A Deep Dive into Clover Finance: A Foundational Layer for Cross‑Chain Compatibility

Markets Apr 14, 2021

Last week, we announced our collaboration with Clover Finance, a foundational layer for cross-chain compatibility. Clover is aiming to become the first non-custodial bridge from Ethereum to Polkadot. This week, we sat down with the Clover team to discuss what they are building, its use cases, and recent traction.

Let’s dive in:

1. To begin, what is Clover and what problem does it solve?

Clover is a Substrate-based DeFi service platform built on Polkadot. Clover provides an easy-to-use interoperable blockchain infrastructure through its extensive support for Ethereum’s EVM-based applications and a wide range of implemented developer tools. Through its smart core, like Clover Scan and Clover multi-chain extension wallet, Clover will bring the smoothest and most advanced DeFi experience to its users.

Clover is addressing three main problems in the crypto space:

  • Lack of Interoperability - The decentralized financial networks of today remain isolated in silos that cannot trustlessly communicate with each other and meaningfully exchange value. This led to some third party custodial services who make the overall ecosystem more centralized, taking away the essence of what crypto is all about. To achieve a new-level of interoperability, Clover created the model of built-in SPV chain simulation technology combined with a novel threshold signatory protocol to enable seamless cross-chain communication across financial networks.
  • Poor User Experience - The concept of gas is unfamiliar to most non-technical users. People with no base-currency-asset are unable to send transactions directly on smart contract platforms due to their lack of ability to pay for gas, which is a major hurdle in user onboarding. From gasless transactions to mobile-driven infrastructure, Clover provides a perfect gateway to DeFi for everyone including those who are completely new to DeFi.
  • Builder Incentives - DeFi applications require a solid financial foundation, and donations from the community are generally insufficient to cover development expenses. All smart contract platforms direct the entire gas fee to miners. However, Clover believes that dApp builders should benefit from making contributions to the ecosystem, and receiving part of the gas fee as their revenue. This is so that Clover re-parameterized the gas distribution model to direct gas fee to both network maintainers and dApp builders.

2. Clover is not the only project building cross chain bridges from Ethereum to Polkadot. Who do you view as your competitors and what unique advantages does Clover offer?

Today’s cross-chain bridges operate under a federated model which is governed by a trusted set of off-chain relayers who can collude to steal funds with a single point of failure. The more signatories a bridge accommodates the more decentralized the bridge becomes, however this is very challenging as there are enormous fee/gas cost challenges in doing this. Bitcoin script is limited to 15 signatories in a multisig operation and is expensive in witness units. Ethereum VM can perform more complex multisig operations yet remain expensive in gas consumption.  

Clover Bridge proposes a solution to the pain point of decentralization cost of how a proper cross-chain communication should be operating under scarce resources. Clover comes with a Schnorr threshold signatory protocol that provides a high level of decentralization by accommodating up to unlimited number of signatories while massively reducing the verification cost. With Clover Bridge, the entire operation is compressed to one aggregated public key which can be verified with a single signature check that consumes only 85,000 gas in Ethereum VM and 291 weight units in Bitcoin script (with the upcoming BIP-340 upgrade).

3. Clover is a Blockchain Operating System, which contains a storage layer, smart contract layer, Defi protocol layer and eApp layer. Can you explain each layer and how they empower crypto developers?

  • Storage layer: Storage protocol layer supports distributed storage of dApp data. The supported protocols are currently IPFS, AR and CRUST.
  • Smart contract layer: Supports one-stop cross-chain deployment and calls of dApps. Clover provides a Web3-compatible API, while existing web3 dApps can be migrated to Clover without any changes needed.    
  • DeFi protocol layer: Supports various basic Defi protocols, such as Swap, Lending, Insurance, and provides a platform on which developers can build their own Defi protocols. Clover also provides a drag-drop smart contract compiler, which is easy-to-use, faultless and can be compiled to WASM.
  • eApp layer: Supports the evolution from dApp to eApp (External App). Developers can build and deploy their eApps easily on Clover, without need for machines, domain names, or network bandwidth.

4. What types of projects are best suited to build on Clover?

Clover is a powerful smart contract platform that enables Ethereum developers and projects to migrate their contracts onto Polkadot. By minimizing the changes required to run existing Solidity smart contracts on the new network, Ethereum projects can simply replicate their dApp and deploy it to Clover using MetaMask, Truffle, Remix, and other familiar tools.

Clover automatically directs a percentage of transaction fees to contract owners to incentivize third party contract developers and commons, to boost development and innovation to ultimately enlarge the overall DeFi ecosystem on Polkadot. Builders who want to benefit from supporting cross-chain assets in their projects and receiving a passive income for doing so are highly encouraged to innovate, build, and deploy on Clover.

5. Can you tell us more about the “two-way” peg to the Bitcoin network your team is building? Why is this important?

To achieve a new-level of interoperability, Clover created a model called built-in SPV chain simulation to enable trustless two-ways pegs between turing-complete and non-turing-complete blockchains. Clover can natively verify Bitcoin transactions by enforcing some standards, dissecting transactions and block headers. This is so that Clover can natively inspect a Bitcoin transaction without storing/checking the entire external blockchain history. Users willing to peg-in Bitcoins send funds to a predetermined Bitcoin script that escrows funds for further peg-outs. Clover can verify that the transaction is included in a block by checking a merkle path of inclusion, checking each block references the previous one, and calculating the total POW spent to make the chain.

Clover validators, while securing the network, notarise Clover block headers with a secure n of m threshold protocol. Clover uses secp256k1 schnorr signatures to provide a high level of decentralization for the notarisation, as opposed to today's federated cross-chain bridges that are limited to 15 signatories in the script. Users willing to peg-out Bitcoins burn tokenized assets on the Clover network whose proof of inclusion along with the notary proof can redeem real assets back on the Bitcoin mainnet.

6. Clover already has quite a few strategic partners integrating with its infrastructure. Can you share any notable examples?

Clover has secured strategic partnerships with many DeFi projects in the ecosystem, publicly listed on the website:

Clover extension wallet itself has support for many existing EVM compatible networks including BSC, Fantom, Avalanche, and Ethereum. In addition to current Polkadot, Kusama, Edgeware support all major Polkadot Parachains will be added to the wallet moving forward. Clover will continue to cultivate as many ecosystem partnerships to embrace the future cross-chain DeFi infrastructures.

7. Large players in DeFi are increasingly agitated with scaling issues and high fees on Ethereum. Some projects are choosing to sidestep Ethereum from the get-go and instead work with platforms built by Polkadot, Solana, Algorand, NEAR, and others. How do you see this trend playing out in 2021, and what impact will ETH 2.0 have on addressing some of these issues?

There are two main categories of users right now in the DeFi ecosystems: Retail and Institutional. We believe large scale funds and institutional users in DeFi will lean more on the side of security at the sacrifice of scaling issues at times. Non-institutional parties on the other hand will become agitated by paying fees which deems their entire experience with DeFi applications non-usable, these users will definitely choose a scaling solution possibly at the opportunity cost of some security. As many projects listed above continue to work on a solution that can gain the trust of institutions investors and at the same time not sacrificing scaling issues, we will continue to see increased usage on all platforms, including Polkadot, Ethereum, Solana, Algorand, NEAR, and many others. Ethereum 2.0 will definitely help to the scaling issues to some extent, however other L1 solutions with optimized gas costs will continue to thrive in the cross-chain DeFi user experience which Clover will look to support.

8. What crypto trends are you most excited about in 2021?

We’re most excited for a few trends in the smart contract infrastructure and DeFi space. This year has proven to us there will not be any clear “winner” in the L1 landscape, amongst projects like Ethereum, Binance Smart Chain, Solana, NEAR. The near future will continue to be a multi chain user experience for DeFi, and Polkadot embodies this philosophy of separate infrastructure chains serving their own purposes. Clover emphases these principles further by being a chain agnostic parachain candidate to support as many ecosystems running DeFi projects as possible. This is why the most exciting trends in the crypto ecosystem will be how various layer 1 infrastructures will be able to integrate together to create a user experience for cross-chain ecosystems.

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