CWAP SWAP: Cross-Chain Decentralized Exchange

CWAP SWAP is a decentralized exchange developed based on Coinweb, aiming to achieve cross-chain asset exchange, allowing users to directly trade native assets between different blockchains, such as Bitcoin and Ethereum.

Unlike traditional DEXs that rely on bridge mechanisms, CWAP SWAP can complete these exchanges without intermediaries, connecting multiple blockchains including Bitcoin, BNB Chain, and MultiversX. Users can trade a variety of tokens with lower fees and faster speeds. By eliminating the need for bridges, CWAP SWAP reduces the risk of security vulnerabilities and simplifies the user experience, making cross-chain swaps more convenient and cost-effective.

CWAP SWAP implements efficient cross-chain exchanges through Coinweb's innovative mechanism - Penalty Adjudication for Cross-chain Transactions (PACT) system, which uses Chain Transaction Sentinel (CTS) and Penalty Adjudicator (PA) to monitor transactions on-chain, ensuring exchanges comply with the terms set in smart contracts. If a transaction fails to meet these terms, the PA will assign responsibility and release the collateral to the affected party, enhancing security without the need for traditional bridging methods.

This design provides a non-consensus, non-permissioned system where users can exchange native assets (such as Bitcoin or Ethereum) between chains, significantly reducing costs and improving security compared to traditional cross-chain transaction methods. CWAP SWAP reduces exchange costs by up to 95% and becomes a competitive solution for high-frequency and large-scale trading users.

PACT: Cross-chain Trading Penalty Arbitration Mechanism

The Cross-Chain Transaction Penalty (PACT) framework is the core mechanism for CWAP SWAP to securely execute cross-chain exchanges. Unlike traditional cross-chain DEX relying on validators and bridges to facilitate transactions, PACT observes and enforces transaction rules in real-time on multiple blockchains through smart contracts called Chain Transaction Sentinels (CTS) and Penalty Arbiters (PA).

Chain Transaction Sentinel (CTS) is a reactive smart contract designed to monitor changes in the state of the blockchain. Each CTS acts as an independent observer, collecting data on transaction-related events such as token transfers or state changes. Once a transaction is initiated on the blockchain, the CTS observes and provides real-time data to the Punishment Arbitrator (PA), ensuring that any deviations from the expected outcome are recorded. This approach is more reliable and adaptable than traditional validator mechanisms, as it reduces the possibility of centralized failure points and lowers costs by avoiding continuous reliance on third-party infrastructure.

The Punishers (PA) are responsible for enforcing the terms of the transaction. Upon receiving the data provided by CTS, the PA will verify whether the transaction complies with the predefined terms and conditions embedded in the smart contract. If any inconsistencies are found (e.g., required asset transfers not occurring or being delayed), the PA will allocate responsibility and release the collateral to the affected party. This adjudication process enhances security by ensuring clear accountability while reducing transaction costs. There is no need for an external verifier network to protect the transaction, as the PA completes enforcement within a single contract, further reducing costs and potential delays.

Capital efficiency and cost reduction

PACT supports dynamic collateral management, which means that collateral requirements can be adjusted based on factors such as the scale and duration of the transaction. This flexibility helps reduce capital requirements, as only necessary collateral is bound in the PACT system. For example, CWAP SWAP has reduced transaction costs by 50%-95% by implementing this model, compared to other cross-chain systems. This system is particularly advantageous for short-term and medium-term state machines, where maintaining high capital efficiency is crucial for scalability.

Security Considerations

PACT's design eliminates many vulnerabilities common in bridging and validator-based systems, which are often centralized failure points. With PACT, CTS and PA can independently observe transactions and continue to apply contract terms in the event of network restructuring or chain-specific failures. This means that, unlike multi-signature bridges, PACT has built-in mechanisms for handling transaction anomalies, avoiding complete loss of user trust in the system due to collateral loss by reallocating collateral to affected parties. These features make CWAP SWAP highly secure and reliable.

By eliminating reliance on validators and focusing on maintaining consistent arbitration standards, Coinweb has built a more scalable and accessible blockchain ecosystem through CWAP SWAP. This system is particularly attractive to institutional traders in need of a reliable and cost-effective multi-chain asset management mechanism. By integrating PACT, CWAP SWAP provides a scalable and secure solution for cross-chain exchanges, while also supporting Coinweb's broader goals in interoperability and blockchain efficiency.

The impact on liquidity and its role in the Coinweb ecosystem

CWAP SWAP provides liquidity support for the Coinweb ecosystem by facilitating direct exchange between multiple blockchain native assets. This feature allows users to access liquidity from multiple networks within a single platform, expanding trading opportunities and providing a more flexible trading experience. By enhancing liquidity between connected chains, CWAP SWAP supports other dApps on Coinweb that require efficient asset transfers and high levels of liquidity. The transaction cost reduction achieved through the consensus-free PACT system makes CWAP SWAP a cost-effective solution, particularly suitable for users engaged in high-frequency trading or arbitrage.

Highlights

• CWAP SWAP is a cross-chain DEX that allows asset exchange between multiple blockchains without the need for bridging.
• The PACT system uses On-chain Transaction Sentinel (CTS) and Punishment Arbiter (PA) for secure transaction verification.
• The arbitration process of PACT assigns responsibilities and releases collateral when the exchange conditions are not met.
• CWAP SWAP enhances the liquidity of the Coinweb ecosystem by facilitating direct and low-cost asset exchanges.
• This DEX is a key component of Coinweb's strategy to build an interoperable multi-chain DeFi platform.