blockchain applications

Blockchain interoperability is a hurdle that the industry currently solves by making extensive use of bridges so assets from one change can be transferred to another, or at least their value/currency representation.

However, countless exploits, breaches and thefts have plagued this essential part of the crypto infrastructure, with the Ronin theft the most high profile, helping to perhaps fatally undermine the Axie Infinity Play-to Earn crypto gaming success story. Umbria Network is changing all that.

Umbria get’s rid of those headaches by implementing a liquidity approach that does not rely on having faith in the custodial integrity of validators vis a vis reserves and managing a jumble of wrapped assets.

The Polygon community has taken notice. After receiving an initial grant early in 2021 from Polygon, on 7 June Umbria joined Polygon Village, the DAO of the Polygon ecosystem in a big win for the project.

Umbria Networks has invented a solution for bridging that has made the Polygon community sit up and take notice. We caught up with the founders of the London-based crypto start-up – brothers Oscar and Barney Chambers – to hear about their joining the Polygon Accelerator program and how they see it turbo boosting adoption of their bridging technology.

This the final part of a three-part interview series.

You can read the first part of the series, where we discussed the Ethereum Merge and Ethereum falling to $600 and other matter at the link.

Cryptoassets are a highly volatile unregulated investment product.

How does the Umbria Narni bridging protocol differ from the dominant mint/burn approach?

Oscar: Most bridges use a minting and burning model. What that means is if someone is bridging some assets over from, let’s say Ethereum to Polygon, they will send the assets into the bridge on Ethereum; the assets will then get locked up in the bridge, unable to move, and the bridge will then mint those assets again on the other blockchain and give them back to the user.

That is quite a clever way of bridging but it does come with its own problems – the main problem being that is is incredibly expensive to do the locking and minting mechanism, particularly if you are using a blockchain like Ethereum.

So what we did instead of the minting and burning mechanism is we have done something similar to UniSwap in what they do with their DEX.

We have basically built liquidity pools on all the different blockchains that we have.

When a user wants to bridge there assets from one blockchain to another, they simply deposit their assets into a liquidity pool on one blockchain and then our oracle system, which is scanning the blockchain for confirmed transactions, notices that they have sent assets into one of the liquidity pools and it is confirmed on the blockchain, and then they get sent those assets again on the other side of the bridge, on the other blockchain from the other liquidity pool.

Huge unique selling point – bridging native assets

Barney: So a couple of advantages that aren’t just speed and cost, even though speed is a factor of 10 faster and the cost 10x cheaper.

Another thing that our bridge can do that other bridges cannot do is bridge the native asset of each chain.

So if you were going to use the official Polygon bridge, for example, or really any other bridge, and you wanted to bridge ETH from Ethereum to Polygon, or any other native asset, you have this problem where you have to wrapped the asset and then hope that other projects will accept your wrapped product as a valuable worthy asset to use in their ecosystem.

Many of these wrapped assets on other bridges just aren’t accepted by DEXs or any DeFi protocol on the destination chain.

So we have the advantage that we can actually bridge the real USDT or the real USDC or the real ETH – we don’t have to make our own Umbria wrapped version of it.

Oscar: One of the other beautiful things about our system is that the liquidity that is provided by the system is completely community driven.

When people bridge their assets, the community earns APY for facilitating those bridges. So even with a very small amount of cryptocurrency, let’s say for example with Ethereum, our system with 100 ETH can facilitate 20 ETH every minute or so of bridging. Therefore it only requires a very small amount of assets to facilitate very large amounts of bridging.

umbria founder barney and oscar chambers

A bridging protocol that’s off the hackers radar, capital efficient and with record high APYs

Barney: This also means we are off the radar as far as a lot of hacking is concerned. If the potential reward for hacking us is very low compared to some other kind of bridge.

Our bridge is incredibly capital efficient. It can use liquidity over and over again in a very short period of time. We can do millions and millions of dollars of volume in a day with just hundreds of thousands of dollars worth of assets in the liquidity pool. That proves are users who have provided that liquidity with really high APYs with no impermanent loss.

We’ve had APYs of up to 100% on ETH with no impermanent loss, Which at the time was the highest APY on ETH in the entire crypto space.

We have consistently high APYs for really nice assets like USDC and USDT – things that people are familiar with and they get paid out in those assets. The capital efficiency of our system has enabled us to generate really high APYs for our users.

So what about for larger transactions – are you still super capital efficient?

Barney continues: If a user wanted to bridge large amounts of money, it wouldn’t be capital efficient to use our bridge.

That’s because our bridge takes a flat fee of 0.5% and so as the amount of money that your bridging increases, the actual fee also increases to pay the liquidity providers.

When you get up to says $40k to $50k, our bridge is no longer the most capital efficient bridge to use – then maybe you would go other to the Polygon official bridge but you would still have to wait sometimes possibly hours for that transaction to finalise so people sometimes still do bridge larger amounts than is capital efficient just for that speed benefit.

But we’ve found that most people in the space – 97 to 98% of people are bridging amounts of money that are less than $10,000. If you look at the Polygon official bridge or other native bridges for all these different blockchains, it is actually quite rare to see people bridge more than about $10k, so we don’t really see that [large tx amounts] as much of an issue.

So what risks are there when depositing into a pool?

Oscar: Pretty much the only risk is that Umbria might get hacked in the future. Or that the value of the stake assets decrease in a faster fashion than they earn APY.

300 to 1,000 tx per day on ETH to Polygon bridge then next largest BSC with about 100 tx per day.

So who is using the bridge? Are you seeing a lot of interest from Web3 and NFT projects?

Barney: Yeah, we’ve just gone through a massive wave of NFT hype. The projects with the most interest over the last year or so have all been NFT project, they haven’t really been DeFi.

What NFT projects were doing was creating their NFTs and do something called a drop, where they would invite the community to come in all at the same time and participate.

They would generate hype and a launchpad. And when that happened we would have an influx of people using our bridge, trying to get assets over to Polygon, BSC or whatever it might be and then participate in that NFT project.

We found that partnering with projects that are pre-launched or just about to launch a project – those have been the projects that have brought in the most mooring to our bridge.

On interoperability you basically will apply your solution to any chain, right? In other words you take a multi-chain approach

umbr token price chart

The UMBR token of the Umbria Network is currently priced at $0.9559

Oscar: We have lots of different chains, they all do different things some that do certain things well, some that do other certain things well.

And so our approach to the future of crypto is to take a multi-chain approach, to say we want to offer bridging for any chain, then we can sort of glue all of these chains together – the buzz word at the moment is ‘interoperability’ – and once these chains are all interoperating together , then you can start creating even more exciting applications on top of that.

For example like a decentralised exchange that really pulls all of these chains together and creates interesting arbitrage opportunities between these chains and resolutions between these chains to have one unified crypto space on the technology level.

And that kind of is reminiscent of what has happened to the internet and all of the internet technology that we have. As time has gone by, the internet has become more of one standardised technology that are increasingly well understood and well leveraged.

We think the same thing will happen to the crypto space, precisely by taking a chain agnostic approach and creating software layers on top of all changes so that they can all interoperate in a kind of seamless hidden way – and then you can create applications on top of that – applications that leverage all of that technology without all that technology getting in the way.

Barney: Umbria as a technology is really an infrastructure layers, so anything the community needs for bridging, we are happy to implement that.

So if there is a great demand to get assets on a new and exotic chain then Umbria is going to be very excited to integrate that because of its use case.

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