Making XRD a Cross-Chain Token With eXRD and Instabridge
We know the community has been eagerly awaiting news of how their eXRD tokens on Ethereum can be swapped for XRD tokens on the Radix mainnet, which is launching soon. This blog explains how that’s going to work. But we’re also pleased to announce that we’ve been working on some much more exciting things than the typical token redemption event.
Here’s the quick breakdown:
- At mainnet launch, eXRD will become the “wrapped” form of XRD on Ethereum (think wBTC/BTC) and will create a permanent bridge between the Radix and Ethereum ecosystems. No need to swap your eXRD if you’d rather keep your tokens on Ethereum where they are!
- Radix will launch Instabridge, an optional service allowing anyone to quickly convert back and forth between eXRD and XRD — moving value freely between Radix and Ethereum networks. Users who wish to convert eXRD to XRD to access Radix network features and rewards will be able to do so starting on day 1 of Radix mainnet launch using Instabridge.
- Radix will also launch Instapass, a single sign-on compliance service that will be used initially by Instabridge, and will become a streamlined way for users to connect to regulatory compliant DeFi applications in the future.
Let’s take a look at how this is going to work.
eXRD is the Ethereum-wrapped Form of XRD
You might be familiar with typical ICO tokens, issued on Ethereum and redeemed for a mainnet token soon after its launch. With this type of token, there is a rush to convert the token on Ethereum to the “real” mainnet token.
eXRD is completely different.
eXRD won’t go away after the launch of the XRD token on the Radix mainnet. Instead, eXRD will continue in parallel with XRD, with users able to freely convert back and forth between the two at a 1:1 ratio. This means that eXRD will become simply a different form of XRD that lives on the Ethereum network, and can be used with Ethereum DeFi applications. When users prefer to have their XRD in native form on the Radix network, they can move them there to participate in Radix staking, pay network fees, and later (in the 2022 Babylon release of the Radix network) use them in Radix-based DeFi applications.
How does this work? Each circulating eXRD token will correspond to an XRD token, locked out of supply on the Radix network. A user may remove 1 eXRD from supply on Ethereum to get the corresponding 1 XRD on Radix — or they may lock up 1 XRD on Radix to be issued 1 eXRD on Ethereum. Instabridge (described more below) initially will be responsible for these conversions, making it as easy as possible for users starting with eXRD → XRD swaps at mainnet launch.
If you are familiar with wBTC (a wrapped form of BTC on Ethereum), the concept is very similar. wBTC allows users to hold Bitcoin but in a form that is more useful because it can interact with Ethereum DeFi applications. Because the two forms of the token are 1:1 exchangeable, arbitrageurs naturally tend to keep the price of the two tokens equal.
Radix believes that eXRD will provide a value bridge to a wider DeFi ecosystem that is important both now and into a highly connected DeFi future.
Instabridge: Simple eXRD/XRD Conversions, and More
To provide easy eXRD/XRD conversions, there needs to be a 2-way “bridge” between the two forms of token. Radix is building exactly this, and we’re calling it Instabridge.
At Radix mainnet launch, Instabridge will be focused on allowing the many holders of eXRD to swap for XRD tokens — if they choose — so they may begin staking to validators and receiving network incentive rewards. No one is required to swap, and many may choose to keep their tokens as eXRD for a variety of reasons.
Soon after mainnet launch (we’ll provide a hard date once we have one), Instabridge then will add swaps from XRD back to eXRD — creating a permanent 2-way bridge.
To use Instabridge, you will start by connecting and verifying your Ethereum and Radix wallets in a simple web app. From there, you will send in eXRD from your Ethereum wallet to get XRD in your Radix wallet (or, once enabled, vice versa). Instabridge will support direct web3 linking of Metamask or WalletConnect wallets to make the process as easy as using any DeFi app.
As the Olympia version of the Radix mainnet does not yet have Radix Engine v2 or Scrypto, we are unable to provide trustless bridging services until after the Babylon release of the Radix mainnet. In the interim, to provide this ongoing 2-way bridge service, current regulations say that we must collect KYC information for those who use Instabridge directly. This is just like how minters of wBTC have to provide KYC in that system.
While initially we have designed Instabridge to directly serve individuals who wish to swap, we are also working with the cryptocurrency exchanges that eXRD is already listed on to provide direct swapping as well. Bitfinex is the first exchange to confirm they will be providing the ability to swap between XRD and eXRD. This service will be available to anyone registered on Bitfinex and unlike Instabridge, this service does not require any KYC/AML.
If you wish to use Instabridge, we are making this KYC as painless as possible. For those who have already KYC’d with Radix during our eXRD token sale process, the vast majority will not have to provide those documents again. In fact, we’ll be able to automatically recognize the Ethereum wallet you used in the token sale — just connect and go. If you haven’t KYC’d with Radix previously, we’ll run you through a simple KYC process; this process will feel very familiar if you’ve used a typical crypto exchange. You will then register your wallets and get started with swapping.
Instabridge won’t just stop at creating an XRD value bridge. Following the initial release, we will begin building Instabridge out into a service that makes it as easy as possible for as many forms of value as possible to flow in and out of the Radix network, starting with a variety of cryptocurrencies.
Instapass: Single Sign-on Compliance
Some time ago we realized that required AML/KYC processes, like the one above for Instabridge, are frankly a bit of a pain — a pain that repeats itself for every new service you choose to use that requires regulatory compliance. We do it whenever we create a new exchange account, buy into a new token sale, register for a new crypto card, pay for crypto using a fiat ramp, even register for crypto giveaways. For a permissionless space, we actually end up giving away our personal details a lot.
Right now DeFi is pretty good at being entirely permissionless and we think that is awesome. Permissionless-ness reduces the barriers to entry and increases competition. It makes it possible for teams to compete on a global scale, and it provides a sandbox for testing new ideas in a way that just wasn’t possible before DeFi came along.
However, we have heard from more and more DeFi projects that are thinking hard about regulatory compliance. The recent work Aave has been putting in to create its “Aave Pro” permissioned DeFi pools on their lending platform is testament to exactly this: if we want the big institutions to play in DeFi and bring the billions of dollars of assets they manage into the ecosystem, we have to make DeFi work for their regulatory requirements.
Users and developers on open decentralized networks like Radix have to make these choices for themselves, but many projects see this as a huge approaching problem for DeFi usability. DeFi has given us the ability to use any DeFi service we want from a single wallet and therefore, DeFi is effectively single sign-on for finance — but this huge benefit is diminished if regulation would eventually mean that we would have to go through KYC over and over again for each DeFi service that requires it!
Rather than solving this problem only for Instabridge, we decided that it was time to provide a unified solution so that Radix builders who choose to be regulatory compliant can focus on their dApp, and users of those dApps can connect frictionlessly. We call this solution Instapass. Once a user has provided KYC documents in Instapass, they will in the future have the option to share this information with DeFi and other services rather than repeating the same steps over and over. Instapass is being built with bank-grade data security standards, integrating with industry-leading KYC provider Jumio, and drawing on our own team’s past experience building and operating secure systems that manage sensitive personal information.
Instapass will really come into its own around the time of our Babylon release of the Radix network, when we enable powerful, smart contract functionality for dApp builders suitable for both DeFi and CeFi. Instapass will provide these builders with a way to easily onboard users in a compliant way, save them time and money, and be yet another advantage of building on Radix. When we open up Instabridge, the first users won’t just be doing a one-time-only KYC; they will become the first users of “single sign-on compliance” — if they choose to do so.
Instapass will never be a requirement for using the Radix network, but we are delighted to offer this turnkey compliance solution for applications that desire it.