Technical Architecture

Executive Summary

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Introduction

Purpose and Scope

This document outlines the technical architecture of Transfuse's Minimum Viable Product (MVP), focusing on the implementation of Soroban smart contracts on the Stellar network for end-to-end native USDC swaps. The primary goal is to detail the system's components, interactions, and compliance with relevant SEPs and CAPs, ensuring a secure and efficient asset bridge that prioritizes the Stellar ecosystem while providing secondary support for Ethereum.

Background

The growing landscape of blockchain technology has led to an increased demand for interoperability between different networks. Existing cross-chain bridges often rely on wrapped assets or centralized intermediaries, introducing security vulnerabilities, higher costs, and inefficiencies. There is a need for a solution that leverages the strengths of the Stellar network to provide fast, secure, and low-cost asset transfers without compromising decentralization.

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Problem Statement

Current cross-chain asset transfer solutions face significant challenges:

• Security Risks: Reliance on centralized intermediaries or wrapped assets introduces vulnerabilities, including the risk of hacks and fraud.

• High Costs: Transactions involving wrapped assets or multiple intermediaries can result in increased fees.

• Inefficiency: Longer transaction times and complex processes hinder user experience.

• Lack of Decentralization: Centralized control points contradict the principles of blockchain technology.

• Regulatory Compliance: Navigating KYC/AML requirements while maintaining user privacy is complex.

These issues create barriers to seamless asset transfers between Stellar and Ethereum networks, limiting the potential for broader adoption and interoperability.

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Solution Overview

Transfuse proposes a Stellar-centric asset bridge that:

• Utilizes Soroban Smart Contracts: Leveraging Stellar's native smart contract platform for secure asset management.

• Adheres to SEPs and CAPs: Ensuring compliance with Stellar's standards and protocols for optimal functionality.

• Maintains Non-Custodial Control: Users retain control over their assets, eliminating the need for centralized custody.

• Provides Atomic Swaps: Enables direct asset exchanges without intermediaries or wrapped tokens.

• Offers Ethereum Integration (Secondary): Extends functionality to interact with Ethereum, broadening asset transfer capabilities.

By focusing on Stellar's capabilities, Transfuse addresses the identified problems, providing a secure, efficient, and user-friendly solution for cross-chain asset transfers.

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Technical Architecture

System Components

1. Users

   • Individuals initiating USDC swaps between Stellar and Ethereum networks.

   • Interact through a user-friendly frontend optimized for Stellar.

2. Stellar Network

   • Primary blockchain network for USDC transfers.

   • Offers fast, secure, and low-cost transactions.

3. Ethereum Network (Secondary)

   • Secondary network to extend asset transfer capabilities.

   • Interacts with Stellar via validators and oracles.

4. Wallet Providers

   • Stellar Wallets: Freighter, Albedo, Rabet.

   • Ethereum Wallet: MetaMask (secondary support).

5. Soroban Smart Contracts

   • Manage asset locking, releasing, and custody on Stellar.

   • Comply with relevant SEPs and CAPs.

6. Validator Nodes

   • Monitor transactions on Stellar.

   • Facilitate cross-chain communication.

   • Utilize Stellar's consensus protocol.

7. Oracle Service

   • Provides cross-chain data verification.

   • Integrates price feeds and ensures data consistency.

Architecture Diagram

Interactions and Data Flow

1. User Interaction

   • Users initiate swaps via the frontend.

   • Wallet authentication follows SEP-0010 for secure login.

2. Transaction Initiation

   • Soroban smart contracts handle USDC locking on Stellar.

   • Contracts emit events for validators.

3. Validation and Consensus

   • Validators monitor events, validate transactions, and reach consensus.

   • CAP-0059 may be used for sponsored reserves.

4. Oracle Verification

   • Oracles verify transactions and relay data cross-chain.

   • Ensures atomicity and data integrity.

5. Asset Release

   • Upon validation, assets are released on the destination network.

   • SEP-0039 facilitates claimable balances for user convenience.

Transfuse Architecture Wireframe and Charity Donation User Story

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Implementation Details & Integration Description

The MVP focuses on implementing Soroban smart contracts to handle end-to-end (E2E) interactions for native USDC swaps. This bridge leverages Stellar's fast, secure, and low-cost transactions to provide a seamless user experience while addressing inherent risks associated with cross-chain bridges.

Necessary SEPs (Stellar Ecosystem Proposals)

1. SEP-0010: Stellar Web Authentication

   • Authentication for users accessing the Ionize bridge.

   • Ensures secure and decentralized user login via Stellar wallets (e.g., Albedo, Rabet).

2. SEP-0031: Simplified Payment Flow

   • Enables simplified transaction requests between Stellar and external blockchains.

   • Useful for handling end-user payments within the Ionize bridge.

3. SEP-0024: Anchor/Client Interoperability

   • Facilitates asset transfer operations between Stellar and external networks.

   • Ionize's functionality as a bridge closely aligns with this SEP's focus on asset interoperability.

4. SEP-0023: Compliance Protocols (Optional)

   • For regulatory adherence, especially regarding KYC/AML compliance when handling asset transfers.

5. SEP-0039: Claimable Balances

   • Improves user experience by enabling smoother claim-and-redeem flows for interrupted or asynchronous transactions.

6. Custom SEP: Cross-Chain Bridge

   • Ionize may need to propose or follow an evolving SEP for a Stellar-compliant bridge that outlines:

     • Atomic swap methodology.

     • Vault or custody mechanics.

     • Interaction with external networks like Ethereum.

Required CAPs (Core Advancement Proposals)

1. CAP-0058: Liquidity Pool Support

   • Enables native use of Stellar liquidity pools for optimized swaps.

   • Critical for minimizing slippage in cross-chain asset swaps.

2. CAP-0059: Sponsored Reserves

   • Used for collateralizing bridge transactions and securing liquidity.

3. CAP-0038: Asset Clawback

   • Adds safety mechanisms for recalling funds in case of misbehaviors or failures during bridging.

4. CAP-0045: Fee Adjustments for Transactions

   • Essential to ensure scalability and affordability when handling high-volume transactions between Stellar and Ethereum.

Deployed Contracts and Integrations

1. Soroban Smart Contracts

   • Custody Contracts:

     • Handle asset locking on Stellar before bridging to Ethereum.

     • Provide decentralized custody and order management.

   • Order Matching:

     • Enable atomic swaps and liquidity management.

     • Ensure tamper-proof execution.

2. Ethereum Smart Contracts

   • ERC-20 compatible contracts for locking/unlocking assets and handling token transfers.

   • Validator or multisig integration for transaction signing.

3. Validator Network

   • Shared Vaults:

     • Built using threshold signatures or smart contract-based multisig for decentralized custody.

   • Consensus Layer:

     • BFT-like mechanism (e.g., based on Tendermint/CometBFT) for validator agreement on asset transfer execution.

4. Price Oracle Integration

   • Price feeds from reliable sources (e.g., Chainlink or native Stellar oracles) to monitor exchange rates and maintain stability.

Technologies Used

• Programming Languages: Rust (Soroban contracts), TypeScript (frontend and backend).

• Frameworks and Libraries:

  • Backend: Node.js, Express.js.

  • Frontend: React.js, Next.js, Stellar SDKs.

• Smart Contracts:

  • Stellar: Soroban smart contracts in Rust.

  • Ethereum (Secondary): Solidity contracts.

• Databases: NoSQL databases (e.g., MongoDB) for transaction records.

Protocols and Standards

• Stellar Ecosystem Proposals (SEPs):

  • SEP-0010: Stellar Web Authentication.

  • SEP-0024: Anchor/Client Interoperability.

  • SEP-0031: Simplified Payment Flow.

  • SEP-0039: Claimable Balances.

• Core Advancement Proposals (CAPs):

  • CAP-0058: Liquidity Pool Deposit Authorization.

  • CAP-0059: Sponsored Reserves.

  • CAP-0038: Asset Clawback.

  • CAP-0045: Fee Bump Transactions.

Compliance with SEPs and CAPs

• SEP-0010: Ensures secure user authentication via Stellar wallets, maintaining decentralization.

• SEP-0024 & SEP-0031: Facilitate asset transfers and simplified payment flows between Stellar and external networks.

• SEP-0039: Improves user experience with claimable balances for asynchronous transactions.

• CAP-0058 & CAP-0059: Enable optimized swaps using liquidity pools and sponsored reserves.

• CAP-0038: Provides mechanisms for asset clawback in case of failures.

• CAP-0045: Ensures transactions remain affordable and scalable.

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Security Considerations

Threat Model

• Potential Threats:

  • Smart contract vulnerabilities (e.g., reentrancy attacks).

  • Man-in-the-middle attacks during data transmission.

  • Malicious validators attempting to disrupt consensus.

  • Cross-chain communication failures.

Mitigation Strategies

• Smart Contract Security:

  • Rigorous testing and audits of Soroban contracts.

  • Use of safe coding practices and adherence to Stellar's security guidelines.

• Data Transmission Security:

  • Implement SSL/TLS encryption for all communications.

  • Use of secure APIs and authentication methods.

• Validator Integrity:

  • Establish a robust consensus mechanism aligned with Stellar's protocol.

  • Monitor validator performance and implement slashing conditions for malicious behavior.

• Cross-Chain Reliability:

  • Utilize redundant oracle services to prevent single points of failure.

  • Implement fail-safes and timeouts for cross-chain transactions.

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Use Cases and User Stories

Use Case 1: Stellar to Ethereum USDC Transfer

User Story: Alice wants to transfer USDC from her Stellar wallet to an Ethereum address.

Steps:

1. Alice accesses Transfuse's frontend and logs in using her Stellar wallet (Freighter).

2. She initiates a swap, specifying the amount of USDC and the recipient Ethereum address.

3. The frontend interacts with the Soroban smart contract to lock USDC on Stellar.

4. Validators confirm the transaction, and oracles relay information to Ethereum.

5. If applicable, the equivalent USDC is released to the specified Ethereum address.

6. Alice receives confirmation of the completed transfer.

Use Case 2: Ethereum to Stellar USDC Transfer (Secondary)

User Story: Bob wants to transfer USDC from his Ethereum wallet to a Stellar address.

Steps:

1. Bob accesses Transfuse's frontend and connects his MetaMask wallet.

2. He initiates a swap, specifying the amount of USDC and the recipient Stellar address.

3. The Ethereum smart contract locks USDC, and validators monitor the event.

4. Oracles verify the transaction and communicate with the Soroban contract on Stellar.

5. USDC is released to Bob's Stellar address.

6. Bob receives confirmation of the completed transfer.

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Roadmap and Future Work

• Short-Term Goals:

  • Expand support for additional EVM-compatible networks.

  • Enhance user interface with multilingual support.

  • Implement advanced security features and conduct third-party audits.

• Long-Term Goals:

  • Integrate additional assets beyond USDC.

  • Develop mobile applications for wider accessibility.

  • Propose or adopt a custom SEP for standardized cross-chain bridges.

  • Explore partnerships with other blockchain projects for interoperability.

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Conclusion

Transfuse offers a Stellar-centric solution to the challenges of cross-chain asset transfers. By leveraging Soroban smart contracts and adhering to SEPs and CAPs, it ensures security, efficiency, and compliance within the Stellar ecosystem. The focus on non-custodial control and decentralization addresses key limitations of existing solutions. Transfuse's architecture paves the way for broader adoption and innovation in decentralized finance, providing users with a seamless experience in transferring assets across chains.

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References

• Stellar Documentation: https://developers.stellar.org/

• Soroban Documentation: https://soroban.stellar.org/docs

• SEP-0010: Stellar Web Authentication

  • SEP-0010 Link

• SEP-0024: Anchor/Client Interoperability

  • SEP-0024 Link

• SEP-0031: Simplified Payment Flow

  • SEP-0031 Link

• SEP-0039: Claimable Balances

  • SEP-0039 Link

• CAP-0058: Liquidity Pool Deposit Authorization

  • CAP-0058 Link

• CAP-0059: Sponsored Reserves

  • CAP-0059 Link

• CAP-0038: Asset Clawback

  • CAP-0038 Link

• CAP-0045: Fee Bump Transactions

  • CAP-0045 Link

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Appendix

Glossary

• Atomic Swap: A smart contract technology that enables the exchange of one cryptocurrency for another without using centralized intermediaries.

• Non-Custodial: A system where users have full control over their private keys and assets.

• Validator Nodes: Network participants that validate transactions and maintain the blockchain's integrity.

• Oracle Service: A mechanism to fetch and verify external data for use in smart contracts.

Contact Information

• Project Website: github.com/transfuselabs

• Support Email: [e-mail]

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For further information and technical details, please refer to the official Stellar and Soroban documentation or contact the Transfuse development team.