Swoop: An Asset Consolidation Layer on Top of Wormhole

Abstract

As the DeFi ecosystem expands, managing assets across multiple L2 chains has become increasingly complex. According to L2Beat, there are over 70 L2 chains, collectively holding approximately $72 billion in Total Value Locked (TVL). Bridging assets across these chains is crucial for users to participate in staking, liquidity mining, and other incentive programs. While solutions like Wormhole facilitate easy bridging, they also contribute to significant asset fragmentation. Moreover, consolidating assets from multiple chains into a single token currently requires tedious manual processes.

Enter Swoop: an asset consolidation layer built on top of Wormhole. Swoop simplifies the process by allowing users to consolidate assets across chains without the hassle of converting and bridging tokens individually.

Motive

The idea for Swoop was born out of our own challenges in managing assets across multiple chains for our product. As a multichain product, we had to maintain liquidity on four different L2s. When it came time to rebalance assets back to Arbitrum, we faced a complex and time-consuming process. We had to manually convert assets into ETH, find the best exchange rates, and then bridge them back to the desired chain. This experience made us realize that other users likely face similar challenges.

Below are some of the key issues identified:

Identified Problems

Asset Fragmentation Across Chains: Managing funds dispersed across multiple chains leads to inefficiencies and increased complexity in asset management.

Conversion Costs and Optimization: Consolidating funds requires converting assets into a common token, which involves finding the best exchange rates to avoid losses during the trade.

Time-Consuming Bridging Process: Bridging assets individually from each chain to a single chain is time-intensive and cumbersome.

Exchange Rate Uncertainty: Users must manually determine the best exchange rates available across different chains, adding complexity to the consolidation process.

Scalability Issues: As users’ portfolios grow to include more chains, consolidating and bridging assets becomes increasingly unmanageable and less scalable.

Poor User Experience: Currently, there are no user-friendly interfaces that allow users to view fragmented assets and consolidate them from a single dashboard. Users often need to write scripts to achieve this task.

Proposed Solutions

Swoop Snap: A Metamask Snap that allows users to interact with Swoop's consolidation features directly within their wallet, eliminating the need to visit external bridging applications and enhancing security.

Comprehensive Portfolio Analytics: Implement a portfolio analytics layer, similar to DeBank, providing users with a unified view of their assets across multiple chains.

Automated Conversion to Common Token: Develop a system that automatically converts diverse assets into a common token at the best available rates, minimizing trade losses.

Streamlined Bridging Process: Create an automated bridging solution that transfers funds from each chain to a specified destination chain, eliminating the need for manual intervention.

Error Prevention and Efficiency: By automating the consolidation and bridging process, $woop reduces manual errors, enhances efficiency, and decreases the risk of fund loss.

MVP Architecture

The architecture of $woop consists of four primary components:

1. Source Chain: The chains where users' assets are distributed.
2. Destination Chain: The chain where users want to consolidate their funds into one token.
3. Consolidation Layer: The layer where Swoop groups diverse assets and performs conversion operations using the token conversion layer.
4. Token Conversion Layer: This layer finds the best exchange rates for tokens, determining the optimal route for each asset on each chain. It intelligently plans when to bridge and swap assets to ensure value preservation.

$woop leverages Wormhole's infrastructure to bridge assets from the source chain to the destination chain.

Technology Stack

Swoop contracts will be built using the following technologies:

• Solidity: For smart contract development.
• Ethers.js: For DApp integration.
• Wormhole: For asset consolidation and bridging.
• TheGraph: For data indexing and analytics.
• BigQuery: For user portfolio mapping.
• Next.js: For server-side rendering.

Design Concept Wireframe:

Intended User Experience

1. On the dApp, when the users connect the wallet, they can see all the chains on which their assets reside (similar to how DeBank shows you the asset distribution). 
2. The user is provided with simple selection-based components from which they can choose source chains, the destination chain, the destination token, and the source tokens list to bridge from. 
3. The users will be asked to approve all the chains they select and after that, the Swoop contract will be able to fetch the funds to its balance.
4. It will then convert the funds from the token conversion layer which comprises diverse aggregators and trade fillers.
5. Swoop will get the best quote from the token conversion layer and then bridge the converted asset to the destination chain using the Wormhole bridge.

Target Market

• Users with diverse portfolios: Individuals managing assets across multiple chains.
• Projects with multichain liquidity: Teams need to manage liquidity across various chains.
• Yield farmers: DeFi users looking to optimize returns across multiple protocols.

Potential Impact

Swoop aims to provide users with a seamless fund management experience across chains, avoiding the complexity of multiple bridges and asset conversions. Additionally, having tools to scale portfolios efficiently is crucial as the DeFi ecosystem rapidly evolves. Swoop addresses the challenges of scalability, allowing users to experiment with new chains without worrying about the complexities of asset consolidation.

Conclusion

With its unique approach to funds consolidation, Swoop targets the growing challenges of scalability in the DeFi space. By simplifying the process of asset management across chains, Swoop makes it easier for users to explore new opportunities without the headache of fragmented assets.

Also read: A Decentralized Bridge to Seamlessly Transfer Bitcoin to Ethereum