Unifying User Experience for the On-chain Financial System

Over the past few years, we’ve seen significant growth of on-chain financial applications, including DEXs, lending, stablecoins, bridges, and various yield bearing assets.

Compared to traditional finance, the on-chain alternative offers unique values: it is open and permissionless on a global scale, more transparent, efficient, and trust-minimizing. We strongly believe in those values and strive to accelerate its adoption.

However, navigating through the on-chain financial system is quite complex and unintuitive. The ever-increasing numbers of chains, tokens, and assets are fragmenting the user and developer experiences. For example:

• The same ETH, but on different chains → not interoperable → fragmented liquidity (*picture from Vitalik’s wallet disclosed in his blog post)

• The same ETH, but staked in different Liquid Staking Protocols → different LSD tokens → not interoperable → fragmented liquidity *(picture from Eigenpie)

The Latch protocol is built to address these challenges, aiming to unify yield, liquidity, and chains.

Crypto Mega Trends & The Fragmentation Problems

But how do we put ourselves into these challenges today? Let’s first recap the megatrends, not only their bright side but also the consequences.

The Mega Trends:

1) Explosion of Yield-Bearing Assets On-chain

Marked by Ethereum’s successful transition from Proof-of-Work (”PoW”) to Proof-of-Stake (”PoS”), we are witnessing the birth of a robust on-chain yield market, and the explosion of yield-bearing assets leveraging multiple sources of yields on-chain, including staking, re-staking yields, lending yields, RWA yields, and their combinations.

2) Liquid Staking Tokens Are Widely Adopted for Higher Capital Efficiency

At the same time, Liquid Staking/Re-staking Derivative (”LSD”) tokens like stETH & eETH are quickly adopted, as they enable users to further put their LSD tokens to use in Defi. Today, LSD ETH represents 40%+ of all staked ETH in total, and the “moneyness” of the LSD tokens continues to increase as they reach broader integration and use cases in dApps.

3) Modular Scalability Leading to An Increasingly Multi-chain World

Scaling blockchains via a modular stack has become quite powerful. Every dApp can now launch its own L1/L2/L3 chain with ease, offering them more economic sovereignty and design space. We are already seeing a burst of new chains launching and there are no signs of slowing down.

While all these are great, fragmentation is the hidden poison they bring:

1) Existing Swapping & Bridging Solutions Fall Short in This Multi-Chain & Multi-LSD World

Say I want to buy this new memecoin on Solana, but my existing assets are the yield bearing stETH on Arbitrum. Channeling part of my stETH value to Solana is a painful multi-step process with high friction, including wait time and non-trivial swap & bridge fees. I would need to:

• Swap out part of my stETH to ETH (with some friction)

• Swap ETH to USDC on Ethereum

• Bridge USDC from Ethereum to Solana

• Swap USDC to SOL on Solana

• Then finally buy the memecoin via SOL…

2) Liquidity Sourcing & Maintenance Become Hard

For example, in the good old days when Ethereum was the only go-to chain, when we wanted to trade ETH, we’d just concentrate in 1 liquidity pool (e.g. ETH/USDT) on 1 chain, for maximal efficiency.

But now in the multi-chain & multi-LSD world, to trade the LSD ETH, we need to resort to multiple liquidity pools on multiple chains, which is not only troublesome but also undermines capital efficiency.

The complexities of yield (incl. liquid staking/re-staking), liquidity sourcing, and cross-chain settlement should all be handled in the background, and users should enjoy a simple unified asset balance across chains & dApps without grappling with the underlying technicalities.

The Latch Protocol: Unifying Yield, Liquidity, and Chains

To streamline the yield and liquidity flow for users in a multi-chain context, we come up with this architecture:

1) Savings & Yield

The overall savings mechanism is similar to standard Defi Vaults & Liquid Staking Protocols. A set of smart contracts is deployed on multiple chains to manage the deposit/withdraw, staking/unstaking, mint/burn of LSD tokens, and yield distributions.

The underlying yield of respective vaults is coming from established yield protocols on the market, e.g. Ether.Fi / Eigenlayer for ETH denominated yield and Ethena for stablecoin denominated yield.

At the same time, we further integrate DEX aggregators and Cross-chain Intent Settlement infra to optimize the deposit & saving experiences for users, to achieve:

• Deposit by any token from any chain

• Gas savings via transaction batching

• Simplified UX

• Automatic yield and airdrop points distribution (subject to each vault’s yield strategy)

2) Building on Gravity Chain for Cross-chain Intent Settlement (”CCIS”)

While the buzzword “intent” may sound abstract, it actually is a simple idea to free users from obscure blockchain technicalities. An “intent” is a message signed by a user to express ‘what’ is to be done instead of ‘how’ to do it.

For example, when I want to use my $5 worth of MATIC on Polygon to exchange for $5 worth of USDT on Base, instead of signing and executing several steps of swapping & bridging by myself, I can just sign one intent: “Anyone that sends my address $5 worth of USDT on Base, can take my $5 worth of MATIC on Polygon.” Such that I can outsource the entire execution task to professionals who can process these cross-chain transactions in a more efficient way.

While this solution sounds intuitive enough, the challenging part is how do we settle this intent securely due to its cross-chain nature. Different blockchains don’t really “talk” to each other, and they have different states and finality rules → thus hard to synchronize for settlement.

To achieve Cross-chain Intent Settlement (”CCIS”) ****, we will be building on Gravity Chain, which is a high performance blockchain with native support of CCIS, featuring:

• Safer consensus & faster finality, leveraging PoS consensus and restaking

• Efficient ZKP verification for cross-chain communication

• High throughput with cost efficiency ****

Gravity Chain will iron out the synchronization issues of different blockchains and act as the unified settlement layer.

3) “Filler” & Liquidity Provision

With the above, the final piece of the puzzle is the “Fillers”, who provide multi-chain liquidity and execute the intent published by users. Latch and dApp partners will act as the professional “Fillers”, organizing and executing the cross-chain transaction flows to deliver the desired outcomes specified by user intents.

For example:

• I deposit $1,000 worth of USDT in Latch → I get $1,000 worth of Stablecoin LSD, which generates yield for me automatically

• Later I want to buy $100 worth of memecoin on Base, but I don’t have any existing token on Base → I just sign this intent → Latch sends the $100 worth of memecoin on Base to my address directly, thus filling the intent → Latch then claims the $100 worth of my Stablecoin LSD which I have pre-authorized via intent signing

Compared to doing all the swapping and bridging by myself, the intent flow is just much simpler!

As a professional “Filler”, Latch will also perform multiple optimizations to enhance the overall capital efficiency, including:

• Liquidity aggregation, across Defi and Cefi

• Transaction routing & execution optimization, to achieve minimal slippage and friction

• Multi-chain liquidity rebalancing

From the user perspective, the Smart Savings powered by Latch provides multiple benefits:

• Use one yield-bearing balance to fund activities on all chains / in partner dApps

• On-demand instant liquidity (subject to certain cap)

• Savings on cross-chain fees

• Minimize other transaction frictions (gas, slippage, etc.)

Future Roadmap: One Balance is All You Need

With the Latch Protocol laying out the framework, we believe that there are more exciting opportunities down the road, to further enhance capital efficiency and ultimately lead to the ideal UX that abstracts away the blockchain infrastructures.

Higher Capital Efficiency

For users, in addition to being able to “spend” your Latch balance directly, Latch could also offer “Credit Card” style on-chain credit services, and potentially collaborate with DID players to explore personalized credit (e.g. enhanced on-demand liquidity quota for users with a higher credit score).

For fillers, there could be a more generalized market structure to incentivize liquidity provision & intent execution, to get more 3rd party fillers to join and collaborate permissionlessly. For example, the value captured by the Latch Protocol could be redistributed to fillers based on their contribution.

Further Simplify UX with Smart Wallets

We think crypto wallet is another critical piece to solve the fragmented UX. With the adoption of various account abstraction related upgrades in the Ethereum community (incl. EIP-4337, EIP-7702, etc.), wallets will be more powerful with built-in programable features like gas sponsorship and transaction batching.

Wallet-to-dApp communication also needs an upgrade to adapt to this multi-chain world. For example, instead of only reading the user’s token balance on a single chain, it should also track the user’s multi-chain balance which is available to spend on-demand.

We plan to further experiment on smart wallets in the future and work with dApps to explore new UX flows.

Deposit to Latch Now to Earn 40%+ APY

We are rolling out our first product “Smart Savings”, featuring boosted yield and on-demand liquidity. Our launch partner Galxe will also integrate Latch Protocol to upgrade Galxe Smart Balance to Galxe Smart Savings! Stay tuned for that upgrade!

To reward our early users, we are offering exclusive APY boosts, which you can find more details here:

Deposit now at latch.io to earn a boosted APY of 40%+ on your latch balance!

To reward early users, Latch is offering APY boost at launch with detailed rules below. Deposit now at latch.io to earn a boosted APY of 40%+ on your latch balance!

APY Boost Rules

On top of the APY that users can earn from the underlying protocols (Ether.Fi, Ethena), Latch is offering an additional 20% APY. For example, if the underlying yield for Ethena vault is 30% APY, then the eligible Latch user can earn 50% APY (30% + 20%) post APY boost.

The APY boost is subject to the eligibility criteria below:

1. Users need to meet and maintain the minimal deposit balance for the respective vaults:

• Ether.Fi Vault: Deposit Balance ≥ 0.3 ETH

• Ethena Vault: Deposit Balance ≥ 1,000 USDe

• If a user fails to maintain the minimal balance requirement after spending or withdrawal, the 20% APY boost will stop

2. There is a per-address cap on the amount of Latch balance that can enjoy the 20% APY boost:

• Ether.Fi Vault: capped at 25 ETH balance per address

• Ethena Vault: capped at 100,000 USDe balance per address

The 20% APY boost is going be distributed in ETH (Ether.Fi Vault) and USDe (Ethena Vault) on a daily basis, starting at the T+2 day after making deposit, and automatically compounding. Funding for the APY boost comes from Latch and its launch partners, including Galxe.

TVL Cap Rules

An initial TVL cap is set for the 2 vaults:

• Ether.Fi Vault: 1,500 ETH in total

• Ethena Vault: $5MM USDe in total

After the TVL cap is hit, the deposit function will be paused temporarily, and to be re-opened after TVL cap adjustments.

FAQ

1. What’s the start and end time for this APY boost?

• The APY boost starts from May 30th. The end time is not set, and it will not end before the TVL cap is hit. We will make announcements for any potential change to the boost policy in the future

2. For APY from the underlying vault, how is that calculated?

• For the underlying APY of Ether.Fi and Ethena, we sourced 3rd party APY data from Pendle. which reflects the market trading prices of the implied yield from Ether.Fi (restaking) and Ethena (locking USDe to earn points), incorporating the value of their airdrop points

3. What if I deposited 200,000 USDe? How is the APY calculated?

• In this case, your first 100,000 USDe balance earns the underlying Ethena APY + 20% APY boost offered by Latch, and the rest 100,000 USDe balance earns the underlying yield only without boost

• Assuming the underlying Ethena APY is 30%, then the overall APY on your 200,000 USDe balance = (100,000*(20%+30%) + 100,000*30%) / 200,000 = 40%

4. Does withdrawal impact the APY boost?

• You are free to withdraw any amount at any time, but there is a 7-day waiting period. You can read more about this waiting time in our docs here. As long as you maintain the minimal required balance, the APY boost is not affected by withdrawal.

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