ChainX — Connecting Every Blockchain and Building Web3
Hey DEFI WORLD community!
We have been talking a lot about interoperability lately, which is for sure one of the most interesting parts of DeFi.
The author of today’s guest article is Alexander Vogels, who will teach you all about ChainX.
ChainX aims to become a secondary relay chain on Polkadot.
Level up your DeFi knowledge and subscribe to our newsletter!
ChainX is a community-driven project built on Parity’s next-generation blockchain framework Substrate designed to bridge non-Polkadot blockchains into the Polkadot Ecosystem. Last year we’ve already built the largest Layer-2 network of Bitcoin using the Light-client protocol with smart contract support. In the future, ChainX will evolve into a secondary relay chain on the Polkadot network.
Its tokenomics is similar to bitcoin, where it’s total amount is capped at 21 million and it’s block reward halved every 2 years. Mining is done by staking PCX and holding assets such as BTC, DOT, and FIL.
In the near future, ChainX 2.0 will be released, preparing for the para-chain docking on Polkadot and enabling smart-contracts.
In not so short
Every public blockchain is like a local area network, it’s limited. It can only communicate among its own users and cannot be connected to other blockchains to exchange information. No matter how big it is, it’s only a local area network. Polkadot is a blockchain too but thinks totally different. Polkadot wants to connect all the public blockchains together, creating an internet of blockchains, the idea of web 3. It thus creates an interchain. But Polkadot requires blockchains connected to it to be built with the same programming language, making a connection with Bitcoin or Ethereum impossible.
This is where ChainX comes in. ChainX created a bridge incorporating Bitcoin’s lightning nodes into its network, allowing users to deposit BTC and use it in any Polkadot project. Asset crossing chains is a process in which a user locks the asset in the original chain, maps the asset onto the target chain where withdrawal is available, and finally unlocks the asset in the original chain. In the future, other chains will be added to create a secondary relay chain into the Polkadot ecosystem.
Assets do not disappear in the original chain, but instead are transferred to the decentralized trust of Light Node Protocol, or to a centralized trust managed by an individual or individuals.
Basically a bridge is composed of two parts: deposit and withdrawal. ChainX Bitcoin bridge has implemented a builtin Bitcoin light client which is the theoretically ultimate trust-free solution for the deposit purpose. ChainX uses the way of multisig for Bitcoin withdrawal, and are improving the current withdrawal scheme with a better alternative suitable for the ChainX system.
How do the tokenomics work
ChainX will issue cryptocurrency PCX (P stands for Polkadot), with a total of 21 million and the amount released halved every two years. 20% of the issuance in the first two years is distributed to the founding team for ongoing development. After two years, around May 2021, all new issuance will be distributed to the community
All participants of the asset mining compete against each other with PCX as the unit to calculate the computing power which is divided into virtual computing power: inter-chain mining and real computing power: voting mining.
Inter-chain mining refers to all kinds of assets outside the chain like BTC and ETH that users transfer into the system through depositing, mapping or locking-up, which are automatically converted into virtual PCX inter-chain mining power according to the price of the asset and the discount given to each asset. Every inter-chain asset has a different discount rate which could be adjusted through community voting. The reason why assets are discounted in value entering the chain is because PCX, as the system’s internal currency, should enjoy greater mining power than other inter-chain assets to encourage users to hold more PCX.
Voting mining means users that hold real PCX participate in the election of the PoS system and manually vote for certain nodes. The total mining power of a user is equal to the inter-chain mining power of virtual PCX plus the voting power of the real PCX. For example, one user deposits one BTC, two ETHs into ChainX, and holds 700 PCXs among which 300 PCXs participate in the election and 400 PCXs do not. At the time, the exchange price in ChainX stands at 1BTC: 10000PCX, 1ETH: 1000PCX, and the user will automatically obtain the mining power of (1 * 10000 + 2 * 1000) * 10% + 300 = 1500PCX. All users have access to PCX mining revenue in each reward cycle according to the mining power they have. Users can use the PCX obtained through revenue to participate in elections or wait for the value of the inter-chain assets to go up to claim more mining power.
What does the future hold?
Polkadot’s parachain is also a completely full main blockchain which can provide secondary slots like Polkadot itself. Based on this feature we can realize the secondary relay chain over the parachain. Since Polkadot’s slots are Limited, the parachain may be too expensive to afford for many teams. Fortunately, there is a good way to solve this problem which is a secondary relay chain. Teams could consider choosing to develop bridges on the secondary relay chain. This problem is exactly what ChainX wants to solve. The mission of ChainX is to break barriers among assets in different chains and creating the ecosystem of multi-currency integration. Our goal is to become the largest secondary relay chain on Polkadot. This is our biggest advantage.
What does it currently bring to users?
In its current form, it provides staking rewards through voting PCX for nodes and governance of the project through voting on referendums put forth by the council. X-BTC holders are rewarded with PCX as described above and can be traded on the DEX. The up to date APR can be found on Exxibox.com. We’re currently in the closing stages of upgrading to ChainX 2.0 and will have more news soon on our Medium.
All information presented above is for educational purposes only and should not be taken as investment advice.