Thread by @davidtperk

1/ I'm excited for @catalogfinance, the cross-chain AMM being built directly on #RenVM by Ren Labs. Here's why it could become one of the biggest spot exchanges in all of crypto.🧵

2/ RenVM’s security enables Catalog’s potential. Its “boundless liquidity mechanism” is secured by MPC and TEEs, which make it impossible for Darknodes to reveal their secret shares of a private key to steal assets.

3/ This means Catalog pools don’t need to include — and be underwritten by — the bond token (REN).

4/ For example, @THORChain's economic security model underwrites liquidity with the bond token (RUNE), so pools can be made whole by slashed bonds in case of theft. This requires RUNE as a settlement asset in each pool, which is why A->B swaps must first swap A to & B from RUNE.

5/ In contrast, Catalog pools could safely be of any two assets (like BTC/USDT) because the pools don't need to be underwritten. This reduces price impact because short-tail assets swap directly within the same pool and with more liquid settlement assets than a native token.

6/ Long-tail assets too volatile for economic security altogether wouldn't pose a risk either. And they'd be widely swappable without a native settlement token because stablecoins make a good alternative. An A->B swap can swap A->USD and then USD->B.

7/ Interestingly, @THORChain's reasoning for a native token was that at the time, MPC and TEEs didn't allow for cross-chain liquidity that was live and safe from theft without economic disincentives. But Ren Labs seems to have cracked it.

https://twitter.com/THORChain/status/1351732925369262081?s=20

8/ Catalog's scalable liquidity reduces price impact even further. @THORChain is secure as long as RUNE bonded > 2x liquidity, enough to underwrite pools in case of theft by nodes. But if nodes can't steal funds, then any amount of liquidity is safe, enabling much deeper markets.

9/ Most interestingly, Catalog APYs could potentially be unparalleled. RenVM contracts can respond to events on other chains and autonomously take action on any other chain. So what if Catalog put its own liquidity in other AMMs and rebalanced those positions on its own?

10/ You could imagine Catalog putting a % of liquidity in concentrated positions and leaving the rest in its "hot wallet" to save gas on withdrawals from RenVM. It could update its own pools' supplies after external swaps and rebalance and withdraw from its positions as needed.

11/ LPs would earn fees from liquidity positions in Catalog in addition to concentrated positions in other AMMs, while traders would get liquidity at both layers. Pareto improvements for both.

12/ Catalog can have all of the same pools as other AMMs, but with higher APYs. In fact, I would expect Catalog's APYs and breadth of markets to make RenVM one of the largest LPs in the AMMs we use today.

13/ That would attract enough liquidity to make Catalog an AMM for not just cross-chain assets, but all assets. The implications of this are two-fold.

14/ First, it accelerates a multichain DeFi. Multichain dApps on RenVM need a liquid AMM to use in the same atomic transactions as their own logic — think of flash loans & multichain CoWs — which would be impossible with asynchronous calls to AMMs on other chains.

15/ Second, it reproduces the CEX experience, but with decentralized custody. Traders could deposit any assets into a decentralized hosted wallet, trade any market with sub-second finality, pay for gas out of their asset, and without confirmations or gas on the underlying chains.

16/ And like CEXs, settling on RenVM could let Catalog combine multichain stablecoins into the same asset. USDC pools could contain a mix of USDC-ERC20 and USDC-SPL, perhaps along with a USDC-ERC20/USDC-SPL pool to aid withdrawals, deepening markets even further.

18/ While this is all conjecture, Catalog seems to have the primitives in place for deep liquidity, unparalleled APYs, and a CEX-like experience; all the makings for explosive growth and a top spot exchange. 🚀