Sei, the fastest Layer 1 optimized for DeFi, is partnering with Axelar to enable cross-chain messaging between DeFi on Cosmos and EVM chains. Axelar is the premier cross-chain infrastructure provider, and this partnership will open up novel possibilities for bridging, messaging, and execution across chains, programming languages, and virtual machines.
One of the core bottlenecks for DeFi scalability is liquidity fragmentation across multiple ecosystems. Billions of dollars worth of crypto assets are locked, wrapped, minted, and burned each day, forcing every chain to compete for TVL in a zero-sum game. Inevitably, the success of DeFi protocols and their underlying chains are highly correlated.
This partnership seeks to solve the issue of liquidity fragmentation by enabling interoperability and shared liquidity across IBC and EVM chains. At a high level, Sei expects to observe the following effects:
- Users will no longer be limited to interfacing with the “local” protocols (protocols built on the same chain as their wallets) and will not need to deal with the hassle of bridging to use “foreign” protocols (protocols on separate chains).
- Developers will be able to query data and utilize logic/smart contracts from other chains.
- Ecosystems will be able to attract and interact with liquidity from “foreign chains” through back-end integrations.
What does this partnership enable?
Cross-Chain Messaging between IBC and EVM chains
With this partnership, cross-chain communication goes beyond wrapping and locking assets. Instead, Axelar’s infrastructure can enable protocol on an EVM chain (ie. Avalanche) to utilize smart contract functionality and logic from Sei and vice versa. Cross-chain messaging opens up new use cases and possibilities, such as multi-chain liquidity pools, cross-chain lending, cross-chain swapping, and cross-chain arbitrage.
Cross-Chain Vaults for Structured Product Protocols
Cross-Chain Vaults will allow users to deposit assets into vault protocols and access unique strategies on any Axelar partnered chain. This would allow wallets on Ethereum to leverage novel derivative trading strategies on Sei without the complexity of bridging their assets or creating new crypto wallets. Users will have a simple “one-click” experience, interacting with any and all chains across Web3 with all the intricacies efficiently and securely abstracted from them.
This partnership will enable dApps building on Sei to securely query the prices and market conditions of various cross-chain assets and asset classes. This means that synthetics on Sei will not be limited to IBC assets but can span the entirety of Web2 and Web3. The ability to mint and maintain the peg for these novel synthetic assets will greatly democratize trading for all of crypto.
Axelar delivers secure cross-chain communication for Web3. The infrastructure enables dApp users to interact with any asset or application, on any chain, with one click. Axelar is like Stripe for Web3. Axelar is backed by Binance, Coinbase Ventures, Dragonfly Capital, and Polychain Capital. Axelar is integrated with the Ethereum, Avalanche, Cosmos, and Polkadot ecosystems.
Sei is the first layer 1 blockchain optimized for DeFi. Most layer 1’s fall into a barbell distribution: two extremes with general purpose chains on one end (e.g., Ethereum, Solana) and app-specific chains on the other (e.g., dYdX, Osmosis). Sei unlocks an entirely new design space between the two—not general-purpose nor app-specific, but DeFi-specific, which enables Sei to create an environment custom-built for DeFi applications. Sei features a built-in order matching engine, frontrunning protection, and the fastest finality of any chain (600 ms) currently in market. The combination of these optimizations make it possible for new types of financial products to emerge—everything ranging from live sports betting to complex options and futures.