Many of you know we are releasing the bridge tool from CCX to wCCX and vice versa on March 1st.
Before we delve into the details of how it all works, let’s clarify one thing, strictly speaking, it’s not a swap and yet it is. What do we mean by that?
Well on one hand, what the tool really does is wrap your CCX onto the ETH network to create wCCX. That’s why exactly one wCCX will always represent (or equal) one CCX. wCCX is just a representation of CCX on the Ethereum network — a tokenized CCX if you will.
On the other hand, you could call it a swap — because what the tool does is lock away one CCX and at the same time you receive one wCCX, so it looks like you swapped the two assets. But the key here is, you are locking your CCX and receiving its representation, wCCX on the Ethereum network. So it might be better to call it a bridge and this is how we will refer to it from now on.
Now that you have a general understanding of the bridging process, you are probably interested in how it all works. On to the details!
Let’s start with what kind of bridging mechanism we are dealing with. This type of bridge is considered a custodian type. This means that the setup is not completely trustless and is centralized to some extent.
Now many of you will say, well this is not good, crypto is supposed to be decentralized right? Yes, and we absolutely agree, but in some cases, you need to make compromises. Unfortunately, at the moment there is no way to decentralize the bridge tech and chains we have at our disposal.
So, it’s either a custodian type of bridge or nothing. Because the CCX Team are all big proponents of decentralization, we will strive to make the bridge better and more decentralized over time.
However, we want to provide the ability for our users to take advantage of our privacy features and the DeFi opportunities happening on the Ethereum network now!
Let’s get into the details and describe how the bridging tool really works. Below is a diagram that will help you visualize the process as we describe it.
As you can see from the diagram there are basically two bridge wallets that hold CCX and wCCX needed for the bridge to work.
The most important thing to highlight here is that there must always be, at any given time, exactly the same amount of CCX + wCCX in circulation. Meaning the total of both asses will equal the same amount as shown in the Conceal Explorer.
As wCCX is only a representation of CCX on the Ethereum network, that means that for each wCCX in circulation we need to have one CCX locked in the custodian wallet. When the wCCX is bridged back to CCX the flow is then reversed. The wCCX token is locked in the wCCX custodian wallet and the corresponding CCX is released from the CCX custodian wallet.
So, there is always the same amount of CCX + wCCX in circulation. As we speak, and even before the bridge tool is released, we have the same amount of CCX locked as there is wCCX in the wild.
One question that may come up as users study the wCCX contract is why the mint/burn features still exist? Well, the reason is quite simple and twofold.
First, if the mint/burn features were not in place on the wCCX contract we would need to create the max supply of wCCX upfront. That’s 200 million wCCX, which would be equal to the max supply of CCX. Not the most elegant solution and having 200 million wCCX locked in a wallet is not really what you would want to see as an investor.
Second, as we move forward in trying to decentralize the solution, mint/burn will play an essential part in the dynamic process of token allocation between the two assets. And since our wCCX contract cannot be easily upgraded, it was smarter to have that functionality upfront on the wCCX contract.
Since both wCCX and CCX locked amounts are auditable and transparent, users can feel safe that both assets are not being abused.
We got a lot of questions about how we will handle the big price difference in the wCCX and CCX assets. Nobody wants one side abusing the other in arbitrage, where some people earn money on the expense of others. We expect prices to equalize soon in a natural way. However, if that does not happen we will have arbitrage protection in place, that will only allow the bridge to work from more expensive asset to less expensive asset if the gap in price is too big. The second that the prices equalize that won’t be necessary anymore. In any case, we will not allow any dumps from less expensive side to more expensive side.
Lastly, we need to say a few words why the bridge was even made, what purpose does it serve.
Ethereum is quickly becoming the main financial decentralized tool, where people are able to invest, trade and do other financial services in a permissionless, decentralized manner. It will be more and more important and have a big impact on the financial world. So making a two-way bridge from CCX to Ethereum only makes sense. This opens CCX holders an easy way to participate in that ecosystem. What is even more important maybe is that enables a way back from ETH ecosystem into a private one that is CCX where you are again anonymous and all your transactions are safe from prying eyes.
We hope this article explains how the bridge works and clears some misconceptions about it. Thanks for taking the time to read.