Modular DPoS Network

Reposted Original Article Title: Understanding Elixir in 5 Minutes: The Modular DPoS Network That Caught Arthur Hayes’ Eye

Recently, the modular DPoS network Elixir announced the completion of its $8 million Series B funding round, co-led by Mysten Labs and Arthur Hayes’ family office-operated Maelstrom Capital, with participation from Manifold, Arthur Hayes, Amber Group, GSR, Flowdesk, and others. According to RootData, Elixir, founded in 2022, is a modular DPoS liquidity network that allows anyone to directly provide liquidity to the order book, bringing liquidity to long-tail crypto assets and enabling exchanges and protocols to direct their ledger liquidity. Elixir completed its $2.1 million seed round in January and $7.5 million Series A round in October of the previous year, with investments from renowned institutions like Hack VC, NGC Ventures, FalconX, and others.

Despite its successful funding, Elixir has maintained a low profile within the Chinese community, largely because, unlike order book DEXs such as dYdX and Vertex, Elixir serves as a liquidity network and infrastructure provider for these DEX projects. Its prior two testnet releases involved minimal direct user interaction.

However, Elixir recently announced not only a new round of financing but also the launch of a new product, Apothecary. Apothecary is a new points tracking system that supports users in earning points (or potions) / profits by depositing assets and recruiting new users, aiding users in tracking their contributions to the network before the mainnet launch on August 15th this year.

What are the highlights of Elixir?

Elixir stands out in several key areas when compared to traditional financial markets and their reliance on centralized intermediaries for liquidity provision. Here’s a translation highlighting its unique features:

Traditional financial markets have long depended on centralized intermediaries, such as institutions and hedge funds, to provide liquidity through advanced trading strategies and algorithms, optimizing liquidity for exchanges. However, entrusting funds to centralized institutions carries certain risks. Thus, DeFi has been exploring decentralized order book models, which enable traders to transact directly with each other, relying on mathematical models and liquidity pools to facilitate token trades.

Ideally, order books not only address the issues of low capital efficiency and high slippage present in current AMM models but also ensure the flexibility of trades and the decentralization of assets. In reality, order book DEXs are more suitable for markets with a substantial number of tokens like Bitcoin and Ethereum. However, they face challenges in markets with insufficient liquidity and a lack of depth in supply and demand for long-tail assets, leading to high spreads that prevent trades from occurring.

According to its official website, Elixir’s goal is to allow anyone to directly provide liquidity to the order book, bringing liquidity to long-tail crypto assets. How is this envisioned to be achieved? The Elixir network opens trading pairs to retail investors (including institutions and market makers) and subsidizes APY, naturally attracting more users to provide liquidity directly to the order book through the network. Elixir can be combined with other projects across chains, allowing order book DEXs to integrate Elixir into their core infrastructure.

On one hand, order book DEXs can share the liquidity provided by Elixir as infrastructure, enhancing the trading experience. On the other hand, it is difficult for ordinary users to provide liquidity on order book DEXs manually. Through Elixir, users can automatically place buy and sell orders at a high frequency, earning liquidity fees. This makes using order book DEXs as convenient as AMMs for users to provide liquidity.

From a network architecture perspective, the order book run by Elixir is almost equivalent to the Uniswap v2 x*y=k curve, which is used to establish liquidity and reduce the spread between buy and sell orders on the order book, presenting risks and returns very similar to those of AMM LPs. The network achieves DPoS consensus on orders placed on exchanges.

Moreover, its infrastructure resembles the security model of Arbitrum, with fraud proofs published on the Ethereum mainnet. Notably, Elixir also integrates public data from various exchanges (including centralized exchanges), ensuring low-latency updates for trades, positions, and order books, and consistency across exchange order books.

In terms of ecosystem, Elixir has integrated with over 30 DEXs. Because the order book model requires cheap and high-frequency transactions, it demands high blockchain throughput. These projects are often exchanges within high-throughput and low gas fee L1 and L2 network ecosystems, such as Sui, Sei, Starknet, Arbitrum, Blast, Injective, including Vertex, RabbitX, NFTPerp, Orderly Network, dYdX, and others.

Currently, the Elixir network has plans to issue its token ELX, though the token economic model has not been disclosed yet. ELX will primarily serve two purposes: one is for staking by nodes and validators to ensure network security, and the other is to act as a community governance token.

What interactions can users do?

Users can interact with Elixir in several ways, as the platform was established in 2022 and has already launched two testnets, with the v3 testnet coming soon. This will be the last testnet before the mainnet goes live in August. Currently, users can engage by running nodes, earning points, and providing liquidity for DEXes integrated with Elixir.

1. Running Nodes / Validators

Elixir boasts 13,563 nodes worldwide, offering rewards for those who operate nodes. However, applications for testnet v2 nodes have been paused as preparations for the v3 launch are underway. Users will be able to apply to run nodes once v3 is launched.

Related links: https://docs.elixir.xyz/running-an-elixir-validator

2. Apothecary: Earning Points

Launched on March 12, Apothecary is a comprehensive points tracking tool that monitors user contributions to the network, integrations, minting of elxETH, and referrals, among other activities. Points (potions) can also be earned by running nodes and trading on exchanges integrated with Elixir.

As shown, users can deposit at least $100 worth of ETH to mint elxETH, unlocking mysterious treasure chests. elxETH, a native yield token backed 1:1 by ETH, will power order book liquidity for exchanges as an all-chain LP token upon the mainnet launch. The deposited assets will be locked by the protocol to provide liquidity for Elixir-supported products and DEXes. After the mainnet launch on August 15, users will be able to withdraw their assets and unlock the treasure chest to receive earnings. If users choose not to withdraw, the assets will automatically earn rewards from the exchange. The amount of assets determines the number of points earned, and inviting new users to deposit assets also earns points.

Related links: https://www.elixir.xyz/apothecary

3. Providing Liquidity for DEXes Integrated with Elixir

Users can also earn points by depositing assets worth more than $100 on exchanges within the Elixir ecosystem. However, minting elxETH on the mainnet offers an additional 50% in points.

Elixir currently supports over 50% of the order book liquidity on Bluefin, over 20% on Vertex, over 40% on RabbitX, and is set to introduce native integrations with dYdX, Hyperliquid, Orderly, and over 30 others.

Users can also earn points by depositing assets worth more than $100 on exchanges within the Elixir ecosystem. However, minting elxETH on the mainnet offers an additional 50% in points.

Elixir currently supports over 50% of the order book liquidity on Bluefin, over 20% on Vertex, over 40% on RabbitX, and is set to introduce native integrations with dYdX, Hyperliquid, Orderly, and over 30 others.

Disclaimer:

1. This article is reprinted from [panews], the original title is “Read Elixir in 5 minutes: Why did the modular DPoS network fall into the eyes of Arthur Hayes?, the copyright belongs to the original author [Nian Qing], if you have any objection to the reprint, please contact Gate Learn Team, the team will handle it as soon as possible according to relevant procedures.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. Other language versions of the article are translated by the Gate Learn team, not mentioned in Gate.io, the translated article may not be reproduced, distributed or plagiarized.