FLUXLAYER: High-Performance Design for Cross-chain Fragmented Liquidity

TL;DR

FluxLayer is a novel three-layer framework designed to address liquidity fragmentation across blockchains, enhancing cross-chain arbitrage and MEV capture while reducing costs.

Contribution

It introduces a comprehensive multi-layer solution combining settlement, intent, and leverage mechanisms to improve cross-chain liquidity and arbitrage efficiency.

Findings

Increased cross-chain arbitrage opportunities

Reduced transaction costs for liquidity providers

Enhanced overall liquidity across multiple blockchains

Abstract

Autonomous Market Makers (AMMs) rely on arbitrage to facilitate passive price updates. Liquidity fragmentation poses a complex challenge across different blockchain networks. This paper proposes FluxLayer, a solution to mitigate fragmented liquidity and capture the maximum extractable value (MEV) in a cross-chain environment. FluxLayer is a three-layer framework that integrates a settlement layer, an intent layer, and an under-collateralised leverage lending vault mechanism. Our evaluation demonstrates that FluxLayer can effectively enhance cross-chain MEV by capturing more arbitrage opportunities, reducing costs, and improving overall liquidity.