After exploring the options available, we felt the Gravity Bridge was the most suitable and could help us achieve our results in the fastest whilst safest way possible.

One of the key things that attracted us to the Gravity Bridge is the way in which the Ethereum contract has been highly optimised, utilising batches to dramatically reduce the cost of transfers between Cosmos and Ethereum.

We also felt the decentralised running of the network was most in line with our vision at cheqd. As it’s a non-custodial solution, a stake can be slashed for any misbehaviour in accurately bridging assets or secure messages.

In addition, as a native bridge, the value of tokens on the destination chain and the absence of double spending are guaranteed by the same consensus as on the consensus chain. This means all the validators are coming to a consensus that the individual owns the tokens that are registered on both sides (the same amount of tokens has been launched on both sides of the bridge — i.e. on both chains).

Finally, we also saw the bridge as a powerful way to ensure having a token on another chain doesn’t fracture liquidity like wrapped tokens through a custodian would do.

Potential issues identified

One of the issues that was raised with the Gravity Bridge is down to the upgrade process. Given the team’s warranted focus on simplicity, it has led to the Solidity contract (gravity.sol) being non-upgradeable, whereas the other bridges can be upgraded by multi-sig wallets. This means the validators and their delegators are completely in control of the Gravity Bridge, and no one else can change the code.

Although we recognise this concern, we feel that the validators on the Gravity Bridge chain have a legitimate governance process and have acted in line with our principles to date. We also plan to set up a validator node on the Gravity chain and engage more in the governance and running of the bridge itself.

How to take part in a Liquidity Pool

At the time of writing CHEQ is currently only available for liquidity providing on the Osmosis DEX.

The CHEQ token is available in two pools:

Pool #602: CHEQ / OSMO

Pool #617 : ATOM / CHEQ

First, head to Osmosis and click enter the lab.

Once you’ve agreed to terms and you’re ‘in the lab’ you’ll see some trading pairs and a button to connect your wallet (bottom left of the dashboard).

You can then select Keplr wallet which will automatically connect to your Keplr wallet if you’ve already set it up as a Browser extension.

Next, you’ll need to deposit the assets you would like to contribute towards a Liquidity Pool. You can see the available Liquidity Pools under ‘Pools’. For example, if you would like to contribute to the Pool #602 : CHEQ / OSMO, you will need to deposit both of these tokens.

To do so, select ‘Assets’ and find the tokens you would like to deposit to contribute to the pool.

Note: if you already hold OSMO in your Keplr wallet you won’t be required to deposit.

Once you have deposited enough tokens for both sides of the pools (i.e. ensure that if the pool is setup as 50:50, you must have the equivalent amount is USD on both sides)

Next, find your pool and select ‘Add/ Remove Liquidity’.

Here you’ll be able to add tokens on both sides of the pool.

On selecting ‘Add Liquidity’ you’ll then be directed back to Keplr to approve the transaction (a small fee is required).

Once you have added liquidity to the pool, you’ll receive your LP tokens (a token representing your share of the total pool). Now it’s time to start ‘Liquidity Mining’.

You’ll now be able to see your total Available LP tokens. Below this you’ll see an option to Start Earning.

Once here you’ll see a few options for your unbonding period (i.e. the amount of days it takes to remove your tokens from the pool if you decide to withdraw). The longer you choose to bond your tokens, the higher the rewards you’ll be eligible to earn.

Next select the amount of your LP tokens you’d like to contribute to the pool and finally hit ‘Bond’ (this will kick off another approval through a Keplr pop-up).

You’ll now see your total bonded tokens. Each day rewards will then be distributed. When you decide to withdraw from the pool you’ll simply need to select ‘Remove Liquidity’ and select the amount you’d like to withdraw.

Conclusion

Overall, Liquidity Pools are an incredibly exciting and equalising tool, which represent the true nature of the DeFi and Web3.0 movement. Where for many years engaging in and benefiting from such financial systems was reserved solely for the wealthiest individuals and large organisations, now anyone can gain access and start contributing to their favourite projects, voting on their future direction and earning from the part they play.

Context

Whilst beginning our investigation into bridges, we came across varying bridging techniques available, mainly in the Cosmos ecosystem, although these remain much the same across protocols.

Although many of the wrapped tokens available require a custodian to manage this minting and burning (aka. centralised or trusted bridges), the more innovative bridges that now exist (aka. noncustodial, decentralised or trustless bridges) do this through automated methods using contracts on either side of the bridge, as we’ll come on to.

As mentioned, our initial priority with a bridge is for ease of accessing stablecoins for settling payments for trusted data that will be facilitated on the cheqd network. With this in mind, our bridging requirements at this stage are less complex than they might be in the future (for example, we aren’t necessarily in need of a fully-fledged solution that allows the bridging of smart contracts across protocols like EVMos will in time enable).

If you’re a project looking at bridging, we’d recommend you check out this great explainer video put together on bridges by Ken Timsit from Cronos (Cronos also plan to use the Gravity Bridge, launching in Q2)

Evmos

Evmos is a Secondary Bridge leveraging a third party — the Connext Peer-to-Peer Bridge. Connext acts as an intermediary to provide liquidity on both sides by locking up purchased tokens and adding these

Essentially when using EVmos you don’t have an Ethereum contract (like Gravity does with Gravity.sol), but it uses the existing contracts of the tokens that exist on the other side. Therefore, given other third parties provide the liquidity, we felt this would be a greater overhead for our team compared to Gravity and more centralised.

That said, we are excited by EVMos and the great team working on this project, who look to have an exciting year ahead with four different DEXs, lending protocol, two perpetual platforms and at least three NFT collections for the NFT marketplaces.

Connext

Connext is a peer-to-peer bridge / cross-chain swap. It uses a similar method to the Hashed Timelock Contract, a transactional agreement used on the Bitcoin network to produce conditional payments wherein the receiver or the beneficiary must acknowledge the receipt of payment before a predetermined time or a preset deadline.

Basically, when you want to transfer tokens, there is one router which will be assigned and takes the responsibility of fronting the liquidity. In exchange, they will wait to get paid after the transaction is completed on Ethereum with the same amount of tokens.

Connext’s network utilises nxtp, a lightweight protocol for generalised cross-chain transfers. Nxtp is made up of a simple contract that uses a locking pattern (mentioned above) to prepare and fulfil transactions, a network of off-chain routers that participate in pricing auctions and pass calldata between chains and a user-side SDK that finds routes and prompts on-chain transactions.

Thorchain

Thorchain is a blockchain protocol built onCosmos that aims to “make all of crypto liquid”. It seeks to do this by enabling the trading of non-native crypto assets, such as trading Bitcoin for Ethereum, but in a completely decentralised way. In essence, it does much of what Coinbase and Binance do — but without a third party ever taking control of the funds.

The Thorchain protocol also powers a decentralised exchange (DEX) by the same name. LikeUniswap orSushiSwap, the Thorchain DEX allows anyone to trade or lend their crypto assets by providing liquidity to an asset pool and, in exchange, earn a return (or “yield”) on those assets. With 1.5 million transactions to date and >80 validators, it is a leading solution, however, for our use case, it just didn’t offer the simplicity and ease of enabling a $CHEQ token on Ethereum.

Since we completed our investigation, Osmosis has also spent some time exploring how they plan to bridge their DEX’s requirements. Axelar, Wormhole and Nomad were also discussed here — all options we came across but did less investigating at the time. You can also find the RFPs for these Bridge proposals links: Axelar, Gravity Bridge, Nomad, Wormhole

A brilliant panel with some of the bridge providers can be found here, and the write-up also available here.The Osmosis Discord has had perhaps the most lively debate since Robo McGobo created a special channel for bridge discussions, and representatives from the various teams have been quite responsive there.

Overview

In order for liquidity pools to function in the way that leads to the outcomes laid out in the previous page, i.e. greater decentralisation of projects and increasing liquidity, there are a number of key aspects worth understanding:

• token weighting;

• pricing;

• market-making functions;

• LP tokens.

(much of the following is taken from the official documentation from Osmosis Labs).

Token Weight

Liquidity pools are simply clusters of tokens with pre-determined weights. A token's weight is how much its value accounts for the total value within the pool.

For example, Uniswap pools involve two tokens with 50-50 weights. The total value of Asset A must remain equal to the total value of Asset B. Other token weights are possible, such as 90-10.

Pricing

With fixed predetermined token weights, it is possible for AMMs to achieve deterministic pricing, i.e. outcomes are precisely determined through known relationships among states and events, without any room for random variation. As a result, tokens in LPs maintain their value relative to one another, even as the number of tokens within the pool changes. Prices adjust so that the relative value between tokens remains equal.

For example, in a pool with 50-50 weights between Asset A and Asset B, a large buy of Asset A results in fewer Asset A tokens in the pool. There are now more Asset B tokens in the pool than before. The price of Asset A increases so that the remaining Asset A tokens remain equal in value to the total number of Asset B tokens in the pool.

Consequently, the cost of each trade is based on how much it disrupts the ratio of assets within the pool. Traders prefer deep liquid pools because each order tends to involve only a small percentage of assets within the pool. In small pools, a single order can cause dramatic price swings; it is much more difficult to purchase say 1,000 ATOMs from a liquidity pool with 2,000 ATOMs than a pool with 2,000,000 ATOMs.

Market-Making Functions

AMMs leverage a formula that decides how assets will be priced in the pool. Many AMMs utilise the Constant Product Market Maker model (x * y = k). This design requires that the total amount of liquidity (k) within the pool remains constant. Liquidity equals the total value of Asset A (x) multiplied by the value of Asset B (y).

Other market-making functions also exist, you can find out more about these here.

Liquidity Pool Tokens (LP tokens)

When a user deposits assets into a Liquidity Pool, they receive LP tokens. These represent their share of the total pool.

For example, if Pool #1 is the OSMO<>ATOM pool, users can deposit OSMO and ATOM tokens into the pool and receive back Pool1 share tokens. These tokens do not correspond to an exact quantity of tokens, but rather the proportional ownership of the pool. When users remove their liquidity from the pool, they get back the percentage of liquidity that their LP tokens represent.

The collection of the mechanisms above is used to ensure liquidity pools are able to maintain a stable price and ultimately work as a traditional market maker would do.

However, in order to achieve their ultimate goals, encouraging token holders to provide liquidity to pools is required.

The aspects in place to do so is what is known as ‘liquidity mining’ or ‘yield farming’. Contributing to a pool makes an individual a liquidity provider (LPs).

Liquidity mining

Liquidity providers earn through fees and special pool rewards. LP rewards come from swaps that occur in the pool and are distributed among the LPs in proportion to their shares of the pool’s total liquidity. So where do the rewards themselves come from?

Liquidity rewards are derived from the parameters laid out in the genesis of the AMM, in the case of the Cosmos Ecosystem this is Osmosis. For Osmosis, each day, 45% of released tokens go towards liquidity mining incentives.

When a liquidity provider bonds their tokens they become eligible for the OSMO rewards. On top of this, the Osmosis community decides on the allocation of rewards to a specific bonded liquidity gauge through a governance vote.

Bonded Liquidity Gauges

Bonded Liquidity Gauges are mechanisms for distributing liquidity incentives to LP tokens that have been bonded for a minimum amount of time. For instance, a Pool 1 LP share, 1-week gauge would distribute rewards to users who have bonded Pool1 LP tokens for one week or longer. The amount that each user receives is in proportion to the number of their bonded tokens.

The rewards earned from liquidity mining are not subject to unbonding. Rewards are liquid and transferable immediately. Only the principal bonded shares are subject to the unbonding period.

However, as with any opportunity for gain, there is of course some degree of risk; i.e. an individual could be better off holding the tokens rather than supplying them.

This outcome is called impermanent loss and essentially describes the difference in net worth between HODLing and LPing (more here). Liquidity mining mentioned above helps to offset impermanent loss for LPs. There are also other initiatives within the Osmosis ecosystem and beyond exploring other mechanisms to reduce impermanent loss.

Context

This guide will provide the information you’ll need to make a transfer of tokens native to Cosmos, across to Ethereum and ultimately onto a Decentralised Exchange (DEX).

It has been constructed using another Cosmos project (StarGaze) as the token that is being transferred across using the Gravity Bridge.

The process follows 3 distinct parts:

Part 1: Transfer CHEQ tokens to Gravity Bridge

In order to transfer tokens from Cosmos to Ethereum, the Gravity Bridge chain is required to hold the tokens you wish to transfer. Therefore, the first step is to send the tokens from the chain you are transferring from on Cosmos, to the Gravity Bridge, via IBC.

Part 2: Transfer CHEQ tokens from to Ethereum

The Gravity Bridge then will be able to transfer the tokens across the bridge, locking them up on the Cosmos side, and minting them on the Ethereum side

Part 3: Add the wrapped CHEQ token to your MetaMask wallet

Finally, if you'd like to interact with DEX's such as UniSwap you will be required to add the token to your MetaMask using a ‘Contract Address’, and then connect this to your UniSwap account.

The final section of the guide will provide instructions on how to complete this process in reverse (i.e. transferring tokens from Ethereum to Cosmos).

Let’s do it…

Part 1: Transfer CHEQ tokens to Gravity Bridge from cheqd

The following instructions for this part use Spacestation itself for the IBC transfer of CHEQ tokens to the Gravity chain. You can however also do a direct IBC transfer within Keplr itself.

Step 1: Connect Wallets

Connect your Keplr wallet containing the tokens you which to transfer.

This will take you through the login process using the browser extensions for both wallets (don’t worry about which side if on Source and which Destination at this stage).

Step 2: Source Chain

Select the cheqd as the 'Source' chain

Step 3: Destination Chain

Select the destination chain - this MUST be the Gravity Bridge chain.

Step 4: Select Token and Transfer

Select the token you wish to transfer and enter the amount noting you'll need an additional amount to pay for gas fees.

A pop-up will appear which you'll need to approve for the transaction to go through.

Part 2: Transfer CHEQ tokens from Gravity Bridge to Ethereum

Step 5: Select Source & Destination

Select Gravity Bridge as the Source, and Ethereum as the Destination.

Step 6: Select your CHEQ tokens & Enter the amount you wish to transfer

The token you have sent to Gravity Bridge will now appear on the list within Gravity Bridge with the available amount listed. Enter the amount you wish to transfer.

Note: The transaction fees are high due to the costs of transactions on the Ethereum side. You can select either a day, an hour or instant, at increasing costs.

Part 3: Add the CHEQ token to MetaMask & connect to UniSwap

Once you have completed the transfer you will need to wait for duration you have selected.

Step 7: Add CHEQ to your MetaMask wallet

During this time you can get started with adding CHEQ to your MetaMask wallet.

Open your MetaMask wallet and select ‘import tokens’ at the bottom of the window

Select ‘Custom Token’ and enter the CHEQ 'Token Contract Address'.

CHEQ**:** 0x70EDF1c215D0ce69E7F16FD4E6276ba0d99d4de7

Here are a selection of other Cosmos chains available thanks to the Gravity Bridge

ATOM: 0xdaf0b40b961CA51Fc914fbabdA8E779619576caD STARS: 0x4547254E6E3195cE57Bc50352193A25c2F4B8FCf HUAHUA: 0x7bE48633D86AA9821284B01030b8a3F9B06eA876 NYM: 0x525A8F6F3Ba4752868cde25164382BfbaE3990e1 NYMT: 0xE8883BAeF3869e14E4823F46662e81D4F7d2A81F PLA: 0xa752Ef191E8b103150D5FE4a6639A598Ede5a50F

When entered this will automatically retrive the CHEQ token symbol and denomination (10^9 for CHEQ). CHEQ will now appear in your list of assets on the MetaMask homepage.

Now you can wait for CHEQ tokens that have been sent via Gravity Bridge to appear in your MetaMask wallet.

Liquidity pools are an innovative solution within DeFi to create the mechanics of a market maker in a decentralised fashion. Although often met with confusion, they are simply clusters of tokens with pre-determined weights. A token's weight is how much its value accounts for the total value within the pool. Liquidity Pools are an exciting and equalising tool, which represent the true nature of the Decentralised Finance (DeFi) and Web3.0 movement.

This blog will offer some insight into Liquidity Pools.

Understanding the origination of Automated Market Makers (AMMs) and Liquidity Pools

Here we’ll explain what a liquidity pool is and why they are needed in decentralised finance (DeFi) but first, like many things in the Web 3.0 and DeFi space, it’s important to understand the existing world of trade finance.

Traditional exchanges, i.e. Nasdaq, London Stock Exchange, STAR, work through an order book model which records the average of the current bid and ask prices being quoted. In this model buyers and sellers come together to trade; buyers simply try to buy at the lowest price possible, and sellers try to sell for the highest price.

For a trade to be completed both parties must agree on a fair price meaning either the buyer comes up or the seller goes down. However, it’s not that simple because finding someone who wants to both buy that specific amount and for the price they are looking to sell for is unlikely.

Let’s use an example.

Photo credit: Skånska Matupplevelser

You’ve just picked 100 apples on a farm but suddenly you have to leave town and need to sell every single one of them. You have to sell them at the market price of $1 in order to have enough to pay the farm their fee. You can’t find anyone willing to pay at this price and you can’t take them with you. You’re stuck. This is where market makers come in handy.

In this example, the market maker would be an individual or company who is permanently on hand to purchase the apples at the market price of $1. When you place a market order to sell your apples, the market maker will buy them from you even if it doesn’t have a buyer lined up. Likewise, the reverse is also true; a buyer can purchase the apples even if a seller isn’t lined up.

Market makers in return earn a profit through the spread between the bid and offer price as they bear the risk of covering the apple which may drop below the market price. Without them, it would take considerably longer for buyers and sellers to be matched up, which in turn would reduce liquidity, making it more difficult to enter or exit positions (or leave town). They also track the current price of assets by changing their prices — hence they ‘make’ the market. This is the same method that Centralised Exchanges, such as Coinbase and Binance, work, however, it is not truly decentralised whilst you have a market maker acting as an intermediary to exchange.

That said, although it is valuable to buyers and sellers alike, as market makers perform this delicate balancing act, they command a disproportionate amount of power over the market and ultimately act as an intermediary… a big no in the decentralised vision.

Enter AMMs and liquidity pools

Where traditional finance requires expensive and centralised intermediaries which have a level of power to manipulate prices, AMMs allow digital assets to be traded in a permissionless and automatic way.

This both embodies the ideals of blockchain and decentralisation generally and offers users and companies unique opportunities to trade more efficiently and cheaply whilst having total trust in the system makes it so. Before they arrived on the scene, liquidity, i.e. how easy it is for one asset to be converted into another, often fiat currency without affecting its market price, was difficult for DEXs.

AMMs offer a solution to scarce liquidity through liquidity pools; a shared pot of tokens that users can trade against. Users can create a liquidity pool and others can supply tokens to it. In return, like with traditional market makers, those that are willing to take on the risk of providing liquidity to the pool earn fees and other rewards. An explanation specific to Osmosis can be found here. At the time of writing Osmosis’ liquidity pools contain about $544 million in total value locked (TVL).

As we build payment rails for trusted data (more on that below), we want to offer issuers, verifiers (the receivers of trusted data), and holders a choice on the means of settlement. We expect a preference for to eliminate the volatility in either pricing or settling payments for trusted data.

More on this in our

Whilst the Cosmos ecosystem has these, they aren’t as widely adopted yet as either or , both of which are within the Ethereum ecosystem. Furthermore, as we want to work with fiat on and off-ramps to remove the need for end customers to worry about crypto, there are currently more of these available in the Ethereum ecosystem, although we’re sure the Cosmos ecosystem will catch up with new companies joining the likes of .

A nice byproduct of this is providing easier access to CHEQ, whether you’re building upon the network, seeking to secure the network through staking or liquidity mining.

Ethereum was the first ecosystem we bridged to but it certainly won’t be the last.

To create an ERC20 representation of the Cosmos based CHEQ token we’ve used a bridge. A blockchain bridge or ‘cross-chain bridge’ enables users to transfer assets or any form of data seamlessly from one entirely separate protocol or ecosystem to another (i.e. Solana to Ethereum, or in our case Cosmos to Ethereum and vice versa).

Bridges generally use some kind of mint-and-burn function to keep token supply constant across all platforms. When the token leaves one blockchain, it is burned or locked, and an equivalent token is minted on the opposite blockchain. Conversely, the equivalent token is burned or locked when the token moves back to its original network. This equivalent token is known as a ‘wrapped token’ because the original asset is put in a wrapper, a kind of digital vault that allows the wrapped version to be created on another blockchain.

The CHEQ-ERC20 wrapped token can be found here (you can also add it to your MetaMask wallet through this link — go to profile summary > click ‘more’ > ‘add token to MetaMask’ )

Instructions

The following instructions will be lighter weight as much of the general process of sending CHEQ tokens to Ethereum via Gravity Bridge has been explained separately.

Step 1: Set your Source chain and Destination chain

Go to SpaceStation and select the respective chains. Your Source chain should be Ethereum, and your Destination chain Gravity Bridge.

Step 2: Initiate Transfer

Initiate Transfer by selecting the token you wish to transfer and the amount, hit transfer and confirm.

Step 3: Approve the transfer

A MetaMask pop-up will appear. Check the transaction fees and approve the transfers (again, the high transfer fees are on the Ethereum side, not Cosmos.

Fortunately these fees will reduce based on the volumes of transfers on the Gravity Bridge thanks to the Batching mechanism designed as part of the bridge).

Step 4: Transfer tokens to your final destination chain

Finally, transfer the tokens from the Gravity Bridge chain to your final destination chain (the cheqd network).

If at any point you want to check the transfer, you can enter your Gravity address into MintScan using G-Bridge.

And that’s it, your tokens are now available in your Keplr wallet and can be used once again for all things Cosmos!

Understand additional information on how CHEQ can be used in liquidity pools as well as in the Ethereum ecosystem.

Now that you have CHEQ-ERC20 tokens you can engage with DeFi activities within the Ethereum ecosystem.

Within UniSwap you can either Swap tokens, or add them to a Liquidity Pool.

To find out more about Liquidity Pools, head to What is a Liquidity Pool?

Adding tokens to a Liquidity Pool

Step 1: Find Pool

As a pool has been created on UniSwap these instructions offer insight into how to use UniSwap, however other options exists and CHEQ will likely appear on them in the near future.

Head to the CHEQ:USDT pool.

Step 2: Add liquidity and initiate transaction

Select ‘Add liquidity’ which will take you to the UniSwap app.

On the app, enter the amount of tokens you’d like to deposit and hit ‘Preview’

Select ‘Add’ which will initiate the transaction.

Step 3: Confirm transaction

Check the gas fees and confirm the transaction. I

If you'd like to reduce the transaction fee you can select a lower one using the updated MetaMask. To turn this on, go to your settings in MetaMask and select 'Experimental' and toggle the 'Enable Enhance Gas Fee UI' to ON

Once the transaction has completed you'll see your positions appear on your UniSwap account.

The Gravity Bridge is a trustless, neutral bridge between the Ethereum and Cosmos ecosystems built by the team. Built using the Cosmos SDK, it uses the validator set to sign transactions instead of a multi-sig or permissioned set of actors.

The neutrality here implies that the entire focus of the Gravity community is on providing the most effective and secure bridge possible instead of on a DeFi application on the local chain. This neutrality aggregates volume from a number of blockchains and sources, increasing efficiency and lowering costs. All control over the bridge is handled entirely by the Gravity Bridge validator set.

The Gravity Bridge has two defined components:

The way Gravity Bridge works is similar to how all cross-chain bridges work, i.e. locking up a native token on one side of the bridge and minting a representation of that token on the other. The user then uses this representation before it is returned to the bridge and redeemed for the native asset on the other chain.

The most critical component for bridges to and from Ethereum is the Solidity contract. It holds the native assets being sent across the bridge.