There are several reasons to use a cross-chain settlement protocol. We explain two of them using the examples below:
- 1.Alice has ETH on Ethereum and wants to hold it. There is a protocol on Solana that gives a yield on ETH, which is higher than the yields on Ethereum. Alice can transfer her ETH from Ethereum to Solana and deposit it in that protocol.
- 2.Alice has BTC on Bitcoin and wants to exchange it for ETH on Ethereum. One option is to move BTC to a centralized exchange, exchange it for ETH and then withdraw it on Ethereum. But the process is long, costly, and slow. Also, it involves a centralized exchange, which is not desirable for Alice.
In short, users submit their cross-chain transfer and exchange requests on the source chain. Nodes called Teleporters collect users' requests from the source chain and submit them to the target chain. The validity of the submitted request is checked by the TeleportDAO bridge. Then, valid requests get executed by TeleSwap smart contracts.
A wrapped asset is a representation of an asset on chains other than its native blockchain. For example, when some amount of ETH is locked on Ethereum, an equivalent amount of wrapped ETH gets minted on the target chain. Since every wrapped ETH has an equally backed ETH, their prices are tightly closed.
Holders of a wrapped asset can burn it at any time and redeem the equivalent amount of the asset on its native blockchain.
The fee that users pay for cross-chain settlements breaks into target transaction fee, Relay fee, Teleporter fee, Locker fee, and protocol fee. An additional fee can be added if the settlement speed is instant. Details of fees can be found in the cc transfer fees section.
In TeleSwap, all the fees get merged into the one that is payable in the source chain's native currency. It means that, in contrast to existing protocols, the user is not required to hold native currencies of both the source and target chain. This makes cross-chain settlements easier to use.
TeleSwap has three main participants: Locker, Teleporter, and instant pool provider. Each of these participants earns on the service that they provide. To see a full description of each role, please refer to the network participants sections.