Cross-Chain Lending

What Is Cross-Chain Lending?

Cross-chain lending is the ability to supply collateral on one blockchain and borrow assets on another without transferring assets between chains. This innovation allows users to maximize their liquidity across multiple blockchains seamlessly.

Simple Example:

• Imagine Alice:

• Supplies $10,000 worth of ETH as collateral on Ethereum-Aave using Soul.

• Borrows $5,000 worth of USDC on Arbitrum-Compound, a blockchain with lower fees.

• Manages both her collateral and borrow positions through a unified account powered by Soul.

With cross-chain lending, Alice can access liquidity on different blockchains while keeping her collateral secure in its original protocol.

Technical Explanation: How It Works in Soul

• Step 1: Connecting Chains

To enable cross-chain lending, a user must first connect the blockchains they wish to use. For instance:

• Alice activates cross-chain functionality between Ethereum and Polygon by connecting one to the other.

• These chains are linked through Soul’s Controller smart contract, which serves as the central risk assessor and manager for all her positions across them.

• Step 2: Cluster Creation

Once chains are connected, Soul aggregates the user's collateral and borrowing power across these chains:

• Soul gathers real-time data on the user's collateral and borrow balances from all connected chains.

• This data is securely transmitted using cross-chain messaging protocols like LayerZero.

• Collateral on one chain is combined with collateral from others to calculate a global borrowing limit.

• For Alice, her ETH collateral on Ethereum and her USDT on Polygon contribute to a single account.

• Step 3: Borrowing Across Chains

When Alice initiates a borrowing transaction:

• The Controller evaluates her global risk profile, aggregating collateral and borrow positions across chains.

• The system verifies that Alice's borrow request stays within her borrowing limit.

• Funds are supplied from the base protocol on the borrowing chain (e.g., Compound on Polygon).

• Alice's ETH collateral remains locked in Aave on Ethereum.

• Only the borrowing request and its associated data are communicated between chains, ensuring security and reducing costs.

• Step 4: Monitoring and Adjustments

• The Controller continuously monitors Alice's positions across all connected chains.

• If market conditions change (e.g., asset prices fluctuate), Soul automatically adjusts the user's borrowing power and risk status to maintain protocol security.

Why It's Revolutionary