Entangle - Weaving DeFi Liquidity Together

Bridging DeFi's fragmentation gap with OmniChain interoperability and Liquid Staking innovations.

Mar 05, 2024

As of writing, there is approximately $100 billion of total value locked (TVL) across all of DeFi applications, a figure that represents over a doubling from what it was barely half a year ago according to data from DefiLlama. Much of the surge is thanks to liquidity staking offered by the top two DeFi protocols, namely Lido Finance and MakerDAO.

However, this combined TVL figure does not represent a fully accessible liquidity pool. The DeFi landscape is very heterogeneous with about 58% of funds currently stored on Ethereum, and the next 31% spread across nine other blockchains. Such fragmentation forces DeFi apps to build on multiple blockchains, a move which is more of a stop-gap solution than an actual cross-chain interoperability solution.

What is lacking is a means to connect isolated liquidity sources from different networks without having to go through lengthy smart contract executions. As each chain is built differently, network time intervals and price feeds are not always in sync, hence processing transactions between different chains often ends up being troublesome and costly.

Optimizing liquidity across all of DeFi is a complex problem that requires addressing a number of things. First, different blockchains must have a more efficient means of communicating with each other, second, they must be able to execute multiple smart contract events in parallel, and third, they must be able to rely on a synchronized and uniform real-time price feed.

Finding solutions to each of these issues are at the core of Entangle, an omnichain liquidity protocol with a vision of connecting all of DeFi into one seamless ecosystem.

What is Entangle?

Entangle is an interoperability layer which acts as a foundation for decentralized applications (dApps) for facilitating value exchange and executing smart contracts between different blockchains.

Simply put, by building on Entangle, dApps will no longer be limited to communicating only with one blockchain or ecosystem (as is the case with most dApps which can only function within their native network). Instead, they will be able to efficiently transact and derive liquidity from multiple blockchains, greatly expanding their utility and yield opportunities.

For DeFi users, this is a game-changing proposition. Users will no longer have to be limited to using only the applications available within a single ecosystem, or be hassled with running separate DeFi strategies for each network.

Entangle empowers dApps with the following benefits:

Providing digital assets with cost-efficient cross-chain interoperability
Establish trustless bridging between networks and cross-chain functionality between dApps
Enabling smart contract automation even for multi-chain transactions
Expanding dApp communities and resource ecosystems

But how does Entangle address the long-standing issues with interoperability and scalability? To understand its approach, we have to first see Entangle’s unique network architecture.

How Entangle works: Bridging the EVM and non-EVM divide

Entangle is composed primarily of two main products, a communication layer called Photon, and an oracle-based data feed.

The Photon messaging layer is unique as it is compatible with both EVM networks and non-EVM networks. For those who are unfamiliar with the distinction, it bears pointing out that EVM compatibility is perhaps the single most dividing factor when it comes to cross-chain interoperability.

EVM or “Ethereum Virtual Machine” is simply a modular program that allows a network to execute Ethereum-based smart contracts. As Ethereum has an established majority share of the DeFi sector, many blockchains find EVM integration absolutely vital as it allows their own dApps to tap into an already established liquidity and user base. Networks such as BNB Chain, Polygon, Tron, Avalanche, and Cardano, all have their protocols built with EVM compatibility from the start, or have integrated EVM later on.

Non-EVM protocols however, such as Solana, NEAR, Cosmos, and dozens of other smaller blockchains all run their own respective smart contract protocols. They prefer to remain outside of Ethereum as they appeal to developers and users who are looking for more cost-efficient solutions, as well as to investors who see them as having more room for innovation and growth.

By ensuring both EVM and non-EVM compatibility, the Photon layer effectively removes the barriers between these two DeFi polar landscapes, creating entirely new opportunities for optimizing yield and cross-pollination of utility between dApps. More than that, it also optimizes communication between EVM networks thanks to its next component, its oracle-based infrastructure.

Currently, Entangle has already set testnets to connect between Ethereum, Arbitrum, Optimism, Mantle, Polygon, BNB Chain, Avalanche, Fantom, MultiVersX and SEI Network.

The Entangle Testnet app

Entangle as an Oracle network

Meanwhile, Entangle addresses the issues with smart contract execution and synchronized price feeds by basically functioning as its own ‘oracle’.

An oracle is a specialized network that connects a blockchain with the outside world and vice-versa, feeding it relevant real-time data needed to accurately execute smart contracts such as price feeds and exchange rates.

DeFi apps especially, need secure, verifiable and interoperable data which can be accessed on demand, and which adequately meets the parameters required for their varied functions. Currently, EVM networks predominantly rely on Chainlink, the most established oracle network for Web3. However, as Chainlink is largely non-compatible with non-EVM chains, this presents another problem when it comes to ensuring that smart contracts on either end of a transaction are receiving the same price feeds and at the same time intervals.

Entangle’s oracle solution is to store data on-chain for easier processing and execution as needed, without having to rely on different networks’ varying time intervals, thereby also significantly lowering the costs needed for processing transactions.

This setup is possible because unlike Chainlink, Entangle allows full customization for each dApps’ execution thresholds, allowing developers to design applications that are more streamlined for their specific use cases instead of having a one-size-fits-all solution. DApps that deal with sensitive data for instance, can set their execution thresholds at a much higher rate, while routine processes can be set at lower thresholds for maximum efficiency and less network throughput.

The Entangle network architecture, showing how it functions as an oracle for validating and aggregating on- and off-chain data.

Entangle’s oracle network takes a page from the standard Proof-of-Stake (PoS) architecture, which requires nodes who would like to participate in validating data streams to first have a stake in the network, placing a safeguard against potential bad actors. In PoS, validators determine which data is accurate by a majority consensus. In return, they are rewarded with a percentage of the network’s profits proportional to their contribution, while nodes who consistently provide inaccurate inputs are penalized by having their stake slashed.

In Entangle, these validators are agents which perform different tasks such as ‘transmitters’ who gather data from a broad range of external sources including decentralized and centralized exchanges (DEXs/CEXs)) and APIs. The data is then coursed through the blockchain’s ’Controller’ which uses a range of algorithms, including median, time-weighted average price (TWAP) and volume-weighted average price (VWAP). Other agents then sign off on the data before it is broadcast to the entire network.

Meanwhile, the “Circuit” functions as a hub for the different external blockchains, and is responsible for collecting and aggregating data, and making it possible for smart contracts to be executed as a simultaneous event across multiple blockchains.

Additionally Entangle’s staking mechanism uses its own native token, NGL.

How to use Entangle: the Liquid Vaults dApp

Liquid staking has become increasingly popular in DeFi as it allows users to continue leveraging the value of their assets even if they are locked in Proof-of-Stake (PoS) chains. When previously, staked tokens were completely inaccessible for the whole duration of the lock-up period, liquidity staking issues its users with Asset Backed Liquid Staking Derivatives (LSDs) such as liquidity pool tokens (LPs) which are a direct representation of their staked assets. These LSDs in turn can be traded in the market, or utilized in other platforms for additional yield.

Entangle simply takes this existing mechanism and empowers it further by widening the utility capabilities of LSDs. Through Entangle’s native dApp called Liquid Vaults, users can deposit their LSDs and utilize it to supercharge yield opportunities.

Liquid Vaults is Entangle’s native vault for accessing liquidity across multiple blockchains.

To illustrate an example, a user might stake tokens at a liquidity pool at Fusion X, which is a DEX native to the Mantle network. In return, Fusion X issues the users LPs equivalent to the value of the staked assets.

But since Mantle is a relatively smaller network, the utility of the LPs issued by Fusion X are somewhat limited.

What the user can do is to stake the LPs on Entangle, which stakes and auto-compounds the LP tokens. The user is issued a Liquid Vault in return as a receipt.

Users can even take it a step further by using the Liquid Vault receipts as collateral for borrowing USDC via Vendor.Finance, which can then be allocated for other DeFi opportunities.

A step-by-step guide for using Liquid Vaults can be found here.

To date, Liquid Vaults is deployed on nine networks and integrated with the following DEXs: Curve Finance (Ethereum), Pancake Swap (BNB Chain), Wombat Exchange (BNB Chain), Trader Joe (Avalanche), Stargate (Polygon), Stargate (Arbitrum), SpookySwap (Fantom), Stargate (Fantom), Velodrome (Optimism), Fusion X (Mantle), and AshSwap (MultiVersX).

The NGL Token

Entangle has its own native token, NGL, which has the following use cases:

NGL is used to set up one’s own validator to participate in the network and earn rewards.

NGL can be delegated to transmitter agents in exchange for a portion of their rewards.
NGL is used to connect dApps to the Entangle layer.
NGL is used to pay for all gas fees for processing transactions on Entangle.

NGL token allocation

NGL has a total supply of 1 billion tokens, of which 30.6% are allocated for staking rewards, 9.8% for marketing and business development, 9.6% for liquidity, 12% for the Entangle team, 3% for advisors, 3% for airdrop, while the rest are distributed across public and private funding rounds.

Team

Entangle is headed and founded by Faisal Mehrban, with Slava Korolev as co-founder. Mehrban is an Oxford graduate and has previous experience as Tech Programme Lead and Blockchain Advisory at Credit Suisse, and a Fintech consultant for Deutsche Bank and JP Morgan Chase. Meanwhile, Korolev is a fintech innovator with a computer science degree from Technische Universität Chemnitz.

Other notable team members include Sergey Pogorelov, Amir Alnadi, Aziz Kenjaev, and Alexy Koninos, whose collective experience include working for Balancer, Tinkoff, Bing X, Overbit, TradingView, TON, and Neti.

Community and Roadmap

Entangle has a healthy community of over 186K followers spread across its official Discord and Twitter (X) channels.

Additionally, Entangle already has 10 blockchains connected to its testnet, with over 35 dApps and over 1.35 million transactions to date. The network aims to increase those numbers to over 13 networks and 50 dApps before the mainnet launching, happening sometime within February 2024.

Conclusion

DeFi was meant to serve as a cornerstone for the democratization and expansion of financial opportunities, but it hasn’t quite achieved that yet due to the technological limitations of the current blockchain infrastructure.

Projects like Entangle, which think big in finding solutions to interoperability, ought to be given more attention if the Web3 revolution at all is to succeed in truly creating an alternative global financial ecosystem. After all, the ability to seamlessly connect liquidity pools across diverse platforms will not only empower institutions, but also individuals worldwide in participating in previously inaccessible financial activities.

Entangle also shows that DeFi continues to evolve and mature, which is a refreshing change from all the hype that used to define what the industry was merely a few years ago.

References

Entangle

https://entangle.fi/

Entangle Testnet

https://test.entangle.fi/

Total value Locked (DeFiLlama)

https://defillama.com/

All Chains TVL (DeFiLlama)

https://defillama.com/chains

Entangle Gitbook

https://entangle.gitbook.io/entangle/

EVM Blockchain Vs. Non-EVM Blockchain: what is the best solution?