Introducing ‘Exact Output’ for precise Cross-chain payments

With the recent surge in volumes and activity across the DeFi ecosystem, we can start to better understand the challenges that teams and users face as they begin composing and experimenting cross-chain.

Here at deBridge, a core goal is to solve the three pillars of cross-chain interoperability (value exchange, asset custody, and authenticated messaging) for DeFi, enabling anyone to compose cross-chain experiences that feel as seamless as in-chain ones. Often, part of this task involves trying to rethink the current experience of moving cross-chain from first principles.

This blog will explore how our Exact Output feature offers a solution to the lack of confidence users experience when trading and bridging across chains, instead offering the unique ability to execute cross-chain transfers of any size with absolute certainty. But first, let’s dig into the problem.

The challenge of unpredictability

It may sound fairly basic, but until now, it’s been impossible for users to know how much they should trade on the source chain in order to receive a certain amount on the destination chain. The only certainty here is uncertainty — let’s see what this looks like in practice.

Imagine you are the owner of a company that wishes to send monthly payments to all its employees. You have $50,000 of funds on BNB Chain and wish to disburse payments on Polygon. Using any liquidity pool-based bridge, you could end up paying $49,350, $50,400, or any other amount to your employees.

Amplify this on a larger scale, and the problem becomes even more absurd. Large cross-chain exchanges of 6, 7, 8 figures, and more become simply impossible to execute with confidence.

By nature, classical cross-chain technology cannot solve this problem.

Why can’t we achieve “Exact Output” with liquidity pools?

A Liquidity Pool, as per the common definition, is a collection of tokens or digital assets that are locked in a smart contract to provide essential liquidity to decentralized exchanges. In the context of bridges, liquidity pools have been the main way of enabling the transfer of assets between different blockchain networks.

These pools provide the required liquidity for cross-chain value transfer, allowing users to exchange crypto assets from Chain A to Chain B. Liquidity pools maintain a reserve of various assets on each chain by incentivizing users to contribute to these pools by offering fees or other rewards. However, liquidity pools expose users to a variety of problems, such as security risks, scalability and sustainability issues, capital inefficiencies, poor UX, and high fees.

The fundamental problem is that any cross-chain protocol using liquidity pools is subject to on-chain price discovery through AMM models. The price discovery ensures that the prices of these assets are determined algorithmically within the blockchain network itself, providing transparency and accessibility to users. In simple terms, variables like slippage, MEV, and price impact mean that the output of a trade cannot be guaranteed—this is why you will almost always end up with less than expected while using a classical cross-chain bridge.

What is the solution to this problem?

The only true solution is to avoid liquidity pools and AMMs entirely and seek another route for cross-chain trading. We introduce DLN, a high-performance cross-chain trading infrastructure built on deBridge with a unique 0-TVL design.

DLN operates without traditional liquidity pools and employs a novel model for transferring assets across blockchains, i.e., rather than using locked liquidity, it adopts "liquidity-on-demand." With DLN, we are not bridging between chains but rather trading native assets between chains.

In terms of flow, users (Makers) create a cross-chain intent that is executed by market makers (Takers) in the destination chain. The transfer is sent directly to the user’s wallet on the destination chain, resulting in fast, secure, and cost-effective transactions. We have written a separate article about our intent-based 0-TVL model, which you can read here.

Exact Output

The DLN protocol provides you with the unique ability to specify and achieve exact output for any cross-chain transaction. All thanks to the intent-based 0-TVL model, any user, company, or DAO can seamlessly transfer the exact amount of funds across any of our supported chains. We guarantee that if you want to receive $1000 in SOL on Solana, you must first trade $X in MATIC on Polygon.

Projects that integrate with the DLN API can now leverage the exact output amount in their dApp by setting the srcChainTokenInAmount parameter to “auto” and the dstChainTokenOutAmount to the value they expect to receive. For more information, please refer to the link here.

What are the real-world applications of Exact output?

Our feature is gaining momentum among integrators and is also widely used by users in the DLN application. Here are a few use cases:

1. Cross-chain trading: Users can trade on DLN or any eligible dApp integrated with the DLN API to benefit from exact output when performing a cross-chain transaction, including cross-chain limit orders.
2. Cross-chain payments: Teams can build cross-chain payment applications, enabling users to send and receive payments on any chain in seconds with absolute certainty.
3. Portfolio rebalancing: Treasury or asset managers can quickly determine the exact inputs required to achieve the desired portfolio distribution. This will aid in streamlining their asset allocation strategies across chains.
4. Payroll distribution: Businesses or owners can use this feature to send the exact amount of funds in seconds. Alternatively, they can clear invoices from any of our supported chains with guaranteed settlement.
5. DeFi strategies: Assume your Aave health factor is running low and you need to deposit a certain amount to increase it. You can now guarantee that your deposit will meet your target factor with the exact output.
   

We thank many of our partners, such as Espresso Cash, for being early adopters of the "Exact Output" feature and for using it to provide better services to all of their customers. With a few clicks, any protocol or dApp that wants to integrate with the DLN API can use the exact output functionality.

A step towards seamless UX across cross-chain

Exact Output transforms the benchmark for UX in the space and opens up countless opportunities in DeFi across payments, treasury management, and more — we believe that with this paradigm shift towards declarative, intents-based trading, our partners and users will find a vast array of new usage cases for Exact Output.