Omnichain Fungible Tokens
OFT is a relatively new concept that many of you may not have heard of, but with the development trend of cross-chain transactions, OFT will be an indispensable trend in the future and Global Interlink (Gil) will be one of the Tokens that will be at the forefront of this future trend.
What is OFT?!
Omnichain Fungible Tokens (OFTs) is a new token standard introduced by LayerZero to allow tokens to scale across a multi-chain ecosystem. As of now, some of the top DeFi teams are adopting and using them on their own platforms.
Omnichain Fungible Tokens (OFTs) are gaining attention as a cross-chain standard for similarity tokens. A special feature of OFTs is the ability to Mint and Burn 1:1 which helps to mitigate honeypot attack threats while reducing resource requirements for liquidity and remittance fees. OFTs are positioned to bring multi-chain capabilities to native tokens of applications.
Why need OFT?!
We've made progress in multi-chain scaling, where instead of unifying liquidity, bridges are creating independent liquidity "isolation boxes".
The difference is that in the past, these boxes existed between blockchains. However, thanks to bridges and the ability to generate wrapped tokens, these boxes have migrated to unique tokens and contract standards for each bridge solution.
Token Standard (Token Standard)
Token standards are regulations that define how a token should be designed and operated on a particular blockchain network. These blueprints ensure that tokens are interoperable with other tokens (i.e. they have exchange value) and can be easily integrated into various decentralized applications. Popular examples include fungible-token standards like Ethereum's ERC-20 or BNB Chain's BEP-20 and non-fungible token standards like ERC-721.
The Omnichain Fungible Token (OFT) standard was created by LayerZero Labs to serve as a multi-chain standard for fungible-token. An OFT is designed to be a common fungible token standard that is interoperable with other fungible-token established on different chains. An OFT is interoperable with ERC-20, BEP-20, fungible-token on Aptos and more. Almost a year after the first OFT was created with the launch of the Stargate Finance governance token, STG, OFTs began to be widely used across the entire crypto economy.
Problem
In 2021, as cryptocurrencies become multi-chain, applications begin to depend on different bridging solutions to issue wrapped tokens on behalf of the native token. While convenient in the short term, the ability to allow each bridge to issue its own wrapped instance creates inconsistencies between different platforms' wrapped tokens.
OFT offers a solution to this problem by allowing any application to mint and burn a standard token on different chains from LayerZero Endpoint smart contracts. When a user requests to transfer OFT coins from Chain A to Chain B, the Endpoint on Chain A destroys the OFT, records the change in the total OFT money supply, and generates a message request to the Endpoint on Chain B to generate the corresponding number for users on Chain B. The transfer of messages between these chains complies with the standards of LayerZero's modular interoperability framework.
While this requires applications to trust an oracle network to transfer properly, LayerZero's design allows applications to choose their trust assumption for each transaction. In essence, LayerZero's OFT standard allows any application to act as a bridge to its own native token but across multiple blockchains.
Notable benefits make OFTs replace Wrapped tokens
OFTs do not require assets to be locked on one chain before being minted on another. Instead, assets are burned on the source chain and then minted on the destination chain. This eliminates vector attacks on honeypots on bridges.
There is no official version of the token - the OFT version deployed on Chain A is considered to be equivalent in value to the version deployed on Chain B as both can be minted and burned 1:1 .
There is no need for the liquidity networks common in other bridging solutions (as assets can be minted and burned 1:1 on demand). This means that the only fee a user has to pay to bridge an OFT is the gas fee. A transfer of $10,000 of an OFT will cost the same amount as a transfer of $10,000,000 of OFT assets of the same type.
As Ethereum Layer-2 and other Layer-1 networks continue to gain momentum, the benefits that OFTs provide make them applicable in a variety of ways across multichain terrain.
Facts
With a total supply of just under 7,000 tokens, BTC.b represents only ~4% of the largest aggregate Bitcoin asset size, WBTC, with a supply of ~170,000 tokens. There is still a lot of work to be done for this new financial product to reach mainstream across the market. However, since switching to the OFT standard, the supply of BTC.b has doubled while the supply of WBTC has decreased by ~26%. This is not to say that the growth of BTC.b has come from the drop in WBTC, but the relative change in supply should continue to be watched as BTC.b matures.
Application to DeFi protocols
In recent months, a growing number of DeFi protocols have upgraded or announced plans to upgrade their governance tokens to the OFT standard. A governance token with local multi-chain capabilities has many benefits:
Users will be able to interact with the protocol or vote without restrictions within a single network.
For established projects looking to expand their presence across partner networks, token momentum is crucial to entering any new ecosystem. In recent months, DeFi protocols such as Trader Joe (JOE), PancakeSwap (CAKE), Radiant Capital V2 (RDNT) and GMD Protocol (GMD) have signaled their transition to the OFT standard. It is likely only a matter of time until these protocols begin to use OFT-based governance tokens as the driving force behind their new battlegrounds.
Avalanche's $BTC.b - When Bitcoin becomes Multi-Chain native token
Avalanche and LayerZero have partnered to launch BTC.b, an OFT representing Bitcoin on Avalanche that is automatically bridged (transferring value across different chains) in Core. Since BTC.b is an OFT, it can be converted to and from Avalanche to LayerZero-supported chains like Polygon, Arbitrum, Ethereum, Aptos, and more, on the fly.
This allows the user to:
Use their native Bitcoin on dApps as BTC.b and quickly convert BTC.b back to original Bitcoin.
Use Bitcoin Bridge to convert BTC.b to any LayerZero supported chain and use it on dApps in that ecosystem.
$CAKE is an OFT - Extends to Aptos
In December 2022, PancakeSwap announced it had partnered with LayerZero to launch Aptos PancakeBridge.
While PancakeBridge's initial announcement did not mention OFT, CAKE is an OFT and this means that CAKE on Aptos is equal to CAKE on BNB Chain - and users can bridge CAKE tokens between the two chains at a rate 1:1 ratio.
$GIL is an OFT- Extends from Sui to all BTC and ETH EVM chains
Sui's mainnet phase in Q2, Global interlink will announce a partnership with Layer Zero to launch Gil Bridge.
The goal is that GIL will become a multi-chain token that exists on both Sui, Aptos, BTC and ETH Chains and at that point GIL will become a mainstream OFT.
OFTs and LayerZero were able to solve the multi-chain problem in the crypto world. Any application that wants to support multi-chain for its native token can adopt the OFT standard and issue tokens on any chain connected to LayerZero. Multi-chain support will be extended with existing OFTs. In the future, the OFT standard could be used by GIL to develop decentralized stablecoin protocols for the next generation.
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