Look Ma, no pools!

The Otomic is a decentralized cross-chain bridge based on the HTLC atomic swap. In later sections, we will discuss how it innovates on the UX workflow, and improves liquidity matches by introducing an edge client framework into the ecosystem. In this section, we will discuss its most important feature and differentiator from many other bridge solutions — Otomic does not require any liquidity pools or lock-and-mint pools. As we have described, the HTLC atomic swap mechanism is fundamentally a peer-to-peer exchange protocol. The bridge needs to match parties of the trade. There is no need to maintain long-lived liquidity pools. This simple difference has significant implications.

Much better security. Without long-lived liquidity and lock-and-mint pools, the Otomic is much safer than pool-based bridges.

Capital efficient. The atomic swap design only requires the liquidity providers (LPs) to come up with the tokens at the time of the exchange. It dramatically improves capital efficiency and enables more diverse stakeholders to become LPs.

Regulation compliance. The Atomic Swap is a peer-to-peer exchange. With Otomic, it is possible for the system to only match KYCed LPs with users.

Censorship resistant. With the decentralized Otomic, each liquidity provider can decide whom to do business with (ie to exchange) based on individual preference and local regulations. For an individual user, there is a high likelihood to always find someone to exchange within a diverse group of liquidity providers.

Much faster withdraws. With the HTLC atomic swap, funds are sent instantly by your peers as regular blockchain transactions.

That also means the success of Otomic is not going to be measured by its TVL (Total Value Locked). Without a pool, there is no TVL. In fact, the core of our argument is that TVL is bad for cross-chain bridge security. A large TVL creates a large target for hackers, results in more loss when a hack occurs, and gives more censorship power to its signers.

What about atomic swap's disadvantages?

As we discussed before, the liquidity pool-based bridges emerged to get around some of the big challenges in the atomic swap. How is Otomic going to address these challenges without the pool? In the next several sections, we will discuss the Otomic solutions.

Solution 1: Provide highly-available and highly-efficient liquidity through our blockchain edge client architecture. The edge nodes are "always-on" software agents that represent LPs. They can be matched to users as trading counterparties at any time without committing any capital upfront. LP capital is only needed when an LP is matched to a transaction, and LP can immediately earn transaction fees and token incentives.

pageEdge client architecture

Solution 2: The LP nodes are automated software agents. Otomic shifts all the complex interactions in the Atomic Swap to the LP node (i.e., Bob). As a result, the Otomic user experience (UX) on par with pool-based bridges through workflow innovations and UI tweaks.

pageThe Otomic UX

Solution 3: Make the Otomic compatible with all blockchains through omni HTLC contracts.

pageAn omni bridge

Read on to learn more!