no option for transaction reversion, and enough liquidity to make sure all transactions are successfully completed.

How Does Stargate Finance Work?

Sending assets from one cryptocurrency network to another is a common challenge for blockchains. Stargate Finance was created on LayerZero, an omnichain interoperability protocol, to simplify the process of sending assets from one network to another.

Stargate Finance wants unified liquidity pools, access to native assets, and a fully guaranteed destination for the funds to be included on every bridge.  The platform is mainly used for transferring assets between blockchains at a 1:1 ratio, which means users can swap USDT from the Solana blockchain with USDT from the BNB chain.

Stargate Finance has also created its own token, STG, to expand its features and offerings. Along with native swaps, Stargate Finance offers farming and liquidity pools, the latter giving users the opportunity to earn a certain amount of stablecoins for their farming.

Crypto investors can earn and farm the STG token, and stake the tokens to earn veSTG, the platform's governance token. Users who earn veSTG can take part in deciding the future of Stargate Finance.

Features of Stargate Finance

As the first native asset bridge that aims to solve the bridging trilemma, Stargate Finance is equipped with many features that distinguish it from similar crypto projects, including Stargate transfer, liquidity pools, yield farming, staking, rebalancing fees and omnichain composability.

Stargate Transfers

Stargate is able to swap native assets 1:1 across different blockchains by accessing unified liquidity pools. The transfer that's sent from the source blockchain is guaranteed once it reaches the destination blockchain.

Because of the Stargate transfer feature’s design, users no longer need to contend with transactions failing because of a lack of liquidity or issues with a wrapped token. You'll also receive a fully native asset, as opposed to a synthetic wrapped asset that would need to be swapped for the correct one after the transaction is completed.

Pools

Stargate Finance also provides access to liquidity pools from different networks, which means users are able to place liquidity in any pool as long as they have the correct assets. Since Stargate accommodates only liquidity pools of stable assets, users who place their assets in these pools can expand their investment portfolios with the rewards they receive.

Yield Farming

You can yield farm only when you provide liquidity to Stargate's pools. Once you've provided liquidity, you can farm liquidity pool tokens to earn STG. After you receive STG, you can choose to either hold onto the token to obtain additional benefits, or swap the token for other assets that you can eventually withdraw into your wallet. Yield farming is certainly a great option when you want to obtain an income stream and regular rewards for the investments you make.

Staking

If you're an STG holder, you can stake your tokens in order to earn veSTG, which is Stargate's governance token. Once you have veSTG tokens, you're able to vote for all initiatives and proposals that are brought up for discussion.

Rebalancing Fees

Since the instant guaranteed finality feature with native assets is a core aspect of Stargate, the exchange’s performance requires any destination chain to have enough reserve balance available to ensure that swap transactions are properly handled. The protocol starts with balances at the optimal target balance.

However, additional swap transactions will reduce these balances on destination chains, while at the same time increasing others on source chains. Stargate implements rebalancing fees to incentivize users to perform swaps that “refill” low native asset balances and dissuade them from performing additional transactions that could deplete reserves. These rebalancing fees typically depend on the current balance and transaction size of any potential transaction. 

The rebalancing fees that are accrued are all sent to a reward pool, which will later be distributed to any user who performs a “refilling” transaction. The amount they receive will be proportional to how close the post-transaction balance returns to the optimal target balance.

Omnichain Composability

Stargate currently accommodates one-click swaps with all assets and all blockchains. This is extremely beneficial, as it obviates the need to transfer one asset on a blockchain for another asset on a different blockchain. For instance, it's possible for a Stargate user to exchange DAI for AAVE, even though DAI is on Ethereum and AAVE is on Polygon.

In the event that the blockchain isn't on Stargate, users need to connect their wallet directly to the Ethereum mainnet, after which they must navigate to a chain and swap DAI for USDC, since Polygon doesn't support DAI. The next step involves locating a first-gen bridge that allows USDC to be swapped for a wrapped version of the token.

MetaMask must then be connected to Polygon and bridged, which involves paying a fee. At this point, an automated market maker (AMM) needs to be located on BNB Chain. A USDC-wrap must be swapped for AAVE, which requires you to pay another fee. At the end of this process, you’ll need to go back to the Ethereum mainnet and repeat the process once more.

With the inclusion of omnichain composability, users can swap DAI with AAVE in a single transaction that starts from the source blockchain. When using SushiXSwap, you can complete this process from a single interface. Fees for the source chain and destination chain are only paid once.

On-Demand Cross-Chain Liquidity

Sushi is known as the first decentralized exchange to effectively leverage the Stargate platform. This ensures that unified liquidity pools can be accessed from any blockchain, which was guaranteed once SushiXSwap launched. The goal of cross-chain liquidity is to simplify the transaction process for users and developers alike.

Developers are given large pools of liquidity that are capital-efficient and don't require liquidity pool emissions to be managed. SushiXSwap also allows customers to gain access to various native assets. Decentralized applications aren't necessary with Stargate, since the platform wants liquidity pools from different chains to have instant access to liquid inventory, as well as automation for cross-chain inventory management.

STG Tokenomics

As mentioned previously, STG is Stargate’s native token. STG tokens are used for liquidity provision, staking, and making governance decisions that pertain to the Stargate protocol. As a token holder, you can stake your STG to receive veSTG, after which you can take part in governance votes. If you lock your veSTG for an extended period of time, you'll receive more rewards. In fact, the Stargate protocol uses a type of time-weighted system that increases the amount of veSTG stakers obtain based on how long the tokens are locked.

Users can add liquidity directly to the Stargate protocol, after which they receive stablecoin rewards. These rewards are provided for every transfer. The fee for a non-STG transfer on Stargate is 0.06%. It's also possible for liquidity pools to farm liquidity pool tokens to obtain STG rewards.

At the moment, some of the individuals who are taking part in farming with the unified liquidity pools are receiving an APY near 30%. Because of these appealing yields, Stargate should continue to increase its TVL. The maximum supply for STG is one billion tokens. However, the circulating supply is just over 133 million tokens.

Tokens allocated for the initial launch auction, investors and the team at Stargate are set to be locked for a total of 12 to 24 months, which ensures that supply remains low while the protocol grows. The current price for this token is $0.59, with a market cap of more than $78 million. The fully diluted market cap is situated at $592 million.

STG Price Prediction

According to PortalCripto.com, the Stargate Finance token will reach a high of $0.954 by the end of 2022. It's possible, however, that it will grow to a max price of $1.836 when taking the PortalCripto price prediction index into account.

By 2025, the STG token may be worth $2.213. It's expected that the minimum value for Stargate Finance in 2030 will be $1.959. Based on these estimations, the max price could be as high as $3.612.

Where to Buy STG

STG can be purchased on a wide range of cryptocurrency exchanges, one of which is Bybit. If you'd like to purchase the STG token via Bybit, the first thing you must do is log in to your existing Bybit account or create a new account.

Once you're logged in, enter STG into the search bar in the top center of the Spot Trading page. When you click on the result, you'll be taken to the STG/USDT Spot Trading page, which shows you the current market buy and market sell prices. On the right side of the page is the area where you can create a buy order for this token.

Is Stargate Finance a Good Investment?

Stargate has already appealed to thousands of new and experienced crypto investors because it solves the bridging trilemma. The platform provides a number of features, as well as great opportunities for earning income and expanding your portfolio. Because of how this platform works, it's easy for users to swap different assets without taking on too much risk.

At the moment, the main issue with this platform is its focus on stablecoins, which reduces coin diversity. However, Stargate Finance should improve in this regard in the months and years to come. Because of its high value proposition, Stargate Finance is a great platform in which to invest.

Closing Thoughts

While there are thousands of different cryptocurrencies and projects you can place your money in, Stargate Finance offers a powerful native asset bridge that other projects don't have. Whether you want to farm tokens or take part in protocol governance, investors have numerous options when joining the Stargate Finance platform. If you'd like to buy the STG token, you can complete a buy order on Bybit in just a few steps.