Stargate Finance Review

What is Stargate Finance?

Stargate Finance, developed by LayerZero Labs, is a groundbreaking solution in the DeFi industry, serving as the first fully composable native asset bridge. It enables a seamless process for cross-chain liquidity transfer, making complex, multi-step procedures obsolete. Users can effortlessly perform transactions like swapping USDC on Ethereum for USDT on BNB.

Stargate Finance also empowers application developers by enabling integration for native cross-chain transactions at the application level. It can enhance services of various platforms, like DEX for single transaction cross-chain swaps or yield aggregators deploying assets cross-chain.

Notably, Stargate Finance aims to resolve the traditional bridging trilemma, delivering instant guaranteed finality, support for native assets, and unified liquidity across multiple chains, without compromise. 

How does Stargate Finance work?

Stargate Finance operates as a bridge that connects different blockchains, facilitating smooth cross-chain transactions. Here's an overview of how it functions:

1. Initiating a Transaction: When a user wants to perform a cross-chain transaction, such as swapping USDC on Ethereum for USDT on BNB, they start the transaction on the Stargate Finance platform.
2. The Role of Unified Liquidity Pools: These transactions are supported by unified liquidity pools, which are community-owned. The unified nature of these pools means that liquidity from multiple chains is pooled together, allowing for deeper liquidity and better price execution.
3. Message Routing and Transfer: The User Application (UA) sends a message from the source chain (Chain A) to the destination chain (Chain B). This message gets routed through an on-chain endpoint, which then notifies the user-specified Oracle and Relayer of the message and its destination.
4. Role of the Oracle and Relayer: The Oracle forwards the block header to the endpoint on the destination chain (Chain B). The Relayer then submits the transaction proof. The proof is validated on the destination chain, and the message is forwarded to the destination address.
5. Completion of the Transaction: The transaction is finalized and the swapped asset is available on the user's destination blockchain.

In essence, Stargate Finance operates as an intermediary facilitating the smooth transfer of assets from one blockchain to another. It eliminates the need for users to go through multiple steps to swap or move their assets between different blockchains, thereby making the process quicker, cheaper, and more efficient.

Following the transaction process facilitated by Stargate Finance, an integral component comes into play, the ∆ (Delta) algorithm. This novel resource balancing method, proposed by the founders of Stargate Finance, takes Stargate's cross-chain bridge capabilities to new heights by guaranteeing immediate finality in native assets, providing unified liquidity, and enabling cross-chain composability. Let's delve deeper into this remarkable solution:

1. Initial State: In the hypothetical setting of the Delta algorithm, consider three blockchains (X, Y, Z), each starting with equal liquidity. The distribution of this liquidity among different connections relies on assigned weights.
2. Transactions: When transactions occur, the Delta algorithm modulates the local states of the chains involved in the transaction. The state changes align with the specific lines from the algorithm's pseudocode.
3. Asset Bridge Process: When a user initiates a cross-chain transfer, the requested amount is deposited into the liquidity pool of the source chain. The Delta algorithm divides the transaction into credit for the destination chain and the remaining chains based on the assigned weights. The receiving chain updates its balance and assets, thus finalizing the transaction.
4. Dynamic Rebalancing: The Delta algorithm dynamically rebalances the remote balances with each transaction, ensuring balance across chains. If the balance deviates from its initial value during a transaction, the Delta algorithm utilizes the transaction amount to restore equilibrium as much as possible.
5. Credit Piggybacking and Weight Parameterization: The algorithm combines credits from previous transactions with new user requests. Simultaneously, it factors in weight parameters when dividing the transaction amount among chains. This ingenious approach enables more efficient transfers and balance, thereby increasing scalability.
6. Unique Features and Contributions: Delta Bridges, powered by the Delta algorithm, overcome limitations seen in existing cross-chain solutions. By enabling cross-chain composability, scaling to support a large number of chains, and allowing transactions with native assets, Delta Bridges increase the versatility and convenience for the users.
7. Potential Applications: The Delta algorithm has the potential to significantly enhance existing applications like decentralized exchanges. By enabling fast, guaranteed cross-chain transfers of native assets, it paves the way for a whole new class of cross-chain applications.

How to use Stargate Finance?

Transferring Assets with Stargate Finance: 

Stargate provides a sophisticated platform to seamlessly facilitate the transfer of native assets across distinct blockchains. To initiate a transfer, one must connect their wallet to Stargate Finance and utilize the 'Transfer' function. This process requires the user to designate their token of choice, the source network, the destination network, and the quantity they wish to transfer. In the case where the user's active network does not match the source network, the system prompts a network switch. Note that transfers involving STG tokens are devoid of protocol transfer fees, with users only accountable for the gas fees linked to their transactions. Transfers of non-STG tokens carry a standard fee of .06%, with potential additional pool rebalancing fees, dependent upon the respective source and destination pool equilibrium status. The system also offers the ability to dictate the volume of native gas allocated to the transfer, adjustable under the 'Advanced Settings'.

Pooling Liquidity with Stargate Finance: 

Stargate Finance grants users the opportunity to accumulate rewards through the addition of liquidity to Stargate pools. By connecting their wallet to the Stargate Finance platform and selecting the 'Pool' function, users can choose to contribute liquidity to a preferred pool. In exchange for this contribution, users receive LP tokens proportional to the size of their contribution. These tokens represent the user's stake in the pool and can be exchanged back into funds at any time. Each utilization of a liquidity pool for a transfer accrues a fee ranging from 2-10 basis points.

Farming Rewards with Stargate Finance: 

For those providing liquidity, Stargate Finance offers the additional benefit of STG rewards through the allocation of LP tokens to a Stargate farm. To do this, one must connect their wallet to the Stargate Finance platform, select the 'Farm' option, and nominate a preferred farm for their LP token contribution. In recognition of their contribution, users are gifted STG rewards. These rewards can be further staked to acquire veSTG, the governing token of the Stargate protocol.

Stargate Finance Fees: 

Stargate Protocol applies a 6 bps fee for non-STG transfers. It's divided between the Protocol Treasury (4 bps), veSTG holders (1 bp), and Liquidity Providers (1 bp). If a source pool for a transfer has emissions, the fee is reversed to the protocol. Partners who integrate Stargate and drive significant transaction volumes can join a whitelist program and earn a 0.3 bps fee from the Treasury's baseline fee.

The protocol uses rebalancing fees to ensure balanced reserve levels across chains. If transaction activity disrupts the balance, Stargate applies these fees to incentivize refilling transactions and dissuade draining transactions. The fee function depends on the post-transaction balance, with different conditions and fee formulas applied based on this balance.

All fees collected through rebalancing are sent to a reward pool for disbursement to users executing refilling transactions. If the reward pool risks depletion due to lack of direct rebalancing fee revenue in the Tier 1 Safe Zone, the protocol Treasury reallocates up to 1 bps of its transaction fees to the pool.

Stargate Finance staking 

Stargate encourages community engagement through its governance system, offering the opportunity for its users to lock their STG tokens in exchange for veSTG, the protocol's governance token. This mechanism enables community members to influence Stargate DAO's governance decisions.

To stake your STG tokens, you first need to connect your wallet to the Stargate platform. Once connected, you can proceed by clicking on the 'Stake' option in the navigation bar. Here, you can choose the staking pool that suits your preferences. The next step is to specify the quantity of STG tokens you wish to stake. You are then required to set a lock period for your tokens, with a minimum duration of one month and a maximum of three years. With these details in place, you can finalize the process by clicking on 'Stake'.

The STG token

The Stargate Protocol's native token, STG, has a fixed total supply of 1 billion. Seventeen-point-five percent of this supply is designated for the protocol's core contributors and investors, ensuring vested interests in the protocol's long-term success. These tokens are subject to a one-year lock-up period, and they subsequently unlock linearly over two years.

The lion's share of STG, approximately 65% of the total supply, is reserved for community distribution. This allotment fuels the protocol's vision of facilitating cross-chain liquidity transfers. It encompasses various facets such as protocol launch, launch auction, liquidity pool establishment on Curve.fi, bonding, and the initial emissions program. A portion is also allocated for dispersal across different decentralized exchanges on diverse chains, including BNB, Avalanche, Polygon, Arbitrum, Optimism, and Fantom. The remaining portion of this community allocation is set aside for future initiatives to ensure the protocol's longevity.

In March 2022, the Stargate protocol conducted a community auction to extend STG's reach, particularly targeting those who had missed the initial launch. This auction broadened community participation in the protocol's governance. Eligible wallets could procure STG at $0.25 per token. These tokens were subject to a one-year lock-up and six months of linear unlock, mirroring the terms of the original Launch Auction.

The protocol also initiated an emissions program in March 2022. This program, lasting approximately three months, was designed to emit 2.11% of the total STG supply, thereby incentivizing liquidity provisioning.

The launch of the Stargate protocol was bifurcated into two stages: a Launch Auction and a subsequent Bonding phase. The Launch Auction, which was designed to remain open until either 48 hours had passed or 25M USDC was added to the launch auction contract, saw 10% of the STG supply being auctioned. Contributors received voting escrow STG (veSTG) to participate in Stargate governance during their STG lock-up period. Following the auction, the Bonding phase unfolded, allocating 15.95% of the STG supply across 12 STG bonding curves. Unlike the auction, participants in this phase received their STG tokens immediately.

STG Use-Cases:

1. Governance: STG token holders can participate in governance decisions by voting on various proposals. This gives token holders the ability to shape the future direction of the protocol.
2. Liquidity Provision: STG tokens can be used to provide liquidity in various pools. Liquidity providers are incentivized with STG rewards under the initial emissions program.
3. Transaction and Rebalancing Fees: The STG token is used as the medium for fee payment within the Stargate protocol. It includes transaction fees and rebalancing fees, contributing to the economic viability of the protocol.
4. Auction and Bonding: STG was used in the launch auction and bonding phase, helping bootstrap the STG-USDC pool and building Stargate's protocol owned liquidity.
5. Staking: STG token holders can stake their tokens to earn rewards. They also receive veSTG, Stargate's governance token, which they can use to participate in governance decisions.

Is Stargate Finance safe?

The Stargate protocol has undergone extensive auditing, with a total of 14 audits conducted by various auditing firms. Importantly, all critical and major issues identified in these audits have been addressed by the Stargate team.

In addition to these audits, Stargate operates one of the most substantial bug bounty programs in the industry, with a bounty pool reaching up to $15 million. This program is aimed at incentivizing the wider community to help identify and report potential security vulnerabilities in the protocol, thus adding an extra layer of security and robustness.

The bug bounty program is in the process of being moved to Immunefi for more efficient management. Reports can currently be made directly to Stargate. 

Stargate Finance Team

Stargate Finance is the result of the combined efforts of Bryan Pellegrino, Caleb Banister, and Ryan Zaric, who are the co-founders of LayerZero Labs, the parent company behind the protocol.

Bryan Pellegrino, who is the CEO and Co-Founder of LayerZero Labs, has been with the company since its inception in February 2021. His diverse professional experience includes leading the Machine Learning Architecture division at Rho AI, co-founding OpenToken, and heading BuzzDraft as CEO. Bryan's expertise spans machine learning, operations management, and decentralized ecosystems, all of which add a considerable amount of depth to Stargate's leadership team.

Caleb Banister, another Co-Founder at LayerZero Labs, has been serving in his capacity since February 2021. With his background in blockchain and software development, Caleb brings a unique perspective to the team. Before joining LayerZero Labs, he co-founded Minimal AI and 80Trill, a company specializing in smart contract writing and auditing for blockchain-related projects. Caleb's experience and understanding of blockchain technologies, smart contracts, and application development have been instrumental in the development and success of Stargate Finance.

Unfortunately, the information on Ryan Zaric, the third co-founder, is sparse.

Partners 

Stargate Finance has established significant partnerships in recent times. These include a collaboration with SushiSwap resulting in SushiXSwap, the first omnichain decentralized exchange. A partnership with OKX Wallet allows direct Stargate access, with the wallet's native DEX introducing one-click routed cross-chain swaps through Stargate. Additionally, a collaboration with Magic Internet Money has led to the launch of their omni-stable token, $MIM, as an Omnichain Fungible Token on Stargate, enabling its movement across seven different chains. These are among numerous alliances Stargate has entered into, each contributing to its enhanced interoperability and utility within the blockchain and DeFi realms.

What's next?

There is no public Stargate Finance 2023 roadmap available, at the time of this writing.

Links

https://stargateprotocol.gitbook.io/stargate/