Analysis of Everclear: An indispensable liquidation layer under the chain abstract narrative

Chain Abstraction is one of the most popular narratives in the current cryptocurrency field. This narrative aims to abstract complex blockchain concepts into a unified model or interface so that developers and users can more easily create applications or interact without having to deal with the underlying complex technical details.  

In other words, chain abstraction is to hide complex technologies behind the scenes so that users cannot perceive the existence of the blockchain when actually using it - just as Internet users do not need to know which cloud service provider they are interacting with, blockchain users do not need to know which chain they are interacting with.

Limitations of Chain Abstraction

However, the narrative of chain abstraction is facing an objective limitation in its implementation: under the concept of chain abstraction, the liquidity of the major blockchains at the bottom layer should be able to be called freely and efficiently , but this is not the case.

At present, the interoperability of liquidity between multiple chains mainly relies on bridge protocols such as LayerZero and Wormhole. However, since the usage requirements of each blockchain are different, the available liquidity on the bridge protocol will always gradually flow to the chain with greater usage demand, resulting in an imbalance in the available liquidity between chains. In order to ensure the sustainability of cross-chain functions, liquidity rebalancing is required at this time. Currently, most of the rebalancing tasks performed behind the bridge protocol are performed by the protocol itself or other large liquidity providers (also known as Solvers, which may be exchanges, market makers or other roles). They will actively coordinate the liquidity between chains based on the actual supply and demand situation.

Here comes the crux of the matter. This active coordination mechanism has many shortcomings: first, the execution efficiency is low , which may indirectly limit the liquidity availability of some blockchains; second, the economic effect is low , and the high cost will cause a lot of unnecessary wear and tear. More importantly, the lack of economic benefits will limit the motivation of expanding bridge services to new chains or new currencies, which is not conducive to the expansion of multi-chain ecology. In short, the concept of chain abstraction is currently limited by objective liquidity conditions and it is difficult to play the imagined utility, which will directly hit the core proposition of the narrative of lowering the threshold and improving the experience, and thus restrict the real implementation of the narrative.

Everclear’s Solution

Regarding the above issues, the major bridging protocols that are on the cross-chain front line are the ones who feel them most deeply.

In June this year, Connext, which was once positioned as a bridge protocol, announced that it would undergo a strategic upgrade and rebrand to Everclear. Everclears new positioning is to serve as a clearing layer to coordinate the settlement and balance of inter-chain liquidity, solving the problem that inter-chain liquidity cannot be freely and efficiently called.

In conjunction with the rebrand, Everclear also announced that it had raised $5 million through the sale of NEXT tokens to Pantera Capital.  

In Everclears view, the blockchain industry is no longer short of bridge protocols. In fact, there are countless bridge protocols in different ecosystems on the market, and liquidity rebalancing has become a common problem faced by all bridge protocols. To this end, Everclear hopes to build an effective liquidity coordination mechanism to break the current isolated and active liquidity rebalancing model and provide a unified, efficient and low-cost solution for all bridge protocols.

How does Everclear do it? In short, Everclears system monitors the liquidity balance between all chains in the entire network, aggregates and sorts out each isolated liquidity rebalancing demand, and then combines the overall demand to quickly find the best settlement path, greatly improving execution efficiency and reducing operating costs.  

To put it in a more intuitive way. For example, there are currently two bridge protocols. One has liquidity that has leaned towards chain A and needs to be rebalanced to chain B. The other has liquidity that has leaned towards chain B and needs to be rebalanced to chain A. In the traditional model, these two bridge protocols must actively perform a rebalancing operation each. With Everclear acting as the clearing layer, these two demands can offset each other, thereby minimizing the amount of liquidity that actually needs to be rebalanced.  

This is like the settlement mechanism in cross-border payments . Assuming that a payment institution has an inflow of US$100 and an outflow of US$80 in a single day, the bank does not actually need to transfer out US$100 and then transfer in US$80. Instead, it records the inflow and outflow and only executes a net inflow of US$20 after the final settlement.

In Everclears view, although the entity responsible for rebalancing can also optimize its team quality to improve efficiency under the current model (for example, CEX usually has a team of more than 30 people, using bridge protocols to maintain liquidity balance within the platform), looking at the overall situation, an open, decentralized global coordination mechanism is the fundamental way to solve the above dilemma. In the long run, with the emergence of more and more blockchains and more and more bridge protocols, Everclears performance will also be highlighted.  

With the upgrade of positioning, Everclears customers will also change from ordinary cross-chain customers to bridge protocols. To this end, Everclear must integrate with more cross-chain protocols, thereby gradually expanding its services and eventually evolving into the clearing layer for cross-chain transfers in the entire crypto world.  

Current status: Mainnet launch token upgrade

In mid-September, Everclear announced the launch of the mainnet Beta version. This version of Everclear temporarily covers five networks including Ethereum, Optimism, Base, Arbitrum, and BNB Chain, and integrates bridge protocols such as LiFi Protocol, Router Protocol, Symbiosis, and Synapse.  

Everclear said that the significance of the Beta stage is that it can provide more real and accurate data for the operation of the system. Once all functions have been fully tested, Everclear will transition from the Beta stage to the formal stage and expand to more networks and integrate more cross-chain protocols.  

Compared with the progress at the product level, the market may be more concerned about the utility upgrade of Everclear protocol token NEXT.

According to Everclear’s latest announcement, NEXT will adopt the vb governance model in the future, that is, coin holders can pledge NEXT to become vbNEXT, which can not only participate in the distribution of Everclear’s protocol income, but also guide the inter-chain transfer of liquidity through governance.

Everclear revealed that the vb governance model is designed based on the ve governance model of Curve Finance , but focuses on the new scenario of liquidity settlement. Specifically, vbNEXT can direct token incentives to specific chains or paths through voting, thereby using higher yields to adjust the demand for liquidity transfer between chains - This easily reminds people of the Curve War period, when major stablecoins competed to accumulate CRV in order to attract higher liquidity. Perhaps in the future we will also see major networks or bridge protocols accumulate NEXT in order to attract higher liquidity...

Protocol + Token, Both Open Up Your Imagination

Taken together, Everclear’s rebranding may be one of the most radical positioning upgrades in the entire history of cryptocurrency.  

At the protocol level, Everclear has jumped out of the highly competitive bridge protocol track and positioned itself as a unique clearing layer in the current crypto world. By capturing the core pain points of its own bridge protocol, Everclear is expected to quickly expand its services to more networks and more cross-chain protocols, transforming from an independent individual protocol into a large and closely connected ecosystem.

At the token level, the utility of NEXT has been qualitatively upgraded under Everclears new narrative. It can serve as a key medium to influence the liquidity balance between chains . This is expected to amplify the real demand for NEXT and introduce more solid value support for the token.

Looking ahead, as the concept of chain abstraction becomes more popular, the necessity of Everclear as a clearing layer will become increasingly prominent, and perhaps that will be its true value discovery cycle.