The DeFi ecosystem is rapidly evolving, with innovative solutions continuously emerging to address scalability and interoperability challenges. As the demand for cross-chain services grows, the need for a unified, seamless platform becomes more pressing. Cross-chain lending is one such service that allows users to borrow and lend assets across different blockchains, facilitating better capital efficiency and a broader range of asset utilization. The TVL in DeFi surpassed $50 billion in 2024, with cross-chain protocols contributing significantly to this growth. This demonstrates the increasing appetite for interconnected DeFi solutions, opening up opportunities for new platforms to capitalize on this trend.
Axelar, a decentralized interoperability network, stands at the forefront of enabling cross-chain communication and bridging multiple blockchain ecosystems. By providing a reliable and scalable infrastructure, Axelar allows developers to build powerful cross-chain applications, such as lending platforms, with ease.
Notable examples of cross-chain lending platforms utilizing Axelar include Kalkulus Finance and Midas Lending, both of which leverage Axelar’s interoperability to facilitate lending and borrowing across different blockchain networks.
This blog will guide you through the development process of building a cross-chain lending platform on Axelar, covering key aspects from smart contract deployment to ensuring liquidity across chains. Let’s begin!
Understanding Cross-Chain DeFi and Its Growing Significance
Cross-chain DeFi represents a critical evolution in the DeFi ecosystem, enabling decentralized financial applications to operate seamlessly across multiple blockchain networks. To better understand cross-chain DeFi, imagine each blockchain as a unique TV network with its shows and content. Typically, viewers would need separate subscriptions to access content from different networks.
Cross-chain DeFi acts as a “streaming aggregator,” offering users access to multiple blockchains from a single interface, eliminating the need for separate interactions with each network. This simplifies engagement with decentralized financial services across a variety of platforms, improving both accessibility and user experience.
Security Concerns of Cross-Chain DeFi
Cross-chain DeFi offers greater liquidity and access, but it also comes with significant security concerns. One of the biggest risks is the vulnerabilities in cross-chain bridges that facilitate asset transfers between blockchains. These bridges have become prime targets for hackers.
Notable breaches include:
- Ronin Network (2022): A $600 million loss due to weaknesses in the bridge’s centralized structure and validation protocols.
- Wormhole (2022): Attackers exploited the Wormhole bridge for $300 million, taking advantage of flawed smart contracts.
- Nomad (2022): A $190 million loss due to a code flaw, allowing multiple users to exploit the system simultaneously.
- Binance Smart Chain (2022): A hack resulted in a $100 million loss and halted transactions, highlighting bridge infrastructure vulnerabilities.
These high-profile breaches underline the importance of improving security protocols and code audits to avoid future exploits. But security isn’t the only challenge facing cross-chain DeFi.
Scalability Issues
As DeFi grows, handling a higher volume of transactions across chains is becoming more difficult. This leads to congestion, slower transactions, and higher fees. Solutions like sharding and layer-2 scaling are being explored, but they are still developing.
Security Concerns
With multiple blockchains integrated, new risks arise, such as double-spending and unauthorized access. Cross-chain bridges, acting as intermediaries, are particularly vulnerable to attacks. Strong encryption, secure consensus mechanisms, and constant monitoring are crucial to preventing these issues.
Interoperability Challenges
While cross-chain interoperability has come a long way, fully seamless and secure asset and data transfers between different blockchains remain tough. Each blockchain has its own nuances, and achieving a standardized approach requires collaboration between developers and protocols.
The Need for a Cross-Chain Lending Platform Built on Axelar
A cross-chain lending platform built on Axelar can address key challenges in DeFi’s security, scalability, and interoperability. Here’s how Axelar can help:
Enhanced Security
Axelar provides a decentralized interoperability network that securely connects different blockchains. It uses threshold cryptography and multi-signature mechanisms to ensure safe asset transfers, mitigating risks from traditional cross-chain bridges that are prone to hacking.
Seamless Cross-Chain Interoperability
Axelar allows cross-chain communication without the need for custom integrations with each blockchain. This enables lending platforms to tap into diverse liquidity pools across various blockchains like Ethereum, Binance Smart Chain, and others, making it easier for users to borrow and lend assets.
Scalability
Axelar’s hub-and-spoke model ensures the platform can scale efficiently without congestion. This is crucial for a growing lending platform that needs to handle increasing transactions while maintaining performance and low fees.
Cost Efficiency
By removing the need for intermediary bridges, Axelar enables direct cross-chain transfers, reducing transaction costs and improving transaction speed. This lowers borrowing and lending fees for users, making the platform more affordable.
Risk Mitigation
Axelar enables cross-chain diversification, allowing lending platforms to access assets from multiple blockchains. This reduces dependency on any single chain and helps mitigate risks like network congestion or security vulnerabilities.
Key Market Takeaways for Cross-Chain Lending Platform
According to Gminsights, the blockchain interoperability market is booming! It was valued at $275.5 million in 2022 and is expected to grow rapidly at a CAGR of 26.8%, reaching around $2.88 billion by 2032. This growth is mainly driven by the rising demand for cross-chain asset transfers, which are becoming essential for businesses that operate on multiple blockchain networks.
Source: Gminsights
As more companies explore the unique benefits of different blockchains, the need for seamless communication and interoperability is becoming a key focus. This, in turn, supports smoother asset transfers and boosts the overall efficiency of decentralized applications and DeFi platforms.
One example of this trend is the growing number of partnerships and integrations in the cross-chain lending space.
For instance, in early 2023, Aave teamed up with Cosmos Hub to enable cross-chain lending and borrowing. This integration allows users to deposit and borrow assets on Cosmos Hub, offering lower transaction fees compared to Ethereum.
Similarly, Uniswap’s integration with Polygon will enable users to trade assets across Ethereum and Polygon without the hefty gas fees, making cross-chain transactions more accessible. These partnerships not only increase liquidity but also expand the variety of assets available for lending and borrowing across different blockchain networks.
A Perfect Time to Invest in Developing a Cross-Chain Lending Platform on Axelar
If you’re considering launching a cross-chain lending platform on Axelar, now is a great time. The DeFi market is booming, and cross-chain functionality is in high demand. Axelar makes it easy to connect assets across different blockchains, allowing your platform to reach more users and tap into liquidity from multiple ecosystems.
Platforms like Anchor Protocol and Sovryn have already used Axelar’s tech to expand their reach, processing over $20 million in cross-chain deposits for Anchor and $50 million in monthly transaction volumes for Sovryn, significantly growing their platforms.
In terms of profitability, cross-chain lending platforms can generate revenue through transaction fees, interest rate spreads, and incentives. With Axelar’s secure and scalable infrastructure, users will have a seamless experience, which can lead to higher transaction volumes.
For instance, Sovryn sees monthly transaction volumes of $50 million, earning between 0.1% and 0.3% per loan in fees. This creates a great revenue stream for platforms that make cross-chain lending easy and accessible.
Looking ahead, cross-chain solutions will only become more important in DeFi, positioning platforms that offer these services for long-term success.
With DeFi’s continuous growth, platforms using Axelar for cross-chain lending are well-positioned to capture significant market share. So, if you’re thinking about entering the space, now’s the time to take advantage of this growing trend!
Development Steps for a Cross-Chain Lending Platform on Axelar
Cross-chain lending platforms use Axelar’s decentralized infrastructure to ensure smooth interoperability between blockchains. Building one requires thoughtful planning to ensure security, scalability, and ease of use. Here are the key steps to create a cross-chain lending platform with Axelar.
1. Define Core Features and Business Requirements
Start by identifying the platform’s primary functionalities, such as multi-chain lending and borrowing, collateral management, yield optimization, and interest rate standardization. Determine the user base, business goals, and the blockchain networks you wish to integrate with Axelar.
2. Design the Architecture and Workflow
Plan the technical architecture of the platform, focusing on how users interact with the system. Ensure the design accommodates cross-chain operations such as collateral deposit, loan requests, and repayments across multiple blockchains. Axelar’s Cross-Chain Gateway Protocol can be a foundation for smooth data transfer between chains.
3. Integrate Axelar’s Cross-Chain Gateway
Use Axelar’s Cross-Chain Gateway Protocol to enable secure communication between connected blockchains. This protocol allows your platform to perform read and write operations on external chains, ensuring the efficient transfer of assets.
4. Develop Smart Contracts
Create and deploy smart contracts on each integrated blockchain to manage lending, borrowing, and collateralization processes. Leverage Axelar’s interchain smart contract capabilities to synchronize operations across chains without duplicating development efforts.
5. Implement Multi-Party Cryptographic Security
Incorporate multi-party cryptography to secure cross-chain transactions. Validators in Axelar’s decentralized network verify and sign each transaction, ensuring robust security for asset transfers and loan agreements.
6. Build the User Interface
Develop an intuitive and responsive UI that allows users to interact seamlessly with your platform. Ensure the design provides a clear view of cross-chain operations, such as borrowing options, interest rates, and loan statuses. Include features to monitor assets across integrated blockchains.
7. Test and Optimize the Platform
Conduct rigorous testing to identify vulnerabilities, bugs, or inefficiencies in the system. Test the cross-chain asset transfer functionality, smart contract interactions, and validator consensus processes. Optimize the platform for performance and scalability.
8. Implement Governance and Staking Mechanisms
Integrate governance features to involve users in decision-making processes. Allow token holders to stake tokens and participate in the election of validators. This ensures the system remains decentralized and governed by its community.
9. Launch and Continuous Improvement
Deploy the platform on the mainnet and provide users with educational resources to understand its functionality. Monitor its performance post-launch, gather user feedback, and make necessary updates to enhance usability and address emerging challenges.
Cost of Developing a Cross-Chain Lending Platform on Axelar
Category | Task | Description | Cost Range ($) |
Research & Design | Market Research | Analyze cross-chain lending platforms, competitors, and user needs. | $1,000 – $3,000 |
Technical Research | Investigate Axelar SDKs, documentation, and best practices. | $1,000 – $3,000 | |
Lending Model Design | Define lending mechanics, risk strategies, and liquidation parameters. | $1,000 – $3,000 | |
UI/UX Design | Create wireframes, mockups, and prototypes for a user-friendly interface. | $3,000 – $6,000 | |
Total for Research & Design | $6,000 – $15,000 | ||
Smart Contract Development | Lending Pools | Develop smart contracts to manage deposits, loans, and withdrawals for each chain. | $3,000 – $10,000 |
Cross-Chain Transfers | Integrate Axelar SDKs for secure asset transfers across chains. | $3,000 – $8,000 | |
Oracle Integration | Implement price oracles for accurate asset valuation and liquidation triggers. | $2,000 – $5,000 | |
Security Audits | Conduct in-depth security audits to identify and mitigate vulnerabilities. | $2,000 – $5,000 | |
Total for Smart Contract Development | $10,000 – $28,000 | ||
Frontend Development | User Interface | Build a user-friendly interface for deposits, loans, and repayments. | $3,000 – $6,000 |
Dashboard | Create a dashboard to monitor loans, interest rates, and lending pool health. | $2,000 – $4,000 | |
Wallet Integration | Enable integration with wallets like MetaMask for seamless user experience. | $3,000 – $6,000 | |
Total for Frontend Development | $8,000 – $16,000 | ||
Backend Development | API Development | Develop APIs for frontend communication and third-party integrations. | $2,000 – $5,000 |
Database Integration | Implement a database like PostgreSQL or MongoDB to store user data and transaction history. | $2,000 – $5,000 | |
Server Infrastructure | Set up servers or cloud services for hosting and scalability. | $3,000 – $6,000 | |
Total for Backend Development | $7,000 – $16,000 | ||
Testing & Deployment | Unit Tests | Test individual functions of smart contracts and components. | $1,000 – $3,000 |
Integration Tests | Test interactions between frontend, backend, and smart contracts. | $1,000 – $3,000 | |
Security Audits | Engage professionals to perform detailed security assessments. | $2,000 – $4,000 | |
Deployment | Deploy smart contracts and launch the frontend application. | $1,000 – $3,000 | |
Total for Testing & Deployment | $5,000 – $13,000 |
Total Estimated Cost Range: $10,000 – $100,000
Factor Affecting the Development Cost of the Cross-Chain Lending Platform on Axelar
Several factors can significantly impact the overall development cost of a cross-chain lending platform on Axelar.
- Number of Supported Blockchains: Integrating with more blockchains increases development complexity and testing requirements.
- Platform Features: Advanced features like flash loans, NFT lending, and complex governance mechanisms add to development time and cost.
- Team Expertise: Experienced blockchain developers and security auditors are crucial, but their expertise comes at a premium.
- Axelar Integration Complexity: The specific integration requirements with Axelar’s SDKs and the complexity of cross-chain communication can influence costs.
Top 5 Cross-Chain Lending Platforms Built on Axelar
Cross-chain lending platforms are revolutionizing the DeFi space, enabling users to access assets across multiple blockchains. Axelar’s interoperability makes transactions smoother and liquidity sharing easier. Here’s a look at five notable cross-chain lending platforms built on Axelar and how they leverage its capabilities:
1. Aurigami
Aurigami is a cross-chain money market that lets users deposit assets on one blockchain and get loans in various cryptocurrencies across different chains. Axelar helps the platform streamline liquidity, making the borrowing process quick and easy.
- Cross-Chain Liquidity Aggregation: Aurigami pools liquidity from several blockchains, so users can earn passive yields and access lending options from different ecosystems (EVM and Cosmos).
- Instant Loan Access: No long approval waits—users can access loans quickly, perfect for those who need fast liquidity.
- Wide Asset Support: Users can deposit and borrow a range of cryptocurrencies, so they’re not limited to just one type of asset.
With Axelar’s General message-passing capabilities, Aurigami makes cross-chain lending smoother and more efficient.
2. Trisolaris
Trisolaris is primarily a DEX, but it integrates with Axelar to facilitate cross-chain swaps and payments. By connecting with Axelar, Trisolaris offers broader liquidity and makes it easier for users to trade across different blockchains.
- Cross-Chain Trading: Users can seamlessly trade assets between blockchains, enhancing liquidity.
- Partnership with Aurigami: This collaboration lets users borrow and lend directly through the DEX, combining trading and financing in one place.
- User-Friendly Interface: With an intuitive design, Trisolaris is easy for both beginners and seasoned traders to navigate.
Axelar’s tech allows Trisolaris to unify trading experiences across different blockchains, making it a game-changer for traders.
3. Prime Protocol
Prime Protocol uses Axelar’s infrastructure to provide lending and borrowing options across different blockchains. With its expansive features, Prime Protocol makes it easy to deposit assets from one blockchain and borrow from another.
- Interoperable Lending: Users can borrow and lend assets across multiple blockchains without sticking to just one network.
- Dynamic Interest Rates: The platform adjusts interest rates based on supply and demand, ensuring competitive rates.
- Strong Security: Prime Protocol takes extra care in securing user funds during cross-chain transactions.
Thanks to Axelar’s GMP, Prime Protocol makes interacting with assets feel like working within a single blockchain, making borrowing hassle-free.
4. StellaSwap
StellaSwap is a DEX that makes it easy for users to swap and lend assets across different blockchains, all in one place. By teaming up with Axelar, StellaSwap offers smooth cross-chain swaps and lending options, making it a go-to platform for a complete DeFi experience.
- Integrated Lending Market: Users can lend their assets directly through the DEX, making the whole process simpler and more convenient.
- Seamless Cross-Chain Swaps: Users can swap assets across different blockchains with ease, expanding trading options and boosting liquidity.
- User-Friendly Design: Whether users are new to DeFi or experienced traders, StellaSwap’s intuitive interface helps them navigate cross-chain activities effortlessly.
5. Lido
Lido is mostly known for liquid staking, but it’s now branching out into cross-chain lending too. By integrating Axelar’s interoperability, Lido lets users stake their tokens on one blockchain and borrow against them on another.
- Liquid Staking Integration: Users can stake assets and borrow against them at the same time, maximizing capital efficiency.
- Multi-Chain Support: Lido’s use of Axelar lets it support a variety of blockchains, giving users more options.
- Yield Optimization: The platform helps users optimize yield on staked assets, boosting returns for those using both staking and lending.
Lido showcases how Axelar’s interoperability can facilitate innovative financial products that blend staking with lending functionalities.
Conclusion
Building a cross-chain lending platform on Axelar is a great way to unlock the true potential of DeFi. With Axelar’s interoperability, businesses can offer a smooth lending experience across multiple blockchains, attracting more users and tapping into a larger pool of assets. This opens up opportunities to generate revenue through lending and borrowing fees, as well as potentially through governance tokens. A well-run cross-chain lending platform can also help boost the DeFi ecosystem by increasing liquidity, improving capital efficiency, and making financial services more accessible to users on different blockchains.
Looking to Develop a Cross-Chain Lending Platform on Axelar?
At Idea Usher, with over 500,000 hours of coding experience, we’re here to help you build a strong and secure cross-chain lending platform on Axelar. We specialize in creating innovative DeFi solutions, and our expertise in Axelar’s interoperability can connect your platform to a wide network of users and assets. Let us help you create a user-friendly, scalable, and profitable lending platform that taps into the growing demand for cross-chain financial services.
FAQs
Q1: How to develop a cross-chain lending platform?
A1: To develop a cross-chain lending platform, you’ll need to focus on integrating blockchain technologies that enable interoperability between different chains. The process includes selecting compatible blockchains, building secure smart contracts for lending and borrowing, and creating a user-friendly interface. Additionally, ensuring strong security protocols, like collateral management and transparent transaction tracking, will be essential for a smooth and secure platform experience.
Q2: What are the features of a cross-chain lending platform?
A2: A cross-chain lending platform typically includes multi-chain support, enabling users to lend and borrow assets from different blockchains. Key features also include decentralized governance, allowing users to participate in platform decisions, and various security measures to protect collateral and assets. Other features often include dynamic interest rates, loan tracking, liquidity pools, and risk management tools to maintain platform stability.
Q3: What is the cost of developing a lending platform?
A3: The cost of developing a lending platform depends on its complexity and the features involved. It covers aspects like blockchain integration, smart contract development, user interface design, security measures, and legal compliance. Ongoing maintenance and scaling the platform as it grows also factor into the total cost. Customization and advanced functionalities can increase the price.
Q4: How does a cross-chain lending platform make money?
A4: A cross-chain lending platform typically makes money by charging interest rate spreads, where borrowers pay more than lenders receive. The platform may also earn from transaction fees, loan origination fees, or platform usage fees. Additional revenue streams can include charging for premium services, such as faster loan processing or extra security features, and taking a small fee from liquidity pools or collateral management.