The developers of the decentralized lending protocol Compound are developing a new blockchain network, called Gateway, that will allow for decentralized lending and cross-chain collateralization.
Compound, one of the protocols of DeFi most popular currently, is preparing to launch a network blockchain own, which allows managing decentralized loans between different blockchains with reduced costs. The prototype, called Gateway, which is in full development, is based on the document that the protocol presented a few months ago, where it explains Compound Chain, their proposal to create a distributed ledger capable of transferring value and liquidity between different ledgers. Compound Chain is a tool designed to allow users to port or bring a wide range of digital assets to the Compound protocol from a variety of blockchain networks or distributed ledgers.
Now, a more complete adaptation of this proposal is Gateway, which seeks to incorporate guarantees into different blockchain networks. As the protocol developers explain, Gateway will allow for the creation of “a cross-chain interest rate market,” making it possible to borrow digital assets native to a blockchain, for example on Ethereum, and use them as collateral within another blockchain, such as Polkadot.
This new Compound tool will bring with it great value opportunities for investors in the DeFi ecosystem, while also helping to avoid the high gas fees currently experienced in Ethereum, which greatly hinder the interaction of new investors with DeFi.
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Substrate, power to build blockchain networks
One of the advantages offered by the protocol Substrate, and why it is being widely adopted among different developers, is its power to make the process of creating a blockchain much easier, simpler and more intuitive. In this way, developers have the possibility to easily create the blockchain they want, under their own custom logic. In addition, this protocol also allows for the design and execution of scalable and high-performance blockchain networks. In fact, Polkadot, one of the blockchains that is rising strongly as a rival to Ethereum, is designed on this protocol.
Due to its advantages, Substrate was the protocol chosen by Compound developers to build Gateway.
“We chose Substrate so we could focus on building application code, rather than inventing consensus algorithms; it’s a modern framework built in a modern language, Rust.”
Gateway, earnings and interest in CASH
In their post, Compound developers highlighted that through Gateway, users will be able to manage loans using Ethereum assets on any compatible blockchain network, and that The interest that will be earned within this market will be paid in dollars using CASH directly, as Gateway’s native unit of account. This model will allow users to standardize value across the different digital assets being used.
In addition, CASH will also be used to pay fees for transactions made within Gateway.
Another benefit that the new network integrates into its system is a Stronger risk engine; which will allow capital to be managed more efficiently for less volatile assets. Also, through Gateway it will be possible transfer any asset present on the network to other users, even wallets from other blockchain networks quickly, cheaply and securely.
New earning model for validators
Gateway is a blockchain that will use the Proof of Authority (PoA) consensus protocol with multiple validators, who will be chosen at random by Compound governance, taking into account the assets deposited in the protocol. Once chosen, validators will be able to generate extra income from the interest generated from loans, in all markets. Thus, in addition to generating profits from transaction commission fees, validators will also receive a percentage of the interest generated on loans; that is, a portion of the total interest paid on digital assets borrowed from Gateway is paid directly to validators, in each block.
Also, validator rewards and security will scale with the market size.
Compound’s vision is to continue building innovative tools that reinvent the future of finance. With Gateway, Compound aims to become “the backbone of a global interest rate marketplace, capable of supporting any asset, including the wave of coins, assets, and tokens yet to be created.”
So far, Compound developers have not set a date for the launch of the new blockchain. At the moment, Gateway runs as a testnet connected to Ropsten, one of Ethereum's testnets.
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