The blockchain landscape expanded rapidly with the proliferation of new layer-one (L1) and layer-two (L2) networks. They commonly support decentralised exchanges (DEXes) utilising AMM technology. The liquidity fragmentation problem arises and leads to price inconsistencies of DEXes. These discrepancies create arbitrage opportunities for profit-driven traders, a broader Maximal Extractable Value (MEV) arbitrager. Although MEV has been well explored within single blockchain domains, cross-chain arbitrage MEV remains underexplored. This paper proposes FluxLayer, a solution to mitigate fragmented liquidity to capture MEV in a cross-chain environment better. FluxLayer is a three-layer framework that integrates a settlement layer, an intent layer, and an under-collateralised leverage lending vault mechanism. Our evaluation demonstrates that FluxLayer can effectively enhance cross-chain MEV by enhancing execution and settlement, reducing costs, and improving overall liquidity efficiency.

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FluxLayer: A High-efficiency Solution for Cross-Chain Liquidity Fragmentation

  • Xin Lao,
  • Qin Wang,
  • Shiping Chen

摘要

The blockchain landscape expanded rapidly with the proliferation of new layer-one (L1) and layer-two (L2) networks. They commonly support decentralised exchanges (DEXes) utilising AMM technology. The liquidity fragmentation problem arises and leads to price inconsistencies of DEXes. These discrepancies create arbitrage opportunities for profit-driven traders, a broader Maximal Extractable Value (MEV) arbitrager. Although MEV has been well explored within single blockchain domains, cross-chain arbitrage MEV remains underexplored. This paper proposes FluxLayer, a solution to mitigate fragmented liquidity to capture MEV in a cross-chain environment better. FluxLayer is a three-layer framework that integrates a settlement layer, an intent layer, and an under-collateralised leverage lending vault mechanism. Our evaluation demonstrates that FluxLayer can effectively enhance cross-chain MEV by enhancing execution and settlement, reducing costs, and improving overall liquidity efficiency.