The Composable XCVM enables novel DeFi cross-chain capability
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The Composable XCVM enables novel DeFi cross-chain capability

John Williams
John Williams

Composable Finance recently held its inaugural Unchained Conference in Berlin, Germany. The conference gathered DeFi's brightest minds to discuss interoperability and had Composable officially unveil its cross-chain virtual machine (XCVM). Unchained’s flagship keynote consisted of a deep dive and live demo of the XCVM, which represents the core of Composable’s technology stack and the enablement of a novel XCVM-based cross-chain DeFi.

Composable’s XCVM reinvents DeFi’s possibilities.

DeFi presents users with the highest possible returns available today. However, for a user to engage in and utilize DeFi, they must go through several cumbersome steps. They must first select the chain they wish to use. They must then bridge their assets onto that chain. From there, they must choose the protocol they want to use and then deploy their assets onto that protocol. Finally, after completing all of the above, they can perform whatever transaction is necessary to fulfill their need, such as taking out a loan. However, after choosing between multiple ecosystems, they may find that the optimal return for their use case exists on another chain or layer. In addition, any marginal gains possibly made may have been erased through transaction costs or a large amount of time needed for labor and education. The DeFi landscape is complex for a reason, and that complexity is part of why it is able to offer higher returns to users. However, it prevents DeFi from being used efficiently or adopted en-masse. The user experience is simply too ineffective. Composable aims to solve this problem.

The XCVM enables developers to write cross-chain smart contracts and deploy once across different ecosystems. These contracts unify state transition functions across chains to create an asynchronous cross-chain compute environment; all chains are under one smart contract, so users get the best of all ecosystems. This should not be confused with smart contracts that are ‘multi-chain’ because they are interoperable with other ecosystems and can be duplicated cross-chain. Instead, the XCVM sits on multiple chains at once. As such, the XCVM is able to leverage the entirety of the DeFi landscape to give users the best returns but abstract the process to provide a seamless and streamlined user experience.

How Composable’s XCVM redefines the DeFi user experience to generate more value

Users can gain the best return across the entire DeFi ecosystem within a single, simple and accessible interface: the XCVM.

Take an example where a user seeks to take out a loan, with assets on one chain being used as collateral for a loan protocol on another chain, hoping to gain the lowest interest rate. A developer will create a loan-seeking decentralized application through the XCVM’s cross-chain smart contracts. The XCVM will then send IBC information packets to satellite contracts on each associated chain. It will then select the best return across chains and protocols and then autonomously route the assets back to the user through the most efficient network of bridges and swaps. It will then return the user the best loan for the lowest rate in an autonomous manner.

The complexity of DeFi here has been abstracted to provide a seamless and accessible user experience. However, the value in DeFi’s intricate multi-chain landscape has been fully leveraged. The XCVM acts as a top-level orchestration and reconciliation layer that allows multiple different ecosystems to talk and collaborate, to unleash a new paradigm of XCVM-based cross-chain DeFi.

Composable’s XCVM-based cross-chain DeFi is endlessly interoperable and scalable

Composable’s XCVM is housed on a Polkadot parachain. As such, it is reinforced by Polakdot’s shared security advantage, is highly secure and technologically robust, and can handle institutional throughput.

The XCVM leverages Composable’s Centauri and Mosaic pallets to become interoperable with nearly every significant DeFi ecosystems, such as the IBC-Cosmos network of blockchains and Ethereum Virtual Machine (EVM) compatible Layer 1s and 2s. Centauri allows the XCVM to extend its interoperability through trustless bridges to any chains with a light client installed. As such, it can be easily scaled to new blockchains, such as the NEAR protocol, which commonly integrate light clients into their runtime.

XCVM-based cross-chain DeFi enables a new future

Composable’s XCVM represents the next generation of DeFi’s development. It takes a similar path to the evolution of traditional markets, where DTCC first acted as a reconciliation layer that connected markets, which led to the development of high-frequency trading, and then the eventual evolution of a fully abstracted and optimized user experience via an application like Robinhood.

Composable’s XCVM will allow users to aggregate, maximize, and leverage the entirety of DeFi’s chains. It will also provide the necessary abstraction and virtualization to enable retail and institutional usage. The XCVM represents a significant milestone in developing a cross-chain DeFi landscape composed for mass adoption. It represents a definitive step to mark a frontier for unprecedented innovation: Composable’s XCVM-based cross-chain DeFi.